We have heard the rival submissions and perused the material available on record. We find that the tax effect in the present case is below Rs.3 lakh and we find that as per this Board instruction No.3 dated 9.2.2011, the limit of tax effect for filing the appeal before the Tribunal has been increased to Rs.3 lakhs and the same for filing appeal before Hon’ble High Court has been increased to Rs.10 lakhs. In the case of CIT v. Rajan Ramanee (supra), the Hon’ble Delhi High Court has applied this Board instruction dated 9.2.2011 and dismissed the appeal of the revenue because of low tax effect.
U/s 250(4), the CIT (A) has the power to direct enquiry and call for evidence from the assessee. Under Rule 46A, the assessee has the right to ask for the admission of additional evidence. If the CIT (A) exercises his powers u/s 250(4) to call for additional evidence, the AO need not be given an opportunity to show-cause. However, if the CIT (A) acts on an application under Rule 46A, then the requirement of giving the AO an opportunity as per Rule 46A(3) is mandatory. The argument that in all cases where additional evidence is admitted, the CIT (A) should be considered to have exercised his powers u/s 250(4) is not acceptable as it will render Rule 46A redundant.
Non-availability of the acknowledgement of the receipt cannot be the sole basis on which the order made can be annulled. The fact that notice was not served on the assessee has to be established by considering all relevant facts. The dispatch number on face of notice is a relevant fact. Once the notice has been issued at the correct address by speed post and same has not been received back then it will be deemed to be served. Therefore, CIT (A) is directed to decide the issue after taking all these relevant facts into consideration.
Assessee’s claim that travel website should be treated as software (and hence website development cost is eligible for 60% depreciation) is not justified. By approaching travel website of assessee, customers/people can approach assessee and conduct business; therefore, website as such cannot be treated as software; it would fall under definition of intangible asset on which depreciation @ 25% is allowable.
We are of the opinion that there is nothing to suggest that all the primary facts were not disclosed by the assessee at the time of original assessment completed u/s 143(3) of the Act nor any failure on the part of the assessee to disclose fully and truly all the material facts has been ascribed in the circumstances narrated before us. It cannot be said that the assessee suppressed any material facts. It is well-settled that if a notice under sect ion 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down
Hon’ble Delhi High Court that in the case of C.I.T. vs. Pawan Kumar Gupta (2009) 318 ITR 322 (Del.) in the context of issue of notice u/s 143(2) in block assessment, which are in pari materia to proceedings u/s. 148, wherein it has held that section 143(2) is a mandatory provision whether one looks at it from the standpoint of a regular assessment or from the standpoint of an assessment under Chapter XIVB. Section 143(2) has no application in a situation where the Assessing Officer, on receipt of the return of undisclosed income in the Form No. 2B from the assessee, is satisfied with the same as reflecting the true state of affairs then it is not necessary for him to embark upon any further enquiry or investigation but where the Assessing Officer is not inclined to accept the return of undisclosed income filed by the assessee, the procedure in section 143(2) has to be followed.
In this case, the return of income was filed under section 139 (1) on 31.10.2001. The same was processed under section 143(1)(a) of the Income-tax Act. There was no scrutiny assessment under section 143(3) of the Income-tax Act. The reassessment proceedings u/s 147 was initiated by issuing notice u/s 148 on 28.03.2008 by recording the reasons. The reopening proceedings were initiation on the information received from Investigation Wing that assessee has received accommodation entries during the year. Thus, the Assessing Officer had considered the information received form investigation wing and has formed an opinion on the basis of that material and then initiated the proceedings for reassessment.
The assessee was regularly employing the method of valuation for valuing the stock at cost or net realizable value whichever is less. By shifting to a new ERP package, for example, SAP 2 worked out the value of the stock at cost, any reduction in the valuation of the stock is not permitted in law. The assessee’s claim that the regularly employed method means change method should be adopted in subsequent years is also untenable. The regular employed method by the assessee must have been followed in the past years which is continued to be followed in the subsequent years. Considering the totality of the facts of the case and considering the case laws relied upon, we find no fault in the orders of the authorities below.
Indisputably, the ld. CIT(A) considered additional material in relation to two comparables and that of the assessee, which was not available before the TPO/AO. Apparently, the ld. CIT(A) did not follow the procedure laid down under Rule 46A of the IT Rules,1962 nor allowed any opportunity to the AO. The powers of the CIT(A) to admit additional evidence are not only in situations where the evidence could not be produced before lower authorities owing to lack of adequate opportunity but also in situations where the fresh evidence would enable the CIT(A) to dispose of the appeal or for any other substantial cause.
Travelling expenses have been incurred in connection with technical services agreement. Therefore, the expenditure has been incurred for earning royalty/FTS. In spite of the fact that the agreement provides inter-alia for adequate level of support and posting its personnel, the expenses for which will be reimbursed, the fact remains that the expenditure has been incurred for earning the royalty/FTS. The expenditure is that of the assessee and not that of the Indian subsidiary company. Article 12 provides for taxation of royalty/FTS in the source country on gross basis at a concessional rate of tax. This means that the expenditure incurred for earning royalty/FTS is not deductible in computing gross royalties or gross FTS received by the assessee company. The assessee has found that taxation under the Income Tax Act, 1961 is not more beneficial to it. Therefore, the receipts have been offered for taxation under Article 12 of the DTAA.
