TaxTMI 
TaxTMI 
2026 (7) TMI 801
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....f the ld. Commissioner of Income Tax, Central-II, Delhi [hereinafter referred to as 'ld. CIT(A)', in short] dated 01.04.2010 against the order of assessment passed u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 01.06.2006 by the Assessing Officer, ACIT, Central Circle-2, New Delhi (hereinafter referred to as 'ld. AO'). 3. The appeal of the Assessee in ITA No. 2060/Del/2010 for AY 2002-03, arises out of the order of the ld. Commissioner of Income Tax, Central-II, Delhi [hereinafter referred to as 'ld. CIT(A)', in short] dated 01.04.2010 against the order of assessment passed u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 01.06.2006 by the Assessing Officer, ACIT, Central Circle-2, New Delhi (hereinafter referred to as 'ld. AO'). 4. The appeal of the Assessee in ITA No. 2061/Del/2010 for AY 2003-04, arises out of the order of the ld. Commissioner of Income Tax, Central-II, Delhi [hereinafter referred to as 'ld. CIT(A)', in short] dated 01.04.2010 against the order of assessment passed u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 01.06.2006 by the Assessing Officer, ACIT....
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....he Act. 3.1 That the CIT erred in facts and in law in observing that complete inspection of records had been allowed while the writ petition was pending before the Hon'ble High Court. 4. That on the facts and circumstances of the case and in law the proceedings under section 263 of the Act having been initiated at the dictates of superior authorities (CCIT/CBDT) were bad in law and void abinitio. 4.1 That on the facts and circumstances of the case and in law, the CIT erred in holding that while setting aside the original order passed under section 263 of the Act, the Hon'ble High Court, vide order dated 11.12.2009, had dismissed the aforesaid ground raised by the appellant in the writ petition. 5. That on the facts and circumstances of the case and in law, the CIT erred in exercising jurisdiction under section 263 of the Act without appreciating that the original assessment order under section 143(3)/153A of the Act having been passed under the monitoring of the Commissioner/Chief Commissioner, such an assessment was not amenable to revision under section 263 of the Act. 6. That on the facts and circumstances of the case and in l....
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....ion 195 of the Act. 12. That on the facts and circumstances of the case and in law, the CIT erred in alleging that since import of 'Net Varsity' from NIIT USA was fictitious, the order of the assessing officer allowing depreciation on the value of Net Varsity, was erroneous and prejudicial to the interest of the Revenue. 12.1 That on the facts and circumstances of the case and in law, the CIT erred in holding that 'Net Varsity' was developed in India and, therefore, the question of importing the said software from NIIT USA did not arise. 12.2 That on the facts and circumstances of the case and in law, the CIT erred in alleging that the said software having not been put to use during the year under consideration, the order of the assessing officer allowing depreciation thereon, was erroneous and prejudicial to the interest of the Revenue. 12.3 That in holding as aforesaid, the CIT failed to appreciate that aforesaid software, viz., Netvarsity had already been put to use from financial year 1997-98 onwards and formed part of the block of assets thereafter. 12.4 That on the facts and circumstances of the case and in law, the....
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.... alleging that since NIIT Antilles NV was a tax resident of India, the appellant was not entitled to exemption under section 10B of the Act in respect of income from export of software to NIIT Antilles NV and the assessing officer having allowed the claim of the appellant in this regard, without verification and enquiry, the order of the assessing officer was erroneous and prejudicial to the interests of Revenue. 15.1 That on the facts and circumstances of the case and in law, the CIT erred in holding that the control and management of NIIT Antilles NV was wholly situated in India. 15.2 That on the facts and circumstances of the case and in law, the CIT erred in alleging that the appellant had 'obliquely and indirectly' admitted that the control and management of NIIT Antilles NV was wholly situated in India. 15.3 That on the facts and circumstances of the case and in law, the CIT erred in alleging that the export of software to NIIT Antilles NV was not genuine and, therefore, the appellant was not entitled to exemption under section 10B of the Act in respect of income derived from such export. 15.4 That the CIT erred on facts and in law ....
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....year 2001-02. 17.3 Without prejudice, the CIT erred on facts and in law in setting aside the aforesaid issue to the assessing officer without appreciating that all the vendors from whom the appellant had purchased software were regular income tax assessees and the PAN Nos. and addresses of all such parties were furnished before the assessing officer and the CIT as well. 18. That on the facts and circumstances of the case and in law, the CIT erred in alleging that since the assessing officer while allowing netting off of interest income against interest expense in the order passed under section 143(3)/153A of the Act failed to examine nexus between interest income and expense, the order of the assessing officer was erroneous and prejudicial to the interest of the Revenue. 18.1 That on the facts and circumstances of the case and in law, the CIT failed to appreciate that the aforesaid issue having already been examined and scrutinized in detail during the original assessment proceedings under section 143(3)/153A, the CIT could not have exercised jurisdiction in respect thereto, under section 263 of the Act. 19. That on the facts and circumstances of....
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....ction whereof was allowable under section 31/37 of the Act. 21. That on the facts and circumstances of the case and in law, the CIT erred in holding that the expenditure on course execution charges incurred by the appellant was accepted by the assessing officer without any verification and enquiry and, therefore, the order of the assessing officer in this regard was erroneous and prejudicial to the interest of the Revenue. 21.1 That on the facts and circumstances of the case and in law, the CTT failed to appreciate that the aforesaid issue was duly examined by the assessing officer during the original assessment proceedings and, therefore, was not amenable to revisionary jurisdiction under section 263 of the Act. 22. That on the facts and circumstances of the case and in law, the CIT erred in holding that the assessing officer failed to verify whether any expenses were incurred for earning exempt income which were required to be disallowed under section 14A of the Act and. therefore, the order of the assessing officer was erroneous and prejudicial to the interest of the Revenue. 22.1 That on the facts and circumstances of the case and in law, the....
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.... by the assessing officer without verification and enquiry and, therefore, the order of the assessing officer in this regard was erroneous and prejudicial to the interest of the Revenue. 26.1 That on the facts and circumstances of the case and in law, the CIT failed to appreciate that all certificates in respect of foreign taxes paid/deducted were duly furnished before the assessing officer and the assessing officer after being satisfied allowed credit for such taxes while processing the return of income under section 143(1) of the Act." 9. We have heard the rival submissions and perused the materials available on record. The Assessee Company is engaged in the business of providing learning and knowledge solutions and imparting computer education and training to clients. The Assessee Company derives income from domestic business and export, income from capital gains and income from other sources. The original return of income was filed by the Assessee Company for Assessment year 2000-01 on 30-11-2000. The assessment was completed under section 143(3) of the Act on 31-3-2003. A search and seizure operation under section 132 of the Act was conducted on the Assessee on 10-....
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....ssessment order is erroneous in as much as it is prejudicial to the interest of the revenue. 11. The assessee filed several factual paper books containing various details. We deem it fit to reproduce the contents of the paper book from its Index as under:- INDEX OF PAPERS - ORDERS IN OWN CASE Sl. No. Particulars Page No. 1 Copy of office notes to the assessment order for the assessment year 1999-2000 to assessment year 2005-06. 1-42 2. Copy of the order dated 11.12.2009 passed by the Hon'ble Delhi High Court in the assessee's own case setting aside the order dated 19.06.2008 passed by the Commissioner for assessment year 1999-00 with the direction to the Commissioner to fresh pass order for AYs 1999-00 and also orders for AYs 2000-01 to 2005-06 after considering the objections raised by the assessee. [WP (C) No. 4722/2008 and WP (C) Nos. 172 to 177/2009] 43-61 3. Copy of the order dated 5.2.2010 passed by the Hon'ble Delhi High Court in CM No. 1415/2010 in W.P.(C) No. 4722/2008. 62-64 4. Copy of the order dated 03.08.2012 passed by the Hon'ble Delhi High Court in the assessee's own case holding that the assessee is entitled to challen....
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.... Matter of record 10. Copy of letter dated 10.03.2010 filed before the Commissioner of Income Tax, Central II during the course of proceedings under section 263 of the Act for assessment year 1999-2000 to 2005-06 containing all legal objections including inspection of records. 161-178 CIT 11. Copy of order dated 11.03.2010 passed by the CIT in response to the letter dated 10.03.2010 filed by the assessee. 179-184 Matter of record 12. Copy of letter dated 15.03.2010 filed before the Commissioner of Income Tax, Central II during the course of proceedings under section 263 of the Act for assessment year in consideration giving details/information regarding:- • inspection of records • the annual maintenance charge, • remittance to NIIT subsidiary- Netvarsity, • payment of royalty to Neg • suppression of technical know-how fee/royalty received from overseas franchisee/licensee. • Arrangement of routing technical know-how fees/royalty through M/s NIIT Antilles NV • Fictitious import of software from M/s Relativity Technologies Inc, USA. 185-255 CIT 13, Copy....
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....05 Informant to AC IT (CC - 2) 08.06.2017 14-18 6. 08.11.2005 AC1T (CC - 2) to CIT (Central) - III 08.06.2017 19 7. 14.11.2005 CIT (Central) - III to CCIT 08.06.2017 20-21 8. 29.11.2005 ACIT (CC - 2) to CIT (Central) - III 11.08.2016 22 9. 29.11.2005 ACIT (CC - 2) to CIT (Central) - III 08.06.2017 23 10. 30.11.2005 CIT (Central) - III to CCIT (Central) 08.06.2017 24 11. 05.12.2005 CCIT (Central) to Dy Secretary (Inv - I) CBDT 11.08.2016 25 12. 12.12.2005 ACIT (CC - 2) to Informant 19.07.2016 26 13. 15.12.2005 Informant to ACIT (CC - 2) 19.07.2016 27 14. 19.01.2006 ACIT (CC - 2) to Informant 19.07.2016 28-29 15. 24.01.2006 Informant to ACIT (CC - 2) 19.07.2016 30-31 16. 25.01.2006 ACIT (CC - 2) to CIT (Central) -III 11.08.2016 32-38 17. 31.01.2006 CIT (Central) -III to CCIT (Central) 08.06.2017 39 18. 02.02.2006 CCIT (Central) to Dy Secretary (Inv - I) CBDT 11.08.2016 40 19. 06.02.2006 Informant to ACIT (CC - 2) 19.07.2016 41-66 20. 28.02.2006 ACIT (CC-2) to ....
