Income Tax Appellate Tribunal - Delhi
Tulip Telecom Ltd., New Delhi vs Department Of Income Tax on 28 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H', NEW DELHI
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
&
SHRI C.M. GARG, JUDICIAL MEMBER
ITA Nos. 4888 to 4894/Del/2013
Assessment Years: 2004-05 to 2010-2011
M/s Tulip Telecom Ltd., vs. ACIT,
Okhla Industrial Area, Central Circle 11,
Phase - 1, New Delhi. New Delhi.
(PAN : AAACT2717J)
(Appellant) (Respondent)
ITA Nos. 5160 to 5165/Del/2013
Assessment Years: 2004-05, 2006-07 to 2010-11
DCIT, vs. Tulip Telecom Ltd.,
Central Circle-11, C-160, Okhla Industrial Area,
New Delhi. New Delhi.
(PAN : AAACT2717J)
(Appellant) (Respondent)
Cross Objection Nos. 44 & 45Del/2014
(In ITA Nos. 5161 & 5163/Del/2013)
Assessment Years: 2006-07 & 2008-09
Tulip Telecom Ltd., vs. DCIT,
C/o RRA Taxindia, Central Circle-11,
D-28, South Extension, Part-I, Room No. 364,
ARA Centre, New Delhi.
New Delhi.
(PAN : AAACT2717J)
(Appellant) (Respondent)
Assessee by : Dr. Rakesh Gupta, Advocate and
Shri Somil Aggarwal, CA
Respondent by : Sh. R.S. Meena, CIT(DR)
2 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 &
C.O. Nos. 44 & 45/D/2014
ORDER
PER BENCH :
These cross appeals and cross objections arising out of the order of the CIT(A)-XXXI, New Delhi dated 20th June, 2013. It is a consolidated order for A.Y. 2004-05 to 2010-11 (for seven assessment years). Part relief was allowed to the assessee.
2. Brief facts of the case are that search and seizure operation was carried out u/s 132 and survey action u/s 133A of the Income Tax Act at the premises of the assessee's as well as at the premise of the other associate group concerns on 24th September, 2009. Notices u/s 153A were issued on 28.4.2010 and the assessments for A.Y. 2004-05 to 2009-10 were finalized u/s 143(3)/153A of the Income Tax Act, 1961 on 29.12.2011 and assessment for AY 2010-11 was made u/s 143(3), wherein 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 3 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in observing that appellant has admitted to discrepancies in computation of deduction u/s 80IA.
(C) That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in observing that books of accounts of assessee are not verifiable.
(D) That in any case and in any view of the matter, action of ld. CIT(A) in confirming the action of ld. AO in disallowing the deduction u/s 80IA amounting to Rs. 3,88,42,563/- is bad in law and against the facts and circumstances of the case and beyond the scope and jurisdiction of the impugned assessment order.
2 (A) 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 disallowing the deduction u/s 80IB amounting to Rs. 26,99,907/- 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 4 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 such disallowance could not have been made in the proceeding u/s 153A.
(B) That having regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in observing that CMD of the company has admitted that no manufacturing activities was carried out at Jammu unit.
(C) That in any case and in any view of the matter, action of ld. CIT(A) in confirming the action of ld. AO in disallowing the deduction u/s 80IB amounting to Rs.26,99,907/- is bad in law and against the facts and circumstances of the case and beyond the scope and jurisdiction of the impugned assessment order.
3. 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 making disallowance of Rs. 1,03,747/- on account of preliminary expenses 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.
4. 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 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.
5 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
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 law and on facts in confirming the action of ld. AO in making disallowance of Rs. 81,67,898/- on account of alleged bogus purchases 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 impugned disallowance has been made only on the basis of presumptions, surmises and conjectures and without observing the principles of natural justice, more so when such disallowance could not have been made in the proceeding u/s 153A."
3.1 Ground no. 4 in ITA No. 4889, 4890, 4891 & 4892 is same with the regard to the alleged bogus purchases. The other grounds in these appeals are same as in ITA No. 4888/D/2013.
