New evidences obtained can be used only after proper opportunity of being heard is given to assessee

Brief Facts of the case-

• The Revenue is aggrieved by the order of the ITAT in several appeals preferred by the assessee for Assessment Years (AYs) 1999-2000 to 2004-05.
• The assessee (Swedish company) is a subsidiary of LME. It entered into a contract with Indian telecom service providers during 1995-97 for supply of telecommunication equipments which comprise hardware and software components.
• It claimed that it was not liable to tax under the provisions of Income Tax Act, 1961 read with relevant DTAA.
• For previous year i.e. 1997-98, the income from supply of equipments was held to be non taxable in asessee’s own case, reported as Director of Income Tax v. Ericsson (2012) 343 ITR 470 (Del HC).
• For the subject assessment years, the assessment was completed on 31.12.2007 in the light of the previous assessment made for 1997-98. However these assessments were pending before CIT(A).
• A survey was conducted on 22.11.2007 in the premises of Ericsson India Limited (EIL), a subsidiary of LME. The CIT(A) took note of the materials collected during the course of survey under Section 133A and sought to use them in the assessee’s pending appeals. Assessee filed appeal before ITAT, which gave a favorable ruling.

Contention of the revenue

The facts in the decision rendered by Delhi HC in AY 1997-98 are different from subject assessment year. Accordingly, the said ruling should not be applied in subject AY and be brought in the ambit of tax.

Contention of the assessee

• The Ld. CIT(A), without confronting the assessee or the Assessing Officer, tried to make out a case that the facts of subject appeals are different from AY 1997-98. The basis on which this summary is arrived was not stated.
• There was no distinction between the facts which were considered by this Court in its decision in Ericsson (supra) and the facts for the subsequent assessment years.
• CIT (Appeals) did not offer any opportunity to the assessee to make submissions with respect to the materials obtained from the survey and unilaterally rendered findings,
• CIT (Appeals)’s order was bad for the reason that he did not follow the procedure prescribed by the law.

Held by Respective Court

• Having primarily recorded that the CIT (Appeals)’s order was bad for the reason that he did not follow the procedure prescribed by the law, the ITAT ought not to have followed in the same manner, in appreciating the facts in the first instance as it did.
• The ruling of Delhi HC in AY 1997-98 should not be disturbed now as the same has to be seen in the light of the facts available to Court at that time.
• Accordingly, the matter is remitted back to the CIT (Appeals) who shall give reasonable opportunity to the assessee to make necessary submissions before it.