Appeal Details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 74053 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 1 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-01-2014
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
16-02-2017
Assessment Year
2002-2003
Appeal Filed On
16-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOU NTANT MEMBER ITA NO. 5768/DEL/2010 ASSESSMENT YEAR: 2002-03 MITSUBISHI CORPORATION, VS . ACIT BIRLA TOWERS REAR SIDE, CIRCLE 3 (1) 3 RD FLOOR, 25, BARAKHAMBA ROAD, NEW DELHI. NEW DELHI 110 001. (PAN AACCM7020P) (APPELLANT) (RESPONDENT) AN D ITA NO. 4755/DEL/2011 ASSESSMENT YEAR: 2005-06 DDIT VS. MIT SUBISHI CORPORATION, CIRCLE 3 (1), INTL. TAXATION, 2 ND FLOOR, HOTEL LE MERIDIEN NEW DELHI. COMMERCIAL TOWER, WINSDOR PLACE, JANPATH, NEW DELHI 110 001 (PAN AACCM7020P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARANDEEP SINGH, CA RESPONDENT BY : SHR I YOGESH VERMA, CIT (DR) ORDER PER I.C. SUDHIR, JUDICIAL MEMBER ITA NO. 5768/D/2000 THE ASSESSEE HAS PREFERRED THE APPEAL AG AINST THE ORDER OF LD. DRP / AO ON THE FOLLOWING GROUNDS :- ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 2 1. THAT ON THE FACTS AND IN LAW, THE LD. DRP/AO HAS ERRED IN LAW IN ISSUING A REASSESSMENT NOTICE UNDER SECTI ON 148 OF THE ACT ON THE APPELLANT AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR MERELY ON T HE BASIS OF THE CHANGE OF OPINION. WITHOUT PREJUDICE TO THE ABOVE, THE LD. DRP/AO HAS ERRED IN ISSUING A REASSESSMENT NOTICE UNDER SECTION 148 OF THE ACT ON THE APPELLANT DESPITE THE FACT THAT THE APPELLANT F ILED ITS RETURN OF INCOME AND DISCLOSED FULLY AND TRULY ALL MATERIA L FACTS NECESSARY TO COMPLETE THE ASSESSMENT PROCEEDINGS. 2. WITHOUT PREJUDICE, THE LD. DRP/AO HAS ERRED IN I SSUING DIRECTIONS TO LEARNED AO TO APPLY DEEMED PROFIT RAT E OF 10 PERCENT ON THE TOTAL SALES MADE TO DMRC BY FOLLOWIN G THE ORDER PASSED BY DIT (INTL. TAX) U/S 264 OF THE ACT ON 16.1.2003, SUCH RATE BEING HIGHLY EXECESSIVE, EXORB ITANT AND ARBITRARY. THE HONBLE DRP FAILED IN APPRECIATING T HE FACT THAT ACTUAL PROFIT MADE BY THE APPELLANT IS LESS THAN 10 PERCENT ON THE TOTAL PERCENT ON THE TOTAL SALES. THEREFORE SUC H PROFIT RATE BEING HIGHLY EXCESSIVE, ARBITRARY AND ILLOGICAL MAY BE QUASHED. 3. THAT THE LEARNED DRP/AO ERRED IN NOT APPRECIATIN G THAT DMRC SALES WERE ATTRIBUTED TO THE LO BY THE LD. AO ITSELF IN EARLIER ASSESSMENT YEARS AND ASSESSEE TO BUY PEACE HAS NOT OBJECTED TO THAT AND FOLLOWED THE SAME BASIS AS APP LIED BY LD. AO IN FUTURE YEARS. THUS, WITH NO CHANGE IN FACTS T HE SAME CANNOT BE ATTRIBUTED TO THE PROJECT OFFICE BY THE L D. AO IN SUBSEQUENT YEARS. 4. THAT THE LD. DRP/AO ERRED IN HOLDING THAT DMRC S ALES ARE EFFECTED THROUGH PO THAT THE LD. DRP/AO GROSSLY ERRED IN LAW IN HOLDING THAT A PRINCIPLE OF RESTRICTED FORCE OF ATTRACTION IS APPL ICABLE TO DMRC SALES AND EVEN DIRECT SALES MADE BY HO WILL BE ATT RIBUTED TO PO. 5. WITHOUT PREJUDICE, THE LD. DRP/AO HAVE FURTHER F AILED TO APPRECIATE THAT DMRC SALES OFFERED TO TAX BY APPE LLANT AS PART OF LO REVENUE OUGHT TO EXCLUDE THE SHARE OF RE VENUE OF HYUNDAI ROTEM, KOREA. ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 3 5.1. THE LD. DRP/AO FAILED TO APPRECIATE THE FACT T HAT THE APPELLANT MERELY COLLECTED THE SHARE OF HYUNDI ROTE M KOREA UNDER THE CONTRACT FROM DMRC AND PASSED ON THE SAME TO HYUNDAI ROTEM KOREA. 5.2. THAT THE SHARE OF HYUNDAI ROTEM KOREA IS BEING BROUGHT TO TAX SEPARATELY AND INDEPENDENTLY IN HANDS OF THE SAID CONSORTIUM MEMBER, THUS, VIOLATING THE BASIC PRINCI PLE OF TAXATION BY BRINGING THE SAME INCOME TO TAX TWICE. 6. THE LD. DRP/AO HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE IN ALLEGING THAT THE CONTRACT IN QUESTION, I.E . RSI CONTRACT IS A WORKS CONTRACT AND NOT A SALES CONTRACT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP/AO HAND LEARNED AO HAS ERRED IN LE VYING INTEREST UNDER SECTION 234B AND SECTION 234C OF TH E ACT. 2. AT THE OUTSET OF HEARING THE LD. AR POINTED OUT THAT THE ISSUE RAISED IN GROUND NO. 1 QUESTIONING THE VALIDITY OF NOTICE ISSUED U/S 148 OF THE ACT HAS NOW BECOME INFRUCTUOUS AS IN BETWEEN THE HONBL E JURISDICTIONAL DELHI HIGH COURT VIDE ITS ORDER DATED 1.5.2012 IN WP NO. 13983 OF 2009 IN THE CASE OF ASSESSEE ITSELF FOR ASSTT. YEAR 2002-03 HAS BEEN PLEASED TO HOLD THAT THE REOPENING WAS NOT JUSTIFIED. THE LD. DR WAS HAV ING NO SERIOUS OBJECTION TO THE SUBMISSION OF THE LD. AR. WE ACCORDINGLY HEA RD THE PARTIES ON THIS ISSUE FIRST. GROUND NO. 1 3. THE LD. AR SUBMITTED THAT THE AO HAD ISSUED NOTICE U/S 148 OF THE ACT TO THE ASSESSEE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 4 ASSESSMENT YEARS. HENCE THE NOTICE IS NOT VALID IN VIEW OF THE PROVISO TO SECTION 147 OF THE ACT. HE SUBMITTED THAT THE ORIG INAL ASSESSMENT U/S 143 (3) WAS COMPLETED VIDE ORDER DATED 24.3.2006 AND TH E TIME LIMITATION TO ISSUE NOTICE U/S 148 OF THE ACT WAS UPTO 31.3.2007, WHEREAS THE NOTICE U/S 148 HAS BEEN ISSUED ON 31.3.2009. HE POINTED OUT FU RTHER THAT FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS FILED ITS RETU RN ON 31.8.2002 WHICH WAS LATER ON REVISED ON 31.3.2004/ SUBSEQUENTLY THE LD. ADIT ISSUED NOTICE US/ 143(2) OF THE ACT TO THE ASSESSE AND ASSESSMENT U/S 143(3) WAS PASSED ON 24.3.2006. THE LD. AR SUBMITTED THAT AT THE REQU EST OF THE ASSESSEE THE REASONS WERE SUPPLIED TO THE ASSESSEE. THEREAFTER T HE ASSESSEE FILED ITS DETAILED OBJECTIONS TO THE REOPENING BOTH ON THE PR ESUMPTION OF JURISDICTION BY THE AO AS WELL AS ON THE MERITS OF THE OTHER ISS UES RAISED. THE SAID OBJECTION WAS ARBITRARILY REJECTED BY THE AO. THE R EASONS FOR REOPENING WERE PRIMARILY ON THE BASIS OF ASSESSMENT ORDER PAS SED U/S 143(3) FOR THE ASSESSMENT YEAR 2005-06. HE SUBMITTED THAT IT IS AN ADMITTED POSITION THAT ALL THE FACTS WERE ON RECORD AND THERE WAS NO FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL FACTS NECE SSARY FOR ASSESSMENT AS INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT HAD ALREA DY BEEN ASSESSED VIDE ORDER DATED 24.3.2006. THE ASSESSEE HAD QUESTI ONED THE VALIDITY OF THE SAID NOTICE ISSUED U/S 148 VIDE A WRIT PETITION NO. 13983 OF 2009 BEFORE THE ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 5 HONBLE JURISDICTIONAL HIGH COURT AND VIDE ITS ORDE R DATED 1.5.2012 THE HONBLE HIGH COURT WAS PLEASED TO HOLD THAT REOPEN ING WAS NOT JUSTIFIED. 4. THE LD. DR ON THE OTHER HAND TRIED TO JUST IFY THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE OF VALIDITY OF NOTIC E ISSUED U/S 148 OF THE ACT. 5. THE ASSESSEE, A NON-RESIDENT, OPERATING IN I NDIA THROUGH LIAISON OFFICE AND PROJECT OFFICE HAD FORMED A CONSORTIUM WHICH WA S AWARDED A CONTRACT BY DMRC FOR A LUMP SUM CONSIDERATION. FOR ASSESSMEN T YEAR 2002-03 IT WAS FOUND THAT ASSESSEE DID NOT INCLUDE SALES TO DM RC EFFECTED THROUGH PROJECT OFFICE WHICH AMOUNT REPRESENTED MILESTONE P AYMENTS RECEIVED ABROAD IN FOREIGN CURRENCY AND SAME WAS NOT OFFERED TO TAX IN INDIA AS INCOME OF PROJECT OFFICE. THE AO REOPENED AND CONCL UDED ASSESSMENT. HOWEVER IT WAS FOUND THAT TURN OVER OR SALES MADE T O DMRC AND EXPENSES OF PROJECT OFFICE WHICH WAS A PERMANENT ESTABLISHME NT WAS DISCLOSED AT TIME OF ORIGINAL ASSESSMENT. ONLY ISSUE WAS WHAT SH OULD GP RATE AND WHETHER OR NOT ONLY 50 PERCENT OF TURN OVER / SALES MADE TO DMRC SHOULD BE ATTRIBUTED TO THE INDIAN OPERATIONS AS HELD BY T HE AO. NOTING THESE MATERIAL FACTS IT WAS HELD BY THE HONBLE HIGH COUR T IN THE ABOVE CITED WRIT THAT SINCE THIS ISSUE WAS A MATTER OF CONCLUSION TO BE DRAWN FROM THE MATERIAL FACTS AND NOT A MATTER RELATING TO FURNISH ING MATERIAL DETAILS AND PARTICULARS I.E. PRIMARY FACTS, CONCLOUSION DRAWN B Y THE AO COULD NOT BE ATTRIBUTED TO FAILURE OF PETITIONER TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS. ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 6 IT WAS HELD THAT SINCE NO NEW FACTS OR PARTICULARS HAD COME TO THE KNOWLEDGE OF AO REOPENING WAS NOT JUSTIFIED. IN VIE W OF THIS FINDING OF THE HONBLE HIGH COURT ON THE ISSUE OF VALIDITY OF NOTI CE ISSUED U/S 148 OF THE ACT WE HOLD THAT GROUND NO. 1 IN THIS REGARD BEFORE US HAS BECOME INFRUCTUOUS. IN RESULT THE ISSUES RAISED IN OTHER GROUNDS HAVE ALSO BECOME INFRUCTUOUS AND ACADEMIC. 7. IN THE RESULT APPEAL IS ALLOWED. ITA NO. 4755/DEL/2011 8. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE QUESTIONING THE FIRST APPELLATE ORDER WHERBY THE LD. CIT(A) HAS HELD THAT THE INTEREST U/S 234B AND 234C OF THE ACT ARE NOT CHARGEABLE IN THE PRESE NT CASE. 9. IN SUPPORT OF THE GROUNDS THE LD. DR SUBMI TTED THAT CHARGING OF INTEREST U/S 234B AND 234C ARE MANDATORY AND CONSEQ UENTIAL IN NATURE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF ANJUM GHASWALA 252 ITR 1 (SC). 10. LD. AR ON THE OTHER HAND TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER WITH THIS SUBMISSION THAT THE ISSUE RAISED IN THIS GROUND IS FULLY COVERED IN THE CASE OF ASSESSES ITSELF BY THE DECISION OF HON BLE DELHI HIGH COURT IN THE ASSESSMENT YEAR 2001-02 REPORTED IN (2010) 194 TAX MAN 495 (DELHI) IN THE CASE OF DIRECTOR OF INCOME TAX VS. JACABS CIVIL INCORPORATED /MITSUBISHI CORPORATION. ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 7 11. HAVING GONE THROUGH THE ABOVE CITED DECIS IONS OF HONBLE DELHI HIGH COURT IN THE CASE OF ASSESSEE ITSELF FOR THE A SSESSMENT YEAR 2001-02 (SUPRA) ON AN IDENTICAL ISSUE WE FIND THAT THE ISSU E RAISED IN THE GROUND IS FULLY COVERED IN FAVOUR OF THE ASSESSEE. WHILE DEC IDING THE ISSUE THE HONBLE DELHI HIGH COURT HAS ALREADY CONSIDERED SEV ERAL DECISIONS CITED BEFORE IT INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ANJUM GHASWALA (SUPRA). THE HONBLE HIGH COURT HAS BEEN PLEASED TO HOLD THAT IF A PERSON WHO HAD TO MAKE PAYMENTS TO NON RESIDENT, HAD DEFAULTED IN DEDUCTING TAX AT SOURCE FROM SUCH PAYM ENTS, NON-RESIDENT WOULD NOT BE ABSOLVED FROM PAYMENT OF TAXES THEREON , HOWEVER IN SUCH A CASE NON-RESIDENT WOULD BE LIABLE TO PAY TAX AND QU ESTION OF PAYMENT OF ADVANCE TAX WOULD NOT ARISE. IT WAS HELD THAT SINCE ASSESSEE WAS A NON- RESIDENT, ENTIRE TAX WAS TO BE DEDUCTED AT SOURCE ON PAYMENTS MADE BY PAYEE TO IT AND THERE WAS NO QUESTION OF PAYMENT OF ADVANCE TAX BY ASSESSEE AND THEREFORE IT WOULD NOT BE PERMISSIBLE FOR REVENUE TO CHARGE ANY INTEREST U/S 234B FROM THE ASSESSEE. THE HONBL E COURT WHILE DECIDING THE ISSUE HAS REFERRED THE RELATED PROVISIONS OF T HE INCOME TAX ACT 1961. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THIS BINDING DECISION OF HONBLE HIGH COURT WE ARE OF THE VIEW THAT LD. CIT(A) HAS R IGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESEE. THE SAME IS UPHELD. THE G ROUND IS ACCORDINGLY REJECTED. ITA NO. 5768/DEL/2010 & ITA NO.4755/DEL/2011 8 12. IN THE RESULT APPEAL IS DISMISSED. 13. IN SUMMARY APPEAL PREFERRED BY THE ASSESSEE IS ALLOWED AND THAT PREFERRED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2014. SD/- SD/- (SHAMIM YAHYA) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 24 TH JANUARY, 2014 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR, ITAT
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