ITO 8(2)1, MUMBAI V. JAZZY CREATIONS P LTD, MUMBAI

ITA 8049/MUM/2011

• Counselvise Citation: 804919914 RSA 2011
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 19-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KU MAR JAIN
• Assessee Lawyers: HITEN VASANT
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Retrospective amendment; Condonation of delay
• Section: 92C; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K MUMBAI . . , / !' , # $ % BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER . / ITA NO. 8049/MUM/2011 & . / ITA NO. 1322/MUM/2012 ' ' ' ' / ASSESSMENT YEAR 2007-08 INCOME TAX OFFICER 8(2)-1, ROOM NO.212/216A, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020. / VS. M/S.JAZZY CREATIONS PVT. LTD. PRINCE BHAVAN, 1 ST & 2 ND FLOOR, ROOM NO.16, MIDC, ANDHERI (E), MUMBAI 400 093. ( # ./ )* ./ PAN/GIR NO. : AABCJ 4852D ( (+ / APPELLANT ) .. ( ,-(+ / RESPONDENT ) C.O.NO.101/MUM/2013 (ARISING OUT OF ITA NO.8049/MUM/2011,A.Y.2007-08) M/S.JAZZY CREATIONS PVT. LTD. PRINCE BHAVAN, 1 ST & 2 ND FLOOR, ROOM NO.16, MIDC, ANDHERI (E), MUMBAI 400 093. / VS. INCOME TAX OFFICER 8(2)-1, ROOM NO.212/216A, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020. (APPELLANT IN APPEAL) ( # ./ )* ./ PAN/GIR NO. :AABCJ 4852D (CROSS OBJECTOR) .. ( APPELLANT IN APPEAL ) REVENUE BY SHRI AJIT KUMAR JAIN ASSESSEE BY : SHRI HITEN VASANT . /# / DATE OF HEARING : 19/08/2013 01' . /# / DATE OF PRONOUNCEMENT : 19/08/2013 . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 2 2 / O R D E R PER BENCH: THE APPEALS ARE FILED BY THE REVENUE IN RESPECT OF ASSESSMENT YEAR 2007-08 FOR WHICH THE AO HAD PASSED TWO ASSESSMENT ORDERS ONE UNDER SECTION 143(3) AND OTHER UNDER SECTION 144C(3) R.W. S. 143(3) OF THE INCOME TAX ACT,1961 (THE ACT). AGAINST THESE TWO ORDERS OF AO ASSESSEE HAD FILED TWO APPEALS. THE APPEAL AGAINST ASSESSMENT ORDER UNDER SECTION 143(3) WAS DECIDED BY LD. CIT(A) VIDE HIS ORDER DATED 12/09/20 11, AGAINST WHICH REVENUE HAS PREFERRED AN APPEAL WHICH IS ITA NO.8049/MUM/20 11. AGAINST OTHER ASSESSMENT ORDER LD. CIT(A) HAS PASSED ANOTHER ORDE R DATED 16/12/2011, AGAINST WHICH THE REVENUE HA FILED ITA NO.1322/MUM/ 2012. GROUNDS OF APPEAL IN BOTH THE APPEALS READ AS UNDER. GROUNDS OF APEPAL IN ITA NO.8049/MUM/2011: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) FAILED TO INTERPRET THE PROVISIONS O F SECTION 92C(2) OF THE INCOME TAX ACT, IN ITS RIGHT PERSPECTIVE AND THE TR UE MEANING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING THE BENEFIT OF -5% RELIEF TO THE EXTENT OF RS.1,21,74,468/- WITHOUT APPRECIATING THE FACT THAT THE BENEFIT OF -5% IS NOT LIKE STANDARD DEDUCTION AVAILABLE TO THE ASSESS EE UNDER THE INCOME TAX ACT, 1961. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. GROUNDS OF APEPAL IN ITA NO.1322/MUM/2012: GROUNDS OF APPEAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE BASIS OF HIS DECISION IN APPEAL NO.CIT(A)- 15/IT-CURR.66/11-12 D ATED 12/09/2011 IN ASSESSEES OWN CASE, WITHOUT APPRECIATING THE FACT THAT THE REVENUE HAS ALREADY FILED AN APPEAL AGAINST THE SAID ORDER BEFO RE THE HONBLE ITAT, MUMBAI ON 01/12/2011. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) FAILED TO INTERPRET THE PROVISIONS OF SECTI ON 92C(2) OF THE INCOME TAX ACT IN ORDER DATED 12/09/2011, IN ITS RIGHT PERSPEC TIVE AND TRUE MEANING. . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING THE BENEFIT OF -5% RELIEF TO THE EXTENT OF RS.1,21,74,468/- IN HIS ORDER DATED 12/09/2011, WIT HOUT APPRECIATING THE FACT THAT THE BENEFIT OF -5% IS NOT LIKE A STANDARD DEDUCTION AVAILABLE TO THE ASSESSEE UNDER THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE BELATED BY 506 DAYS. AN APPLICA TION DATED 23/05/2013 HAS ALSO BEEN FILED BY THE ASSESSEE REQUESTING FOR COND ONATION OF DELAY. THE REASONS STATED BY THE ASSESSEE FOR DELAY IN FILING OF CROSS OBJECTIONS ARE THAT AMENDMENT TO SECOND PROVISIO TO SECTION 92C BY FINA NCE ACT 2012 IS RETROSPECTIVE W.E.F. 1/04/2002 AND AS ASSESSEE WAS SATISFIED WITH THE RELIEF GRANTED BY THE LD. CIT(A) IT DID NOT PREFER AN APP EAL. THE AFOREMENTIONED RETROSPECTIVE AMENDMENT HAS GIVEN REASON TO THE ASS ESSEE TO FILE THE CROSS OBJECTIONS. THE OTHER REASONS GIVEN ARE AS UNDER: (II) SPECIAL BENCH JUDGMENT IN THE CASE OF M/S. IHG IT SERVICES (INDIA) VS. INCOME TAX OFFICER WHEREIN IT WAS HELD THAT THE BENEFIT OF TOLERANCE MARGIN WOULD BE AVAILABLE ONLY IF THE VARIATION IS WITHIN THE TOLER ANCE MARGIN, ONCE THE VARIATION EXCEEDED THE TOLERANCE MARGIN, THEN THERE WOULD BE NO BENEFIT EVEN UPTO TOLERANCE MARGIN. ( DECISION PRONOUNCED IN THE OPEN COURT ON 30.04.2013) (III) AT THE TIME OF HEARING FIXED ON 26.03.2013, T HE DEPARTMENTAL REPRESENTATIVE SOUGHT ADJOURNMENT TO FILE ADDITIONAL GROUNDS, THE COPY OF WHICH HAVE NOT BEEN RECEIVED BY YOUR APPELLANT TILL DATE. IT WAS SUBMITTED THAT AFOREMENTIONED CIRCUMSTANCES WERE BEYOND THE CONTROL OF THE ASSESSEE, THEREFORE, ASSESSEES APPLICATION FOR CONDONATION OF DELAY SHOULD BE ACCEPTED. 2.1 WITHOUT PREJUDICE TO THE AFOREMENTIONED REAS ONS IT IS THE CASE OF THE ASSESSEE THAT LD. CIT(A) HAD DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE BY FOLLOWING THE DECISIONS AVAILABLE ON THE ISSUE THA T SAFE HARBOUR OF 5% SHOULD BE GRANTED AS STANDARD DEDUCTION, HOWEVER, THE SAID POSITION HAS BEEN REVERSED BY THE AFOREMENTIONED RETROSPECTIVE AMENDM ENT, THEREFORE, AS PER RULE OF NATURAL JUSTICE THE MATTER SHOULD BE RESTORED B ACK TO THE FILE OF LD. CIT(A) . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 4 EVEN IN DEPARTMENTAL APPEAL SO THAT THE ASSESSEE MA Y GET OPPORTUNITY TO MEET WITH THE RETROSPECTIVE AMENDMENT AS WELL AS TO CONT EST ADDITIONS ON OTHER ISSUES. 3. ON THE OTHER HAND, IT WAS THE CASE OF LD. DR THA T ASSESSEES REQUEST FOR CONDONATION OF DELAY SHOULD NOT BE ACCEPTED AS THE AMENDMENT REFERRED BY THE ASSESSEE HAD COME IN THE MONTH OF MAY 2012 AND ASSE SSEE HAS FILED THE CROSS OBJECTIONS ONLY IN MAY 2013 AND THERE IS NO EXPLAN ATION FOR DELAY IN FILING THE CROSS OBJECTIONS FOR ONE YEAR AFTER THE DATE OF AME NDMENT. HE SUBMITTED THAT SUB-SECTION (2A) OF SECTION 92C HAS CLARIFIED THA T FIRST PROVISO TO SUB SECTION (2) AS IT STOOD BEFORE ITS AMENDMENT BY THE FINA NCE (NO.2) ACT 2009 IS APPLICABLE IN RESPECT OF INTERNATIONAL TRANSACTIONS FOR THE ASSESSMENT YEAR AND THE VARIATION BETWEEN ARITHMETICAL MEAN REFERRED TO IN THE SAID PROVISO AND THE PRICE AT WHICH SUCH TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN EXCEEDS 5% OF THE ARITHMETICAL MEAN, THEN, THE ASSESSEE SHALL NOT BE ENTITLED TO EXERCISE THE OPTION AS REFERRED TO IN THE SAID PROVISO. THEREFO RE, LD. DR PLEADED THAT REVENUES APPEAL IN ITA NO.8049/MUM/2011 SHOULD BE ALLOWED AND APPLICATION OF THE ASSESSEE FOR CONDONATION OF THE DELAY SHOULD BE DISMISSED. 3.1 LD. DR FURTHER SUBMITTED THAT REVENUES APPEAL NO.1322/MUM/2012 MAY BE CONSIDERED AS INFRUCTUOUS AS SIMILAR ISSUE H AS BEEN RAISED IN ITA NO.8049/MUM/2011. LD. D.R IN THIS REGARD ALSO RE FERRED TO THE LAST PARA OF ORDER OF LD.CIT(A) IN HIS ORDER DATED 16/12/2011 WH ICH READ AS UNDER: 5. IT IS SEEN THAT DUE TO THE FACT THAT TWO DIFFE RENT ASSESSMENT ORDERS FOR THE SAME ASSESSMENT YEARI.E. A.Y 2007-08, ONE UNDER SEC TION 143(3) AND OTHER UNDER SECTION 144C(3) R.W.S. 143(3) WERE ISSUED BY THE AO THAT THE APPELLANT HAS FILED TWO SEPARATE APPEALS FOR THE SAME ASSESSMENT YEAR. THE APPEAL FIELD AGAINST THE ASSESSMENT ORDER U/S. 143(3) WAS DECIDED BY ME VIDE ORDER IN APPEAL NO.CIT(A)-15/IT-CUURR66/11-12 DATED 12.09.2011. TH E GROUNDS OF APPEAL IN BOTH THESE APPEALS ARE SAME. ACCORDINGLY, IN THE F ACTS OF THE CASE, THE DECISION GIVEN BY ME, IN THE CASE OF THE APPELLANT, VIDE ORD ER IN APPEAL NO.CIT(A)-15/IT- CURR66/11-12 DATED 12.09.2011, WOULD APPLY MUTADIS- MUTANDIS TO THIS APPEAL . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 5 AND THE AO IS DIRECTED TO GIVE EFFECT ACCORDINGLY. IN VIEW OF THE SAME, THIS APPEAL IS ACCORDINGLY DISPOSED OFF AS HAVING PARTLY ALLOWE D. 4. WE HAVE HEARD BOTH THE PARTIES. LD. CIT(A) IN H IS ORDER DATED 12/9/2011 HAS GRANTED RELIEF TO THE ASSESSEE FOR A SUM OF RS. 1,21,74,468/- BEING 5% OF THE MARGIN OF INTERNATIONAL TRANSACTIONS AND SUCH D EDUCTION IS ALLOWED AS STANDARD DEDUCTION. AFTER GIVING SUCH RELIEF LD. C IT(A) HAS UPHELD THE BALANCE ADDITION ON TP ISSUE WHICH IS A SUM OF RS.5,70,30 4/-. AS PER AFOREMENTIONED AMENDMENT WHICH IS MADE APPLICABLE W.E.F. 1/4/2002, IF TP ADJUSTMENT EXCEEDS SAFE HARBOUR OF 5%, THEN ASSESSEE SHALL N OT BE ENTITLED TO CLAIM THAT RELIEF AS STANDARD DEDUCTION. THE AFOREMENTIONED AMENDMENT HAS BEEN BROUGHT BY FINANCE ACT, 2012. THE BENEFIT OF AMEND MENT WAS NOT AVAILABLE WHEN LD. CIT(A) HAS PASSED THIS ORDER. IN VIEW OF AVAILABILITY OF RELIEF OF 5% AS STANDARD DEDUCTION THE ASSESSEE MAY NOT HAVE PREF ERRED OTHER GROUNDS ON WHICH SUCH ADDITION COULD BE AGITATED. PROBABLY F OR THAT REASON ASSESSEE MAY NOT HAVE PREFERRED TO FILE APPEAL AGAINST THE IMPUG NED ORDER OF LD. CIT(A). THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE DELAY I N FILING CROSS OBJECTIONS, THEREFORE, THE DELAY IN FILING THE CROSS OBJECT IONS CANNOT BE CONDONED. HOWEVER, AS PER RULES OF NATURAL JUSTICE, EVEN W HILE DECIDING DEPARTMENTAL APPEAL ON THE BASIS OF RETROSPECTIVE AMENDMENT WHI CH WAS NOT THERE WHEN FIRST APPELLATE AUTHORITY HAS DECIDED THIS ISSUE TH EN IT WILL BE APPROPRIATE FOR US TO RESTORE THIS MATTER BACK TO THE FILE OF LD. CIT( A) FOR RE-ADJUDICATION OF THE ASSESSEES GRIEVANCE AS PER LAW AFTER GIVING THE AS SESSEE A REASONABLE OPPORTUNITY OF HEARING. 4.1 THUS, OUR FINDINGS ON THIS ISSUE WILL BE TH AT AS ASSESSEE HAS NOT BEEN ABLE TO FULLY EXPLAIN THE DELAY IN FILING THE CROS S OBJECTIONS, THE CROSS OBJECTIONS ARE LIABLE TO BE DISMISSED FOR WANT OF E XPLANATION FROM THE ASSESSEE FOR FILING IT BELATEDLY. HOWEVER, FOLLOWING THE RU LES OF NATURAL JUSTICE, WHILE DECIDING THE REVENUES APPEAL IN ITA NO.8049/MUM/2 011 WE HAVE TO RESTORE THE ISSUE RAISED BY THE REVENUE TO THE FILE OF CIT (A) WHICH REALLY PERTAINS TO . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 6 DELETION OF TP ADJUSTMENT, WHICH THE REVENUE IS CONTESTING ONLY ON THE BASIS OF RETROSPECTIVE AMENDMENT. WE CONSIDER IT APPRO PRIATE TO RESTORE THE ENTIRE ISSUE REGARDING TP ADJUSTMENT TO THE FILE OF LD. CI T(A) WITH A DIRECTION TO RE- ADJUDICATE THE SAME BY TAKING INTO ACCOUNT THE AFO REMENTIONED AMENDMENT AS WELL AS THE OTHER GRIEVANCES OF THE ASSESSEE ON T.P ADJUSTMENT BY GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. AFT ER GIVING SUCH OPPORTUNITY LD. CIT(A) WILL RE-ADJUDICATE THE ISSUE REGARDING TP ADJUSTMENT AS PER PROVISIONS OF LAW. WE ORDER ACCORDINGLY. 5. SO AS IT RELATES TO ANOTHER APPEAL FILED BY THE REVENUE I.E. ITA NO.1322/MUM/2012 THE SAME IS HELD TO BE INFRUCTUOUS IN VIEW OF OUR DECISION GIVEN IN ITA NO.8049/MUM/2011. THEREFORE, ITA NO. 1322/MUM/2012 IS DISMISSED HAVING BECOME INFRUCTUOUS. 6. TO SUM UP: (I) CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIS MISSED IN THE MANNER AFORESAID. (II) ITA NO.8049/MUM/2011 IS CONSIDERED TO BE ALLOW ED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. (III) ITA NO.1322/MUM/2012 IS DISMISSED AS INFRUC TUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 19/08/2013 2 . 01' # 3 45 19 /08/2013 1 . 6 % SD/- SD/- ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED 19 /08/2013 . / ITA NO. 8049/MUM/2011 . / ITA NO. 1322/MUM/2012 C.O.NO.101/MUM/2013 ' ' ' ' / ASSESSMENT YEAR 2007-08 7 2 2 2 2 . .. . ,/78 ,/78 ,/78 ,/78 98'/ 98'/ 98'/ 98'/ / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. 8;6 ,/ , , / DR, ITAT, MUMBAI 6. 6< = / GUARD FILE. 2 2 2 2 / BY ORDER, -8/ ,/ //TRUE COPY// > >> > / ? ? ? ? ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS