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ITA 699/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65325 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: AJAY VOHRA ABHISHEK AGARWA L
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Additional evidence
• Section: 143(3)

Judgement Text

ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 699/DEL/2012 ASSESSMENT Y EAR: 2006-07 OMNIGLOBE INFORMATION TECHNOLOGIES VS INCOME TA X OFFICER, (INDIA) PVT. LTD., WARD 13(4), E-11, RAJOURI GARDEN, NEW DELHI. NEW DELHI-110027 (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI AJAY VOHRA, ABHISHEK AGARWA L RESPONDENT BY: SHRI PEEYUSH JAIN, CIT(D R) O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF THE ITO WARD 13(4), NEW DELHI U/S 143(3) READ WITH SECT ION 144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) DATED 30.12.2011 PASSED AFTER RECEIVING ORDER FROM DRP-II, NEW DELHI VIDE ORDER DATED 23.11.2011 BY WHICH THE DRP-II REJECTED THE OBJECTI ONS RAISED BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO PROC EED FURTHER AND COMPLETE THE ASSESSMENT AS PROPOSED IN THE DRAFT ASSESSMENT ORDER (FOR SHORT THE DAO) . ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 2 2 . THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN PROPOSING TO COMPLETE THE ASSESSMENT UNDER SECTI ON 144C/143(3) OF THE INCOME TAX ACT, 1961 AT AN INCOM E OF RS.2,66,61,089 AS AGAINST INCOME OF RS.3417 RETURN ED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.2,66,61,089 ON ACCOUNT OF DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERN ATIONAL TRANSACTIONS OF RENDERING INFORMATION TECHNOLOGY ENABLED SERVICES (ITES), ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE DRAFT ORDER U/S 144C OF THE ACT DATED 17.12.2009 WAS PASS ED AND SERVED ON THE ASSESSEE. THE ASSESSEE FILED OBJECTION U/S 144C(2) (B) OF THE ACT ON 19.1.2010 BEFORE DRP-II AGAINST THE SAME ON THE POI NTS OF ADDITIONS TO THE TUNE OF RS.3,22,29,917 AS PROPOSED TO BE MADE ON TH E BASIS OF TPO ORDER DETERMINING ARMS LENGTH PRICE OF ASSESSEES INTERNA TIONAL TRANSACTIONS AND ON DISALLOWANCE OF HIGHER RATE OF DEPRECIATION @60%. THE ASSESSEE FILED OBJECTIONS U/S 144C(2)(B) OF THE ACT ON 19.1.2010 B EFORE DRP-II AND THE SAME WERE REJECTED ON 23.11.2011 AND THE ASSESSING OFFICER WAS ASKED TO FINALIZE THE ASSESSMENT ON THE BASIS OF DRAFT ORDER . THE ASSESSING OFFICER FINALIZED THE ASSESSMENT AS PER ORDER OF DRP-II U/S 254/143(3) OF THE ACT ON ASSESSED INCOME OF RS.2,66,57,342 BASED ON ARMS LE NGTH PRICE MARGIN. HENCE, THIS APPEAL BEFORE THIS TRIBUNAL BY THE ASSE SSEE. ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 3 4. AT THE OUTSET, THE ASSESSEES REPRESENTATIVE SUB MITTED THAT HIS APPLICATION U/S 29 OF THE INCOME TAX (APPELLATE TRI BUNAL) RULES, 1963 MAY KINDLY BE CONSIDERED AS DRP-II DID NOT CONSIDER THE ADDITIONAL EVIDENCE APPLICATION AND PASSED THE ORDER REJECTING THE OBJE CTIONS OF THE ASSESSEE WITHOUT GIVING ANY FINDING ON THE SAME, KEEPING ASI DE THE ADDITIONAL EVIDENCE. LD. DR DID NOT DISPUTE THE FACT THAT THE ASSESSEE FILED AN APPLICATION FOR ADDITIONAL EVIDENCE BEFORE THE DRP- II, NEW DELHI BUT THE SAME WAS NOT DULY CONSIDERED AND DECIDED BY THE DRP AND IMPUGNED ORDERS BY THE DRP-II AND SUBSEQUENTLY BY THE ASSESSING OFF ICER WERE PASSED WITHOUT CONSIDERING THE ADDITIONAL EVIDENCE WHICH W AS RELEVANT TO DECIDE THE CONTROVERSY INVOLVED IN THE ASSESSMENT PROCEEDINGS. WE NOTED THAT A COPY OF ABOVE APPLICATION DATED 16.11.2011 HAS ALSO BEEN FILED BEFORE US. 5. LD. COUNSEL APPEARING BEFORE US RELIED UPON THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE C ASE OF COMMISSIONER OF INCOME TAX(A) VS TEXT HUNDRED INDIA PVT. LTD. IN ITA NO.2077, 2061 AND 2065/2010 DATED 14.1.2011 WHEREIN THEIR LORDSHIPS HELD THAT THE TRIBUNAL FOR THE REASONS TO BE RECORDED, ALLOWED AD DITIONAL EVIDENCE TO BE ADDUCED BY SUBMITTING SUCH DOCUMENTS TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AN AFFIDAVIT TO BE FILED IF THE INCOME TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUN ITY TO THE ASSESSEE TO ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 4 ADDUCE EVIDENCE. OPERATIVE PARAS OF ABOVE JUDGEMEN T ARE BEING RESPECTFULLY REPRODUCED AS UNDER:- 12. WE MAY ALSO QUOTE THE FOLLOWING OBSERVATIONS O F CALCUTTA HIGH COURT IN INCOME-TAX OFFICER, DIST. II I (I) V. B.N. BHATTACHARYA, 112 ITR 423 (CAL.). IN THAT C ASE THE COURT EVEN PERMITTED THE ADDITIONAL EVIDENCE BE FORE IT AT APPELLATE STAGE WHERE THE QUESTION WAS AS TO WHETHER THE NOTICE WAS PROPERLY SERVED UPON THE ASS ESSEE OR NOT. RECORD OF THE PROCESS SERVER AND THE INCOME -TAX OFFICER WERE PRODUCED AND OBJECTION OF THE ASSESSEE THAT SUCH EVIDENCE COULD NOT BE PRODUCED WAS TURNED DOWN INVOKING THE POWER TO ADMIT SUCH EVIDENCE UNDER ORD ER 41 RULE 27(1) OF THE CODE OF CIVIL PROCEDURE. FOLLO WING PERTINENT OBSERVATIONS WERE MADE IN THE PROCESS:- 'BUT IT WAS OBSERVED BY THE SUPREME COURT IN THE CASE OF K. VENKATRAMAIAH V. A. SEETHARAMA REDDY, AI R 1963 SC 1526, THAT UNDER RULE 27(1) OF ORDER 41 OF THE CODE OF CIVIL PROCEDURE, THE APPELLATE COURT HAS TH E POWER TO ALLOW ADDITIONAL EVIDENCE NOT ONLY IF IT R EQUIRES SUCH EVIDENCE 'TO ENABLE IT TO PRONOUNCE JUDGMENT', BUT ALSO FOR 'ANY OTHER SUBSTANTIAL CAUSE'. THERE MIGHT WELL BE CASES WHERE EVEN THOUGH THE COURT FOUND THAT IT WAS ABLE TO PRONOUNCE JUDGMENT ON THE STATE OF RECORD A S IT WAS, AND SO IT COULD NOT STRICTLY SAY THAT IT REQUI RED ADDITIONAL EVIDENCE TO ENABLE IT TO PRONOUNCE JUDGM ENT, IT STILL CONSIDERED THAT IN THE INTEREST OF JUSTICE SOMETHING WHICH REMAINED ITA NOS.2077, 2061 AND 2065/2010 PAGE 11 OF 14 OBSCURE SHOULD BE FILLED UP SO THAT I T COULD PRONOUNCE ITS JUDGMENT IN A MORE SATISFACTORY MANNE R. SUCH A CASE WOULD BE ONE FOR ALLOWING ADDITIONAL EVIDENCE FOR ANY OTHER SUBSTANTIAL CAUSE UNDER RULE 27(1)(B) OF ORDER 41 OF THE CODE. IN THE INSTANT CA SE, IN ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 5 THE AFFIDAVIT-IN-OPPOSITION FILED BEFORE THE LEARNE D TRIAL JUDGE, IT HAD BEEN STATED THAT THE NOTICE HAD BEEN SERVED BY AFFIXATION AT 8/1, DACRES LANE, CALCUTTA.' 13. THE AFORESAID CASE LAW CLEARLY LAYS DOWN A NEAT PRINCIPLE OF LAW THAT DISCRETION LIES WITH THE TRIB UNAL TO ADMIT ADDITIONAL EVIDENCE IN THE INTEREST OF JUSTIC E ONCE THE TRIBUNAL AFFIRMS THE OPINION THAT DOING SO WOUL D BE NECESSARY FOR PROPER ADJUDICATION OF THE MATTER. TH IS CAN BE DONE EVEN WHEN APPLICATION IS FILED BY ONE OF TH E PARTIES TO THE APPEAL AND IT NEED NOT TO BE A SUO M OTTO ACTION OF THE TRIBUNAL. THE AFORESAID RULE IS MADE ENABLING THE TRIBUNAL TO ADMIT THE ADDITIONAL EVIDE NCE IN ITS DISCRETION IF THE TRIBUNAL HOLDS THE VIEW THAT SUCH ADDITIONAL EVIDENCE WOULD BE NECESSARY TO DO SUBSTA NTIAL JUSTICE IN THE MATTER. IT IS WELL SETTLED THAT THE PROCEDURE IS HANDMADE OF JUSTICE AND JUSTICE SHOULD NOT BE AL LOWED TO BE CHOKED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OMISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE AT THE APPROPRIATE STAGE. ONCE IT IS FOUND THAT THE PARTY INTENDING TO LEAD EVIDENCE BEFORE THE TRI BUNAL FOR THE FIRST TIME WAS PREVENTED BY SUFFICIENT CAUS E TO LEAD SUCH AN EVIDENCE AND THAT THIS EVIDENCE WOULD HAVE MATERIAL BEARING ON THE ISSUE WHICH NEEDS TO BE DEC IDED BY THE TRIBUNAL AND ENDS OF JUSTICE DEMAND ADMISSIO N OF SUCH AN EVIDENCE, THE TRIBUNAL CAN PASS AN ORDER TO THAT EFFECT. 6. IN VIEW OF THE ABOVE JUDGEMENT, WE ARE OF THE OP INION THAT THE ADDITIONAL EVIDENCE APPLICATION SUBMITTED BY THE AS SESSEE BEFORE TAX AUTHORITIES DESERVES TO BE CONSIDERED AND THEIR FIN DINGS THEREON BUT IN THE PRESENT CASE, THE TAX AUTHORITIES PASSED IMPUGNED O RDERS WITHOUT CONSIDERING THE ADDITIONAL EVIDENCE APPLICATION. ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 6 7. THE AR ALSO SUBMITTED A COPY OF THE JUDGEMENT OF ITAT, DELHI A BENCH IN THE CASE OF ACIT VS M/S NIT LTD. IN ITA NO S. 1844/DEL/2009 AND 1871/D/2009 FOR AY 2005-06 WHEREIN THE ITAT HELD AS BEING REPRODUCED BELOW:- 10. AFTER CONSIDERING THE ASSESSEES APPLICATION AND KEEPING IN MIND THE FACT THAT THESE DETAILS NOW SUB MITTED BEFORE US WERE NOT AVAILABLE TIN THE PUBLIC DOMAIN AT THE TIME WHEN TRANSFER PRICING STUDY WAS SUBMITTED BY T HE ASSESSEE OR AT THE LATER STAGE WHEN TRANSFER PRICIN G ASSESSMENT PROCEEDINGS WERE TAKEN BY THE TPO AND HA VING REGARD TO THE FACT THAT THESE DOCUMENTS ARE ESSENTI AL FOR DETERMINING ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION EFFECTED BY THE ASSESSEE DURING THE YEA R UNDER CONSIDERATION, WE ARE INCLINED TO ADMIT THESE ADDIT IONAL EVIDENCES FOR CONSIDERATION AND THESE ARE ACCORDING LY ADMITTED FOR CONSIDERATION. SINCE THESE DOCUMENTS WERE NOT AVAILABLE BEFORE THE TPO AND THE TPO HAD NO OPPORTUNITY TO EXAMINE THE ANNUAL REPORT OR DATA BA SE OF THE AFORESAID COMPANIES, WE FIND IT FIT THAT THE IS SUE INVOLVED IN THIS APPEAL BE FRESHLY DECIDED BY THE T PO AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WHILE MAKING FRESH TRANSFER PRICING ORDE R, THE TPO SHALL TAKE INTO ACCOUNT THE ANNUAL REPORTS OR DATABASE OF THE AFORESAID