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TMI Blog2018 (5) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... artment : Shri H. K. Choudhary, CIT-DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 25.10.2011 passed by the Assessing Officer u/s 144C(5)/143(3) of the I.T. Act, 1961 for the assessment year 2002-03. 2. Facts of the case, in brief, are that the assessee is a subsidiary of Keane Inc. USA, and is engaged in the business of software development, integration and maintenance through various units located in different parts of the country. It has developed units at Noida, Hyderabad and Gurgaon apart from office at Delhi. It filed its return of income on 31.10.2002 declaring income of ₹ 27,879/-. The above return was accepted through intimation u/s 143(1) of the I.T. Act, 1961 on 31.03.2004. Subsequently, the Assessing Officer reopened the assessment by issue of notice u/s 148 after recording the following reasons :- Reasons recorded under section 148 of the I.T. Act, 1961. Name and address of the assessee Keane India Limited PAN AABCK 7777 j Status Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued statutory notices u/s 143(2) and 142(1) to which the assessee filed the requisite details. Rejecting the various explanations given by the assessee, the Assessing Officer completed the assessment on a total income of ₹ 6,15,51,950/- by making the following additions :- Returned Income ₹ 27,879/- Add: Understated value of international transaction as per TPO order Rs.6,04,82,785/- Add: Disallowance u/s 14A as discussed ₹ 2,26,286/- Add: Bogus Expenditure Booked ₹ 8,15,000/- Rs.6,15,24,071/- Assessed Income Rs.6,15,51,950/- 4. The assessee approached the DRP against the draft assessment order passed by the Assessing Officer u/s 144C(1) and challenged the proposed additions. The DRP directed the TPO to re-compute the adjustment made vide order u/s 92CA(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs the transfer pricing assessment bad in law 4.5 The Ld AO erred in selecting functionally different companies (namely, Infosys Technologies Ltd.) as comparable to the Appellant Company. 4.6 The Ld AO erred in including Service Charges in the cost base of the software development expenses for determining the Arm's Length Price. 4.7 The Ld AO erred in not allowing the Appellant Company, an adjustment on account of differences in working capital investments vis-a-vis independent comparable companies. 4.8 The Ld AO erred in not allowing the Appellant Company, a low risk entity i.e. captive service provider, an adjustment towards differential in its risk profile. 4.9 The Ld. AO erred in not providing relief in accordance with second proviso to section 92C(2) of the Income Tax Act, 1961 (the Act ). 4.10 The Ld. AO erred in rejecting use of multiple year data for benchmarking purposes. 4.11 The Ld. AO erred in initiating penalty proceedings u/s 271G of the Act for delayed submission of prescribed documentation per rule 10D of the Income Tax Rules, 1992. The grounds of appeal are notwithstanding each other. The appellant craves l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to law is also placed at Annexure-3. In view of the above it humbly prayed that the additional ground may kindly be admitted. 7. Ld. counsel for the assessee submitted that the additional ground so raised by the assessee is nothing but modification of the original grounds no.4.5 filed earlier. He submitted that the above additional grounds bring out the basic grievance of the assessee which can be decided on the basis of information which is already in public domain and on record and no further evidences are needed for adjudicating it. Relying on various decisions, he submitted that the additional grounds should be admitted for adjudication. 8. After hearing both the sides and considering the fact that all material facts are already available on record and no further evidence is needed for adjudicating it, the additional grounds raised by the assessee are admitted for adjudication. 9. Ld. counsel for the assessee at the outset raised a preliminarily objection relating to the initiation of re-assessment proceedings by the Assessing Officer as per ground no.1. He submitted that the Assessing Officer while re-opening the assessment for assessment year 2002-03 has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to which, the assessee was required to furnish copy of complete set of ITR filed for assessment year 2002-03. He submitted that prior to Question No.17 put to Shri Gajanand Aggarwal, he was not asked to give any details for assessment year 2002-03. Referring to page 3 of the said assessment order, he submitted that the Assessing Officer in the last paragraph at page 3 has mentioned Apparently, the assessee has simply provided accommodation entries to prove all beneficiaries, who have booked certain expenses in their books wherein no actual expenditure has ever taken place . 11. He submitted that the statement of the director of M/s GA Buildcon Pvt. Ltd. is self-serving as the said company wants to reduce its tax liability by offering one percent of actual receipts as income. He never produced the book of a/c or return of GA Buildcon, as promised, before his A.O. 12. Referring to the statement of Gajanand Aggarwal, he submitted that it is vague, inconsistent, self-contradictory and not supported by external evidences like field enquiry. He submitted that in his reply to Question No. 11 he has categorically stated that the receipts in the two current accounts maintained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 354 ITR 536, he submitted that the basic condition that there must be bonafide and specific reasons for issuing notice u 148 is as much applicable to reopening an assessment u1s 143(1) as it is for assessment u 143(3). 15. Referring to the decision of the Hon ble Allahabad High Court in the case of Jamila Ansari reported in 225 ITR 490, he submitted that for the purpose of issuing notice u/s 148, facts of one assessment year must not be imported into another assessment year without due verification. The 'reason to believe' is not the same as reason to suspect. The Hon'ble Delhi High Court in Mesco Laboratories Ltd. (288 ITR 219) has held that notice u/s 148 issued on the basis of order of settlement commission for the Block Period, including immediately preceding year, to be invalid. 16. He accordingly submitted that the 'reason to believe' has no rational nexus with the facts of the case for F.Y. 2001-02. At best, it is 'reason to suspect', which is not a sufficient. 17. Ld. DR on the other hand heavily relied on the order of the DRP/Assessing Officer. He submitted that Shri Gajanand Aggarwal in his reply to Question No.11 has clearly stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the orders of the Assessing Officer/DRP/TPO and the Paper Book filed on behalf of the assessee. From perusal of the reasons recorded u/s 148 of the I.T. Act, which has been extracted in the preceding paragraphs, it is noted that there is no allegation by the Assessing Officer that there was any omission or failure on the part of the assessee to disclose material facts in the return. It is also borne out from the reasons recorded that the reopening of the assessment was based on the statement of Shri Gajanand Aggarwal recorded during the course of assessment proceedings of M/s G.A. Buildcon Pvt. Ltd. for assessment year 2001-02. A perusal of the assessment order of M/s G.A. Buildcon Pvt. Ltd., copy of which is placed at page 90 of Paper Book, Volume- 1 shows that the Assessing Officer at page 3 of the order has mentioned Apparently, the assessee has simply provided accommodation entries to number of beneficiaries, who have booked certain expenses in their books wherein no actual expenditure has ever taken place . Although the statement of Shri Gajanand Aggarwal has been recorded by the Assessing Officer in the assessment order of M/s G.A. Buildcon Pvt. Ltd., the same nowhe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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