Sitac Re Pvt, Ltd., New Delhi V. DCIT, Circle-23(2), New Delhi

ITA 968/DEL/2020

AI Insights

The case involves Sitac Re Pvt. Ltd., a company engaged in the business of installation and sale of windmills, which appealed against the order of the CIT(A) that dismissed its appeal ex-parte. The primary contention was the improper handling of the appeal process by the CIT(A), including not providing adequate opportunity for the assessee to present its case and not addressing the specific grounds of appeal. The Tribunal noted that the CIT(A) had not followed the legal mandate to state the points in dispute and provide reasons for his conclusions, as required by section 250 of the Income Tax Act, 1961. The Tribunal emphasized the principles of natural justice, stating that no party should be condemned unheard and sufficient opportunity of hearing should be given.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302781 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 28-11-2022
• Assessment Year: misc
• Appeal Filed On: 03-01-2023
• Other Referred Cases: 223 ITR 480 (MP), (1991) 381 ITD 320 (Del.), 322 ITR 180 (SC), [2009] 312 ITR 0254 (SC), 311 ITR 475 (Del.), Pr CIT 8 Vs Samwon Precision Mould Mfg. India Pvt. Ltd (Del) - ITA No 72/2018 order dated 23.02.2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Principle of natural justice; Reasonable cause; Set aside
• Section: 6; 250

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 968/Del/2020 Asstt. Year: 2016-17 O R D E R PER ASTHA CHANDRA, JM The appeal by the assessee arises out of the order dated 17.02.2020 of the Ld. Commissioner of Income Tax (Appeals) – 8, New Delhi (“CIT(A)”) pertaining to assessment year (“AY”) 2016-17. 2. The assessee is a company stated to be engaged in the business of installation and sale of windmills and provision of consultancy services in relation to windmill project. For the AY 2016-17, the assessee e-filed its return of income on 29.11.2016 declaring total income of Rs. 5,58,00,440/- which was subsequently revised on 20.3.2018 declaring total income of Rs. 4,11,41,840/-. The case was selected for scrutiny. The Ld. Assessing Officer (“AO”) completed the assessment on 27.12.2018 on total income of Rs. 9,00,11,280/- including therein disallowance of transmission charges of Rs. 1,46,58,592/-; addition of notional interest income on Compulsory M/s. Sitac Re Pvt. Ltd. 27-B, Prithvi Raj Road, New Delhi – 110 011 PAN AACCN2500M Vs. DCIT, Circle 23(2) New Delhi. (Appellant) (Respondent) Assessee by: Shri Praveen Kumar, CA Department by : Shri Abhishek Kumar, Sr. DR Date of Hearing 29.11.2022 Date of pronouncement 02.12.2022 ITA No.968/Del/2020 2 Convertible Debenture (CCD) of Rs.1,91,70,000/- and disallowance of exchange fluctuation loss of Rs. 1,50,40,850/-. 3. Aggrieved, the assessee filed appeal before the Ld. CIT(A) who vide his order in appeal No. 10347/18-19 dated 17.02.2020 dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A) the assessee is now before the Tribunal raising the following grounds of appeal: “1. That the Ld. CIT(A) has erred on facts and in law in disposing the appeal ex-parte vide his order for this year 1.1 That the ex-parte order of the Ld CIT(A) is unlawful and erroneous, inter alia, as it is not only the appellant who asked for adjournment for reasonable cause but it is also CIT(A) who was pre-occupied and adjourned the matter on an earlier date. It is incorrect to state that the appellant is not interested in disposal of the appeal and that there is no grievance also as the appellant is alleged tobe no pursuing the appeal in response to various notices. The Ld. CIT(A) has erroneously relied on two decisions reported in 223 ITR 480 (MP) and (1991) 381 ITD 320 (Del.) which relate to cases of non-appearance. On one date i.e. 17/02/2020 before Ld. CIT(A) adjournment was sought for reasonable casue and on one date i.e. 03/02/2020 it is the Ld. CIT(A) who 'suo motto adjourned the appeal. There were only two dates before this Ld CIT(A) on change of the appellate officer. Adjournment was allowed in past for just and reasonable cause. 1.2 That on the last date fixed for hearing i.e. 17/02/2020, the counsel of the appellant Mr. Vinod Garg was unwell for which just and reasonable cause his colleague sought short adjournment when he was asked by the Ld. CIT(A) to file the application in his office which was duly done. His office said that your adjournment application is pending with CIT(A) and fresh date would be informed on its disposal by the CIT(A) which was also stated on enquiry from his office subsequently. Rather than fresh date, the case was unfairly and unlawfully decided ex- parte. Rejection of the said application was never conveyed to appellant or its Counsels. 1.3 That otherwise too, the order of the Ld. CIT(A) is a non-speaking order which does not consider the specific grounds of appeal, statement of facts and records. He has not discussed the appellant’s contentions and submissions including case law relied upon and quoted in the assessment order. A non-speaking order has been passed rejecting the appeal summarily simply ITA No.968/Del/2020 3 following the views of the Ld. AO in the assessment order despite detailed specific grounds. 1.4 That the order of the Ld. CIT(A) is without proper lawful opportunity and without complying with the principles of equity, natural justice and fair-play. The order of the Ld. CIT(A) is liable to be quashed or set-aside. 2. That the Ld. A.O. has erred on facts and law involved in making disallowance of transmission charges amounting to Rs 1,46,58,592/- which are not penal for infraction of any law but are compensatory and of commercial nature. The Ld. CIT(A) has erred in sustaining the same. 2.1 That the appellant had claimed such transmission charges alternatively in AY 2016-17 without prejudice to its claim in AY 2015-16, on the basis that the Ld. AO himself held the same to be related to AY 2016-17 while making disallowance in assessment order for AY 2015-16. The said transmission charges of Rs 1,46,58,561/- are allowable in AY 2015-16 or AY 2016-17. On recovery from customers on project sale in AY 2017-18, the same have been offered as income in AY 2017-18. As such too, the department is not prejudiced if it is allowed in this year or in AY 2015-16. If not allowed in AY 2015-16 or AY 2016-17, the same is not taxable as income in AY 2017-18. 2.2 That otherwise too, it is settled law that the department should not dispute the year of allowance as to whether it is allowable in one year or the other, particularly when there is no tax arbitrage and rate of tax is same in both years. 3. That the Ld. A.O. has erred on facts and law involved in making an addition of Rs 1,91,70,000/- (9% of 21.30 Crore) being notional/ hypothetical interest income on 9% Compulsorily Convertible Debentures (CCD) of Rs. 21.30 crore, which on waiver by assessee during the year, was neither accrued to nor received by the assessee. The Ld. CIT(A) has erred in sustaining the same. 4. That the Ld. A.O. has erred on facts and in law in disallowing a sum of Rs 1,50,40,850/- being the amount of exchange fluctuation loss provided at ihe year end on business advance received by the assessee and appearing in the balance sheet as advance against services to be rendered. The Ld. CIT(A) has erred in sustaining the same. 4.1 That the Ld. AO has erred on facts and law in treating the said exchange fluctuation loss of Rs 1,50,40,850/- as notional loss as against claim of the assessee as revenue loss ignoring the fact ITA No.968/Del/2020 4 that the said claim of the assessee has been accepted by the Hon’ble Tribunal in AY 2008-09 and AY 2009-10. 4.2 That the said exchange fluctuation loss being on revenue account is allowable as business loss as per the binding precedents of the Apex court and jurisdictional Delhi High Court in the cases reported in 322 ITR 180 (SC) - Oil and Natural Gas Corporation Ltd. Vs. CIT, [2009] 312 ITR 0254 (SC) - CIT Vs. Woodward Governor India P. Ltd. and 311 ITR 475 (Del.) - CIT vs. Taiko Chander Nagar Chemicals P. Ltd. On this score also the same is liable to be deleted. 4.3 That the disallowance of said exchange loss is contrary to the consistency principle as the exchange gain on such advance in past and in future has been returned and assessed as income of the appellant. Refer Pr CIT 8 Vs Samwon Precision Mould Mfg. India Pvt. Ltd (Del) - ITA No 72/2018 order dated 23.02.2018. 4.4 That mere fact that an incorrect addition was made u/s 41(1) in AY 2015-16 on account of alleged cessation of liability of business advance of Rs 11.25 Crore which is pending in dispute before the Hon’ble ITAT, cannot be the ground for the disallowance of the said exchange fluctuation loss of Rs. 1,50,40,850/-. The said business advance of Rs. 11.25 crore has been duly acknowledged as debt by the assessee in its books of accounts as on 31.03.2016. 4.5 That on subsequent settlement, the original business advance of Rs 11.25 Crore is agreed to be repaid and the overall net exchange difference of Rs 2,87,40,000/- standing in the books was written back and offered to tax in AY 2018-19. On such facts too, the disallowance made by the Ld. AO in this year of Rs 1,50,40,850/- is erroneous as the same resulted in double taxation. If this exchange fluctuation loss of Rs 1,50,40,850/- is not allowed in this year, then the said sum is correspondingly not taxable as returned in AY 18-19. 5. That the addition as made by the Ld. AO and as sustained by the Ld. CIT(A) is based on erroneous views and / or non-appreciation of the facts and law involved including ignoring and not appreciating and not rebutting detailed submissions, details and documents filed by the assessee. As such too the same are unwarranted and not capable of being sustained. 6. That the above additions/disallowances are based on suspicion, conjectures, assumptions and presumptions without any substantive basis or cogent material. Suspicion however strong cannot be a basis of addition. On this score itself, the addition as made is liable to be deleted in toto. ITA No.968/Del/2020 5 7. That the Ld. A.O. has erred on facts and in law in not allowing brought forward MAT Credit of Rs. 6,61,703/-. The Ld. CIT(A) has erred in not dealing with this ground of appeal and not allowing corresponding relief. 8. That the Ld. A.O. has erred on facts and in law in levying interest u/s 234A amounting to Rs. 42,114/- despite the fact that original ITR has been filed on 29.11.2016 within the time allowed u/s 139(1) of the Act being Transfer pricing case. The Ld. CIT(A) has erred in not dealing with the same and not allowing relief. 9. That the total income, tax and interest as assessed and computed are erroneous. 10. That the assessment, as made and the order of the Ld. CIT(A) are against law and facts of the case involved. 11. That the grounds of Appeal as herein are without prejudice to each other. 12. That the appellant respectfully craves leave to add, amend, alter and/or forego any ground(s) at or before the time of hearing.” 4. We have heard the Ld. Representative of the parties. It is submitted by the Ld. AR that the Ld. CIT(A) has passed ex-parte order without giving proper opportunity and without properly discussing and disposing the issues on merits. He further submitted that the assessee’s submissions as partly quoted in the assessment order and as embedded in statement of facts before the Ld. CIT(A) were not considered and rebutted by him. He, therefore, prayed that the ex-parte order of the Ld. CIT(A) be set aside and restored to his file for re-adjudication of the issues involved. The Ld. DR had no objection. 5. We have perused the order of the Ld. CIT(A) which reveals that he has passed an ex-parte order without deciding the issues on merits. We are of the opinion that by dismissing the appeal without considering the issues on merit, the Ld. CIT(A) has not followed the mandate of law contained in sub- section 6 of section 250 of the Income Tax Act, 1961 which requires the Ld. CIT(A) to state the points in dispute and thereafter assign the reasons in support of his conclusion. It is well settled principle of natural justice that ITA No.968/Del/2020 6 sufficient opportunity of hearing should be given to the parties and no party should be condemned unheard. We, therefore, set aside the impugned order of the Ld. CIT(A) and restore the matter back to the file of the Ld. CIT(A) for decision afresh after allowing reasonable opportunity of hearing to the assessee. We also direct the assessee to file an undertaking for appearance before the Ld. CIT(A) and to cooperate with him in the appellate proceedings. 6. In view of our decision to restore the matter back to the file of the Ld. CIT(A), we are not adjudicating on merits the grounds raised by the assessee before us. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 2 nd December, 2022. sd/- sd/- (ANIL CHATURVEDI) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 02/12/2022 Veena Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS ITA No.968/Del/2020 7 Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order