M/s. Nortel Networks India Pvt. Ltd, New Delhi V. JCIT (OSD), New Delhi

ITA 660/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58832 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Keywords: Additional evidence; Corroborative evidences; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 660/DEL/2009 ASSTT. YR: 2003-04 M/S NORTEL NETWORK INDIA PVT. LTD. VS. JT. CIT (OS D), C-227, GROUND FLOOR, CIR. 13(1), NEW DELHI. NEAR GARDEN OF FIVE SENSES, WESTEND MARG, PARYAVARAN COMPLEX, NEW DELHI-110030. PAN/GIR NO. AABCN1424B ITA NO. 1938/DEL/2009 ASSTT. YR: 2004-05 JT. CIT (OSD), VS. M/S NORTEL NETWORK INDIA PVT. LTD. CIR. 13(1), NEW DELHI. C-227, GROUND FLOOR, NEAR GARDEN OF FIVE SENSES, WESTEND MARG, PARYAVARAN COMPLEX, NEW DELHI-110030. (APPELLANT) ( RESPONDENT ) ASSESSEE BY : SHRI SALIL KAPOOR ADV. RESPONDENT BY : SHRI RAJ TANDON CIT (DR) O R D E R PER R.P. TOLANI, J.M : THESE ARE TWO APPEALS ONE BY THE ASSESSEE AGAINST CIT(A)S ORDER DATED 17-11-2008 RELATING TO A.Y. 2003-04; AND THE OTHER BY THE REVENUE AGAINST CIT(A)S ORDER DATED 5-2-2009 RELATING TO A .Y. 2004-05. BOTH THESE ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 2 APPEALS ARE HEARD TOGETHER AND BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. GROUNDS RAISED BY THE ASSESSEE AND THE REVENUE I N THEIR RESPECTIVE APPEALS ARE AS UNDER: ASSESSEES APPEAL (ITA NO. 660/DEL/09 A.Y. 2003-0 4) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XVI (HEREINAFTER REFERRED TO AS [LEARNED CIT(A), ] ER RED IN UPHOLDING THE ACTION OF THE JOINT COMMISSIONER OF I NCOME TAX (OSD), CIRCLE 13(1), NEW DELHI (HEREINAFTER REFERRE D TO AS LEARNED AO) IN DISALLOWING THE ADDITIONAL DEDUCTI ON CLAIMED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, IN RESPECT OF OPERATING EXPENSES OF RS. 15,839,489/ - INCURRED BY THE APPELLANT DURING THE PREVIOUS YEAR RELEVANT TO THE SUBJECT ASSESSMENT YEAR. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO IN DISALLOWING THE DEDUCTION CLAIMED BY THE APPELLA NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN RESPECT OF EXCESS REVENUE OF RS. 42,798,480/- ACCRUED IN THE FINANCIA L STATEMENTS FOR THE SUBJECT ASSESSMENT YEAR AND WRITTEN OFF IN THE FINANCIAL STATEMENTS OF THE SUBSEQUENT PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-2005. REVENUES APPEAL (ITA NO. 1938/DEL/09) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETI NG THE ADDITION ON ACCOUNT OF EXCESS REVENUE WRITTEN OFF OF RS. 4,2 7,98,480/- AFTER ADMITTING ADDITIONAL EVIDENCES DURING APPELLA TE PROCEEDINGS IN CONTRAVENTION OF RULE 46A OF I.T. RU LES, 1962. ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 3 3. BRIEF FACTS, APROPOS ASSESSEES APPEAL FOR A.Y. 2003-04, ARE: THE ASSESSEE FILED ITS RETURN DECLARING INCOME OF RS. 13,65,23,610/-. THE SAME WAS PROCESSED U/S 143(1). SUBSEQUENTLY, THE CASE WA S PICKED UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE FILED A LETTER DATED 13-03-2006, STATING THAT WHILE WORKING ON ACCOUNTS ACCOUNTS OF THE NEXT YEAR IN JANUARY 2006, ASSESSEE REALIZED THAT CERTAI N EXPENSES AMOUNTING TO RS. 1,58,39,489/- RELATING TO F.Y. ENDING 31-3-2003 WERE INADVERTENTLY NOT CHARGED TO THE P&L A/C OF A.Y. 2003-04. THESE PRIOR PERIOD EXPENSES WERE DISCLOSED IN THE FINANCIAL STATEMENT FOR SUBSEQUENT YEAR. ASSESSEE MADE A REQUEST THAT SINCE THE ASSESSMENT PROCEEDINGS FOR A .Y. 2003-04 HAD NOT BEEN CONCLUDED, THE EXPENSES BEING RELATABLE TO THIS YEA R SAME MAY BE ALLOWED DURING THIS YEAR. AO, HOWEVER, HELD THAT THE ORIGIN AL RETURN OF THE ASSESSEE FILED U/S 139(4), WAS A BELATED RETURN. THE ASSESSE ES CLAIM CANNOT BE ENTERTAINED AS NEITHER A REVISED RETURN WAS FILED, NOR THE ASSESSEE COULD HAVE FILED A REVISED RETURN OF INCOME. RELIANCE WAS PLA CED ON HONBLE SUPREME COURT JUDGMENT IN THE CASE OF KUMAR JAGDISH CHANDRA SINHA VS. CIT (1996) 86 TAXMAN 122. 3.1. APROPOS SECOND GROUND, AO DISALLOWED THE DEDUC TION OF REVENUE OF RS. 4,27,98,480/- BY FOLLOWING OBSERVATIONS: WITHOUT PREJUDICE TO THE ABOVE, INSPITE OF AFFORDI NG REASONABLE OPPORTUNITIES OF BEING HEARD, THE ASSESSEE COMPANY COULD NOT FURNISH THE SUPPORTING EVIDENCE IN ORDER TO JUSTIFY ITS CLAIM OF EXCESS REVENUE OF RS. 4,27,98,480/- AND ITS VERIFIC ATION THEREOF. FURTHER, THE ASSESSEE COULD NOT ESTABLISH AS TO HOW SUCH TREATMENT WAS NOT IN ACCORDANCE WITH THE ACCOUNTING POLICIES BEING FOLLOWED BY THE ASSESSEE COMPANY. MOREOVER, T HERE IS NO SPECIFIC COMMENTS OF THE AUDITORS ON THIS ISSUE EI THER IN THE A.Y. 2003-04 OR IN THE A.Y. 2004-05. IT COULD NOT B E ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 4 UNDERSTOOD WHEN THE ASSESSEE HAS ITSELF WRITTEN OFF THESE REVENUE AS UNBILLED REVENUE IN THE FINANCIAL STATEM ENT OF A.Y. 2004-05, HOW THE DEDUCTION OF THE SAME CAN BE ALLOW ED IN THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEES CLAI M OF DEDUCTION OF REVENUE OF RS. 4,27,98,480/- IS NEITHE R DULY SUPPORTED WITH PROPER DOCUMENTARY EVIDENCES NOR THE SAME IS ALLOWABLE IN THE YEAR UNDER CONSIDERATION BEING ALR EADY6 CLAIMED IN FINANCIAL STATEMENTS OF A.Y. 2004-05, TH EREFORE, THE SAME IS R5EJECTED. 3.2. ON FIRST APPEAL, CIT(A) UPHELD THE ORDER OF AO . CIT(A) FURTHER APPLIED HONBLE SUPREME COURT JUDGMENT IN THE CASE OF M/S GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 HOLDING THAT AO CANNOT ALL OW ANY DEDUCTION CLAIMED BY THE ASSESSEE BY WAY OF FILING A LETTER A ND DEDUCTION CAN BE CLAIMED ONLY BY FILING A REVISED RETURN. 3.4. AGGRIEVED, ASSESSEE IS BEFORE US. 3.5. BRIEF FACTS, APROPOS REVENUES APPEAL FOR A.Y. 2004-95, ARE: ASSESSEE RAISED FOLLOWING GROUND OF APPEAL BEFORE CIT(A) IN RESPECT OF EXCESS CLAIM OF REVENUE: THAT THE AO HAS ERRED ON FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW IN NOT ALLOWING DEDUCTION IN RESPECT OF EXCESS REVENUE OF RS. 42,798,480/-, WHICH WAS INADVERTENT LY ACCRUED IN ASSESSMENT YEAR 2003-04 AND WAS WRITTEN OFF IN T HE FINANCIAL STATEMENTS FOR FINANCIAL YEAR RELEVANT TO SUBJECT A SSESSMENT YEAR. 3.6. CIT(A) UPHELD THE ASSESSEES CLAIM BY FOLLOWIN G OBSERVATIONS: I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT FILED ON VARIOUS DATES, OBSERVATIONS OF THE AO AS CONTAINED IN THE ASSESSMENT ORDER AND VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT. IT IS SEEN THAT APPELLANT HAS WRITTEN OF F UNBILLED REVENUE OF RS. 4,27,98,840/- IN THE FY 2003-04 RELE VANT TO THE ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 5 INSTANT ASSESSMENT YEAR. THE APPELLANT CLAIMED THAT THIS REVENUE HAD ALREADY ACCRUED TO THE APPELLANT COMPANY IN FY 2001-02 RELEVANT TO AY 2002-03, HOWEVER BY MISTAKE, THIS AM OUNT OF REVENUE WAS AGAIN INCLUDED IN THE FY 2002-03, RELEV ANT TO AY 2003-04 WHICH WAS NOT IN ACCORDANCE WITH THE ACCOUN TING POLICY FOLLOWED BY THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2003-04, THE APPELLAN T CLAIMED DEDUCTION OF THIS UNBILLED REVENUE BY FILING A REVI SED STATEMENT OF INCOME. HOWEVER, THIS REVISED STATEMENT WAS NOT CONSIDERED BY THE AO AS THE SAME WAS FILED AFTER EXPIRY OF THE TIME LIMIT OF FILLING OF REVISED RETURN OF INCOME. THEREAFTER, TH E APPELLANT FILED AN APPEAL BEFORE ME AND CLAIMED DEDUCTION FOR THIS UNBILLED REVENUE IN THE APPEAL WHICHW AS NOT CONSID ERED IN VIEW OF THE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. GOETZ INDIA LIMITED (2006) 284 ITR 323 (SC). THE AP PELLANT SIMULTANEOUSLY HAS WRITTEN OFF THIS AMOUNT IN ITS B OOKS OF ACCOUNT FOR FY 2003-04, ON THE GROUND THAT THIS REV ENUE AHS OVER ACCRUED AND HAD ALREADY BEEN OFFERED FOR TAXAT ION IN THE AY 2003-04. THE APPELLANT FURTHER CLAIMED THAT THIS UNBILLED REVENUE WAS NOTIONAL IN NATURE. IN SUPPORT OF WRITI NG OFF THIS UNBILLED REVENUE, THE APPELLANT SUBMITTED A COPY OF CERTIFICATE FROM THE AUDITORS OF THE APPELLANT COMPANY M/S S. K OCHAR AND ASSOCIATES BEFORE THE AO VIDE ITS SUBMISSION DATED 21 ST SEPTEMBER, 2006 AND COPY THEREOF IS FILED BEFORE ME AT PAGE 63 OF THE PAPER BOOK. THE CONTENTS OF THE CERTIFICATE ARE AS UNDER:- THIS IS TO CERTIFY THAT REVENUE OF R. 42,798,480 WAS INCORRECTLY ACCRUED IN THE AUDITED FINANCIAL STATEMENTS OF NORTEL INDIA FOR THE YEAR ENDED MARCH 31,2003 UNDER THE GAIL PROJECT. THE ACCRUAL OF REVENUE OF RS. 42,798,480, WHICH WAS NOT IN ACCORDANCE WITH THE ACCOUNTING POLICY OF NORTEL INDIA, HAS BEEN WRITTEN OFF AS UNBILLED REVENUE IN THE AUDITED FINANCIAL STATEMENT OF NORTEL INDIA FOR THE YEAR ENDED MARCH 31,2004. THE SAID REVENUE AHS ALREADY BEEN RECOGNIZED IN THE FINANCIAL STATEMENTS OF NORTEL NETWORKS INDIA PVT. LTD. FOR THE EARLIER PERIODS. ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 6 FROM THE ABOVE CERTIFICATE, IT EMERGES THAT THE INC OME SHOWN IN THE FY 2002-03 RELEVANT TO AY 2003-04 WAS NOT THE A CTUAL INCOME OF THE COMPANY BUT BY MISTAKE, THE SAME HAS BEEN SHOWN AS RETURN OF INCOME OF THE SAID ASSESSMENT YE AR. IT IS ALSO NOTICED THAT THIS INCOME ACCRUED FROM GAIL PRO JECT, HAD ALREADY BEEN OFFERED BY THE APPELLANT IN THE PRECED ING ASSESSMENT YEAR I.E. 2002-03. THE APPELLANT FURTHER SUBMITTED THAT IT IS ONLY THE ACCRUAL OF REAL INCOME WHICH IS CHARGEABLE TO TAX. FOR TAKING ANY I NCOME, THE FOLLOWING CONDITIONS MUST BE SATISFIED- I. INCOME MUST BE REAL IN NATURE; II. INCOME MUST HAVE ACCRUED TO THE APPELLANT. THUS, THE APPELLANT CONTENDS THAT INCOME WHICH WAS SHOWN BY MISTAKE IN AY 2003-04 OF RS. 4,27,98,430/- DID NOT ACCRUE TO IT AND IT WAS NOT ITS REAL INCOME. IN VIEW OF THE SAID FACTS, IT WAS SUBMITTED THAT THE SAID INCOME CANNOT BE TAXED IN T HE HANDS OF THE APPELLANT. IF AN INCOME IS OFFERED BY MISTAKE I N THE EARLIER YEARS AND TAXED ACCORDINGLY, THEN APPELLANT HAS RIG HT TO WRITE IT OFF IN THE SUBSEQUENT YEARS. 4. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ISSUE OF WRITE OFF OF UNBILLED REVENUE COLLECTION WAS INTEGRALLY CONNECT ED BETWEEN A.Y. 2003-04 AND 2004-05. WHEN THE RETURN OF INCOME FILED BY ASS ESSEE WAS BASED ON THE ABOVE MISTAKE, WHICH WAS NOT DETECTED DUE TO INAD VERTENCE. LATER ON, THE MISTAKE CAME TO THE NOTICE OF THE ASSESSEE AND THER EFORE A LETTER WAS FILED TO THIS EFFECT IN THE ASSESSMENT PROCEEDINGS FOR A.Y. 2003-04. AO AND CIT(A) HAVE RELIED ON HONBLE SUPREME COURT JUDGMENT IN TH E CASE OF GOETZ INDIA LIMITED (SUPRA) THAT NO CLAIM OF THE ASSESSEE CAN B E ENTERTAINED WITHOUT A REVISED RETURN. LD. COUNSEL CONTENDS THAT LD. CIT(A ) IS AN APPELLATE FORUM AND IN CATENA OF SUBSEQUENT JUDICIAL PRONOUNCEMENTS IT HAS BEEN HELD THAT THE APPELLATE AUTHORITY CAN GO BEYOND THE CLAIMS MA DE BY ASSESSEE IN THE ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 7 RETURN OF INCOME, IF THE CIRCUMSTANCES SO DEMAND AN D THE ASSESSEES CLAIM CAN BE ADJUDICATED. IN A.Y. 2003-04 THE ASSESSEES CLAIM WAS NOT APPRECIATED BY THE LOWER AUTHORITIES; THE CLAIM OF THE ASSESSEE IS FULLY JUSTIFIED AND SUPPORTED BY AUDITED RETURN AND PROPE R CLAIM, THEREFORE, THE SAME SHOULD BE ALLOWED. 5. APROPOS REVENUES APPEAL, LD. DR CONTENDS THAT T HE CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE HAS RELIED ON ADDITIO NAL EVIDENCE. THERE IS NO PROPER FINDING ABOUT ADMISSION OF ADDITIONAL EVIDEN CE NOR ANY REMAND REPORT HAS BEEN CALLED FOR FROM THE AO, THEREFORE, THE ORD ER OF THE CIT(A) SHOULD BE REVERSED. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. FROM THE ARGUMENTS OF BOTH THE PARTIES IT IS CLEAR THAT THE ISSUES IN QUESTION ARE INTER RELATED AND HAVE BEARI NG ON A.Y. 2002-03 TO 2004-05. HONBLE SUPREME COURT IN M/S GOETZE (INDIA ) LTD. (SUPRA), ITSELF HAS HELD THAT RESTRICTION OF FILING REVISED RETURN DOES NOT IMPINGE UPON THE POWER OF APPELLATE AUTHORITIES. THEREFORE, APPELLAT E AUTHORITY CAN ENTERTAIN THE CLAIM OF THE ASSESSEE IF THE CIRCUMSTANCES SO W ARRANT. IN OUR CONSIDERED OPINION, IF THE ASSESSEE IS ELIGIBLE FOR A CLAIM, IT IS A DUTY CAST ON THE ITAT TO ENSURE THAT A PROPER ASSESSMENT IS FRAMED ON THE ASSESSEE. THE TECHNICALITIES OF FILING A CLAIM THROUGH REVISED RE TURN MAY BE BINDING ON THE AO, HOWEVER, APPELLATE AUTHORITIES CAN DIRECT A CL AIM OF THE ASSESSEE TO BE EXAMINED IN ACCORDANCE WITH LAW. IF A PROPER CLAIM IS MADE BY THE ASSESSEE, THEN IT WILL BE IN THE INTEREST OF JUSTICE TO EXAMI NE AND DECIDE THE SAME. IN OUR CONSIDERED VIEW IF THE ASSESSEES CASE HAS INT ERCONNECTED BEARING ON A.Y. 2003-04 AND 2004-05, THEN IN ORDER TO FRAME A PROPER ASSESSMENT, IT ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 8 WILL BE DESIRABLE THAT THE SAME BE EXAMINED BY AO. IN A.Y. 2004-05 THE ASSESSEE HAS SUCCEEDED BUT REVENUE HAS CHALLENGED T HE DELETION OF ADDITION ON ACCOUNT OF OBJECTIONS TO ADMISSION OF ADDITIONAL EVIDENCE. THUS THE ISSUES ARE INTERCONNECTED IN BOTH THE YEARS. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE ARE INCLINED TO SET ASIDE THE ISS UES RAISED IN THE APPEALS OF ASSESSEE AND REVENUE BACK TO THE FILE OF AO TO EXAM INE THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW AND FRAME A PROPER ASSESSMENT IN BOTH THE YEARS. WE ORDER ACCORDINGLY. 7. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 29-02-2012. SD/- SD/- ( K.D. RANJAN) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29-02-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 660/DEL/09 M/S NORTEL NETWORK INDIA PVT. LTD. 9