4. Ground no. 4 & 5 in ITA No. 4893 and 4894 read as under:
Grounds no. 4 & 5 of ITA No. 4893/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 6 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 disallowance of Rs. 24,28,24,110/- fully on account of interest expenses u/s 36(1)(iii) and has further erred in sustaining the disallowance to the extent of Rs.13,71,33,433/- 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 facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in enhancing the income by Rs. 62,26,49,700/- on account of alleged gain on buyback of FCCB and that too by treating it as revenue receipt 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.
(C) That in any case and in any view of the matter, action of ld. CIT(A) in not deleting the disallowance made by ld. AO fully and has further erred in enhancing the income of assessee is bad in law and against the facts and circumstances of the case and beyond the scope and jurisdiction of the impugned assessment order.
5. That having regard to the facts and circumstances of the 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."
7 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 regard to the facts and circumstances of the case, ld. CIT(A) has erred in law and on facts in enhancing the income by Rs. 19,09,53,372/- on account of alleged gain on buyback of FCCB and that too by treating it as revenue receipt 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.
(C) That in any case and in any view of the matter, action of ld. CIT(A) in not deleting the disallowance made by ld. AO fully and has further erred in enhancing the income of assessee is bad in law and against the facts and circumstances of the case and beyond the scope and jurisdiction of the impugned assessment order.
5. That having regard to the facts and circumstances of the 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. 58,00,000/- 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 8 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 enhancement could not have been made in the proceeding u/s 153A."
4.1 Other grounds of these appeals are same as in ITA No. 4888/Del/2013.
5. The grounds of appeal in revenue's appeal read as under:
"Grounds of ITA No. 5160/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. 1,27,20,436/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies."
"Grounds of ITA No. 5161/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. 34,50,70,130/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies."
"Grounds of ITA No. 5162/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. 16,90,09,870/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies."
9 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 "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 of ITA No. 5165/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. 4,11,99,400/- made by AO on account of disallowance of expenses relating to External Commercial Borrowing (ECB);
10 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
3. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs.18,99,29,872/- 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. 120,95,68,900/- made by AO on account of alleged low profit by rotating entries of purchase/sales within group companies."
6. In all these substantive grounds of the assessee's appeal, it has been pleaded that the CIT(A) has decided the appeal of assessee without observing the principle of nature justice.
7. Grounds of Cross Objections read as under:
"Grounds of Cross Objection No.44/D/2014 read as under :
1. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in not reversing the action of ld. AO in making addition of Rs. 37,01,589/- on account of transaction made with M/s XL Telecom & Energy Ltd. (Purchases/Sales) by wrongly observing it as sham transaction and impugned addition has been made that too without considering the facts and circumstances of the case and without giving adequate 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. 37,01,589/- 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."11 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 "Grounds of Cross Objection No.45/D/2014 read as under:
1. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in not reversing the action of ld. AO in making addition of Rs. 1,05,455/- on account of transaction made with M/s XL Telecom & Energy Ltd. (Purchases/Sales) by wrongly observing it as sham transaction and impugned addition has been made that too without considering the facts and circumstances of the case and without giving adequate 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."
Summary of aggregate additions/disallowance after ld. CIT(A)'s order Issue Involved A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. Total 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Preliminary 45050 103747 103747 103747 103747 103747 103747 667532 Expenses Bogus - 8167898 8180263 41376272 108442456 44180025 - 210346917 Purchases Interest - - - - - 137133433 16183397 153316830 u/s 36(1)(iii) Gain on - - - - - 622649700 19053372 813603072 FCCB due To prepayment (Enhancement) Cash - - - - - 19451000 5800000 25251000 Generation (Enhancement) Purchases/Sales - - 3701589 - - - - 3701589
- M/s XL Telecom & Energy Ltd.
Deduction u/s 38842563 91541646 494767515 827160478 175634572 1225629345 811621935 5246098054 80IA Deduction u/s 2699907 6948759 2699907 634080 3260237 2961812 8019160 27223862 80IB Total 41587520 106762050 509453021 869274577 1862341012 2052109065 1032681611 6480208856 12 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
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 the I.T. Act and no disallowance was made, therefore, there cannot be an addition in the assessments made in consequence of search u/s 143/153A of Income Tax Act in consequence of search operation. The ld.
DR pleaded that even if no incrementing document was found, such disallowance can be made while making the assessment u/s 143(3)/153A of the I.T. Act. On this issue ld. Counsel for assessee relied on the following decisions to support his contention :-
13 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 • All Cargo Global Logistics Ltd. vs. DCIT (2012) 18 ITR (Trib.) 106 (Mum.) (SB);
• Gurinder Singh Bawa vs. DCIT (2012) 28 Taxmann.com 328 (Mum.) (Trib.);
• Jai Steel India vs. ACIT, 259 CTR 281 (HC) (Rajasthan);
• Kusum Gupta vs. DCIT, ITA Nos. 4873/Del/2009, (2005-06) 2510 (A.Y. 2003-04), 3312 (A.Y. 2004-05) 2833/Del/2011 (A.Y. 2006-07);
• MGF Automobiles Ltd. vs. ACIT, ITA Nos. 4212 & 4213/Del/2011;
• Tarannum Zafar Khan vs. ACIT, ITA Nos. 5888 to 5890/Mum./2009;
• Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011 & ITA No. 2/Del/2011 After hearing both the sides, we note that there is nothing clear either from the assessment order of the AO or from the order of the CIT(A) with regard to the nature of the preliminarily expenses. It is also not clear whether such expenses were allowable at all. Therefore, keeping in view the interest of justice and equity, we deem it fit to restore the issue to the file of the AO. The AO shall decide the issue afresh after ascertaining the true nature of these expenses of course providing adequate opportunity of being heard to the assessee.14 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
2. The other issue is with regard to the disallowances of interest u/s 36(i)(iii) of I.T. Act in the A.Y. 2009-10 and 2010- 11 of Rs.13,71,33,433/- and Rs.1,61,83,397/- respectively.
On this issue it was pleaded that such disallowances could not be made u/s 143(3)/153A as there was no incrementing documents were found during the course of search with regard to payment of such interest. The assessee has not transferred any funds to its sister concerns but these were debits as a result of sale in the ordinary course of business. The amount was not a loan. Further, the payments made against these purchases were not out of interest bearing borrowed funds.
He pleaded that such disallowance should not have been made. On the other hand, ld. CIT(DR) relied on the order of the authorities below and pleaded that such contentions 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 15 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 material found during the course of search qua this issue. Hence such disallowance could not have been made in assessments finalized u/s 143(3)/153A of the Income Tax Act. He further submitted that these convertible bonds were loans which were capital receipts and short repayment of such loans would not result in taxable income. Ld. AR draw our attention to page 1380 of paper book which are submissions before the CIT(A).
These Convertible bonds proceeds were utilized for procurement of fixed assets. It was also pleaded that CIT(A) 16 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 has found a new source of income which is beyond the power of CIT(A). On the other hands, ld. DR justified the enhancement of the income.
3.1 After hearing both the sides and going through the material available on record we found that this issue was raised first time by the CIT(A). We also note that the time period before the CIT(A) was too short to thrash out the new issue in detail. In our considered view several factual and legal issues have not been dealt in detail by the CIT(A). On this issue we hold that there was inadequate opportunity to the assessee at the level of the CIT(A) for making the enhancements of income. Therefore, in the interest of justice and equity, we deem it fit to remand the matter to the file of the AO to be decided afresh after providing adequate opportunity of being heard to the assessee.
4. Other issue raised in these appeals are with regard to the addition on account of bogus purchases of Rs. 8167898/- for A.Y. 2005-06, Rs. 8180263/- for A.Y. 2006-07, Rs. 4137672/-
for A.Y. 2007-08, Rs. 108442456/- for A.Y. 2008-09 & Rs.44180025/- for A.Y. 2009-10 aggregating to Rs.
210346917/-. The ld. AR submitted that this addition has been made only on the basis of statement of Shri Bedi, 17 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 Managing Director of the Company in which he has surrendered an amount of Rs. 75 crores in the hands of the sister concerns as bogus purchases. It was submitted before us that if purchases were not verifiable in the hands of sister concerns, then how could the addition be made in the hands of assessee company. It was also submitted that there was no incrementing material which could have indicated anything with regard to bogus purchases in the hands of the assessee company. It was also submitted that total addition was of about Rs. 21 crores approximate, out of which purchases to the tune of 14.53 crores were from M/s R.H. Impotech 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.
18 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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.
2,52,51,000/-. The ld. AR submitted that this issue was taken up by the CIT(A) by exercising his power of enhancement.
According to the CIT(A) page 65 to 69 of Annexure 'A4' found at the time of search shows that there was a generation of undisclosed cash. The ld. AR submitted that out of the total addition made by the CIT(A) an amount of Rs. 59,31,000/-
was out of cash withdrawal from bank account of the assessee and sister concerns and the balance amount was out of unverified purchases admitted in the hands of the sister concerns. He submitted that the pages showing the transaction of the assessee and the group concerns as a whole should be appreciated in a holistic manner. Since the sister concerns have admitted bogus purchase of Rs. 75 crores and 19 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 has offered that amount in their Income-tax Return. It was submitted that cash deposited and reflected in seized material is out of bogus purchases in the hands of sister concerns. The addition in the assessee's hand was nothing but double addition. The ld. DR relied on the order of the CIT(A) and submitted that the assessee is trying to make out a new case in its favour which should not be allowed at this stage and pleaded to confirm the addition.
5.1 After hearing both the sides we hold that this addition was made by the CIT(A) by invoking his power of enhancement. We are also aware about the fact that the Hon'ble High Court has fixed the time limit for adjudication of the first appeal by assessee and the proceedings were conducted in a time bound manner by the CIT(A). We have also gone through the order sheet entries of proceedings before the CIT(A) which has been filed by the ld. CIT(DR) before us. Having regard to the totality of facts and circumstances and in the interest of justice and equity we find it appropriate to restore the issue to the file of AO to be decided afresh in accordance with law after providing adequate opportunity of being heard to the assessee.
20 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
6. The other issues raised in assessee's appeal is with regard to not allowing deduction u/s 80IB amounting to Rs.2,69,907/- for A.Y. 2004-05, Rs. 69,48,759/- for A.Y. 2005-06, Rs.26,99,907/- for A.Y. 2006-07, Rs. 6,34,080 for A.Y. 2007-08, Rs. 32,60,237/- for A.Y. 2008-09, Rs.
29,61,812/- for A.Y. 2009-10 and Rs. 80,19,160/- for A.Y. 2010-11 aggregating to Rs. 2,72,23,862/-. This disallowance was in respect of profit derived from Jammu Unit. 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.
21 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 of facts and circumstances and in the interest of justice and equity, we are restoring this issue to the file of AO to be decided afresh in accordance with law after providing adequate opportunity of being heard to the assessee.
7. The other major issue involved in all the assessment years is with regard to not allowing deduction u/s 80IA of the I.T. Act. The claim of 80IA disallowed in different years is as under:
"Deduction u/s 80IA Rs.3,88,42,563/- for AY 2004-05, Rs.915,41,646/- for A.Y. 2005-06, Rs.49,47,67,515/- for A.Y. 2006-07, Rs.82,71,60,478/- for AY 2007-08, Rs.175,65,34,572/- for A.Y. 2008-09, Rs.122,56,29,345/- for A.Y. 2009-10, Rs.81,16,21,935/- for A.Y. 2010-11 aggregating to Rs.524,60,98,054/-."
7.1 Before us the ld. Counsel for the assessee submitted that for the interest of justice and equity the issue of deduction u/s 22 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 80IA needs to be restored to the file of the AO for fresh adjudication. The ld. AR submitted that the time given by the CIT(A) was too in adequate for deciding the issue as the appeal proceedings before the CIT(A) started at the end of the March till the beginning of the June, 2013 only and the ld. AR pointed out our attention towards the adverse observations of the CIT(A) with regard to that no opportunity was given to the assessee. These adverse observations narrated by the ld. AR as under:
"Adverse observations for which no opportunity was given:
1. Ld. CIT(A) has mentioned at page 43 of the appeal order that the photocopies of Form No. 10CCB do not contain the enclosures namely balance sheet, profit and loss account and other schedules of "Tulip Connect" and that copies of balance sheet and profit and loss account of "Tulip Connect" available in the departmental assessment records are photocopies.
2. Ld. CIT(A) has mentioned at page 43 of the appeal order that copies of balance sheet and profit & loss account of "Tulip Connect" though are bearing signatures of two directors and the seal of the company but the same has not been signed by the auditor and, therefore, such new kind of claim by filing photocopy of C.A. Certificate in Form No. 10CCB would not be correct.
3. Ld. CIT(A) has mentioned at page 69 in para 18 of the appeal order that annual reports of the assessee show that it offers many kinds of services and he has made description of such 23 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 services which according to him do not qualify for deduction 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 75-76 of the appeal order that the revenue shown to DOT is not comparable to the kind of income shown for claiming deduction u/s 80IA and that appellant has not submitted the details of different types of revenue receipts to AO/CIT(A).
7. Ld. CIT(A) has mentioned in para 31-32 at page 76 of the appeal order that the trial balance for F.Y. 2008-09 has breakup of twenty one services but these are consolidated figures in respect of different branches and three out of them just mentions the amounts under the head Recurring charges. Further, he has mentioned that 24 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 it is not possible to ascertain the account heads under income streams which have been taken to 80IA income and that information provided to DOT as per seized material are such that they cannot be reconciled with profit and loss account.
8. Ld. CIT(A) has mentioned in para 33-34 at page 76-77 of the appeal order that assessee has supplied net working equipment to HDFC banks under EDICS Unit and has claimed deduction u/s 80IA which according to ld. CIT(A) is not available to the assessee and thus, ld. CIT(A) held that accounts are not verifiable with regard to service income from eligible telecom service.
9. Ld. CIT(A) has mentioned in para 35-36 at page 77-78 of the appeal order that assessee did not produce the relevant details during post search proceedings in spite of lapse of four and a half months.
10. Ld. CIT(A) has further mentioned in para 35-36 at page 77-78 of the appeal order that account of Golf Technologies P. Ltd. seized as Annexure A-9 from the Registered Office is different than the ledger account filed in appeal proceeding in as much as there are certain narrations like sales others, purchases VPN South are mentioned in the ledger account filed in appeal proceedings, whereas ledger account seized does not mention "Tulip Connect" only is mentioned in the case of plant and machinery and thus assessee, according to ld. CIT(A), has changed its accounts and further that similar discrepancies have been noticed in the case of the ledger accounts of copies of other sister concerns filed during the appeal proceeding and those contained in seized annexures.
11. Ld. CIT(A) has mentioned in para 3 at page 92 of the appeal order that the appellant has not given any specific date as the commencement date for its new undertaking both during search 25 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 proceedings and during assessment proceeding and also 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 application to DOT dated 31.1.2005 has mentioned that it has not yet started. Further that under Kerala license, business started on which date was not established.
14. Ld. CIT(A) has mentioned in para 3(ix)(i) at page 101 to 102 of the appeal order that letter of M/s Pan Indian Network Infravest P. Ltd. PB 485-487 was in two different fonts.
15. Ld. CIT(A) has mentioned in para 3(ix)(ii) at page 102 of the appeal order that purchase order of bank of Punjab Ltd. PB 488 is in different fonts and does not mention the location, for which 26 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 these services were to be obtained and information in the purchase order is vague.
16. Ld. CIT(A) has mentioned in para 3(ix)(iii) at page 102 of the appeal order that order of Tata Finance Ltd. was in the same fonts as that of Bank of Punjab and was for Gurgaon office.
17. Ld. CIT(A) has mentioned in para 3(ix)(iv) at page 102-103 of the appeal order that the purchase order from HDFC Bank, PB 490 mentions the name of the assessee as Tulip Telecom Ltd. whereas at the relevant time the name of the appellant was Tulip IT Services Ltd.
18. Ld. CIT(A) has mentioned in para 3(ix)(v) at page 103 of the appeal order that purchase order from M/s Glenmark Pharmaceuticals Ltd. mentioned only "installation" and "recurring" at PB 491.
19. Ld.CIT(A) has mentioned in para 3(x)(i)(ii)(iii)(iv) at page 103-105 of the appeal order that purchase orders from M/s Excel India P. Ltd. PB 639, M/s B.D. PB 642, mention the word "Tata" in the list of deliverables.
20. Ld. CIT(A) has mentioned in para 3(xi)(i)(ii)(iii) at page 106 of the appeal order that purchase orders of Philips India (PB 202-203) from Zicom (PB 204, 205-207, 208), M/s Excel (PB 211) are for different cities in India whereas All India License was given to the assessee on 02.11.2004.
21. Ld. CIT(A) has mentioned in para 3(xi) at pge 106-107 of the appeal order that only photocopies of the purchase orders were given and original were not produced. Therefore, their authenticity is in doubt.
22. Ld. CIT(A) has mentioned in para 1 of 3
(xii) at page 107 of the appeal order that the 27 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 letter of intent (LOI) from M/s Air Liquide North India P. Ltd. dt. 07.09.2005 includes scope written as "128 KBPS radio-frequency link between New Delhi to Alwar with uptime of 99%", thus, alleging that this service is same as was being provided by the appellant during F.Y. 2003-04, more so when there is 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 there is no mention of providing internet or VPN Services.
26. Ld. CIT(A) has mentioned in para 3(xii)(5) at page 108 of the appeal order that in the master service agreement dated 21.07.2005 between the appellant and ONGC Videsh Ltd. (217-18 of 28 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 appeal order). It is mentioned that DOT has issued Category-A ISP/NLD/ILD Licenses to Tulip whereas as per the copies of the licenses, the appellant had not even got license for providing VPN Service, leave alone NLD/ILD Services and that the appellant made applications seeking license for NLD Service only on 10.01.2006. Further, ld. CIT(A) has relied upon the covering letter enclosed with the application to DOT for NLD services (PB 2477-2484) which states that the company wishes to migrate to NLD Service license from the provisional IP/VPN license issued vide provisional license no. 820-820/05-LR dated 06.10.2005 (PB 2484) and alleges that whether it was a black dated agreement and that there was incorrect mentioning of the status of the affairs while entering into a back dated agreement.
27. Ld. CIT(A) has mentioned in para 3(xiii) at page 109 of the appeal order has mentioned that photocopies of agreements/letters/purchase orders submitted during the appeal proceedings cannot be relied upon as originals were not produced on the ground that they were not readily available and that it could not be established that Tulip connect undertaking was started for 13.04.2004.
In reply, it is submitted that originals could not be produced as the time given was not adequate and in any case all these agreements/letters are from reputed companies and direct verification could have been made. In any case evidences/pleadings referred earlier clearly indicate the commencement of Tulip Connect Undertaking.
28. Ld. CIT(A) has mentioned in para-4 at page 109-110 of the appeal order that installation of towers as claimed by the assessee could not establish anything as towers were under EDICS also.
29. Ld. CIT has mentioned in para-5 at page 110 of the appeal order that assessee was already 29 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 using leased line/bandwidth under EDICS also and, therefore, how can it be said that by incurring expenditure on lease line/bandwidth, assessee has commenced new undertaking.
30. Ld. CIT(A) has mentioned at page 110-111 of the appeal order that the note on Tulip Connect and EDICS submitted by the appellant gives a list of different types of ISPs 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) has mentioned at page 127, 128 of the appeal order that though the assessee has claimed that a new undertaking by the name tulip connect was started in F.Y. 2004-05 for providing VPN Services but DOT letter shows that the 30 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 assessee was given provisional approval on 06.10.2005 to enable providing VPN Services which shows that the appellant could have started VPN Services only in F.Y. 2005-06 and this fact is corroborated from director's report for F.Y. 2005- 06, which mentions that the company has launched its wireless based VPN Services branded as Tulip Connect and that assessee was already offering VPN Services to its customers since 1999-2000 using traditional technologies and that the assessee has already taken the lease lines from MTNL/BSNL from A.Y. 2000-01.
34. Ld. CIT(A) has mentioned at page 132-133 of the appeal order that though the annual reports/directors reports for F.Y. 2003-04 mention about the closure of EDICS but enquiry made by CIT(A) with ROC, BSE, SEBI, and NSE revealed NSE forwarding such annual reports and there was no mention of closure of EDICS business found in the notes to the accounts was also missing in the annual report of F.Y. 2004-05 filed before the said authorities.
35. Ld. CIT(A) has mentioned in para 2(v) at page 147 to 148 of the appeal order as under:
"The consumption of electricity of per month was in the range of Rs. 2000 per month and thus the process cannot be termed as carried out with the aid of power. The details of the electricity charges paid as per their electricity bills recovered from the premises is as under:
August 2009- Rs. 1956/-
July 2009 - Rs. 1617/-
June 2009 - Rs. 1314/-
May 2009 - Rs. 1923/-
April 2009 - not available
March 2009 - Rs. 1300/-
36. Ld. CIT(A) has mentioned in para 2(vi) at page 148 of the appeal order as under:31 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 "The only activity if it all can be called as being carried out with the aid of power (as required u/s 80IB (2) (iv) is soldering of connector to the PCB Board, which cannot be termed, in the given circumstances of the case, as a manufacturing process carried on with the aid of power. No expenses relating to generator work debited in the P&L account."
37. Ld. CIT(A) has mentioned in para 2(vii) at page 148 of the appeal order as under:
"The total number of employees who were actually working at the premises was only six as against 11 mentioned in the attendance register. 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 32 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 three associates concerns accepted to have taken accommodation entries without actual supply of material and that some of the suppliers were common.
42. Ld. CIT(A) has mentioned in para 4 at page 177 of the appeal order that mode of delivery has been shown by hand, which could not have been delivered by hand.
43. Ld. CIT(A) has mentioned para 4 at page 177 of the appeal order that associate concerns are operating from the registered office of the assessee company and were employing only one or two employees.
44. Ground relating to alleged suppression of profit on purchase and sale from/to M/s XL Telecom & Energy Ltd. Rs. 3701589 & Rs. 105455-Our C.O. (Relevant to A.Y. 2006-07 & 2008-09). This ground has been dealt by ld. AO at page 35 of A.Y. 2006-07 and page 36 of A.Y. 2008-09 whereas ld. CIT(A) has discussed this issue at page 177-178 of the appeal order."
The ld. AR has also submitted a copy of letter received by him from the ld. CIT(A)-XXXI, New Delhi which is also reproduced as under :
"With reference to the letter of CIT-Central -1, New Delhi dated 16.04.2014, forwarding the letter of CIT(DR) H Bench ITAT New Delhi dated 16.04.2014, it is to state that sufficient number of opportunities were given to the appellant to lead evidences in support of various grounds taken by 33 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 them. The notings in the order sheets of the appeal folder show that 38 hearings in all have been held and on each occasion detailed discussions have taken place on all the matters involved in the appeal. The proceedings were in fact conducted on priority in order to meet the deadline fixed by the Hon'ble High Court of Delhi. The entire set of note sheets containing notings of the 38 hearings held between 27/02/2013 to 13/06/2013 containing 37 pages is enclosed herewith for reference.
I may recall here that due to the conduct of the appellant and the complexity of the issues involved, the undersigned had approached the Hon'ble High Court of Delhi to do away with the time limit fixed by Hon'ble High Court which was vehemently opposed by the appellant and the Hon'ble Court gave only one month's extension. When the dead line was approaching, I had moved the Hon'ble High Court to further extend the time by 1 more month which again was also opposed by the appellant.
It was the appellant who had filed the appeal and was allowed several opportunities to lead evidences in support of grounds 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 34 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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 the sake of convenience and ready reference, the following paragraphs may be referred to.
1. para 3 on page 13
2. para 6 on page 15
3. page 8 on page 15 & 16
4. para 9 on page 16
5. para 10 on page 16
6. para 11 on page 16
7. last sentence of para 1 of ground no.
1.2 on page 22
8. para 4 on page 23
9. para C on page 35
10. para 1 (last sentence) on page 36
11. para 2 on page 36
12. para 25 on page 73 & 74
13. para 26, 27 on page 74
14. para 36 & 37 on page 78
15. para 2 on page 92
16. para 5 on page 93
17. para 8 on page 94
18. para (ii) on page 99
19. para (vi) on page 100
20. First new para without any numbering on page 107 (starting with "The above photocopies....")
21. para 7 on page 152 It is also mentioned here that as an appellate authority I am not a party before the Hon'ble ITAT Delhi. The above factual details are therefore, forwarded herewith as requested by CIT(Central)- 1, Delhi."35 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 7.2 On the other hand, ld. DR submitted that CIT(A) has provided adequate opportunities. He also submitted a copy of order sheet of proceedings before the ld. CIT(A).
7.3 We have heard both the sides from the issue, we find that although the disallowance was made by the AO for claim of deduction u/s 80IA. However, the CIT(A) has sought compressive details/information from the assessee. The CIT(A) has tried to give effective hearing to the assessee.
However, the time period of hearing before the ld. CIT(A) was just over three months which in our considered view was not adequate having regard to the complex nature of the business of the assessee and geographical scattered branches of the assessee from where the assessee was required the details to be submitted before the CIT(A). In our considered view in such a short period the required/asked details could not have been collected by the assessee to comply the query raised by CIT(A). We have also considered the synopsis which has been reproduced in the earlier paras. Certain requirements of confronting the assessee were not specifically met by the CIT(A) by giving specific opportunity on these issues. We have also gone through the order sheet entries recorded by the CIT(A) on day to day basis. In considering all 36 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 these aspects we are of the view that for making such a huge addition for not allowing deduction u/s 80IA of the Act, which was allowed in some of the assessment years while framing the assessment 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 37 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 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. 2006-07 & 2008-09 respectively.
The ld. AR submitted that no incrementing material found during the course of search hence no disallowance is to be made while framing the assessment u/s 143 (3) / 153A of the I.T. Act. It was also pleaded that no adequate opportunity was given by the Assessing Officer on this issue. It was also submitted that factually wrong findings have been recorded with regard to purchases. The ld. AR submits that sales were not more than purchases for the same he referred to the ledger account of M/s XL Telecom and Energy Ltd. in the assessee's books of account. On the other hand, ld. DR relied on the order of the AO as well as CIT(A).
8.1 After hearing both sides on this issue we hold that this issue also requires a re-look at the level of the AO. We remit this issue to the file of the AO to be decided afresh in accordance with law after providing adequate opportunity of being heard to the assessee.
Departmental Appeals : -
38 ITA Nos. 4888 to 4894/D/2013,5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014
9. In these appeals there is a ground with regard to the disallowance u/s 10A of the I.T. Act which was allowed by the CIT(A).
10. In the A.Y. 2004-05 the ground is relating to disallowance u/s 10A of the I.T. Act. The disallowance was made by the AO without any discussion. The CIT(A) deleted the same. Ld. DR submitted that if all other major issues if considered for restoring to the file of the AO then this issue may also be restored to the file of the AO for fresh adjudication. After hearing both the sides, we are of the view that this issue is also required to be considered at the level of the AO afresh. Therefore, we restored the issue to the AO's file for a fresh adjudication as per law. The AO shall provide adequate opportunity of being heard to the assessee before finalization of the issue.
11. In all the assessment years under appeal except the assessment year 2005-06 the Revenue also raised the issue relating to addition on account of reduction in profit by rotating purchase and sales within the group companies which was deleted by the CIT(A). Ld. DR submitted that AO has made the addition based on evidences and pleaded that CIT(A) was not justified in deleting the addition. After 39 ITA Nos. 4888 to 4894/D/2013, 5160 to 5165/D/13 & C.O. Nos. 44 & 45/D/2014 hearing both the sides, we find it appropriate to set aside this issue also to the file of the AO for deciding afresh as per law after providing adequate opportunity of being heard to the assessee.
12. The other issue in the revenue's appeal relevant for A.Y. 2009-10 and 2010-11 is with regard to deleting the disallowance made by the AO in respect of expenses relating to external commercial warrant (ECB) and deleting the disallowance of interest equal to the gain on by back of Foreign Currency Bond (FCB). After hearing both the sides from this issue we find it appropriate in the interest of justice and equity to remit the issue to the file of AO to be decided in accordance with law after providing adequate opportunity of being heard to the assessee.
9. In the result, all the appeals by assessee and revenue and cross objection filed by the assessee are allowed for statistical purposes in the above terms.
Order pronounced in the open court on this 28th day of August, 2014.
Sd/- sd/-
(C.M. GARG) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: the 28th day of August, 2014
TS
40 ITA Nos. 4888 to 4894/D/2013,
5160 to 5165/D/13 &
C.O. Nos. 44 & 45/D/2014
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
ASSISTANT REGISTRAR