DCIT, New Delhi V. M/s. Fidelity Business Services India (P) Ltd., New Delhi

ITA 4335/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3774 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETMALA MOHANANEY
• Assessee Lawyers: R P MALL; C S AGGARWAL SALIL AGGARWAL
• Keywords: Transfer pricing; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.4335/D/2010 ASSESSMENT YEAR :2004-05 DCIT, VS. M/S FIDELITY BUSINESS SERVICES INDIA CIRCLE 11(1), (P) LTD. (FORMERLY KNOWN AS FIDELITY NEW DELHI INFORMATION SYSTEMS COMPANY INDIA (P) LTD.), 84E, C-6, STREET OFF CENTRAL AVENUE, SAINIK FARMS, ND PAN NO.AAACF 6175E (APPELLANT) (RESPONDENT) APPELLANT BY : MS. GEETMALA MOHANANEY, CIT- DR RESPONDENT BY : S/SHRI C.S. AGGARWAL, SALIL AGGARWAL & R.P. MALL, ADVOCATES ORDER PER K.G. BANSAL: AM: THE ONLY GROUND TAKEN BY THE REVENUE IN THIS CASE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF `4,04,10,424/- MADE BY THE ASSESSING OF FICER IN RESPECT OF DEDUCTION U/S 10A OF THE INCOME-TAX ACT, 1961. 1.1 IN THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE MOVED A NOTICE OF MOTION UNDER RULE 27 OF THE I.T. RULES, 1963. IN THIS NOTICE, IT IS INTER ALIA MENTIONED THAT THE ADDITIONS ON MERITS MADE BY THE ASSESSING OFFICER HAVE BEEN FULLY DELETED BY THE LEARNED CIT(A). IN VIEW THEREOF, TH E ASSESSEE DID NOT MOVE AN APPEAL BEFORE THE TRIBUNAL. HOWEVER, THE ASSESSING OFFICER HAS PREFERRED APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A). IN VIEW THEREOF, THE ASSESSEE WANTS TO SUPPORT THE ORDER OF THE LEARNED CIT(A) UNDER THE AFORES AID RULE 27. THE GROUND 4335-2010-FBSI 2 ON WHICH THE ORDER OF THE LEARNED CIT(A) IS SOUGHT TO BE SUPPORTED IS THAT THE LEARNED CIT(A) ERRED BOTH ON FACTS AND IN LAW IN UPHOLD ING THE VALIDITY OF PROCEEDINGS U/S 147 OF THE ACT. ONE MORE GROUND HAS BEEN TAKEN WHICH IS IN THE NATURE OF THE ARGUMENT IN SUPPORT OF THE AFORESAID GROU ND AND IT IS MENTIONED THAT THE PROCEEDINGS U/S 147 HAVE BEEN INITIATED MERELY ON CHANGE OF OPINION AND THE PRECONDITION MENTIONED IN PROVISO TO SECTION 147 IS NOT SATISFIED. 1.2 SINCE THE GROUND RAISED BY THE ASSESSEE UNDER RULE 27 IS PRELIMINARY IN NATURE, WE PROCEED TO DECIDE THE SAME AT THE OUTSET. 2. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE NO.27 OF THE PAPER BOOK, WHICH CONTAINS NOTES TO THE TAX COMPUTATION. N OTE NO.2 DEALS WITH THE DEDUCTION U/S 10A OF THE ACT. IN THIS NOTE, IT IS IN TER ALIA MENTIONED THAT THE COMPUTATION OF DEDUCTION U/S 10A IS IN ACCORDANCE WIT H THE PROVISIONS OF THE ACT, WHICH HAS BEEN SPECIFIED IN FORM NO.56F ENCLOSED WITH THE RETURN. FURTHER, OUR ATTENTION HAS BEEN DRAWN TOWARDS LETTER DATED 07.09.2006, ADDRESSED TO THE ASSESSING OFFICER, PLACED IN THE PAPER BOOK ON PAGE NOS. 29 TO 31. PARAGRAPH NO.8 DEALS WITH ELIGIBILITY FOR DEDUCTION U/S 10A. IT IS INTER ALIA MENTIONED THAT THE AUDITORS REPORTS ISSUED U/S 10A OF THE ACT IN FORM NO .56F IN RESPECT OF GURGAON AND BANGLORE UNITS HAVE BEEN FILED ALONG WITH THE RETURN O F INCOME. OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS LETTER DATED 11.09.2006, ADD RESSED TO THE TPO, WHICH HAS BEEN PLACED IN PAPER BOOK ON PAGE NOS.32 TO 34 . ITEM NO.(III) OF THE LETTER MAKES A REFERENCE TO ANNEXURE-B, BEING FORM NO.56F. ANNEXURE-B CONTAINS THE REPORTS OF THE AUDITORS, PRICE WATERHOUSE CAS, IN FOR M NO.56F. THE ANNEXURES SHOW THE DEDUCTION AT `3,90,68,242/- AND `4,84,51,693 /- FOR THE TWO UNITS. OUR ATTENTION HAS ALSO BEEN DRAWN TO LETTER DATED 20.07.2009 ADDRESSED TO THE ASSESSING OFFICER, IN WHICH IT IS INTER ALIA MENTIONED T HAT HE HAS CONSIDERED THE DEDUCTION OF `4,84,51,693/- FOR THE BANGLORE UNIT ONLY WITHOUT CONSIDERING THE DEDUCTION OF `3,90,68,242/- FOR THE GURGAON UNIT. TH IS LETTER HAS BEEN WRITTEN IN 4335-2010-FBSI 3 RESPONSE TO NOTICE U/S 148 AND THE ASSESSING OFFICER HAS BEEN REQUESTED TO ASSESS THE TOTAL INCOME AT NIL. THE CASE OF THE LEARNED COUNSEL O N THE BASIS OF AFORESAID EVIDENCES IS THAT THE ASSESSEE HAD FILED TWO REPORTS IN THE C OURSE OF ORIGINAL ASSESSMENT. THEREFORE, INITIATION OF PROCEEDINGS U/S 147 ON THE FOOTING THAT ONLY ONE REPORT HAD BEEN FILED WAS BAD IN LAW. 2.2 IN REPLY, THE LEARNED CIT-DR OBJECTED TO THE APPLICATI ON UNDER RULE 27 ON THE GROUND THAT THE ASSESSEE COULD HAVE FILED THE CROSS APPEA L OR THE CROSS OBJECTION, ESPECIALLY IN THE LIGHT OF THE FACT THAT THE APPEAL HAD B EEN DECIDED BY THE LEARNED CIT(A) AGAINST THE ASSESSEE ON THIS ISSUE. FURTHER, IT WAS SUBMITTED THAT THE REVENUE HAD FILED THE APPEAL ON 22.09.2010. THE APPLICATION HA S BEEN FILED ON 10.02.2011. THEREFORE, THERE IS A GAP OF ABOUT 5 MONTH S. THE ASSESSING OFFICER HAD EXAMINED THE RECORDS AFTER MAKING ORIGINAL ASSESSMENT AND IT WAS SPECIFICALLY FOUND THAT FORM 56F IN RESPECT OF ONE UNIT HAD NOT BEEN FILED ALONG WITH THE RETURN OF INCOME. THEREFORE, THE DEDUCTION WAS WRONGLY ALLOWED IN RESPECT OF THIS UNIT. THIS WAS A MATTER OF FACT, ON THE BASIS OF WHICH HE CAME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. THEREFORE, IT HAS BEEN AGITATED THA T THE GROUND TAKEN BY THE ASSESSEE MAY BE REJECTED IN LIMINE. 2.3 IN REJOINDER, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE IS ENTITLED TO TAKE UP THIS GROUND UNDER RULE 27 EVEN IN SPITE OF THE FA CT THAT CROSS APPEAL OR CROSS OBJECTION HAS NOT BEEN FILED. IN FACT, RULE 27 COMES IN TO OPERATION WHEN CROSS APPEAL OR CROSS OBJECTION HAS NOT BEEN FILED. THE APPLIC ATION CAN BE FILED AT ANY TIME DURING THE PENDENCY OF THE APPEAL. NO NEW FACT IS REQ UIRED TO BE FOUND WHILE DECIDING THIS GROUND AND, THEREFORE, THERE IS NO BAR ON T HE POWER OF THE TRIBUNAL TO ENTERTAIN THE GROUND. IT IS FURTHER SUBMITTED THAT THE A MOUNT OF INCOME ESCAPED ASSESSMENT HAS BEEN WRONGLY MENTIONED IN THE NOTE OF SATIS FACTION. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S MADE BEFORE US. RULE 27 STATES THAT THE RESPONDENT, THOUGH HE MAY NOT HAV E APPEALED, MAY SUPPORT 4335-2010-FBSI 4 THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED A GAINST HIM. THE ASSESSEE HAD TAKEN GROUND NO.1 BEFORE THE LEARNED CIT(A) TO THE EFFECT THAT THE ORDER OF REASSESSMENT PASSED BY THE ASSESSING OFFICER U/S 1 43(3) READ WITH SECTION 147 OF THE ACT FOR ASSESSMENT YEAR 2004-05 IS BAD IN LA W AND VOID AB INITIO AND LIABLE TO BE QUASHED. THIS GROUND WAS DECIDED AGAINST T HE ASSESSEE BY THE LEARNED CIT(A) BY MAKING FOLLOWING OBSERVATIONS:- I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSION MADE BY AR. A COPY OF THE WRITTEN SUBMISSI ONS DATED SEPTEMBER 07, 2006 STATED TO HAVE BEEN FILED BEFORE THE ASSESSIN G OFFICER IS FILED BEFORE ME. IN THE SAID SUBMISSION THE A SSESSEE HAS EXPLAINED HOW IT FULFILLED THE CONDITIONS NECESSARY FOR ALLOWANCE OF DEDUCTION U/S 10A OF THE ACT. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAD PASSED HIS ASSESSMENT ORDER WHEREBY DEDUCTION U/S 10A WAS GRANTED TO THE ASSESSEE. THE APPELLANT HAS ALSO CLAIMED TO HAVE FILED FORM 56F U/S 10A(5) OF THE INCOME-TAX ACT BEFORE THE TR ANSFER PRICING OFFICER, TO WHOM THE CASE HAD BEEN REFERRED FOR DETERMINING ARMS LENGTH PRICE. HOWEVER, THERE IS NO CATEGORICAL FINDING IN THE ORIGINAL ASSESSMENT ORDER DATED 10.11.2006 THAT FORM NO.56F HAS BEEN FILED BY THE ASSESSEE FOR BOTH THE STPI UNITS AT GURGAON AND BA NGLORE. EVEN WHILE PROVIDING THE REASONS FOR REOPENING U/S 147 TH E ASSESSING OFFICER HAS CLEARLY RECORDED THAT: FROM THE VERIFICATION OF CASE RECORDS, IT HAS BEEN OBSERVED THAT THE ASSESSEE HAD CLAIMED AND WAS ALLOWED EXEMPTION U/S 10A OF THE ACT TO THE EXTENT OF `8,88,62,117/- BUT AS PER THE AUDIT R EPORT, THE ALLOWABLE EXEMPTION WAS ONLY TO THE EXTENT OF `4,84,51,693/-. THE DEDUCTION HAS BEEN ALLOWED IN EXCESS TO THE EXTENT OF `4,04,10,42 4/-. PLEASE EXPLAIN WHY THE SAME SHOULD NOT BE ADDED BACK. IN VIEW OF THE ABOVE REASONS RECORDED THE ASSESSMEN T CANNOT BE SAID TO HAVE BEEN REOPENED ON ACCOUNT OF CHANGE OF OPINION BY THE ASS ESSING OFFICER AND, THEREFORE, THE RATIO OF SUPREME COURT DECISION IN CASE OF CIT VS. KELVINATOR OF INDIA LTD. 228 ITR 488 IS NOT APPLICABLE TO THE FACTS OF PRESE NT CASE. GROUND NOS. 6 & 7 IS ACCORDINGLY DECIDED AGAINST THE APPELLANT. 3.1 ALTHOUGH THE MATTER OF INITIATION OF REASSESSMENT PR OCEEDINGS WAS DECIDED AGAINST THE ASSESSEE BUT THE APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE IN SO FAR 4335-2010-FBSI 5 AS QUANTUM IS CONCERNED BY MENTIONING THAT THE REQUIREMENT OF FILING THE REPORT IS NOT MANDATORY BUT DIRECTORY, AND THAT THE ASSESSEE CAN C LAIM THE DEDUCTION BY FILING THE REPORT FOR THE FIRST TIME IN APPEAL BEFORE THE CIT(A) . THUS, IT IS CLEAR THAT THE GROUND REGARDING REOPENING THE ASSESSMENT WAS DECIDED AGAIN ST THE ASSESSEE. THERE IS NO EXTRAORDINARY DELAY IN TAKING UP THE GROUND BEFORE US AS CAN BE SEEN FROM THE FACT THAT THE APPEAL WAS INITIALLY POSTED FOR HEARING ON 24.11.2010, WHEN IT WAS ADJOURNED TO 10.02.2011. THE APPEAL WAS SUBSEQUENTL Y ADJOURNED TO 05.05.2011 AND FINALLY HEARD ON 12.05.2011. THE GROU ND HAS BEEN FILED ON 12.05.2011 AND A COPY THEREOF WAS SERVED ON THE LEARNED DR PRIOR TO THAT. IN VIEW THEREOF, WE ARE UNABLE TO AGREE WITH THE LEARNED DR THAT THER E IS SUBSTANTIAL TIME GAP BETWEEN FILING OF THE APPEAL BY THE REVENUE AND THE APPL ICATION BY THE ASSESSEE, WHICH DEBARS THE ASSESSEE FROM TAKING THE GROUND. IT IS ALSO CLEAR THAT ALL THE FACTS ARE THERE ON RECORD, AS MENTIONED IN THE SUBMISSI ONS OF THE LEARNED COUNSEL. IN ANY CASE, NO NEW FACT IS SOUGHT TO BE BRO UGHT ON RECORD. IN THIS SITUATION, RULE 27 CLEARLY PERMITS THE RESPONDENT-ASSESSEE T O TAKE UP THIS GROUND, WHICH HAD BEEN DECIDED AGAINST IT. 3.3 COMING TO THE FACTS, THE LETTER DATED 07.09.2006 SHO WS THAT THE ASSESSEE HAD TWO UNITS AT GURGAON AND BANGALORE FOR WHICH AUD ITORS HAD ISSUED REPORTS IN FORM NO.56, WHICH WERE STATED TO HAVE BEEN FILED WITH THE R ETURN OF INCOME. THE LETTER DATED 11.09.2006 ALSO SHOWS THAT TWO SEPARATE FOR MS WERE FILED BEFORE THE TPO SHOWING DEDUCTIONS AT `3,90,68,242/- AND `4,84,5 1,693/-. THE ASSESSEE MADE AVERMENT ABOUT THESE FORMS IN PROCEEDINGS U/S 148 WH ILE FILING LETTER DATED 20.07.2009, IN WHICH IT IS MENTIONED THAT THE ASSESSING OFFICER CONSIDERED DEDUCTION IN RESPECT OF BANGLORE UNIT ONLY. ALL THESE FA CTS LEAD TO A REASONABLE CONCLUSION THAT THE ASSESSEE HAD FILED REPORTS IN RESPECT O F BOTH THE UNITS ALONG WITH THE ORIGINAL RETURN OF INCOME. IN VIEW THEREOF, THE ASSESS MENT COULD NOT HAVE BEEN REOPENED ON THE GROUND THAT EXCESSIVE CLAIM WAS MADE FOR DED UCTION U/S 10A. THIS 4335-2010-FBSI 6 OBSERVATION HAS BEEN MADE BY THE ASSESSING OFFICER BY CONS IDERING ONLY ONE REPORT. THE LEARNED CIT-DR VEHEMENTLY ARGUED THAT ASSESSING OFFICER AND THE LEARNED CIT(A) HAD GIVEN A CLEAR FINDING, ON THE BASIS O F SCRUTINY OF RECORD, THAT ONLY ONE REPORT WAS AVAILABLE. HOWEVER, ON THE BASIS OF FACT S MENTIONED ABOVE, WE ARE OF THE VIEW THAT BOTH THE REPORTS HAD BEEN FILED. IT MAY BE THAT ONE REPORT WENT MISSING FROM THE FILE WHEN IT WAS LATER SCRUTINIZED BY T HE ASSESSING OFFICER/LD. CIT(A). ACCORDINGLY, IT IS HELD THAT THE LEARNED CIT(A ) ERRED IN RECORDING THE FINDING THAT INITIATION OF REASSESSMENT PROCEEDINGS WAS VALID. THE CONSEQUENCE OF THIS FINDING IS THAT THE LIABILITY OF THE ASSESSEE SURVIVES AS PER THE ORDER OF THE LEARNED CIT(A) AND BECOMES FINAL. THIS ALSO MEANS THAT THERE IS NO NEED TO GO INTO THE MERITS OF THE CLAIM. 4. IN RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.17.06.2011. NS COPY FORWARDED TO:- 1. INCOME TAX OFFICER, CIRCLE-11(1), NEW DELHI. 2. M/S FIDELITY BUSINESS SERVICES INDIA (P) LTD. (FORMERLY K NOWN AS FIDELITY INFORMATION SYSTEMS COMPANY INDIA (P) LTD.), 84E, C- 6, STREET, OFF CENTRAL AVENUE, SAINIK FARMS, NEW DELHI. 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).