Adroitec Information Systems Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 3666/DEL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1752 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-10-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 29-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAILSWAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A , NEW DELHI) BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.3666 /DEL/2011 ASSESSMENT YEAR : 2001-02 ADROITEC INFORMATION SYSTEMS PVT. LTD., VS. DCIT, CIRCLE I(1), D-194, 2 ND FLOOR C R BLDG., DELHI OKHLA INDUSTRIAL AREA PHASE I, NEW DELHI-110 020 GIR / PAN:AAACH2422A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. D. KLAPILA, ADV. SHRI R. R. MAURYA ADV. SHRI SANJAY KUMAR, ADV. RESPONDENT BY : SHRI K K JAILSWAL, DR DATE OF HEARING : 06.10.2015 DATE OF PRONOUNCEMENT : 27.11.2015 ORDER PER KULDIP SINGH, JM: THE APPELLANT M/S. ADROITEC INFORMATION SYSTEMS PV T. LTD., NEW DELHI BY FILING THE PRESENT APPEAL UNDER INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) SOUGHT TO SET ASIDE THE IMPU GNED ORDER DATED 24.06.2011 PASSED BY LD. CIT(A) IV, DELHI FOR THE A SSESSMENT YEAR 2001- 02 ON THE GROUNDS INTER ALIA THAT: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - IV ( HEREINAFTER REFERRED TO AS 'THE COMMISSIONER OF INCOME TAX (APP EALS)' ) ERRED ITA NO3666/DEL/2011 2 ON FACTS AND IN LAW IN DISMISSING THE APPEAL OF THE APPELLANT ON VARIOUS GROUNDS. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED O N FACTS AND IN LAW IN CONFIRMING THE ALLOCATION OF INTEREST COS T AND THE MANAGEMENT COST TO THE STPI UNIT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED O N FACTS AND IN LAW IN CONFIRMING THE ALLOCATION OF THE EXPENSES RELATING TO ACCOUNTS DEPARTMENT, AUDIT FEE AND EXPENSES RELATED TO RAVI KUMAR ON THE GROUND THAT THE ASSESSEE HAD NOT OBJECTED TO SUCH ALLOCATION. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED O N FACTS AND IN LAW IN STATING THAT THE APPELLANT DID NOT AVAIL OF THE OPPORTUNITY GIVEN TO IT FOR EXPLAINING ITS CASE, WHEN NO REAL O PPORTUNITY WAS PROVIDED. 5. THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED ON FACTS AND IN LAW IN RELYING ON THE REPORT FROM THE ASSESSING OFFICER, WHEREIN IT WAS STATED THAT THE APPELLANT HAD NO OBJECTION AGAI NST ALLOCATION OF MANAGEMENT COST AND THAT DESPITE PROVIDING OPPORTUN ITY, THERE WAS NO COMPLIANCE BY THE APPELLANT. NO OPPORTUNITY WAS PRO VIDED TO THE APPELLANT, WHICH HAS BEEN SUBMITTED TO THE INCOME T AX COMMISSIONER (APPEALS) IN LETTER DATED 15.07.2011. 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE: DURI NG THE PROCESSING OF INCOME TAX RETURN FILED BY THE APPELLANT FOR THE AS SESSMENT YEAR 2001-02 DECLARING INCOME OF RS.2,09,70,130/-, THE CASE WAS SUBJECTED TO SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS SERVED UPON THE AS SESSEE. 3. THE ASSESSEE COMPANY IS INTO THE MANUFACTURING O F COMPUTER HARDWARE AND SOFTWARE AND PROVIDING RELATED SERVICE S HAVING THREE UNITS OUT OF WHICH UNIT AT BANGALORE IS QUALIFIED FOR EXEMPTI ON U/S 10A OF THE ACTS. SHRI AJAY BHAGWANI, CA AND SHRI RAJEEV BHASIN & MS. ROZY SACHDEVA, ARS ON BEHALF OF THE ASSESSEE FIELD NECESSARY DETAI LS AND THE CASE WAS ALSO DISCUSSED WITH THEM. THE ASSESSEE IS FOUND TO BE E NGAGED IN THE BUSINESS OF DISTRIBUTION OF PRODUCTS MANUFACTURED BY M/S. AUTO DESK INC. IN INDIA FROM ITA NO3666/DEL/2011 3 HEAD OFFICE SITUATED AT DELHI. THE ASSESSEE HAS AL SO TWO STP UNITS IN DELHI AND BANGALORE, UNDERTAKING VARIOUS ASSIGNMENTS AND INCOME OF THESE TWO UNITS IS EXEMPTED U/S 10A OF THE ACT. SO, SEPARATE ACCOUNTS OF ALL THE THREE UNITS I.E. TAXABLE ENTITY AND STP UNITS AT BANGALOR E AND DELHI WERE MENTIONED AND IT IS OBSERVED THAT THE ASSESSEE HAS NOT ALLOCATED COMMON EXPENSES TO ALL THE THREE UNITS. ALL THE EXPENSE O F SENIOR MANAGEMENT, ACCOUNTS DEPARTMENT, AUDIT FEE AND INTEREST COSTS E TC. WERE BOOKED INTO THE HEAD OFFICE I.E. THE TAXABLE ENTITY. FROM THE SCRU TINY OF ACCOUNTS, IT HAS COME TO THE NOTICE DURING THE YEAR UNDER ASSESSMENT THAT FUNDS HAVE INITIALLY FLOWN TO THE STP UNIT AT BANGALORE FOR ITS ESTABLISHMENT BUT THE INTERESTS COST DEBITED TO THIS UNIT IS ONLY RS.65,461/- WHICH ARE BANK CHARGES. NO ALLOCATION OF INTEREST COST BORNE BY THE BUSINESS A S A WHOLE HAS BEEN MADE TO THE EXEMPT ENTITY. SO, THE P & L OF SPT UNITS IS E XEMPT U/S 10A AND THE INCOME IS ASSESSED AT RS.1,72,18,810/-. 4, THE ASSESSEE BY CHALLENGING THE ASSESSMENT ORDER CARRIED THE MATTER BEFORE LD. CIT(A) WHO HAS DISMISSED THE APPEAL. FE ELING AGGRIEVED, ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 5. LD. A.R. OF THE APPELLANT CHALLENGING THE IMPUGN ED ORDER, CONTENDED THAT NO OPPORTUNITY OF BEING HEARD HAS BEEN PROVIDE D BY THE A.O. AS WELL AS LD. CIT(A) NOR ANY ADDITIONAL EVIDENCE HAS BEEN EN TERTAINED BY LD. CIT(A) DURING APPELLATE PROCEEDINGS AND REFERRED TO PARA 1 1 OF THE IMPUGNED ORDER THAT LD. CIT(A) HAS WRONGLY CONFIRMED THE ALLOCATIO N OF INTEREST COST AND THE MANAGEMENT COST TO STPI UNITS. 6. ON THE OTHER HAND, LD. D.R. IN ORDER TO REPELL T HE ARGUMENTS ADDRESSED BY THE LD. A.R., RELIED UPON THE ORDER OF LD. CIT(A ) AND PRAYED FOR DISMISSAL OF THE APPEAL. ITA NO3666/DEL/2011 4 7. UNDISPUTEDLY, THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURING OF COMPUTER HARDWARE AND SOFTWARE AND PROVIDING OTH ER RELATED SERVICES, HAVING THREE UNITS OUT OF WHICH TWO UNITS ARE ELIGI BLE FOR EXEMPTION U/S 10A OF THE ACT AND TO DIVERSIFY THE EXPENSES AND ITS VA LUE ADDED BUSINESS, THE ASSESSEE HAD SET UP IN MARCH 2000 TWO STPI UNITS; O NE AT BANGALORE AND ANOTHER AT NEW DELHI TO PROVIDE THE SERVICES. 8. THE ASSESSEE CLAIMED EXPENSES ALLOCATED TO STPI UNITS VIZ. MANAGEMENT COST AT RS.34,32,356/-, ACCOUNTS DEPARTM ENT COST RS.8,98,767/-, AUDIT FEES RS.1,65,956/-, MR. RAVI KUMAR EXPENSES R S.81,000/- AND INTEREST EXPENSES OF RS.1,07,32,468/-. THE ASSESSEE STATED THATS THESE EXPENSE ARE ALLOCATED AND APPORTIONED TO STPI UNITS AND ARE THE EXPENSES OF STPI UNITS AT DELHI. FUND FLOW STATEMENT OF STPI UNITS DURING THE YEAR UNDER ASSESSMENT STATED TO HAVE BEEN RELATED TO STPI UNIT AT BANGALORE BUT THE INTEREST COST DEBITED TO THE UNIT WAS ONLY RS.65,46 1/- AND LD. CIT(A) HAS TABULATED THE COMMON COST IN PARA 3 OF THE IMPUGNED ORDER. 9. A BARE PERUSAL OF PARA 10 AND 11 OF THE IMPUGNED ORDER GO TO PROVE THAT INSTEAD OF GOING INTO THE MERITS OF APPLICABIL ITY OF SECTION 10A FOR ALLOCATION OF INTEREST COST AND MANAGEMENT COST TO STPI UNITS, LD. CIT(A) HAS MERELY RELIED ON THE ASSESSMENT ORDER DATED 24. 03.2004 PASSED BY THE A.O. AND REMAND REPORTS DATED 25.04.2011 AND 25.04. 2011 SUBMITTED BY THE A.O. FOR FACILITY OF REFERENCE, PARA 10 AND 11 OF THE IMPUGNED ORDER PASSED BY LD. CIT(A) ARE REPRODUCED AS UNDER: 10. MY LD. PREDECESSOR REFERRED THE MATTER TO THE ID. AO, VIDE HIS LETTER NO. 159 DATED 16.02.2009. A REMINDER WAS SEN T ON 27.01.2010 AND LATER ON 10.01.2011. A REMAND REPORT HAS BEEN F ILED, VIDE LETTER NO. 3 DATED 21-03.2011, RECEIVED BY ME ON 08.04.201 1. IT WAS STATED THAT ON THE ISSUE OF ALLOCATION OF ACCOUNTS DEPARTM ENT COST OF RS.3,98,767/- AND AUDIT, FEE OF RS.1,65,956/-, THE APPELLANT DOES NOT HAVE SERIOUS OBJECTION AGAINST ALLOCATION OF COST. THUS, THE ADDITION ITA NO3666/DEL/2011 5 MAY BE UPHELD ON THE ISSUES. INSOFAR THE MANAGEMENT COST OF RS.34,32,356/- AND INTEREST EXPENSE OF RS.1,07,32,4 68/-, THE ID. AO STATED THAT HE HAD OBJECTION TO THE ADMISSION OF TH E ADDITIONAL EVIDENCE. ANOTHER REPORT WAS FILED VIDE LETTER NO. 31 DATED 25.04.2011.IT WAS ALLEGED THAT OPPORTUNITY WAS GIVE N TO THE ASSESSEE TO EXPLAIN THE FUND FLOW STATEMENT AND ALSO INTERES T ATTRIBUTABLE TO THE NON-STPI UNIT AS WELL AS THE SALARY EXPENDITURE DEBITED TO THE STPI UNIT BUT THERE HAS BEEN NO COMPLIANCE. IT WAS STATED THAT THE ASSESSEE WAS NOT SERIOUS IN PURSUING THE REMAND PRO CEEDINGS BEFORE THE LD. AO. AS SUCH, THE FUND FLOW STATEMENT SUBMIT TED BY THE ASSESSEE MAY BE REJECTED AND THE ACTION OF THE AO M AY BE CONFIRMED ON THE ISSUES. 11. COPIES OF THE REMAND REPORT WAS GIVEN TO THE A SSESSEE TO WHICH SHRI AJAY RISHI, MANAGER (ACCOUNTS) APPEARED. HE WAS SPECIFICALLY ASKED WHY THE ADDITIONAL EVIDENCE/ARGU MENTS HAD NOT BEEN FILED BEFORE THE AO TO WHICH THERE WAS NO RESP ONSE FROM THE ASSESSEE. WHEN SPECIFICALLY QUESTIONED ABOUT A REJO INDER TO THE REMAND REPORTS OR ANY ARGUMENT, IT WAS STATED THAT THE ASSESSEE HAD NO REPLY TO GIVE. 10. A FURTHER PERUSAL OF PARA 10 AND 11 OF THE IMPU GNED ORDER REPRODUCED ABOVE GOES TO PROVE THAT EXCEPT ISSUING REMINDERS D ATED 27.01.2010 AND 10.01.2011 BY THE A.O. TO THE ASSESSEE NO EFFORTS H AVE BEEN MADE TO SERVE THE SAME ON ASSESSEE TO RESPOND TO THE QUERIES RAIS ED BY LD. CIT(A) DURING APPELLATE PROCEEDINGS CALLING REMAND REPORT FROM TH E A.O. FURTHERMORE, THE FACTS ENUMERATED IN PARA 11 OF THE IMPUGNED ORDER G OES TO PROVE THAT WHEN LD. A.R. SHRI AJAY RISHI, MANAGER ACCOUNTS HAD BEEN PUTTING IN APPEARANCE BEFORE LD. CIT(A) DURING APPELLATE PROCEEDINGS, IT IS UNBELIEVABLE THAT THE ASSESSEE HAS NOT PREFERRED TO RESPOND TO THE LETTER S (SUPRA) ISSUED BY A.O. DURING REMAND PROCEEDINGS. IT APPEARS THAT THE A.O . HAS MECHANICALLY CONDUCTED THE REMAND PROCEEDINGS EX-PARTE AND SUBMI TTED THE REMAND REPORT WITH THE INTENTION TO RATIFY HIS OWN ORDER. ITA NO3666/DEL/2011 6 11. NOT ONLY THIS, LD. CIT(A) HAS MENTIONED IN PARA 11 O THE IMPUGNED ORDER THAT HE WAS SPECIFICALLY ASKED AS TO WHY THE ADDITIONAL EVIDENCE HAD NOT BEEN FILED BEFORE THE A.O. TO WHICH THERE WAS N O RESPONSE FROM THE ASSESSEE AND THIS FACT DOES NOT FIND CORROBORATIO N FROM THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE LD. CIT(A) ALONG WITH ANNEXURES, LYING AT PAGE 30-89 OF THE PAPER BOOK. LD. CIT(A) HAS EVEN REFERRED IN PARA 11 OF THE ORDER THAT WHEN SPECIFICALLY QUESTIONED ABOUT THE FILING OF REJOINDER TO THE REMAND REPORT OR ANY ARGUMENT, IT WAS STATED THAT THE ASSESSEE HAD NO REPLY TO GIVE. ALL THESE FACTS GO TO PROVE THAT NO OPPORTUNITY OF BEING HEARD HAS BEEN GIVEN TO THE AS SESSEE DURING THE REMAND PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS DESPIT E FILING OF THE DETAILED SUBMISSIONS ALONG WITH NECESSARY ENCLOSURES LYING A T PAGE 30-89 OF THE PAPER BOOK. 12. KEEPING IN VIEW THE CARDINAL PRINCIPLE OF NATUR AL JUSTICE, BOTH A.O. AS WELL AS LD. CIT(A) BEING QUASI JUDICIAL AUTHORITY , WERE UNDER OBLIGATION TO ADHERE TO THE RULE OF NATURAL JUSTICE BY PROVIDING PROPER OPPORTUNITY OF BEING HEARD TO THE PARTIES, WHICH THEY HAVE FAILED TO PRO VIDE, SO WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDER IS NOT LIAB LE TO BE SUSTAINED, HENCE HEREBY SET ASIDE AND FILE IS REQUIRED TO BE RESTORE D TO LD. CIT(A) FOR FRESH DECISION AFTER PROVIDING EFFECTIVE OPPORTUNITY OF B EING HEARD TO THE PARTIES. CONSEQUENTLY, PRESENT APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV., 2015. SD./- SD./- ( N. K. SAINI) (KULDIP SIN GH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 27.11.2015 SP ITA NO3666/DEL/2011 7 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 23/11 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23,26/11 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 27/11/2015 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 27/11 SR. PS/PS 7 FILE SENT TO BENCH CLERK 27/11 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER