TMI Blog2021 (2) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... his case at the first stage, i.e. at the stage of the Assessing Officer to the satisfaction of the Assessing Officer; the matter, in a way, attains Limited Finality because Revenue has no right of appeal against the order of the Assessing Officer. Though the matter can be revisited by Revenue under exceptional circumstances, such as, for example, in the circumstances prescribed under sections 147, 263, 264, 154, 153A 153C, etc. of I.T.Act; the fact that Revenue has no right of appeal against the order of Assessing Officer implies that the matter attains Limited Finality , barring the exceptional circumstances as aforementioned, if the assessee is able to satisfactorily explain the matter to the Assessing Officer. That is why it is of utmost importance that the assessee gets proper and reasonable opportunity at the first stage (i.e. at the stage of Assessing Officer), so that the assessee has a chance to avail of Limited Finality which is an assessee s statutory right. In the present case reasoning adopted by the Ld. CIT(A) for dismissing the assessee s appeal was not considered at the stage of assessment proceedings before the Assessing Officer; which has resulted in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses incurred and claimed by the appellant. 4) The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing. ITA No. 5964/Del/2016, A.Y. 2011-12 1) That the Id. CIT(A) has erred in law and on facts in confirming the disallowance of expense made by Assessing officer amounting to ₹ 44,57,472/-. 2) That the Id. CIT(A) has erred on the facts and in law by not disposing off the Grounds of appeal raised by the assessee which primarily related to addition made by assessing officer for claiming double deduction of expenses as well as non deduction of tax at source on payment made to non residents and further the CIT(A) erred in confirming the same disallowance on the basis of previous year appeal order in a mechanical manner. 3) That the Id. CIT(A) has erred in law as well as facts of the case by confirming the disallowance of ₹ 44,57,472/- being reimbursement of expenses by the appellant to its wholly owned subsidiary in United states for development of its business in United States of America :- i) on the basis that the said expenses have not been incurred wholly and exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de letter dated 17.02.2015 5. First submission before CIT(A) 6. Additional Submission before CIT(A) 7. Letter to AO dated 20.07.2012 along with Balance Sheet ITR of Energy Infratech Inc. 8. Note on business Development activities filed with AO 9. Complete set of Balance Sheet of Energy Infratech Pvt. Ltd. 10. Reply to CIT(A) vide letter dated 12.03.2014 11. Reply to CIT(A) vide letter dated 20.03.2014 12. Reply to CIT(A) vide letter dated 20.06.2014 13. Reply to CIT(A) vide letter dated 10.05.2016 14. Order passed by CIT(A) dated 08.06.2016 15. Assessment order u/s 143(3) of the I. Tax Act 16. Form No. 35 along with Grounds and Statement of facts 17. First submission before CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 86,41,053/-. The assessee was asked to explain the said expenditure incurred on the foreign subsidiary despite the fact that the foreign subsidiary is filing its own Income-tax return in USA. The assessee has replied that the company has been exploring various international markets specialized services. In the process, the company decided to explore the business opportunities in USA and other markets abroad. It is a trend in USA that they preferred USA based entities for availing servicing rather than the importing the services. Keeping these local requirements of USA clients, the assessee company has set up wholly owned subsidiary in USA instead of opening the branch of the company for marketing operations. The functional of the subsidiary companies is to procure consultancy assignment to the parent company for marketing commission or for reimbursement of actual expenses incurred by it. In case of failure to procure business for reasons beyond its control. In the process Energy InfratechInc. incurred expenses under various heads such as rent, salaries, telephone, travel and conveyance etc. and claimed reimburse submitting all necessary bills and documentary proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of services utilize in a business or profession carried on by such persons outside or for the purposes of making or earning any income from any source outside India; or (c) a person who is a non resident, where the fees are payable in respect of services utilized in a business or profession carried on by such persons in India or for the purposes of making or earning any income from any source in India. Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of april, 1976, and approved by the Central government. Explanation 1- for the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976 shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2 - for the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial technical or consultancy services (including the provision of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount, therefore, an amount of ₹ 86,41,053/- is required to be disallowed and added to the total income of the assessee in view of the provision of section 40(a) of the I T Act. Penalty proceedings u/s 271(1)(c) of the IT Act, 1961 is initiated separately for filing inaccurate particulars of income. (Addition: 86,41,053/-) (C) The assessee filed appeal before the Ld. CIT(A) who confirmed the aforesaid disallowance, holding as under :- 2.1. Having gone through the submissions of the appellant, the order of assessment passed by the Assessing Officer and the material facts placed on the record, it emerges from the facts that a subsidiary by the name Energy Infratech Inc. in USA who is a separate tax entity and assessed to tax in the United States of America expended the amount of ₹ 86,41,053/- which has been claimed as expenditure incurred by the assessee in connection with exploration of business in the United States of America. The Assessing Officer noted during the assessment proceedings that the assessee has debited expenditure of ₹ 86,41,053/- in its books of accounts which pertain to the subsidiary expended in the United States. It is claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid impugned appellate order of the Ld. CIT(A), dated 08.06.2016. (E) At the time of hearing before us the Ld. Counsel for the assessee submitted that the aforesaid disallowance of ₹ 86,41,053/- was confirmed by the Ld. CIT(A) on the ground that the assessee was unable to produce evidences to show that the expenditure has been incurred by the assessee wholly and exclusively for the purpose of business; and further that no evidence was adduced to show that the EII made concerted effects to locate any business arrangements in USA. The Ld. Counsel submitted that this reasoning for disallowance was not adopted by the Assessing Officer and the Ld. CIT(A) departed from the reasoning of the Assessing Officer for making the disallowance. He drew our attention to the assessment order to show that disallowance was made by the Assessing Officer on the ground that the amount claimed by the assessee was a double deduction; and further that claim was hit by Section 40(a) of Income Tax Act. He further drew our attention to the fact that the validity of these grounds for making the disallowance was not adjudicated by the Ld. CIT(A); and instead the Ld. CIT(A) followed a entirely different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as both sides have agreed to this, we set aside the issue of disallowance of the aforesaid ₹ 86,41,053/- to the file of the Assessing Officer for fresh order as per law after providing reasonable opportunity to the assessee to produce relevant materials and to make necessary submissions. All the grounds in the present appeal are disposed of in accordance with aforesaid directions and are treated as partly allowed for statistical purposes. Appeal No. 4801/Del/2016, A.Y. 2010-11 is thus partly allowed for statistical purposes. (G) In assessment year 2011-12 similar disallowance of ₹ 44,57,472/- was made by the Assessing Officer, which was likewise confirmed by Ld. CIT(A) in the impugned appellate order for assessment year 2011-12. Present appeal vide ITA No. 5964/Del.2016 has been filed by the assessee against the impugned order of Ld. CIT(A), for assessment year 2011-12. Also, for assessment year 2012-13, similar disallowance of ₹ 15,68,254/- was made by the Assessing Officer, which was likewise confirmed by the Ld. CIT(A) in impugned appellate order for assessment year 2012-13. Present appeal vide ITA No. 5410/Del/2018 has been filed by the assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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