Atotech India Ltd., Gurgaon v. ACIT, Gurgaon

ITA 4620/DEL/2010 | 2006-2007
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 462020114 RSA 2010
Bench Delhi
Appeal Number ITA 4620/DEL/2010
Duration Of Justice 2 month(s) 18 day(s)
Appellant Atotech India Ltd., Gurgaon
Respondent ACIT, Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 07-01-2011
Assessment Year 2006-2007
Appeal Filed On 19-10-2010
Judgment Text
I.T.A. NO.4620 /DEL/10 1/7 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.4620/DEL/2010 ASSESSMENT YEAR : 2006-07 ATOTECH INDIA LTD. ACIT 66-KM STONE NH-8 CIRCLE-1 DELHI JAIPUR HIGH3WAY 5 TH FLOOR HSIIDC BLDG. GURGAON. V. PHASE-V GURGAON. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACCM AACCM AACCM AACCM- -- -0338 0338 0338 0338- -- -G GG G APPELLANT BY : SHRI RAHUL K. MITRA AR. RESPONDENT BY : SHRI N.K. CHANBD SR. DR ORDER PER A.K. GARODIA AM: THIS IS AN ASSESSEE'S APPEAL WHICH IS DIRECTED AGAINST THE O RDER OF DISPUTE RESOLUTION PANEL (DRP) NEW DELHI DATED 30 .6.2010 PASSED U/S 144C OF THE INCOME TAX ACT 1961. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- . I.T.A. NO.4620/DEL/10 2/7 1. THAT THE ASSESSMENT ORDER PASSED IN PURSUANCE TO THE DIRECTIONS ISSUED BY THE LD DRP IS A VITIATED ORDER AS THE LD DRP ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADD ITION MADE BY THE LD ASSESSING OFFICER TO THE APPELLANTS INCOME BY ISS UING A NON SPEAKING ORDER WITHOUT APPROPRIATE APPLICATION O F MIND. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW WHILE UNDERTAKING THE ADDITION OF `.1 57 30 00 0/- THE LD DRP HAS INTER ALIA GROSSLY ERRED: 2.1. IN MISINTERPRETING THE PROVISIONS OF SECTION 92B OF THE INCOME TAX ACT 1961. 2.2. IN CONSIDERING FREE COST SUPPLY OF CHEMICALS TO A THIRD PARTY CUSTOMER VIZ AT&S INDIA LTD. A DOMESTIC COMPANY AS DE EMED RELATED PARTY INTERNATIONAL TRANSACTIONS U/S 92B OF TH E ACT. 2.3. IN GOING BEYOND THE JURISDICTION AND MAKING AN ADJUSTMENT IN RESPECT OF A DOMESTIC TRANSACTION. 2.4. IN NOT APPRECIATING THE BUSINESS RATIONALE FOR MAKING FREE OF COST SUPPLY TO A KEY CUSTOMER AT&S AND DISREGARDING THE BUSINESS/COMMERCIAL REALITY BUSINESS STRATEGY AND THE IND USTRY PRACTICE RELEVANT TO THE ASSESSEE. 2.5 IN IGNORING THE FUTURE BENEFITS ACCRUING TO THE ASSESSEE FROM THE FREE COST SUPPLY WHILE EVALUATING THE ARMS LENGTH NATURE OF SUCH TRANSACTION. . I.T.A. NO.4620/DEL/10 3/7 2.6. IN IGNORING THE INDEPENDENT THIRD PARTY TRANSAC TIONS SUBMITTED BY THE ASSESSEE TO SUBSTANTIATE THE ALLEGED FREE OF COST SUPPLIES MADE BY THE ASSESSEE 2.7. IN NOT APPRECIATING THE FACT THAT THE ALLEGED FREE OF COST SUPPLIES HAVE ALREADY BEEN BENCH MARKED BY THE ASSESSEE U SING TRANSACTIONAL NET MARGIN METHOD. 2.8. IN MAKING VARIOUS STATEMENTS IN THE ORDER PASSED U/ S 92C OF THE ACT BASED ON HIS CONJECTURES SURMISES INFERENCES A ND PRESUMPTIONS WHICH ARE NOT IN ACCORDANCE WITH FACTS OF THE ASSESSEE AND AGAINST LEGAL PRINCIPLES. 3. THAT THE LD DRP ERRED IN CONFIRMING LEVY OF INTE REST U/S 234A B C & D OF THE ACT. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD DRP HAS ERRED IN CONFIRMING INITIATION OF PE NALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT MECHANICALLY AN D WITHOUT RECORDING ANY ADEQUATE REASONS FOR SUCH INITIATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE DRAFT ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICER ON 30 TH DECEMBER 2009 U/S 144C/143(3) OF THE INCOME TAX ACT 1961. DRP HAS PASSE D DIRECTIONS U/S 144C ON 30.6.2010 AGAINST WHICH THE ASSESSEE IS IN APP EAL BEFORE US. 4. AT THE VERY OUTSET IT WAS SUBMITTED BY THE LD AR O F THE ASSESSEE THAT DRP HAS NOT AT ALL CONSIDERED THE ASSESSEES SUBMISSIONS AND PASSED A VERY CRYPTIC AND NON SPEAKING ORDER AND THERE FORE THIS ORDER OF DRP IS NOT SUSTAINABLE. IT IS ALSO SUBMITTED THAT VARI OUS FACTUAL AND . I.T.A. NO.4620/DEL/10 4/7 LEGAL ARGUMENTS AGAINST THE ADDITION PROPOSED BY THE A SSESSING OFFICER HAS BEEN RAISED BEFORE DRP AS PER APPENDIX-10 TO FORM NO.35A SUBMITTED BEFORE DRP COPY OF WHICH IS AVAILABLE ALON G WITH APPEAL MEMO OF THE ASSESSEE. IT IS ALSO SUBMITTED THAT THESE OBJE CTIONS OF THE ASSESSEE AS PER APENDIX-10 ARE RUNNING INTO 9 PAGES BUT T HE SAME WAS BRUSHED ASIDE BY DRP WITHOUT ANY COMMENT OR FINDING W ITH REGARD TO THESE OBJECTIONS. HE ALSO SUBMITTED A COPY OF THE TRIBU NAL DECISION IN THE CASE OF GAP INTERNATIONAL SOURCING INDIA PVT. LT D. V. DCIT IN I.T.A. NO.4073/DEL/2010 DATED 10.12.2010 AS PER WHICH THE MATTER WAS RESTORED BACK TO THE FILE OF THE DRP FOR FRESH DECISIO N AND FOR PASSING A PROPER AND SPEAKING DIRECTION U/S 144C OF THE INCOME TAX ACT 1961. HE ALSO SUBMITTED A COPY OF THE JUDGMENT OF HON'BLE D ELHI HIGH COURT RENDERED IN THE CASE OF VODAFONE ESSAR LTD. V. DRP DAT ED 2.12.2010 AS REPORTED IN 2010-TII-22-HC-DEL-INTL AND SUBMITTED TH AT IN THAT CASE ALSO IT WAS HELD BY THE HON'BLE DELHI HIGH COURT THA T IT IS OBLIGATORY ON THE PART OF QUASI JUDICIAL AUTHORITY TO ASCRIBE COGEN T AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL OF THE MATTER AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUPERIOR FORUM. 5. AS AGAINST THIS LD DR OF THE REVENUE SUPPORTED THE IMPUGNED ORDER OF DRP. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE ORDER OF ASSESSING OFFICER AS WELL AS THE ORDER OF DRP. BEFORE EXAMINING THE FACTS OF THE PRESENT CASE WE EXAMINE TH E TRIBUNAL DECISION RENDERED IN THE CASE OF GAP INTERNATIONAL SO URCING INDIA PVT. LTD. (SUPRA). IN THAT CASE THE DRAFT ORDER OF THE ASSE SSING OFFICER WAS DATED 24.11.2009 AND DRP PASSED DIRECTIONS U/S 144C ON 31.5.2010. IN THAT CASE THE TRIBUNAL HAS REPRODUCED THE PROVISI ONS OF SUB SECTIONS 5 TO 13 OF SECTION 144C AND THEREAFTER IT HAS BEEN O BSERVED BY THE . I.T.A. NO.4620/DEL/10 5/7 TRIBUNAL IN THAT CASE THAT THE DIRECTIONS OF THE DRP ARE TOO LACONIC TO BE LEFT UN-COMMENTED. THE TRIBUNAL HAS CONSIDERED THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF M/S SAHARA INDIA (FARMS) V. CIT AS REPORTED IN 300 ITR 403 IN WHICH IT WAS HELD THAT EVEN AN ADMINISTRATIVE ORDER HAS TO BE CONSISTENT WITH THE RULE S OF NATURAL JUSTICE. IN THAT CASE THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF THE DRP TO CONSIDER THE ISSUE ONCE AGAIN AND T O PASS A PROPER AND SPEAKING DIRECTION U/S 144C OF THE INCOME TAX ACT 1961. THE BASIS OF THAT ORDER IS THAT THE TRIBUNAL WAS IN AGREEME NT WITH THE SUBMISSIONS OF THE LD AR OF THE ASSESSEE THAT THE ASSESSEES SUBMISSION HAS BEEN BRUSHED ASIDE WITHOUT GIVING PROPER CONSIDERATION BY THE DRP. 7. NOW WE EXAMINE THE FACTS OF THE PRESENT CASE. IN T HE PRESENT CASE ALSO IT IS ADMITTED POSITION THAT AS PER APPENDIX- 10 TO FORM NO.35A FILED BEFORE DRP VARIOUS FACTUAL AND LEGAL ARGUMENTS AGAINST THE ADDITION PROPOSED BY THE ASSESSING OFFICER HAS BEEN RAISED BY THE ASSESSEE WHICH RUN INTO ALMOST NINE PAGES AND IN THE IMPU GNED ORDER THE DRP HAS MADE NO COMMENTS ABOUT THOSE ARGUMENTS OF T HE ASSESSEE AND THE MATTER HAS BEEN DISPOSED OFF BY WAY OF CR YPTIC AND NON SPEAKING ORDER. THE RELEVANT PORTION OF THE IMP UGNED ORDER OF THE DRP U/S 144C IS BEING REPRODUCED BELOW:- WE HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEES REPRESENTATIVE AND ALSO THE ORDER OF THE TPO/ASSESSING OF FICER. IT IS HELD THAT THE AMOUNT IS A TRANSACTION UNDER SUB CLAU SE OF SECTION 92F(V). ASSESSEE HAS HIMSELF SUGGESTED THAT THIS IS A N OVERALL ARRANGEMENT/UNDERSTANDING/ACTION OF BUSINESS STR ATEGY BEFORE AES. THE TPO HAS GIVEN HIS FINDING AFTER CONSIDE RING ALL THE ARGUMENTS OF THE ASSESSEE. WHILE ANSWERING THE ASSESSEES OBJECTION THE TPO HAS GIVEN DETAILED REASONS SUPPORTED BY . I.T.A. NO.4620/DEL/10 6/7 JUDICIAL DECISIONS AS TO HOW THE TRANSACTION IS INTERNA TIONAL AND HOW HE HAS DETERMINED THE ARMS LENGTH PRICE OF GOODS SU PPLIED FREE OF COST. THE DRP THEREFORE DOES NOT FIND ANY INFIRMITY WITH THE PROPOSED ORDER. THE LEVY OF INTEREST IS CONSEQUENTIAL AND IN AN Y CASE AT THIS STAGE IS PREMATURE AS IS INITIATION OF PENALTY U/S 2 71(1)( C) 8. FROM THE ABOVE ORDER OF DRP IT IS APPARENT THAT THE SAME IS WITHOUT CONSIDERING VARIOUS OBJECTIONS RAISED BY THE A SSESSEE BEFORE DRP AND HENCE WE ARE IN AGREEMENT WITH LD AR OF TH E ASSESSEE THAT THE ASSESSEES SUBMISSIONS HAD BEEN BRUSHED ASIDE WITHOUT GIVI NG PROPER CONSIDERATION BY DRP. 9. UNDER THIS FACTUAL POSITION AS DISCUSSED ABOVE WE RE SPECTFULLY FOLLOW THE JUDGMENT OF HON'BLE DELHI HIGH COURT REN DERED IN THE CASE OF VODAFONE ESSAR LTD. (SUPRA) AND THE TRIBUNAL DECISION R ENDERED IN THE CASE OF GAP INTERNATIONAL SOURCING INDIA PVT. LTD. ( SUPRA) AND RESTORE THE ENTIRE MATTER BACK TO THE FILE OF DRP TO CONSIDE R THE ISSUE AGAIN AND TO PASS A PROPER SPEAKING AND REASONED ORDER U/S 14 4C OF THE INCOME TAX ACT 1961 AFTER CONSIDERING ALL OBJECTION S OF THE ASSESSEE. SINCE WE ARE REMITTING THE MATTER TO THE FILES OF DR P FOR PASSING FRESH DIRECTION WE DO NOT MAKE ANY COMMENT ABOUT THE MER ITS OF THE CASE. NEEDLESS TO SAY THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPO RTUNITY OF BEING HEARD. WE WOULD ALSO LIKE TO OBSERVE THAT AS PER THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF VOD AFONE ESSAR LTD. (SUPRA) IT WAS HELD THAT FOR A QUASI JUDICIAL AUTHORI TY IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAM E IS THE HEART AND SOUL OF THE MATTER AND FURTHER THE SAME ALS O FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BEF ORE THE SUPERIOR . I.T.A. NO.4620/DEL/10 7/7 FORUM. THESE OBSERVATIONS OF HON'BLE DELHI HIGH COURT SHOULD BE KEPT IN MIND BY DRP AND SHOULD BE FOLLOWED WHILE DISPOSING OF THE MATTER. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY 2011. SD/- SD/- (I.P. BANSAL) (A.K. GARO DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 7.1.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. (ITAT NEW DELHI).