BNP PARIBAS SECURITIES INDIA P.LTD, MUMBAI V. ITO 1(1)(4), MUMBAI

ITA 3280/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3587 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Keywords: Business income; Additional evidence
• Section: 234B; 37(1); 56; 28

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D , MUMBAI , , BEFORE SHRI D KARUNAKAR RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER IT A NO. : 3280 /MUM/20 1 4 ( A SSESSMENT Y EAR: 200 9 - 1 0) BNP PARIBAS SECURITIES INDIA P LTD , 1 NORTH AVENUE MAKER MAXITY BANDRA KURLLA COMPLEX, BANDRA(E), MUMBAI - 400 05 1 PAN : A A DCB 4690 F VS IT O - 1(1) ( 4 ) , MUMBAI ( APPLICANT ) (RESPONDENT) APPELLANT BY : SHRI A J IT KUMAR JAIN SHRI AKSHUT JAIN SHRI RATNKAR THAKKAR RESPONDENT BY : SHRI N P SINGH /DATE OF HEARING : 22 - 0 8 - 201 6 / DATE OF PRONOUNCEMENT : 22 - 0 8 - 201 6 ORDER : . . : PER AMIT SHUKLA , JM : T HE AFORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 21.01.2014 , PASSED BY LD. CIT(APPEALS) I, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 14 3(3) FOR THE ASSESSMENT YEAR 2009 - 10. IN THE GROUNDS OF APPEAL, FOLLOWING GROUNDS HAVE BEEN RAIS ED: - 1 IN NOT GIVING AN ADEQUATE OPPORTUNITY TO THE APPELLANT TO PRESENT THE APPELLANTS REBUTTAL TO CERTAIN ASPECTS RAISED BY BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 2 THE CIT(A) DURING THE COURSE OF THE HEARINGS, DESPITE THE APPELLANT FILING A LETTER DATED JANUARY 10, 2014 WITH THE CIT(A), TO THIS EFFECT. 2. IN TAXING INCOME OF RS.12,30,14,130 EARNING BY THE ANOTHER TAXPAYER [IN BNP PARIBAS INDIA SOLUTIONS PVT LTD (BNP SOLUTIONS)]AS INCOME IN THE HANDS OF THE APPELLANT [I . E . BNP PARIBAS SECURITIES INDIA PVT LTD]. 3. WITHOUT PREJUDICE TO GRO UND 2 ABOVE, BY TAXING THE GROSS AMOUNT RECEIVED BY BNP SOLUTIONS AMOUNTING TO RS.12,30,14,130 IN THE HANDS OF THE APPELLANT AND NOT ALLOWING THE APPELLANT TO CLAIM A TAX DEDUCTION FOR THE SUM OF RS.10,69,68,808 BEING EXPENSES INCURRED TO EARN THE SUBJECT INCOME. 4. IN NOT DUE WEIGHTAGE TO THE FOLLOWING EVIDENCES THAT WERE SUBMITTED BY THE APPELLANT TO THE CIT(A) WHICH DEMONSTRATES THAT THE INCOME OF RS.12,30,14,130 RECEIVED BY BNP SOLUTIONS FROM BNP PARIBAS SA, HONG KONG BRANCH (BNP HK) DID NOT PERTAIN TO THE APPELLANT AND THAT THE EXPENSES OF RS.10,69,68,808 EXPENDED BY BNP SOLUTIONS TOWARDS EARNING THIS INCOME DID NOT PERTAIN TO THE APPELLANT. A) LETTER DATED FEBRUARY 22, 2013 ISSUED BY BNP SOLUTIONS TO ITS STATUTORY AUDITOR; AND B) CERTIFICATE DATED M ARCH 2, 2013 ISSUED BY THE STATUTORY AUDITOR TO BNP SOLUTIONS. 5. IN DECIDING ON TAXING THE SUM OF RS.12,30,14,130 IN THE HANDS OF THE APPELLANT BY SOLELY RELYING ON A POORLY WORDED LETTER DATED NOVEMBER 22, 2011 THAT WAS FILED BY THE APPELLANT BEFORE TH E LEARNED AO AND NOT APPRECIATING ALL THE EVIDENCES THAT WERE SUBMITTED IN ENTIRETY. 