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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed these appeals against the orders passed by the Principal Commissioner of Income Tax-1, Coimbatore in C.No. 120(2)/263/PCIT- 1:CBE/15-16 dated 19.02.2016 for assessment years 2010-11 and 2011-12, respectively.
:-2-: I.T.A. N0s. 1080 & 1801/Mds/2016
GDA Technologies Ltd, the assessee, a subsidiary of GDA Technolgies Inc (USA) which was incorporated as a California corporation on May 14, 1996 . It provides design technology services in the areas of system architecture, board design, integrated circuits design and embedded software. It is a product development partner for companies in the embedded networking and consumer electronics market. GDA Technolgies Inc (USA) is a wholly owned subsidiary of L& T infotech Ltd (India) which is wholly owned by L&T Ltd (India). L & T group are engaged in diversified business viz engineering , construction, cement, information technology , switch gears , electronic equipments etc. However, the assessee is a design services company offering a range services in IC design, Systems design, Software development and PCB layout for several global customers as well as for the customers who are located in India and also a leading supplier of Silicon Intellectual Property (Semiconductor IP) solutions for the communications, Storage and Consumer markets.
2.1 For the assessment year 2010-11, the AO completed the assessment on 10.03.2014. This order was subject matter of an action u/s. 263 by the PCIT-1, Coimbatore. After considering the assessee’s explanations and relevant material, the PCIT held that the AO arrived “the working of business profits of the assessee company by first reducing the eligible deduction u/s. 10A and then setting off brought forward losses is not correct. The assessee ought to have been set-off the brought forward loss of Rs. 1,23,95,916/- before allowing the deduction u/s. 10A. As per section 10A (1) of the IT Act, deduction is to be :-3-: I.T.A. N0s. 1080 & 1801/Mds/2016 allowed from the total income after setting off of brought forward losses. The CBDT vide circular dated 16.07.2013 (File No. 279/Misc./M-116/2012-IT) has clarified this procedure. This resulted in excess allowance of deduction u/s. 10A as given under:
Profit before deduction u/s. 10A Rs. 3,39,94,288 Less: B/f loss of A.y. 2008-09 Rs. 1,23,95,916 Total income Rs. 2,15,98,372 Less: deduction u/s. 10A claimed Rs. Rs. 2,15,98,375 3,15,78,373/- but restricted to Total income Excess deduction allowed Rs. 98,00,01 This aspect was not verified by the AO in the order passed u/s. 143 (3) dated 10.03.2014 and hence it is erroneous and which is prejudicial to the interest of revenue” and hence, the PCIT set-aside assessment order with direction to the Assessing Officer to re-do the assessment afresh, after verifying the assessee’s claim u/s. 10A of Rs. 3,15,78,373/- and the brought forward loss for AY 2008- 09 as per law and in line with the Board’s Circular dated 16.07.2013 after giving an opportunity to the assessee .
2.2 For the assessment year 2011-12, the AO completed the assessment on 20.03.2014. This order was subject matter of an action u/s. 263 by the PCIT-1, Coimbatore. After considering the assessee’s explanations and relevant material, the PCIT held that “it is seen from the income computation statement for :-4-: I.T.A. N0s. 1080 & 1801/Mds/2016 assessment year 2011-12, that the assessee had claimed deduction u/s. 10A to the extent of Rs 54,16,455/- and arrived a total income of Rs. 13,92,488/- and the same was set off against the brought forward loss of assessment year 2008- 09 as follows:
Profit before deduction u/s. 10A Rs. 68,08,943 Less: deduction u/s. 10A Rs. 54,16,455 Total income Rs. 13,92,488 Brought forward loss Rs. 13,92,488 Total income Nil
During the scrutiny proceedings the assessee had stated that the 1st year of claim was assessment year 2001-02. The claim of deduction u/s. 10A in assessment year 2011-12 was 8th year of claim as the assessee had not claimed deduction during assessment years 2004-05, 2005-06 and 2008-09. It is pertinent to mention that though the assessee had commenced its manufacturing or production activity during financial year 2000-01 relevant to assessment year 2001-02 and the assessment year for which the assessee’s claim 10A now, is of eleventh year (i.e., ay 2011-12) and as per section 10A (1) , deduction shall be allowed from the total income for ten consecutive assessment years only and in assessee’s case it was ended up to for assessment year 2010-11. Hence, the deduction allowed u/s. 10A of Rs. 54,16,455/- by the AO is erroneous. This aspect was not verified by the AO in the order passed u/s. 143(3) dated 20.03.2014 and hence it is erroneous and which is prejudicial to the interest of :-5-: I.T.A. N0s. 1080 & 1801/Mds/2016 revenue” and hence the PCIT set aside the assessment order , with direction to the Assessing Officer to re-do the assessment afresh, after verifying the assessee’s claim u/s. 10A of Rs. 54,16,455/-, as per law, after giving an opportunity to the assessee .
Aggrieved against the above orders, the assessee filed these appeals.
Since, both the appeals are connected with the same assessee and against the orders passed u/s 263, they are heard together and disposed off in this order for convenience sake .
The AR pleaded that the orders passed u/s. 263 for the impugned assessment years are merely a change of opinion. The orders passed u/s. 143(3) for these assessment years do not in any way represent erroneous orders and the Ld. PCIT failed to appreciate that the Assessing Officer passed these orders, after considering the submissions made by the assessee and hence they should not have be interfered only because another view is possible. He also relied on the decision of the Supreme Court in the case of CIT & Anr. Vs Yokogawa India Ltd., 391 ITR 274 and this Tribunal decision in the case of ACIT Vs. M/s. Charon Tec. Pvt. Ltd., in for the assessment year 2005-06. Per contra, the DR supported the orders of the PCIT.
We have heard the rival contentions and gone through the respective assessment orders. It is clear from the assessment order of ay 2010-11 that the :-6-: I.T.A. N0s. 1080 & 1801/Mds/2016 AO has without any discussion on the impugned issues proceeded to determine the total income from the returned income at NIL and for the assessment order of ay 2011-12 , the AO has without any discussion on the impugned issues proceeded to determine the total income from the returned income at 13,92,488 and simply allowed loss brought down from earlier years at 28,04,985 without any discussion and then determined the total income at NIL. Time and again the Courts have held that the need for delivering a reasoned order is a requirement of law which has to be complied with in all appealable orders. Any order dehors of such reasons suffers from non-application of mind. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The “inscrutable face of a sphinx ” is ordinarily incongruous with a judicial or qusi-judicial performance. The Delhi High Court in the case of CIT vs Toyota Motor Corporation in 306 ITR 49 held that “There is no doubt that the proceedings before the AO are quasi judicial proceedings and a decision taken by the AO in this regard must be supported by reasons.
Otherwise, every order, such as the one passed by the AO, could result in a theoretical possibility that it may be revised by the CIT under Section 263 of the Act. Such a situation is clearly impermissible.
It is also necessary for the parties to know the reasons that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the AO should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law.
:-7-: I.T.A. N0s. 1080 & 1801/Mds/2016 We find that the order passed by the AO is cryptic, to say the least, and it cannot be sustained. The Tribunal cannot substitute its own reasoning to justify the order passed by the AO when the AO himself did not give any reason in the order passed by him.
Under the circumstances, we answer the question in the affirmative, in favour of the Revenue and against the assessee and remand the matter back to the file of the AO to decide the issue afresh in terms of the order passed by the CIT under Section 263 of the Act.”
5.1 The Supreme Court dismissed an appeal against the above order in M/S Toyota Motor Corporation vs Comm. Of Income Tax in Civil Appeal No. 5313 OF 2008 (Arising out of SLP(C) No.21772/2008 (CC No.11258/2008) on 25 th August, 2008, inter alia, holding that “It goes without saying that when the matter be taken up by the Assessing Officer on remand, it shall be his duty to take into account all the relevant aspects including the materials, if any, already placed by the assessee, and pass a reasoned order. The appeal is dismissed with the aforesaid observations.”
5.2 In this case also, the AO’s orders are cryptic. They are not self-contained orders giving the relevant facts and reasons for coming to the conclusion based on those facts and law. Thus, they do not reveal application of mind on the impugned issues and hence the PCIT has correctly invoked the jurisdiction u/s 263 in respect of both these years . Since the PCIT has directed the AO to re-do those assessments, afresh, after verifying the assessee’s claim as per law, after
:-8-: I.T.A. N0s. 1080 & 1801/Mds/2016 giving an opportunity to the assessee, we do not find any infirmity in those orders and hence the assessee’s above appeals are dismissed .
In the result, the assessee’s appeals for ays 2010-11 & 2011-12 are dismissed.
Order pronounced on Thursday, the 13th day of July, 2017 at Chennai.