COMPANIES NOW SUBMITTED B EFORE US AND SHALL ALSO DECIDE THE POINT AS TO WHETHER AL L THE COMPARABLES SELECTED BY THE ASESSEE ARE PROPER COMPARABLES FOR THE PURPOSE OF DETERMINING ARMS LE NGTH PRICE AFTER CONSIDERING THE FOLLOWING FACTORS AS PE R LAW:- (I) WHETHER THE COMPANIES HAVE LARGE VOLUME OF RELATED PARTY TRANSACTIONS. (II) WHETHER COMPANIES HAVE ABNORMALLY HIGH PROFITS OR L OSSES. (III) WHETHER COMPANIES HAVE GONE FOR BUSINESS RE-STRUCTU RING. (IV) WHETHER COMPANIES HAVE SHOWN HIGH GROWTH. (V) WHETHER COMPANIES ARE HAVING HIGH TURNOVER. ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 7 (VI) WHETHER COMPANIES ARE HAVING LARGER INVENTORY. (VII) WHETHER COMPANIES ARE HAVING HIGH MARKETING EXPENSE S. 11. WE FURTHER ORDER THAT THE MATTER SHALL BE DECI DED AFRESH AS PER LAW AND AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. THE ASSESSING OFFICER SHALL MAKE A REFERENCE TO THE TPO ION RESPECT OF THE MATT ERS INVOLVED IN THIS APPEAL TO PASS AFRESH ORDER AFTER CONSIDERING ALL THE COMPARABLES IN THE LIGHT OF THE VARIOUS PARAMETERS LAID DOWN BY THE VARIOUS COURTS FROM TIM E TO TIME. THE ASSESSEE SHALL BE UNDER AN OBLIGATION TO FURNISH ALL THESE DETAILS THAT HAVE BEEN SUBMITTED BEFORE U S, BEFORE THE TPO TO ENABLE HIM TO CONSIDER THEM FOR HIS DECI SION. THIS UNDERSTANDING WAS GIVEN AT THE TIME WHEN THE H EARING OF THESE APPEALS HAD TAKEN PLACE. WE ORDER ACCORDI NGLY. 8. IN THE PRESENT CASE ON BARE READING OF IMPUGNED ORDER OF DRP-II, NEW DELHI AND IMPUGNED ORDER, WE OBSERVE THAT THESE AUT HORITIES DID NOT CONSIDER THE ADDITIONAL EVIDENCE ADDUCED BY THE ASSESSEE WIT H APPLICATION DATED 16.11.2001 WHEREIN THE ASSESSEE SUBMITTED THE COMPA RABLES AND THE OPERATING PROFIT/TOTAL COST(OP/TC) OF SELECTED COMP ARABLES. THUS, THE APPELLANT-ASSESSEE HAS FILED AN APPLICATION UNDER R ULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 ENCLOSING A COPY O F ADDITIONAL EVIDENCE APPLICATION DATED 16.11.2011 BEFORE US WHICH WAS IG NORED BY THE TAX AUTHORITIES BELOW AND WE NOTED THAT THEY DECIDED TH E CASE WITHOUT CONSIDERING AND GIVING ANY FINDINGS IN REGARD TO AD DITIONAL EVIDENCE ADDUCED BY THE ASSESSEE. ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 8 9. DURING THE ARGUMENTS ON APPLICATION OF ASSESSEE U/S 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES 1963, BOTH THE PARTI ES HAVE SUBMITTED THAT THE ADDITIONAL EVIDENCE WHICH OUGHT TO BE CONSIDERE D BY THE AUTHORITIES BELOW THE MATTER DESERVES TO BE RESTORED TO THE FIL E OF THE DRP-II, NEW DELHI AND WE RESTORE THE SAME TO THE FILE OF THE DRP-II, NEW DELHI WITH A DIRECTION THAT THE APPLICATION OF ADDITIONAL EVIDENCE BE CONS IDERED AND MATTER BE DECIDED AFRESH DE NOVO. 10. ACCORDINGLY, WE ARE INCLINED TO DECIDE THIS APP EAL AS INDICATED ABOVE AND IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.8.2012. SD/- SD/- ( J.S. REDDY ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 29TH AUGUST 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR ITA 699/DEL/2012 ASSTT.YEAR: 2006-07 9