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M/s Tulip Telecom Ltd. Okhla Industrial Area, Phase 1, New Delhi. Vs. ACIT, Central Circle 11, New Delhi
August, 29th 2014
       IN THE INCOME TAX APPELLATE TRIBUNAL
             DELHI BENCH `H', NEW DELHI

BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
                        &
        SHRI C.M. GARG, JUDICIAL MEMBER

                  ITA Nos. 4888 to 4894/Del/2013
              Assessment Years: 2004-05 to 2010-2011

M/s Tulip Telecom Ltd.,  vs.                    ACIT,
Okhla Industrial Area,                          Central Circle 11,
Phase ­ 1, New Delhi.                           New Delhi.
      (PAN : AAACT2717J)

      (Appellant)                               (Respondent)

                ITA Nos. 5160 to 5165/Del/2013
         Assessment Years: 2004-05, 2006-07 to 2010-11

DCIT,                    vs.        Tulip Telecom Ltd.,
Central Circle-11,                  C-160, Okhla Industrial Area,
New Delhi.                          New Delhi.
                                          (PAN : AAACT2717J)

      (Appellant)                               (Respondent)

              Cross Objection Nos. 44 & 45Del/2014
               (In ITA Nos. 5161 & 5163/Del/2013)
              Assessment Years: 2006-07 & 2008-09

Tulip Telecom Ltd.,                 vs.   DCIT,
C/o RRA Taxindia,                         Central Circle-11,
D-28, South Extension, Part-I,            Room No. 364,
ARA Centre,                               New Delhi.
New Delhi.
      (PAN : AAACT2717J)

(Appellant)                                     (Respondent)

         Assessee by   : Dr. Rakesh Gupta, Advocate and
                          Shri Somil Aggarwal, CA
                Respondent by : Sh. R.S. Meena, CIT(DR)
                                  2   ITA Nos. 4888 to 4894/D/2013,
                                               5160 to 5165/D/13 &
                                          C.O. Nos. 44 & 45/D/2014

                              ORDER

PER BENCH :

      These cross appeals and cross objections arising out of the

order of the CIT(A)-XXXI, New Delhi dated 20th June, 2013. It is a

consolidated order for A.Y. 2004-05 to 2010-11 (for seven

assessment years). Part relief was allowed to the assessee.


2.    Brief facts of the case are that search and seizure operation

was carried out u/s 132 and survey action u/s 133A of the Income

Tax Act at the premises of the assessee's as well as at the premise of

the other associate group concerns on 24th September, 2009. Notices

u/s 153A were issued on 28.4.2010 and the assessments for A.Y.

2004-05 to 2009-10 were finalized u/s 143(3)/153A of the Income

Tax Act, 1961 on 29.12.2011 and assessment for AY 2010-11 was

made u/s 143(3), wherein the claim made u/s 80IA and 80IB were

disallowed. Preliminary expenses were also disallowed. In some of

the years additions were also made on account of rotating entries of

purchases of assets of the companies and bogus purchases.

Disallowances were also made for not allowing deduction u/s 10A of

the Act. Most of the grounds in all these appeals are common.

However, in certain years some grounds are different, however, for

the sake of convenience and brevity all these appeals are being
                                 3    ITA Nos. 4888 to 4894/D/2013,
                                               5160 to 5165/D/13 &
                                          C.O. Nos. 44 & 45/D/2014

disposed off by this common order. The grounds of appeal for

assessment year 2004-05 in ITA No. 4888/D/2013 read as under:

      1)     (A)    "That having regard to the facts and
      circumstances of the case, ld. CIT(A) has erred in law
      and on facts in confirming the action of ld. AO in
      disallowing the deduction u/s 80IA amounting to Rs.
      3,88,42,563/- as claimed by the assessee and that too by
      recording incorrect facts and findings and without
      considering the submissions of the assessee and without
      bringing any adverse material on record and without
      observing the principles of natural justice, more so when
      such disallowance could not have been made in the
      proceeding u/s 153A.

            (B)     That having regard to the facts and
      circumstances of the case, the ld. CIT(A) has erred in law
      and on facts in observing that appellant has admitted to
      discrepancies in computation of deduction u/s 80IA.

            (C)     That having regard to the facts and
      circumstances of the case, ld. CIT(A) has erred in law
      and on facts in observing that books of accounts of
      assessee are not verifiable.

             (D) That in any case and in any view of the
      matter, action of ld. CIT(A) in confirming the action of
      ld. AO in disallowing the deduction u/s 80IA amounting
      to Rs. 3,88,42,563/- is bad in law and against the facts
      and circumstances of the case and beyond the scope and
      jurisdiction of the impugned assessment order.

      2      (A) That having regard to the facts and
      circumstances of the case, the ld.CIT(A) has erred in law
      and on facts in confirming the action of ld. AO in
      disallowing the deduction u/s 80IB amounting to Rs.
      26,99,907/- as claimed by the assessee and that too by
      recording incorrect facts and findings and without
      considering the submissions of the assessee and without
      bringing any adverse material on record and without
      observing the principles of natural justice, more so when
                           4    ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

such disallowance could not have been made in the
proceeding u/s 153A.

      (B) That having regard to the facts and
circumstances of the case, ld. CIT(A) has erred in law
and on facts in observing that CMD of the company has
admitted that no manufacturing activities was carried out
at Jammu unit.

       (C) That in any case and in any view of the
matter, action of ld. CIT(A) in confirming the action of
ld. AO in disallowing the deduction u/s 80IB amounting
to Rs.26,99,907/- is bad in law and against the facts and
circumstances of the case and beyond the scope and
jurisdiction of the impugned assessment order.

3.     That having regard to the facts and circumstances
of the case, the ld. CIT(A) has erred in law and on facts
in confirming the action of ld. AO in making
disallowance of Rs. 1,03,747/- on account of preliminary
expenses and that too by recording incorrect facts and
findings and without considering the submissions of the
assessee and without bringing any adverse material on
record and without observing the principles of natural
justice, more so when such disallowance could not have
been made in the proceeding u/s 153A.

4.     That having regard to the facts and circumstances
of the case, the ld. CIT(A) has erred in law and on facts
in confirming the action of ld. AO in framing the
impugned assessment order u/s 143(3)/153A without
assuming jurisdiction as per law, more so when no
incriminating material was found and seized as a result of
search and without obtaining requisite approval as per
law and without complying with the other mandatory
conditions envisaged under the Act.

5.     That in any case and in ay view of the matter
action of ld. AO in framing the impugned assessment
order is contrary to law and facts, void ab initio, beyond
jurisdiction and the same is not sustainable on various
legal and factual grounds.
                                 5    ITA Nos. 4888 to 4894/D/2013,
                                               5160 to 5165/D/13 &
                                          C.O. Nos. 44 & 45/D/2014

      6.     Without prejudice to the above grounds,
      additions/disallowances could not be made in the present
      appeal because no incriminating material has been found
      as a result of search.

      7.     That having regard to the facts and circumstances
      of the case, the ld. CIT(A) has erred in law and on facts
      in confirming the action of ld. AO in charging interest
      234A and 234B of the Income Tax Act, 1961."


3.    In ITA No. 4889/Del/2013 except the ground no. 4 the other

grounds are same. The ground no. 4 in ITA No. 4889 read as under:

      "4. That having regard to the facts and circumstances of
      the case, ld. CIT(A) has erred in law and on facts in
      confirming the action of ld. AO in making disallowance
      of Rs. 81,67,898/- on account of alleged bogus purchases
      and that too by recording incorrect facts and findings and
      without considering the submissions of the assessee and
      without bringing any adverse material on record and
      impugned disallowance has been made only on the basis
      of presumptions, surmises and conjectures and without
      observing the principles of natural justice, more so when
      such disallowance could not have been made in the
      proceeding u/s 153A."


3.1   Ground no. 4 in ITA No. 4889, 4890, 4891 & 4892 is same

with the regard to the alleged bogus purchases. The other grounds in

these appeals are same as in ITA No. 4888/D/2013.


4.    Ground no. 4 & 5 in ITA No. 4893 and 4894 read as under:

      Grounds no. 4 & 5 of ITA No. 4893/D/2013:

      "4(A) That having regard to the facts and circumstances
      of the case, the ld. CIT(A) has erred in law and facts in
      not reversing the action of ld. AO in deleting the
                           6    ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

disallowance of Rs. 24,28,24,110/- fully on account of
interest expenses u/s 36(1)(iii) and has further erred in
sustaining the disallowance to the extent of
Rs.13,71,33,433/- and that too by recording incorrect
facts and findings and without considering the
submissions of the assessee and without bringing any
adverse material on record and without observing the
principles of natural justice, more so when such
disallowance could not have been made in the proceeding
u/s 153A.

(B) That having regard to the facts and circumstances
of the case, ld. CIT(A) has erred in law and on facts in
enhancing the income by Rs. 62,26,49,700/- on account
of alleged gain on buyback of FCCB and that too by
treating it as revenue receipt and that too by recording
incorrect facts and findings and without considering the
submissions of the assessee and without bringing any
adverse material on record and without observing the
principles of natural justice, more so when such
disallowance could not have been made in the proceeding
u/s 153A.

(C) That in any case and in any view of the matter,
action of ld. CIT(A) in not deleting the disallowance
made by ld. AO fully and has further erred in enhancing
the income of assessee is bad in law and against the facts
and circumstances of the case and beyond the scope and
jurisdiction of the impugned assessment order.

5. That having regard to the facts and circumstances of
the case, the ld. CIT(A) has erred in law and on facts in
assuming jurisdiction to enhance and has erred in
enhancing the income of Rs.1,94,51,000/- on account of
alleged unaccounted cash and that too by recording
incorrect facts and findings and without considering the
submissions of the assessee and without bringing any
adverse material on record and without observing the
principles of natural justice, more so when such
enhancement could not have been made in the
proceeding u/s 153A."
                           7    ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

Grounds no. 4 & 5 of ITA No. 4894/D/2013:

4(A) "That having regard to the facts and circumstances
of the case, the ld. CIT(A) has erred in law and facts in
not reversing the action of ld. AO in deleting the
disallowance of Rs. 24,73,12,669/- fully on account of
interest expenses u/s 36(1)(iii) and has further erred in
sustaining the disallowance to the extent of Rs.
1,61,83,397/- and that too by recording incorrect facts
and findings and without considering the submissions of
the assessee and without bringing any adverse material
on record and without observing the principles of natural
justice, more so when such disallowance could not have
been made in the proceeding u/s 153A.

(B) That having regard to the facts and circumstances of
the case, ld. CIT(A) has erred in law and on facts in
enhancing the income by Rs. 19,09,53,372/- on account
of alleged gain on buyback of FCCB and that too by
treating it as revenue receipt and that too by recording
incorrect facts and findings and without considering the
submissions of the assessee and without bringing any
adverse material on record and without observing the
principles of natural justice, more so when such
disallowance could not have been made in the proceeding
u/s 153A.

(C) That in any case and in any view of the matter, action
of ld. CIT(A) in not deleting the disallowance made by
ld. AO fully and has further erred in enhancing the
income of assessee is bad in law and against the facts and
circumstances of the case and beyond the scope and
jurisdiction of the impugned assessment order.

5. That having regard to the facts and circumstances of
the case, the ld. CIT(A) has erred in law and on facts in
assuming jurisdiction to enhance and has erred in
enhancing the income of Rs. 58,00,000/- on account of
alleged unaccounted cash and that too by recording
incorrect facts and findings and without considering the
submissions of the assessee and without bringing any
adverse material on record and without observing the
principles of natural justice, more so when such
                                  8   ITA Nos. 4888 to 4894/D/2013,
                                               5160 to 5165/D/13 &
                                          C.O. Nos. 44 & 45/D/2014

      enhancement could not have been made in the
      proceeding u/s 153A."


4.1   Other grounds of these appeals are same as in ITA No.

4888/Del/2013.


5.    The grounds of appeal in revenue's appeal read as under:

      "Grounds of ITA No. 5160/D/2013:

      1. The order of ld. CIT(A) is not correct in law and facts;

      2. On the facts and circumstances of the case the ld.
      CIT(A) has erred in deleting the addition of Rs.
      1,27,20,436/- made by AO on account of alleged low
      profit by rotating entries of purchase/sales within group
      companies."

      "Grounds of ITA No. 5161/D/2013:

      1. The order of ld. CIT(A) is not correct in law and facts;

      2. On the facts and circumstances of the case the ld.
      CIT(A) has erred in deleting the addition of Rs.
      34,50,70,130/- made by AO on account of alleged low
      profit by rotating entries of purchase/sales within group
      companies."


      "Grounds of ITA No. 5162/D/2013:

      1. The order of ld. CIT(A) is not correct in law and facts;

      2. On the facts and circumstances of the case the ld.
      CIT(A) has erred in deleting the addition of Rs.
      16,90,09,870/- made by AO on account of alleged low
      profit by rotating entries of purchase/sales within group
      companies."
                            9   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

"Grounds of ITA No. 5163/D/2013:

1. The order of ld. CIT(A) is not correct in law and facts;

2. On the facts and circumstances of the case the ld.
CIT(A) has erred in deleting the addition of Rs.
122,55,97,901/- made by AO on account of alleged low
profit by rotating entries of purchase/sales within group
companies."

"Grounds of ITA No. 5164/D/2013:

1. The order of ld. CIT(A) is not correct in law and facts;

2. On the facts and circumstances of the case the ld.
CIT(A) has erred in deleting the addition of Rs.
68,66,567/- made by AO on account of disallowance of
expenses relating to External Commercial Borrowing
(ECB);

3. On the facts and circumstances of the case the ld.
CIT(A) has erred in deleting the addition of
Rs.9,88,24,110/- made by AO on account of
disallowance of expenses relating to Foreign Currency
Convertible Bond (FCCB);

4. On the facts and circumstances of the case the ld.
CIT(A) has erred in deleting the addition of Rs.
135,31,98,403/- made by AO on account of alleged low
profit by rotating entries of purchase/sales within group
companies."

"Grounds of ITA No. 5165/D/2013:

1. The order of ld. CIT(A) is not correct in law and facts;

2. On the facts and circumstances of the case the ld.
CIT(A) has erred in deleting the addition of Rs.
4,11,99,400/- made by AO on account of disallowance of
expenses relating to External Commercial Borrowing
(ECB);
                                  10   ITA Nos. 4888 to 4894/D/2013,
                                                5160 to 5165/D/13 &
                                           C.O. Nos. 44 & 45/D/2014

      3. On the facts and circumstances of the case the ld.
      CIT(A) has erred in deleting the addition of
      Rs.18,99,29,872/- made by AO on account of
      disallowance of expenses relating to Foreign Currency
      Convertible Bond (FCCB);

      4. On the facts and circumstances of the case the ld.
      CIT(A) has erred in deleting the addition of Rs.
      120,95,68,900/- made by AO on account of alleged low
      profit by rotating entries of purchase/sales within group
      companies."

6.    In all these substantive grounds of the assessee's appeal, it has

been pleaded that the CIT(A) has decided the appeal of assessee

without observing the principle of nature justice.

7.    Grounds of Cross Objections read as under:

      "Grounds of Cross Objection No.44/D/2014 read as
      under :

      1.     That having regard to the facts and circumstances
      of the case, the ld. CIT(A) has erred in law and on facts
      in not reversing the action of ld. AO in making addition
      of Rs. 37,01,589/- on account of transaction made with
      M/s XL Telecom & Energy Ltd. (Purchases/Sales) by
      wrongly observing it as sham transaction and impugned
      addition has been made that too without considering the
      facts and circumstances of the case and without giving
      adequate opportunity of hearing.

      2.    That in any case and in any view of the matter,
      action of ld. CIT(A) in not reversing the action of ld. AO
      in making the impugned addition of Rs. 37,01,589/- is
      bad in law and against the facts and circumstances of the
      case.

      3.    That the cross objector craves the leave to add,
      amend, modify, delete any of the grounds of cross
      objection before or at the time of hearing."
                                                             11   ITA Nos. 4888 to 4894/D/2013,
                                                                           5160 to 5165/D/13 &
                                                                      C.O. Nos. 44 & 45/D/2014

                       "Grounds of Cross Objection No.45/D/2014 read as
                       under:

                       1.     That having regard to the facts and circumstances
                       of the case, the ld. CIT(A) has erred in law and on facts
                       in not reversing the action of ld. AO in making addition
                       of Rs. 1,05,455/- on account of transaction made with
                       M/s XL Telecom & Energy Ltd. (Purchases/Sales) by
                       wrongly observing it as sham transaction and impugned
                       addition has been made that too without considering the
                       facts and circumstances of the case and without giving
                       adequate opportunity of hearing.

                       2.    That in any case and in any view of the matter,
                       action of ld. CIT(A) in not reversing the action of ld. AO
                       in making the impugned addition of Rs. 1,05,455/- is bad
                       in law and against the facts and circumstances of the case

                       3.    That the cross objector craves the leave to add,
                       amend, modify, delete any of the grounds of cross
                       objection before or at the time of hearing."


                             Summary of aggregate additions/disallowance after ld. CIT(A)'s order
Issue Involved     A.Y.        A.Y.        A.Y.         A.Y.         A.Y.           A.Y.          A.Y.        Total
                   2004-05     2005-06     2006-07      2007-08      2008-09        2009-10       2010-11
Preliminary        45050       103747      103747       103747       103747         103747        103747      667532
Expenses
Bogus              -           8167898       8180263     41376272    108442456     44180025      -            210346917
Purchases
Interest           -           -             -           -           -             137133433     16183397     153316830
u/s 36(1)(iii)
Gain on            -           -             -           -           -             622649700     19053372     813603072
FCCB due
To prepayment
(Enhancement)
Cash               -           -             -           -           -             19451000      5800000      25251000
Generation
(Enhancement)
Purchases/Sales    -           -             3701589     -           -             -             -            3701589
­    M/s      XL
Telecom        &
Energy Ltd.
Deduction u/s      38842563    91541646      494767515   827160478   175634572     1225629345    811621935    5246098054
80IA
Deduction u/s      2699907         6948759   2699907     634080      3260237       2961812       8019160      27223862
80IB
Total              41587520    106762050     509453021   869274577   1862341012    2052109065    1032681611   6480208856
                                 12   ITA Nos. 4888 to 4894/D/2013,
                                               5160 to 5165/D/13 &
                                          C.O. Nos. 44 & 45/D/2014

8.    After hearing arguments, counter arguments and rejoinders

raised by ld. AR, Shri Gupta and by ld. CIT(DR) with respect to the

various grounds in various years, we decide the issues as under:

      1.    With regard to the disallowance of preliminary

      expenses aggregating to Rs. 667532/- which is issue in all the

      assessment years it was argued that no incrementing document

      was found during the search operation with regard to

      preliminary expenses.     Hence, such addition/disallowances

      could not have been made in the assessments finalized as a

      result of search u/s 143(3)/153A of the Act. It was submitted

      that assessee had already submitted Return of Income along

      with profit and loss account and balance sheet for various

      years. The assessments for A.Y. 2004-05, 2005-06 & 2006-07

      were made u/s 143(3) of the I.T. Act and no disallowance was

      made, therefore, there cannot be an addition in the

      assessments made in consequence of search u/s 143/153A of

      Income Tax Act in consequence of search operation. The ld.

      DR pleaded that even if no incrementing document was found,

      such disallowance can be made while making the assessment

      u/s 143(3)/153A of the I.T. Act. On this issue ld. Counsel for

      assessee relied on the following decisions to support his

      contention :-
                            13   ITA Nos. 4888 to 4894/D/2013,
                                          5160 to 5165/D/13 &
                                     C.O. Nos. 44 & 45/D/2014

·     All Cargo Global Logistics Ltd. vs. DCIT (2012) 18
      ITR (Trib.) 106 (Mum.) (SB);
·     Gurinder     Singh    Bawa     vs.   DCIT     (2012)       28
      Taxmann.com 328 (Mum.) (Trib.);
·     Jai Steel India vs. ACIT, 259 CTR 281 (HC)
      (Rajasthan);
·     Kusum Gupta vs. DCIT, ITA Nos. 4873/Del/2009,
      (2005-06) 2510 (A.Y. 2003-04), 3312 (A.Y. 2004-05)
      2833/Del/2011 (A.Y. 2006-07);
·     MGF Automobiles Ltd. vs. ACIT, ITA Nos. 4212 &
      4213/Del/2011;
·     Tarannum Zafar Khan vs. ACIT, ITA Nos. 5888 to
      5890/Mum./2009;
·     Vee Gee Industrial Enterprises vs. ACIT, ITA No.
      1/Del/2011 & ITA No. 2/Del/2011

After hearing both the sides, we note that there is nothing

clear either from the assessment order of the AO or from the

order of the CIT(A) with regard to the nature of the

preliminarily expenses.    It is also not clear whether such

expenses were allowable at all. Therefore, keeping in view

the interest of justice and equity, we deem it fit to restore the

issue to the file of the AO. The AO shall decide the issue

afresh after ascertaining the true nature of these expenses of

course providing adequate opportunity of being heard to the

assessee.
                            14   ITA Nos. 4888 to 4894/D/2013,
                                          5160 to 5165/D/13 &
                                     C.O. Nos. 44 & 45/D/2014

2.    The other issue is with regard to the disallowances of

interest u/s 36(i)(iii) of I.T. Act in the A.Y. 2009-10 and 2010-

11 of Rs.13,71,33,433/- and Rs.1,61,83,397/- respectively.

On this issue it was pleaded that such disallowances could not

be made u/s 143(3)/153A as there was no incrementing

documents were found during the course of search with regard

to payment of such interest. The assessee has not transferred

any funds to its sister concerns but these were debits as a

result of sale in the ordinary course of business. The amount

was not a loan. Further, the payments made against these

purchases were not out of interest bearing borrowed funds.

He pleaded that such disallowance should not have been

made. On the other hand, ld. CIT(DR) relied on the order of

the authorities below and pleaded that such contentions were

not raised before the AO as well as before the CIT(A). He

pleaded to sustain the addition. After hearing both the sides

and considering the submissions made and also looking to the

page 1 to 7 of the paper book submitted before the CIT(A), we

are of the view that true nature of transaction was not

ascertained by authorities below.         The true nature of

transaction and legal contentions on this issue has not been

considered by the authorities below. Therefore, in the interest
                            15   ITA Nos. 4888 to 4894/D/2013,
                                          5160 to 5165/D/13 &
                                     C.O. Nos. 44 & 45/D/2014

of justice and equity, we find it appropriate to restore the issue

in both these years to the file of the AO to be decided afresh

after providing adequate opportunity of being heard to the

assessee.

3.    The other issue raised in these appeals is on account of

gain on FCCB due to repayment of Rs.62,26,49,700/- in A.Y.

2009-10 and Rs.1,90,53,372/- in A.Y. 2010-11.             It was

submitted by ld. AR that this addition was not made by the

AO but it has been made by the CIT(A) and the income was

enhanced accordingly.     The CIT(A) has taken a view that

these bonds (FCCB) were prematurely repaid at discount.

Therefore, there was a gain which deserve to be taxed. The ld.

AR submitted that there was no incrementing material found

during the course of search qua this issue.         Hence such

disallowance could not have been made in assessments

finalized u/s 143(3)/153A of the Income Tax Act. He further

submitted that these convertible bonds were loans which were

capital receipts and short repayment of such loans would not

result in taxable income. Ld. AR draw our attention to page

1380 of paper book which are submissions before the CIT(A).

These Convertible bonds          proceeds   were    utilized for

procurement of fixed assets. It was also pleaded that CIT(A)
                           16    ITA Nos. 4888 to 4894/D/2013,
                                          5160 to 5165/D/13 &
                                     C.O. Nos. 44 & 45/D/2014

has found a new source of income which is beyond the power

of CIT(A).     On the other hands, ld. DR justified the

enhancement of the income.

3.1   After hearing both the sides and going through the

material available on record we found that this issue was

raised first time by the CIT(A). We also note that the time

period before the CIT(A) was too short to thrash out the new

issue in detail. In our considered view several factual and

legal issues have not been dealt in detail by the CIT(A). On

this issue we hold that there was inadequate opportunity to the

assessee at the level of the CIT(A) for making the

enhancements of income. Therefore, in the interest of justice

and equity, we deem it fit to remand the matter to the file of

the AO to be decided afresh after providing adequate

opportunity of being heard to the assessee.

4.    Other issue raised in these appeals are with regard to the

addition on account of bogus purchases of Rs. 8167898/- for

A.Y. 2005-06, Rs. 8180263/- for A.Y. 2006-07, Rs. 4137672/-

for A.Y. 2007-08, Rs. 108442456/- for A.Y. 2008-09 &

Rs.44180025/- for     A.Y.      2009-10 aggregating to Rs.

210346917/-. The ld. AR submitted that this addition has

been made only on the basis of statement of Shri Bedi,
                          17   ITA Nos. 4888 to 4894/D/2013,
                                        5160 to 5165/D/13 &
                                   C.O. Nos. 44 & 45/D/2014

Managing Director of the Company in which he has

surrendered an amount of Rs. 75 crores in the hands of the

sister concerns as bogus purchases. It was submitted before us

that if purchases were not verifiable in the hands of sister

concerns, then how could the addition be made in the hands of

assessee company. It was also submitted that there was no

incrementing material which could have indicated anything

with regard to bogus purchases in the hands of the assessee

company. It was also submitted that total addition was of

about Rs. 21 crores approximate, out of which purchases to

the tune of 14.53 crores were from M/s R.H. Impotech Pvt.

