M/s. Delphi Connection System India P. Ltd(Formerly FCI Technology Services Ltd), Cochin V. The ACIT, Cochin

ITA 256/COCH/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7630 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHANTOM BOSE
• Assessee Lawyers: SATYANARAYANAN
• Keywords: Revision of order; Depreciation; Transfer pricing; Additional depreciation; Assessment record
• Section: 143(3); 14A; 263

Judgement Text

ITA NO . 256/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE K, JM ITA NO 256/COCH/2016 (ASST YEAR 2010 - 11 ) M/S DELPHI CONNECTION SYSTEMS INDIA P LTD ( FORMERLY FCI TECHNOLOGY SERVICES LTD ) XXIX/2809 THYKOODAM KOCH I 19 VS THE ASST COMMR OF INCOME TAX CORPORATE CIRCLE 1(1) ( APPELLANT) (RESPONDENT) PAN NO. AAACF5044Q ASSESSEE BY SH SATYANARAYANAN REVENUE BY SH SHANTOM BOSE CIT - DR DATE OF HEARING 7 TH NOV 2016 DATE OF PRONOUNCEMENT 8 TH NOV 2016 ORDER PE R GEORGE GEORGE K,JM: THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIRECTED AGAINST THE CITS ORDER DATED 23.3.2016 PASSED U/S 263 OF THE I T ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE GROUND RAISED, READ AS FOLLOWS: 1 THE LE ARNED C I T WENT WRONG IN REOPENING THE ASSESSMENT COMPLETED U/S.143 (3) R W.S.L44C OF THE IT ACT ON 17 - 4 - 2014. THERE IS NO ERROR PREJUDICIAL TO THE INTEREST OF REVENUE REQUIRING REOPENING U/S.263 OF THE IT ACT. 2. THE ORDER OF THE LEARNED CIT IS NOT VALID FOR THE REASON THAT THE LEARNED CIT HAS NOT MENTIONED HOW THE ASSESSMENT HAS ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE. 3. THE LEARNED CIT HAS ONLY STATED THAT THE CONTENTION OF THE ASSESSEE NEEDS VERIFICATION. THE LEARNED CIT OUGHT TO HAVE VE RIFIED AND CONVINCED THAT THERE IS AN ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO . 256/C/2016 2 4. FOR THESE AND OTHER GROUNDS TO BE FURTHER ADDUCED AT THE TIME OF HEARING THE ORDER OF THE LEARNED CIT REQUIRES TO BE MODIFIED TO THE EXTENT APPEALED AGAINST. 3 BRIEFLY STATED THE FACTS OF THE ASSESSEE ARE AS FOLLOWS: THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF COMPUTER AIDED DESIGN AND ENGINEERING SERVICES. FOR THE ASSESSMENT YEAR 2010 - 11, RETURN OF INCOME WAS FILED ON 15.10.2010 , DECLARING THE TOT AL INCOME OF R S. 71,76,698/ - . THE ASSESSMENT U/S 143(3) R.W.S 144C OF THE ACT WAS COMPLETED VIDE ORDER DATED 17.4.2014 FIXING A TOTAL INCOME OF R S. 88,83,634/ - . 3.1 SUBSEQUENTLY, THE CIT ISSUED NOTICE DATED 24.2.2016 U/S 263 OF THE ACT . THE ASSESSEE RAIS ED OBJECTIONS TO THE NOTICED ISSUED U/S 263 OF THE ACT, WHICH ARE REPRODUCED IN PARA 2 OF THE IMPUGNED ORDER OF THE CIT. THE CIT, HOWEVER, REJECTED THE CONTENTION S RAISED BY THE ASSESSEE AND SET A SIDE THE ASSESSMENT ORDER DATED 17.4.2014 PASSED U/S 143(3) R.W.S 144C OF THE ACT. THE RELEVANT FINDINGS OF THE CIT, READ AS FOLLOWS: 3. I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE. THE CONTENTIONS OF THE ASSESSEE NEED VERIFICATION FROM RECORDS WHICH IS TO BE PROVIDED BY THE ASSESSEE. THIS FACT HAS TO BE E XAMINED BY THE ASSESSING OFFICER IN DETAIL. ALL THESE THINGS WHICH IS SUPPOSED TO BE EXAMINED BY THE ASSESSING OFFICER AT THE TIME OF PASSING THE ASSESSMENT ORDER WAS NOT DONE BY HIM. HENCE THE ORDER IS ERRONEOUS. 4. I, THEREFORE, SET ASIDE THE ORDER U /S 143(3) R.W.S. 144 OF THE IT ACT DATED 17 - 4 - 2014 ON THE ABOVE SAID LIMITED ISSUES. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE FACTS OF THE CASE AND PASS AN ORDER AS PER THE PROVISIONS OF THE INCOME - TAX ACT 1961, AFTER GIVING AMPLE OPPORTUNITY TO THE ASSESSEE. 4 AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE HAS PREFERRED THIS PRESENT APPEAL. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT , IN THE IMPUGNED ORDER , ITA NO . 256/C/2016 3 HAS ONLY MENTIONED THAT THE ASSESSMENT ORDER IS ERRONE OUS . IT WAS SUBMITTED THAT THE CIT HAS NOT MENTIONED THAT THE ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, IT WAS CONTENTED THAT THE TWIN CONDITIONS , FOR INVOKING THE REVISIONARY JURISDICTION U/S 263 OF THE ACT , HA VE NOT BEEN SATISFIED IN THE INSTANT CASE AND THE REVISIONARY ORDER IS TO BE QUASHED. IN SUPPORT OF THE ABOVE CONTENTION, THE LD COUNSEL RELIED ON THE ORDER OF THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF NITCO LOGISTICS P LTD VS PRINCIPAL COMMISSIONER OF INCOME TAX IN ITA NO.236/ASR/2015 (ORDER DATED 31.5.2016). 5 THE LD DR, ON THE OTHER HA N D , ARGUED THAT THE ASSESSMENT ORDER HAS NOT BEEN DEALT WITH ANY OF THE ISSUES AND HAS ONLY INCORPORATED THE TRANSFER PRICING ADJUSTMENT MADE U/S 92CA(3) OF THE ACT. IT WAS STA TED THAT THE ASSESSMENT ORDER IS CRYPTIC AND HAS NOT BEEN CONSIDERED THE ISSUES THAT WERE RAISED IN THE NOTICE DATED 24.2.2016 ISSUED U/S 263 OF THE ACT . THE LD DR RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TOYOTA MOTOR CORPORATION REPORTED IN 306 ITR 49(DEL). 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT , HAVING EXAMINED THE ASSESSMENT RECORDS , FOR THE ASSESSMENT YEAR 2010 - 11 HAD HELD THAT THE ORDER PASSED U/S 143(3) R.W.S 144C OF TH E ACT , IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ISSUED NOTICE U/S 263 OF THE I T ACT ( NOTICE DATED 24.2.2016 ). THE CIT HAD LISTED OUT FOLLOWING REASONS FOR ISSUANCE OF NOTICE U/S 263 OF THE ACT : ITA NO . 256/C/2016 4 I) FROM THE COMPUTATION O F INCOME FILED, IT IS SEEN THAT THERE IS AN ERROR IN THE TOTAL TAKEN BY THE ASSESSEE OF RS. 18,50,000/ - II) DEDUCTION U/S 10A HAS NOT BEEN CALCULATED PROPERLY AS IT IS SEEN THAT IN THE 56F REPORT THERE IS A REMARK AS UNDER: - TURNOVER OF THE UNDERTAKING IN CLUDES INCOME DUE FOR THE MONTH OF MARCH 2010 OF RS. 56,43,468/ - WHICH WAS PROVIDED AS ON 31.3.2010 BUT SUBSEQUENTLY REVERSED IN APRIL 2010. THE A. Y.2010 - 11 BEING THE LAST YEAR OF 10 A, THE PROFIT FAR A.Y.2010 - 11 IS IN EXCESS. III) ADDITIONAL DEPRECIATION OF RS.41, 43,719/ - IN RESPECT OF PLANT AND MACHINERY PUT TO USE IN A.Y.2009 - 10 HAS BEEN ALLOWED AS DEDUCTION WHICH IS NOT IN ORDER. IV) AN EXCESS SUM OF RS.3,06,082/ - REGARDING ASSETS TAKEN AN LEASE HAS BEEN DEDUCTED FROM THE PROFIT, V) THE DETAILS REG ARDING DEPRECIATION ARE NOT AN RECORD. AS SUCH THE DEPRECIATION WAS NOT PROPERLY VERIFIED BY THE ASSESSING OFFICER. VI) THE APPLICABILITY OF PROVISIONS OF SECTION 145A REGARDING EXCISE DUTY HAS NOT BEEN VERIFIED BY THE ASSESSING OFFICER. VII. THE EXPENSE S RELATED TO INCREASE IN CAPITAL WHETHER TREATED AS CAPITAL OR REVENUE HAS NOT BEEN VERIFIED BY THE ASSESSING OFFICER. VIII. NO. DISALLOWANCE U/S 14A HAS BEEN MADE BY THE ASSESSING OFFICER. IX) GRATUITY AND SUPERANNUATION PAID DURING THE YEAR RELATE TO A .Y.2009 - 10. AS SUCH THESE ARE EXPENSES OF A.Y.2009 - 10 WHICH ARE ALLOWED IN A.Y.2010 - 11. THIS IS NOT IN ORDER. X) THE EXPENSES UNDER THE HEAD MISCELLANEOUS EXPENSES AND RATES AN D TAXES HAVE N OT BEEN VERIFIED WITH REGARD TO PAYMENT OF TAX XI. RECONCIL IATION OF 'OTHER INCOME' HAS N O T BEEN DONE PROPERLY. XII. BROUGHT FORWARD LOSSES H AVE NO T BEEN VERIFIED BY THE ASSESSING OFFICER. ITA NO . 256/C/2016 5 6 .1 ON PERUSAL OF THE ASSESSMENT ORDER COMPLETED ON 17.4.2014 U / S 143(3) R.W.S 144C OF THE ACT, WE NOTICE THAT SEVERAL IS SUES , RAISED BY THE CIT IN THE NOTICE DATED 24.2.2016 U/S 263 OF THE ACT , HA VE NOT BEEN CONSIDERED IN THE ASSESSMENT ORDER. 6 .2 THE HONBLE DELHI HIGH COURT IN THE CASE OF TOYOTA MOTOR CORPORATION (SUPRA) HAD HELD THAT THE ORDER OF THE ASSESSING OFFICER MUST BE SELF CONTAINED GIVING RELEVANT FACTS AND REASONS FOR COMING TO A CONCLUSION ON THOSE FACTS AND LAW. THE RELEVANT FINDINGS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TOYOTA MOTORS CORPORATION (SUPRA) READ AS FOLLOWS: IT IS ALSO NECESSARY F OR THE PARTIES TO KNOW THE REASONS THAT HAVE WEIGHED WITH THE ADJUDICATING AUTHORITY IN COMING TO A CONCLUSION. THE ORDER PASSED BY THE ASSESSING OFFICER SHOULD BE A SELF - CONTAINED ORDER GIVING THE RELEVANT FACTS AND REASONS FOR COMING TO THE CONCLUSION BA SED ON THOSE FACTS AND LAW. WE FIND THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS CRYPTIC, TO SAY THE LEAST, AND IT CANNOT BE SUSTAINED. THE TRIBUNAL CANNOT SUBSTITUTE ITS OWN REASONING TO JUSTIFY THE ORDER PASSED BY THE ASSESSING OFFICER WHEN THE ASSE SSING OFFICER HIMSELF DID NOT GIVE ANY REASON IN THE ORDER PASSED BY HIM 6.3 ON FURTHER APPEAL, THE HONBLE SUPREME COURT WHILE DISMISSING THE APPEAL OF THE ASSESSEE ( 306 ITR 52) HELD THAT IT WAS NOT NECESSARY TO INTERFERE AT THIS STAGE. WHEN THE MAT TER WOULD BE TAKEN BY THE ASSESSING OFFICER ON REMAND IT WAS HIS DUTY TO TAKE INTO ACCOUNT ALL THE RELEVANT FACTS, INCLUDING THE MATERIALS, IF ANY, PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER . ITA NO . 256/C/2016 6 6 . 4 THE LD AR HAD RELIED ON THE AM RITSAR BENCH OF THE TRIBUNAL IN THE CASE OF NITCO LOGISTICS P LTD (SUPRA ) . A CCORDING TO US, THE ABOVE ORDER OF THE TRIBUNAL WILL NOT HELP THE CASE OF THE ASSESSEE. IN THAT CASE, THE ASSESSING OFFICER HAD PASSED A CONSIDERED ORDER AND THE CIT BY INVOKING THE POWERS U/S 263 OF THE ACT, WAS IN FACT SUBSTITUTED HIS VIEW THAT OF THE AO . THE AMRITSAR BENCH OF THE TRIBUNAL HA D IN SUBSTANCE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE , AFTER CONSIDERING THE FACTUAL SITUATION OF THAT CASE. IN THE INSTANT CASE, AS MENTIONED EARLIER , ON PERUSAL OF THE ASSESSMENT ORDER MANY OF THE ISSUES THAT ARE RAISED IN THE NOTICE DATED 24.2.2016 ISSUED U/S 263 OF THE ACT , WAS NEVER CONSIDERED IN THE ASSESSMENT ORDER AND IN LIGHT OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF TOY OTA MOTORS CORPORATION (SUPRA) , WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN 306 ITR 52, WE HOLD THAT THE CIT IS JUSTIFIED IN INVOKING HIS REVISIONARY POWERS U/S 263 OF THE AC T AND , WE UPHOLD THE SAME. IT IS ORDERED ACCORDINGLY. 7 IN THE RESUL T, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF NOV 2016. SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 8 TH NOV 2016 RAJ* ITA NO . 256/C/2016 7 COPY TO: 1 . APPELLANT 2 . RESPON DENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN