2015 (5) TMI 820 - ITAT DELHI

Remittances made by NIPL to Nokia Corporation for software downloads are 'sums chargeable to Tax' as laid down in S 195 - whether NIPL can be held to be an "assessee in default" for non-deduction of tax thereon as per law - validity of survey - denial of natural justice - Held that:- On examination of the entire scheme of the Act, we are of the considered opinion that the plea advanced by ld. counsel for the assessee deserves to be rejected for the simple reason that the term ‘proceeding’, defined u/s 133A, includes the TDS proceedings also. The survey, thus, could be conducted for obtaining information in regard to TDS proceedings also as mandated u/s 133A sub-section (1) clause (iii). We are in agreement with the submission of ld. Spl. counsel that this amendment has been inserted by way of abundant precaution so as to ensure that while carrying out the survey proceedings, for ensuring compliance with TDS provisions, cash and stock is not examined. Further, we find from the case laws relied by ld. Special Counsel that survey was carried out for TDS purposes even prior to introduction of sub-section (2A) to section 133A and Hon’ble Supreme Court has also taken cognizance of the same. We, accordingly, hold that the survey could be conducted even prior to insertion of subsection (2A) of section 133A.

Authorization to DDIT, Chennai for conducting the survey - Held that:- There is no requirement under this section read with rules for issuing of authorisation. As per proviso to section 133A, the survey can be carried out by the authorities mentioned in the section itself and only if the survey is carried out by an Asstt. Director or a Dy. Director or AO, or tax recovery officer or Inspector of Income-tax, then the approval of the Joint Director or the Joint Commissioner, as the case may be, is required. In the present case, the DDIT Chennai was authorized by the Addl. Director of Income-tax (Inv.), which was in accordance with the CBDT Notification no. S.O. 1189(E) dated 3-12-2001. Thus it cannot be said that DDIT, Chennai was not duly authorized to carry out the survey. A bare reading of section 133A(1) makes it clear that survey can be carried out at the place where business or profession is carried on irrespective of the fact whether the place of business or profession is separate from its registered office. The object of survey is to gather information in regard to the proceedings under the Act which is enumerated in clauses (i),(ii) & (iii) to section 133A(1), as reproduced above and, therefore the powers cannot be restricted in any manner, particularly when sufficient safeguards have been provided by legislature itself while drafting section 133A, as is evident from bare reading of various clauses of section 133A.

Statement u/s 131 could not be recorded because there was no non-cooperation of persons present at the time of survey as is contemplated u/s 133A(6) - Held that:- The assessee has also submitted that the statement of ex-employee Mr. Jintendra Agarwal, auditor, being not present at the time of survey, could not be recorded. In our opinion, this plea deserves to be rejected at the very outset, because once the powers are exercised u/s 131(1A) in order to gather the information, the designated authorities could issue summons to any person. DDIT is one of the designated authority and, therefore, no irregularity/ illegality can be imputed.In view of above discussion, we hold that there was no illegality in carrying out survey and the statements recorded u/s 131 at Chennai were validly recorded.

Cross-examination being not provided in respect of various statements used in framing the order u/s 201/201(1A) - held that:- All the statements were duly provided to assessee and during the proceedings before the AO, the assessee never asked for cross-examination. Addition was not made merely on the basis of findings given apropos the secret bank accounts, disbursement made out of such account’s or on the strength of havala entries, by which the bogus commission and trading income said to have been reintroduced in the books of the assessee. These aspects are only secondary, subordinate and were used to buttress the main matter connected with the amount of addition. The violation or otherwise of any rule of natural justice must be a matter of substance not of mere form. Natural justice should always be used for the furtherance of the cause of justice. The palladium of justice requires, that law suits be not protracted, otherwise treat oppression might be done under the colour and pretence of law [interest republica ut sit finis litum]. These loafty principles which are harbinger of justice cannot be used for dragging the justice in the labyrinth. We have already indicated that adverse evidence and material, relied upon in the order, to reach the finality should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. Having regard to the facts and circumstances of the case, we are of the opinion that there was no denial of the principles of natural justice.

The employees, whose statements were relied by AO, were highly technical persons, controlling the entire manufacturing operations and, therefore, it cannot be accepted that they were not aware of various technicalities of the entire manufacturing process. The replies given by them have not been disputed/ controverted by assessee in any manner. The submission is that questions put during recording of statements were not taken to its logical end. Therefore, taking an holistic view of the entire gamut of proceedings, we are of the opinion that no irregularity has crept in during course of proceedings before AO/ CIT(A) and, therefore, the orders of both the lower authorities are not required to be set aside, as the matter is not required to be restored to AO/ CIT(A) to correct any irregularity. However, keeping in view the submissions of ld. Sr. Counsel, noted above, in order to impart substantial justice to both the parties, we are of the opinion that a supplementary report should be submitted by AO on various issues pointed out by ld. Sr. Counsel in his written submissions placed on record, if necessary, after seeking clarifications from employees