 | Whether Section 8(4) of Represntation of the People Act 1951 is ultra vires the Constitution |
| Posted on 13 July 2013 by Diganta Paul | |
CourtSUPREME COURT OF INDIA BriefThese two writ petitions have been filed as Public Interest Litigations for mainly declaring sub-section (4) of Section 8 of the Representation of the People Act, 1951 as ultra vires the Constitution. CitationLok Prahari, through its General Secretary S.N. Shukla … Petitioner Versus Union of India & Ors. … Respondents Judgement IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT PETITION (CIVIL) NO. 490 OF 2005 Lily Thomas … Petitioner Versus Union of India & Ors. … Respondents WITH WRIT PETITION (CIVIL) NO. 231 OF 2005 Lok Prahari, through its General Secretary S.N. Shukla … Petitioner Versus Union of India & Ors. … Respondents JUDGEMENT A. K. PATNAIK, J. These two writ petitions have been filed as Public Interest Litigations for mainly declaring sub-section (4) of Section 8 of the Representation of the People Act, 1951 as ultra vires the Constitution. The background facts 2. The background facts relevant for appreciating the challenge to sub-section (4) of Section 8 of the Act are that the Constituent Assembly while drafting the Constitution intended to lay down some disqualifications for persons being chosen as, and for being, a member of either House of Parliament as well as a member of the Legislative Assembly or Legislative Council of the State. Accordingly, in the Constitution which was finally adopted by the Constituent Assembly, Article 102(1) laid down the disqualifications for membership of either House of Parliament and Article 191(1) laid down the disqualifications for membership of the Legislative Assembly or Legislative Council of the State. These two Articles are extracted hereinbelow: 102. Disqualifications for membership. –(1) A person shall be disqualified for being chosen as, and for being, a member of either House of Parliament— (a) if he holds any office of profit under the Government of India or the Government of any State, other than an office declared by Parliament by law not to disqualify its holder; (b) if he is of unsound mind and stands so declared by a competent court; (c) if he is an undischarged insolvent; (d) if he is not a citizen of India, or has voluntarily acquired the citizenship of a oreign State, or is under any acknowledgment of allegiance or adherence to a foreign State; (e) if he is so disqualified by or under any law made by Parliament. 191. Disqualifications for membership. – (1) A person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State— (a) if he holds any office of profit under the Government of India or the Government of any State specified in the First Schedule, other than an office declared by the Legislature of the State by law not to disqualify its holder; (b) if he is of unsound mind and stands so declared by a competent court; (c) if he is an undischarged insolvent; (d) if he is not a citizen of India, or has voluntarily acquired the citizenship of a foreign State, or is under any acknowledgment of allegiance or adherence to a foreign State; (e) if he is so disqualified by or under any law made by Parliament. [Explanation.—For the purposes of this clause], a person shall not be deemed to hold an office of profit under the Government of India or the Government of any State specified in the First Schedule by reason only that he is a Minister either for the Union or for such State. A reading of the aforesaid constitutional provisions will show that besides the disqualifications laid down in clauses (a), (b), (c) and (d), Parliament could lay down by law other disqualifications for membership of either House of Parliament or of Legislative Assembly or Legislative Council of the State. In exercise of this power conferred under Article 102(1)(e) and under Article 191(1)(e) of the Constitution, Parliament provided in Chapter-III of the Representation of the People Act, 1951 (for short 'the Act'), the disqualifications for membership of Parliament and State Legislatures. Sections 7 and 8 in Chapter-III of the Act, with which we are concerned in these writ petitions, are extracted hereinbelow: 7. Definitions.—In this Chapter,— (a) "appropriate Government" means in relation to any disqualification for being chosen as or for being a member of either House of Parliament, the Central Government, and in relation to any disqualification for being chosen as or for being a member of the Legislative Assembly or Legislative Council of a State, the State Government; (b) "disqualified" means disqualified for being chosen as, and for being, a member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State. 8. Disqualification on conviction for certain offences.— (1) A person convicted of an offence punishable under— (a) section 153A (offence of promoting enmity between different groups on ground of religion, race, place of birth, residence, language, etc., and doing acts prejudicial to maintenance of harmony) or section 171E (offence of bribery) or section 171F (offence of undue influence or personation at an election) or subsection (1) or sub-section (2) of section 376 or section 376A or section 376B or section 376C or section 376D (offences relating to rape) or section 498A (offence of cruelty towards a woman by husband or relative of a husband) or sub-section (2) or sub-section (3) of section 505 (offence of making statement creating or promoting enmity, hatred or ill-will between classes or offence relating to such statement in any place of worship or in any assembly engaged in the performance of religious worship or religious ceremonies) of the Indian Penal Code (45 of 1860); or (b) the Protection of Civil Rights Act, 1955 (22 of 1955) which provides for punishment for the preaching and practice of "untouchability", and for the enforcement of any disability arising therefrom; or (c) section 11 (offence of importing or exporting prohibited goods) of the Customs Act, 1962 (52 of 1962); or (d) sections 10 to 12 (offence of being a member of an association declared unlawful, offence relating to dealing with funds of an unlawful association or offence relating to contravention of an order made in respect of a notified place) of the Unlawful Activities (Prevention) Act, 1967 (37 of 1967); or (e) the Foreign Exchange (Regulation) Act, 1973 (46 of 1973); or (f) the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or (g) section 3 (offence of committing terrorist acts) or section 4 (offence of committing disruptive activities) of the Terrorist and Disruptive Activities (Prevention) Act, 1987 (28 of 1987); or (h) section 7 (offence of contravention of the provisions of sections 3 to 6) of the Religious Institutions (Prevention of Misuse) Act, 1988 (41 of 1988); or (i) section 125 (offence of promoting enmity between classes in connection with the election) or section 135 (offence of removal of ballot papers from polling stations) or section 135A (offence of booth capturing) of clause (a) of sub-section (2) of section 136 (offence of fraudulently defacing or fraudulently destroying any nomination paper) of this Act; [or] [(j) section 6 (offence of conversion of a place of worship) of the Places of Worship (Special Provisions) Act, 1991], [or] [(k) section 2 (offence of insulting the Indian National Flag or the Constitution of India) or section 3 (offence of preventing singing of National Anthem) of the Prevention of Insults to National Honour Act, 1971 (69 of 1971), [or] [(l) the Commission of Sati (Prevention) Act, 1987 (3 of 1988); or] [(m) the Prevention of Corruption Act, 1988 (49 of 1988); or] [(n) the Prevention of Terrorism Act, 2002 (15 of 2002),] [shall be disqualified, where the convicted person is sentenced to— (i) only fine, for a period of six years from the date of such conviction; (ii) imprisonment, from the date of such conviction and shall continue to be disqualified for a further period of six years since his release.] (2) A person convicted for the contravention of— (a) any law providing for the prevention of hoarding or profiteering; or (b) any law relating to the adulteration of food or drugs; or (c) any provisions of the Dowry Prohibition Act, 1961 (28 of 1961); and sentenced to imprisonment for not less than six months, shall be disqualified from the date of such conviction and shall continue to be disqualified for a further period of six years since his release.] (3) A person convicted of any offence and sentenced to imprisonment for not less than two years [other than any offence referred to in sub-section (1) or subsection (2)] shall be disqualified from the date of such conviction and shall continue to be disqualified for a further period of six years since his release.] [(4)] Notwithstanding anything [in subsection (1), sub-section (2) or sub-section (3)] a disqualification under either subsection shall not, in the case of a person who on the date of the conviction is a member of Parliament or the Legislature of a State, take effect until three months have elapsed from that date or, if within that period an appeal or application for revision is brought in respect of the conviction or the sentence, until that appeal or application is disposed of by the court. Explanation. —In this section, — (a) "law providing for the prevention of hoarding or profiteering" means any law, or any order, rule or notification having the force of law, providing for— (I) the regulation of production or manufacture of any essential commodity; (II) the control of price at which any essential commodity may be bought or sold; (III) the regulation of acquisition, possession, storage, transport, distribution, disposal, use or consumption of any essential commodity; (IV) the prohibition of the withholding from sale of any essential commodity ordinarily kept for sale; (b) "drug" has the meaning assigned to it in the Durgs and Cosmetics Act, 1940 (23 of 1940); (c) "essential commodity" has the meaning assigned to it in the Essential Commodity Act, 1955 (10 of 1955); (d) "food" has the meaning assigned to it in the Prevention of Food Adulteration Act, 1954 (37 of 1954). 3. Clause (b) of Section 7 of the Act quoted above defines the word "disqualified" to mean disqualified for being chosen as, and for being, a member of either House of Parliament or of the Legislative Assembly or of Legislative Council of State. Sub-sections (1), (2) and (3) of Section 8 of the Act provide that a person convicted of an offence mentioned in any of these sub-sections shall stand disqualified from the date of conviction and the disqualification was to continue for the specific period mentioned in the sub-section. However, subsection (4) of Section 8 of the Act provides that notwithstanding anything in sub-section (1), sub-section (2) or sub-section (3) in Section 8 of the Act, a disqualification under either subsection shall not, in the case of a person who on the date of the conviction is a member of Parliament or the Legislature of a State, take effect until three months have elapsed from that date or, if within that period an appeal or application for revision is brought in respect of the conviction or the sentence, until that appeal or application is disposed of by the court. It is this saving or protection provided in sub-section (4) of Section 8 of the Act for a member of Parliament or the Legislature of a State which is challenged in these writ petitions as ultra vires the Constitution. Contentions on behalf of the Petitioners 4. Mr. Fali S. Nariman, learned Senior Counsel appearing for the petitioner in Writ Petition No. 490 of 2005 and Mr. S.N. Shukla, the General Secretary of the Petitioner in Writ Petition No. 231 of 2005, submitted that the opening words of clause (1) of Articles 102 and 191 of the Constitution make it clear that the same disqualifications are provided for a person being chosen as a member of either House of Parliament, or the State Assembly or Legislative Council of the State and for a person being a member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State and therefore the disqualifications for a person to be elected as a member of either House of the Parliament or of the Legislative Assembly or Legislative Council of the State and for a person to continue as a member of either House of Parliament or of the Legislative Assembly or Legislative Council of the State cannot be different. In support of this submission, Mr. Nariman cited a Constitution Bench judgment of this Court in Election Commission, India v. Saka Venkata Rao (AIR 1953 SC 210) in which it has been held that Article 191 lays down the same set of disqualifications for election as well as for continuing as a member. Mr. Nariman and Mr. Shukla submitted that sub-section (4) of Section 8 of the Act, insofar as it provides that the disqualification under subsections (1), (2) and (3) of Section 8 for being elected as a member of either House of Parliament or the Legislative Assembly or Legislative Council of State shall not take effect in the case of a person who is already a member of Parliament or Legislature of a State on the date of the conviction if he files an appeal or a revision in respect of the conviction or the sentence within three months till the appeal or revision is disposed of by the Court, is in contravention of the provisions of clause (1) of Articles 102 and 191 of the Constitution. 5. Mr. Shukla referred to the debates of the Constituent Assembly on Article 83 of the Draft Constitution, which corresponds to Article 102 of the Constitution. In these debates, Mr. Shibban Lal Saksena, a member of the Constituent Assembly moved an Amendment No. 1590 on 19.05.1949 to provide that when a person who, by virtue of conviction becomes disqualified and is on the date of disqualification a member of Parliament, his seat shall, notwithstanding anything in this Article, not become vacant by reason of the disqualification until three months have elapsed from the date thereof or, if within those three months an appeal or petition for revision is brought in respect of the conviction or the sentence, until that appeal or petition is disposed of, but during any period during which his membership is preserved by this provision, he shall not sit or vote. Mr. Shukla submitted that this amendment to Article 83 of the Draft Constitution was not adopted in the Constituent Assembly. Instead, in subclause (e) of clause (1) of Articles 102 and 191 of the Constitution, it was provided that Parliament may make a law providing disqualifications besides those mentioned in sub-clauses (a), (b), (c) and (d) for a person being chosen as, and for being, a member of either House of Parliament and of the Legislative Assembly or Legislative Council of a State. Mr. Shukla submitted that despite the fact that a provision similar to sub-section (4) of Section 8 of the Act was not incorporated in the Constitution by the Constituent Assembly, Parliament has enacted sub-section (4) of Section 8 of the Act. 6. According to Mr. Nariman and Mr. Shukla, in the absence of a provision in Articles 102 and 191 of the Constitution conferring power on Parliament to make a provision protecting sitting members of either House of Parliament or the Legislative Assembly or the Legislative Council of a State, from the disqualifications it lays down for a person being chosen as a member of Parliament or a State Legislature, Parliament lacks legislative powers to enact sub-section (4) of Section 8 of the Act and sub-section (4) of Section 8 of the Act is therefore ultra vires the Constitution. 7. Mr. Nariman next submitted that the legal basis of sub-section (4) of Section 8 of the Act is based on an earlier judicial view in the judgment of a Division Bench of this Court in Shri Manni Lal v. Shri Parmal Lal and Others [(1970) 2 SCC 462] that when a conviction is set aside by an appellate order of acquittal, the acquittal takes effect retrospectively and the conviction and the sentence are deemed to be set aside from the date they are recorded. He submitted that in B.R. Kapur v. State of T.N. and Another [(2001) 7 SCC 231] a Constitution Bench of this Court reversed the aforesaid judicial view and held that conviction, and the sentence it carries, operate against the accused in all their rigour until set aside in appeal, and a disqualification that attaches to the conviction and sentence applies as well. He submitted that this later view has been reiterated by a Constitution Bench of this Court in K. Prabhakaran v. P. Jayarajan etc. [(2005) 1 SCC 754]. Mr. Nariman argued that thus as soon as a person is convicted 15 of any of the offences mentioned in sub-sections (1), (2) and (3) of Section 8 of the Act, he becomes disqualified from continuing as a member of Parliament or of a State Legislature notwithstanding the fact that he has filed an appeal or a revision against the conviction and there is no legal basis for providing in sub-section (4) of Section 8 of the Act that his disqualification will not take effect if he files an appeal or revision within three months against the order of conviction. He submitted that in case a sitting member of Parliament or State Legislature feels aggrieved by the conviction and wants to continue as a member notwithstanding the conviction, his remedy is to move the Appellate Court for stay of the order of conviction. He cited the decision in Navjot Singh Sidhu v. State of Punjab and Another ([2007) 2 SCC 574] in which this Court has clarified that under sub-section (1) of Section 389 of the Code of Criminal Procedure, 1973 power has been conferred on the Appellate Court not only to suspend the execution of the sentence and to grant bail, but also to suspend the operation of the order appealed against, which means the order of conviction. He submitted that in appropriate cases, the Appellate Court may stay the order of conviction of a sitting member of Parliament or State Legislature and allow him to continue as a member notwithstanding the conviction by the trial court, but a blanket provision like sub-section (4) of Section 8 of the Act cannot be made to keep the disqualification pursuant to conviction in abeyance till the appeal or revision is decided by the Appellate or Revisional Court. 8. Mr. Nariman and Mr. Shukla submitted that in K. Prabhakaran v. P. Jayarajan etc. (supra) the validity of subsection (4) of Section 8 of the Act was not under challenge and only a reference was made to the Constitution Bench of this Court on certain questions which arose in civil appeals against judgments delivered by the High Court in election cases under the Act. They submitted that the Constitution Bench of this Court framed three questions with regard to disqualification of a candidate under Section 8 of the Act and while answering question no.3, the Constitution Bench indicated reasons which seem to have persuaded Parliament to classify sitting members of the House into a separate category and to provide in sub-section (4) of Section 8 of the Act that if such sitting members file appeal or revision against the conviction within three months, then the disqualification on account of their conviction will not take effect until the appeal or revision is decided by the appropriate court. They submitted that the opinion expressed by the Constitution Bench of this Court in K. Prabhakaran v. P. Jayarajan etc. (supra) regarding the purpose for which Parliament classified sitting members of Parliament and State Legislatures into a separate category and protected them from the disqualifications by the saving provision in sub-section (4) of Section 8 of the Act are obiter dicta and are not binding ratio on the issue of the validity of sub-section (4) of Section 8 of the Act. 9. Mr. Nariman and Mr. Shukla submitted that subsection (4) of Section 8 of the Act, in so far as it does not provide a rationale for making an exception in the case of members of Parliament or a Legislature of a State is arbitrary and discriminatory and is violative of Article 14 of the Constitution. They submitted that persons to be elected as members of Parliament or a State Legislature stand on the same footing as sitting members of Parliament and State Legislatures so far as disqualifications are concerned and sitting members of Parliament and State Legislatures cannot enjoy the special privilege of continuing as members even though they are convicted of the offences mentioned in subsections (1), (2) and (3) of Section 8 of the Act. Contentions of behalf of the respondents 10. Mr. Siddharth Luthra, learned ASG appearing for the Union of India in Writ Petition (C) 231 of 2005, submitted that the validity of sub-section (4) of Section 8 of the Act has been upheld by the Constitution Bench of this Court in K. Prabhakaran v. P. Jayarajan etc. (supra). He submitted that while answering question no.3, the Constitution Bench has held in Prabhakaran's case that the purpose of carving out a saving in sub-section (4) of Section 8 of the Act is not to confer an advantage on sitting members of Parliament or of a State Legislature but to protect the House. He submitted that in para 58 of the judgment the Constitution Bench has explained that if a member of the House was debarred from sitting in the House and participating in the proceedings, no sooner the conviction was pronounced followed by sentence of imprisonment, entailing forfeiture of his membership, then two consequences would follow: first, the strength of membership of the House shall stand reduced, so also the strength of the political party to which such convicted member may belong and the Government in power may be surviving on a razor-edge thin majority where each member counts significantly and disqualification of even one member may have a deleterious effect on the functioning of the Government; second, a bye-election shall have to be held which exercise may prove to be futile, also resulting in complications in the event of the convicted member being acquitted by a superior criminal court. Mr. Luthra submitted that for the aforesaid two reasons, Parliament has classified the sitting members of Parliament or a State Legislature in a separate category and provided in subsection (4) of Section 8 of the Act that if on the date of incurring disqualification, a person is a member of Parliament or of a State Legislature, such disqualification shall not take effect for a period of three months from the date of such disqualification to enable the sitting member to file appeal or revision challenging his conviction, and sentence and if such an appeal or revision is filed, then applicability of the disqualification shall stand deferred until such appeal or revision is disposed of by the appropriate Court. 11. Mr. Luthra next submitted that the reality of the Indian judicial system is that acquittals in the levels of the Appellate Court such as the High Court are very high and it is for this reason that Parliament has provided in subsection (4) of Section 8 of the Act that disqualification pursuant to conviction or sentence in the case of sitting members should stand deferred till the appeal or revision is decided by the Appellate or the Revisional Court. He submitted that the power to legislate on disqualification of members of Parliament and the State Legislature conferred on Parliament carries with it the incidental power to say when the disqualification will take effect. He submitted that the source of legislative power for enacting sub-section (4) of Section 8 of the Act is, therefore, very much there in Articles 101(1)(e) and 191(1)(e) of the Constitution and if not in these articles of the Constitution, in Article 246(1) read with Entry 97 of List I of the Seventh Schedule of the Constitution and Article 248 of the Constitution, which confer powers on Parliament to legislate on any matter not enumerated in List II and List III of the Seventh Schedule of the Constitution. 12. Mr. Paras Kuhad, learned ASG, appearing for the Union of India in Writ Petition (C) No.490 of 2005 also relied on the judgment of the Constitution Bench of this Court in K. Prabhakaran v. P. Jayarajan etc. (supra) on the validity of sub-section (4) of Section 8 of the Act and the reasoning given in the answer to question no.3 in the aforesaid judgment of this Court. He further submitted that subsection (4) of Section 8 of the Act does not lay down disqualifications for members of Parliament and the State Legislatures different from the disqualifications laid down for persons to be chosen as members of Parliament and the State Legislatures in sub-sections (1), (2) and (3) of Section 8 of the Act. He submitted that sub-section (4) of Section 8 of the Act merely provides that the very same disqualifications laid down in sub-sections (1), (2) and (3) of Section 8 of the Act shall in the case of sitting members of Parliament and State Legislatures take effect only after the appeal or revision is disposed of by the Appellate or Revisional Court as the case may be if an appeal or revision is filed against the conviction. He submitted that Parliament has power under Article 102(1)(e) of the Constitution and Article 191(1)(e) of the Constitution to prescribe when exactly the disqualification will become effective in the case of sitting members of Parliament or the State Legislature with a view to protect the House. He also referred to the provisions of Articles 101(3)(a) and 190 (3)(a) of the Constitution to argue that a member of Parliament or a State Legislature will vacate a seat only when he becomes subject to any disqualification mentioned in clause (1) of Article 102 or clause (1) of Article 191, as the case may be, and this will happen only after a decision is taken by the President or the Governor that the member has become disqualified in accordance with the mechanism provided in Article 103 or Article 192 of the Constitution. 13. Mr. Kuhad further submitted that Mr. Nariman is not right in his submission that the remedy of a sitting member who is convicted or sentenced and gets disqualified under sub-sections (1), (2) or (3) of Section 8 of the Act is to move the Appellate Court under Section 389 of the Code of Criminal Procedure for stay of his conviction. He submitted that the Appellate Court does not have any power under Section 389, Cr.P.C. to stay the disqualification which would take effect from the date of conviction and therefore a safeguard had to be provided in sub-section (4) of Section 8 of the Act that the disqualification, despite the conviction or sentence, will not have effect until the appeal or revision is decided by the Appellate or the Revisional Court. He submitted that there is, therefore, a rationale for enacting sub-section (4) of Section 8 of the Act. |
| | Order passed based on notice under section 143(2) beyond stipulated period is bad in law |
| Posted on 13 July 2013 by Diganta Paul | |||||||||
CourtINCOME TAX APPELLATE TRIBUNAL BriefThat CIT(A) has erred in law in not appreciating that notice issued and served under section 143(2) of the Income Tax Act is beyond the stipulated period and order passed in pursuance to such notice is without jurisdiction and bad in law. CitationBhutani Builders Pvt. Ltd.,(Now known as Aditi Civil Engineering Pvt. Ltd.), E-49, 202, 2nd Floor, Laxmi Nagar, Delhi-110092 (AAACB8056C) (Appellant) vs Income Tax Officer,Ward 2(4),New Delhi. (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `A' NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.No.5555/Del/2012 Assessment Year: 2006-07 Bhutani Builders Pvt. Ltd., (Now known as Aditi Civil Engineering Pvt. Ltd.), E-49, 202, 2nd Floor, Laxmi Nagar, Delhi-110092 (AAACB8056C) (Appellant) vs Income Tax Officer, Ward 2(4), New Delhi. (Respondent) Appellant by: S/Shri Salil Kapoor, Vikas Jain Respondent by: Shri Bhim Singh, Sr.DR O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal by the assessee has been directed against the order of Commissioner of Income Tax(A)-V, New Delhi dated 22.10.2010 in Appeal No.24/09-10 for AY 2006-07. 2. The grounds raised in this appeal read as under:- "1. That Assessment order passed by the AO and also the order passed by CIT (A) are illegal, bad in law, without jurisdiction and against the principles of natural justice. 2. That CIT(A) has erred in law in not appreciating that notice issued and served under section 143(2) of the Income Tax Act is beyond the stipulated period and order passed in pursuance to such notice is without jurisdiction and bad in law. 3. That the additions made are illegal, bad in law and the CIT(A) has erred in law and also on facts in upholding the same. 4. That AO has, in view of the facts and circumstances of the case, erred in law and on facts in adding the investment of Rs. 1,06,20,000/- to the income of the assessee and CIT(A) has erred in not deleting the same. 5. That AO has, in view of the facts and circumstances of the case, erred in law and on facts in disallowing the l/5th of expenses (Misc/other) of Rs. 37,60,148/- and making an addition of Rs. 7,52,029/- and CIT(A) has erred in no deleting the same. 6. That AO has erred in law and on facts in making and CIT(A) in upholding addition of Rs. 1,06,20,000/- on account of unverified investment and of Rs. 7,52,029/- on account of disallowance of Misc. expenses without bringing any adverse material on record against the assessee. 7. That CIT(A) has erred in law and on facts in not deciding the appeal on merits and dismissing the same for non prosecution and the said order is against the principles of law and provisions of Income Tax Act, 1961. 8. That the interest u/s 234B, 234C and 234D have been wrongly and illegally charged and are liable to be deleted. 9. That the material available on record have not been properly considered and judicially interpreted and the same do not justify the addition made. 10. That the addition / disallowance made are based on mere surmises and conjunctures and the same cannot be justified by any material on record and the same are highly excessive. 11. The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing." 3. Briefly stated the facts giving rise to this appeal are that the case was selected for scrutiny and notices u/s 143 and 142(1) of the Income Tax Act, 1961 (for short the Act) were served on the assessee. Subsequently, another notice along with questionnaire was issued on 31.1.2008 but the same was not complied by the assessee. The Assessing Officer observed that since no compliance was made by the assessee in response to the notices issued to him, therefore, he had no option but to complete the assessment based on material available on record and the Assessing Officer finalized assessment u/s 144 of the Act by making an addition of Rs.1,06,20,000 on account of investment made from undisclosed sources and another addition of Rs.7,52,029 on account of disallowance of 1/5th of amount claimed by the assessee under the head "other/miscellaneous expenses" amounting to Rs.37,60,148 against the sales of Rs.44,65,370. The assessment was finalized on the net taxable income of Rs.1,11,70,352 as against returned negative income (loss) of Rs.2,01,677/-. 4. Being aggrieved by the above assessment order, the assessee preferred an appeal before the Commissioner of Income Tax(A) which was also dismissed by the impugned order. The Commissioner of Income Tax(A) dismissed the appeal for non-prosecution and also on merits by observing that the appellant assessee has not filed any documentary evidence regarding his claim on the grounds raised before him. The Commissioner of Income Tax(A) placed his reliance on the judgment of Hon'ble Supreme Court of India in the case of Commissioner of Income Tax vs B.N. Bhattachargee and another, reported in 118 ITR 461 (SC) and the judgment of ITAT Delhi in the case of Commissioner of Income Tax vs Multiplan India (P) Ltd. 38 ITD 320 (Delhi) and dismissed the appeal for non-prosecution and also on merits by observing that there was non-availability of any submission along with evidence in support of the ground taken by the assessee. 5. Ld. counsel for the assessee submitted that the order of the Commissioner of Income Tax(A) dismissing the appeal on the ground of non-prosecution is entirely erroneous and misconceived. Ld. counsel argued that the Commissioner of Income Tax(A) dismissed the appeal for nonprosecution and also on merits despite the fact that it was obligatory for the Commissioner of Income Tax(A) to pass a speaking order discussing the merits of various ground raised by the assessee in the appeals. Ld. Counsel for the assessee submitted that Shri R.S. Negi, Director of the assessee company attended the proceedings up to hearing on 23.02.2010 but for subsequent dates of hearing, the assessee did not receive any notices and as per principles of natural justice, the appeal of the assessee could not be decided fairly without affording opportunity to the assessee of being heard. Counsel for the assessee placed his reliance on the judgment of ITAT, Ahmedabad 'C' Bench in the case of Gujarat Themis Biosyn Ltd. Vs Joint Commissioner of Income Tax (2000) 74 ITD 339 (AHD) and pointed out para 2 and 3 of the order which read as under: "2. Shri Mukesh Patel, the learned counsel for the assessee, submitted that the order of the CIT(A) dismissing the appeal on the ground of non-prosecution is entirely erroneous and misconceived. Learned counsel argued that it is obligatory for the CIT(A) to pass a speaking order discussing the merits of the various claims raised by the assessee in the appeal. Learned counsel further submitted that appeals filed for the earlier assessment years, namely, for asst. yrs. 1991-92, 1992-93, 1993-94 and 1994-95, which were filed prior to the filing of the present appeal, were pending before the .CIT(A) and have, in fact, not even been taken up for disposal. In the circumstances, taking up the appeal, for asst. yr. 1995-96, which included common points involved in the earlier years was not proper and appropriate. The learned counsel very fairly conceded that there has been non-compliance with the notices of hearing on 26th Aug., 1998 and 10th Sept., 1998. However, it is pointed out that the adjournment application duly moved by the assessee on 12th Oct., 1998, requesting for adjournment on valid grounds has been rejected by the CIT(A) without proper appreciation of the reasons which necessitated the request for adjournment by the assessee. Learned counsel strongly pleaded that the impugned order of the CIT(A) may be set aside in the interest of justice and equity. Learned Departmental Representative on the other hand, .placed reliance on the order of the CIT(A). 3. We have carefully considered the facts and circumstances of the case as well as submissions made before us. The impugned order passed by the CIT(A) is clearly violative of the express provisions of s. 250(6), which provides that the appellate orders of the CIT(A) are to state the points arising in the appeal, the decision of the authority thereon and the reasons for such decision. The underlying rationale of the provision is that such orders are subject to further appeal to the Tribunal. Speaking order would obviously enable a party to know precise points decided in his favour or against him. Absence of the formulation of the point for decision for want of clarity in a decision undoubtedly puts a party in quandary. Sec. 250(6) expressly embodies the principles of natural justice and such a provision is clearly mandatory in nature. The impugned order passed by the CIT(A) in violation of the provisions of s. 250(6) cannot, therefore, be sustained. Regarding the decisions of the Delhi Bench of the Tribunal in Multiplan India Ltd. (supra) cited by the learned CIT(A), we find that the said decision is clearly distinguishable. Sec 254 referring to the orders of the Tribunal confers plenary jurisdiction on the Tribunal in the matter of passing orders under s. 254(1). There is no such express stipulation in s. 254 as contained under the provisions of s. 250(6) relating to the orders of first appellate authority. Therefore, reliance placed by the CIT(A) on Multiplan India Ltd. (supra) is entirely misplaced. Similarly, the case of Late Tukojirao Holkar (supra) cited by the learned CIT(A) is distinguishable and does not support the view taken by the CIT(A)." 6. Replying to the above, ld. DR, on the other hand, placed his reliance on the impugned order of the Commissioner of Income Tax(A) and submitted that Shri R.S. Negi, Director of the company attended proceedings on three occasions in response to the notices issued to the assessee and subsequent notices were also issued on the same address, therefore, it may be presumed that the assessee deliberately did not comply with the notice issued to him by the Commissioner of Income Tax(A), accordingly, Commissioner of Income Tax(A) rightly dismissed the appeal for nonprosecution and also on merits in absence of supporting submissions and evidence of the assessee. 7. A careful consideration of the facts and circumstances of the case as well as rival submissions made before us and on perusal of the impugned order passed by the Commissioner of Income Tax(A) clearly shows violation of the express provisions of section 250(6) of the Act which provides that the appellate authority is bound to state the points and grounds arising in the appeal and the decision thereon with the reasons for such decision. The underlying rationale of the said provision is that such orders are subject to further appeal to the Tribunal, therefore speaking and well reasoned order would obviously enable a party to know the precise points decided in his favour or against him. From the impugned order, we observe that the Commissioner of Income Tax(A) did not adhere to the letter and spirit of the statutory provisions and dismissed the appeal for nonprosecution and also on merits by holding that non-availability of any submission and evidence in support to the ground raised by the assessee in the appeal. In view of above, we are of the opinion that the absence of the formulation of the points for decision for want of clarity in a decision undoubtedly puts the party in dilemma. From Section 250(6) of the Act, it is clear that this statutory provision expressly embodies the principle of natural justice and such a provision is also mandatory in nature. The impugned order passed by the Commissioner of Income Tax(A) in violation of the provisions of Section 250(6) of the Act cannot be sustained. Regarding the decision of Hon'ble Supreme Court in the case of Commissioner of Income Tax vs B.N. Bhattachargee and another (supra) and the judgment of ITAT Delhi in the case of Commissioner of Income Tax vs Multiplan India (P) Ltd. (supra), we find that the benefit of the ratio of the said decision is not available to the revenue as said decisions are clearly distinguishable from the facts and circumstances of the present case since section 254 of the Act referring to the order of the Tribunal confers plenary jurisdiction on the Tribunal in the matter of passing orders u/s 254(1) of the Act and there is n such express stipulation in section 254 as contained under the provisions of section 250(6) relating to the orders of first appellate authority i.e. Commissioner of Income Tax(A). Therefore, we respectfully hold that reliance placed by the CIT(A) on the legal propositions is entirely misplaced and not acceptable as per scheme of the statutory provisions of the Act. 8. After foregoing discussion and for the reasons as indicated above, we find it appropriate to set aside the impugned order of the Commissioner of Income Tax(A) and we set aside the same and direct the Commissioner of Income Tax(A) to dispose of the appeal of the assessee afresh after allowing proper opportunity of hearing in accordance with law and well-accepted procedure of the Act. The appeal of the assessee is decided in the manner as indicated above and may be treated as allowed for statistical purposes. Order pronounced in the open court on 3.5.2013. Sd/- Sd/- (SHAMIM YAHYA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 3rd MAY 2013 'GS' Copy forwarded to:- 1. Appellant 2. Respondent 3. Commissioner of Income Tax (A) 4. CIT 5. DR True copy By Order Asstt.Registrar
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| | TDS and service tax deducted and paid and properly incorporated in accounts is enough to prove the transaction |
| Posted on 15 July 2013 by Diganta Paul | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefOn the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance of commission paid amounting to Rs. 16,80,000/-. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition made u/s 69A of the I.T. Act 1961 amounting to Rs. 7,81,585/- The appellant craves the right to add or alter any ground of appeal." Brief facts are: The assessee is engaged as agent of various companies for selling of industrial boilers. Regular books of account are maintained as required u/s 44AB which are duly audited and supported by audit report in form no. 3CD of the Act. Apropos first ground about disallowance of commission paid amounting to Rs. 16,80,000/, brief facts are: The assessee employed following sub-agents for utilizing their services in her business activity of earning commission from sale of boilers: CitationDy. CIT, Circle-26(1), New Delhi. (Appellant) Vs. Smt. Jaspreet Kaur, 212-A, Jyoti Shikhar, District Centre Janakpuri, New Delhi. (Respondent) PAN: AAIPK 2754 K C.O. No. 407 /Del/ 2012 (In ITA no. 4765/Del/2012) Assessment Year: 2009-20 Smt. Jaspreet Kaur, 212-A, Jyoti Shikhar, District Centre Janakpuri, New Delhi. (Appellant) Vs. Dy. CIT, Circle-26(1),New Delhi.(Respondent) Revenue By: Ms. Shumana Sen Sr. DR Assessee By: Shri Rajneesh CA Judgement IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH "D" NEW DELHI) BEFORE SHRI R. P. TOLANI: JUDICIAL MEMBER And SHRI J.S. REDDY: ACCOUNTANT MEMBER ITA No. 4765 /Del/ 2012 Assessment Year: 2009-20 Dy. CIT, Circle-26(1), New Delhi. (Appellant) Vs. Smt. Jaspreet Kaur, 212-A, Jyoti Shikhar, District Centre Janakpuri, New Delhi. (Respondent) PAN: AAIPK 2754 K C.O. No. 407 /Del/ 2012 (In ITA no. 4765/Del/2012) Assessment Year: 2009-20 Smt. Jaspreet Kaur, 212-A, Jyoti Shikhar, District Centre Janakpuri, New Delhi. (Appellant) Vs. Dy. CIT, Circle-26(1), New Delhi. (Respondent) Revenue By: Ms. Shumana Sen Sr. DR Assessee By: Shri Rajneesh CA ORDER PER R. P. TOLANI, J.M: These are Revenue's appeal and assessee's cross objection against CIT(A)-XXIV, New Delhi's order dated 21-6-2012 relating to assessment year 2009-10. 2. Ld. Counsel for the assessee at the out set contends that the cross objection filed by the assessee is only in support of the order of the CIT(A) and does not raise any fresh issue. 3. Ld. DR is heard. 4. Since the cross-objection is only in support of the order of CIT(A), the same is infructuous and dismissed accordingly. 5. The Revenue's appeal raises following grounds: "(i) On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance of commission paid amounting to Rs. 16,80,000/-. (ii) On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition made u/s 69A of the I.T. Act 1961 amounting to Rs. 7,81,585/- The appellant craves the right to add or alter any ground of appeal." 6. Brief facts are: The assessee is engaged as agent of various companies for selling of industrial boilers. Regular books of account are maintained as required u/s 44AB which are duly audited and supported by audit report in form no. 3CD of the Act. 7. Apropos first ground about disallowance of commission paid amounting to Rs. 16,80,000/, brief facts are: The assessee employed following sub-agents for utilizing their services in her business activity of earning commission from sale of boilers: 1) Shri Ranjit Singh 2) Shri Rajesh Kumar; 3) Shri Kirtipal Singh. 8. Assessing officer asked the assessee to provide complete details of commissions paid, bank statements of the persons concerned, their income tax returns etc. The assessee filed confirmations, details of commission payments and acknowledgement of ITRs. The confirmation of Shri Parvinder Pal Singh was awaited which was filed by the assessee on 20-12- 2011. According to assessing officer, the compliance did not contain complete details of such recipients and though the agreements and kind of services to be provided by such parties were submitted, the nature of services rendered not explained. Unsatisfied, assessing officer held the commission payment to these persons amounting to Rs. 16,80,000/- to be bogus and disallowed the same. 9. Aggrieved assessee preferred first appeal. CIT(A) deleted the addition by following observations: "4.2. I have carefully perused the evidences placed on record by the appellant and the submissions made by her. I have also carefully gone through the logic of the AO as evident from the assessment order. The facts are that the appellant has earned commission income to the tune of Rs. 60 lacs and has paid commission to the tune of Rs.16,80,0001-. She has given the complete names and addresses of all the persons to whom she has paid commission. She has also produced copies of ITR acknowledgements and copies of bank statements of all the persons to whom she has paid commission. These evidences cannot be brushed aside by the AO simply on the basis of suspicion, conjectures and surmises. The AO agrees in the assessment order that all requisite entries have been made in the books of accounts of the appellant. He also agrees that payments have been made by cheque and TDS has been duly d. ducted wherever such payments have been made. However, he makes a remark that mere entries in the books of accounts all' not determinative of nature of transactions and it is the intent and conduct of the parties which is more important. The AO has casted a suspicion on the genuineness of these transactions hut, he has not brought on ecord even a shred of evidence to prove his allegations. He has not carried out any investigations by issuing summons u/s. 131 to the parties to whom commission have been paid by the appellant. He has not cared to cross-verify the receipt of commission by the five recipients from their respective AO's. The AO has merely convinced himself that all the payments of commission made by the appellant are bogus. Such unsubstantiated additions do not withstand the test of judicial scrutiny, particularly when confirmations, ITR acknowledgements and copies of bank statements of the parties concerned are available for examination and the AO has himself agreed that the commissions have been paid through banking channels and TDS has been duly deducted on each such payment. If at all, the AO had any suspicion that the apparent was not real, he should have further investigated and brought on record evidences to the contrary. He has done nothing of the sort and has merely made the additions on the basis of pure suspicion. Reliance is placed in the order of Hon'ble Punjab and Haryana High Court in the case of CI'I' Vs. Septu India Pvt. Ltd. (2008) 305 ITR 295 (P&H). wherein the Hon'ble High Court upheld the decision of Hon'ble ITAT, Bench D, New Delhi in the case of the respondent for A.Y. 1997-98. Aggrieved, Revenue is before us. 10. Ld. DR contends that filing of income-tax returns of the recipients does not suffice the requirement as merely book entries do not prove the rendering of service and genuineness of payment for the same. With income tax returns, no other statements have been filed. Similarly, the actual nature of services rendered by sub agents have not been explained by the assessee. As actual rendering of services and their nature have not been established by the assessee, the burden cast on her to demonstrate the genuineness and business expediency of the expenditure has not been established. Therefore, expenditure was rightly disallowed by assessing officer. Besides, CIT(A) has relied on such documents which had not been furnished before assessing officer. 11. Apropos ground no. 2, CIT(A) deleted the addition by following observations: 4.4 In the second ground of appeal the appellant has impugned the addition of Rs.7,81,585/- on the grounds of difference in gross earnings vis-a-vis the amount appearing in AIR. The appellant submitted that the difference was clearly explained in our submissions as amount for debit note from the client on account of service tax. The appellant has reconciled the full amount and has submitted that service tax paid amounted to Rs.6A9,022/- and as proof of the same, copy of service tax return filed and challans for the amounts paid have been submitted and placed on record by the appellant As regards the balance amount of Rs. 1,32,563/-, the appellant submitted this is on account of income booked in the next year as per the books of accounts the appellant. while, the principals have deducted TDS on 31.03.2009 by making provisional entries. The appellant has averred that the amount of Rs. 1,32,563/- stands included in the next year's audited books of accounts and hence, no revenue has been evaded for tax. I have carefully perused the submissions made by the appellant, who has stated that copies of service tax returns were duly filed vide para 9 of our letter dated 18.08.2011, which has not been taken into consideration by the Id. AO before making this addition. I have also gone through carefully the assessment order passed by the AO, wherein he has stated that no proof of service tax paid was filed by the assessee during the course of the assessment proceedings. This is not totally correct as copy of service tax returns had already been placed on record by the appellant and the AO could have called for copies of the challans specifically. Therefore, finding merit in the submissions made by the appellant, the addition of Rs.7,81,585/- to the income of the appellant is hereby deleted." 12. Apropos ground 2, ld. DR contends that the difference in service tax payment was not explained by the assessee properly. Therefore, assessing officer has rightly made the disallowance. Ld. DR relied on the judgment of Hon'ble Delhi High Court in the case of Schneider Electric India Ltd. Vs. CIT (2008) 171 Taxman 177 (Del.). 13. Ld. Counsel for the assessee, on the other hand, vehemently argues that all the relevant details and submissions were filed before the assessing officer. The fact that assessee earns commission income from business of selling the industrial boiler has not been disputed. For carrying out such business activity sub agents are required in field, whose services were actually utilized. Commission is paid by way of duly executed agreement which has been referred to the AO. The assessing officer has disallowed the commission payment by over insistence of physically producing these parties and inferred that actual rendering of services is doubtful. Ld. Counsel contends that the payment of commission, based on agreement, is made by cheques and proper TDS is deducted thereon. Similarly, the service tax on the commission received by the assessee is deducted by her principals and the service tax is paid on the commission paid by her to sub agents. All these details were incorporated in the books of a/c which are duly audited. The necessary confirmations are filed, therefore, the assessee discharged its burden on both issues in a reasonable manner by enough evidence. Merely because the assessee could not produce the recipients in person cannot be held against the assessee, overlooking and brushing aside the overwhelming evidence filed in support of payment of commission as a business expenditure incurred during the course of business. 14. Apropos ground no. 2 ld. Counsel contends that the service tax difference was clearly explained, reconciled along with the copy of service tax return and challan which is duly considered by CIT(A) in his detailed order, which should be upheld. 15. We have considered rival contentions and gone through the relevant material available on record. Revenue has not raised any ground for admission of additional evidence u/s 46A. Therefore, we are unable to accede to the plea of the ld. DR in this regard. 16. Apropos ground no. 1, the assessee is regularly assessed to tax, maintaining audited books of account. The commission paid to sub agents is through banking channels, supported by agreement, TDS thereon is deducted and service tax is also paid. In our considered view, these facts reasonably discharge the burden of the assessee for establishing the genuineness and business expediency of the expenses. Merely because the assessee could not produce subagents physically cannot be held against her. In view thereof, we see no infirmity in the order of CIT(A), deleting the disallowance. His order on this is issue is upheld. Ground is dismissed. 17. Apropos ground no. 2 also the alleged difference in service tax figures has been duly explained by the assessee which has been described in extensive details by the CIT(A). Service tax is statutory payment and claimed to be paid within the year and difference, if any, has been reconciled by assessee and factually verified by the CIT(A). We see no reason to interfere with the order of CIT(A) on this aspect, accordingly, the same is upheld. 18. In the result, revenue's appeal a well as assessee's cross-objection are dismissed. Order pronounced in open court on 17 /05/ 2013. Sd/- Sd/- (J.S. REDDY) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 17th May, 2013 *MP* Copy forwarded to 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(a) 5. DR, ITAT | |
| Tags :- tds service deducted paid properly incorporated accounts enough prove transaction |
| | When a quasi Judicial Authority like the DRP deals with lis u/s 144C of the Act then it is obligatory |
| Posted on 16 July 2013 by Diganta Paul | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefA perusal of the record shows that the assessee furnished a return electronically on 30.11.2006 by declaring NIL income and claimed a refund of Rs.41.04.516/- out of TDS and self assessment tax. On the basis of selection of case under scrutiny notice u/s 143(2) was issued, the record shows an information through AIR was also received that the company was registered with the Sales Tax Department with a turn over of Rs.7,82,93,491/-. Another information showed that the company had paid Rs.24,89,799/- to Galaxy Auto Pvt. Ltd. and Prime Honda, Delhi for purchase of cars. On the basis of audit report furnished by the assessee, the matter was referred to the TPO for determining the Arm's Length Price of the transaction. The TPO vide his order dated 30.09.2009 determined a sum of Rs.2,84,01,593/- being the difference between the arm's length margin. Accordingly a show-cause notice was issued why an addition, of the said amount not to be made to the assessee's income. The assessee moved the alternative dispute resolution panel against the additions proposed by the TPO. The objections of the assessee were not allowed; consequently the impugned assessment order was passed. Aggrieved by this, the assessee is in appeal before the Tribunal CitationDorling Kindersley India Pvt. Ltd., 14, Local Shopping Centre, Panchsheel Park, New Delhi-110017.PAN-AABCD1360J (APPELLANT) Vs ITO, Ward-10(4),New Delhi. (RESPONDENT) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: "I" NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER (I.T.A .No.-5642/Del/2010) (ASSESSMENT YEAR-2006-07) Dorling Kindersley India Pvt. Ltd., 14, Local Shopping Centre, Panchsheel Park, New Delhi-110017. PAN-AABCD1360J (APPELLANT) Vs ITO, Ward-10(4), New Delhi. (RESPONDENT) Appellant by: Sh. Tarangdeep, CA Respondent by: Sh. Peeyush Jain, CIT DR TP ORDER PER DIVA SINGH, JM This is an appeal filed by the assessee against the order dated 30.09.2010 passed by the CIT(A), New Delhi u/s 143(3)/144 of the Income Tax Act pertaining to the assessment year 2006-07 on the following grounds:- 1. "That on facts and in law the orders passed by the Assessing Officer [hereinafter referred as the "AO"]/Dispute Resolution Panel (hereinafter referred as the "DRP")/ Transfer Pricing Officer [hereinafter referred as the "TPO"] are bad in law and void ab-initio. 2. That on facts and in law the DRP/AO erred in upholding/making an addition of Rs.2,84,01,593/- under Chapter-X of the Income Tax Act, 1961. 3. That on facts and in law the DRP/TPO erred in : (a) computing the Profit Level Indicator (PLI) of the assessee (i.e the tested party) at 17.02% as against 24.30% computed by the assessee in its Transfer Pricing Report. (b) Rejecting the claim of the assessee that while computing its PLI total sales be adopted at Rs.37,70,52,414/- i.e net of turnover discount of Rs.2,47,80,113/-. (c) Upholding/rejecting M/s HT India Ltd as a comparable. (d) Upholding/rejecting M/s MacMillan India Ltd as a comparable. (e) Not making appropriate adjustments to the PLUI of M/s Naveen Publications India P. Ltd to make the same functionally comparable. 4. That without prejudice on facts and in law the AO/DRP erred in not granting the benefit for adjustment of the Arms Length Pric ("ALP") by + as per the proviso to section 92C(2). 5. That on facts and in law the DRP erred in not passing a speaking order while adjudicating upon the grounds of objection raised by the assessee. That the appellant prays for leave to add, alter, amend and/or vary the ground(s) of appeal at or before the time of hearing." 2. A perusal of the record shows that the assessee furnished a return electronically on 30.11.2006 by declaring NIL income and claimed a refund of Rs.41.04.516/- out of TDS and self assessment tax. On the basis of selection of case under scrutiny notice u/s 143(2) was issued, the record shows an information through AIR was also received that the company was registered with the Sales Tax Department with a turn over of Rs.7,82,93,491/-. Another information showed that the company had paid Rs.24,89,799/- to Galaxy Auto Pvt. Ltd. and Prime Honda, Delhi for purchase of cars. On the basis of audit report furnished by the assessee, the matter was referred to the TPO for determining the Arm's Length Price of the transaction. The TPO vide his order dated 30.09.2009 determined a sum of Rs.2,84,01,593/- being the difference between the arm's length margin. Accordingly a show-cause notice was issued why an addition, of the said amount not to be made to the assessee's income. The assessee moved the alternative dispute resolution panel against the additions proposed by the TPO. The objections of the assessee were not allowed; consequently the impugned assessment order was passed. Aggrieved by this, the assessee is in appeal before the Tribunal. 3. Ld. AR, at the time of hearing submitted that the objections passed by the assessee were disposed by the DRP in a cursory manner and various objections on facts and law were raised before the DRP. The comparables which were suggested by the assessee namely M/s HT Media Ltd. and M/s MacMillan India Ltd. were not accepted by the TPO and the assessee had addressed copious arguments in support of the comparables. It was his submission that neither the objections of the assessee have been considered nor the reasoning for upholding the action of the TPO has been brought out in the order. In these circumstances, it was submitted that the issue may be restored to the DRP following the judgement of the Jurisdictional High Court in the case of Vodafone Essar Ltd/ Dispute Panel Reported in 240 CTR 263 Delhi. 4. Ld. CIT DR, on a perusal of the DRP's order though placed reliance on the same fairly submitted that he would have no objection if the issue is restored as the judgement of the Hon'ble High Court is very clear. 5. We have heard the rival submissions and perused the material available on record. It is seen that the assessee raised specific objections on rejection of its comparables as under:- On Objection No.3.1: Rejection of Comparables:- "13. HT Media was selected as a comparable because the company is in the business of publishing of Newspapers & Magazines, though not entirely into a similar business line as the tested party from the point of view of functionality, but it still has a reasonable similarity in the business functions considering the fact that HT Media Ltd besides publishing Newspapers is also publishing magazines, which is comparable with the function performed by the tested party, viz publishing of books. The core point that needs to be understood here while using HT Media as a comparable is that the major Income of the Comparable is from Publishing activity, whether it is publishing of Newspapers or whether it is publishing of Magazines. This fact is further strengthened from the information given by the Company in its Audited Accounts for the Financial Year 2005-06, which is reproduced below:- In the Notes to the accounts of HT Media Ltd for the Financial Year 2005-06 "Schedule 23" (Copy of relevant pages Enclosed – Annexure "E"), the Company has detailed its Nature of Operations: Nature of Operations The Company publishes 'Hindustan Times', an English daily and 'Hindustan', a Hindi daily and two monthly Hindi magazines, "Kadambini' and 'Nandan'. The company derives revenue from the sale of the above mentioned publications, advertisements published therein, and by undertaking printing jobs. The company also derives revenue from the internet business, by displaying advertisements on its website, hindustantimes.com'. Ht Media Ltd. is reporting its Revenues from Printing & Sale of Newspapers & Sale of magazines/ Publications under one segment, which is confirmed from its note no.-4 to the Notes to the Accounts as reproduced below: Segment Information The Company is engaged in the Printing and Publication of Newspapers and Periodicals. The entire operations are governed by the same set of risk and returns, hence, the same has been considered as representing a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard -17 on Segment Reporting. On Objection No.3.2: Rejection of Comparables:- 14. MacMillan India Ltd as a comparable was rejected by the learned TPO for the simple reason that the financials of Macmillan India Ltd were for the year ended 31st December 2005 whereas the Financials of the tested party are for 31st March 2006. We would like to reiterate that the annual closure of the companies can in no way hamper the comparability of the results as long as the results are for a uniform period. In this case the Annual results of both the Companies are for a period of 12 months as such both the companies have gone through the normal annual business cycle. MacMillan India ltd. operates in 3 major segments. The operating Margin of MacMillan in the publishing segment for the 12 month period ending 31st Dec 2005 is 5.67%. If the TPO's logic is used for comparing results, then the results of no international Company can be used as a comparable, since all the international Companies close their accounts on dates other than 31st March each year & most international Companies use calendar year as their year end. Based on the above, financial data of MacMillan India Ltd. can be used as a comparable. 5.1 On a consideration of the same, we are of the view that the issues has been disposed by the ld. DRP in a very cursory manner and it is most definitely not in a manner which can be said to be as contemplated in law as absence of discussion on the issues involved cannot be termed to be a fair and speaking conclusion on the objections posed before the Appellate forum. It is seen that vide its order dated 19.08.2010, the issue was considered in the following manner:- "The objection to draft assessment order was filed before the DRP on 29.1.2010. In response to notice for hearing of the case Shri Vidur Puri attended and argued the case. The assessee has objected to the reference by the AO to TPO, computation of operating profit ratio of gross turnover of Rs.40,18,32,527/- without excluding trading discount, rejection of M/s H.T. India Ltd. as a comparable on ground of difference of functional profile and rejection of M/s MacMillan India Ltd. on the ground that accounting year is different, as also not considering the additional cost incurred by the assessee in getting work done by third party. We have considered the draft assessment order, written submission of the assessee as also the arguments put forth by the assessee's representative. We do not find any infirmity in reference by the AO to TPO for determination of arm's length price in respect of international transaction of the assessee. The TPO has argued that AS.9 is not relevant in this case and based on OECD guidelines which has been found to be more relevant has computed profit margin of gross sale and has thus worked out the ratio of OP upon sales. As regards comparables relied upon by the assessee, the TPO has after giving detailed reasons rejected two of the comparables one being M/s H.T.Media Ltd. by distinguishing the business being different from the assessee's and in the case of MacMilan India Ltd., he has been pointed out the differences in accounting period. The other comparable of the assessee has been accepted by the TPO and the arm's length price has been worked out on that basis. We, therefore, do not find any infirmity in the draft order and decide that no interference with the proposed order is warranted." 5.2. Section 144C of the Act envisages that the DRP shall act in the following manner:- "[Reference to dispute resolution panel] 144C. (1) ****************************** (2) ************************************ (3) ************************************ (4) ************************************ (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. [Explanation-For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.] (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. ------------------------------- The following sub-section (14A) shall be inserted after sub-section (14) of section 144C by the Finance Act, 2012, w.e.f. 1-4-2013: (14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA. ------------------------------ 5.3. On a perusal of the order of the DRP which has been reproduced in the earlier part of this order. We are of the view that in the peculiar facts and circumstances of the case and position of law, the impugned order which has been passed consequent to the DRP's order has to be set aside. We find support from the judgement of the Hon'ble High Court in the case of Vodafone Essar Ltd. which has very categorically held that when a quasi Judicial Authority like the DRP deals with lis u/s 144C of the Act then it is obligatory on its part to ascribe cogent and germane reasons as reasons are the heart and soul of the matter and facilitate the appreciation of the order when the order is called in question either before a superior forum or an Appellate forum. It is an admitted position on record that in support of its comparables various assertions and facts have been made which has been not dealt with by the Ld. DRP. Accordingly, the DRP's order along with the impugned order is set aside and the issue is restored back to the file of the DRP with the direction to pass a speaking order in accordance with law. 6. Accordingly for the reasons given hereinabove, the appeal of the assessee is allowed for statistical purposes. The order is pronounced in the open court on 17th of May 2013. Sd/- Sd/- (S.V.MEHROTRA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 17/05/2013 *Amit Kumar* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI |
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