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....212 47. 15.06.2006 CCIT (Central) to CIT (Central) - III 08.06.2017 213 48. 15.06.2006 CIT (Central) - III to Addl. CIT (CR - V) 08.06.2017 214 49. 16.06.2006 Addl. CIT (CR -V) to CIT (Central) - III 08.06.2017 215-216 50. 19.06.2006 CCIT (Central) to CBDT 08.06.2017 217-218 51. 26.06.2006 CBDT to CCIT (Central) 11.08.2016 219 52. 27.06.2006 Director of Enforcement to ACIT (CC-2) 08.06.2017 220 53. 03.07.2006 CCIT (Central) to CBDT 11.08.2016 221 54. 17.05.2007/21.07.2007 Informant to Member (Investigation), CBDT 08.06.2017 222-230 55. 17.05.2007 Informant to Member (Investigation), CBDT 08.06.2017 231-330 56. 21.05.2007 CBDT to CCIT (Central) 08.06.2017 331 57. 21.05.2007/24.04.2007 Director, CBDT to CCIT (Central) 08.06.2017 332-335 58. 21.05.2007 CCIT (Central) to CIT (Central) -III 08.06.2017 336 59. 22.05.2007 CIT (Central) - III to Addl. CIT(CR) -V 08.06.2017 337 60. 22.05.2007 CIT (Central) - III to Addl. CIT(CR) -V 08.06.2017 338 61. 22.05.2007 CIT (Central) ....
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....mber CBDT 08.06.2017 468 92. 23.07.2007 CIT (Central)-III to NUT (Show cause Notice) 08.06.2017 469-471 93. 23.07.2007 Addl CIT (CR-VI) to CIT (Central) - III 08.06.2017 472-476 94. 26.07.2007 CCIT (Central)to CIT (Central) - III 08.06.2017 477-486 95. 27.07.2007 CIT (Central) - III to CCIT (Central) 08.06.2017 487-488 96. 27.07.2007/06.06.2007 CIT (Central) - III to CCIT (Central) 08.06.2017 489-492 97. 30.07.2007 Addl CIT (VI) to CIT (Central) - III 08.06.2017 493-494 98. 30.07.2007 Transfer Order 08.06.2017 495 99. 03.08.2007 CIT (Central) - III to CIT Central - II 08.06.2017 496-497 100 03.08.2007/06.08.2007 CBDT to CCIT (Central) 08.06.2017 498 101 06.08.2007 Informant to Member (Investigation), CBDT 08.06.2017 499-500 102 09.08.2007 Director (Investigation) CBDT to CCIT 08.06.2017 501 103 14.08.2007 CBDT to CCIT (Central) 08.06.2017 502-503 104 14.08.2007 Informant to Member (Audit & Judicial), CBDT 08.06.2017 504-507 105 16.08.2007 CCIT (Central) to CIT (Central) - II ....
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....nder Section 153 A of the Act. 773- 796 AO 49. Copy of notice dated 29.12.2005 issued under Section 143 (3) of the Act issued by ACIT, Central Circle 2. 797- 798 Matter of record 50. Copy of letter dated 09.01.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Section 143 (2) of the Act giving detail/ information of NIIT NV including bank account details and addresses, board resolution regarding power of managing director and note on control and management where it exists. 799- 808 AO 51 Copy of notice dated 10.01.2006 issued under Section 153 A of the Act issued by ACIT, Central Circle 2 809- 809 Matter of record 52 Copy of letter dated 17.01.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Section 143 (2) of the Act giving detail information regarding working of NIIT NV with documentary evidence 810- 850 AO 53. Copy of notice dated 10.02.2006 issued under Section 153 A of the Act issued by ACIT, Central Circle 2. 851- 855 Matter of record 54. Copy of letter dated 27.02.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Se....
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....of proceedings under Section 153 A of the Act giving details/information regarding TDS on account of Relativity Inc., USA. 982- 994 AO 66 Copy of notice dated 01.03.2006 issued under Section 153A of the Act issued by ACIT, Central Circle 2. 995- 1006 Matter of record 67 Copy of letter dated 6.03.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Section 143 (2) of the Act giving detail/ information regarding remittance made to M/s Relativity Inc. USA. 1007- 1020 AO 68 Bogus Purchase of Software Copy of notice dated 2.11.2005 issued under Section 153 A of the Act issued by ACIT, Central Circle 2. 1021- 1026 Matter of record 69 Copy of letter dated 21.11.2005 Filed before ACIT, Central Circle 2 during the course of proceedings under Section 153 A of the Act giving details of software purchased above Rs. 25 lacs from certain parties. 1027- 1035 AO 70 Copy of letter dated 6.2.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Section 153 A of the Act giving details/ information regarding increase in turnover through business partners. 1036- 1041 AO 71. Copy ....
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.... proceedings under Section 153A of the Act giving detail/ information/note on the exemption claimed under section 10B of the Act by the assessee including STPI approvals. 1155-1197 AO 82. Copy of the order of the Commissioner of Income tax (Appeals) in the matter of the appellant for the assessment year 1999- 2000. 1198-1206 Matter of record 83 Copy of the order of the Commissioner of Income tax (Appeals) in the matter of the appellant for the assessment year 2001- 2002. 1027-1223 Matter of record 84. Claim of course execution charges. Copy of notice dated 2.11.2005 issued under Section 153 A of the Act issued by ACIT, Central Circle 2. 1224-1229 Matter of record 85. Copy of letter dated 14.11.2005 filed before ACIT, Central Circle 2 during the course of proceedings under Section 153 A of the Act. 1230-1236 AO 86. Copy of notice dated 29.12.2005 issued under Section 143 (3) of the Act issued by ACIT, Central Circle 2. 1237-1238 Matter of record 87 Copy of letter dated 09.01.2006 filed before ACIT, Central Circle 2 during the course of proceedings under Section 143 (2) of the Act giving detail/ information of ex....
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....ter dated 14,11.2005 filed before ACIT, Central Circle 2 during the course of proceedings under Section 153 A of the Act giving details of loan given or taken during the relevant assessment year. 1301- 1307A AO 99. Miscellaneous Copy of return of income. 1308-1323 AO 100. Copy of computation of income. 1324-1326 AO 101. Copy of auditor's report. 1327-1327 AO 102. Tax Audit Report-Form 3 CD 1328-1382 AO 103. Copy of letter dated 08,02.2006 filed before the ACIT, Central Circle 2 during the course of assessment proceedings under section 153A of the Act giving details/information regarding the contents of the material seized from office premises, residential premises of the Directors and also from Al/88 Janakpuri, New Delhi. 1383-1395 AO 104. Copy of the order of the assessing officer under section 143(3) of the Act for the captioned assessment year. 1396-1398 Matter of record INDEX OF PAPERS - VOL- V S. No. Particulars Filed before Page No. Re: AY 1998-99 - Assessment proceedings 1. Copy of the assessment order, dated 16.11.2000, passed under section 143(3) of the Act in the c....
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....ceedings First Round of proceedings under section 263 /Second Round of proceedings under section 263 Vol.-I Notice/ queries raised by A.O. Pg No. of PB Merits Reply by assessee Pg. No. of PB PB - Pg. No. of SCN issued in first round (19.11.2007/ 18.12.2008) PB-Pg. No. of SCN dated 5.2.2010 u/s. 263 (Second Round) Reply to SCN by assessee Pg, No. of PB 11. Annual Maintenance charges/ technical service fee paid outside India, without deduction of tax at source - Not examined by assessing officer 13 to 16 Questionnaire dated: - 2.11.2005 AO asked the assessee to explain why tax has not been deducted on the payments made towards software upgrades - 10.2.2006 AO asked the assessee to explain why tax has not been deducted on payments made towards AMC on imported software Vol II 411-412 (Q. No. 33) Vol II 428 (Q No. A) Replies dated: - 14.11.2005 The assessee gave justification for not deducting tax at source on the payments made for purchase of upgrades along with copy of invoices and the bill of entry....
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.... 19-24 Questionnaire dated: 2.11.2005 AO asked to furnish details of income from the sale/use of CBTs purchased from NETg 29.12.2005 AO asked to explain the circumstances under which materials from Netg were imported after expiry of agreement with Netg. - 10.2.2006 AO sought detailed explanation regarding the remittances to NETg - 1.3.2006 AO sought explanation on certain emails exchanged between certain functionaries of the assessee and NETg relating to purchase in the assessment year 2002-03 (USD 2,07,785) to allege that said remittance was in the nature of payment for royalty. Vol. II 536 (Q. No. 24) 542 569-570 580-585 Replies dated: 14.11.2005 Assessee submitted the reply giving details of imports as well as usage of products from NETg and revenue earned therefrom. - 9.1.2006 Assessee submitted the copy of agreement with Netg highlighting the minimum purchase commitment of NIIT along with note on import of material from Netg Copy of distributorship agreement dated 31.12.1994 between Netg and the assessee Copy of account of M/s K.K Lubricants and ....
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....59 4-5 153 15.03.2010 241-244 15. Arrangement for routing technical knowhow fee/royalty through M/s NIIT Antilles NV ('NIIT NV') 27-32 Questionnaires dated: - 2.11.2005 AO asked the assessee to explain whether the control and management of NIIT NV was situated in India - 29.12.2005 AO asked the assessee to furnish bank account, board resolution appointing MD of NIIT NV - 10.1.2006 AO asked the assessee to furnish note on working of NIIT NV along with documentary evidence. - 10.2.2006 AO asked the assessee to furnish details of who was handling international overseas business in overseas and submit whether any Director travelled to Netherlands. - 1.3.2006 AO sought explanation as to the business model existing prior to 1.10.1999 and w.e.f. 1.10.1999 and whether the assessee had camouflaged receipt of royalty / technical know-how fee in garb of export proceeds from NV. Vol III 769 (Q. No. 27) 798 Q. No.10) 809 (Q. No.4) 855 (Q. No. H) 871-873 (Q. No. 7) Replies dated -14.11.2005 It was submitted that NIIT Antilles is a compa....