6. WITHOUT PREJUDICE TO GROUNDS 2 TO 5 BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AND SECTION 56 READ WITH SECTION 59 OF THE ACT AGAINST THE APPELLANT TAXING THE SUM OF RS.12,30,14,130 IN THE HANDS OF THE APPELLANT IN THE FIRST YEAR OF ITS OPERATIONS. BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 3 7. IN NOT CONSIDERING JUNE 1, 2008 AS THE DATE OF SET - UP AND THE DATE OF COMMENCEMENT OF THE BUSINESS OF THE APPELLANT, AND TAXING THE INCOME OF RS.12,25,71,917 EARNED BY THE APPELLANT DURING THE PERIOD JUNE 1, 2008 TO DECEMBER 31, 2008 UNDER SECTION 56 OF THE ACT AS INCOME FROM OTHER SOURCES AND NOT UNDER SECTION 28 OF THE ACT AS BUSINESS INCOME. 8. IN CONFIRMING THAT EXPENSES IN THE NATURE OF (A) OPERATING AND OTHER COSTS, (B) PERSONNEL COST AND (C) REGISTRATION FEES, AGGREGATING TO RS.20,80,75,902 FALL WITHIN THE AMBIT OF SECTION 35D OF THE ACT. 9. IN NOT ALLOWING A DEDUCTION FOR (A) OPERATING AND OTHER COATS, (B) PERSONNEL COST AND (C) REGISTRATION FEES, AGGREGATING TO RS.20,80,75,902 UNDER SECTION 37(1) OF THE ACT. 10. WITHOUT PREJUDICE TO GROUNDS 7 TO 9 ABOVE, IN NOT ALLOWING (A) OPERATING AND OTHER COSTS, AND (B) PERSONNEL COST AS A DEDUCTION UNDER SECTION 57(III) OF THE ACT FROM THE INCOME OF RS.12,2 5,71,917 EARNED BY THE APPELLANT DURING THE PERIOD JUNE 1, 2008 TO DECEMBER 31, 2008. 11. IN NOT DELETING INTEREST LEVIED UNDER SECTION 234B OF THE ACT AMOUNTING TO RS.39,65,445. 12. IN NOT DELETING INTEREST LEVIED UNDER SECTION 234D OF THE ACT AMOUNTING TO RS.7,99,840. 2. BEFORE US, THE LD. COUNSEL SHRI A J IT KUMAR JAIN, SUBMITTED THAT THE MAJOR ADDITIONS CHALLENGED BY THE ASSESSEE RELATES TO FIRSTLY , DISALLOWANCE OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND; SECONDLY , CESSATION OF T AX LIABILITY UNDER SECTION 21(1) AND LASTLY , DISALLOWANCE OF PRE - COMMENCEMENT EXPENSES ON THE GROUND THAT THE SAME ARE NOT QUALIFIED FOR DEDUCTION UNDER SECTION 35 D . AT THE OUTSET HE POINTED OUT THAT, B EFORE THE LD. CIT(A), THE ASSESSEE HAD REPRESENTED ITS CASE, HOWEVER, ON THE DATE OF BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 4 HEARING ON 6 TH JANUARY, 2014 , THE ASSESSEE WAS MADE TO UNDERSTAND OR WAS UNDER THE IMPRESSION THAT FURTHER HEARING WOULD BE PROVIDED BY THE LD. CIT(A) TO CLARIFY AND MAKE FURTHER SUBMISSIONS . IN FACT, ASSESSEE VIDE LETTER DAT ED 10 TH JANUARY, 2014 ( FILED ON 13 TH JANUARY, 2014 ) IN THE OFFICE OF CIT(A) , THE ASSESSEE HAD SPECIFICALLY REQUESTED THE LD. CIT(A) TO GIVE OPPORTUNITY FOR FURTHER HEARING AND TO MAKE ADDITION AL SUBMISSIONS IN SUPPORT OF THE ISSUES RAISED IN THE APPEAL BEF ORE HIM. HOWEVER, THE LD. CIT(A) THEREAFTER, DID NOT GIVE ANY OPPORTUNITY TO THE ASSESSEE AND PASSED THE APPELLATE ORDER ON 21.01.2014. THUS, DUE AND PROPER OPPORTUNITY OF HEARING WAS NOT GIVEN BY THE FIRST APPELLATE AUTHORITY TO GIVE PROPER REBUTTAL WITH RESPECT TO EACH AND EVERY ADDITION MADE BY THE AO . HE FURTHER SUBMITTED THAT, THE ASSESSEE HAS ALSO FILED A PETITION FOR ADMISSION OF ADDITIONAL EVIDENCES ON 9 TH AUGUST, 2016 BEFORE THIS TRIBUNAL, WHEREIN, IT HAS FILED CERTAIN DOCUMENTS IN SUPPORT OF ITS C ASE WHICH GOES TO THE ROOT OF THE ISSUE INVOLVED . THE REASONS FOR ADMISSION HAVE BEEN ELABORATED IN DETAIL IN THE SAID PETITION . THUS, HE REQUESTED THAT NOT ONLY THE ADDITIONAL EVIDENCE S SHOULD BE ADMITTED BUT THE APPEAL OF THE ASSESSEE SHOULD BE HEARD ON MERITS. BY WAY OF AN ALTERNATIVE SUBMISSION, HE SUBMITTED THAT THE ENTIRE MATTER CAN BE RESTORED BACK TO THE FILE OF THE CIT(A) OR AO SO THAT PROPER REPRESENTATION /SUBMISSIONS CAN BE MADE BY THE ASSESSEE, BECAUSE , AT THE STAGE OF THE FIRST APPELLATE AUTHOR ITY ADEQUATE OPPORTUNITY TO THE ASSESSEE WAS NOT GIVEN TO REPRESENT ITS CASE. 4. ON THE OTHER HAND, LD. CIT - DR, MR. N P SINGH SUBMITTED THAT, NOTHING IS BORNE OUT FROM THE ORDER OF THE CIT(A) THAT HE ) HAD REQUIRED THE ASSESSEE TO FURNISH ANY BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 5 ADDITIONAL I NFORMATION OR SUBMIS SION FOR WHICH ANY FURTHER DATE WAS REQUIRED TO BE GIVEN TO THE ASSESSEE . THE ASSESSEE ON ITS OWN VOLITION HAS PRESU MED THAT FURTHER DATE WAS TO BE GIVEN FOR THE HEARING AND, THEREFORE, ASSESSEE CANNOT PLEAD THAT THERE IS LACK OF PROVID ING PROPER OR ADEQUATE OPPORTUNITY OF HEARING BY THE FIRST APPELLATE AUTHORITY. IN ANY CASE, HE SUBMITTED THAT IF THE ADDITIONAL EVIDENCES ARE TO BE ADMITTED THEN THE ENTIRE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION ON THE ENTIRE ISSUES RAISED BEFORE THE TRIBUNAL . 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT MATERIAL PLACED BEFORE US ON THE PRELIMINARY GROUND AS RAISED IN 1 ST GROUND . IN THIS REGARD T HE MAIN CONTENTION OF THE LD. COUNSEL MR. AJIT JAI N BEFORE US IS THAT, THERE HAS BEEN LACK OF PROPER OPPORTUNITY OF HEARING BY THE FIRST APPELLATE AUTHORITY. IN SUPPORT, HE HAD DREW OUR ATTENTION TO LETTER FILED BEFORE THE CIT(A) WHICH HAS BEEN PLACED AT PAPER BOOK AT PAGE 169, THE CONTENTS OF WHICH READS AS UNDER: - JANUARY 10, 2014 THE COMMISSIONER OF INCOME - TAX (APPEALS) - I, 4 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400 012 DEAR SIR, RE: BNP PARIBAS SECURITIES INDIA PVT LTD (BNP SECURITIES) PAN AADCB 4690 F ASSESSMENT YEAR (A Y) 2009 - 10 APPEAL NO: IT - 148/11 - 12 APPEAL FILED UNDER SECTION 246A(1)(A) OF THE INCOME - TAX ACT, 1961 WE REFER TO THE APPEAL SUBMITTED BY OUR CLIENT, BNP SECURITIES IN RESPECT OF THE AY 2009 - 10. IN THIS RESPECT AND FURTHER TO OUR MEETING ON JANUARY 6, 2014 IN CONNECTION WITH THIS APPEAL, WE UNDERSTAND THAT A FURTHER HEARING WILL BE SCHEDULED TO DISCUSS CERTAIN ASPECTS OF THE APPEAL PRIOR TO YOUR OFFICE PASSING AN ORDER DISPOSING THE APPEAL. BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 6 FURTHER, AS DISCUSSED, WE, ON BEHALF OF OUR CLIENT BNP SECURIT IES, WILL MAKE ADDITIONAL SUBMISSION IN SUPPORT OF THEIR APPEAL TO FURTHER ASSIST YOU IN DECIDING THE MATTER AS PER THE LAW. YOURS FAITHFULLY, SD/ - (XXX) IT APPEARS THAT, AFTER FILING OF THIS LETTER ON 13 TH JANUARY, 2014, THE LD. CIT(A) HAS NOT GIVEN ANY D ATE OF HEARING TO THE ASSESSEE AN D INSTEAD ORDER HAS BEEN PASSED BY HIM ON 21 ST JANUARY, 2014. FROM THE AFORESAID LETTER, IT APPEARS THAT, ASSESSEE WANTED TO FILE CERTAIN ADDITIONAL SUBMISSIONS AND WAS UNDER THE IMPRESSION THAT FURTHER HEARING WOULD B E SCHEDULED BY LD. CIT(A) TO DISCUSS CERTAIN ASPECTS ON THE ISSUES RAISED IN THE FIRST APPEAL , H OWEVER, THE LD. CIT(A) HAS DECLINED TO ENTERTAIN SUCH A REQUEST. THOUGH MATTER OF OPPORTUNITY OF HEARING IS THE DISCRETION OF THE APPELLATE AUTHORITY OR THE COU RT, HOWEVER, THE CARDINAL RULE OF JUSTICE IS TO PROVIDE DUE AND EFFECTIVE OPPORTUNITY TO THE LITIGANT TO REPRESENT ITS CASE, UNLESS LITIGANT IS FOUND TO INVOLVE IN DELAYING TACTICS OR THERE IS CONSCIOUS LATCHES ON HIS PART. I N THE INTEREST OF SUBSTANTIAL J USTICE AND ON THE FACTS OF THE CASE , WE FOUND THAT THERE IS LACK OF PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE IN A PROPER PERSPECTIVE AND THEREFORE, TH IS CASE NEEDS TO BE REMANDED BACK FOR PROPER ADJUDICATION. APART FROM TH E AFORESAID FACT , TH E ASSESSEE HAS ALSO FILED CERTAIN ADDITIONAL EVIDENCES VIDE PETITION DATED 8TH AUGUST, 2016 F ILED ON 9 TH AUGUST, 2016, WHEREIN, CERTAIN DOCUMENTARY EVIDENCES HAVE BEEN FILED AFTER GIVING DETAIL REASONS. LOOKING TO THE OVERALL FACTS AND CIRCUMSTANCES, WE AR E OF THE OPINION THAT ALL THE ISSUES RAISED BEFORE US IN THE GROUNDS OF APPEAL SHOULD BE REST ORED BACK TO THE FILE OF THE AO AND THIS PRECISELY HAS BEEN CONTENDED BY THE LD. CIT DR BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 7 ALSO. ACCORDINGLY, WE DIRECT THAT TH E ASSESSEE TO FILE THE ADDITIONAL EVIDE NCES BEFORE THE AO, WHO SHALL EXAMINE THE SAME AND DECIDE THE ISSUE S AFRESH AND IN ACCORDANCE WITH THE LAW . THE AO WILL ALSO ADJUDICATE THE OTHER ISSUES RAISED IN THIS APPEAL AFRESH AFTER GIVING DUE AND EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASS ESSEE SHALL ALSO ENSURE THAT IT COOPERATE S WITH THE AO TO PRESENT ITS CASE AND IS FREE TO FILE ANY EVIDENCES /DOCUMENTS OR SUBMISSIONS IN SUPPORT OF ITS CASE. 7. WITH THE ABOVE OBSERVATION, ALL THE GROUNDS RAISED HERE IN THIS APPEAL ARE REMANDED BACK TO TH E FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW. ACCORDINGLY , THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND AUGUST , 2016. SD/ - SD/ - ( ) ( ) ( D KARUNAKAR RAO ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 22ND AUGUST , 2016 / COPY TO: - 1 ) / THE APPLICANT . BNP PARIBAS SECURITIES INDIA P LTD ITA NO. 3280 /MUM/2014 8 2 ) / THE RESPONDENT. 3) THE CIT (A) - 1 , MUMBAI . 4 ) THE COMMISSIONER OF INCOME TAX - 1 6 / CONCERNED__ , MUMBAI . 5 ) D , , / THE D.R. D BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS