Well Flow Drilling Services WLL, Dehradun V. ADIT, Dehradun

ITA 5654/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65385 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 16-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K GUPTA
• Assessee Lawyers: S D KAPILA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 234B

Judgement Text

ITA NO. 5654/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A. NO. 5654/DEL/2011 A.Y. : 2008-09 M/S WELL FLOW DRILLING SERVICES WLL, C/O HEMANT ARORA & CO., CHARTERED ACCOUNTANT, 1, TYAGI ROAD, DEHRADUN 248001 (PAN: AAACW6720G) VS. ASSISTANT DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION), INCOME TAX OFFICE, 13-A, SUBHASH ROAD, DEHRADUN 248001 (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. S.D. KAPILA, ADV. DEPARTMENT BY : SH. D.K. GUPTA, C.I.T. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE ASSESSING OFFICER DATED 07.10.2011 FOR THE ASSESSM ENT YEAR 2007-08 PASSED IN TERMS OF SECTION 143(3)/144 OF THE I.T. ACT. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ASSESSMENT ORDER DATED 7.10.2011 PASSED U/S 143(3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT, 1961 ('THE ACT') IN THE CASE OF M/S WELL FL OW DRILLING SERVICES WLL ('THE APPELLANT') IS BASED UPO N ITA NO. 5654/DEL/2011 2 CONJECTURES, SURMISES, ASSUMING INCORRECT FACTS AND INCORRECT APPLICATION OF LAW. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ASSISTANT DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, DEHRADUN (LD. A.O.) ERRED O N FACTS AND IN LAW IN COMPUTING THE TOTAL INCOME OF TH E ASSESSEE AT ` 23,45,00,960/- AS AGAINST THE RETURNE D LOSS OF ` 2,46,66,668/- IN RESPECT OF CONTRACT FOR HIRING SERVICES OF DRAIN HOLE DRILLING ON INTEGRATED WELL CONCEPT AWARDED TO IT BY THE OIL AND NATURAL GAS CORPORATION LIMITED (ONGC). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO AND THE DISPUTE RESOLUTION PANEL ('DRP') HAVE ERRED IN DISALLOWING THE EXPENDITURE AMOUNTING TO RS.15,90,59,651 RELATING TO RIG EQUIPMENT RENTAL CHARGES AND RS.10,01,17,979 RELATING TO OTHER EXPENSES WITHOUT CORRECTLY APPRECIATING THE FACTS AND EVIDENCES AS BROUGHT OUT BEFORE THEM. ITA NO. 5654/DEL/2011 3 3.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, THE LD AO/DRP HAVE ERRED IN DISALLOWING EXPENSES AMOUNTING TO RS. 25,91,67,630 (15,90,59,651 + 10,01,17,979) AS AFORESAID ON THE GROUND THAT 'DUE TO FURNISHING OF THE INFORMATION AT A VERY LATE STAGE O F ASSESSMENT SUFFICIENT TIME WAS NOT AVAILABLE TO THE AO TO MAKE NECESSARY VERIFICATION' (PARA 4, LINE 8 OF THE IMPUGNED ASSESSMENT ORDER) EVEN THOUGH THE ASSESSEE H AD FURNISHED TIMELY RESPONSES TO AO'S QUERIES BY JULY 2010 AND THE LD. AO ISSUED FURTHER NOTICES FOR HEARING AND N ECESSARY VERIFICATION IN THE MONTH OF DECEMBER 2010 (I.E. AFTE R A LAPSE OF FIVE MONTHS) WHEN THE MATTER WAS GETTING BA RRED BY LIMITATION. 3.2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE TH E LD AO/DRP HAVE ERRED IN DISALLOWING EXPENSES AMOUNTING TO RS. 25,91,67,630 ON THE GROUND THAT 'THE ISSUE OF D EDUCTION OF TAX AT SOURCE HAS NOT BEEN ADEQUATELY EXPLAINED' (PARA 4, LINE 10 OF THE IMPUGNED ASSESSMENT ORDER) WHERE A S THE FACT REMAINS THAT COMPLETE DETAILS OF DEDUCTION OF TA X AT SOURCE ON AFORESAID PAYMENTS WERE FURNISHED WITH TH E LD. ITA NO. 5654/DEL/2011 4 AO AND/OR DRP. THAT THIS ASSERTION OF THE DRP IS BALD A ND WITHOUT ANY BASIS. 3.3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO/DRP HAVE SELFCONTRADICTED THEMSELVES BY, ON ONE HAND, ALLEGING THAT ISSUE OF DEDUCTION OF TAX HAS NOT BEE N ADEQUATELY EXPLAINED AND, ON THE OTHER HAND, IN THE IMMEDIATELY FOLLOWING LINES (AT SAME PARA 4 OF THE IMPUGNED ASSESSMENT ORDER) CONFIRMING THAT THE DETAILS OF TDS MADE BY THE ASSESSEE'S AGENT (M/S HRD) WERE SUBMITTED BUT, ALBEIT, AT A LATE STAGE OF THE PROCE EDINGS. 3.4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD.AO/DRP HAVE ERRED IN DISALLOWING THE SAID EXPENSES AMOUNTING TO RS. 25,91,67,630 ON THE GROUND THAT 'TH E ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE ADEQUATEL Y THAT THE EXPENSES WERE INCURRED WHOLLY AND ADEQUATELY F OR THE BUSINESS' (PARA 4 AT 4TH LAST LINE ON PAGE 3 OF THE IMPUGNED ASSESSMENT ORDER) WHEREAS THERE IS NO DISPUT E ON THE FACTS THAT THE EXPENSES IN QUESTION WERE ACT UALLY RIG EQUIPMENT RENTAL CHARGES AND OTHER RELATED EXPENSES, THE APPELLANT WAS ONLY EXECUTING DRILLING CONTRACTS WIT H ONGC, HAD NO OTHER BUSINESS IN INDIA AND THEREFORE THE SA ID ITA NO. 5654/DEL/2011 5 EXPENSES COULD NOT HAVE BEEN INCURRED FOR ANY PURPO SE OTHER THAN THE BUSINESS OF EXECUTING THE SAID CONTR ACT WITH ONGC. 3.5. THAT THE REIMBURSEMENT OF EXPENSES CLAIMED BY M /S HRD ON COST TO COST BASIS WERE NOT LIABLE FOR DEDUC TION OF TAX BY THE APPELLANT AS THERE WAS NO ELEMENT OF INC OME EMBEDDED IN IT, EVEN THOUGH AT THE TIME OF MAKING PAYMENT ON BEHALF OF THE APPELLANT TO THE RIG OWNERS/VENDORS M/S HRD HAD DULY DEDUCTED TAX AT SOU RCE IN ACCORDANCE WITH LAW. THE LAW IN THIS REGARD HAS BEE N VERY CLEARLY LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PRIVATE LIMITED V. CIT 32 7 ITR456 (SC)[2010]. 3.6. THAT IN FACTS AND CIRCUMSTANCES OF THE CASE AN D THE EXPENSES AMOUNTING TO RS. 25,91,67,630 WHICH TO THE EXTENT HAVE BEEN SUBJECTED TO TDS BY THE APPELLANT A ND IT'S AGENT M/S HRD DESERVE TO BE ALLOWED IN ENTIRETY. 4. THAT THE LD. AO/DRP HAVE ERRED IN CHARGING INTER EST UNDER SECTION 234B OF THE ACT AND NOT APPRECIATING THE FACT THAT SINCE THE ENTIRE INCOME OF THE APPELLANT WAS SU BJECT TO ITA NO. 5654/DEL/2011 6 TAX WITHHOLDING, IF SUCH INCOME WERE TO BE HELD CHAR GEABLE TO TAX, THE APPELLANT WAS NOT LIABLE TO PAY ADVANCE TAX. 4.1. THAT THE DRP BY CONFIRMING THE LEVY OF INTEREST U /S. 234B BY STATING THAT DECISION OF THE JURISDICTIONAL UTTRAKHAND HIGH COURT IN FAVOUR OF THE APPELLANT, O N THIS ISSUE, HAS 'NOT BEEN ACCEPTED BY THE DEPARTMENT' (PA RA 6 OF THE IMPUGNED ASSESSMENT ORDER) HAS ACTED IN CONTRAVENTION OF THE PRINCIPLE OF JUDICIAL DISCIPLIN E AS HAS ALSO BEEN ELUCIDATED BY THE APEX COURT IN UNION OF INDIA V. KAMLAKSHI FINANCE CORPORATION LIMITED. AIR 1992 SC 711 . 5. THAT THE LD. AO HAS ERRED ON FACTS AND IN LAW IN CHARGING INTEREST UNDER SECTION 234D OF THE ACT. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENA LTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO ONE ANOTH ER. THAT THE ASSESSEE RESERVES ITS RIGHT TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF OBJECTIONS EITHER BEFORE OR A T THE TIME OF HEARING OF THESE OBJECTIONS. ITA NO. 5654/DEL/2011 7 3. ASSESSEE HAS ALSO FILED THE FOLLOWING ADDITIONA L GROUNDS FOR CONSIDERATION OF THE BENCH. I) THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER /DRP HAVE ERRED IN NOT CORRECTLY APPLYING THE PROVISIONS OF SECTION 44BB OF THE ACT. II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER IS BAD IN LAW BECAUSE IT HAS BEEN PASSED IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IT HAS BEEN SUBMITTED THAT THE ADDITIONAL GROUNDS OF APPEAL RAISED ARE QUESTIONS OF LAW. 4. WE HAVE CAREFULLY CONSIDERED THE SAME. UPON HEA RING BOTH THE COUNSEL, WE ADMIT THE ADDITIONAL GROUNDS OF APPEAL. 5. WE FIRST TAKE UP THE ISSUE OF VIOLATION OF PRINC IPLE OF NATURE JUSTICE. IN THIS REGARD, LD. COUNSEL OF THE ASSESSE E HAS SUBMITTED THAT THE ASSESSING OFFICER HAS REQUIRED CERTAIN DOCUMEN TS / EXPLANATIONS SOME TIMES REPEATING THE SAME. ALL THESE REQUIRE MENTS WERE DULY SUPPLIED. HOWEVER, LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT DESPITE ITA NO. 5654/DEL/2011 8 THIS ULTIMATELY THE ASSESSMENT ORDER HAS BEEN PA SSED WITHOUT GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD IN THIS REGARD. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD S. WE FIND THAT THE ASSESSEE HAS RAISED THE ISSUE OF VIOLATION OF P RINCIPLES OF NATURAL JUSTICE BEFORE THE DRP ALSO. THE SAME READS AS UNDER: - OBJECTION 1 DENIAL OF OPPORTUNITY OF BEING HEARD AND VIOLATION OF PRINCIPLE OF NATURAL JUSTICE : BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARN ED ASSESSING OFFICER HAS ERRED IN LAW BY DENYING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND THEREBY, VIOLATING THE PRINCIPLE OF NATURAL JUSTICE IN ASSE SSING THE INCOME OF THE ASSESSEE. MORE PARTICULARLY, THE LEARNED ASSESSING OFFICER HAS : I. DENIED THE ASSESSEE SUFFICIENT TIME TO JUSTIFY AND CORROBORATE THE LOSSES INCURRED IN CONNECTION WITH THE CONTRACTS WITH OIL AND NATURAL GAS CORPORATION (ONGC); AND II. NON PROVIDED ANY APPROPRIATE RATIONALE OR STATED ANY SPECIFIC FINDINGS WHILE PROPOSING CERTAIN ITA NO. 5654/DEL/2011 9 VARIATIONS IN COMPARISON TO THE RETURN OF INCOME FILED BY THE ASSESSEE. 6. ON THIS ISSUE THE DRP HAS REFERRED TO THE REMAND RE PORT OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS SUBMITTED THAT THE ASSESSING OFFICER HAS PROVIDED THE OPPORTUNITIES T O THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, FROM PE RUSAL OF THE DRAFT ASSESSMENT ORDER, IT APPEARS THAT ASSESSEE H AS NOT AVAILED THE OPPORTUNITY PROVIDED, TO FURNISH THE DOCUMENTARY EVI DENCE IN SUPPORT OF THE VARIOUS EXPENSES CLAIMED, AS REQUIRED BY THE ASSESSING OFFICER . THE DRP HAS CONSIDERED THIS ISSUE AND HELD AS UNDE R:- 4.2 THE PANEL HAS CONSIDERED THE SUBMISSIONS THE REPORT OF THE ASSESSING OFFICER AND IS OF THE VIEW THAT THE OBJECTION IS GENERAL IN NATURE AND BASICALLY INVOLVES THE ISSUE REGARDING THE OBSERVANCE OF PRINCIPLE OF NATURAL JUSTICE. AS NO VARIATION OF IN COME IS INVOLVED AND THE OVERALL ISSUE OF THE PREJUDICE CAUSED TO THE ASSESSEE IN THE FORM OF VARIATIONS TO ITS INCOME WILL BE COVERED IN THE SUBSEQUENT GROUNDS, T HE PANEL IS OF THE VIEW THAT NO DIRECTIONS ARE REQUIRED TO BE GIVEN IN RESPECT OF THIS OBJECTION. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. IN OUR CONSIDERED OPINION, THERE IS A VIOLATION OF NATURAL JUSTICE IN THIS CASE, IN AS MUCH AS PROPER OPPORTUNITY TO THE ASSESSEE HAS NOT BEEN GI VEN BY THE ASSESSING OFFICER. IT IS A SETTLED LAW THAT EVE N ADMINISTRATIVE ORDERS ITA NO. 5654/DEL/2011 10 HAVE TO BE CONSISTENT WITH THE RULES OF NATURAL JUS TICE. HENCE, IN OUR CONSIDERED OPINION, THE ISSUES RAISED IN THIS APPEA L SHOULD BE REMITTED BACK TO THE ASSESSING OFFICER. ACCORDINGLY, THE I SSUES ARE REMITTED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL CONSIDER THE SAME AFTER GIVING PROPER OPPORTUNITY TO THE ASS ESSEE OF BEING HEARD. LD. DEPARTMENTAL REPRESENTATIVE DID NOT HA VE ANY SERIOUS OBJECTION TO THIS PROPOSITION. ACCORDINGLY, THE I SSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31/8/2012. SD/- SD/- [ [[ [C.M. GARG C.M. GARG C.M. GARG C.M. GARG] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 31/8/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES