M/s Smart Cube India Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 5473/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3170 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 21-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Application of stay; Reassessment proceedings
• Section: 10B; 147; 148; 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.5473/DEL/2016 & STAY APPLICATION NO.109/DEL OF 2018 (IN ITA NO.5473/DEL/2016) ASSESSMENT YEAR: 2007-08 M/S SMART CUBE INDIA PVT. LTD. VS INCOME-TAX O FFICER, HAUZ KHAS, NEW DELHI. WARD ((1), NEW DELHI (PAN : AAHCS8978H) (APPELLANT) ( RESPONDENT) ASSESSEE BY: SHRI AJAY VOHRA, SENIOR ADVOCATE, MS DEEPIKA AGARWAL, ADVOCATE DEPARTMENT BY: SHRI S.S. RANA, CIT DR DATE OF HEARING: 27.02.2018 DATE OF PRONOUNCEMENT: 27.02.2018 ORDER PER K.NARASIMHA CHARY, JUDICIAL MEMBER CHALLENGING THE ORDER DATED 22.8.2016 IN APPEAL NO. 480/14-15/69/15-16 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS)-28, NEW DELHI {LD. CIT(A)}, ASSESSEE PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SUBSIDIARY COMPANY OF SMART CUBE LTD., U.K. AND IS A CAPTIVE SERVICE PROV IDER RENDERING INFORMATION 2 TECHNOLOGY ENABLED SERVICES TO ITS ASSOCIATED ENTERP RISES (AE). FOR THE ASSTT. YEAR 2007-08 THEY HAVE FILED A RETURN OF INCOME ON 31.10.2007 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS.4,94,99,936/ - U/S 10B OF THE INCOME-TAX ACT, 1961 (THE ACT). RETURN OF INCOME WAS PROCES SED U/S 143(1) OF THE ACT ACCEPTING THE CLAIM OF THE ASSESSEE U/S 10B OF THE ACT. HOWEVER, STATING THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2010-11 IN THE CASE OF THE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE HAD BEEN CLAIMING DEDUCTION U/S 10B OF THE ACT DESPITE THE FACT THAT THE STPI, NOIDA FROM WHOM THE ASSESSEE HAD BEEN TAKING APPROVAL WAS NOT COMPETENT TO ACCORD APPROVA L FOR DEDUCTION/EXEMPTION U/S 10B OF THE ACT. ON THAT GROUND LEARNED AO SOUG HT TO REOPEN THE ASSESSMENT PROCEEDINGS FOR AY 2007-08 BY ISSUING A NOTICE U/S 1 48 OF THE ACT, IN RESPONSE TO WHICH THE ASSESSEE FILED THE RETURN OF INCOME ON 1. 5.2014 CLAIMING DEDUCTION OF RS.4,95,31,186/- U/S 10A OF THE ACT WITH A REQUEST TO CONSIDER THE SAME. HOWEVER, BY WAY OF ORDER DATED 30.6.2014, LEARNED AO ASSESSED THE INCOME OF THE ASSESSEE AT RS.4,86,20,748/- AGAINST THE RETURN ED INCOME OF NIL, BY DISALLOWING THE DEDUCTION OF RS.4,86,20,748/- U/S 10B OF THE AC T. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE LEARNED CIT(A), LEARNED CIT(A) BY WAY OF IMPUGNED ORDER OBSERVED THA T THE REASSESSMENT PROCEEDINGS ARE ALWAYS INTENDED TO PUT THE REVENUE I N BENEFICIAL POSITION SO AS TO CHARGE ANY INCOME WHICH ESCAPED TAXATION AT AN EARLI ER STAGE, AS SUCH, THE ASSESSEE CANNOT MAKE USE OF THE REASSESSMENT PROCEE DINGS TO CONVERT THE CLAIM ORIGINALLY MADE U/S 10B OF THE ACT INTO A CLAIM U/S 10A OF THE ACT. LEARNED CIT(A), THEREFORE, TURNED DOWN THE CLAIM OF THE ASSESSEE U/ S 10A OF THE ACT. 3 4. CHALLENGING THIS FINDING, THE ASSESSEE IS IN APP EAL BEFORE US. THE ASSESSEE ALSO FILED STAY APPLICATION SEEKING STAY OF DEMAND OF RS.2,57,38,552/- PENDING DISPOSAL OF THE APPEAL. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER HEARING THE COUNSEL, WE DEEM IT JUST AND NECESSARY TO DISPOSE OF THE APPEAL ITSELF INSTEAD OF DISPOSING THE STAY APPLICAT ION, WHILE KEEPING THE APPEAL PENDING, BECAUSE THE DISCUSSION ON THE MERITS OF TH ESE TWO PROCEEDINGS WOULD BE SAME AND OVERLAPPING. LEARNED COUNSEL ON EITHER SI DE AGREED FOR THE SAME AND ARGUED THE MATTER ON MERITS OF THE APPEAL. HENCE T HE STAY APPLICATION HAS BECOME INFRUCTUOUS. WE, THEREFORE, PROCEED TO DISP OSE OF THESE TWO MATTERS BY WAY OF THIS COMMON ORDER. 5. IT IS THE ARGUMENT OF THE LEARNED AR THAT THE CL AIM U/S 10B OF THE ACT IN THE ORIGINAL RETURN THAT WAS FILED U/S 139(1) OF THE AC T WELL WITHIN TIME WAS ACCEPTED BY NOT CHOOSING THE CASE FOR SCRUTINY AND ALLOWING IT TO BE PROCESSED U/S 143(1) OF THE ACT. HOWEVER, WHEN THE ASESSSMENT WAS SOUGHT TO BE REOPENED, THE LEARNED AO WAS UNDER LEGAL OBLIGATION TO ISSUE NOTICE U/S 1 48 OF THE ACT AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO FILE THE RETURN OF IN COME AND FOR ALL PRACTICAL PURPOSES, THE RETURN SO FILED IS THE RETURN U/S 139 (1) OF THE ACT AND ALL OTHER PROVISIONS OF THE ACT WOULD BE APPLICABLE ACCORDING LY. HE, THEREFORE, SUBMITS THAT WHEN ONCE THE CLAIM U/S 10A OF THE ACT WAS PREFERRE D IN THE RETURN SO FILED IN RESPONSE TO SECTION 148 OF THE ACT, LEARNED AO HAS TO ADJUDICATE THE CLAIM U/S 10A OF THE ACT ONLY, BUT NOT ON THE BASIS OF 10B OF THE ACT. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 10A(2) OF THE ACT AR E IN PARI MATERIA WITH THE PROVISIONS U/S 10B OF THE ACT, THEREFORE, THE AO CA NNOT REFUSE TO ALLOW THE DEDUCTION/EXEMPTION CLAIMED BY THE ASSESSEE U/S 10A OF THE ACT WHEN ALL THE CONDITIONS REQUIRED U/S 10A(2) OF THE ACT ARE SATIS FIED. 4 6. HE PLACED RELIANCE ON THE DECISIONS REPORTED IN CITVS N. SANNAMMA, 204 TAXMAN 356 (KAR) AND ITO VS MAHAKAL MANDIR PRABANDH SAMITI, 42 SOT 1 (INDORE TRIB) IN SUPPORT OF HIS SUBMISSION THAT WHEN THE AS SESSEE FILED THE RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT, THE RETURN SO FILED SHALL BE CONSIDERED AS THE RETURN U/S 139(1) OF THE ACT AND THE LEARNED AO CANNOT GO BEYOND THAT RETURN TO THE ORIGINAL ONE TO DISALLOW T HE CLAIM OF THE ASSESSEE U/S 10B OF THE ACT. 7. IN SO FAR AS MERITS ARE CONCERNED, LEARNED AR SU BMITTED THAT IN CIT VS REGENCY CREATIONS LTD., 353 ITR 326 (DEL), THE HON BLE JURISDICTIONAL HIGH COURT INITIALLY REJECTED THE CLAIM OF THE ASSESSEE FOR DED UCTION U/S 10B OF THE ACT FOR WANT OF APPROVAL FROM THE BOARD APPOINTED U/S 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION ) ACT, 1951 (IDR ACT) BUT NOT BY T HE STPI AUTHORITIES. HE SUBMITTED THAT, HOWEVER, IN THE REVIEW PETITION FIL ED BY THE ASSESSEE IN CM NO.19897/2012, THE HONBLE HIGH COURT CONSIDERED TH E REQUEST OF THE ASSESSEE AND DIRECTED THE AO TO EXAMINE THE CLAIM OF THE ALL OWABILITY OF DEDUCTION U/S 10A WITH RESPECT TO THE STPI UNIT. HE FURTHER SUBMITTE D THAT SIMILAR ARE THE FACTS AND THE DIRECTION OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS VALIANT COMMUNICATIONS LTD. ITA 2002/2010 AND BATCH OF CASE S WHEREIN THE HONBLE HIGH COURT THOUGHT IT FIT THAT WHEN ONCE THE DEDUCTION U /S 10B WAS NOT ACCEPTED, THE ALTERNATIVE CLAIM FOR ENTITLEMENT U/S 10A OF THE AC T HAS TO BE CONSIDERED. 8. LEARNED DR, PER CONTRA, BASED HIS SUBMISSIONS ON SECTION 139(1), 80A(5) AND THE PROVISO TO SUB SECTION 1A OF SECTION 10A OF THE ACT AND SUBMITTED THAT INASMUCH AS THE RETURN OF INCOME IN RESPONSE TO SEC TION 148 NOTICE DATED 31.3.2014 WAS FILED ON1.5.2014 I.E BEYOND THE DIREC TED PERIOD OF 30 DAYS IS NOT A 5 VALID RETURN TO BE CONSIDERED AS IF FILED U/S 139( 1) OF THE ACT. HIS FURTHER SUBMISSION IS THAT IN THE CASES RELIED UPON BY THE A SSESSEE, THERE WAS NO DISCUSSION WITH REGARD TO SECTION 80A(5) OR PROVISO TO SECTION 10AOF THE ACT, AS SUCH THEY ARE NOT APPLICABLE TO THE CASE OF THE ASS ESSEE. FURTHER, ISSUANCE OF NOTICE U/S 148 OF THE ACT WAS NOT INVOLVED IN THE D ECISIONS RELIED UPON BY THE ASSESSEE AND IN SUCH CASES THE ALTERNATIVE CLAIM WA S MADE DURING THE ASSESSMENT PROCEEDINGS. HE, THEREFORE, SUBMITTED THAT INASMUC H AS NO CLAIM WAS MADE U/S 10A OF THE ACT IN THE ORIGINAL RETURN AND NO REVISE D RETURN WAS FILED BEFORE THE DUE DATE SPECIFIED UNDER LAW, IN VIEW OF SECTION 80 A(5) AND PROVISO TO SECTION 10A OF THE ACT, THE CLAIM OF THE ASSESSEE FOR DIREC TION U/S 10A OF THE ACT COULD BE COUNTENANCED. 9. WE HAVE CAREFULLY GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IN THIS CASE, THE CLAIM U/S 10 B OF THE ACT MADE IN THE ORIGINAL RETURN OF INCOME WAS ACCEPTED. HOWEVER, SUBSEQUENTL Y, LEARNED AO OPINED THAT FOR WANT OF APPROVAL OF THE AUTHORITY U/S 14 OF THE IDR ACT AND NOT THAT OF THE STPI AUTHORITY, ALLOWING DEDUCTION/EXEMPTION U/S 10B OF T HE ACT WAS BAD AND FOR SUCH PURPOSE HE ISSUED NOTICE U/S 148 OF THE ACT, IN RES PONSE TO WHICH THE ASSESSEE FILED A RETURN OF INCOME ON 1.5.2014 PREFERRING CLA IM U/S 10A OF THE ACT. BOTH THE LEARNED AR AND LEARNED DR ARE PLACING RELIANCE ON T HE DECISION OF THE HONBLE APEX COURT IN CIT VS. SUN ENGINEERING WORKS P. LTD. , 198 ITR 297 (SC). PLACING RELIANCE ON THIS DECISION LEARNED DR ARGUED THAT KE EPING IN VIEW THE OBJECT AND PURPOSE OF THE PROCEEDINGS U/S 147 OF THE ACT, WHIC H ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE, THE ASSESSEE CANNOT RA ISE A CLAIM U/S 10A OF THE ACT IN THE RETURN FILED IN RESPONSE TO THE NOTICE U/S 1 48 OF THE ACT INASMUCH AS SUCH A CLAIM WAS NOT THERE IN THE ORIGINAL RETURN. HOWEVE R, LEARNED AR ARGUED THAT IN 6 THE REASSESSMENT PROCEEDINGS FOR BRINGING TO TAX IT EMS WHICH HAD ESCAPED ASSESSMENT, IT IS ALWAYS OPEN TO THE ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON TAXABILITY OF THE ITEMS AT ALL. HE, THEREFORE, SUBMITTED THAT IT IS OPEN FOR THE ASSESSEE TO CONTEND THAT THE ITEMS SOUGHT TO BE BROUGHT TO TAX BY INITIATING THE PROCEEDINGS U/S 147 OF THE ACT , ARE NONTAXABLE AT ALL, U/S 10AOF THE ACT. 10. FOR PROPER APPRECIATION OF THESE CONTENTIONS, I T IS NECESSARY TO EXTRACT THE RELEVANT PORTION OF THE OBSERVATIONS OF THE HONBLE APEX COURT IN SUN ENGINEERING CASE (SUPRA), WHICH READ AS FOLLOWS: CLAIMS WHICH HAVE BEEN DISALLOWED IN THE ORIGINAL A SSESSMENT PROCEEDING CANNOT BE PERMITTED TO BE REAGITATED ON THE ASSESSMENT BEING REOPENED FOR BRINGING TO TAX CERTAIN INCOME WHICH HAD ESCAPED ASSESSMENT BECAUSE THE CON TROVERSY ON REASSESSMENT IS CONFINED TO MATTERS WHICH ARE RELEVANT ONLY IN RESP ECT OF THE INCOME WHICH HAD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGINAL AS SESSMENT. A MATTER NOT AGITATED IN THE CONCLUDED ORIGINAL ASSESSMENT PROCEEDINGS ALSO CANN OT BE PERMITTED TO BE AGITATED IN THE REASSESSMENT PROCEEDINGS UNLESS RELATABLE TO TH E ITEM SOUGHT TO BE TAXED AS 'ESCAPED INCOME'. INDEED, IN THE REASSESSMENT PROCE EDINGS FOR BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSMENT, IT WOULD BE OPEN TO A N ASSESSEE TO PUT FORWARD CLAIMS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INCOME OR THE NON-TAXABILITY OF THE ITEMS AT ALL. KEEPING IN VIEW THE OBJECT AND PURPOSE OF THE PROCEEDINGS UNDER SECTION 147 OF THE ACT WHICH ARE FOR THE BENEFIT OF THE REV ENUE AND NOT AN ASSESSEE, AN ASSESSEE CANNOT BE PERMITTED TO CONVERT THE REASSESSMENT PRO CEEDINGS AS HIS APPEAL OR REVISION, IN DISGUISE, AND SEEK RELIEF IN RESPECT OF ITEMS EA RLIER REJECTED OR CLAIM RELIEF IN RESPECT OF ITEMS NOT CLAIMED IN THE ORIGINAL ASSESSMENT PROCEE DINGS, UNLESS RELATABLE TO 'ESCAPED INCOME', AND REAGITATE THE CONCLUDED MATTERS. EVEN IN CASES WHERE THE CLAIMS OF THE ASSESSEE DURING THE COURSE OF REASSESSMENT PROCEEDI NGS RELATING TO THE ESCAPED ASSESSMENT ARE ACCEPTED, STILL THE ALLOWANCE OF SUC H CLAIMS HAS TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE THE INCOME TO THAT ORIG INALLY ASSESSED. THE INCOME FOR PURPOSES OF 'REASSESSMENT' CANNOT BE REDUCED BEYOND THE INCOME ORIGINALLY ASSESSED. 11. FROM THE ABOVE IT IS CLEAR THAT IN THE REASSESS MENT PROCEEDING FOR BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSMENT, IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAIMS FOR NON TAXABILITY OF THE SAME. SINCE IN THIS MATTER THE 7 AMOUNT SOUGHT TO BE BROUGHT UNDER TAX BY REASSESSMEN T PROCEEDINGS IS THE SAME AMOUNT WHICH THE ASSESSEE CLAIMS NON TAXABLE U/S 10 A OF THE ACT, WE HOLD THAT THE ASSESSEE CANNOT BE PREVENTED FROM CONTENDING TH E AMOUNT WHICH WAS ORIGINALLY ALLOWED TO BE DEDUCTIBLE U/S 10B IS ALSO DEDUCTIBLE U/S 10A OF THE ACT. THERE IS NO DISPUTE THAT THE AGITATION IN THIS MATT ER RELATES TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME. WE, WHILE RESPECTFULLY F OLLOWING THE DECISION IN THE CASE OF SUN ENGINEERING (SUPRA), HOLD THAT THE ASSE SSEE HAS TO BE PERMITTED TO AGITATE THE GROUND WHICH RENDERS THE ESCAPED INCOME AS NONTAXABLE. 12. NOW COMING TO THE SUBMISSION OF THE LEARNED AR BASING ON THE DECISION OF THE JURISDICTION HIGH COURT IN REVIEW PETITIONS IN REGENCY CREATIONS LTD. (SUPRA) AND VALIANT COMMUNICATIONS (SUPRA), WE FIND THAT IN REGENCY CREATIONS, THE HONBLE JURISDICTIONAL HIGH COURT HELD AS FOLLOWS: WE HAVE CAREFULLY CONSIDERED THE RECORDS AND SUBMI SSIONS. IT APPEARS THAT THE ASSESSEE HAD CLAIMED THE BENEFIT OF SECTION 10A. TH EREFORE, AO MUST IN FAIRNESS CONSIDER THE DOCUMENTS ON THE BASIS OF THE CLAIM AN D ASCERTAIN WHETHER THEY ARE PROPER AND AFTER VERIFYING THEM, PASS APPROPRIATE O RDER AS TO WHETHER THE BENEFIT OF SECTION 10A CAN BE GRANTED. ALMOST SIMILAR WAS THE FINDING OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE VALIANT COMMUNICATIONS LTD. (SUPRA). 13. IN THE PRECEDING PARAGRAPHS, WHILE FOLLOWING TH E DECISIONS OF THE HONBLE HIGH COURT, WE HELD THAT IT IS OPEN TO THE ASSESSEE TO PUT FORTH CLAIM FOR NON TAXABILITY OF THE ESCAPED INCOME IN VIEW OF SECTION 10A OF THE ACT, WHILE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN REGENCY CREATIONS LTD. AND VALIANT COMMUNICATIONS LTD.(SUPR A), WE DEEM IT JUST AND PROPER TO DIRECT THE LEARNED AO TO EXAMINE THE CLAI M OF THE ASSESSEE FOR 8 DEDUCTION U/S 10A OF THE ACT BY AFFORDING AN OPPORTU NITY TO THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE MATTER TO THE FILE OF T HE AO TO CONSIDER THE CASE OF THE ASSESSEE U/S 10A OF THE ACT. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE, AND THE STAY PETITION IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 27.02.2018 SD/- SD/- (G.D. AGRAWAL) (K.NARASIMH A CHARY) PRESIDENT JUDICIAL MEMBER DATED: 27 .02.2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI