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TMI Blog2020 (1) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer (AO) passed assessment order u/s 143(3) r.w.s. 144C(13) on 27-07-2015 determining income at Rs. 159.85 crores and after set off of brought forward losses of Rs. 159.85 crores, the income was assessed at Nil. 3. Thereafter, the case was reopened u/s 147 by issuing notice u/s 148 on 30-03-2016. The assessment was reopened on the basis of information from investigation wing of revenue Calcutta that assessee has taken accommodation entries from Tara Trading Company and Annapurna Company. The assessment was completed u/s 143(3) r.w.s. 147 on 29-12-2017 by making additions on account of the alleged bogus entry. Thereafter, the assessment order dated 29-122017 revised by Ld. CIT(LTU) vide order dated 25-06-2018. While revising the assessment order, the Ld. CIT(LTU) held that scrutiny of computation of deduction u/s 10B revealed that while computing profit of unit eligible, the assessee company had added back deemed mark up of Rs. 56.75 crores in respect of transaction with overseas related parties. This addition was on account of deemed mark up of 18% on non E&P services and P&T unit made by assessee to bring the international transaction within arm's length price (AL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice dated 08-12-2017 asked the assessee as to why tax holiday benefit claimed on suo moto transfer pricing adjustment should not be denied to the assessee. The said show cause notice was replied by assessee vide reply dated 18-12-2017. The assessee explained in its reply that in the draft assessment order held that the tax holiday benefit under section 10B should be restricted to the gross total business of the assessee. Accordingly the AO computed tax holiday benefit under section 10B. The assessee also filed copy of the reply dated 18.12.2017 and other related documents. In the reassessment order dated 29-12-2017, the contention of assessee with regard to the tax holiday benefit was accepted by AO. The assessee also stated that the order passed by AO is neither erroneous nor prejudicial to the interest of revenue. The order is passed in accordance with the provisions of law. The assessment order was passed after making necessary enquiries and verification of facts. It was specifically submitted that wherever two opinions are possible and the AO has taken a possible view, the same cannot be controverted u/s 263. The assessee prayed that revision proceedings initiated u/s 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law, the learned CIT has erred in deciding the issue on the merits against the Appellant without dealing with the decision of CIT v. I-Gate Global Solutions Ltd. (ITA No. 453/2008) dated 17 June 2014 decided by the Hon 'ble Karnataka High Court. 3.3 The learned CIT has failed to appreciate that the decision of I-Gate (supra) has not been litigated further by the Income-tax department. 4. Initiation of penalty proceedings under section 271(l)(c) of the Act 4.1 On the facts and in the circumstances of the case and in law, the learned CIT has erred in directing the AO to initiate penalty proceedings under section 271(l)(c) for furnishing inaccurate particulars of income. 4.2 The learned CIT has further failed to appreciate the fact that the Appellant has not furnished inaccurate particulars of income in its Return of Income prejudicial to the interest of the revenue. The learned CIT failed to appreciate that the issue involved is debatable and has been examined by the AO. 1.3 On the facts and in the circumstances of the case and in law, the learned CIT has erred in exercising jurisdiction under section 263 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that besides the decision of Hon'ble Karnataka High Court in I.GATE Global Solutions Ltd (supra), there are several decisions of Tribunal in favour of assessee wherein similar relief was granted by Tribunal by taking view that provisions of section 92C(4) will not be applicable wherein the pricing adjustment has been made voluntarily by assessee and income has been offered to tax which forms part of profit of the business and deduction u/s 10B / 10A cannot be denied. In support of his submissions the ld AR for the assessee relied on the following decisions:- * A.T. Kearney India Pvt Ltd vs ACIT(ITA No.2623/Del/2015), * M/s Austin Medical Solutions Pvt Ltd vs ITO, I.T.(T.P.) A.No.542/Bang/2012, * Sumtotal System India (P) Ltd Vs DCIT [2017] 88 taxmann.com 897 (Hyd Trib), * Approva Systems Pvt Ltd Vs DCIT (ITA No.1051/PUN/2015) and * Karnataka High Court in CIT Vs I Gate Global Solution Ltd (ITA No. 452/2008 dated 17th June 2014) 9. The Ld. AR further submits that the decision of Tribunal in Deloitte Consulting India Pvt. Ltd Vs ITO in ITA No.157/MUM/2012 and Agiligys I.T. Services India Ltd, the Tribunal has not considered the decision of Karnataka High Court in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO, after considering the explanation furnished by the assessee has passed the assessment order after his full satisfaction though there is no reference about the examination of issue in the assessment order. The Ld.AR submits that once the AO raised query, queries raised by AO was duly replied and AO passed the assessment order, the assessment order cannot be branded as erroneous or not in accordance with law when it was passed after due enquiry and full satisfaction by AO. 13. In support of his submission, the Ld.AR of the assessee also relied upon the decision of Hon'ble Apex Court in case of Malabar Industrial Co. Ltd reported vide 243 ITR 83(SC); decision of Bombay High Court in CIT Vs Gabriel India Ltd reported vide 203 ITR 108 (Bom), decision of Karnataka High Court in CIT Vs M/s I.Gate Global Solutions (P) Ltd (supra). 14. On the other hand, the Ld. DR for the revenue supported the order of Ld. CIT (LTU). The Ld. DR further submits that the ratio of decision in Deloitte Consulting India Pvt. Ltd (supra) is fully applicable in the facts of the present case. The AO while passing the assessment order dated 29-12-2017 has not considered the Proviso to section 92C(4) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction under section 263 must have material on record to arrive at a satisfaction. * If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard." 16. In the light of aforesaid principals, now we shall examine the facts of the present case. During the course of hearing the ld AR for the assessee vehemently submitted the assessee made suo moto disallowance of the deduction under section 10B, the assessing officer while passing the assessment order AO computed tax holiday benefit u/s 10B of Rs. 69.46 crores instead of Rs. 90.21 crores as claimed by assessee in its return of income, against this proposed addition the assessee filed objection before the DRP. The objection was disposed of vide direction dated 09-06-2015 wherein the DRP directed the AO to admit the claim of deduction u/s 10B. Further, the ld AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to the applicability of Proviso to section 92C(4) in respect of deduction u/s 10A / 10B / 10AA. We have noted that the AO vide question No.1 in Annexure to notice dated 08-12-2017 raised the similar question as raised by Ld.CIT(LTU) in her show cause notice u/s 263. The assessee filed its reply vide reply dated 08-122017, copy of which is filed at pages 264 to 270 of the paper book. In the reply, the assessee stated that in the draft assessment order, certain additions / disallowances were proposed, including transfer pricing adjustment to the total income of the assessee. In the draft assessment order it was held that tax holiday benefit u/s 10B should be restricted to the gross total business income. It was also explained that AO computed tax holiday benefit u/s 10B of Rs. 69.46 crores instead of Rs. 90.21 crores as claimed by the assessee, in its return of income which was again subject to the objection filed before the Dispute Resolution Panel (DRP) and the DRP directed the AO to delete the restricted denial of deduction u/s 10B. We have noted that there is no reference regarding the queries raised by AO and the explanation furnished by assessee, in the re-assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the ALP, the revenue cannot deny the deduction u/s 10A. Similar view was taken by Hyderabad Tribunal in Sumtotal Systems India (P) Ltd Vs DCIT (2017) 88 taxmann.com 897 (Hyderabad-Trib.) while relying upon the decision of Karnataka High Court in I Gate Global Solutions Ltd (supra). 21. The Ld.CIT (LTU) revised the assessment order by referring the decision of Deloitte Consulting India Pvt Ltd (supra) and Agilisys IT Services India (P) Ltd Vs ITO (supra), in our view the said decision will not stand because of the decision of Hon'ble Karnataka High Court in CIT Vs I Gate Solutions (supra), on the similar issue on similar facts. We are conscious of the facts that the decision is of nonjurisdictional High Court is binding on Tribunal as held by Hon'ble Bombay High Court in CIT Vs Godavaridevi Saraf (1978) 113 ITR 589 (Bom). Now contrary decision on the issue by jurisdictional High Court is brought to our notice by either party. Therefore, considering the fact that during the re-assessment the AO raised necessary queries, the assessee furnished detailed submission, which was accepted by the AO though no reference about the consideration of such issue in the assessment order. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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