If any evidence left to be consider matter to restore in the file of the authority below

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘E’ NEW DELHI

BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER

AND

SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

ITA No. 699/Del/2012

Assessment Year: 2006-07

Omniglobe Information Technologies

(India) Pvt. Ltd.,

E-11, Rajouri Garden,

New Delhi-110027

(Appellant)

vs

Income Tax Officer,

Ward 13(4),

New Delhi.

 (Respondent)

Appellant by: S/Shri Ajay Vohra, Abhishek Agarwal

Respondent by: Shri Peeyush Jain, CIT(DR)

O R D E R

PER CHANDRAMOHAN GARG, JUDICIAL MEMBER

This appeal has been preferred by the assessee against the order of the ITO Ward 13(4), New Delhi u/s 143(3) read with section 144C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.12.2011 passed after receiving order from DRP-II, New Delhi vide order dated 23.11.2011 by which the DRP-II rejected the objections raised by the assessee and directed the Assessing Officer to proceed further and complete the assessment as proposed in the Draft Assessment Order (for short ‘the DAO”).

2. The grounds of appeal read as under:-

“1. That the Assessing Officer erred on facts and in law in proposing to complete the assessment under section 144C/143(3) of the Income Tax Act, 1961 at an income of Rs.2,66,61,089 as against income of Rs.3417 returned by the appellant.

2. That the Assessing Officer erred on facts and in law in making an addition of Rs.2,66,61,089 on account of difference in the arm’s length price of the ‘international transactions’ of rendering Information Technology Enabled Services (ITES), on the basis of the order passed under section 92CA(3) of the Act by the TPO.”

3. Briefly stated the facts giving rise to this appeal are that the Draft Order u/s 144C of the Act dated 17.12.2009 was passed and served on the assessee. The assessee filed objection u/s 144C(2)(b) of the Act on 19.1.2010 before DRP-II against the same on the points of additions to the tune of Rs.3,22,29,917 as proposed to be made on the basis of TPO order determining arms length price of assessee’s international transactions and on disallowance of higher rate of depreciation @60%. The assessee filed objections u/s 144C(2)(b) of the Act on 19.1.2010 before DRP-II and the same were rejected on 23.11.2011 and the Assessing Officer was asked to finalize the assessment on the basis of Draft order. The Assessing Officer finalized the assessment as per order of DRP-II u/s 254/143(3) of the Act on assessed income of Rs.2,66,57,342 based on Arm’s Length Price margin. Hence, this appeal before this Tribunal by the assessee.

4. At the outset, the assessee’s representative submitted that his application u/s 29 of the Income Tax (Appellate Tribunal) Rules, 1963 may kindly be considered as DRP-II did not consider the additional evidence application and passed the order rejecting the objections of the assessee without giving any finding on the same, keeping aside the additional evidence. Ld. DR did not dispute the fact that the assessee filed an application for additional evidence before the DRP-II, New Delhi but the same was not duly considered and decided by the DRP and impugned orders

by the DRP-II and subsequently by the Assessing Officer were passed without considering the additional evidence which was relevant to decide the controversy involved in the assessment proceedings. We noted that a copy of above application dated 16.11.2011 has also been filed before us.

5. Ld. counsel appearing before us relied upon the judgement of Hon’ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax(A) vs Text Hundred India Pvt. Ltd. in ITA No.2077, 2061 and 2065/2010 dated 14.1.2011 wherein their Lordships held that the Tribunal for the reasons to be recorded, allowed additional evidence to be adduced by submitting such documents to be produced or witness to be examined or an affidavit to be filed if the income tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence. Operative paras of above judgement are being respectfully reproduced as under:-

“12. We may also quote the following observations of Calcutta High Court in Income-Tax Officer, Dist. III (I) v. B.N. Bhattacharya, 112 ITR 423 (Cal.). In that case the Court even permitted the additional evidence before it at appellate stage where the question was as to whether the notice was properly served upon the assessee or not. Record of the process server and the Income-Tax Officer were produced and objection of the assessee that such evidence could not be produced was turned down invoking the power to admit such evidence under Order  41 Rule 27(1) of the Code of Civil Procedure. Following pertinent observations were made in the process:-

"But it was observed by the Supreme Court in the case of K. Venkatramaiah v. A. Seetharama Reddy, AIR 1963 SC 1526, that under rule 27(1) of Order 41 of the Code of Civil Procedure, the appellate court has the power to allow additional evidence not only if it requires such evidence "to enable it to pronounce judgment", but also for "any other substantial cause". There might well be cases where even though the court found that it was able to pronounce judgment on the state of record as it was, and so it could not strictly say that it required additional evidence to enable it to pronounce judgment, it still considered that in the interest of justice something which remained ITA Nos.2077, 2061 and 2065/2010 Page 11 of 14 obscure should be filled up so that it could pronounce its judgment in a more satisfactory manner. Such a case would be one for allowing additional evidence for any other substantial cause under rule 27(1)(b) of Order 41 of the Code. In the instant case, in the affidavit-in-opposition filed before the learned trial judge, it had been stated that the notice had been served by affixation at 8/1, Dacres Lane, Calcutta."

13. The aforesaid case law clearly lays down a neat principle of law that discretion lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motto action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect.”

6. In view of the above judgement, we are of the opinion that the additional evidence application submitted by the assessee before tax authorities deserves to be considered and their findings thereon but in the present case, the tax authorities passed impugned orders without considering the additional evidence application.

7. The AR also submitted a copy of the judgement of ITAT, Delhi A Bench in the case of ACIT vs M/s NIT Ltd. in ITA Nos. 1844/Del/2009 and 1871/D/2009 for AY 2005-06 wherein the ITAT held as being reproduced below:-

“10. After considering the assessee’s application and keeping in mind the fact that these details now submitted before us were not available tin the public domain at the time when transfer pricing study was submitted by the assessee or at the later stage when transfer pricing assessment proceedings were taken by the TPO and having regard to the fact that these documents are essential for determining arm’s length price of the international transaction effected by the assessee during the year under consideration, we are inclined to admit these additional evidences for consideration and these are accordingly admitted for consideration. Since these documents were not available before the TPO and the TPO had no opportunity to examine the annual report or data base of the aforesaid companies, we find it fit that the issue involved in this appeal be freshly decided by the TPO after providing reasonable opportunity of being heard to the assessee. While making fresh transfer pricing order, the TPO shall take into account the annual reports or database of the aforesaid companies now submitted before us and shall also decide the point as to whether all the comparables selected by the asessee are proper comparables for the purpose of determining Arm’s length price after considering the following factors as per law:-

(i) Whether the companies have large volume of related party transactions.

(ii) Whether companies have abnormally high profits or losses.

(iii) Whether companies have gone for business re-structuring.

(iv) Whether companies have shown high growth.

(v) Whether companies are having high turnover.

 (vi) Whether companies are having larger inventory.

(vii) Whether companies are having high marketing expenses.

11. We further order that the matter shall be decided afresh as per law and after providing reasonable opportunity to the assessee. The Assessing Officer shall make a reference to the TPO ion respect of the matters involved in this appeal to pass afresh order after considering all the comparables in the light of the various parameters laid down by the various courts from time to time. The assessee shall be under an obligation to furnish all these details that have been submitted before us, before the TPO to enable him to consider them for his decision.

This understanding was given at the time when the hearing of these appeals had taken place. We order accordingly.”

8. In the present case on bare reading of impugned order of DRP-II, New Delhi and impugned order, we observe that these authorities did not consider the additional evidence adduced by the assessee with application dated 16.11.2001 wherein the assessee submitted the comparables and the operating profit/Total Cost(OP/TC) of selected comparables. Thus, the appellant-assessee has filed an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 enclosing a copy of additional evidence application dated 16.11.2011 before us which was ignored by the tax authorities below and we noted that they decided the case without considering and giving any findings in regard to additional evidence adduced by the assessee.

9. During the arguments on application of assessee u/s 29 of the Income Tax (Appellate Tribunal) Rules 1963, both the parties have submitted that the additional evidence which ought to be considered by the authorities below the matter deserves to be restored to the file of the DRP-II, New Delhi and we restore the same to the file of the DRP-II, New Delhi with a direction

that the application of additional evidence be considered and matter be decided afresh de novo.

10. Accordingly, we are inclined to decide this appeal as indicated above and in the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 29.8.2012.

                                                 Sd/-                          Sd/-

                                    (J.S. REDDY) (CHANDRAMOHAN GARG)

                          ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 29th AUGUST 2012

‘GS’

Copy forwarded to:-

1. Appellant

2. Respondent

3. CIT(A)

4. CIT

5. DR

By Order

Deputy Registrar