DCIT, New Delhi V. M/s. Marubeni India Pvt. Ltd., New Delhi

ITA 933/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0179 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Additional evidence; Wholly owned subsidiary; Audi alteram partem
• Section: 92C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 978/DEL/2015 : ASSTT. YEAR : 200 5-06 M/S MARUBENI INDIA PVT. LTD., 5 TH FLOOR, LOTUS TOWER, COMMUNITY CENTER, NEW FRIENDS COLONY, NEW DELHI-110065 VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1), NEW DELHI (APPELLANT ) (RESPONDENT) PAN NO. AAACM6413A ITA NO. 933/DEL/2015 : ASSTT. YEAR : 2005 -06 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1), NEW DELHI VS M/S MARUBENI INDIA PVT. LTD., 5 TH FLOOR, LOTUS TOWER, COMMUNITY CENTER, NEW FRIENDS COLONY, NEW DELHI-110065 (APPELLANT) (RESPONDENT) PAN NO. AAACM6413A ASSESSEE BY : SH. NAGESHWAR RAO, ADV. REVENUE BY : SH. M. BARNWAL, SR. DR DATE OF HEAR ING: 03 . 06 .20 20 DATE OF PRONOUNCEMENT: 24 .0 6 .20 20 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AND REVENUE AGAINST THE ORDERS OF THE LD. CIT(A)-44, NE W DELHI DATED 18.11.2014. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: GROUND 1: ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) ERRED IN PARTIALLY CONFIRMING THE ADDITION PROPOSED BY THE LEARNED ASSESSING OFFICER ('AO'), ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 2 AND THEREBY CONFIRMING THE ORDER ISSUED UNDER SECTI ON 92CA(3) THE INCOME TAX ACT, 1961 ('THE ACT') PASSED BY THE LEARNED TRANSFER PRICING OFFICER ('TPO') REJECT ING THE ECONOMIC ANALYSIS CARRIED ON BY THE APPELLANT. GROUND 2: THAT THE HON'BLE CIT(A)/ TPO HAVE ERRED I N LAW IN RE-DETERMINING THE ARM'S LENGTH PRICE OF THE IMP UGNED TRANSACTION OF THE APPELLANT WITHOUT APPRECIATING T HE FACT THAT CIRCUMSTANCES NECESSITATING THE DETERMINATION OF PRICE BY THE LEARNED TPO AS MENTIONED IN SUB SECTIO N (3) OF SECTION 92C DID NOT EXIST IN CASE OF THE APPELLA NT. GROUND 3: THE HON'BLE CIT(A) HAVE GROSSLY ERRED IN FACTS AND LAW IN CONFIRMING THE ACTION OF THE LEARNED TPO OF REJECTING THE ECONOMIC ANALYSIS (USING A COMBINED TRANSACTION APPROACH WITH TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD) UNDERTAKEN B Y THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME TAX RULES, 1962 ('THE RULES) FOR DETERMINING THE ARM'S LENGTH PRICE ('ALP') OF THE IMPUGNED TRANSACTION. GROUND 4: THAT THE HON'BLE CIT(A) HAS ERRED IN LAW AND IN FACTS BY PARTIALLY CONFIRMING THE ADDITION ON ACCOU NT OF TRANSFER PRICING BY PLACING RELIANCE ON AN INCORREC T PREMISE THAT THE ASSESSEE TAKES PHYSICAL DELIVERY O F GOODS UNDER THE RELATED PARTY TRADING ACTIVITIES AN D THUS APPLYING AN AD-HOC RATIO OF 1:38 (WHICH REPRESENTS THREE TIMES GROSS PROFIT OF AE TRADING SEGMENT TO COMMISS ION) FOR ALLOCATING EXPENSES BETWEEN THE RELATED PARTY T RADING SEGMENT AND COMMISSION SEGMENT. 