Date Of Judgment 12-07-2018, Ita v. M/S. Genisys Integrating Systems [India] Pvt. Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 12 DAY OF JULY 2O18| PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A.No.564/2013 BETWEEN : 1.THE COMMISSIONER | OF INCOME-TAX, CIT|A] C.R. BUILDING, QUEENS ROAD BANGALORE. «|THE DY. COMMISSIONER OF INCOME-lTAX CIRCLE- 11[3]. RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE.» . APPELLANTS| (BY SRI K.V.ARAVIND, ADV.) AND : M/s. GENISYS INTEGRATINGSYSTEMS PVT. LTD.,No.43-46 & 33-36, EPIPWHITHKFIBLD ROADBANGALORE -560066._. RESPONDENT. (BY SRI S. SHARATH, ADV. FOR SRI CHYTHANYA.K.K., ADV.) THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 28.06.2013 PASSED IN M.P.NO.66/BANG/2012 [IN ITA)No.1231/MUM/2010|], FOR THE ASSESSMENT YEAR 2006-07, Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 2/9 ANNEXURE-E, PRAYING TO: 1]. FORMULATE THE SUBSTANTIALQUESTIONS OF LAW STATED ABOVE; 2}. ALLOW THE APPEALAND SEI ASIDE THE ORDERS PASSED BY THE INCOME-IAX|APPELLATE TRIBUNAL, BANGALORE M.P.NO.66/BANG/2012 [IN|ITA No.1231/MUM/2010| DATED 28.06.2013, ANNEXURE-E,|CONFIRMING THE ORDER OF THE APPBELLATEBE COMMISSIONANDCONFKIRMTHEORDER|PASSED)BY|THEDY.COMMISSIONER OF INCOME TAX, CIRCLE-11/3], BANGALORE. THIS APPEAL COMING ON FOR FINAL HEARING, THISDAY,S. SUJATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. K.V.Aravind,Adv. for Appellants — Revenue.Mr. S.Sharath,Adv. tor | Mr. Chythanya.K.K.,|Adv. for Respondent — Assessee. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, BangaloreBench ‘A’, Bangalore, inM.P No.66/Bang/2012 [In.ITA. No.1231/Mum/2010dated28.06.2013, relatingto the Assessment Year2006-07. 2.Theappealhas|beenadmitted|OTL 11.07.2014 to consider the substantial question of law.raised by the Revenue. Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 3/9 3.The substantial question of law framed by the Appellants-Revenue in the Memorandum of Appealis as under: “Whether the Tribunal was correct inholding that the assessee should be given anopportunity to cross examine all those partieswhose comparables have been selected by theTransfer Pricing Officerfor determination ofArms”Length Price in the case of the assesseeP” 4The learned Tribunal, after discussing the rival contentions of both the Appellants-Revenue andRespondent-Assessee, has returned findings as under: atiHaving heard both the parties andhaving considered the material on record, we findthat u/s 254/2] of the Income-tax Act, the powerof the Tribunal is restricted to rectification ofmistakesapparentfromthe.recorgdonly.According to the Revenue, the direction given bythe Tribunal is impossible to comply with and is,therefore, a mistake apparent from record. Thedirection of the Tribunal to the Revenue was togive the assessee an opportunity to cross-examine the parties from whom information was Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., collected u/s 133/6/ of the Income-tax Act andsuch information was being used against theassessee. The reasoning given by the Revenue to)say that the direction is not possible to becomplied with is that the authorized persons fromthe comparable companies may not appear beforethe Revenue authorities for cross examination bythe other party and also since they were notexamined on oath u/s 131 of the Income-tax Act,no opportunity of cross examination can be given.This, in our opinion, is not correct. Let us nowexamine the scope of sec. 131 vis-a-vis sec.133]6] of the IT Act. Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., collected u/s 133/6/ of the Income-tax Act andsuch information was being used against theassessee. The reasoning given by the Revenue to)say that the direction is not possible to becomplied with is that the authorized persons fromthe comparable companies may not appear beforethe Revenue authorities for cross examination bythe other party and also since they were notexamined on oath u/s 131 of the Income-tax Act,no opportunity of cross examination can be given.This, in our opinion, is not correct. Let us nowexamine the scope of sec. 131 vis-a-vis sec.133]6] of the IT Act. 12.The Revenue quthonties have the.power to collect information u/s 1393/6] of theIncome-tax Act and this information is furnishedby the concerned party verified in the mannerspecified by the AO and under the signature ofthe authorized persons only. Thus the personfurnishing the information is_ certifying theauthenticity or correctness of the informationfurnished by him. In such a situation, though oralevidence is not recorded under oath u/s 131, theinformation furnished by the said persons istreated as statement made by the said persons inwriting after verification of the details. When such Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 5/9 information is sought to be used by the Revenueauthorities against the assessee, it is incumbentupon the authorities to allow the assessee torebut such information, particularly, when suchinformation is at variance with the informationavailable in the public domain. Simply becausethese persons were not examined on oath, theinformation furnished by them cannot be said tohave lost its evidentiary value as the Revenuerepeatedly relies upon such information to makethe TP adjustments. In such circumstances, theauthorized signatories of the said companies areto be allowed to be cross examined by theassessee company to verify the authenticity of theinformation furnished by them. Mere furnishing ofthe information to the assessee by the Revenueauthorities and allowing the assessee to raise theobjections to the information collected u/s 133/6]will not satisfy the conditions for compliance ofthe principles of natural justice. The Hon’bleSupreme Court in the case of KishinchandChallaram reported in 125 ITR 713 whiledealing with a case, where a letter from Managerof Bank through which money was remitted wasnot shoiwwn to the assessee but addition wamade on the basis of such a letter, held that suchevidenceWasnotadmissiblebecause|the Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 6/9 assessee was not gwen an opportunity tocontrovert the same by asking for an opportunityto cross examine the manager of the bank withreference to the statements made in the letters.” 5.The controversy involved herein is no moreres integrain view of the decision of this Court in 1.T.A.Nos.536/2015 c/w 537/20154;=9425.06.2018 [Prl. |Commissioner.of|Income.TaxaAnr.V/s.M/s.Softbrands India Pvt. Ltd.,]2wherein it has beenobserved that unless the finding of the Tribunal is foundex facie perverse, the Appeal u/s. 260-A of the Act, isnot maintainable. The relevant portion of the Judgmentis quoted below for ready reference: “Conclusion: 55.Asubstantialquantumof)international trade and transactions dependsupon the fair and quick judicial dispensation insuch cases. Had it been a case of substantialquestion of interpretation of provisions ofDouble Taxation Avoidance Treaties (DTAA),interpretation of provisions of the Income Tax Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 7/9 “Conclusion: 55.Asubstantialquantumof)international trade and transactions dependsupon the fair and quick judicial dispensation insuch cases. Had it been a case of substantialquestion of interpretation of provisions ofDouble Taxation Avoidance Treaties (DTAA),interpretation of provisions of the Income Tax Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 7/9 Act or Overriding Effect of the Treaties over theDomestic Legislations or the questions likeTreaty Shopping, Base Erosion and _ Profishifting (BEPS), Transfer of Shares in TaxHavens (like in the case of Vodafone etc.), ifbased on relevant facts, such substantialquestions of law could be raised before theHigh Court underSection 260-Aof the Act, theCourtscouldhave|embarkedUuUposuchexercise of framing and answering suchsubstantial question of law. On the other hand,the appeals of the present tenor as to whetherthe comparables have been rightly picked up ornot, Filters for arriving at the correct list ofcomparables have been rightly applied or not,do not in our considered opinion, give rise toany substantial question of law. 56. We are therefore of the considered|opinion that the present appeals filed by theRevenue do not give rise to any substantialquestion of law and the suggested substantialquestions of law do not meet the requirementsofSection 260-Aof the Act and thus theappeals filed by the Revenue are found to be Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., 8/9 devoid of merit and the same are liable to bedismissed. 57. We make it clear that the same'|yardsticks and parameters will have to beapplied, even tf such appeals are filed by theAssessees, because, there may be cases wherethe Tribunal giving its own reasons andfindings has found certain comparables to begood comparables to arrive at an'7s| ‘ArLength Price“in the case of the assessees withwhich the assessees may not be satisfied andhave filed such appeals before this Court.Therefore we clarify that mere dissatisfactionwith the findings of facts arrived at by thelearned Tribunal is not at all a sufficient reasonto invokeSection 260-Aof the Act before this|Court. 58. The appeals filed by the Revenue aretherefore dismissed with no order as to costs.” 6.In the circumstances, having heard the learned Counsel appearing for both the sides, we are of the considered opinion that no substantial question oflaw arises for consideration in the present case. Date of Judgment 12-07-2018, ITA No.564/2013 The Commissioner of Income-tax & Another Vs. M/s. Genisys Integrating Systems [India] Pvt. Ltd., T 9/9 Hence, the Appeal filed by the Appellants- Revenue is liable to be dismissed and is accordingly dismissed. Nocosts.| NC. Sd/-.JU DGE Sd/-.JU DGE