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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI K.N. CHARY
ORDER PER K. NARSIMHA CHARY, J.M.
Challenging the order dated 22.01.2013 in appeal no. 119/10-11 passed by the Ld. Commissioner of the Income Tax (Appeals)-XI, New Delhi 1 (for short called as the “Ld. CIT (A)”) Revenue preferred the appeal and the assessee preferred the cross objection.
Facts in brief are that the assessee is a company incorporated in Switzerland and for the AY 2002-03, return of income was filed declaring a total income of Rs.13,87,54,266/-. By way of order dated 07.03.2005, Ld.AO made an addition of Rs.138,43,38,750/- and taxed it at 10% on account of licensing of software. Subsequently, by issuance of notice dated 28.03.2007 u/s 148 of the Act, Ld.AO sought to re-open the assessment.
Assessee did not file any fresh return of income. The reasons were furnished to the assessee. Assessee contested the taxability of the payments of software as royalty, and claimed it as royalty even if effectively connected with EABP, it cannot be taxed on gross basis. Subsequently by order dated 31.12.2007, Ld AO recorded that the contention of the assessee are not acceptable and proceeded to bring the royalties and fee for technical services to tax at 20% as against 10% tax earlier.
In appeal before the Ld. CIT(A), assessee challenged the re-opening proceedings on the ground that the objections of the assessee to the reasons recorded for re-opening were not disposed of by way of a speaking order. Ld. CIT(A) rejected the same. However, while relying upon the orders of the Tribunal for AYs 1999-2000 to AY 2004-05, Ld. CIT(A) held that the assessee did not have a PE in India and deleted the addition.
Ld.CIT(A) further held that the charging of interest u/s 234B of the Act is mandatory in nature. 2
In this appeal, Revenue challenged the observations of the Ld.CIT(A) in favour of the assessee by following the decision of the Tribunal in assessee’s own case for AY 1999-2000 to 2004-05. Revenue now contends such orders were not accepted by the Revenue. Revenue is also challenging the consequent deletion of the addition made on account of taxing the royalty at 20% instead of 10%. At the same time, assessee preferred the cross-objection challenging the observations of the Ld.CIT(A) in respect of the non-disposal of the objections of the assessee to the reasons recorded by the AO by speaking order and charging of the interest u/s 234B of the Act.
Ld. DR submitted that in respect of the orders of the Tribunal for the AYs 1999-2000 to 2004-05, Revenue preferred appeal before the Hon’ble Jurisdictional High Court and Hon’ble High Court by way of order dated 18.05.2015 set aside the matter to the file of Ld.CIT(A) to decide the matter afresh in the light of the survey that was conducted on 22.11.2007, as such, in view of this fact, he prayed to remand this matter also to the file of the CIT(A) to be disposed of with the batch of matters that are remanded by the Hon’ble High Court to the file of the Ld.CIT(A).
However, Ld.AR submitted that inasmuch as the C.O relates to the legality or otherwise of the re-open proceedings, the present matters could be disposed of by this Tribunal at this stage and there is no need of remand. On merits, he submitted that there is no fresh material that has come to the possession of the AO in order to seek the reopening of the 3 concluded proceedings. He further submitted that in this matter the reasons recorded by the Ld. AO amount to change of opinion and is prohibited under law. He further stated that it is not open for the Ld. AO to proceed further with the matter of reopening the concluded assessment without disposing of the objections filed by the assessee, and any such assessment in violation of the mandate of the Hon’ble court in GKN driveshaft case is bad under law. The next contention is that the rectification proceedings under section 154 of the Act were proposed but dropped on the similar grounds as such reopening is not sustainable.
Lastly, he contended that when the appeal against the original assessment was pending on the file of the Ld. CITA, as on the date of the issuance of the notice under section 148 of the Act, Ld. AO does not have jurisdiction to proceed with the reopening of the concluded assessment. In support of these contentions, Ld. AR submitted a number of decisions of the Hon’ble apex court, Hon’ble jurisdictional High Court, and coordinate Benches of this tribunal.
In reply, Ld. DR submitted that it is evident from the order of the Hon’ble High Court that neither the assessee not the Ld. AO had the opportunity to consider the material found in survey conducted on 22/11/2007, and for this reason the Hon’ble High Court remanded the matter to the file of the Ld. CITA and precisely for the same reason this matter also needs to be considered by the Ld. CITA while disposing of the appeals that were remanded by the Hon’ble High Court. He further submitted that in any case there can be only one assessment for a particular assessment year, as such, it would be just and convenient for disposal of the present appeal along with cross objection, with the appeal preferred against the original assessment for the assessment year 2002-03.
In respect of merits he submitted that the assessee preferred the cross objection questioning the applicability of section 44D of the Act and also charging of interest under section 234 B and 234 D of the Act. In respect of the applicability of section 44D, Ld. DR submitted that it requires determination whether the royalties effectively connected with PE, and inasmuch as the questions relating to the Permanent Establishment and royalty are open before the Ld. CITA, as a consequence of the orders of the Hon’ble High Court such an issue need not and cannot be decided at this stage. In respect of chargeability of interest under section 234B is concerned, Ld. DR submitted that, as is evident from the orders of the Tribunal as well as the Hon’ble High Court, such a question is open before the Ld. CITA. He brought to our notice the observations of the Hon’ble High Court that the rights and contentions of the parties are reserved before the Ld. CITA. For all these reasons, Ld. DR submitted that no specific adjudication is required by the Tribunal at this stage and it is just and convenient to remand the matter to the file of the Ld. CITA for disposal along with the batch of appeals relating to the assessment years 1999- 2000 to 2004-05 which includes the appeal relevant for the assessment year 2002-03.
We have gone through the record. Vide paragraph No. 8, in the appeals relating to the assessment years 1999-2000 to 2004-05, the Hon’ble High Court observed as follows:-
8. In the circumstances, this court deems it most appropriate to set aside the order of the ITAT and a CITA and remedy matter to the CIT (appeals) who shall give reasonable opportunity to the assessee, in the light of the material collected during the survey conducted on 22/11/2007 for the assessment years in question that is 1999-2000 to 2004-05. It’s open to the assessee to take all the contentions including the submissions to be made in the light of the previous judgement of this court. Rights and contentions of the parties are reserved.
It is therefore clear that by reserving the rights and contentions of the parties, the Hon’ble High Court remanded the matters relating to the assessment years 1999-2000 to 2004-05 to the file of the Ld. CITA for disposal of the matters in the light of the material collected during the survey conducted on 22/11/2007. When such matter is pending before the Ld. CITA whose powers are coextensive with those of the Ld. DR, and in any case there can be only one assessment, it appears proper to us that instead of disposing of this appeal separately, as rightly suggested by the Ld. DR, it would be just inconvenient to remand this matter also to the file of the Ld. CITA for disposal by taking a comprehensive view, along with the appeals relating to the assessment years 1999-2000 to 2004-05 which includes the appeal relating to the year under consideration in this appeal.
It is more particularly necessary in view of the fact that the appeal against the original assessment order needs to be decided in the light of the survey that was conducted on 22/11/2007 whereas the notice under section 148 of the Act in his assessment year was issued on28.03.2007. When the 6 Hon’ble High Court directed that the Ld. CITA had to consider the material collected during the survey conducted on 22/11/2007, which is later than the issuance of the notice under section 148, the order of the Hon’ble High Court will prevail and the Ld. CITA is bound to consider the later events while disposing of the matter, as such, disposal of this appeal and cross objection which relates to the period earlier to the survey is of little consequence. It is always open for the assessee to take the contentions before the Ld. CITA during the course of such hearing. With this view of the matter, we are inclined to agree with the Ld. DR in the submission that this appeal cannot be disposed of by way of a separate order inasmuch as substantially the matter is pending before the Ld. CITA. We, therefore, set aside the issue involved in both the appeal and the cross objection to the file of the Ld. CITA for disposal along with the batch of appeals remanded to him by the Hon’ble jurisdictional High Court relevant for the assessment years 1999-2000 to 2004-05, after giving reasonable opportunity to the assessee to rise the contentions in respect of these matters also.
The appeal and cross objection or disposed of accordingly. In the result appeal and cross objection are allowed for statistical purposes.
Order pronounced in the open court on 26.12.2017