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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri P.M. Jagtap, V.P (KZ) & Shri S.S. Godara, JM
ORDER Shri S.S. Godara, JM:
This Revenue’s appeal and assessee’s corresponding cross objection for assessment year 2010-11 arise against the CIT (A), 11, Kolkata’s order dated 23-08-2018 passed in case No. 528/CIT(A)-11/C-8/14-15/KOL. AY 2010-11 involving proceedings u/s 143(3) of the Income-tax Act, 1961 ( in short the ‘Act’). We have heard both the parties. Case files perused.
We notice at the outset that the Revenue’s sole substantive grievance raised in the instant appeal challenges correctness of the CIT(A) ‘s order that he has erred in law and on facts in accepting/admitting assessee’s additional evidence in violation of Rule 46A of the Income-tax Rules, 1962 in short, the ‘” Rules”, thereby reversing the C.O No. 3/Kol/2019 AY 2010-11 Clininvent Research P.Ltd Assessing Officer’s action disallowing its project-wise and salary expenses of Rs. 5,77,33,000/- and Rs. 3,98,77,597/-; respectively.
Learned CIT/DR at the outset took us to the assessment order dated 30-03-2013 in paras 3.1 and 4.2 at pages 2-3 that since the assessee had failed to produce project wise expenditure with its clients along with details of man power, set-up and projects undertaken viz-a-viz allocation of plant-wise/project-wise expenditure and also had not deducted TDS on salary payments pertaining to its clients, M/s. Pfizer, Novartis, Byer & M/s. Glaxo (GSK) etc, (the latter sums claimed in the nature of professional fees payable to employees of the said clients/companies), both these heads of expenditure deserved to be disallowed. He invited our attention to the CIT(A) corresponding lower appellate discussion in paras 6, 6.1 and 9 at pages 9-13 that this tax payer had filed additional details involving the reconciliation of costs and reimbursement details pertaining to the said four entities in furtherance to the relevant agreements for the first time in appellate proceedings only which have been put to factual verification. Learned CIT/DR also submitted that the relevant sample copies of the agreements with the above four companies never saw light of the day during the course of assessment and copies of necessary TDS return pertaining to said entities had also not been filed before therein and therefore, the instant issue deserves to be restored back to the Assessing Officer for his afresh adjudication.
Mr. Tibrewal drew strong support from the CIT(A)’s order deleting the twin disallowances on the basis of corresponding agreements with the said four entities (supra) after carrying out the necessary verification. He quoted paper book pages 1 to 407 indicating corresponding documents forming part of assessment as well as lower records. He lastly contended that the CIT(A) has rightly reversed the assessing authority’s action disallowing the impugned project-wise and salary expenses. 5. We have given our thoughtful consideration to rival submissions against and in support of the CIT(A)’s action deleting project wise and salary payments 2
C.O No. 3/Kol/2019 AY 2010-11 Clininvent Research P.Ltd disallowance. We make it clear that the Revenue’s sole substantive grievance is that the CIT(A)’s action under challenge in admitting/accepting additional evidence has violated Rule 46A of the I.T Rules, 1962 since the assessing authority has not been afforded adequate opportunity of hearing. We find force in the Revenue’s instant sole grievance. We see from a perusal of assessee’s compilation of documents filed in the paper book at Sl. No. 14 to 17 that the it had filed copies of agreement with M/s. Novartis, Pfizer, Bayer & M/s. Glaxo (GSK) with sample copies of employment contractts filed before the CIT(A) for the first time in the lower appellate proceedings only. Mr. Tibrewal sought to emphasize that the assessee’s two letters dated 25-03-2013 and 24-11-2009 duly placed on record the corresponding sample copies of employment agreements with its clients before the Assessing Officer before completion of the regular assessment in issue dated 30-03-2013. There is no indication in the case records as to whether these details had in fact been filed before the Assessing Officer. We deem it appropriate in these facts and circumstances that the CIT(A)’s action allowing relief to assessee in deleting the project wise and salary expenses disallowance is not sustainable being in violation of principle natural justice prescribed in Rule 46A of the Rules. We accordingly accept the Revenue’s sole substantive grievance and restore both these issues to the Assessing Officer for his afresh adjudication on merits. We make it clear that the assessee shall also be at liberty to file necessary evidence/particulars in addition to those already forming part of records. The Revenue’s appeal (ITA No. 2451/Kol/18 for AY 2010-11) stands accepted for statistical purpose. C.O No. 3/Kol/2019 arising out of AY 2010-11-by the assessee 6. Coming to assessee’s Cross Objection, we find that its solitary grievance is that both the lower authorities have erred in law and on facts in disallowing commission of Rs.17,45,902/- u/s. 37(1) of the Act paid to Shri Swadesh Chatterjee, an American resident. Both the parties are ad idem that this sole issue be restored to the Assessing
C.O No. 3/Kol/2019 AY 2010-11 Clininvent Research P.Ltd Officer since requiring fresh actual verification qua allowability of the above claim under company law vis-à-vis provisions of the Act. We therefore, set aside this sole issue raised in assessee’s cross objection to the Assessing Officer for his afresh adjudication as per law. The assessee’s cross objection (C.O No. 3/Kol/19) is also treated as allowed for statistical purposes.
This Revenue’s appeal ( C.O ( No. 3/Kol/2019) are allowed for statistical purpose in above terms. Order pronounced in the Court on 15 -12-2020 Sd/- Sd/- [ P.M.Jagtap ] [ S.S.Godara ] Vice President (KZ) Judicial Member Dated : 15 -12-2020 **PRADIP, Sr. PS Copy of the order forwarded to:
1. 1. Appellant/Department: The ITO War 2(2) Aaykar Bhawan, P-7 Chowringhee Sq., Kolkata-69..
2. Respondent/Assessee: M/s. Clininvent Research Pvt. Ltd Block-BN, Plot-7, Saltlake Electronics Complex, Kolkata-91. 3..C.I.T(A).- 4. C.I.T.- Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.