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Income Tax Appellate Tribunal, DELHI BENCHES “F” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI N.S. SAINI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “F” : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA.No.5071/Del./2018 Assessment Year 2006-2007 M/s. Religare Finvest Ltd., 1st Floor, Tower-A, A-3,4,5, The DCIT, Circle – 21 (1), vs GYS Global, Sector-125, C.R. Building, Noida – 201301, U.P. New Delhi – 110 002. PAN AASCS6801H (Appellant (Respondent) For Assessee : Shri Rohit Jain And Ms. Tejasvi Jain, Advocates For Revenue : Smt. Sulekha Verma, CIT-DR & Shri Surender Pal, Sr. D.R. Date of Hearing : 12.03.2019 Date of Pronouncement : 25.03.2019 ORDER PER BHAVNESH SAINI, J.M.
This appeal by assessee has been directed against the order of Learned CIT(A)-38, Delhi, dated 2nd March 2018, for the assessment year 2006 2007.
Briefly the facts of the case are that assessment in this case was completed on 10th November 2008 under section 143(3) of the Income Tax Act, 1961 at an income of 2 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. Rs.17.56 crores. It was observed that the then assessing officer has allowed the commission paid to Ranbaxy Holding Company Ltd., and Oscar Investment Ltd., to the tune of Rs.1,35,52,986/- without making relevant inquiries/ investigations, culminated the assessment proceedings and passed the order under section 143(3) of the Income Tax Act dated 10th November 2008. The proceedings under section 263 of the Income Tax Act were initiated by the Commissioner of Income-Tax and vide order dated 21st January 2010 held that the assessment order passed by the assessing officer was erroneous and presidential to interest of revenue and further directed to re-decide the issue of allowability of the deduction of total expenditure of Rs.1,64,61,096/- as stated above, after making necessary inquiry/investigation/verification. Consequent to the directions contained in the order under section 263 of the Income Tax Act, dated 21st January 2010, the assessing officer in his order passed under section 263/143(3) dated 29th December 2010, re-assessed the income of the assessee at Rs.18,92,33,210/-, by disallowing the 3 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. commission paid to Ranbaxy Holding Company Ltd., and Oscar Investment Ltd., to the tune of Rs.1,35,52,986/- after verification/inquiry.
3. The assessee preferred appeal before ITAT and the Tribunal vide order dated 12th March 2013 remit the file back to Commissioner of Income Tax for adjudication and recording his findings and objections to show cause notice which were filed by assessee. Consequently order under section 263 of the Income Tax Act was passed on 19th March 2015. The assessing officer after hearing the assessee again made edition of Rs.1,35,52,986/- on account of disallowance of commission as above and completed the assessment under section 263/147/143(3) dated 22nd March 2016 and computed the income at Rs. 18.92 crores. The Learned CIT(A), partly allowed the Appeal of assessee.
4. The Learned Counsel for the Assessee referred to the same reasons as have been recorded in the assessment order that original assessment was passed on 10th November 2008 under section 143(3). The Learned CIT
4 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. passed the order under section 263 on 21st January 2010. The assessing officer passed the order under section 263/ 143(3) on 29th December 2010. On 4th January 2013 on the date of order against first 263 order upheld the 263 jurisdiction but directed the Commissioner of Income Tax to consider merits before remitting to assessing officer. On 19th March 2015 order passed by Commissioner of Income Tax under section 263 pursuant to the direction of ITAT, directed the assessing officer to examine the merits of the case. The assessee preferred an appeal before the Honourable High Court in Income Tax Appeal No.297 of 2013, which were decided by Delhi High Court vide Judgment dated 17th April 2015 modifying the directions of the ITAT. The Judgment of the High Court in paras 2 to 5 is reproduced as under :
2. “The facts are that the appellant's return for AY 2006-07 was finalized by an order dated 10.11.2008. At that stage, in the return, it claimed three heads of expenditure towards syndication and guarantee fees. After the assessment order
5 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. was framed, the CIT in exercise of his revisional authority under Section 263 of the Income Tax Act, 1961 (hereafter referred to as "the Act”) issued Show Cause Notice dated 03.09.2009, alleging that the said three heads claimed were allowed without due enquiry by the Assessing Officer (AO). The assessee resisted the notice: by order dated 21.01.2010, the CIT rejected the objections and directed the AO to decide afresh the issue of allowability of total expenditure of Rs.1,64,61,096/-. The Income lax Appellate Tribunal (ITAT) to whom the assessee approached claiming to be aggrieved, directed a limited remand to the CIT to record his findings on the objections raised by the assessee as stated in the following terms:
“7. But the action of the id. CIT in not considering the merits of object ions raised by assessee vide reply dated 11.1.2010 placed 6 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. at pages 3 to 12 of paper book and just remitting back to Assessing Officer for re- adjudication was not appropriate. ”
Learned senior counsel for the assessee argues that though innocuous, the remand has not addressed the assessee’s basic grievance against the CIT's notice under Section 263 assuming jurisdiction. It is pointed out that the assessee had in the original proceedings at the stage of assessment filed written submissions which were also produced before the ITAT and that the ITAT upheld the CIT’s assumption of jurisdiction in an earlier part of the order as is evident from the observations that, "the observations of learned CIT that assessment order was erroneous and prejudicial to the interests of revenue is correct. In view of the above facts, we are of the view that the learned CIT had rightly initiated proceedings under Section 263 of the Act as assessment order 7 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. was both erroneous and prejudicial to the interest of the revenue” It was submitted that given the fact that the CIT did not record any findings on the merits of the objections as to the initiation of proceedings itself on both the aspects, i.e. erroneous view of the AO and the potential consequence to the revenue, the ITATs affirmation of such assumption of jurisdiction is untenable and the remand for the limited purpose of deciding objections is merely academic.
Learned counsel for the revenue submits that a complete consideration of the record would reveal that the expenditures claimed were in respect of payments made to related party transactions which had not been taken into consideration at the original assessment stage. In these circumstances, the upholding of the assumption of jurisdiction was warranted.
5. This Court is of the opinion that the CIT’s order does not address the appellant's objections both 8 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. as to the assumption of jurisdiction as well as the merits. As is evident from the operative portion of the CTFs order itself, the merits were remitted for consideration to the AO. However, as regards the assessee's objections against the Show Cause Notice under Section 263 was concerned, there are no findings. Given these facts, the ITAT’s order upholding assumption of jurisdiction could not have been made. In that sense, the assessee is correct in contending that the remand on the question of deciding objections had been rendered academic.
6. For the above reasons, the impugned order is modified; it is open to the assessee to contend both on the correctness and legality of assumption of jurisdiction as well as the merits of the items sought to be taxed in the revisional proceedings. The impugned order is partly set aside to the extent of above modification. The appeal is allowed to the above extent.”
9 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi.
4.1. Learned Counsel for the Assessee, therefore, submitted that since the directions given by the Tribunal have been further modified by the High Court and that no fresh order under section 263 have been passed by the Commissioner of Income Tax, therefore, the entire assessment order is illegal and bad in law because the directions of the ITAT and the Hon’ble High Court have not been complied with. Further, when no order under section 263 have been passed, there were no justification for the assessing officer to pass the impugned assessment order. He has, therefore, submitted that matter maybe remitted to the assessing officer to pass the order afresh in the light of directions of the ITAT and the Hon’ble High Court of Delhi after passing the order under section 263 by the Commissioner of Income Tax.
On the other hand, Learned Departmental Representative relied upon the orders of the authorities below and submitted that there was no justification to remand back the matter to the file of assessing officer.
10 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi.
After considering the rival submissions, we are of the view that the matter requires reconsideration at the level of the assessing officer. The assessing officer in the present case passed the assessment order in pursuance of directions of the Commissioner of Income Tax under section 263 of the Income Tax Act 1961. Learned Counsel for the Assessee rightly contended that order of the Commissioner of Income Tax under section 263 dated 19th March 2015 and Order of the ITAT have now been modified by the subsequent Judgment of the Hon’ble Delhi High Court dated 17th April 2015 (supra). Therefore, the fresh order should have been passed by the assessing officer in the light of directions of the ITAT as well as Hon’ble Delhi High Court. Learned Counsel for the Assessee also contended that since no fresh order have been passed by the Commissioner of Income Tax under section 263, therefore, directions of the High Court and ITAT should be complied with. These facts, therefore, clearly show that on the date of passing of the impugned assessment order, there were directions of the ITAT as well as Hon’ble Delhi High Court
11 ITA.No.5071/Del./2018 M/s. Religare Finvest Ltd., New Delhi. because the order of the Tribunal has now merged with the order Hon’ble Delhi High Court, therefore, such directions should have been complied by the assessing officer while passing the order afresh. In this view of the matter, we set aside the impugned orders and restore the entire matter in issue to the file of assessing officer, with a direction to re- decide the matter, following the order of ITAT and Hon’ble Delhi High Court (supra). Assessing officer shall verify, if any, fresh directions have been given by the Commissioner of Income Tax under section 263 in view of the above Judgment of the Hon’ble Delhi High Court and pass order afresh, in accordance with law by giving reasonable, sufficient opportunity of being heard to the assessee.
In the result, appeal of assessee allowed for statistical purposes. Order pronounced in the open Court.