9911796707
TMI Blog2014 (9) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... in the claim made u/s 80IA and 80IB were disallowed. Preliminary expenses were also disallowed. In some of the years additions were also made on account of rotating entries of purchases of assets of the companies and bogus purchases. Disallowances were also made for not allowing deduction u/s 10A of the Act. Most of the grounds in all these appeals are common. However, in certain years some grounds are different, however, for the sake of convenience and brevity all these appeals are being disposed off by this common order. The grounds of appeal for assessment year 2004-05 in ITA No. 4888/D/2013 read as under: 1) (A) "That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in disallowing the deduction u/s 80IA amounting to Rs. 3,88,42,563/- as claimed by the assessee and that too by recording incorrect facts and findings and without considering the submissions of the assessee and without bringing any adverse material on record and without observing the principles of natural justice, more so when such disallowance could not have been made in the proceeding u/s 153A. (B) That having regard to the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the action of ld. AO in framing the impugned assessment order u/s 143(3)/153A without assuming jurisdiction as per law, more so when no incriminating material was found and seized as a result of search and without obtaining requisite approval as per law and without complying with the other mandatory conditions envisaged under the Act. 5. That in any case and in ay view of the matter action of ld. AO in framing the impugned assessment order is contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds. 6. Without prejudice to the above grounds, additions/disallowances could not be made in the present appeal because no incriminating material has been found as a result of search. 7. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in confirming the action of ld. AO in charging interest 234A and 234B of the Income Tax Act, 1961." 3. In ITA No. 4889/Del/2013 except the ground no. 4 the other grounds are same. The ground no. 4 in ITA No. 4889 read as under: "4. That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the ld. CIT(A) has erred in law and on facts in assuming jurisdiction to enhance and has erred in enhancing the income of Rs. 1,94,51,000/- on account of alleged unaccounted cash and that too by recording incorrect facts and findings and without considering the submissions of the assessee and without bringing any adverse material on record and without observing the principles of natural justice, more so when such enhancement could not have been made in the proceeding u/s 153A." Grounds no. 4 & 5 of ITA No. 4894/D/2013: 4(A) "That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and facts in not reversing the action of ld. AO in deleting the disallowance of Rs. 24,73,12,669/- fully on account of interest expenses u/s 36(1)(iii) and has further erred in sustaining the disallowance to the extent of Rs. 1,61,83,397/- and that too by recording incorrect facts and findings and without considering the submissions of the assessee and without bringing any adverse material on record and without observing the principles of natural justice, more so when such disallowance could not have been made in the proceeding u/s 153A. (B) That having re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AO on account of alleged low profit by rotating entries of purchase/sales within group companies." "Grounds of ITA No. 5163/D/2013: 1. The order of ld. CIT(A) is not correct in law and facts; 2. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 122,55,97,901/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies." "Grounds of ITA No. 5164/D/2013: 1. The order of ld. CIT(A) is not correct in law and facts; 2. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 68,66,567/- made by AO on account of disallowance of expenses relating to External Commercial Borrowing (ECB); 3. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 9,88,24,110/- made by AO on account of disallowance of expenses relating to Foreign Currency Convertible Bond (FCCB); 4. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 135,31,98,403/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies." "Grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing. 2. That in any case and in any view of the matter, action of ld. CIT(A) in not reversing the action of ld. AO in making the impugned addition of Rs. 1,05,455/- is bad in law and against the facts and circumstances of the case 3. That the cross objector craves the leave to add, amend, modify, delete any of the grounds of cross objection before or at the time of hearing." 8. After hearing arguments, counter arguments and rejoinders raised by ld. AR, Shri Gupta and by ld. CIT(DR) with respect to the various grounds in various years, we decide the issues as under: 1. With regard to the disallowance of preliminary expenses aggregating to Rs. 667532/- which is issue in all the assessment years it was argued that no incrementing document was found during the search operation with regard to preliminary expenses. Hence, such addition/disallowances could not have been made in the assessments finalized as a result of search u/s 143(3)/153A of the Act. It was submitted that assessee had already submitted Return of Income along with profit and loss account and balance sheet for various years. The assessments for A.Y. 2004-05, 2005-06 & 2006-07 were made u/s 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were not raised before the AO as well as before the CIT(A). He pleaded to sustain the addition. After hearing both the sides and considering the submissions made and also looking to the page 1 to 7 of the paper book submitted before the CIT(A), we are of the view that true nature of transaction was not ascertained by authorities below. The true nature of transaction and legal contentions on this issue has not been considered by the authorities below. Therefore, in the interest of justice and equity, we find it appropriate to restore the issue in both these years to the file of the AO to be decided afresh after providing adequate opportunity of being heard to the assessee. 