ACIT CIRCLE 2 vs. NIIT ONLINE LEARNING LTD,

, 3902 & 3903/Del/2006 2 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. 2. Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.

“On the facts and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,89,41,731/- which was made on account of disallowance of depreciation on claim of purchase of software from M/s Hi-Tech Software Ltd., the genuineness of which was not established.”

4. NIIT Online Learning Ltd. (“Assessee”) has also filed a cross-objection on the following ground:

“That on the facts and circumstances of the case, the disallowance of depreciation amounting to Rs. 2,89,41,731/- in respect of software purchased from Hi-Tech Software Ltd. in the assessment completed under Section 153A of the Income-Tax Act, 1961 is not sustainable since the said disallowance is not based on any material/document found during the course of search.”

6. The Assessee has also filed an additional ground of appeal under Rule 11 on the jurisdictional issue, claiming that no search had taken place at their premises.

Admission of Additional Grounds:

7. With regard to the filing of additional evidence, it was the primary contention of Revenue that the additional ground raised by the Respondent cannot be heard and adjudicated unless the CO filed by the Respondent is admitted by the Bench after condoning the delay. The Respondents cannot be given the liberty to beat a judicial process by suggesting that since the additional ground raised by them raises a jurisdictional issue, that should be heard first and all other issues would then become only academic. This is a blatant attempt to bypass a statutory judicial process under which they have to plead for the admission of additional ground of appeal. What the Respondent are trying to do is to evade their explanation about condonation of delay and seeking to persuade the bench that the entire proceedings are without jurisdiction and therefore the bench need not go into the question of the admission of the CO or into the merits of Revenue’s appeal. It is submitted that such a plea is wholly untenable.

8. On the other hand, the ld. AR argued that admittedly, the assessee did not take any specific ground challenging the validity of the order passed on the ground that in absence of any search being carried out in the case of the assessee, the order passed under section 153A of the Act is illegal and bad in law. It was submitted, under a misconception of law regarding , 3902 & 3903/Del/2006 4 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. the correct legal position and imperfect legal understanding about the distinction between search being assessee specific vis-a-vis premises specific more particularly, considering the fact that the common premises occupied by the assessee with its other occupants was subjected to search in case of Mr. R.S. Pawar, the Chairman of NIIT Group, without there being any search in the case of the assessee.

9. It was argued that the aforesaid order of the CTT(A), the Revenue filed captioned appeals for assessment years 2002-03 to 2004-05 before the Tribunal. The assessee filed cross- objections in Form 36A on 24.08.2010, along with application for condonation of delay of three years, three months and eleven days, on the ground that the impugned disallowance was beyond the scope of assessment under section 153A, since the same was not based on any incriminating material/ document found during the course of search. It was argued that the assessee challenged the validity of the assessment made under section 153 A of the Act, by way of additional ground of appeal(s) filed on 19.08.2017 for each year, on the ground that since no search was conducted in the case of the assessee, the invocation of the said section and framing of assessment thereunder was beyond jurisdiction, bad in law and void ab initio.

10. Having heard the contentions of both the parties, keeping in view the judgment, keeping in view, the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, the additional ground filed by , 3902 & 3903/Del/2006 5 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. the assessee is accepted. The relevant portion of the judgment is as under:

“5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross- objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.

6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of , 3902 & 3903/Del/2006 6 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.

7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. KaramchandPremchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd. . Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits.”

Merits of Additional Grounds: Absence of Search U/s 132:

3. Without entering into the written submissions made by the Revenue as well as assessee as it may cause pre-judice to the parties on merit, we are of the considered view that when the entire case of the Revenue is based upon the primary documents viz. search warrant and panchnama, etc., prima facie no findings can be returned on the secondary documents relied upon by the parties viz. appraisal report. Moreover, to arrive at the logical conclusion and to decide the controversy, once for all, we are of the considered view that Revenue should come up with complete facts as to the alleged search, by filing affidavits that search warrants were issued in case of the assessee and pursuant thereto, panchnama was prepared with complete details of the officers issuing the search warrants and detail of the panchnama prepared. Moreover, it is settled principle of law that since jurisdictional issue can be raised by any party to the litigation at any stage of the proceedings, there is no need to admit the cross objection first, rather filing of the details of the search conducted at the premises of the assessee in the shape of affidavit would facilitate the Bench to decide the issue in entirety. Consequently, question framed is accordingly answered, by directing the Revenue to file the affidavit before the next date of hearing i.e. 10.12.2018. The matter is now listed for 10.12.2018.

, 3902 & 3903/Del/2006 8 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

12. There has been no reply from the Revenue for a period of more than three years. Subsequently, the Bench of Tribunal had, vide order dated 18.01.2022, passed the following directions:

6. In these circumstances, we deem it just and proper to have the presence of DIT(Inv.), New Delhi and PCIT-4, New Delhi to appraise them of the need of the document available at the command of the revenue but not produce inspite of repeated adjournments and efforts put in by the Id. Special Counsel and the mandatory requirement of drawing an adverse interference against the case of revenue on the failure of production of such document. For this purpose, we call upon DIT (Inv.), New Delhi and PCIT-4, New Delhi to present before the bench on 22nd February 2022 at the bench so as to enable us to understand the difficulty in production of the documents.

13. On 22.02.2022, a letter was filed by the Special Counsel appointed by the Revenue enclosing the communications dated 21.02.2022 received from Pr. DIT (Inv.)-1, New Delhi and PCIT- 4, New Delhi wherein it was stated that the records are old and difficult to track and the warrant is not available.

(i) Such person to whom summons under section 131(1), or notice under section 142(1) of the Act to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice; or (ii) Such person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act; or (iii) Such person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Act.

“7. It is seen that even on the first date of hearing i.e. 2nd March 2015, the Revenue had produced from the Assessing Officer’s file a copy of the vanchnama drawn on 7th July 2006 and not the warrant of search, if any issued in the name of the Respondent. The Court therefore proceeds on the basis that there is no search warrant issued in the name of the Respondent.

8. It is evident front Rule 112 read with Form 45 that the search warrant has to be issued in the name of the person. The search warrant will also have to indicate the place of search. The documents placed on record by the Respondent Assessee shows that while there was search warrant in the name of Mr. Raj Kumar Singhania, the father of the Respondent, there was no separate search warrant in the name of the Respondent. The panchnama dated 7th July 2006 with reference to search of locker No. Ill of the Respondent, refers to the said proceedings being in continuation of the earlier search proceedings which took place on 23rd June 2006. The search proceedings on 23rd June 2006 was on the basis of the search warrant issued in the name of the father of the Respondent and not the Respondent. As already noted, the Revenue has been unable to produce till date any record to show that there was any search warrant issued in the name of the Respondent.

9. This Court is of the view that the Respondent’s contention is correct that with the Department not having proceeded to search the locker No. 111 on 23rd June 2006 itself and having completed the search proceedings on that date by 5.15 pm, if it thereafter proposed to search locker No. Ill belonging to the Respondent, it ought to have issued a separate search , 3902 & 3903/Del/2006 12 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. warrant in her name, specifying the place of search that was undertaken on 7th July 2006. Alternatively, if the Department wanted to continue with the search warrant issued on 23rd June 2006 in the name of Mr. Raj Kumar Singhania and proceed to open locker No.lll, then they could not havefnstituted separate proceedings against the Respondent under Section 153A without there being any separate search warrant in her name.

11. Consequently, the Court is satisfied that apart from other reasons mentioned in the impugned order of the IT AT, the proceedings under Section 153A against the Respondent was itself without the authority of law.

12. No substantial question of law arises from the impugned order of the 11AT. The appeal is dismissed. ” (emphasis supplied)

17. With regard to the merits of additional grounds of appeal, the ld. Counsel for the Revenue argued vehemently objecting of the additional grounds. The salient points of the arguments are as under:

• that the Assessee has acquiesced to the assessment proceedings under Section 153A and therefore it cannot challenge the jurisdiction of the Ld. A.O. and contend that no search was carried out by the Appellant therefore the assessment under Section 153A is bad in law.

• that the Assessee did not raise any factual jurisdictional objection i.e., any objection regarding the non-existence of , 3902 & 3903/Del/2006 13 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. search being conducted at its premises, during the course of assessment proceedings. In fact, the Assessee co-operated with the Ld. A.O. and submitted necessary documents to help complete the assessment. Accordingly, once the Assessee has participated in the assessment proceedings under Section 153A, without any protest or objection, it cannot be allowed to contend that no search took place, at a belated stage.

• Reliance in this regard is placed on the order of the Hon’ble Supreme Court in the case of Gunjan Girishbhai Mehta v. Director of Investigation, SLP(C) 30282/2015 wherein it was held that:

“3. Notice under Section 132 of the Income Tax Act, 1961 (for short “the Act”) was issued in the name of a dead person. The said notice was duly received by the present petitioner as the legal heir of the dead person. Notice of assessment under Section 158BC of the Act was issued and in the assessment proceedings, where the income was declared to be 'nil', the present petitioner as the legal heir had participated. Thereafter, notice under Section 158BD of the Act was issued to the present petitioner on the basis of information coming to light in the course of search. Aggrieved, the petitioner moved the High Court and on dismissal of the writ petition filed, the present Special Leave Petition has been instituted.

4. The point urged before us, shortly put, is that if the original search warrant is invalid the consequential action under Section 158BD would also be invalid. We do not agree. The issue of invalidity of the search warrant was not raised at any , 3902 & 3903/Del/2006 14 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. point of time prior to the notice under Section 158BD. In fact, the petitioner had participated in the proceedings of assessment initiated under Section 158BC of the Act. The information discovered in the course of the search, if capable of generating the satisfaction for issuing a notice under Section 158BD, cannot altogether become irrelevant for further action under Section 158BD of the Act.”

19. Against the arguments of ld. Counsel for Revenue, the ld. Senior Counsel for the assessee argued that, no search was initiated/ conducted in the case of the assessee, as is evident from the fact that name of the assessee is not mentioned in any of the panchnamas prepared by the search team and that the assessee, in its letter dated 8.02.2006 filed before the assessing officer, stating that “there is no separate Panchnama in the name of the assessee. The main contention of the assessee was that inspite of the fact that no search was conducted in the case of the assessee, Assessment proceedings were concluded under section 153A of the Act, for assessment years 2002-03 to 2004-05, after making disallowance of depreciation on software imported from Hi-Tech Software Ltd. in assessment year 2002-03. , 3902 & 3903/Del/2006 15 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

20. The aforesaid order was challenged in appeal before the CIT(A). In the statement of facts filed along with Form 35 before the ld. CIT(A) on 14.06.2006, it was stated, as a fact, that no search was carried out in the case of the assessee nor any panchnama drawn in the name of the assessee.

21. While allowing relief to the assessee on merits, in para 7 of the common appellate order passed for assessment years 2002-03 to 2004-05, the CIT(A) recorded/ observed as under:

7. … However, on perusal of statement of facts and submission made in the appellate proceedings, it is noticed that according to appellate company there was no search and Panchnama in the case of appellant company but admittedly there were certain documents found during the course of search in the case of associate companies of the appellant company which were pertaining to the appellant company, since no formal ground of appeal has been taken either at the time of filing of appeal or during the course of appellate proceedings challenging the validity of proceedings u/s 153A and otherwise also on merit the relief has been given to the appellant company on the one and only issue involved in the aforesaid three appeals, therefore, it is not considered necessary to address this issue while disposing these appeals.

“B. PROCESS ADOPTED TO REACH A CONCLUSIVE FINDING ON THE QUESTION WHETHER OR NOT A SEARCH WAS CONDUCTED IN THIS CASE

5. Vide interim order dated 29.08.2018, the Revenue was called upon to file an affidavit in this regard.

a. The notice was not challenged before the AO all through the assessment proceedings and there was not even a whisper to the effect that they were not subjected to search operation. The AO had, therefore, no occasion to go into this aspect of the matter. b. No such ground was raised before the Commissioner of Income Tax (“CIT(A)”). In the Statement of Facts, a mention was made that there is no Panchanama etc., but the CIT(A) did not consider this aspect as no ground of appeal to that effect was raised and the CIT(A) gave relief on merits. Once again, this jurisdictional issue was neither raised nor enquired nor adjudicated during the appellate proceedings. c. The Assessee did not file any appeal against the refusal of the CIT(A) to go into this question and even the CO filed after such delay did not raise this issue. d. In 2017, the Respondents, for the first time, raised this issue in a formal manner by filing an additional ground to the CO. As a necessary fall out, the ITAT is called upon to render a finding of fact as to whether or not, a search was conducted in this case. This finding would be , 3902 & 3903/Del/2006 19 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. reached, without the AO having any opportunity to enquire into this factual aspect.

10. It is submitted with great respect that the additional ground involving enquiry into facts cannot and should not be admitted as a pure question of law. These questions may also not be decided on the basis of affidavit from the officers who have no personal knowledge of happenings some 17 years back. The available records only raise doubts, but do not conclusively demonstrate that no search had taken place, more so when this claim is being advanced only in the case of the Assessee, out of the searches conducted on all other entities of the group, a fact which is not a normal event.

D. OTHER FACTS WHICH GO TO SHOW THAT THE SEARCH WAS CONDUCTED

11. A copy of the Appraisal Report dated 08.06.2005, which is a contemporaneous record, records that the warrant was issued in the case of the Assessee.

[Kindly refer relevant extracts of the Appraisal Report dated 08.06.2005 which are annexed herewith and marked as Annexure-1].

14. Notice under Section 153A of the Act was issued to the Assessee on 06.09.2005, and there is every reason to presume in the normal course of events that the A.O. would not issue any notice under Section 153A, unless he has a record of search proceedings.

15. The Assessee has, in fact, co-operated with the Ld. A.O. during the course of assessment proceedings under Section 153A and there is no whisper that they were not subjected to search operation and hence the notice under Section 153A was invalid.

16. On 08.02.2006, during the course of assessment proceedings under Section 153A of the Act, the Assessee has written to the Ld. A.O. stating that:

In this connection we have to state that there is no separate Panchanama in name of the assessee. However, if any paper concerning assessee has been seized the contents thereof will be explained in the case of NIIT Ltd.

[Kindly refer Page 72 of the Paper-book filed by the Assessee on 26.04.2007 which is annexed herewith and marked as Annexure-2].

When the Assessee states that there is no separate panchanama, in response to notice under Section 153A, it could , 3902 & 3903/Del/2006 21 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. have as well said that they were not subjected to search operation, instead of pointing out that the panchanama was not separate from other group entities.

[Kindly refer Pages 73-76 of the Paper-book filed by the Assessee on 26.04.2007 which is annexed herewith and marked as Annexure-3].

18. Subsequent to the Income Tax Appeals (“ITAs”) filed by the Revenue bearing for A.Y.s 2002-03 to 2004-05, a Cross Objection (“CO”) has been filed by the Assessee on 24.08.2010 before the Hon’ble Income Tax Appellate Tribunal (“ITAT”) raising the following ground: - “(i) That on facts and circumstances of the case, the disallowance of purchase amounting to Rs. 3,55,64,739/- in respect of software purchased from Hi Tech Software Ltd., in the assessment completed u/s 153A of the Income Tax Act, 1961 is not sustainable since the said disallowance is not based on any material document found during the course of search.”

subsequently, search under Section 132 of the Act was conducted at the business premises of the Respondent on 10.11.2004.

[The letter for condonation of delay in filing the CO is annexed herewith and marked as Annexure-4], This is a clear admission by the Director of the Assessee that they were subjected to search under Section 132 of the Act. This is an unequivocal statement and coming from a person who has the personal knowledge of the fact whether or not search had taken place. Such a categorical statement cannot be brushed aside merely on the ground that after 17 years, the Warrant/Panchanama is not traceable from available records.

(i) That the Assessing Officer erred on facts and in law in completing assessment under Section 153A vide order dated 01.06.2006, without there being any search conducted upon the appellant under Section 132 of the Act.

, 3902 & 3903/Del/2006 23 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. 22. The additional ground of appeal challenging the jurisdiction dated 19.08.2017, has been filed more than 12 years after the search took place (which has been disputed by the Assessee) and nearly 10 years after the order of the CIT(A).

23. The non-availability of the search warrant and the panchanama after 17 years and the existence of facts/circumstances/documents on record, pointed out hereinabove, indicate that there are other material/evidence on record which go to prove that the search warrant was issued in this case.

