RFS INDIA TELECOM PVT. LTD.,NEW DELHI vs. ITO, WARD- 21(2), NEW DELHI

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ITA 3053/DEL/2018Status: DisposedITAT Delhi03 March 2023AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal for statistical purposes. It was noted that the assessee had appeared on several dates and the CIT(A) had passed the order without granting a sufficient opportunity for hearing.

What were the facts?

The assessee appealed against the CIT(A)'s order which confirmed the disallowance of compensation paid to a contract manufacturer. The assessee contended that they appeared on multiple dates before the CIT(A) but did not get a proper opportunity to be heard.

What were the issues?

Whether the assessee was denied a proper opportunity of being heard by the CIT(A) and whether the compensation paid was a legitimate business expenditure.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHIBENCH ‘F’, NEW DELHI

Before: Dr. B. R. R. KumarSh. Yogesh Kumar US

Hearing: 07.12.2022Pronounced: 03.03.2023

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of ld. CIT(A)-XXV, New Delhi dated 06.03.2018.

2.

Following grounds have been raised by the assessee:

“(1) Ld. Commissioner of Income Tax (Appeals)-XXV, Delhi failed to appreciate that the Appellant has appeared on all dates fixed for the hearing and filed the letters of adjournment. The appellant complied with the terms of the hearing notice issued by Commissioner of Income Tax (Appeal)-XXV, Delhi as well as notice issued by Assessing Officer.

(2) The appellant prays that the order of Ld. Commissioner of Income Tax (Appeals)-XXV, Delhi be amended since it is not based on facts.

RFS India Telecom Pvt. Ltd. (3) Ld. CIT-Appeal-XXV failed to appreciate that the Appellant through Authorized Representative has appeared on following dates 18/08/2017, 29/11/2017, 13/12/2017, 30/01/2018, 16/02/2018, 26/02/2018, & 28/02/2018, for attending the hearing in response of notice received.

Ld. CIT-(Appeals)-XXV has not given the opportunity of the hearing for representations in greater manner. Unfortunately Appellant has neither get opportunity from Ld. CIT-Appeal-XXV nor from the Assessing Officer Circle- 21(2).

No proper & sufficient opportunity was given of being heard before issue of this Assessment Order for expressing his true position as envisaged under principle of natural justice.

Ld. CIT-(Appeal-XXV) has passed the order on 06th March -2018 without giving the proper opportunity whereas there is no time constraint like in cases of time baring matters.

(4) Aggrieved by the assessment order under section 143(3), the assessee preferred appeal before the Ld. CIT-Appeal-XXV. The CIT-A in the appellate proceedings, only after considering the assessment order, confirmed the main disallowance made by the AO in his order.

(5) On the facts and circumstances of the case, the Ld. AO has erred on the facts and in law in not appreciating that the payment of compensation to Reflex is in accordance with the agreement dated 28.04.2011 entered between the parties and amendment thereof and is a legitimate expenditure incurred wholly and exclusively for the purpose of business.

Without prejudice, that the assessing officer erred on facts and in law in not appreciating that, at best, the disallowance ought to be restricted to the increased compensation of Euro 73000 agreed between the parties, i.e. Euro 3230000 agreed vide agreement

RFS India Telecom Pvt. Ltd. dated 18.07.2013 less initial compensation of Euro 250000.

(6) Ld. Commissioner of Income Tax (Appeal)-XXV, Delhi acted unlawfully in upholding the purported addition made by the Ld. Asstt. Commissioner of Income Tax, Circle- 21(2) on account of compensation paid Rs. 2,52,24,820 to M/s Reflex Communication Pvt. Ltd. to save the business in the facts and circumstances of the instant case and specious finding on that issue is absolutely arbitrary and preserve.

(7) Ld. Assessing officer erred on facts and in law in making disallowance of compensation paid to contract manufacturer, M/s Reflex Communications P. Ltd. (Reflex) amounting to Rs. 2,52,24,820 allegedly holding that the said expenditure in not incurred wholly and exclusively for the purpose of business and therefore, be disallowed under section 37(1) of the Act.

Ld. CIT-Appeal-XXV, Delhi indulged in surmises and conjecture in upholding the purported addition of Rs. 2,52,24,820/- as made by the Asstt. Commissioner of Income Tax Circle-21(2) without any basis and the impugned finding on that issue is completely unfounded, unjustified and untenable in law.

(8) That the above addition is untenable in the eyes of law, having been made on the basis of assumption/hypothesis merely and for the reason that the artificial arrangement to lower the incomes of the appellant.

(9) Ld. CIT-Appeal-XXV, Delhi erred in upholding the impugned the addition on account of Compensation of Rs.2,52,24,820/- made by the Assessing Officer Circle- 21(2), Delhi without considering both Contract Agreements dt.28.04.2011 & 18.07.2013, adducing, justifications and accepting the requisite details from the appellant and also ignoring the facts.

Ld. CIT-(Appeal-XXV) and A.O. has absolutely ignored the above position, and despite having certain material on the records, proceeded to make the present

RFS India Telecom Pvt. Ltd. assessment without reference to material available with them. Adhoc addition on this ground is unjustified.

(10) The appellant humbly submits that the additions of Rs.2,52,24,820.00 made by the A.O by disregarding the facts of the expenditures as is unjustified & unwarranted and accordingly, the said additions should be deleted.

(11) The appellant prays that the said addition of Rs.2,52,24,820.00 be deleted.”

3.

At the outset, it was submitted that the ld. AR of the assessee appeared before the ld. CIT(A) on 18/08/2017, 29/11/2017, 13/12/2017, 30/01/2018, 16/02/2018, 26/02/2018 & 28/02/2018, for attending the hearing in response of notice received. It was argued that the assessee could not get the opportunity of hearing and the order has been passed on 06.03.2018. Since, no prejudice would be caused to the revenue if an opportunity of being is given to the assessee on the issue of payment of compensation and foreign exchange fluctuation. The assessee shall comply to the notices issued by the ld. CIT(A) promptly failing which the ld. CIT(A) would be at liberty to invoke suitable proceedings as per the Income Tax Act.

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