TaxTMI 
TaxTMI 
2020 (6) TMI 314
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....CIT(A) erred in upholding the disallowance u/s. 40(a)(ia) of the Act made by the learned AO; 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the learned AO in denying deduction u/s. 10A of the Act on the disallowance made u/s. 40(a)(ia) of the Act; The Appellant prays that the order of the learned CIT(A) and the learned AO be quashed and consequential relief be granted." 3. The brief facts leading to the case is this that the assessee company engaged in the business activities of designing, developing and exporting of computer software and software services, filed its return of income originally on 30.09.2008 declaring total income at Rs. 26,83,740/- for the A.Y. 2008-09 which was completed under section 143(3) r.w.s. 144C (13) of the Act on 21.11.2012 upon assessing income at Rs. 18,54,75,020/-. Subsequently the said assessment was reopened under section 147 by and under the issuance of notice under section 148 of the Act dated 18.03.2015 under the signature of the erstwhile DCIT-15(2)(1), Mumbai. In response to the notice under section 148 of the Act the assessee requested the Revenue to consider the origi....
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.... failed to disclose fully and truly all material facts necessary for his assessment, for that assessment year particularly in view of the following "proviso" of Sec. 147 of the Act: "Provided that where an assessment under sub-section (3) of section 143 of this section has been made for the relevant assessment year, no actin shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for usch assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." Furthermore, as per the observation it was noted that the fact was not brought to light earlier is not correct since the same has only taken from the return. All the statutory obligation has already been fulfilled by the assessee by submitting all the relevant materials before the authority below. Therefore, there is no failure and/or lapse on the part of the assessee as visualized by provi....
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.... supported by any extraneous material. The order disposing of the objections cannot act as a substitute for the reasons to believe and neither can any counter affidavit filed before this court in writ proceedings." 18. As far as the present case is concerned, it is seen that the detailed questionnaire was first issued on 23rd October, 2012 by the AO during the course of the original assessment proceedings under Section 143 (3) of the Act. The AO had called for copies of all the bank accounts, the details of the sources of funds credited to the bank accounts and the application of the funds debited in such accounts. A reference was made to the search and seizure operations undertaken on 28th March, 2012 in which cash was found from plot No. H-8, Netaji Subhash Palace, New Delhi. On 30th October, 2012 the Petitioner gave a point-wise reply including the Auditors report and the balance sheets, profit and loss account etc. By a separate letter dated 6th November, 2012 the Petitioner give further clarifications on certain other points placed by the AO. 19. A further notice was issued on 27th November, 2012 by the AO which was specific to the amount received from PACL. Copy of the ag....
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....al Audit Objection in the case of the assessee for the year under consideration on 04.03.2015 categorically mentioned that the nature of payment in dispute relates to reimbursement of expenditure to its associate concerns based in foreign companies. Since, it was merely reimbursement of expenses and not in the nature of interest, royalty or fee for technical services, no disallowance could be made on the ground that no TDS was made. It was further clarified by the said DCIT that the obligation of TDS arises only in the case when the amount of interest or any other sum payable to non-resident is chargeable to tax under the Act. The said reply is also on record at Page 106 of the Paper Book filed before us. On the very next day i.e. on 05.03.2015 the said Revenue Officer being the DCIT-15(2)(1), Mumbai proceeded further with a request for approval for remedial action under section 147 of the Income Tax Act before the DCIT-15(2)(1), Mumbai only to safeguard the interest of the Revenue; more so, while requesting for such approval the said DCIT again put it on writing that the internal Audit Objection is not acceptable for the reason as already explained by him by and under his letter d....
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....iew already taken by the DCIT disclosed in its letter dated 04.03.2015 address to the DCIT-15(2)(1), Mumbai appearing at Page-106 of the Paper Book where he has categorically mentioned that the payments relate to reimbursement of expenditure to its associate concern based in foreign countries is merely reimbursement of expenses; neither in the nature of interest, royalty or fee for technical services; disallowance is not, thus, permissible on the ground that TDS was not made. The case of the assessee is further been strengthen by the contains of the letter dated 05.03.2015 issued under the signature of the said DCIT when he has conceded that even though he has objected to such reopening on merit, only to safe-guard the interest of Revenue approval for remedial action under section 147 of the Act has been requested for. Therefore, it is evident on record that the internal audit objection has become the prime consideration to believe that an income amounting to Rs. 20,38,13,817/- has escaped assessment resulting into reopening of assessment proceeding of the assessee company for A.Y. 2008-09 and not the decision of the Ld. AO on merit. Thus, such believe, according to us, is nothing ....
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....on the same we find no justification for approving the reassessment proceeding initiated by the Revenue. Hence, the same is found to be devoid of any merit and thus quashed. 8. In the result, the appeal is allowed. 9. Before parting we would like to make certain observation relating to the issue cropped up under present scenario of Covid-19 pandemic as to whether when the hearing of the matter was concluded on 08.01.2020 the order can be pronounced today i.e. on 19.05.2020. The issue has already been discussed by the Co-ordinate Bench in the case of DCIT vs. JSW Ltd. (ITA Nos. 6264 & 6103/Mum/2018) pronounced on 14.05.2020 in the light of which it is well within the time limit permitted under Rule 34(5) of the Appellate Tribunal Rules, 1963 in view of the following observations made therein: "7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 8th January 2020, this order thereon is being pronounced today on the day of 14th May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rule....
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.... beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon'ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockd....
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....eted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon'ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed "while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly". The extraordinary steps taken suo motu by Hon'ble jurisdictional High Court and Hon'ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words "ordinarily", in the light of the above analysis of the legal position, the ....