Express Drilling Systems LLC, Noida V. DCIT International Taxation, Dehradun

ITA 6630/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3718 (ITAT-DEHRADUN)
• Duration Of Justice: 4 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N C UPPADHAY
• Assessee Lawyers: AMIT ARORA CA SHRI ITESH DODHI
• Keywords: Revised return
• Section: 40(a)(ia); 201(1); 201; 144C; 13; 139

Judgement Text

1 | P A G E INCOME TAX APPELLATE TRIBUNAL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6630 /DEL/ 2016 (ASSESSMENT YEAR: 2012 - 13 ) EXPRESS DRILLING SYSTEMS LLC, C/O. N ANGIA & CO, A - 109, SECTOR - 136, NOIDA PAN: AABCE6891R VS. DICT INTERNATIONAL TAXATION, CIRCLE - 1, DEHRADUN (APPELLANT (RESPONDENT) ASSESSEE BY: SHRI AMIT ARORA, CA SHRI ITESH DODHI, CA REVENUE BY : SHRI N. C. UPPADHAY, SR. DR DATE OF HEARING 04 /03/2021 DATE OF PRONOUNCEMENT 0 8 / 0 6 /2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - 2, NOIDA DATED 31.10.2016 FOR ASSESSMENT YEAR 2008 - 09 BY WHICH APPEAL FILED BY ASSESSEE AGAINST ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX , INTERNATIONAL TAXATION , CIRCLE 1, DEHRADUN MADE ON 29 /05/ 2015 U /S 143 (3)/144C OF THE INCOME TAX ACT WAS PARTLY ALLOWED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2012 - 13: - GROUND NO. 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DISALLOWING AN AMOUNT OF INR 200,505,600 U/S 40(A)(IA) OF THE ACT ON THE PREMISE OF THE CRITERIONS LAID DOWN BY THE PROVISO TO SECTION 201(1) BEING NOT MET BY THE APPELLANT. IN DOING SO, THE LD. CIT(A) DID NOT TAKE COGNIZANCE OF THE FACT THAT IN THE ASSESSMENT ORDER PASSED, THE AO CATEGORICALLY MENTIONED THE SUBMISSION OF FORM 26A AS PER RULE 31ACB OF THE INCOME - TAX RULES BY THE APPELLANT. GROUND NO. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)/AO HAS ERRED IN DISALLOWING THE COST OF MATERIAL WITHOUT APPRECIATING THE SAME WAS INCURRED 'WHOLLY AND EXCLUSIVELY' FOR THE PURPOSE OF THE BUSINESS. 3. F ACTS SHOW S THAT ASSESSEE IS A NON - RESIDENT , NONDOMESTIC C OMPANY FOR THE PURPOSE OF INDIAN TAXATION . IT HAS ENTERED INTO A CONSORTIUM AGREEMENT WITH MINERAL EXPLORATION CORPORATION LTD AND SHIVA VANI OIL AND GASS EXPLORATION SERVICES LTD ON 5 DECEMBER 2006 . CONSORTIUM HAS BEEN AWARDED A CONTRACT BY ONGC FOR PRO VIDING INTEGRATED TURNKEY SERVICES FOR CBM DEVELOPMENT IN CENTRAL PARBATPUR AND PILOT WELLS. PAGE | 2 4. ASSESSEE FILED ITS RETURN OF INCOME ON 30 SEPTEMBER 2012 DECLARING TOTAL INCOME OF RS. NIL . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY S UBMITTED AUDITED ACCOUNTS . THE ASSESSEE WAS ISSUED A NOTICE TO SUBSTANTIATE ITS CLAIM DEDUCTION OF EXPENSES AS PER PROFIT AND LOSS ACCOUNT ALONG WITH THE RETURN OF INCOME . ON EXAMINATION OF THE INFORMATION , LEARNED ASSESSING OFFICER NOTED THAT A SUM OF 200,505,600/ WAS PAID TO SUBCONTRACTORS WITHOUT DEDUCTION OF TAX AT SOURCE , IT IS MENTIONED IN TAX AUDIT REPORT AND DISALLOWED BY ASSESSEE WHILE FILING RETURN OF INCOME . HOWEVER IN ASSESSMENT PROCEEDINGS , ASSE SSEE FILED A WRITTEN SUBMISSION WHEREIN IT HAS BEEN CONTENDED THAT DISALLOWANCE UNDER THAT SECTION CANNOT BE MADE AS ASSESSEE IS NOT AN ASSESSEE IN DEFAULT . A SSESSEE FURNISHED FORM NUMBER 26A AS PER RULE 3 1 ACB OF THE INCOME TAX RULES . THE LEARNED AO NO TED THAT THE ASSESSEE IS TAKING A BENEFIT OF THE PROVISO INSERTED U/S 201(1 ) INSERTED WITH EFFECT FROM 1 JULY 2012. H E REJECTED THE CLAIM OF THE ASSESSEE THAT THE PROVISO INSERTED WITH EFFECT FROM 1/7/2012 IS RETROSPECTIVE IN NATURE. HE THEREFORE MADE DISALLOWANCE OF 200,505,600 / - ON ACCOUNT OF PAYMENT MADE TO THE CONTRACTS FOR SERVICES ON WHICH NO TAX WAS DEDUCTED . LEARNED AO FURTHER HELD THAT ASSESSEE HAS NOT FILED THE REVISED RETURN OF INCOME AND THEREFORE THE CLAIM OF THE ASSESSEE IS ALSO NOT ENT ERTAINED IN VIEW OF THE DECISION OF THE HONOURABLE SUPREME COURT IN 284 ITR 323. ASSESSEE HAS ALSO DEBITED 38,519,708 A S COST OF MATERIAL . A SSESSEE WAS ASKED TO JUSTIFY CLAIM OF THE EXPENSES AS ACCORDING TO THE AO NEGLIGIBLE BUSINESS ACTIVITY HAS BEEN CARRIED OUT AND THE MAJOR BUSINESS WAS CARRIED OUT IN ASSESSMENT YEAR 2011 - 12 , WHERE ASSESSEE HAS NOT DEBITED ANY EXPENSES ON ACCOUNT OF COST OF MATERIAL . THEREFORE, LD AO WAS O F VIEW THAT EXPENSES DEBITED ON THIS ACCOUNT DOES NOT RELATE TO THE YEAR UNDER CONSIDERATION AND THEREFORE TH OSE ARE PRIOR PERIOD EXPENDITURE . ACCORDINGLY THE DISALLOWANCE OF 38,519,318 / - WAS MADE . LD AO PASSED DRAFT ASSESSMENT ORDER . AS SESSEE DID NOT FILE ANY OBJECTION BEFORE THE LEARNED DISPUTE RESOLUTION PANEL AND THEREFORE THE FINAL ASSESSMENT ORDER WAS CONSEQUENTLY PASSED U/S 143 (3) READ WITH SECTION 144C (3) (B) OF THE INCOME TAX ACT ON 29/0 5 /2015 DETERMINING THE TOTAL INCOME OF THE ASSESSEE A T 203,786,360/ . 5. ASSESSEE AGGRIEVED WITH THE ORDER OF THE LEARNED ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE LEARNED CIT A WHEREIN THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED . HE DISMISSED CLAIM OF ASSESSEE FOR DISALLOWANCE U/S 40 (A) ( IA) OF THE INCOME TAX ACT HOLDING THAT ASSESSEE HAS NOT MADE THE CLAIM IN THE RETURN OF INCOME WHICH IS MANDATORY . H E APPLIED THE DECISION OF THE HONOURABLE SUPREME COURT IN 284 ITR 323 . ACCORDING TO HIM, ASSESSEE SHOULD HAVE FILED THE REVISED RETURN . DURING THE COURSE OF APPELLATE PROCEEDINGS , ASSESSEE WAS ASKED TO PRODU CE EVIDENCE IN THIS REGARD THAT PAYEES HAVE FURNISHED RETURNS U/S 139 , INCLUDED THIS SUM IN THEIR RETURN, AND PAID TAX THEREON . LD CIT (A) HELD THAT A SSESSEE COULD NOT BROUGHT ANYTHING ON RECORD TO SUGGEST THAT THE RECEIPT OF 200,505,600/ HAS BEEN TAKEN INTO ACCOUNT FOR COMPUTING INCOME IN THE RETURN OF INCOME OF THE PAYEE AND THE PAYEE HAS PAID THE DUE TAX ON THE INCOME DECLARED IN ITS RETURN OF INCOME . HE FURTHER NOTED THAT ASSESSEE H AS ALSO FAILED TO FURNISH A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN THE PRESCRIBED PROFORMA . IN VIEW OF THIS , HE CONFIRMED THE DISALLOWANCE U/S 40(A ) ( IA) OF THE ACT . WITH RESPECT TO THE COST OF MATERIAL CLAIMED BY THE ASSESSEE , HE HELD THAT T HE COST OF MATERIAL IS 9% OF THE REVENUE REPORTED AND APPELLANT COULD NOT PRODUCE ANY EVIDENCE FOR ALLOWABILITY OF THE ABOVE CLAIM . HE FURTHER PAGE | 3 HELD THAT THE DISALLOWANCE UNDER THAT HEAD WAS ALSO FOR THE REASON OF NONPRODUCTION OF THE RELEVANT PURCHASE BIL LS . HE HELD THAT ASSESSEE HAS NOT PRODUCED ANYTHING EITHER BEFORE THE ASSESSING OFFICER OR BEFORE HIM AND THEREFORE HE CONFIRMED THE DISALLOWANCE. HE PASSED APPEAL ORDER ON 31 OCTOBER 2016 . ASSESSEE IS AGGRIEVED WITH THAT ORDER HAS PREFERRED THIS APPE AL CONTESTING THE ABOVE DISALLOWANCES. 6. RIVAL PARTIES ARE HEARD AND THE ORDERS OF THE LOWER AUTHORITIES ARE PERUSED. 7. WITH RESPECT TO THE GROUND NUMBER 1, WE FIND THAT A SSESSEE HAS MADE PAYMENT TO SUB CONTRACTORS OF 200,505,600/ WHICH IS MENTIONED IN THE TAX AUDIT REPORT AS DISALLOWABLE FOR NON - DEDUCTION OF TAX AT SOURCE , DISALLOWED IN ITS ORIGINAL RETURN . IN ASSESSMENT PROCEEDINGS , ON 27 TH OF MARCH 2015 ASSESSEE SUBMITTED BEFORE THE ASSESSING O FFICER THAT THE ABOVE SUM COULD NOT BE DISALLOWED IN VIEW OF THE AMENDED PROVISIONS OF SECTION 201 (1) OF THE ACT BY FILING FORM NUMBER 2 6 A AND A CERTIFICATE BY CHARTERED ACCOUNTANT. HOWEVER, THE AO HELD THAT ASSESSEE IS TAKING A BENEFIT OF THE PROVISO IN SERTED WITH EFFECT FROM 1 JULY 2012 UNDER THE PROVISIONS OF SECTION 201 (1) OF THE INCOME TAX ACT AND WHICH DOES NOT APPLY FOR ASSESSMENT YEAR 2012 13 . FURTHER AO HELD THAT ASSESSEE HAS NOT FILED REVISED RETURN AND THEREFORE RELYING ON THE DECISION OF T HE HONOURABLE SUPREME COURT IN 284 ITR 323 MADE THE ABOVE DISALLOWANCE . THE LEARNED CIT A CONFIRMED THE SAME . WE FIND THAT PROVISO INSERTED U/S 201 (1) BY THE FINANCE ACT 2012 WITH EFFECT FROM 1 JULY 2012 HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY HONOURABLE DELHI HIGH COURT IN ON ANSAL LANDMARK TOWNSHIP PRIVATE LIMITED 377 ITR 635 AS IT IS CURATIVE IN NATURE . HOWEVER TO GET THE BENEFIT OF THE ABOVE PROVISO CERTAIN PARTICULARS ARE REQUIRED TO BE FURNISHED BEFORE THE AO IN A PARTICULAR MANNER . THOUGH ASSESSEE HAS FURNISHED CERTAIN INFORMAT ION BEFORE AO HOWEVER THEY WERE NOT IN THE PRESCRIBED FORMAT AND NOT ACCOMPANIED WITH THE CERTIFICATE OF THE ACCOUNTANT SHOWING THAT INCOME HAS BEEN INCLUDED BY PAYEES IN RETURN OF INCOME . SO IT WAS REJECTED . LEARNED AO FURTHER HELD THAT THERE WAS NO CLAIM MADE BY THE ASSESSEE BY FILING REVISED RETURN AND THEREFORE IN VIEW OF THE DECISION OF THE HONOURABLE SUPREME COURT IT CANNOT BE ENTERTAINED. WE FIND THAT AS THE HONOURABLE DELHI HIGH COURT HAS HELD THAT THE ABOVE PROVISO INSERTED U/S 201 (1) IS RETROSPECTIVE IN NATURE THE ASSESSEE MUST BE GRANTED THE BENEFIT OF THE ABOVE PROVISO PROVIDED THE ASSESSEE FURNISH THE REQUISITE INFORMATION BEFORE THE ASSESSING OFFICER IN THE PRESCRIBED MANNER . THE INFORMATION SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, IS NOT IN THE MANNER IN WHICH IT IS REQUIRED . BEFORE LD CIT A ALSO ASSESSEE DID NOT FILE THIS INFORMATION. THEREFORE, IN INTEREST OF JUSTICE, THERE IS NO HARM IF ASSESSEE GETS ONE MORE OPPORTU NITY IN TIME BOUND MANNER TO FURNISH THIS INFORMATION. REGARDING NOT MAKING CLAIM BY FILING REVISED RETURN, FETTERS LAID DOWN BY THE HONOURABLE SUPREME COURT IN THE DECISION OF THE GOETZ ( 284 ITR 323) DO NOT APPLY T O THE FIRST APPELLATE AUTHORITY . TH EREFORE, THE CLAIM OF THE ASSESSEE SHOULD HAVE BEEN ENTERTAINED BY THE LD CIT (A) . IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE SET - ASIDE THE WHOLE ISSUE BACK TO THE FILE OF THE LEARNED CIT A WITH A DIRECTION TO THE ASSESSEE TO FURNISH THE REQUISITE IN FORMATION IN PRESCRIBED MANNER AND ALSO PRESCRIBED CERTIFICATES TO CLAIM THE BENEFIT OF THE SECOND PROVISO TO SECTION 201 (1) OF THE ACT WITHIN 90 DAYS FROM THE DATE OF THIS ORDER, THEREAFTER THE LEARNED CIT A MAY EXAMINE HIMSELF OR THROUGH THE ASSESSING OFFICER THE VERACITY OF SUCH INFORMATION AND IF THE SAME IS FOUND TO PAGE | 4 BE IN ORDER, THE ADDITION MADE U/S 40 (A)(IA) MAY BE DELETED TO THAT EXTENT. IN VIEW OF THIS GROUND NUMBER 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. 8. THE SECOND GRO UND OF APPEAL IS WITH RESPECT TO DISALLOWANCE OF COST OF MATERIAL AMOUNTING TO 38,519,3 18/ AS ASSESSEE FAILED TO SUBMIT AN Y INFORMATION BEFORE THE LEARNED ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT A . EVEN BEFORE US , NO SUCH INFORMATION IS F URNISHED. THE LOWER AUTHORITIES NOTED THAT ASSESSEE HAS MERELY STATED THAT ASSESSEE HAS REPORTED REVENUE FROM OPERATION DURING THE YEAR AND THE COST OF MATERIAL CONSUMED DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE ABOVE SUM WHICH IS ONLY AROUND 9% OF TH E TOTAL REVENUE EARNED BY THE APPELLANT AND THEREFORE THE ABOVE DISALLOWANCE CANNOT BE MADE . ASSESSEE HAS ALSO SUBMITTED THAT THE EARNING OF THE REVENUE SHOWN BY THE ASSESSEE CANNOT BE EARNED WITHOUT CONSUMPTION OF ANY MATERIAL. WE FIND THAT IF ASSESSEE WOULD LIKE TO CLAIM ANY EXPENDITURE AS A DEDUCTION, IT IS THE DUTY OF THE ASSESSEE TO FURNISH THE REQUISITE INFORMATION IN A REASONABLE MANNER . ASSESSEE CANNOT PLEAD THAT AS PERCENTAGE OF EXPENDITURE COMPARED TO INCOME IS VERY LOW , THEREFORE, THERE IS NO NEED OF SUBMISSION OF ANY DETAILS. WE DO NOT APPRECIATE SUCH AN ARGUMENT, IT TANTAMOUNT TO BYPASS THE AUTHORITY AND RESPONSIBILITY OF LD AO TO COM P UTE THE CORRECT INCOME OF ASSESSEE . FURTHER, IT CAN ALSO NOT BE SAID THAT IF THERE IS A REVENUE THERE HAS TO BE CERTAIN EXPENDITURE, WHICH SHOULD NECESSARILY BE ALLOWED WITHOUT VERIFICATION . IN THIS CASE, ASSESSEE HAS NOT SUBMITTED ANY DETAILS EXCEPT THE ANNUAL ACCOUNTS . THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES IN CONFIRMING THE ABOVE DISALLOWANCE . IN THE RESULT GROUND NUMBER 2 OF THE APPEAL IS DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 . 06 .2021. - S D / - - S D / - (SUDHANSHU SRIVASTAVA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 8 . 06 .2021 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI