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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ON THE 31ST DAY OF OCTOBER, 2019
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
AND
THE HON’BLE MR. JUSTICE ASHOK S. KINAGI
INCOME TAX APPEAL NO.216 OF 2010 CONNECTED WITH INCOME TAX APPEAL NOS.357-358 OF 2014
INCOME TAX APPEAL NO.216 OF 2010:
BETWEEN:
COMMISSIONER OF INCOME TAX
BENGALURU-III CENTRAL REVENUE BUILDINGS QUEENS ROAD BENGALURU-560 001.
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(3) CENTRAL REVENUE BUILDINGS QUEENS ROAD BENGALURU-560 001. ...APPELLANTS
(BY SRI: E.I. SANMATHI, ADVOCATE)
AND: M/S. SYNERGIA CONSULTANTS PRIVATE LIMITED NO.35, EMBASSY DIAMANTE
2 VITTAL MALLYA ROAD BENGALURU-560 001. …RESPONDENT
(BY SRI: K.P. KUMAR, SENIOR COUNSEL FOR SRI: G. SRIDHAR, ADVOCATE)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2005-2006, PRAYING THIS HON'BLE COURT TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; ALLOW THE APPEAL AND TO PASS CONSEQUENTIAL ORDERS, IN THE INTEREST OF JUSTICE AND EQUITY.
INCOME TAX APPEAL NOS.357-358 OF 2014:
BETWEEN:
M/S. SYNERGIA CONSULTANTS PRIVATE LIMITED NO.35, EMBASSY DIAMANTE VITTAL MALLYA ROAD BENGALURU-560 001 REPRESENTED BY ITS MANAGING DIRECTOR MR. TOBBY SIMON AGED ABOUT 49 YEARS SON OF LATE P.S. SIMON. ...APPELLANT
(BY SRI: K.P. KUMAR, SENIOR COUNSEL FOR SRI: G. SRIDHAR, ADVOCATE)
AND:
THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-12(3) CENTRAL REVENUE BUILDINGS
3 QUEENS ROAD BENGALURU-560 001. …RESPONDENT
(BY SRI: E.I. SANMATHI, ADVOCATE)
THESE INCOME TAX APPEALS ARE FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 22.01.2010 PASSED IN ITA NOS.80 AND 315(BNG)/2008, FOR THE ASSESSMENT YEAR 2004- 2005 AND 2005-2006, PRAYING THIS HON'BLE COURT TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; ALLOW THE APPEAL AND SET-ASIDE THE ORDERS PASSED BY THE ITAT BEARING ITA NOS.80 AND 315(BNG)/2008, FOR THE ASSESSMENT YEAR 2004-2005 AND 2005-2006 DATED 22.01.2010.
*****
THESE INCOME TAX APPEALS COMING ON FOR FINAL HEARING THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING:
JUDGMENT
The assessee filed its return of income declaring the income and claiming that it is engaged in the business of software development and services. It claimed profit at the rate of 94%. Deduction was claimed under Section 10-A of the Income Tax Act. The Assessing Authority issued notice to the assessee calling upon him to show
4 cause as to why the percentage as declared by others at the rate of 23% to 62% should not be considered in the assessee’s case as well. The same was contested by the assessee. The Assessing Officer passed an order holding that, the assessee is entitled to deduction under Section 10-A read with Section 80IA-10 of the Income Tax Act to an extent of 62% only and not 94% as claimed by the assessee. An appeal was filed before the Commissioner of Income Tax (Appeals). The appeal was partly allowed by holding that the assessee is entitled to an extent of 80%. Aggrieved by the same, the revenue preferred ITA Nos.314 and 499 (BNG)/2008 before the Tribunal and the assessee preferred ITA Nos.80 and 315 (BNG)/2008. The Tribunal dismissed both the appeals. Hence, ITA No.216 of 2010 is filed by the revenue and ITA Nos.357-358 of 2014 is filed by the assessee.
By the order dated 14.06.2011, ITA No.215 of 2010 connected with ITA No.216 of 2010 were admitted to consider the following substantial question of law:
5 “Whether the finding of Appellate Tribunal that the assessee – company is entitled to deduction under Section 10A of the Income Tax Act as it was engaged in the development of computer software, is perverse and arbitrary for non consideration of the material in favour of the Revenue and is unsustainable?”
By the order dated 07.10.2014, ITA Nos.357- 358 of 2014 were admitted to consider the following substantial questions of law: “1) Whether the Tribunal was justified in sustaining that the appellant was entitled to the relief under Section 10A of the Act only on 82% of its profits?
2) Whether the Tribunal was justified in upholding the application of Section 10A read with Section 80IA(8) of the Act when close connection between the transacting parties was not established by the Revenue as required under Section 80IA(10) of the Act?
6 3) There being no material to suggest close connection between the transacting parties, whether the Revenue can resort to estimate of the profit of the eligible business of the appellant by resorting to Section 10A read with Section 80IA(8) of the Act?
4) In the absence of close connection being established by the Revenue, whether the appellant was not eligible for deduction under Section 10A of the Act in respect of the entire profit on the export declared by it?”
Thereafter, by the order dated 31.10.2019, ITA No.215 of 2010 was disposed off on monitory limits in terms of the Circular No.17 of 2019 dated 08.08.2019 passed by Director (ITJ), Central Board Direct Taxes, New Delhi. Hence, ITA No.216 of 2010 and ITA Nos.357-358 of 2014, are taken up for consideration.
The learned Counsel for the appellants primarily contend that substantial material were produced before the Tribunal for consideration. The same is reflected in para 8 of the order of the Tribunal. So also, the assessee has filed additional evidence as narrated by the Tribunal at para 9 of its order. The additional evidence filed by the assessee as well as the revenue were admitted by the Tribunal. Thereafter, the Assessing Officer was directed to submit the remand report on various points as narrated in para 10 of the order of the Tribunal. It is contended that the material placed by the revenue has not been properly considered by the Tribunal. That the Tribunal went into the exercise of evaluating the evidence and the material as led in by the revenue and the assessee. That the Tribunal should have rightly remanded the matter to the Assessing Officer for a fresh consideration based on the additional evidence that was led in. Therefore, non-consideration of the evidence and the perversity in considering the other evidences led in by
8 the revenue is evident from the order of the Tribunal. That the findings recorded by the Tribunal being perverse, interference is called for.
One such contention is the additional documents relied upon by the revenue as narrated in para 8(k) of the order of the Tribunal. Reference is made that invoice No.SC003 dated 28.11.2003 issued by the assessee is not found recorded in the books of M/s Maxitulin SDN BHD. Reliance is also placed on the letter dated 18.02.2009 written by Inland Revenue Board of Malaysia. Therein, they have stated that there is no record of the said Invoice No.SC003 dated 28.11.2003 in the ledger book for the year 31.12.2004. It is further narrated in the order of the Tribunal that they were unable to verify that the software was actually supplied by the assessee. However, at page 44 of the order of the Tribunal, it is narrated that, the letter from M/s Michael Camus states that the company has not supplied data process and that the letter does not deny the supply of traceability software.
9 That the Department in its remand report has accepted that the assessee was not involved in pharmaceutical exports.
Various such anomalies were brought to our notice by the learned Counsel for the revenue. Under these circumstances, appreciation of the material produced by the revenue as well as assessee, may not be right. Even otherwise, we are of the considered view that, the material produced by the revenue as well as the assessee, would have to be considered by the Assessing Officer, at the first instance,. Hence, the matter requires to be remanded to the Assessing Officer for a fresh consideration. On certain issues, the findings recorded by the Tribunal is not in tune with the material and evidence as led in by the other side.
The same is disputed by the learned Counsel for the assessee. He contends that the Tribunal has rightly
10 considered all the material and remanding the matter to the Assessing Officer would serve no purpose.
However, we are unable to accept the said submission. It is not a case wherein a single piece of evidence or material is placed for consideration as additional document before the Tribunal. Substantial material have been produced before the Tribunal by the revenue and the assessee. On going through the entire material, in our considered view, it is not proper for the Tribunal to consider the entire material. When huge and voluminous material is produced by the other side, it is only the Original Authority would have to decide the issue at the first instance. It is not proper for the Tribunal to indulge in such an exercise. It is appropriate to remand the matter to the Assessing Officer for a fresh consideration.
Under these circumstances, the matters stand remanded to the Assessing Officer for a fresh consideration
11 in accordance with law. The Assessing Officer shall consider all the material that is already on record. None of the findings as recorded by the Tribunal will come in the way of the Assessing Officer to decide the matter. The substantial question of laws are accordingly answered.
The appeals are disposed off.
The Assessing Officer is directed to complete the exercise by the end of June, 2020.
Sd/-
Sd/- JUDGE
JUDGE
*bgn/-