Ita/216/2010 Of Commissioner Of Income Tax v. M/S.synergia Consultants Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU ON THE 3l[ST|]DAY OF OCTOBER, 2019 BEFORE. THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON’BLE MR. JUSTICE ASHOK S. KINAGI INCOME TAX APPEAL NO.216 OF 2010CONNECTED WITH&INCOME TAX APPEAL NOS.35/358 OF 2014 INCOME TAX APPEAL NO.216 OF JZOLQ BETWEEN: 1.COMMISSIONER OF INCOME TAX)BENGALURU -IIIBENGALURU -III CENTRAL REVENUE BUILDINGS QUEENS ROAD BENGALURU-560 OO1. 2.|DEPUTY COMMISSIONER OF INCOME TAX)CIRCLE-12(3) CENTRAL REVENUE BUILDINGSQUEENS ROADCIRCLE-12(3) CENTRAL REVENUE BUILDINGSQUEENS ROAD BENGALURU-560 OO1. _. APPELLANTS (BY SRI: E.I. SANMATHI, ADVOCATE) AND M/S. SYNERGIA CONSULTANTS PRIVATE LIMITEDNO.35, EMBASSY DIAMANTE _ VITTAL MALLYA ROADBENGALURU-560 OO1. . RESPONDENT (BY SRI: K.P. KUMAR, SENIOR COUNSEL FOR|SRI: G. SRIDHAR, ADVOCATE) THIS|INCOMETAXAPPEAL|[S|FILEDUNDER|SECTION 260-A OF INCOME TAX ACT 1961, FOR THE|ASSESSMENT YEAR 2005-2006, PRAYING THIS HON BLE COURT TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; ALLOW THE APPEAL AND TO PASS.CONSEQUENTIAL ORDERS, IN THE INTEREST OF JUSTICE|AND EQUITY. &INCOME TAX APPEAL NOS.35/358 OF 2014: BETWEEN: M/S. SYNERGIA CONSULTANTS PRIVATE LIMITEDNO.35, EMBASSY DIAMANTE,VITTAL MALLYA ROADBENGALURU-560 OO1REPRESENTED BY ITSMANAGING DIRECTOR.MR. TOBBY SIMONAGED ABOUT 49 YEARS.SON OF LATE P.S. SIMON. | .. APPELLAWN (BY SRI: K.P. KUMAR, SENIOR COUNSEL FOR|SRI: G. SRIDHAR, ADVOCATE) AND THE ASSISTANT COMMISSIONEROF INCOME TAX, CIRCLE-12(3)CENTRAL REVENUE BUILDINGS C QUEENS ROADBENGALURU-560 OO1. . RESPONDENT (BY SRI: E.I. SANMATHI, ADVOCATE) THESE INCOME TAX APPEALS ARE FILED UNDERSECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT|OF ORDER DATED 22.01.2010 PASSED IN ITA NOS.80.AND 315(BNG)/2008, FOR THE ASSESSMENT YEAR 2004-2005 AND 2005-2006, PRAYING THIS HON’ BLE COURT TOFORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE; ALLOW THE APPEAL AND SET-ASIDE THEORDERS PASSED BY THE ITAT BEARING ITA NOS.80 AND.315(BNG)/2008, FOR THE ASSESSMENT YEAR 2004-2005)AND 2005-2006 DATED 22.01.201L1O OK OOK THESE INCOME TAXK APPEALS COMING ON FORFINAL HEARING THIS DAY, RAVI MALIMATH J., DELIVEREDTHE FOLLOWING: JUDGMENT Tne assessee filed its return of income declaring tneincome and claiming that it is engaged in the business ofsoftware development and services. It claimed profit at.the rate of 94%. Deduction was claimed under Section|10-A of the Income Tax Act. The Assessing Authorityissued notice to the assessee calling upon him to snow, cause as to wny the percentage as declared by others at.tne rate of 23% to 62% should not be considered in tne!assessee’s case aS well. Tne same was contested by the.assessee. The Assessing Officer passed an order nolding|tnat, the assessee is entitled to deduction under Section|10-A read witn Section 80IA-10 of the Income Tax Act to'an extent of 62% only and not 94% as claimed by theassessee. An appeal was filed before the Commissioner ofIncome Tax (Appeals). The appeal was partly allowed by|holding that the assessee is entitled to an extent of 80%.Aggrieved by the same, the revenue preferred ITA Nos.314|and 499 (BNG)/2008 before the Tribunal and the assesseepreferred ITA Nos.80 and 315 (BNG)/2008. The Tribunal|dismissed both the appeals. Hence, ITA No.216 of 2010 isfiled by the revenue and ITA Nos.357-358 of 2014 is filed|by the assessee. 2.By the order dated 14.06.2011, ITA No.215 of2010 connected with ITA No.216 of 2010 were admitted to consider the following substantial question of law: “Whether the finding of AppellateTribunal that tne assessee - company isentitled to deduction under Section 10OA ofthe Income Tax Act as it was engaged in tneaqevelopmentOf|computer|software,IS perverse and arbitrary for non considerationof the meterial in favour of the Revenue and.IS unsustainable?” ‘3.By the order dated 07.10.2014, ITA Nos.35/7 2.By the order dated 14.06.2011, ITA No.215 of2010 connected with ITA No.216 of 2010 were admitted to consider the following substantial question of law: “Whether the finding of AppellateTribunal that tne assessee - company isentitled to deduction under Section 10OA ofthe Income Tax Act as it was engaged in tneaqevelopmentOf|computer|software,IS perverse and arbitrary for non considerationof the meterial in favour of the Revenue and.IS unsustainable?” ‘3.By the order dated 07.10.2014, ITA Nos.35/7 358 of 2014 were admitted to consider the following|substantial questions of law: “1)WhethertheTribunalWasjustified in sustaining tnat the appellant wasentitled to the relief under Section 10A of.the Act only on 82% of its profits? 2)WhethertheTribunalWasjustified in upholding the application ofSection 10A read with Section 80IA(8) ofthe Act when close connection pDetween thetransacting parties was not establisned by|the Revenue as required under Section|8O0IA(10) of the Act? 3).There being no_ material tosuggest|closeconnectionbetween thetransacting parties, wnether tne Revenue|can resort to estimate of tne profit of the|eligiblebusinessoftheappellant Dyresorting to Section 10A read witn Section|8O0IA(8) of the Act? 4)Tn.theabsence|Of|closeconnection|beingestablishedDytheRevenue, whetner the appellant was not:eligible for deduction under Section 10A ofthe Act in respect of tne entire profit on tneexport declared by it?”| 4Thereafter, by the order dated 31.10.2019, ITANo.215 of 2010 was disposed off on monitory limits in.terms of tne Circular No.1/7 of 2019 dated 08.08.2019passed by Director (1TJ), Central Board Direct Taxes, New|Delihni. Hence, ITA No.216 of 2010 and ITA Nos.35/7-358 o2014, are taken up for consideration. 5.Tne.jiearnecCounselforthe.appellantsprimarily contend that substantial material were produced|before the Tribunal for consideration. The same i|s_refiected in para 8 of the order of the Tribunal. So also,|the assessee has filed additional evidence as narrated bythe Tribunal at para 9 of its order. The additional evidence|filed by the assessee as well as the revenue were admittedby tne Tribunal. Tnereafter, the Assessing Officer was)directed to submit the remand report on various points as)narrated in para 10 of the order of the Tribunal. It iscontended that tne material placed by the revenue has not)been properly considered py the Tribunal. That the)Tribunal went into the exercise of evaluating the evidence|and the material as led in by the revenue and the.assessee. [nat the Tribunal snould nave rightly remanded |the.matterCOtneASS@SSINGQOfficerforafreshconsideration based on the additional evidence that was'led in. Therefore, non-consideration of the evidence and|the perversity in considering the other evidences led in by| the revenue is evident from the order of the Tribunal. That|the findings recorded by the Tribunal being perverse,|interference is called for. 6.OnesuUCNcontention IStneadaitionaldocuments relied upon by the revenue as narrated in para)8(K) of the order of the Tribunal. Reference is made that.invoice No.SCOO3 dated 28.11.2003 issued by _ thassessee is not found recorded in the books of M/s.Maxitulin SDN BHD. Reliance is also placed on the letter|dated 18.02.2009 written by Inland Revenue Board of)Malaysia. Therein, they have stated that there is no recordof tne said Invoice No.SCOO3 dated 28.11.2003 In the!ledger book for the year 31.12.2004. It is further narratedin the order of the Tribunal that they were unable to verify|that the software was actually supplied by the assessee.However, at page 44 of the order of the Tribunal, it isnarrated that, the letter from M/s Micnael Camus states|that the company Nas not supplied data process and that.tne letter does not deny the supply of traceability software. Tnat the Department in its remand report nas acceptedthat the assessee was not involved in pharmaceutical|exports. | Tnat the Department in its remand report nas acceptedthat the assessee was not involved in pharmaceutical|exports. | /.Various such anomalies were brought to ournotice by the learned Counsel for the revenue. Underthese circumstances, appreciation of the material produced by the revenue as well as assessee, may not be right.Even otherwise, we are of the considered view tnat, thematerial produced by the revenue as well as the assessee, would have to be considered by the Assessing Officer, at)the first instance,. Hence, the matter requires to beremandedCOtheASS@SSINQOfficerforadfresnconsideration. On certain issues, the findings recorded bytne Tribunal is not in tune with tne material and evidence|as led in by the other side. 8.Tne same is disputed by the learned Counselfor the assessee. He contends that the Tribunal has rightly considered all the material and remanding the matter to.tne Assessing Officer would serve no purpose. QO.However, we are unable to accept the saidSubmission. It is not a case wherein a single piece of)evidence or material is placed for consideration asadditional document before the Tribunal. Substantial|material have been produced before the Tribunal by therevenue and the assessee. On going through the entire.material, in our considered view, it is not proper for theTribunal to consider the entire material. When huge and)voluminous material is produced py the other side, it is)only the Original Authority would have to decide the issue)at the first instance. It is not proper for the Tribunal toindulge in such an exercise. It is appropriate to remand)the.matterCOtneASS@SSINGQOfficerforafreshconsideration. ~— 10.Under these circumstances, the matters stand|remanded to the Assessing Officer for a fresh consideration| in accordance with law. The Assessing Officer shallconsider all the material that is already on record. None of)the findings as recorded by the Tribunal will come in theway of the Assessing Officer to decide the matter. Tne.substantial question of laws are accordingly answered. — Tne appeals are disposed off. The Assessing Officer is directed to complete theexercise py the end of June, 2020. Sd/- JUDGE *pgn/-| Sd/-| JUDGE