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.... Vol III 775 799 811 860-863 883 5 153-155 15.03.2010 244-253 16. Fictitious import of software from M/s Relativity Technologies, USA 33-34 Questionnaire dated: - 2.11.2005 AO asked the assessee to prove actual import of software from Relativity and furnish evidences of putting it to use for the purposes of assessee's business - 29.12.2005 AO asked the assessee to furnish details of investment in Relativity and substantiate whether there was any correlation between the payment for import of software and payment made for acquiring equity share in Relativity. Vol III 895 (Q. No. 31) 952 (Q. No. 1-3) Replies dated -14.11.2005 The furnished contemporaneous evidences establishing actual import of software and putting up of same for use in the business of the assessee -09.01.2006 The assessee furnished details of making investment in Relativity and submitted that transaction of import of software and investment in Relativity were independent transactions. Vol III 900 954-971 7 155 15.03.2010 253-255 ....
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.... - 14.11.2005 Assessee gave justification for allocation of various expenses to taxable units as also explained the practice followed for allocating expenses to taxable and non-taxable units for the purpose of computing profits of the EOU units 06.02.2006 Assessee submitted reply regarding impact of allocation of expenses between EOU and Non EOU units, Detail of certain non-allocated expenses; Accounts of EOU units along with certification of chartered accountant. - 09.01.2006 Assessee provided details of exports made during the relevant year, along with proof of physical exports and the corresponding Softex Form Nos. - 17.01.2006 Assessee provided details of year wise export made along with the reference of softex forms. - 24.03.2006 The assessee furnished all the approvals received from STPI authority of relevant state(s), where the EOU unit was established along with note on various business units including EOU units, the nature of operations carried out by them and the method of allocation of expenses amongst such various units. Vol. IV 1070- 1074 Vol. IV 1109 @ 1110, 1112, 1152 Vol. IV ....
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....4 of the audited financial statements : Secured Loans and Unsecured Loans Schedule 6 of the audited financial statements : Investments Vol III 1268-1270 1333, 1334 1336 Not raised 159 - 29.3.2010 283-291 24. Amortization of expenses u/s. 35D (share issue expenses) 64-67 Apparent disclosure in : - Schedule 14 of audited annual accounts : Miscellaneous expenditure - Schedule 19 of audited annual accounts : Administration and others - Tax Audit Report : Clause 15 read with Annexure 3 Vol IV 1339 1342 1352, 1369 Remark Initial year of deduction under section 35D in the assessment year 1993-94 - Always accepted and allowed in earlier year(s) Not raised 159-160 - 23.3.2010 266-268 25. Fresh Loan transactions 67-68 Questionnaire dated: - 2.11.2005 AO asked to submit details of all loans and advances given/taken during the year Vol III 1296 (Q No. 9) Replies dated: - 14.11.2005 Assessee submitted details of all loans and advances given/taken during the year al....
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....facts prevailing in the years under consideration. 15. The aforesaid charts would clearly establish the fact that adequate enquiries were indeed made by the Learned AO on each of the issues contemplated by the Learned CIT under section 263 of the Act. Hence it could be safely concluded that the issues raised by the Learned CIT in the revision order under section 263 of the Act cannot be subjected to revision at all as it is not the case of lack of enquiry. The law is very well settled that revision jurisdiction cannot be initiated unless the Learned CIT is able to establish that there was lack of enquiry on the part of the Learned AO in the assessment proceedings. Reliance in this regard is placed on the decision of the Hon'ble Jurisdictional Delhi High Court in the case of CIT vs Sunbeam Auto reported in 332 ITR 167 (Del) ; CIT vs Anil K Sharma reported in 335 ITR 83 (Del), among others. In any event, adequate information was provided by the Assessee before the Learned AO and the Learned CIT which would enable the authority to form an opinion and take a plausible view on the matter. Hence no error could be attributed in the order of the Learned AO, even if it is found to be pre....
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....SSMENT UNDER SECTION 153A S. No. Date Particulars Contents Remarks Paper Book Page No. 1. 10.11.2004 Search under section 132 2. 30.12.2004 Complaint filed by the Informant before DIT(Investigation) alleging tax evasion by the appellant company on various issues. 1-10 (Vol-1) 3. 06.09.2005 Notice issued under section 153A 4. 12.9.2005 & 23.9.2005 Letter from CBDT to CCIT, and thereafter by CCIT to CIT(Central)-III CBDT directs the CCIT (and CCIT further directs CIT(Central) to indicate the conclusion of enquiry carried out by DGIT (Inv) on the assessment proceedings of the case 11 & 12 (Vol-1) 5. 05.10.2005 Return filed by assessee in response to notice under section 153A 6. 14.10.2005 Another letter from Informant to the assessing officer. Providing information and making allegation of tax evasion by the appellant company on various issues 14-18 (Vol-1) 7. 24.10.2005 Letter from CIT to Addl. CIT enclosing the above letter dated 14.10.2005 (mentioned at Sl. No....
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....l/routine monitoring of assessment, as concluded by the ITAT. 32-38 (Vol-1) 16 31.01.2006 The above status report furnished by the AO, forwarded by CIT to Chief CIT with remark that contents of the report are "self-explanatory" The status report of the AO was forwarded by the CIT to Chief CIT after a gap of almost 6 days and duly applying mind on the nature of enquiries, which is evident from the fact that the CIT reported the contents of report as "self-explanatory". The aforesaid letter also substantiates monitoring of issues raised in assessment by the CIT. 39 (Vol-1) 17 02.02.2006 Letter from Chief CIT to CBDT, enclosing certain information regarding assessment of the appellant company Enclosure not available 40 (Vol-1) 18 06.02.2006, 28.02.2006 & 04.03.2006 Further letters /correspondences between Informant and AO with c.c. to CIT, qua enquiries on various allegations made by the appellant company. 41-66, 67, 68-72 (Vol-1) 19 08.03.2006 Letter from Addl. CIT to TPO to expedite transfer pricing proceedings. 73 (Vol-1) 20 13.03.2006 Letter from CBDT to....
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.... allegation raised by the Informant were confronted to the assessee during the course of assessment and the conclusions drawn on the basis of investigations and documents on record. The report also pointed out that total addition of Rs. 31.29 crores was being made in various companies of the same group. Case monitored by the CIT/ CCIT. Also shows that all the issues raised examined by the assessing officer. 95-162 (Vol-1) 27 16.5.2006 Correspondences between CIT and Addl. CIT relating to status and monitoring of assessment. Regarding points to be kept in mind while conducting investigation. The assessing officer is further advised by the CIT that in case of variance with the stand taken in the appraisal report, the assessing officer should properly record the same in the office note for future reference. Shows that assessment was being monitored / supervised by CIT. 164-165, 166-167 (Vol-1) 28 23.05.2006, 26.05.2006 Another letter from AO to CIT (through Addl. CIT) by CIT along with issue/allegation wise status report AO provided complete status of allegations made by the Informant, in response to the status update sought by the C....
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....Special Counsel for the Revenue prima facie appears to be very fancy and correct, but it could be seen that no search assessment gets monitored by CBDT / CCIT to this minute level as was done in the instant cases before us, by getting into specific queries to be raised by the Learned AO and the replies given by the Assessee to the same on various issues. The constant reporting by the Learned AO to Learned Additional CIT ; Learned Additional CIT to Learned CIT ; Learned CIT to Learned CCIT and Learned CCIT to CBDT on each of the issues during the course of search assessment proceedings and post assessment proceedings are staring on us from the various correspondences placed on record. The aforesaid chart clearly depict a totally different picture duly buttressing the argument of the Learned Special Counsel for the Revenue. This is a classic case where all the authorities were involved at the time of search assessment proceedings itself so as to please the Informant for the various letters written by him to CBDT / CCIT / CIT / Additional CIT and the AO. Infact in the Office Notes recorded by the Learned AO for Assessment Year 2000-01, it had been noted as under:- "The assess....
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....th separately at later part of this order. 18. Post completion of assessment also, the Informant did not resort to close the complaints. He started making fresh complaints against the Learned AO, Learned Additional CIT and the Learned CIT making various personal allegations on them but raking up the very same issues to the higher authorities upto the level of CCIT and CBDT. Due to frequent receipt of complaints and correspondences from the Informant, the CBDT directed the competent authority to conduct a review of the assessment records, seized materials and the appraisal report, which ultimately resulted in initiation of revision proceedings under section 263 of the Act. The following chart containing the complete list of correspondences post completion of search assessment would clearly prove the fact in this regard:- Assessment Year : 2000-01 to 2005-06 ITA No. : 2058, 2059, 2060, 2061, 2062, 2063/Del/2010 & 356/Del/2016 SEQUENCE OF EVENTS LEADING TO INITIATION OF PROCEEDINGS UNDER SECTION 263 S. No. Date Particulars Contents Remarks Paper Book Page No. 1. 01.06.2006 Assessment order(s) passed under section 153A ....
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....at in-depth investigation has been done in the matter from all possible angles, thereby providing their opinion against further review of the assessment order. The said document was not available while deciding appeal for AY 1999-2000, and has been made available recently pursunat to interim order dated 23.05.2017 passed by the Hon'ble High Court. 215-218 (Vol II) 5. 26.06.2006 Another letter from CBDT to CCIT again asking for submission of report on the review of allegations made by the Informant Instance of repeated pressure from CBDT, which was otherwise extraneous in terms of section 119 of the Act. The said document was not available while deciding appeal for AY 1999-2000, and has been made available recently pursunat to interim order dated 23.05.2017 passed by the Hon'ble High Court. 219 (Vol II) 6. 03.07.2006 Reply letter from CCIT to CBDT, inviting attention to the earlier letter dated 19.6.2006, whereby status for review was submitted. [Mentioned at Sl. No. 4 above] Repeated denial by CCIT for review of assessment order. The said document was not available while deciding appeal for AY 1999-2000, and h....
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.... 30.5.2007 Letter from CCIT to CIT, which was further forwarded by CIT to Addl. CIT, intimating about follow-up from CBDT to expediter review of files. Indication of constant follow-up by CBDT 368-369 (Vol II) 13. 01.06.2007 Another Letter from CBDT to CCIT Forwarding letter dated 24.5.2007 of the Informant and seeking review report at the earliest. Indication of constant follow-up by CBDT The said document was not available while deciding appeal for AY 1999-2000, and has been made available recently pursunat to interim order dated 23.05.2017 passed by the Hon'ble High Court. 370 (Vol II) 14. 05.06.2007, 06.06.2007 Review report from the Addl. CIT submitted before CIT, which was further forarded by CIT to CCIT While dealing with various issues raised by the Informant, Addl. CIT informed that such issues were examined by the AO and status report on such issues was also submitted at the time of assessment. However, given the complexity of the matter, keeping in mind the repeated complaints filed by the Informant, Addl. CIT sought further time to submit the report. 371-374 (Vol II) 15. 8.6.2007 Lett....
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....ho was not involved in the original assessment, independently came to a conclusion that no revisionary action under section 263 is warranted. This clearly shows that subsequent action of revision was taken under pressure/dictates of higher authorities. The said document was not available while deciding appeal for AY 1999-2000, and has been made available recently pursunat to interim order dated 23.05.2017 passed by the Hon'ble High Court. 386-407 (Vol II) 21. 25.6.2007 Complaint by the Informant to Hon'ble Prime Minister of India Having regard to the negative reports submitted by the Addl CIT and CIT for revision of assessment, the Informant re-initiated the pressure tactics through writing a letter to PMO. 408-409 (Vol II) 22. 25.6.2007 Review report by CIT to Chief CIT On the basis of report submitted by Addl. CIT and independent examination of record, CIT also expressed his opinion as under: "I have gone through this report with Annexure, Appraisal Report, assessment record, viz-a-viz petition of ........... I find that there is no case for either escapement of income or any case for orders being prejudicial to the inte....
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....that, copy of the same was sent to CCIT and for further transmission to CBDT, which clearly vindicates that CIT was acting under the pressure/dictates of said higher authorities. 445-449 (Vol II) 30. Undated letter/report Author of the letter unknown Content of the letter is review of the interim review reports of Addl. CIT and CIT and, therefore, seems to be written by an higher authority. In the last para, it is stated as under: "The CIT's report do not give any indication that any remedial action is required at this stage in this case. He has, however, been directed to ensure that if anything adverse is notices, appropriate action may be taken without further delay." Another instance of direction from superior authorities to CIT. The said document was not available while deciding appeal for AY 1999-2000, and has been made available recently pursunat to interim order dated 23.05.2017 passed by the Hon'ble High Court. 464-465 (Vol II) 31. 17.7.2007 Letter from CIT to Addl. CIT Requiring report 466 (Vol II) 32. 20.7.2007 Letter from CCIT to CIT Seeking report, as directed by CBDT CCIT was exerting pres....
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....essurizing him. There is also clear indication that he was so pressurized that he even took the extreme step of requesting the jurisdiction of the appellant to be transferred. This painful request accepted on 30.07.2007, referred infra. 487-488 (Vol II) 38. 30.7.2007 Letter from Addl. CIT to CIT Report on allegations made by the Informant in letters dated 19.6.07, 23.6.07, 2.7.07, 3.7.07 493-494 (Vol II) 39. 30.7.2007 Transfer of jurisdiction of the appellant by CCIT Transfer of jurisdiction clearly establishes that when the higher authorities found that it may be difficult to direct the jurisdictional CIT to follow the dictated lines, CIT's request was accepted and the case was immediately transferred. 495 (Vol II) 40. 3.8.2007 Letter from CIT(Central)- III (old CIT) to CIT(Central)-II (new CIT) transferring the appellant's record. 496-497 (Vol II) 41. 3/6.8.2007 Letter from CBDT to CCIT, enclosing another complaint of even date from the Informant. It seems to be clear that CBDT was religiously forwarding the complaints received from Informant, which, ....
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....ce/ dictates by the CBDT/ CCIT to CIT. In this letter, CCIT is directing the CIT the manner and the basis on which issues for 263 of the Act should be identified. Even such direction is, in fact, contrary to the settled legal position that where enquiries are conducted by the assessing officer on a particular issue, the assessment order cannot be regarded as erroneous. Thus, the CCIT is found to be directing the CIT to proceed under section 263 contrary to the settled legal position. 525-526 (Vol II) 52. 28.9.2007 Letter from CCIT to CIT Forwarding letter of CBDT to submit the review report Repeated instance of pressure from CBDT to expedite review process. 527 (Vol II) 53. 15.10.2007 Second show cause notice under section 263 by the CIT 19. From the above correspondences, it is crystal clear that the revision proceedings under section 263 of the Act indeed got triggered based on the dictates / pressure of the higher authorities including CBDT atleast for the years under consideration before us. Infact the change of the CIT, change of jurisdiction of the Assessee's case from one range to another range itse....
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....rough the same and the CIT said that the same shall be returned along with the approval draft orders, but the same has not been returned so far. Since the assessment for assessment year 1998-99 completed under section 143(3) on 31-3-2000 has been set aside by the CIT, Rohtak vide order dated 31-10-2000, which is pending, it is requested that the same may kindly be returned at the earliest. Yours faithfully, Sd/- (Ranjit Singh) Dy. Commissioner of Income-tax Inv. Circle, Gurgaon. Encls. : As above." Similarly, in para 2 of his letter No. DCIT/GGN/1583, dated 30-5-2001 to the Commissioner, the Assessing Officer has observed as under :- "2. As already submitted from time to time, the above case was selected for CIT's monitoring as per CIT, Rohtak's letter F. No. CIT/Tech/CIT's monitor/DCIT/GGN 1999-2000/8266, dated 4/5-10-1999. The case was discussed with the then CIT Rohtak from time to time and after his approval, the order was passed on 31-3-2000 under section 143(3). Thereafter assessment was cancelled under section 263 on 31-10-2000 by the CIT, Rohtak. The said assessment is pending." These letters f....
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....d expenditure of Rs. 5,78,768. That is, direct expenditure and indirect expenditure comes to Rs. 2,47,205 and in the assessment year 1985-86 the assessee has incurred expenditure on construction of Rs. 1,58,29,941. The Assessing Officer has examined this cost of construction, which is fully supported by the vouchers. When the expenditure was fully supported by the vouchers, what more investigation is required specially in this case when the assessment proceedings were monitored by the Commissioner (Vigilance), Calcutta. ................ 16. In view of the aforesaid facts, it cannot be said that the findings of the Tribunal are unreasonable or perverse when the assessment orders were made after due verification and under the supervision of the Commissioner (Vigilance) and all relevant material has been collected by the Assessing Officer. The assessment orders cannot be said to be erroneous and prejudicial to the interest of the revenue. Thus, we found no infirmity in the order of the ITO. 20.2. In the recent decision of Hon'ble Chattisgarh High Court in the case of DCIT vs Surendra Kumar Jain reported in 472 ITR 346 (Chattisgarh), it has been held that- ....
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....ntained in Ground Nos. 1 to 10 were argued in extenso before the Hon'ble Coordinate Bench hearing the appeal for A.Y. 1999-2000 ITA No. 2057/DEL/2010 Notwithstanding the Assessee's attempt to re-argue these issues before this Hon'ble Bench, the Revenue submits that the matters [contained in Ground Nos. 1 tow] are squarely covered by the findings of A.Y. 1999-2000. ii. The Revenue maintains that the findings contained in Paras 14 to 39 (at Page No. 114 to 202 of assessee paperbook - Orders in own case) apply with full force to the present proceedings for the following reasons: - A. There is no change in facts; and B. There is no change in law. iii. Given the well-settled position of law that where a Coordinate Bench has already taken a view in the Assessee's own case on identical facts, judicial propriety demands that the same be followed to maintain the finality of adjudication and avoid unwarranted divergence. Thus, the Revenue submits that there is absolutely no reason to depart from the finding of the Hon'ble coordinate bench for AY 1999- 2000. REBUTTAL TO THE ASSESSEE'S ATTEMPT TO DISTINGUISH THE MATTER FOR A.Y. 2000-01 AND SEEKING F....
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....Hon'ble High Court referred to above correspondences and confidential records in spite of specific prayer to that effect by assessee. 20.6. Thus "all records", as mentioned in the Tribunal's order dated 06.07.2010, have been clarified by Hon'ble High Court in its order dated 03.08.2012 by observing that Tribunal cannot be faulted in directing to produce the assessment record and the records relating to proceedings u/s. 263." 3. That, it has been the consistent case of the Revenue that the correspondence alleged to have not been provided, contained sensitive information, including the identity of informants, which was protected by the principle of confidentiality. It is well-settled that the Revenue is not obligated to disclose confidential information, particularly where such disclosure may compromise the source of information. 4. It needs to be further appreciated that acceding to the Assessee's demand for the disclosure of internal vigilance and administrative records would have grave and far-reaching consequences for the efficacy of the Department's search mechanism. Such a precedent would undermine the sanctity of confidential protocols that h....
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....per the statutory requirements in search proceedings and, therefore, the assessee had the right to ask for the same. However, this proposition cannot be extended to confidential administrative correspondences, which do not even form part of the "record" under Section 263. Such correspondence can be examined by the Court to arrive at a proper conclusion but need not be disclosed to the other party. We, therefore, hold that the decision relied upon by the learned Counsel is of little assistance in the present context. 21.3. The proceedings cannot be brought to a standstill on account of repeated pleas by the assessee regarding confidential records not being provided, which have not even been directed by the Hon'ble High Court to be shown to the assessee, and on which privilege is being claimed by the department, particularly when substantial details have already been made available to the assessee." 6. Regarding the Assessee's strenuous contentions concerning the documents submitted in a 'sealed cover' to the Hon'ble Coordinate Bench for A.Y. 1999-2000, it is submitted that these records formed part of a confidential internal set over which the Revenue has consisten....
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....ecome infructuous, stale and offers no valid ground for departure from the earlier finding of the Hon'ble Bench in Paras 14 to 39 (at Page No. 114 to 202 of assessee paperbook - Orders in own case). 10. The entire attempt to distinguish the facts of the present year with that of the earlier year is without any basis, there is not any iota of evidence in the compilation of so called 'new documents' to suggest any departure from the findings of the Coordinate Bench. While it may be open to raise any ground of appeal in succeeding years but merely because, the assessee choses to reargue the matters, it does not automatically distinguish it from the earlier findings. C. Re; - The Assessee's untenable attempt to distinguish the precedent of A.Y. 1999-2000 on the grounds that the original assessment was completed under Section 143(1) as opposed to Section 143(3)- The Assessee has sought to distinguish the findings of the Ld. Coordinate Bench for A.Y. 1999-2000 by relying on the nature of the original assessment proceedings. Specifically, the Assessee contends that because the earlier year was processed under Section 143(1), whereas the assessment for A.Y. 2000-2001 ....
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....ing Officer (AO) under Section 143(3) 1153^ °f ^e Act in respect of assessment year 1999-2000 is erroneous and prejudicial to the interest of the Revenue because of the reason that certain issues, highlighted in the said order, were not considered at the time of framing of the issues. Consequently, the assessment order has been set aside with direction to the AO to frame the assessment afresh after affording the assessee an opportunity of being heard and after making proper enquiries and verifications. According to the petitioner, this order is illegal and mala fide. 2. As far as the other writ petitions are concerned, only show-cause notice under Section 263 of the Act in respect of different assessment years, i.e., from assessment years 2000-01 to 2003-06 have been issued, which are challenged, but admittedly no orders under Section 263 of the Act have been passed so far. In these circumstances, it is but proper to first deal with W.P.(C) No. 4722/2008 on merits as the consequences from the outcome of this writ petition will determine the fate of other petitions as well." 3. That, the High Court subsequently, further clarified the requirement for an independ....
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.... order does not survive, but the show cause notice does survive. This will be contrary to the very nature of proceedings under section 263." 8. Furthermore, the Hon'ble High Court, via its order dated 05.02.2010, clarified the position regarding limitation, by observing: - "In the impugned order, we make it clear that in Para 24, where it is stated that the issue of limitation would not be raised by the petitioners, the same is in the context of passing of the orders under Section 263 of the Act as well." 9. There is not an iota of evidence on record to suggest that the fresh show cause notices were a mere continuation of the quashed proceedings. It is a settled position that Section 263 proceedings can be re-initiated provided they fall within the statutory period of limitation. The Appellant's contentions in this regard are legally untenable. 10. As there are no distinguishing features on facts or law between the present year and A.Y. 1999-2000, the findings of the Hon'ble Coordinate Bench assume a binding character. Judicial propriety demands that this Hon'ble Bench maintains consistency and declines to depart from the established precedent. ....
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.... or any valuable article or thing, which had not been or would not have been disclosed for the purpose of the Act, referred to as undisclosed income. 34.1. Thus, the trigger point of such assessment is search, which, in turn, can be conducted only where the income tax authority has reason to believe that the assessee is in possession of certain undisclosed assets or documents suggesting earning of undisclosed income by the assessee. The purpose of making assessment u/s. 153 A of the Act is not to verify the return, as such, but to make assessment primarily on the basis of the material found during the course of search. There cannot be any quarrel with these submissions made by the Id. counsel for the assessee. In this regard we may refer to the decision of Hon'ble Jurisdictional High Court in the case of Chetan Das Laxman Das (supra), in which Hon'ble Jurisdictional High Court observed that though there is no condition in section 153A that addition should be strictly made on the basis of evidence found in the course of search or other post-search material or information available with the AO which can be related to the evidence found, but that does not mean that assessment....
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....t treated him as a witness to be examined, rather than a master to be followed. v. The Assessee's contention that the authorities acted at the Informant's behest is legally untenable. An Informant is well within his rights to share his understanding of a taxpayer's business affairs with the Revenue. The Department's duty is to verify such information; the motive of the informant is irrelevant once the information leads to the discovery of undisclosed income or incriminating material. vi. While it is a matter of record that a financial dispute led to arbitration between the Informant and the Appellant, ultimately settled in 2009 as recorded by the Hon'ble High Court in M/s NUT Limited vs. Mr. A.L. Mehta, this collateral dispute has no bearing on the merits of the tax assessment. A personal grievance does not ipso facto vitiate the veracity of the evidence found during a search. SUBMISSIONS REGARDING JURISDICTIONAL ISSUES AND ALLEGED DICTATES i. At the outset, it needs to be appreciated that it is a matter of record that the Hon'ble High Court did not adjudicate upon the jurisdictional challenges, namely, whether the revisionary proceeding....
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....o either: - (i) Carry out the review in a particular manner; or (ii) Pass an order under Section 263 in a pre-determined manner. B. The Appellant's contention is a mere figment of imagination and appears as a strategic ploy to evade a situation where it had received undue and legally inadmissible favors at the assessment stage [a fact fortified by framing of chargesheet against the A.O.]. C. At the outset, the Revenue places strong reliance on the Presumption of Regularity as enshrined under Section 114(e) of the Indian Evidence Act, 1872 [now Section 119(e) of the Bharatiya Sakshya Adhiniyam, 2023]. It is a settled legal mandate that judicial and official acts, including the initiation of revisionary proceedings, are presumed to have been regularly and lawfully performed in good faith. Section 114(e) of the Indian Evidence Act, 1872 reads as under: - "114. Court may presume existence of certain facts. - The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case....
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....y, that the impugned order passed under Section 263 dated 11.03.2010 still suffers from the same jurisdictional defect as was canvassed by the assessee in respect of the proceedings initiated through the show cause notice dated 23.07.2007. 24-1. In view of the above detailed discussion, ground Nos. 3 to 5 are dismissed." G. That, significantly, when the Appellant challenged these findings, the Hon'ble High Court [in ITA No. 809/2015] admitted certain questions of law but conspicuously did not admit any question regarding whether the Section 263 order was passed at the dictates of higher authorities. This decision of the Hon'ble Higher court at the admission stage itself constitutes an implicit affirmation of the Coordinate Benches findings, on this aspect of the matter which have now attained finality. H. The Revenue highlights a letter from the informant, Mr. Mehta, to the Hon'ble Finance Minister dated 25.11.2008 (Page 528 of inspection record PB vol II), wherein he stated: - "...C/T, Centra/-//, would be well advised... to file rejoinders to the appeals in the ITAT and not resort to revision of orders as per Section 263... " I. This c....
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....rrespondence and the submission of reports by the Assessing Officer (AO) to senior authorities do not imply that the assessment was completed under their direction. No approval was sought by the AO, nor were any directions issued by the CIT or CBDT regarding specific additions or disallowances." N. The Appellant's contention that superior authorities cannot seek progress reports is contrary to the established administrative framework. The Revenue draws attention to Circular/Instruction No. F. No. 286/57/2002-IT (Inv. II) dated 03.07.2002 [already submitted to the Hon'ble Bench on the issue regarding deviation from appraisal report], which mandates at Clause xv: "The Range Addl./Joint CIT shall send a progress report in all search and seizure cases at intervals of every three months to the CIT..." O. The submission of these reports is otherwise rule based administrative obligation and does not vitiate the independence of the AO unless specific directions are issued to frame the assessment in a particular manner for which there is no evidence on record. P. Furthermore, the Hon'ble Bench has already considered and adjudicated this issue in detai....
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.... the Act, such instructions are binding. Thus, where such binding instructions are not followed by the concerned authority at the time of framing the assessment or passing the assessment order, the said order becomes erroneous and prejudicial to the interests of the Revenue. C. The Circular itself, in its opening paragraph, clearly mandates that "the Board desires that the following actions should be strictly implemented." Reliance in this regard is placed at serial no. 9 of revenue case law paperbook in case of BSCPL Anurag Tollway v. DCIT, [2026] 183 taxmann.com 60, wherein it has been held that failure to follow the Boards circular is fatal and Section 263 is justified in such circumstances. D. While it is true that Explanation 2, which has been inserted in Section 263, with effect from 01.06.2015 and which specifically provides for invocation of revisionary jurisdiction for failure to follow the binding instructions and circulars by deeming it erroneous in so far as it is prejudicial to the interest of Revenue, it is submitted that such a deeming fiction has been introduced only to clarify what the Legislature had always intended. E. Even without expl....
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....f Income-tax was not merely on the ground that a different view could be taken but on the ground that there was failure to follow the established norms and there being non-application of mind. The reasons given by the Commissioner including the one that there was unusual jump of prices from Rs. 6 per share to Rs. 200 per share within a span of 13 months which could not be held to be explained without examining the sellers and buyers and making further enquiries is not shown to be irrelevant. The Tribunal committed an error of law in ignoring this aspect. In the facts and circumstances of the case, the Tribunal was not justified in holding that the exercise of jurisdiction by the revisional authority was not permissible under section 263 of the Act." H. In so far as the distinction between lack of inquiry and inadequate inquiry, on the touchstone of the present facts is concerned, the Revenue submits that the question has to be answered in light of each fact and each case. An inquiry is only valid if the AO reaches a level of verification where a rational person, under similar circumstances, would be satisfied. Merely raising "Yes/No" questions and accepting replies on face....
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....he invocation of Section 263. C. For the sake of analytical clarity and judicial convenience, the Revenue has categorized Ground Nos. 11 to 26 into two distinct Categories: - 1. Category 1 (Ground Nos. 11-17): - These grounds pertain to issues where direct incriminating material was seized during the search. While Grounds 11- 13 were covered in the previous year, Grounds 1417 are fresh grounds involving incriminating material of a similar nature, which the AO conspicuously failed to investigate, thereby satisfying the jurisdictional requirements of Section 263. 2. Category 2 (Ground Nos. 18-26): - These grounds involve issues where there is no email correspondence. 3. All these issues were decided against the Assessee in the previous year while confirming the action under Section 263 challenge. D. The Revenue's primary contention is that once jurisdiction under Section 153A is triggered by the discovery of incriminating material for a particular assessment year, the scope of the assessment encompasses the 'Total Income', thereby empowering the GIT to revise the AO's failure to enquire into 'other material' already available on re....
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....asked with deciding whether 'other material' could be considered once the jurisdiction was triggered by incriminating material. The following question was referred to the Hon'ble Third Member: - "1. Whether in the facts and circumstances of the case, the assessment u/s. 153A of the Act in the case of unabated I completed year(s) is to be completed only on the basis of incriminating material found during the search, or, once some incriminating materials are found during the course of search, the Assessing Officer is empowered to also take into account any "other material" which may be available with the Assessing Officer and/or information as available from the return of income as well; keeping in view the ratio of decision of Hon'ble Supreme Court in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)?" J. The Hon'ble Third Member agreeing with the Accountant member of the Divisional Bench thereafter made the following observations: - 1. The assumption of jurisdiction under Section 153A is automatic and mandatory. While incriminating material is a sine qua non to disturb an unabated assessment, the object of the assessment i....
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....round 11 - Annual Maintenance Charges/ technical service fee paid outside India. • RE: Ground 12 - Alleged fictitious import of 'NetVarsity' from NUT USA and claim of depreciation thereon. • RE: Ground 13 - Payment of royalty to NETg(UK) for import of CBTs. • RE: Ground 16 - Misallocation of expenses between EOU and non EOU units and grant of exemption u/s. 10B. • RE: Ground 17 - Netting off of interest income against interest expense. • RE: Ground 18 - Grant of exemption u/s. 10B. • RE: Ground 19 - Repair expenses • RE: Ground 20 - Expenditure on course execution charges. • RE: Ground 21 - Disallowance u/s. 14A - Expenditure incurred on earning exempt income. • RE: Ground 22 - Interest free advances/loans/investments out of interest bearing funds. • RE: Ground 23 - Deduction u/s. 35D of the Act. A. The Revenue vehemently submits that the substantive issues raised in these grounds are no longer res Integra. These have been squarely and definitively adjudicated in the Revenue's favor by the Hon'ble Coordinate Bench in the Assessee's own c....
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....s superficial replies at face value without an iota of independent verification. B. In fact, even the office notes themselves expose this glaring omission, inasmuch as these notes merely reproduce the Assessee's stance without offering a single justification for blatantly disregarding vital search material and accepting the claim on its face. C. Crucially and as pointed out by the Ld. CIT, the Ld. A.O. has inexplicably bypassed a seized letter dated 05/09/2000 from Shri Rajesh C. Mathur (Head, NUT GIS Ltd.), which strongly suggested manipulation of the purchase to circumvent TDS obligations. The Assessee's desperate contention that this issue falls outside the scope of Section 153A is patently absurd in as much as these letters relied upon by the Ld. CIT constitute the incriminating materials unearthed during the search itself. These e-mails cast serious doubts on the claim of the import of software. The CIT has not drawn any conclusive view one way or the other, It is of the view that vital enquiries need to be conducted to gather the facts which may conclusively establish the claim of the assessee or the other way recorded. The total lack of inquiry, resulting i....
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....in (Rs. 5.80 Crores) A. It is submitted that the Ld. A.O. has abdicated his duty by unquestioningly permitting the assessee to exclude a massive foreign exchange gain of Rs. 5,80,89,740/- from its taxable income for the year under consideration. Under the mandatory mercantile system of accounting, this accrued gain ought to have been taxed in A.Y. 200102. B. The Assessee's argument that it offered this amount to tax in subsequent year (AY 2002-03) on a realization basis does not cure the in the lack of verification, enquiry and application of mind defect in the A.Y. 2001-02 assessment. The Ld. A.O. has conducted no verification regarding the restatement of these subsidiary loans. This blatant omission to verify the timing of income recognition constitutes a complete lack of inquiry, rendering the assessment both erroneous and prejudicial to the Revenue, thereby validating the Ld. CIT's jurisdiction under Section 263. WRITTEN SUBMISSIONS ON BEHALF OF THE REVENUE IN ITA NO. 2060/DEL/2010 for AY 2002-03 i. On Issues Covered by the order of the Hon'ble Coordinate Bench for A.Y. 1999- 00 • • RE: Ground 11 - Annual Maintenance....
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.... Assessee without any further enquiry needed in the matter. This showed a complete lack of enquiry on the given issue. The CIT had dealt with this aspect in his order. C. The Ld. A.O.'s complete failure to verify the actual downloading and utility of the Rescue ware software, particularly amidst highly suspicious documentary timelines, renders the assessment manifestly erroneous. Furthermore, the 'doctrine of merger' and 'possible view' defenses are entirely inapplicable where the Ld. AO has blindly accepted assessee's statement on its face value form over substance, ignoring glaring realities exposed by incriminating search evidence. The Ld. CIT's intervention was absolutely necessary to protect the Revenue's interest. iii. On Issues Covered by Submissions for AY 2001-02 RE: Ground 23 - Sham import of ENOM software from M/s Convergent Group USA. A. The Revenue relies entirely upon the detailed submissions already advanced in the assessee's own case for Assessment Year 2001-2002, as the facts and legal positions are perfectly identical. B. That, the fundamental premise of the CIT's order under Section 263 jurisdiction....
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....e to the purported software. E. Most astonishingly, when the DDIT issued summons under Section 131 of the Act to these parties during post-search investigations, none of the vendors appeared to substantiate the transactions [a fact completely ignored by the Ld. AO] F. Furthermore, during the search and seizure operation on the Shri S.K. Gupta group of cases (conducted on 12.12.2006), Shri S.K. Gupta confirmed under oath that BT Technet was merely an entry provider and that no software development was done for the Assessee. The Assessee attempts to deflect from the lack of actual delivery by highlighting the corporate credentials of BT Technet Ltd., arguing that it was an ISO 9001 certified, stock exchange-listed, and STPI-registered entity with over 50 IT professionals and overseas offices. It is submitted that these general corporate attributes do not establish the genuineness of the specific transactions in question. A corporate facade cannot substitute for the actual physical or electronic proof of development, delivery, and installation of Rs. 30 Crores worth of software, which the vendors themselves refused to verify before the DDIT. G. Similarly, th....
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....ccording to revenue, the CBTs were first exported outside India and subsequently imported by NOLL through Hitech Software Ltd., which has been alleged to be a dummy entity, there are evidences on record, to support the above allegation:- (i) M/s Hitech Software is not a registered company of Hong Kong. Also it does not have any infrastructure, office, technical expertise to develop the software which was imported by NOLL. (ii) The agreement between Hitech Software and NOLL is 1 and % pages and not detailed one, which is highly impossible in international transaction. (iii) The material alleged purchased from M/s Hitech by NOLL is similar/identical to what was exported by NUT Ltd. to outside co. (iv) There are various e-mail exchanges between key functionary of NIIT/NOLL, which suggest that I PR of courseware were developed by NUT for NOLL for which payment of Rs. 2.38 crores was to be made by NOLL to KSB (Knowledge Solution Business of NUT) for perpetual license and resale rights. The e-mail also indicates that, though the IPR developed by NUT for NOLL but license agreement could not be executed. (v) The intimation letter regarding down ....
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....n of Section 263 deserves be upheld. ii. On Issues Covered by Submissions for AY 2000-01 (Grounds 13,14) • • RE: Ground 13 - Non-eligibility of exemption u/s. 10B on income from export of software to NUT Antilles NV. • RE: Ground 14 - Allowance of deprecation on fictious import of "Rescuware 5X internet software" from M/s Relativity Technologies. A. The Revenue relies entirely upon the detailed submissions already advanced in the assessee's own case for Assessment Year 2000-2001, as the facts and legal positions are perfectly identical. B. That, the fundamental premise of the CIT exercising his jurisdiction under Section 263 jurisdiction is based on the based factual condition that the AO raised a mere facade of raising queries and simply accepted the response of the Assessee without any further enquiry needed in the matter. This showed a complete lack of enquiry on the given issue. The CIT had dealt with this aspect in his order. C. The Ld. A.O.'s complete failure to verify the actual downloading and utility of the Rescue ware software, particularly amidst highly suspicious documentary timelines, renders th....
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....omplete nonapplication of mind and ignoring glaring realities exposed by the statement of Shri S. K. Gupta (head of BT technet) and invoices of Purchase of software from BT technet during search procedure. The Ld. CIT's intervention was absolutely necessary to protect the Revenue's interest. G. In their submission, the appellant has pointed out a few facts regarding Shri S. K. Gupta which were admitted not before the Ld. AO and he could not have taken any decision based on that. The erroneous nature of the order of assessment had to be judged on the basis of material which constitutes "record" and the submission which may have been before the CIT. WRITTEN SUBMISSIONS ON BEHALF OF THE REVENUE IN ITA NO. 2062/DEL/2010 for AY 2004-OS 1. On Issues Covered by the order of the Hon'ble Coordinate Bench for A.Y. 1999-00 • • RE: Ground 11 - Annual Maintenance Charges/ technical service fee paid outside India. • RE: Ground 12 - Alleged fictitious import of 'NetVarsity' from NUT USA and claim of depreciation thereon. • RE: Ground 17 - Repair expenses • RE: Ground 18 - Expenditure on course executio....
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....set up in Kalkaji, your Honour is referring to, is another new unit called 'ITES' situated at Kalkaji. This unit is different and distinct from the other Kalkaji Unit and holds separate licence/approval, separate infrastructure, etc." F. Considering the reply of the assessee, Ld. CIT finds it as devoid of any merit, and mentioned that: "As already mentioned above filing of letter of approval for setting up 100% EOU, wherein the authorities concerned had granted approval /permission subject to various conditions as stipulated therein, is of relevance, as it is not an issue in question. Moreover very fact of location in free trade zone or that it is declared as EOU or declared as Development Growth Centre in NER does not ipso facto lead to relief." G. The Ld. A.O.'s had failed to examine mandatory conditions for claiming the exemption / deduction u/s. 10B, specially with reference to the fact that new unit is formed by splitting up, or the reconstruction, of a business already in existence and it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. H. Ld. CIT required the details from the assessee f....
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....us it is clear that during the course of assessment proceedings, the A.O. has neither examined the eligibility of EOU units, nor verified the genuineness of their profits, as declared by the assessee. As such failure on the part of the Assessing Officer to make necessary enquiries on the such an important aspect connected with assessment, stands established. Reliance in this regard is placed on the decision of hon'ble ITAT Delhi Bench in the case of Shyam Telelink Ltd. vs. ITO (2006) 99 ITD 576 (Delhi) wherein it was held as under: K. Ld. CIT raised an issue that the assessee had claimed deduction u/s. 10B in respect of unit at Delhi-Kalkaji which was not allowable to be claimed after giving a break of one year, as aspect which the Ld. AO failed to examine. Also, the assessing officer failed to verify the applicability of sub-section (7A) of section 10B in light of the fact that demerger had taken place. L. Where Senior counsel of the assessee submits that, with respect to the allegation of CIT in respect to units at Bangalore, Kolkata and Gurgaon stating that issue relating to claim of deduction u/s. 10B in the case of amalgamation/demerger is not examined by ass....
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....nt Group USA. A. The Revenue relies entirely upon the detailed submissions already advanced in the assessee's own case for Assessment Year 2001-2002, as the facts and legal positions are perfectly identical. B. That, the fundamental premise of the CIT's order under Section 263 jurisdiction is that a mere facade of raising queries and simply accepting the response of the Assessee does not tantamount to an sufficient enquiry which is necessary for arriving to a rational decision based on complete factual background and not half backed facts which remain bald assertions. C. The Ld. A.O.'s findings on the issue regarding USD 2 million ENOM software import is a clear case of complete non-application of mind and ignoring glaring realities exposed by incriminating search evidence. The Ld. CIT's intervention was absolutely necessary to protect the Revenue's interest. iv. On Issues Covered by Submissions for AY 2002-03 • • RE: Ground 15 - Claiming of depreciation of bogus purchase of software. A. The Revenue relies entirely upon the detailed submissions already advanced in the assessee's own case for Assessment Year ....
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....sessee's own case for AY 1999-2000 (ITA No. 2057/Del/20W, order dated 27.03.2015). Across these grounds, the Hon'ble Coordinate Bench has consistently upheld the Ld. CIT's findings that the AO's failure to conduct necessary inquiries resulted in an erroneous order prejudicial to the interest of the Revenue. B. The Assessee's attempt to re-agitate these settled issues is an impermissible exercise in absence of any distinguishing facts and the Ld. CIT's invocation of Section 263 deserves be upheld. C. Re: Ground 23 - claimed deduction under section 10B of the Act by adopting book profits as the starting point for computing profits eligible for deduction, apart from the issue raised in AY 1999-2000, There is an additional issue where CIT has observed as under; "that as per the Form 56G submitted for the purpose of claiming deduction u/s. 10B of the Act, it is seen that instead of taking prof its as per the provisions of the Income Tax Act, the Chartered Accountant has taken the book profits of the company, it is seen that in the book profits you have made various adjustments in the computation of income. The said adjustment has made substanti....
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....bed depreciation. The unabsorbed depreciation is allowed to be set off against the current year's income as per section 32(2). J. As mentioned by the Ld. CIT that, the unabsorbed depreciation is totally different from carried forward business losses. Carried forward depreciation is allowable under section 32(2). As per section 32(2), the carried forward depreciation partakes the character of current year's depreciation. Besides, as per section 29 of the Income-tax Act, profits and gains of the business are to be computed in accordance with the provisions contained in sections 30 to 43C. Since, carried forward depreciation is allowable under section 32(2), therefore, the same is to be taken into account while computing the profits and gains of the business K. The Ld. A.O.'s failed to adjust brought forward unabsorbed depreciation before computing the deduction allowable u/s. 10B of the Act. The Ld. CIT's intervention was absolutely necessary to protect the Revenue's interest. ii. On Issues Covered by Submissions for AY 2000-01 • • RE: Ground 12 - Non-eligibility of exemption u/s. 10B on income from export of software to NUT An....
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....nterest. D. It is respectfully submitted that the Ld. A.O. has completely abdicated his duty to examine the escapement of income of Rs. 19,82,302 and Rs. 5,17.724/- being in interest granted under Section 244A of the Act. The same ground is duly discussion at submission for AY 2001-02 at Ground No. 25. iv. On Issues Covered by Submissions for AY 2002-03 • • RE: Ground 14 - Bogus purchase of software. A. The Revenue relies entirely upon the detailed submissions already advanced in the assessee's own case for Assessment Year 2001-2002, as the facts and legal positions are perfectly identical. B. That, the fundamental premise of the CIT's order under Section 263 jurisdiction is that a mere facade of raising queries and simply accepting the response of the Assessee does not tantamount to an sufficient enquiry which is necessary for arriving to a rational decision based on complete factual background and not half backed facts which remain bald assertions. C. The findings of the Ld. A.O. regarding the alleged purchase of bogus software amounting to Rs, 1,94,40,000/- from ABI Overseas Ltd, and the depreciation claimed ....
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....allowed the claim of the assessee in this regard. C. Ld. CIT have observed as under: "It is seen that nowhere the assessee has furnished any justification for allowance of the said claim. Demerger was as per the Scheme of Arrangement approved by Hon'ble High Court of Delhi. Any modification to the same should have also approved by Hon'ble High Court of Delhi but, the approval of the Hon'ble High Court of Delhi in this regard has neither been submitted by the Assessee nor has been asked by the Assessing Officer." D. Further, The CIT has not drawn any conclusive view one way or the other, It is of the view that the LD. A.O. has examined the said claim without verifying its genuineness and allowability. The total lack of inquiry, resulting in an order erroneous insofar as prejudicial to Revenue's interest, fully justifies the Ld. CIT's assumption of revisionary jurisdiction WRITTEN SUBMISSIONS ON BEHALF OF THE REVENUE IN ITA NO. 40q6/Del/2009 [A.Y. 2000-01] i. The present appeal has been preferred by the Revenue against the appellate order of the Ld. CIT(A)-XX, New Delhi, dated 31.07.2009, which erroneously and without legal justificati....
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....ssee to Associated Enterprises (AEs). This in fact is an admitted position. There is no case that any special feature in the contract make the transaction as capital in nature. It is also an admitted proposition that the assessee has extended the loan to its AE's who are 100 per cent subsidiaries. The assessee's case is that it has actually not earned any interest and it was commercially expedient to extend these interest free loans. Now it is noted that this is not a case of ordinary business transaction. The question relates to scrutiny of international transaction to determine whether or not the same it as arm's length. The principle of transfer pricing aims at determining the pricing in the situations of cross border international transactions, where two enterprises which are subject to the same centre or direction or control (associated enterprise) maintain commercially or financially relation with other. In such a situation, the possibility exist that by way of intervention from the centre or otherwise, business conditions must be accepted by the acting units which differs from those which in the same circumstances would have agreed upon between unrelated parties. The aim is ....
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....ntext of transfer pricing has been conclusively put to rest by the Special Bench of the ITAT in Instrumentarium Corporation Ltd. v. ADIT [2016] 71 taxmann.com 193 (Kolkata - Trib.) (SB). The Hon'ble Special Bench in Paras 37 and 39 unequivocally held that the commercial expediency of a loan to a subsidiary is wholly irrelevant in ascertaining the arm's length interest on such a loan. The Hon'ble Special Bench noted that while there is no bar on advancing interest free loans, when such transactions are covered as international transactions between AEs, Section 92C mandates that income must be computed based on the arm's length price G. That, the Ld. TPO's application of the CUP method was methodologically correct. By utilizing the interest rates (7.5% to 9%) that the Assessee actively charged to its other functioning subsidiaries in the USA, UK, and Singapore, the Ld. TPO arrived at a highly conservative and reasonable arm's length rate of LIBOR plus 3% (6.5%). The Revenue submits that the finding of the Ld. TPO is correct and by applying Internal CUP [which is the most preferred basis of analysing comparability], the same must be restored. H. The Ld. T....
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....le device to remit royalty payments to NETg. This elaborate disguise was constructed specifically to circumvent the rigorous withholding tax (TDS) obligations mandated under Section 195 of the Act. The ITAT in A.Y. 1999-00 affirmed that the Ld. A.O.'s failure to investigate this sham transaction constituted a fatal lack of inquiry. F. It is submitted that if the failure to investigate these seized e-mails constituted a fatal error in A.Y. 1999-00, the Ld. CIT(A)'s complete disregard of this same evidence in the present AY 2002-03 renders the appellate order legally unsustainable. An expenditure incurred to execute a sham transaction designed to evade withholding tax cannot, under any interpretation of law, be deemed 'wholly and exclusively for the purposes of the business' under Section 37(1). v. In light of the detailed submissions and the binding judicial precedents cited above, the Revenue respectfully prays that the findings of the Ld. CIT(A) deserve to be quashed and set-aside. 22. We find that the crux of the written submissions of the revenue is only addressing the fact of non-disclosure of identity of the informant. The assessee herein had never....
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....ted the revenue to bring on record all the correspondences exchanged to the knowledge of the assessee herein. These additional correspondences establish the clinching fact that revision proceedings under section 263 of the Act got indeed triggered based on the pressures / dictates of the higher authorities atleast for the years under consideration before us. The additional correspondences are as under:- Assessment Year : 2000-01 ITA No. : 2058/Del/2010 Documents made available post ITAT order dated 27.03.2015 for AY 1999-00 and pursuant to interim order dated 23.05.2017 passed by the Hon'ble Delhi High Court S. No. Date Particulars Page Nos. Documents demonstrating dictates for initiation of proceedings under section 263 (refer Annexure A to Chart of issues - On Jurisdiction) 1. 14.06.2006, 15.06.2006 Letter from CBDT to Chief CIT (which was further forwarded by Chief CIT to CIT and then by CIT to Addl. CIT), enclosing complaint dated 24.05.2006 from the Informant (attached at pg. no, 219-220 of Vol-1) and directing submission of such enquiry report by 21.06.2006 Another instance of pressure from higher authorities to carry out review of the a....
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....tified the action taken in the assessment proceedings. Against allegation no. 6, the Addl. CIT replied at Page 427 as under: "It seems that the complainant is dictating the course of actions to be taken by the Department during the appellate proceedings. As all the relevant facts are mentioned in the assessment order, so there is no need to file rejoinder" Pgs. 381 383 (Vol. II) 9. 22.6.2007 -Letter from CIT to CCIT submitting review report and categorically stating that - "I do not find any merit in the complaint of ........" -CIT carrying out independent examination of record and agreeing with the stand taken in the assessment proceedings Pg. 384 (Vol. II) 10. 22.6.2007 One of the most important documents. Another detailed review report by new Addl. CIT to CIT dealing with each issue/allegation made by the Informant. After dealing with each allegation, the Addl. CIT in the end submitted "Accordingly, in my view, no action is called for." The Additional CIT, who was not involved in the original assessment, independently came to a conclusion that no revisionary action under section 263 is warranted. This clearly shows that subseque....
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....e allegations contained in the letter as well earlier letters." Pg. 75 (Vol-1) 15. 23.05.2006, 26.05.2006 Letter from AO to CIT - issue/ allegation wise status report AO provided complete status of allegations made by the Informant, in response to the status update sought by the CIT. In this letter, the AO also gave his opinion on the illegality of the following suggestion made by the Informant: "In one of his communications, he has stated that "to ensure the assessment order/demands are correctly issued and nothing material are left out, you may show the draft of the assessment order/demand before these are issued." Similarly, in his letter dated 25-03-2006 addressed to the Hon'ble Chairperson he has stated in Para 5, that the explanation filed by the assessee be shown to him for countering the defence of the assessee." The above letter goes to show the severe pressure created by the Informant at various authorities during the course of assessment and, thus, the assessment proceedings were under close monitoring by all the higher authorities within the Department. Pg. 177 190, 193 @ 178 (Vol-1) 24. In view of the aforesaid additional correspondences, we are....
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....een completed on the lines intimated to the CBDT vide CCIT's letter No. CCIT (Central)/2006-07/136 dated 26.05.06 . It is pertinent to note that search assessments were framed on 1.6.2006. This goes to prove that the CBDT /CCIT / CIT were all monitoring the case of the assessee till the fag end of the search assessment proceedings and dictating the manner in which assessments are to be framed for the years under consideration qua this assessee. While it is so, how can this be construed only as an order passed by the Assessing Officer Simplicitor ? It is effectively the assessment order signed by the Assessing Officer on the blessings of the CBDT / CCIT / CIT. Hence the said assessment order, in our considered opinion, cannot be subjected to revision proceedings under section 263 of the Act by the Learned CIT. 25. Further the Learned Special Counsel for the Revenue had stated in his written submissions that the search assessments framed were in complete deviation from the Investigation Wing's Appraisal Report and that under section 119 of the Act, the CBDT Instruction bearing F. No. 286/57/2002-IT(Inv. II) dated 3-7-2002 is binding on the Income Tax Authorities. The main contenti....
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....he CBDT Instruction dated 3-7-2002, as apparently no minutes of meeting of consultative committee had been brought on record by the revenue before us. Infact a specific query in this regard was also posed by the Bench to the Learned Special Counsel for the Revenue to place the minutes of meeting of consultative committee. No evidence has been brought on record by the revenue in this regard to prove the preliminary fact of conduct of such consultative committee meeting and drawing of minutes thereon either before the completion of search assessment or thereafter. The argument of the Learned Special Counsel for the Revenue is like sword cutting both ways. Hence the arguments advanced by the Learned Special Counsel for the Revenue in this regard and further placing reliance on Explanation 2 to section 263 of the Act deserve to be dismissed as it does not advance the case of the revenue. 26. Further from the above tabular form correspondences, we find that even the review of the assessment folders were carried out by the competent authority at the behest of the dictates / pressures applied by CCIT / CBDT due to constant follow up of ceremonious letters written by Informant to CBDT a....
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....e allegations against the then ACIT, the then Addl.CIT. CR-5 and CIT(C)-III. 5. In view of these facts and personal allegations, I has proposed to the then CCIT (C) to mark Addl.CIT's report to some other Commissioner(C) to decide as to whether any 263 action is needed on the issues covered by complainant. This proposal was made for fair and judicious application of mind (letter dated 6-6-2007 enclosed). .................... 11. In view of these circumstances and discussion, I request you to kindly transfer NIIT group of cases to some other CIT(C). List of cases are enclosed. 28. Pursuant to the aforesaid request, the jurisdiction of the case of assessee stood transferred from DCIT, Central Circle 2, New Delhi to DCIT, Central Circle 8, New Delhi vide order passed by the CCIT (Central) under section 127(2) of the Act dated 30-7-2007. Yet another clinching piece of evidence is the letter dated 6-9-2007 addressed by the new CIT to CCIT (Central) wherein he categorically admits that all the points raised in the complaint by the informant had already been examined by the Learned AO in the assessment proceedings itself. It was mentioned that the Learned AO ....
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....iew of the aforesaid elaborate discussions and observations, we have no hesitation to conclude that the entire revision proceedings under section 263 of the Act had been triggered only based on the dictates / pressures from the higher authorities and not based on any independent application of mind by the Learned CIT in the manner known to law. This fact is clearly evident from the aforesaid correspondences brought on record by both the parties before us for the years under consideration and are listed in the index to the paper book in the table reflected in the initial part of this order. Hence the revision proceedings under section 263 of the Act richly deserve to get quashed and are hereby quashed for all the years under consideration. We had already given our detailed observations as to why this Tribunal is deviating from the order of Assessment Year 1999- 2000 supra i.e. due to fresh correspondences brought on record only during the present proceedings which were not made available before the Tribunal in Assessment Year 1999- 2000. 31. Since the relief is granted to the assessee for all the years under consideration by quashing the revision proceedings under section 263 of ....
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....t LIBOR + 3% and consequently, made adjustment of Rs. 1,66,13,615 with respect to international transaction of interest on loan. The assessee filed appeal before the Learned CITA. The Learned CIT(A) deleted the addition made by the Learned TPO by observing as under:- "9.5.1 In light of the above, I agree with the appellant that, NIIT India being the parent company of NIIT NV and having its own business interest in mind extended the loan with an intention to support the operations of its subsidiary. Accordingly, I am of the considered view that the USD 8 million loan' advanced by the appellant to NIIT NV is actually in the nature of a funding support/ mechanism adopted by a parent company to support the operations of its subsidiary. *** 9.7 Based on the above discussion, I am of the opinion that the funds extended by the appellant to NIIT Antilles were actually in the nature of "quasi equity"/ "informal capital" and were structured in the form of a loan, which was only favorable to the appellant at the time of extension of such funds. Accordingly, charging Nil rate of interest by the appellant on the USD 8 million loan is justifiable in the in....
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....s (11,304,300) (10,871,353) (1,986,447) (855,133) 35.2. From the above table, it could be seen that NIIT NV had negative cash flows from its operations. The cash outflow of NIIT NV was essentially on account of investment by that company in assets such as Software / Content procured from the assessee. It was submitted that such content was developed and legally owned by the assessee. It was submitted that majority (over 65%) of the purchases of such assets were made by NIIT NV from the assessee, resulting in enhanced cashflow and profitability for the assessee. In view of the aforesaid, it is submitted that it was in the business and commercial interest of the assessee to adequately capitalize NIIT NV so that benefits in the form of global penetration and higher sales as well as profitability could be enjoyed by the assessee. It was submitted that it is a settled position that commercial expediency is to be taken into consideration for determining the arm's length price of a financial transaction. Reliance is placed in this regard on the decision of Hon'ble Jurisdictional Delhi High Court in the case of CIT vs. Cotton Naturals (I) Pvt. Ltd reported in 276 CTR 445 (De....
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..... In order to fulfil such obligation, the assessee infused capital in the form of interest free loan of USD 8 million. At the cost of repetition, it is submitted that since the loan was advanced for fulfilling the obligation as a shareholder, the said loan was essentially in the nature of equity for which no compensation in the form of interest was warranted. In the present case, the assessee did not advance funds to NIIT NV with the objective of earning interest income. Rather, the dominant purpose was to adequately capitalize the newly incorporated NIIT NV for expansion of business of the assessee in the overseas territory. Such capital infusion, therefore, was in the nature of shareholder activity for which no compensation was warranted. These facts were duly appreciated by the Learned CITA while granting relief to the assessee on which we do not find any infirmity. Hence the Ground Nos. 1.1. to 1.2. raised by the revenue are dismissed. 36. The next issue to be decided in the appeal of the revenue is as to whether the Learned CITA was justified in deleting the disallowance of purchase of CBT products in the sum of Rs. 97,36,496 on the ground that the said purchases were made ....
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....AO deserves to be deleted." 37.1. It was submitted that, under the distributorship agreement entered into between the assessee and NETG, the assessee had been appointed as the sole and exclusive distributor of NETG products in India. In consideration thereof, and in terms of clause 4 of the agreement, the assessee was obligated to purchase CBTs from NETG for onward sale in India at prices determined by the assessee itself. The said clause further stipulated a "minimum order commitment" on a cumulative yearly basis during the currency of the agreement so as to secure adequate revenue generation for NETG and ensure placement of sufficient orders by the assessee from time to time. The aforesaid stipulation regarding "minimum order commitment" was incorporated to ensure procurement of products of a prescribed minimum value during the subsistence of the agreement. Accordingly, the assessee was under a binding obligation to place orders to the extent stipulated under clause 4. In the event of failure to comply with such commitment, NETG was vested with the right to terminate the agreement upon issuance of nine months' notice in terms of clause 17 thereof. Further it was submitted that....
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....ee or that the consideration paid ultimately reverted to the assessee in any form whatsoever, particularly when no incriminating material/document was found during the course of search proceedings under section 132 of the Act suggesting the aforesaid. iv. NETG is an unrelated third party and bears no relationship with either the appellant or its Directors. v. The very existence and identity of NETG has never been doubted by the Revenue. vi. The assessee had also made purchases from the said party in preceding years, which were subsequently sold in the ordinary course of business. Such purchases made from the same party in earlier years stood accepted by the Department, including while framing assessments under section 153A of the Act. vii. There is further no dispute regarding the utilization of the imported products for the purposes of the appellant's business. The assessee required the CBT products procured from NETG for use/reference by students while imparting computer-based education and training as part of its regular business activities. The products were also required to be maintained in the assessee's library for future academic referenc....