5. GROUND 5: WITHOUT PREJUDICE TO OUR CLAIM IN GROU ND NO. 4 ABOVE, EVEN IF INDIRECT EXPENSES INCURRED BY THE APPELLANT ARE TO BE ALLOCATED IN AN AD-HOC MANNER U SING THREE TIMES GROSS PROFIT RELATING TO TRADING ACTIVI TIES AS OPPOSED TO ACTUAL COMMISSION EARNED, THEN THE ALLOC ATION BE MADE IN RESPECT OF ALL SEGMENTS (INCLUDING NON-A E TRADING ACTIVITIES) SINCE THE ONLY PREMISE FOLLOWED BY THE HONBLE CIT(A) - THAT THE APPELLANT TAKES PHYSICAL DELIVERY OF GOODS, HOLDS TRUE ONLY WITH RESPECT TO THE NON-AE TRADING ACTIVITIES. 6. GROUND 6: THAT THE HON'BLE CIT(A) / AO ERRED IN FACTS AND LAW IN DISALLOWING A SUM OF RS. 8,90,958, BEING 25 PERCENT OF BUSINESS PROMOTION EXPENDITURE WHIC H IS INCIDENTAL TO THE BUSINESS AND WHICH IS WHOLLY INCU RRED FOR THE PURPOSE OF THE BUSINESS. ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 3 7. GROUND 7: WITHOUT PREJUDICE TO OUR CLAIM IN GRO UND NO. 6 ABOVE, THE HONBLE CIT(A)/ AO HAS ERRED IN DISALLOWING THE CLAIM OF THE APPELLANT AMOUNTING TO RS. 8,90,958 TWICE. THE SAID AMOUNT HAS BEEN CONSIDERED AS PART OF OPERATING COST CONSIDERED FOR THE PURPOSE O F COMPUTING THE ARMS LENGTH PRICE, AND SECONDLY THE SAME AMOUNT HAS BEEN ADDED BACK TO THE INCOME OF THE APPELLANT. THUS, SUCH DISALLOWANCE HAS RESULTED IN DOUBLE ADDITION ON ACCOUNT OF AN EXPENSE INCURRED BY THE APPELLANT AND HENCE IS UNJUSTIFIED. 3. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) ERRED IN REDUCING THE ADJUSTMENT TO ARMS LENGTH PRICE AS THIS WAS BASED ON THE COMPUTATION PROVIDED BY THE ASSESSEE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) ERRED IN REDUCING THE ADJUSTMENT TO ARMS LENGTH PRICE WITHOUT APPRECIATING THAT BOTH THE TRA DING AND COMMISSION SEGMENT CONSTITUTE INTERNATIONAL TRANSACTIONS AND THEREFORE EVER IF ALLOCATION OF EX PENSES WERE REWORKED THE CORRESPONDING IMPACT ON THE COMMISSION SEGMENT SHOULD ALSO HAVE BEEN CONSIDERED . 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF MARUBENI CORPORATION, JAPAN (MC J). IT WAS INCORPORATED IN JUNE, 1996 MARUBENI IS MAINLY INVOL VED IN BROKERING INTERNATIONAL TRADING DEALS IN WIDE AREA OF INDUSTRIES LIKE MACHINERY, TEXTILES, PETROLEUM, METAL & MINERA LS, CHEMICALS & OTHERS. THE ASSESSEE STATED THAT MCJ IS JAPANESE TRADING COMPANY THAT SERVES AS AN IMPORT-EXPORT GATEWAY, WI TH A SPECIFIC EMPHASIS ON DELIVERING GOODS, SERVICES AND TECHNOLOGIES TO AND FROM THE JAPAN. THE PRINCIPAL ACTIVITY OF TH E COMPANY IS GENERAL TRADING WHICH INCLUDES THE PURCHASE, DISTRI BUTION AND MARKETING OF INDUSTRIAL GOODS AND COMMODITIES. MIPL S OPERATIONS INCLUDE COORDINATION OF IMPORT AND EXPOR T OF GOODS AND SERVICES ADD LIAISON ACTIVITIES. IT COORDINATES THE TRADE IN A ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 4 BROAD, RANGE OF INDUSTRIAL, AGRICULTURAL AND CONSUM ER GOODS, COMMODITIES AND NATURAL RESOURCES. MIPL HAS ALSO UN DERTAKEN A FEW TRADING TRANSACTIONS (BUY-SELL MODEL), PRIMARIL Y INVOLVING UNRELATED PARTIES. 5. GROUND 2 OF THE ASSESSEES APPEAL RELATES TO INV OCATION OF SUB-SECTION (3) OF SECTION 92C BY THE ASSESSING OFF ICER. THIS OBJECTION IS BEING DISMISSED RELYING ON THE ORDER O F THE SPECIAL BENCH BANGALORE OF ITAT IN THE CASE OF M/S AZTEC SO FTWARE AND TECHNOLOGY SERVICES LTD. IN ITA NO. 584/BLR/2006 DA TED 12.06.2007 AND JUDGMENT OF HONBLE HIGH COURT OF DE LHI IN THE CASE OF SONY INDIA PVT. LTD. 288 ITR 52. 6. DURING THE YEAR, THE ASSESSEE HAD TRANSACTION VA LUE OF RS.271,81,364/- ON ACCOUNT OF SALE OF DUMPERS AND RS.27,08,067/- ON ACCOUNT OF MARINE FUELS. AS PER T HE TP REPORT, THE GROSS PROFIT ON SALE OF GOODS HAS BEEN CALCULATED AT RS.14,55,820/- WHICH CORRESPONDS TO 4.87% OF THE SA LES. THE AO HELD THAT OP/TC OF UNRELATED PARTY SEGMENT HAS B EEN CALCULATED BY THE ASSESSEE AT 64.49% AS THE MARGIN OF PROFIT UNDER UNCONTROLLED CONDITIONS. AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE OF THE TRANSACTIONS OF RELATED PARTIES AND UNRELATED PARTIES, THE AO CAME TO A CON CLUSION THAT THE OP/TC OF UNRELATED PARTY SEGMENT IS 4.22% WHERE AS THE SAME FOR RELATED PARTY SEGMENT IS (-)39.16%. BY FOL LOWING TNMM, THE AO MADE ADJUSTMENT OF RS.218,51,592/- TO THE PROFITS OF THE ASSESSEE ON THE INTERNATIONAL TRANSA CTIONS. 7. THE SEGMENTAL DETAILS FURNISHED BY THE ASSESSEE ON FEBRUARY 08, 2008 IS AS UNDER: ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 5 PARTICULARS INCOME FROM RELATED PARTY TRADING SEGMENT INCOME FROM UNRELATED PARTY TRADING SEGMENT AMOUNT BASIS OF ALLOCATION AMOUNT BASIS OF ALLOCATION INCOME GROSS PROFIT 14,55,822 ACTUAL 1,28,57,840 ACTUAL MISCELLANEOUS INCOME 85,098 GROSS PROFIT 7,51,590 GROSS PROFIT GROSS INCOME 15,40,920 1,36,09,430 EXPENDITURE PERSONAL EXPENSES 4,56,086 GROSS PROFIT 18,85,869 ACTUAL ADMINISTRATIVE, SELLING AND OTHER EXPENSES 6,62,163 GROSS PROFIT 63,41,597 ACTUAL DEPRECIATION 92,356 GROSS PROFIT 46,043 ACTUAL BANK CHARGES 1,184 GROSS PROFIT ACTUAL MISCELLANEOUS EXPENDITURE WRITTEN OFF 1,097 GROSS PROFIT ACTUAL TOTAL EXPENDITURE 12,12,887 82,73,510 OPERATING PROFIT 3,28,034 53,35,920 OPERATING MARGIN (OP/TC) 27.05% 64.49% 8. SUMMARY OF THE SEGMENTAL DETAILS FILED BY THE AS SESSEE DATED 28.08.2008: PARTICULARS INCOME FROM RELATED PARTY TRADING SEGMENT INCOME FROM UNRELATED PARTY TRADING SEGMENT AMOUNT BASIS OF ALLOCATION AMOUNT BASIS OF ALLOCATION INCOME SALE OF TRADES GOODS 29,889,431 ACTUAL 279,772,608 ACTUAL MISCELLANEOUS INCOME 751,580 GROSS SALES 7,034,983 GROSS SALES TOTAL INCOME 30,641,011 286,807,591 EXPENDITURE COST OF GOODS SOLD 28,433,609 ACTUAL 266,914,768 ACTUAL PERSONAL EXPENSES 8,247,725 GROSS SALES 1,885,869 ACTUAL ADMINISTRATIVE, SELLING AND OTHER EXPENSES 11,974,377 GROSS SALES 6,341,597 ACTUAL DEPRECIATION 1,670,148 GROSS SALES 46,043 ACTUAL BANK CHARGES 21,411 GROSS SALES - ACTUAL MISCELLANEOUS EXPENDITURE WRITTEN OFF 19,842 GROSS SALES - ACTUAL TOTAL EXPENDITURE 50,367,111 275,188,278 TOTAL PROFIT 19,726,100 11,619,313 OPERATING MARGIN (OP/TC) 27.05% 64.49% ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 6 9. THE TP ADJUSTMENTS COMPUTED BY THE ASSESSEE AND THE TPO IS AS UNDER: PARTICULARS ADJUSTMENT PROPOSED BY TPO IN THE TP ORDER ADJUSTMENT PROPOSED BY THE LD. TPO IN THE SHOW CAUSE NOTICE ADJUSTMENT RE- COMPUTED BY APPELLANT IN SUBMISSION DT. AUGUST 28, 2008 SALE FROM TRADING (RELATED PARTY) 29,889,431 29,889,431 29,889,431 MISCELLANEOUS INCOME 85,098 85,098 85,098 TOTAL OPERATING INCOME 30,641,011 29,974,529 29,974,529 DIRECT COST 28,433,609 28,433,609 28,433,609 INDIRECT COST 21,933,503 1,212,887 1,212,887 TOTAL OPERATING EXPENSES 50,367,112 29,646,496 29,646,496 OPERATING PROFIT 19,726,101 9,889,431 328,033 ARMS LENGTH MARGIN 4.22% 64.49% 4.22% TRANSFER PRICING ADJUSTMENT 21,851,593 9,229,594 WITHIN 5 PERCENT RANGE 10. THE MAIN ARGUMENT OF THE LD. AR IS THAT THE ASS ESSEE HAS RE-COMPUTED OPERATING MARGINS AFTER INCLUDING COST OF SALES AS PART OF THE TOTAL OPERATING COST ON THE REQUEST REC EIVED FROM THE TPO IN RESPECT OF THE TRADING TRANSACTIONS UNDERTAK EN WITH RELATED AND UNRELATED PARTIES. WHILE THE ASSESSEE R E-COMPUTED OPERATING MARGINS IN THE AFORESAID MARGIN (I.E. AFT ER INCLUDING COST OF SALE AS PART OF OPERATING COST), THE ASSESS EE COMMITTED A MATHEMATICAL MISTAKE IN ITS CALCULATION ON ACCOUN T OF WHICH MISCELLANEOUS INCOME AND COMMON COSTS WERE ALLO CATED ON THE BASIS OF GROSS SALES INSTEAD OF GROSS PROFIT , IN RESPECT OF THE SERVICE SEGMENT AND RELATED PARTY TRADING SEGME NT, WHILE THE PORTION OF COMMON COSTS IDENTIFIED IN RELATION TO UNRELATED PARTY TRADING SEGMENT REMAINED UNCHANGED. THUS, RES ULTING IN A (39.16) PERCENT OPERATING LOSS DUE TO ABNORMALLY HI GH ALLOCATION OF COMMON COST TO RELATED PARTY TRADING SEGMENT. IT WAS ARGUED THAT THE ADJUSTMENT IN ALP BASED ON THE SUBMISSION DATED 28.08.2008 IS 4.22% FALLS WITHIN 5% RANGE AND HENCE NO ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 7 ADJUSTMENT IS REQUIRED. IT WAS ARGUED THAT THE RECT IFICATION PETITION FILED BEFORE THE TPO HAS NOT BEEN DISPOSED OFF. IT WAS ARGUED THAT THE MATTER WAS ALSO BROUGHT BEFORE THE LD. CIT (A) HE HAS NOT CONSIDERED THE LETTER DATED 28.08.2008. 11. THE LD. DR ARGUED THAT AS PER THE CHART FILED B Y THE ASSESSEE INITIALLY THE GROSS PROFIT ON TRADING GOOD S OF UNRELATED PARTIES WAS 4.22% WHEREAS THE GROSS PROFIT ON THE T RADING GOODS FROM THE RELATED PARTIES WAS (-)39.16%. HENCE , THE ADJUSTMENT MADE BY THE TPO IS CORRECT AND NEEDS TO BE UPHELD. 12. WE HAVE GONE THROUGH THE ISSUE IN TOTO. WE HAVE GONE THROUGH THE TABLES FILED BY THE ASSESSEE ON VARIOUS DATES. THE ISSUE BOILS DOWN TO WHETHER THE APPORTIONMENT OF TH E EXPENDITURE INCURRED ON PERSONAL, ADMINISTRATIVE AN D SELLING EXPENSES BE APPORTIONED ON ACTUAL BASIS OR IN THE A BSENCE OF THAT WHETHER ON GROSS PROFIT BASIS OR GROSS SALES B ASIS. THE AMOUNTS IN DISPUTE OTHER THAN MISCELLANEOUS INCOME ARE AS UNDER: PARTICULARS INCOME FROM RPT BASIS OF ALLOCATION INCOME FROM URPT BASIS OF ALLOCATION PERSONAL EXPENSES 82,47,725 GROSS SALES 18,85,869 ACTUAL ADMINISTRATIVE & SELLING EXPENSES 1,19,74,377 GROSS SALES 63,41,597 ACTUAL PERSONAL EXPENSES 4,56,086 GROSS PROFIT 18,85,869 ACTUAL ADMINISTRATIVE & SELLING EXPENSES 6,62,163 GROSS PROFIT 63,41,597 ACTUAL 13. AS PER THE TABLE AT PAGE NO. 7 OF THIS ORDER AN D AS PER THE SHOW-CAUSE NOTICE, THE OPERATING COSTS HAS BEEN MEN TIONED AS RS.2,96,46,496/- AND THE ADJUSTMENT PROPOSED WAS ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 8 RS.92,29,594/- WHEREAS IN THE FINAL ORDER THE ADJUS TMENT MADE WAS RS.2,18,51,592/-. THE MAIN ARGUMENT OF THE ASSE SSEE WAS THAT ALLOCATION OF EXPENSES HAS BEEN MADE ON THE BA SIS OF GROSS SALES INSTEAD OF GROSS PROFIT WHILE CALCULATING THE OPERATING MARGIN. THE ASSESSEES CONTENTION THAT THE TOTAL CO ST INCLUDED IN THE UNRELATED PARTY HAS NOT BEEN EXCLUDED IF THE TOTAL COST OF SALES OF RS.26.69 CRORES HAS BEEN FOUND TO BE ATTEN DED TO WHILE ARRIVING AT OPERATING MARGIN OF 4.22%. THE LD. CIT (A) HAS ALSO DULY CONSIDERED THIS FACT WHILE ADJUDICATING, HELD THAT THE GRIEVANCE OF THE ASSESSEE STANDS REDRESSED ON THIS ISSUE. 14. REGARDING THE LACK OF OPPORTUNITY AFFORDED, WHI LE MAKING THE ADDITION AS CANVASSED BY THE LD. AR. THE LD. CI T (A) HELD THAT THE CALCULATION OF THE ADJUSTMENT AND DETERMIN ATION OF THE ALP HAS BEEN MADE BASED ON THE WORKING GIVEN BY THE ASSESSEE. THUS, AT THIS JUNCTURE TWO ISSUES NEEDS T O BE ADDRESSED, A) WHETHER IN THE ABSENCE OF SHOW-CAUSE NOTICE AS TO T HE QUANTUM PROPOSED, THE ADDITION MADE BY THE REVENUE CAN BE HELD TO BE LEGALLY VALID. B) WHETHER THE ALLOCATION OF EXPENSES BE ON THE BASIS OF GROSS SALES OR ON THE BASIS OF GROSS PROFIT. 15. HAVING GONE THROUGH THE SHOW-CAUSE NOTICE AND T HE ADDITION MADE, WE FIND THAT THE ASSESSEE HAS NOT BE EN AFFORDED AN OPPORTUNITY WHILE MAKING THE ADDITION, THUS DENY ING THE PRINCIPLES OF NATURAL JUSTICE. IT IS VERY UNFORTUNA TE THAT IN MANY CASES, ASSESSING OFFICERS MAKE ADDITIONS UNDER SCRU TINY ASSESSMENTS IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE EVEN WITHOUT ISSUING A PROPER SHOW CAUSE NO TICE OR ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 9 WITHOUT GIVING THE TAXPAYER A FAIR OPPORTUNITY TO E XPLAIN HIS POINT OF VIEW. THIS APPROACH NOT ONLY CREATES ILL-W ILL FOR THE DEPARTMENT, BUT ALSO GIVES RISE TO UNJUSTIFIED DEMA NDS. FURTHER, IT MAKES THE APPEAL PROCEEDINGS ALSO COMPLEX AND TI ME CONSUMING, BECAUSE THE COMMISSIONER APPEALS IS REQU IRED TO ADMIT ADDITIONAL EVIDENCE OR CALL FOR REMAND REPORT S ETC. HEARING RULE STATES THAT THE PERSON OR PARTY WHO IS AFFECTED BY THE DECISION MADE JUDICIAL/QUASI JUDICIAL SHOULD B E GIVEN A FAIR OPPORTUNITY TO EXPRESS HIS POINT OF VIEW TO DEFEND HIMSELF. THE PRINCIPLE OF NATURAL JUSTICE IS A VERY OLD CONCEPT AND IT ORIGINATED AT AN EARLY AGE. THE PEOPLE OF GREEK AND ROMAN WERE ALSO FAMILIAR WITH THIS CON CEPT. IN THE DAYS OF KAUTILYA, ARTHASHASTRA AND ADAM WERE ACKNOWLEDGED T HE CONCEPT OF NATURAL JUSTICE. ACCORDING TO THE SCRIPTURES, IN TH E CASE OF EVE AND ADAM, WHEN THEY ATE THE FRUIT OF KNOWLEDGE, THEY WERE FOR BIDDEN BY THE GOD. BEFORE GIVING THE SENTENCE, EVE WAS GIVEN A FAIR CH ANCE TO DEFEND HIMSELF AND THE SAME PROCESS WAS FOLLOWED IN THE CASE OF AD AM TOO. LATER ON, THE CONCEPT OF NATURAL JUSTICE WAS ACCEPTED BY THE ENGL ISH JURIST. THE WORD NATURAL JUSTICE IS DERIVED FROM THE ROMAN WORD JUS-NATURALE AND LEX- NATURALE WHICH PLANNED THE PRINCIPLES OF NATURAL JUSTICE, N ATURAL LAW AND EQUITY. NATURAL JUSTICE IS A SENSE OF WHAT IS WRON G AND WHAT IS RIGHT. IN INDIA, THIS CONCEPT WAS INTRODUCED AT AN EVEN AS EA RLIER AS OF RAMAYANA AND MAHABHARATA. 16. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MOHINDER SINGH GILL VS. CHIEF ELECTION COMMISSIONER 1978 SCR (3) 272, HELD THAT THE CONCEPT OF FAIRNESS SHOULD BE IN EVERY ACTION W HETHER IT IS JUDICIAL, QUASI-JUDICIAL, ADMINISTRATIVE AND OR QUASI-ADMINIS TRATIVE WORK. THE RULES OF NATURAL JUSTICE ARE ROOTED IN ALL LEGAL SYSTEMS, AND ARE NOT ANY 'NEW THEOLOGY. THEY ARE MANIFESTED IN THE TWIN PRINCIPLES OF NEMO JUDEX IN CAUSA SUA AND AUDI ALTERAM PARTEM . IT HAS BEEN ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 10 POINTED OUT THAT THE AIM OF NATURAL JUSTICE IS TO S ECURE JUSTICE, OR, TO PUT IT NEGATIVELY TO PREVENT MISCARRIAGE OF JUSTICE. THESE RIGHTS CAN OPERATE ONLY IN AREAS NOT COVERED BY ANY LAW VALIDLY MADE. THE RULES OF NATURAL JUSTICE ARE NOT EMBODIED RULES. WHAT PARTICULAR RULE OF NATURAL JUSTICE SHOULD APPLY TO A GIVEN CASE MUST DEPEND TO A GREAT EXTENT ON THE FACTS AND CI RCUMSTANCES OF THAT CASE, THE FRAMEWORK OF THE LAW UNDER WH ICH THE INQUIRY IS HELD AND THE CONSTITUTION OF THE TRI BUNAL. WHENEVER, A COMPLAINT IS MADE BEFORE A COURT THAT S OME PRINCIPLE OF NATURAL JUSTICE HAS BEEN CONTRAVENED, THE COURT HAS TO DECIDE WHETHER THE OBSERVATION OF THAT RULE WAS NECESSARY FOR A JUST DECISION ON THE FACTS OF THAT CASE. EVER Y ASSESSING OFFICER, TPO, CIT(A) OR ANY OTHER FUNCTIONARY IMPLE MENTING STATUTE OR LAW WHETHER IMPLEMENTING JUDICIAL FUNCT IONS OR AN ADMINISTRATIVE FUNCTIONS IS A JUDICIAL AUTHORITY W ITH REGARD TO THE ROLE AND DUTIES HE IS SUPPOSED TO PERFORM. WHIL E EXERCISING SUCH JUDICIAL AUTHORITY, OBSERVANCE OF PRINCIPLES O F NATURAL JUSTICE IS A SINE QUA NON. 17. KEEPING IN VIEW THE ABOVE AND THE WELL LAID DOW N PRINCIPLES AND KEEPING IN VIEW THAT THERE IS SUBST ANTIAL DISCREPANCY BETWEEN THE SHOW-CAUSE ISSUE AND THE AD DITION MADE, WE HAVE COME TO A CONCLUSION THAT THIS IS AN UNAMBIGUOUS CASE OF VIOLATION OF PRINCIPLES OF NATU RAL JUSTICE AND HENCE THE ACTION OF THE REVENUE WHICH WAS CONCL UDED WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE IS LIABLE TO BE OBLITERATED. ITA NOS. 933 & 978/DEL/2015 MARUBENI INDIA PVT. LTD. 11 18. THE ISSUE OF APPORTIONMENT OF EXPENSES WHETHER ON THE BASIS OF GROSS PROFIT OR ON THE BASIS OF GROSS TURN OVER IS KEPT OPEN. BUSINESS PROMOTION EXPENDITURE: (GROUND NO. 6) 19. AT THE OUTSET, IT WAS BROUGHT TO OUR NOTICE THA T THE SIMILAR DISALLOWANCE MADE BY THE AO IN THE CASE OF THE ASSE SSEE PERTAINING TO DISALLOWANCE OF 25% OF TOTAL BUSINESS PROMOTION EXPENDITURE IN THE EARLIER YEARS STANDS UPHELD BY T HE CO- ORDINATE BENCH OF ITAT DELHI, THE FACT OF WHICH HAS BEEN FAIRLY CONCEDED BY BOTH THE PARTIES. IN THE ABSENCE OF ANY MATERIAL CHANGE IN THE FACTUAL AND LEGAL CONTEST ON THIS ISS UE IN THIS YEAR, WE HEREBY DECLINE TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/06/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 24/06/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR