National Contracting Company Ltd., CHENNAI V. DCIT International Taxation 2(1), CHENNAI

ITTPA 7/CHNY/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3620 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 07-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 08-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice; Period of limitation; Additional evidence; Time period of passing order; Set aside
• Section: 133A

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.: 7/CHNY/2019 िनधाᭅरण वषᭅ/Assessment Year: 2015 - 16 National Contracting Company Ltd., Project Office, GRR Business Centre, New No.36, Vaidhyaraman Street, T. Nagar, Chennai – 600 017. PAN : AADCN 1320N Vs. The DCIT, International Taxation 2(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri G. Baskar, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Dr. S.Palani Kumar, CIT स ु नवाई कȧ तारȣख/Date of Hearing : 04.07.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 08.07.2022 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the final assessment order of the Deputy Commissioner of Income Tax (International Taxation)-2(1), Chennai in for the assessment year 2015-16 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, - 2 - I.T (TP).A. No. 7/Chny/2019 (hereinafter ‘the Act’) dated 12.10.2018 giving effect to the order of the Dispute Resolution Panel (DRP) – 2, Bengaluru directing the AO for framing assessment vide File No.112/DRP-2/BANG/2017-18, directions dated 20.09.2018. The draft assessment order was framed by the DCIT, International Taxation 2(1), Chennai u/s.144C(1) of the Act dated 29.12.2017. 2. At the outset, the ld.counsel for the assessee, Senior Advocate Shri G. Baskar first of all taken us to the preliminary issue of violation of principles of natural justice. For this, he drew our attention to following ground Nos.2.1 & 2.2 :- Issue : Assessment opposed to principles of natural justice 2.1 The AO erred in framing the assessment order in haste and without providing adequate opportunity of being heard. 2.2 The AO went wrong in sending the pre-assessment notice at the fag end of the limitation period; thus denying a reasonable opportunity of being heard. 2.3 The order of assessment being in violation of the principles of natural justice and the provisions of the Income-Tax Act is liable to be cancelled in toto. 3. The ld.counsel for the assessee took us through the draft assessment order framed by the DCIT, International Taxation u/s.144C(1) of the Act dated 29.12.2017. First, the ld.counsel took - 3 - I.T (TP).A. No. 7/Chny/2019 us through the show-cause notice issued by the AO for framing of draft assessment order and the notice is dated 20.12.2017 (which is enclosed in assessee’s paper-book at pages 179 to 188). The ld.counsel for the assessee took us through the entire show-cause notice and finally at page 187 of assessee’s paper-book, wherein assessee was asked to file reply on or before 28.12.2017. The ld.counsel drew our attention to the relevant, which reads as under:- “The reply in this regard along with the following details be submitted on or before 28.12.2017” 3.1 The ld.counsel stated that this show-cause notice was replied by the assessee vide letter dated 28.12.2017, the relevant details and reply to the show-cause notice is enclosed in assessee’s paper- book at pages 189 to 199. The ld.counsel took us through the show- cause notice issued by the AO dated 20.12.2017, which was received by assessee through e-mail only on 22.12.2017 at 8:03:27 PM. The ld.counsel stated that there was clear three working days for replying the show cause notice and the assessee filed whatever details it could collect within three days. The ld.counsel for the assessee also took us through the objections filed before DRP and the subsequent submissions i.e., the details and supporting documents of the income-tax returns and the issues raised by AO in - 4 - I.T (TP).A. No. 7/Chny/2019 show-cause notice while framing draft assessment order. The assessee filed complete details vide letter dated 21.05.2018 and the copy of the same are enclosed at pages 452 to 454 and the assessee also brought to the notice of the DRP and he specifically drew our notice to the Note-1, enclosed at page 454 i.e., foot note and the relevant reads as under:- “Note #1 : The Showcause in respect of the Scrutiny Proceedings dated 20.12.2017 was received by the assessee through email on 22.12.2017 at 20:03 hours. Furthers, the SCN has given the time frame to furnish the details on or before 28.12.2017 (i.e., within the next three (3) working days). In the absence of sufficient time, the assessee with their best efforts could only managed to furnish the details only to an extent. Further, the observations in the Show cause notice for which references were required was not available with the assessee, since, the books and documents were impounded.” 3.2 The ld.counsel for the assessee finally took us through the DRP order and stated that the High Powered Committee of three senior Commissioners without deliberating anything on the evidences filed by the assessee confirmed the draft assessment order and rejected the assessee’s evidences. He took us through the last para of the DRP’s order, which is given at page 5 and the same reads as under:- - 5 - I.T (TP).A. No. 7/Chny/2019 “During the DRP proceedings, the assessee submitted certain additional evidence but no petition for admission of additional evidence made and no justification is made for not submitting this evidence before AO. Accordingly, the Panel rejected the introduction of additional evidence at this state.” 3.3 The ld.counsel for the assessee in view of entirety of facts stated that there is no opportunity before AO to reply the show- cause notice, a reasonable time should have been granted whereas the AO only granted clear three working days to reply, to which the assessee as far as possible replied and provided many details. Even entire details were filed before DRP, but DRP has not considered those details citing that these are additional evidences and there is no justification made by assessee as to why these evidences were not filed before AO. The ld.counsel for the assessee in entirety of the facts argued only point that the orders i.e., the draft assessment order and the final assessment order as well as the DRP’s order be set aside and matter be remanded back to the file of the AO for giving proper opportunity to the assessee to represent its case and file evidences in regard to the issues on which the Revenue has made additions i.e., rejection of books of accounts and application of profit rate, disallowance of prior period expenses and disallowance of foreign exchange loss. - 6 - I.T (TP).A. No. 7/Chny/2019 4. On the other hand, the ld. CIT-DR, Dr. S. Palani Kumar very vehemently contested the issues of violation of principles of natural justice. He stated that there is no need of setting aside of this issue to the file of the AO for deciding afresh. For this, he first of all took us through the draft assessment order framed by the AO and argued that all these material gathered by Department after conducting survey u/s.133A of the Act on the assessee. The ld.CIT-DR drew our attention to page 3 of the draft assessment order and the relevant part where the finding of survey u/s.133A of the Act is recorded. The relevant para reads as under:- “A survey u/s 133A of the IT Act 1961 was conducted in the premises of the assessee on 21.12.2016, to ascertain the true nature of losses incurred. During the course of survey and subsequent proceedings, evidences contrary were found in respect of certain losses claimed by the assessee. A detailed analysis of the facts of the case of assessee is as follows:” The ld.CIT-DR stated that the draft assessment order was prepared on the basis of survey proceedings, subsequent proceedings and evidences gathered and found during the course of survey by the Department. The ld.CIT-DR took us through the draft assessment order, wherein dates of hearings mentioned are 02.05.2016, 26.08.2016, 12.09.2016, 04.10.2016, 22.11.2016, 2.12.2017 and finally draft assessment order was made only on 29.12.2017. The - 7 - I.T (TP).A. No. 7/Chny/2019 ld.CIT-DR stated that the hearing was fixed on so many dates and assessee was unable to file the details to counter the material gathered by the Revenue. The ld.CIT-DR stated that the matter can be decided here only on the basis of evidences available. He also stated that DRP has accepted the findings of AO rejecting the books of accounts, disallowance of prior period expenses and disallowance of foreign exchange loss by a speaking order. He opposed the arguments of assessee that matter may be restored back to the file of the AO for fresh adjudication. 5. In reply, the ld.counsel for the assessee narrated the facts regarding providing of opportunities by the AO for framing of draft assessment order and he took us through date-wise. He took us through the assessee’s paper-book, wherein assessee started filing reply in responses to notices and the assessee’s replies are enclosed as under:- # Date Particulars Assessee Paper- book Page Nos. 1. 12.09.2016 Reply from the Appellant to the AO in response to notice dated 26.08.2016 51 - 67 2. 04.10.2016 Further reply along with all Annexures thereto 68 - 126 3. 09.12.2016 Further reply along with Annexures 127 & 128 4. 14.12.2016 - do - 129 & 130 5. 23.12.2016 - do - 131 6 29.12.2016 - do - 132 - 136 - 8 - I.T (TP).A. No. 7/Chny/2019 The ld.counsel for the assessee after that took us through the details filed by the assessee before DRP vide letter dated 21.05.2018, filing of evidences before DRP and DRP has not at all considered these evidences. He argued that neither the AO nor DRP has gone into the details and even the last show-cause notice, after sleeping over the issue for more than one year as the last date of hearing was on 22.11.2016 although a survey was conducted by the Department on 21.12.2016 but till 02.12.2017 no action was taken by the Revenue Department, whereas the assessee as and when called for, attended the hearings and filed whatever details were called for while issuing show-cause notices. The ld.counsel stated that there is no non- compliance by the assessee ever and he countered the arguments made by the ld.CIT-DR. 6. We have heard rival contentions on the issue of violation of principles of natural justice and gone through the draft assessment order and the order of DRP. We noted that the AO on various dates issued show-cause notices which were duly replied by assessee by filing evidences but the final notice was issued by the AO vide show- cause notice dated 20.12.2017 which was received by assessee on 22.12.2017 at 8 PM in the evening through mail. We noted that the assessee was having only three clear days for reply and assessee - 9 - I.T (TP).A. No. 7/Chny/2019 replied vide letter dated 28.12.2017 enclosing various details but the AO drafted the draft assessment order u/s.144C(1) of the Act vide dated 29.12.2017. We also noted that before DRP, assessee has filed complete details vide letter dated 21.05.2018, which is enclosed in assessee’s paper-book pages 452 to 454 and the entire details are enclosed in assessee’s paper-book pages consisting of 559 pages. We noted that the DRP simpliciter washed their hands by observing as noted above vide para 3.2, wherein it is stated that the additional evidences could not be admitted as there was no justification for not submitting before AO. In entirety of facts, we are of the view that this is gross violation of principles of natural justice. Assessee was never provided opportunity and even the vital evidences were not examined by the DRP by just making mention that these are new evidences. The DRP is an adjudicating authority and they are not supposed to tell that the evidences were additional evidences. They have to admit all the evidences whatever is filed before them and they have to adjudicate the issue because they are not appellate authority as such. In view of these issues, we set aside the order of DRP, final assessment order and the draft assessment order and remand the matter back to the file of the AO to decide the issue afresh de novo. Since, we have remanded the matter back to the - 10 - I.T (TP).A. No. 7/Chny/2019 file of the AO for framing assessment de novo, we are refraining ourselves from speaking on the issues on merits. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 8 th July, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 8 th July, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.