3. The other issue raised in these appeals is on account of gain on FCCB due to repayment of Rs. 62,26,49,700/- in A.Y. 2009-10 and Rs. 1,90,53,372/- in A.Y. 2010-11. It was submitted by ld. AR that this addition was not made by the AO but it has been made by the CIT(A) and the income was enhanced accordingly. The CIT(A) has taken a view that these bonds (FCCB) were prematurely repaid at discount. Therefore, there was a gain which deserve to be taxed. The ld. AR submitted that there was no incrementing mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Pvt. Limited; The sister concerns has not purchases any material from this party. Therefore, how these purchases from this party can be treated as bogus is the hands of assessee. The payment has been made by cheques only. Ld. CIT(DR) relied on the order of the AO and the CIT(A). We have heard both the sides, we find that CIT(A) has made certain observations while confirming this disallowance which were not confronted with the assessee. The CIT(A) has not made anything clear with regard to the names of the suppliers whose premises were covered in search operation. What evidences were gathered with regard to the accommodation entries is also not clear. The issue regarding the non-substantiating the purchases by the sister concerns was never confronted to the assessee. Therefore, in view of these facts and in the interest of justice and equity and also considering the period of effective hearing before the CIT(A) being too short we restore the issue to the file of the AO to be decided afresh in accordance with law after providing adequate opportunity of being heard. 5. With regard to the addition of Rs. 1,94,51,000/- in A.Y. 2009-10 and Rs. 58 lacs in A.Y. 2010-11 aggregating to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. It is submitted that appellant manufacture routers, modems by assembling components purchased from several sources. It was submitted that the assessee has been allowed deduction u/s 80IB in the A.Y. 2004-05, 2005-06 & 2006-07, where the orders were passed u/s 143(3) of the I.T. Act. No incrementing material was found with regard to the claim of deduction u/s 80IB during the course of search. It was also pleaded that no opportunity was given by the ld. CIT(A) before making adverse observations in respect of profit and loss account showing different amount of profit. The ld. AR draw our attention to various pages of the paper book to impress upon that papers found during the course of search clearly established that there was a manufacturing process under taken by the assessee. 6.1 Ld. DR supported the orders of the AO as well as CIT(A) and pleaded that no inference is called for. 6.2 We have heard both the sides on this issue we have considered the material available on record. We find that this issue was decided without providing adequate opportunity of being heard to the assessee. Adverse observations were also not confronted with the assessee. Having regard to the totality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IA. 4. Ld. CIT(A) has mentioned in para 19-26 at page 69-73 of the appeal order that trial balance filed by the assessee showed the income stream as 80IA income and non 80IA income, consolidated account of cost of goods and does not show the break up. He has also referred the seized material showing the share of DOT. 5. Ld. CIT(A) has mentioned in para 28 at page 75 of the appeal order that assessee was requested during the appeal proceeding to make available the copies of the sales-tax/VAT and service tax returns, which were not made available. In reply, it is submitted that this requirement was asked on 10.06.2013 just giving one day's time and it was submitted vide letter dated 11.06.2013 at PB 1515 that it is not possible to collect all these returns from various locations scattered around the country within such short time. However, summary of the sales as desired by ld. CIT(A) for F.Y. 2008-09 was furnished to him which are at PB 1629-1630. Appellant is having twenty branches throughout the country and these returns are filed at respective locations and it was not possible within such short time to retrieve them. 6. Ld. CIT(A) has mentioned in para 29-30 at page 75-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the closure of EDICS undertaking. In reply, it is submitted that ld. CIT(A) has not mentioned in this para that such date of commencement was asked from the assessee and yet was not given. There is no mention of any precise data etc. in the appeal order. 12. Ld. CIT(A) has mentioned at para 9 at page 94-95 of the appeal order that mere technical note without any supporting documents cannot be an evidence to establish that the appellant started a new undertaking Tulip Connect and there has to be agreement, tender acceptance letter, logistics involved etc. Ld. CIT(A) has further contended that possessing ISP Licenses does not mean that appellant has actually started providing VPN Services, more so when Mumbai, Kolkata ISP Services were not even started as per application dated 31.1.2005 filed to DOT for obtaining VPN license. 13. Ld. CIT(A) has mentioned in para 2(i), (ii), (iii), (iv), (v) at page - 97,98 of the appeal order that obtaining ISP Licenses does not establish that the appellant started Tulip Connect Undertaking for providing VPN Services and it was necessary on the part of the appellant to show evidences of providing VPN Services, more so when assessee in its app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mention of providing internet or VPN Services. 23. Ld. CIT(A) has mentioned in para 2 of 3(xii) at page 107 of the appeal order that there is letter from the appellant dt. 19.12.2005 to M/s Mirza Tanners Ltd. Noida, wherein the appellant's introduction (reproduced at page 107 of the appellate order) has absolutely no mention of the appellant being provider of VPN Services and all the features mentioned by the appellant were provided even during F.Y. 2003-04 under the name EDICS. 24. Ld. CIT(A) has mentioned in para 3(xii)(3) at page 108 of the appeal order that the customer namely HT Media Ltd. has agreed for taking radio link at their Mumbai Office, and this is the same service which the appellant was providing even during F.Y. 2003-04 and there is no mention of providing internet or VPN Services. 25. Ld. CIT(A) has mentioned in para 3(xii)(4) at page 108 of the appeal order that the agreement between the appellant company in M/s E.I. Dupont India P. Ltd. says that the appellant was engaged for providing round-the-clock radio connectivity and related maintenance and supports services and this is the same service which the appellant was providing even during F.Y. 2003-04 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Dial up ISP, DSL, ISP, Cable/Fiber-Optic ISP, Wifi ISP and Satellite ISP but it does not say to which category the appellant belongs to or whether it provides all the types of services and if so where and when and to whom such services had been provided and the same has not been provided earlier before the AO nor during the appellate proceedings. 31. Ld.CIT(A) has mentioned at page 111-112 of the appeal order that the claim of the appellant that EDICS business did not require license/permission from DOT is not correct. 32. Ld.CIT(A) has mentioned at page 113-115 of the appeal order that though assessee has confirmed that there were only four ISP licenses issued by DOT but on the basis of enquiries made with DOT, the assessee was served a copy of DOT's letter giving provisional permission for VPN Services which was dated 06.10.2005 and that on the one hand assessee claimed that it was rendering VPN Services immediately on receipt of ISP license & on the other hand in the application submitted before DOT dated 31.10.2005, assessee has mentioned that it has not yet started providing VPN Services, which later on was allowed by separate license dated 06.10.2005. 33. Ld. CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister. Even here the survey party also noted that only two of the employees were employed for the purpose of assembling activity." 38. Ld. CIT(A) has mentioned in para 2(viii) at page 148 of the appeal order as under: "It was also noted that the total salary actually paid and received by the employees working in the unit was 7.14 lacs as against Rs. 11.15 lacs debited in the P&L account of the said premises." 39. Ld. CIT(A) has mentioned in para 7 at page 152 & 153 of the appeal order. 40. Ld. CIT(A) has mentioned in para 1 at page 174-175 of the appeal order that some of the suppliers' premises were also covered in search and said action revealed that the appellant and its associates had obtained accommodation entries. 41. Ld. CIT(A) has mentioned in para 1 at page 174-175 of the appeal order that three associate concerns of the appellant i.e. M/s Pine Wood Information Systems P. Ltd. M/s Golf Technologies P. Ltd. andM/s Fire Pro Wireless and Technologies P. Ltd. have accepted that they were not in position to substantiate the purchases from some of the companies and they were not in position to produce the suppliers along with the books of accounts for confirmation and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised. It has been stated by the appellant, in the note forwarded by the CIT(DR), that issue of deduction u/s 80IA was taken by CIT(A) for the first time which is contrary to the facts on records. I had only brought into the order the evidences which were already part of the assessment records and which were lead by the appellant during the appeal proceedings. The adverse observations referred to in the said appellant's note are observations on the evidences which are already forming part of the assessment records or which have been furnished during the appeal proceedings by the appellant's themselves. These are in reality narration or description of such evidences and their relevance to the facts in issue. Incidentally it is noted that the comments of the appellant at point no. 5 is incorrect. The requirement of copies of the Sales Tax/VAT and Service Tax returns was formally made on 06.05.2013 itself and not on 10.06.2013 as mentioned by them (May like to see order sheet noting of 06.05.2013 in this regard). The issue of providing adequate opportunity, the manner in which the same has been availed by the appellant can be made out from the body of the appeal order. However, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment u/s 143(3) of the Act a detailed and adequate opportunity needs to be provided to the assessee. In our considered view this entire issue requires thorough enquiries at the level of the AO. Having regard to the totality of facts and circumstances of the present case and considering the nature of business and the requirement of the enquiries to be conducted on the various aspects of the issue we hold that assessee could not get effective and adequate opportunities of being heard before the CIT(A) to meet the adverse observations made by the CIT(A). Therefore, considering all these aspects we hold that a fresh adjudication is necessary on this issue. We, therefore, restore the issue to the file of the AO for deciding fresh in accordance with law after providing adequate opportunity of being heard to the assessee. We hereby clarified that none of our observation are on the merits of the addition. Cross Objections : - 8. The sole issue in both the cross objections of the assessee is with regard to suppression of the profit by making transactions of purchases / sales from M/s XL Telecom and Energy Limited. The addition involved is of Rs. 37,01,589/- and Rs. 1,05,431/- for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