24. The additional ground entails enquiry into facts and therefore it may not kindly be admitted at this stage. Reference is kindly invited to the decision in the case of Phool Chand Gajanand v. CIT, (1966) 62ITR 232 (All) wherein it was held that:-

... This shifting of the onus from the assessee to the department does not mean that the question is not one of fact. It does not cease to be a question of fact merely because the onus, lies upon the department to show that another period of twelve months is the relevant previous year. It would be a question of law only if, regardless of all circumstances, the previous financial year were the relevant previous year. If a question requires investigation of facts, it is not a question of law. The assessee itself conceded that the new question sought to be raised by it could be decided on the basis of the facts appearing on the record; this confirms that it is not a pure question of law. The provision in rule 12 applies to a ground of law as much as to a ground of fact and an appellant is not , 3902 & 3903/Del/2006 24 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. entitled absolutely to the leave if the ground is of law. Therefore, the mere fact that the ground is of law did not entitle the assessee as a matter of right to the leave; if had still to show any; when it did not show any additional facts and when the Tribunal found that the new ground was not absolutely a ground of law, it meant that no case was made out by the assessee for the grant of leave and this was full justification for the Tribunals refusing the leave.

E. EXISTENCE OF A FACT CAN ALSO BE PROVED BY THE EXISTENCE OF OTHER FACTS (THE BURDEN REMAINING STATIC)

26. In light of the above-mentioned legal principle, even if these are in relation to criminal cases, it is respectfully submitted that conduct of search can be inferred from other , 3902 & 3903/Del/2006 25 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. facts which are stated above. Even in the wake of non- availability of search warrant/panchanama, these pieces of evidence are good enough to draw the inference that the search had, in fact, taken place.

27. It is relevant to note that the Assessee in this case, who is also in the special knowledge of the fact (as much as the Revenue is), has never asserted by way of affidavit or otherwise, that they were not subjected to search operation under Section 132 of the Act. The Assessee does not discharge the burden of proving the fact that search had not taken place, by merely raising the same as an additional ground. The conduct of the Assessee, on the other hand, raises serious doubts on the genuineness of the additional ground filed at this stage of proceedings and thereby ensuring that rigours of other provisions are escaped.

28. In this regard, it is necessary to advert to Section 106 of the Evidence Act which states that:-

106. Burden of proving fact especially within knowledge. - When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.

29. The term ‘especially’ used in this section refers to facts that are ‘pre-eminently or exceptionally within the knowledge of a person’. Accordingly, this Section applies to a case where any fact is ‘exceptionally’ within the knowledge of a person, the burden of proof shifts to that person. , 3902 & 3903/Del/2006 26 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

30. Having said that, it is pertinent to note that while the Evidence Act does not apply to proceedings under the Act, however, the Hon’ble Supreme Court has held that on first principles and on general law, the principles contained in Evidence Act can be applied to proceedings under the Act. 31. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case of Chuharmal v. CIT, (1988) 172ITR 250 (SC) wherein it was held that: -

10. ...There a contention was raised that the provision in Section 110 of the Evidence Act where a person was found in possession of anything, the onus of proving that he was not the owner was on the person who affirmed that he was not the owner, was incorrect and inapplicable to taxation proceedings. This contention was rejected. The High Court of Bombay held that what was meant by saying that the Evidence Act did not apply to the proceedings under the Act was that the rigour of the rules of evidence contained in the Evidence Act, was not applicable but that did not mean that the taxing authorities were desirous in invoking the principles of the Act in proceedings before them, they were prevented from doing so. Secondly, all that Section 110 of the Evidence Act does is that it embodies a salutary principle of common law jurisprudence which could be attracted to a set of circumstances that satisfy its condition.

F. AVAILABLE PRESUMPTION IN LAW REGARDING CERTAIN FACTS WHERE A JUDICIAL OR AN OFFICIAL ACT HAVE BEEN PERFORMED , 3902 & 3903/Del/2006 27 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

Illustrations The Court may presume - (a) that a man who is in possession of stolen goods soon after the theft is either the thief or has received the goods knowing them to be stolen, unless he can account for his possession; (b) that an accomplice is unworthy of credit, unless he is corroborated in material particulars; (c) that a bill of exchange, accepted or endorsed, was accepted or endorsed for good consideration; (d) that a thing or state of things which has been shown to be in existence within a period shorter than that within which such things or states of things usually cease to exist, is still in existence; (e) that judicial and official acts have been regularly performed; ………….” , 3902 & 3903/Del/2006 28 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

33. The scope of this provision is explained in The Law of Evidence, Ratanlal & Dhirajlal, 25th Edition in the following terms:-

It is settled law that presumption of fact is a rule in law of evidence that a fact otherwise doubtful may be inferred from certain other proved facts. When inferring the existence of a fact from other set of proved facts, the court exercises a process of reasoning and reaches a logical conclusion as the most probable position. It empowers the court to presume the existence of any fact which it thinks likely to have happened. In that process, the courts shall have regard to the common course of natural events, human conduct, etc. in addition to the facts of the case. (Page 570)

35. Thus, the Assessee is calling upon the Hon’ble Bench to draw a presumption of illegal issue of notice under Section 153A merely on the basis that the said panchanama which would have formed the basis for the issue of notice under Section 153A, is not available after 17 years. , 3902 & 3903/Del/2006 29 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

36. Reliance on the decision of the Hon’ble Supreme Court Churharmal (Supra) is placed to submit that on first principles and on general law, the principles contained in Evidence Act can be applied to proceedings under the Act.

G. ADMITTED FACTS NEED NOT BE PROVED The CO filed by the Assessee challenges the disallowance of purchase, made by the Ld. A.O, on account of the fact that it is not based on any material/document found during the course of search. This is an admission by the Assessee of the fact that search in fact took place. Moreover, the letter of request for condonation of delay in filing the CO before the Hon’ble ITAT mentions in express terms that search under Section 132 of the Act was conducted at the business premises of the Assessee. There cannot be greater evidence than an admission of the Assessee that search in fact took place.

41. Reliance on the decision of the Hon’ble Supreme Court Churharmal (Supra) is placed to submit that on first principles and on general law, the principles contained in Evidence Act can be applied to proceedings under the Act. , 3902 & 3903/Del/2006 31 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

H. THE ASSESSEE HAS ACQUIESCED TO THE ASSESSMENT PROCEEDINGS

42. It is respectfully submitted that the Assessee has acquiesced to the assessment proceedings under Section 153A and therefore it cannot challenge the jurisdiction of the Ld. A.O. and contend that no search was carried out by the Appellant therefore the assessment under Section 153A is bad in law.

44. Reliance in this regard is placed on the order of the Hon’ble Supreme Court in the case of Gunjan Girishbhai Mehta v. Director of Investigation, SLP(C) 30282/2015 wherein it was held that: - “3. Notice under Section 132 of the Income Tax Act, 1961 (for short “the Act”) was issued in the name of a dead person. The said notice was duly received by the present petitioner as the legal heir of the dead person. Notice of assessment under Section 158BC of the Act was issued and in the assessment proceedings, where the income was declared to be 'nil', the , 3902 & 3903/Del/2006 32 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. present petitioner as the legal heir had participated. Thereafter, notice under Section 158BD of the Act was issued to the present petitioner on the basis of information coming to light in the course of search. Aggrieved, the petitioner moved the High Court and on dismissal of the writ petition filed, the present Special Leave Petition has been instituted.

25. The ld. Counsel for the Revenue further relied on the judgment of Hon’ble High Court of Orissa in the case of Shiva Cement Ltd. and Ors. v. Director of Income Tax (Inv.), Bhubaneswar & Ors., (2013) 439ITR 92 (Orissa) wherein it was held by C.J. Muralidhar that:

"...As rightly pointed out by the Department, search is qua a ‘place’ and not necessarily qua the ‘Assessee’. Survey by its very nature could be of the entity and any place from where such entity may operate.

It is perfectly possible that while conducting survey and search of the premises of an entity, for which an authorisation has been issued, the Department can come across some material pertaining to some other person or entity. The provisions like Section 153C of the Act deal with such contingencies. However, that is not to say that a survey or a search cannot happen in two different premises simultaneously. Further, is search is qua the place, the Court sees no reason why if there are two entities in one premises, there cannot be a common search operation ”

32. While the arguments of the assessee were that the issue of non-execution of warrant of Authorization under section 132 of the IT Act, the matter was brought before the Assessing Officer and as well as the ld. CIT(A), the revenue argued that non- availability of the warrant of authorization cannot be treated as non-issue of warrant of authorization. From the examination of the entire facts and circumstances, it can be concluded that , 3902 & 3903/Del/2006 36 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. non-availability of the copy of the warrant of authorization doesn’t necessarily lead to a conclusion that the warrant has never been executed. The appraisal report which is prepared collating the warrants, documents, material, cash and other valuables found & seized and encompassing the entire search proceedings reveals the name of the assessee which can be considered as corroboratory in nature. The existence of a fact can also be proved by the existence of other facts. As the department has undergone the restructuring twice and the records have been shifted from one jurisdiction to another jurisdiction over a period of 18 long years, the non-availability of warrant, at this juncture, cannot be construed as non- existing. Reliance is being placed on the judgment of Hon’ble Supreme Court in the case of Tulsiram Sahadu Suryawanshi Vs. State of Maharashtra, (2012) 10 SCC 373, while examining the scope of Section 106 of the Indian Evidence Act, 1872 canvassed by the revenue wherein it was held as under:

23……..We make it clear that this section is not intended to relieve the prosecution of its burden to prove the guilt of the accused beyond reasonable doubt, but it would apply to cases where the prosecution has succeeded in proving facts from which a reasonable inference can be drawn regarding the existence of certain other facts, unless the accused by virtue of his special knowledge regarding such facts, failed to offer any explanation which might drive the court to draw a different inference....

On merits of the issue: (Revenue Appeal)

34. The only issue involved in these appeals pertains to treatment of transaction of “acquisition of software” from an overseas company namely “Hi-Tech Software Ltd.” and claim of depreciation thereof.

The Assessing Officer has doubted the existence of HSL and its office. Owing to the absence of any website, the AO came to a conclusion that the company HSL is bogus and non-existing. The AO has further alleged that the software imported from HSL was earlier exported by NIIT Ltd. It was alleged that the same , 3902 & 3903/Del/2006 38 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. software which was hitherto exported has been re-imported and an amount of Rs.18.99 Cr. has been paid to a non-existing entity. Hence, it was held that the deprecation claimed is not allowable. For the sake of ready reference, the entire part of the Assessment Order relevant this issue is reproduced as under:

“The assessee company is engaged in the business of providing Online Computer Education. It is alleged that during the year the assessee imported software from Hi-Tech Software Limited , Hong Kong amounting to Rs. 18,99,20,640/-. The assessee has filed details of above transactions of import of software. The agreement with Hi-Tech software Limited is brief and does not state origin of state. Further, it is stated that Hi-tech Software Ltd. does not have its own website. The exporter does not even have its own office. It was further alleged that the software imported was earlier exported by NIIT Ltd. The above allegations were confronted to the assessee during assessment proceedings. During assessment proceedings the assessee has filed documents relating to imports from Hi-Tech Software Limited like software download report, licensee to use software, intimation to custom authorities, CA Certificates, instructions for payment. Further assessee has also filed revenue generated during the year and thereafter by usage of software imported from Hi-Tech Software Limited.

Further assessee has filed confirmation from NIIT Ltd that they never exported any material to Hi-Tech Software Limited. , 3902 & 3903/Del/2006 39 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. Further assessee has furnished evidence regarding address of Hi-Tech Software Limited.

The assessee has stated that it is not necessary that company should have its own website. It is further stated that the agreement with Hi-Tech Software Limited, is brief but precise and includes all key terms and conditions. On the issue of origin of state, it is not mandatory to mention the origin on import documents. The assessee has further clarified that purchase order was generated manually as the SAP system was in initial stages of implementation. It is also denied by Mr. Vijay Kumar Thadani, Director NIIT Limited, that he has any connection with Hi-Tech Software Limited. An affidavit to this effect has also been filed by him. Further, the assessee has explained that the titles of educational contents imported bearing identical resemblances with the title of educational contents exported by NIIT Ltd., is on account of reference to the contents which is required in case of educational courseware materials. For example contents related to networking will always referred as networking as title no matter who is the author/developer and what are the contents. For example window based software will always referred to as “windows………..”

I have examined replies and explanations given by assessee.

The import of software from M/s. Hi Tech Software Ltd., has already been referred to FEMA. The genuineness of the purchase cannot be accepted till the order from FEMA is received, especially in view of the fact that a company dealing in computer software does not even have a website. Moreover the , 3902 & 3903/Del/2006 40 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. overall circumstances seems to be abnormal and the assessee’s submissions are weak. Therefore, the total value of the software is being disallowed amounting to Rs. 18,99,20,640/-. Depreciation on this software amounting to Rs. 3,55,64,739/- is disallowed. An addition of Rs.3,55,64,739/- is made. Penalty proceedings u/s 271(1)(c) have been initiated separately.”

38. The main allegation of the AO was that the exporting company HSL has no website and the software has been exported earlier. The Corollary allegation for making the disallowance was that the issue of import of software from HSL has been referred to FEMA.

39. It was argued that there is no requirement to have a website to do the business and the disallowance on this basis is totally unacceptable. It was submitted that HSL is incorporated and located in Hong Kong and the Director of HSL, Shr. Rajesh Malik visited the assessee company on May 29, 2001 for business discussions. It was argued the content of software to be purchased was to be used to facilitate the customers by blending them so as to be used as composite library to deliver learning services to the customers and in this connection some of the content was procured from HSL.

40. The assessee has submitted record certificate from Indian Overseas Bank certifying receipt of import documents/bills from , 3902 & 3903/Del/2006 41 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. M/s HSL, through bank for payment and the perpetual license to use the software before the ld. CIT(A). It was argued that download of software through the internet from countries outside India is permitted under the Customs Act and is, to be reported to Customs authority in accordance with Circular No. 9 -AP (Dir. Series) of Foreign Exchange Management Act, 2000 (‘FEMA’), issued by Reserve Bank of India. The assessee has duly intimated the details of all the softwares purchased/imported from M/s HSL, Hong Kong in accordance with above Circular, to customs authorities, which have been examined by the ld. CIT(A). Similar certificate certifying import of software through Internet was made available to the bank before release of payment to the foreign supplier. On the strength of the same, the bank has also released payment to M/s HSL, Hong Kong. The assessee also submitted that they have generated substantial revenue by offering various courses to the students, for which the courseware included the software imported from M/s HSL.

Assessment Revenue prior to Total Revenue after year purchase of Content purchase of Content from from M/s Hi-Tech M/s Hi-Tech Software Ltd. Software Ltd. and and other vendor (Rs.) other vendors (Rs.) 2001-02 189,475 - 2002-03 6,231,503 21,079,956 2003-04 - 70,245,295 2004-05 - 56,741,024 2005-06 - 44,755,453 Total 6,420,97 192,821,728 3 !,821,728 , 3902 & 3903/Del/2006 42 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd.

Name of the course title exported Name of the course title to NIIT-NV imported from Hi-Tech Software Limited, Hong Kong MS Word 97 Word 97 Basic Advanced Word for Office 97 Word 97 Advanced Advanced Excel for Office 97 Excel 97 Advanced MS PowerPoint 97 PowerPoint 97 Networking Essentials Fundamentals of Networking C Programming Basics Basic C Programming Advanced C Programming Advanced C Programming Object Oriented Programming with C++ Object Oriented C++ Programming

43. We find the ld. CIT(A) has examined the following points and directed to allow the depreciation:

(i) The movement/import of software via download from internet/VSAT is established by way of software download reports and intimation to custom authorities. (ii) The payment for the software was made through normal banking channels.

, 3902 & 3903/Del/2006 43 CO Nos. 264, 265 & 266/Del/2010 NIIT Online Learning Ltd. (iii) The fact that software was utilized by the appellant is established from substantial increase in revenue from sale of software courses pursuant to import of software from M/s HSL. (iv) There is no document/evidence with the Assessing Officer to doubt the transaction or suggest that payment sent to M/s HSL was received back. (v) Agreement for purchase of the software (vi) Purchase order placed by the assessee (vii) Invoices issued by the seller (viii) Software download reports (ix) Perpetual licence agreement (x) Intimation to custom authorities (xi) Certificate to bank (xii) Payment through normal banking channels. (xiii) No proof of any infraction of law by any of the Government authorities, viz., customs, FEMA, as alleged by the AO.

45. Hence, keeping in view the entire facts and since the purchase of the software cannot be disputed, we decline to interfere with the order of the ld. CIT(A) directing to allow the depreciation on the software purchased.

Order Pronounced in the Open Court on 05/08/2022.