Limited; The sister concerns has not purchases any material

from this party. Therefore, how these purchases from this

party can be treated as bogus is the hands of assessee. The

payment has been made by cheques only. Ld. CIT(DR) relied

on the order of the AO and the CIT(A). We have heard both

the sides, we find that CIT(A) has made certain observations

while confirming this disallowance which were not confronted

with the assessee. The CIT(A) has not made anything clear

with regard to the names of the suppliers whose premises were

covered in search operation. What evidences were gathered

with regard to the accommodation entries is also not clear.
                           18   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

The issue regarding the non-substantiating the purchases by

the sister concerns was never confronted to the assessee.

Therefore, in view of these facts and in the interest of justice

and equity and also considering the period of effective hearing

before the CIT(A) being too short we restore the issue to the

file of the AO to be decided afresh in accordance with law

after providing adequate opportunity of being heard.

5.    With regard to the addition of Rs. 1,94,51,000/- in A.Y.

2009-10 and Rs. 58 lacs in A.Y. 2010-11 aggregating to Rs.

2,52,51,000/-. The ld. AR submitted that this issue was taken

up by the CIT(A) by exercising his power of enhancement.

According to the CIT(A) page 65 to 69 of Annexure `A4'

found at the time of search shows that there was a generation

of undisclosed cash. The ld. AR submitted that out of the total

addition made by the CIT(A) an amount of Rs. 59,31,000/-

was out of cash withdrawal from bank account of the assessee

and sister concerns and the balance amount was out of

unverified purchases admitted in the hands of the sister

concerns.    He submitted that the pages showing the

transaction of the assessee and the group concerns as a whole

should be appreciated in a holistic manner. Since the sister

concerns have admitted bogus purchase of Rs. 75 crores and
                           19      ITA Nos. 4888 to 4894/D/2013,
                                            5160 to 5165/D/13 &
                                       C.O. Nos. 44 & 45/D/2014

has offered that amount in their Income-tax Return. It was

submitted that cash deposited and reflected in seized material

is out of bogus purchases in the hands of sister concerns. The

addition in the assessee's hand was nothing but double

addition. The ld. DR relied on the order of the CIT(A) and

submitted that the assessee is trying to make out a new case in

its favour which should not be allowed at this stage and

pleaded to confirm the addition.

5.1   After hearing both the sides we hold that this addition

was made by the CIT(A) by invoking his power of

enhancement.    We are also aware about the fact that the

Hon'ble High Court has fixed the time limit for adjudication

of the first appeal by assessee and the proceedings were

conducted in a time bound manner by the CIT(A). We have

also gone through the order sheet entries of proceedings

before the CIT(A) which has been filed by the ld. CIT(DR)

before us.     Having regard to the totality of facts and

circumstances and in the interest of justice and equity we find

it appropriate to restore the issue to the file of AO to be

decided afresh in accordance with law after providing

adequate opportunity of being heard to the assessee.
                           20   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

6.    The other issues raised in assessee's appeal is with

regard to not allowing deduction u/s 80IB amounting to

Rs.2,69,907/- for A.Y. 2004-05, Rs. 69,48,759/- for A.Y.

2005-06, Rs.26,99,907/- for A.Y. 2006-07, Rs. 6,34,080 for

A.Y. 2007-08, Rs. 32,60,237/- for A.Y. 2008-09, Rs.

29,61,812/- for A.Y. 2009-10 and Rs. 80,19,160/- for A.Y.

2010-11 aggregating to Rs. 2,72,23,862/-. This disallowance

was in respect of profit derived from Jammu Unit.          It is

submitted that appellant manufacture routers, modems by

assembling components purchased from several sources. It

was submitted that the assessee has been allowed deduction

u/s 80IB in the A.Y. 2004-05, 2005-06 & 2006-07, where the

orders were passed u/s 143(3) of the I.T. Act.                  No

incrementing material was found with regard to the claim of

deduction u/s 80IB during the course of search. It was also

pleaded that no opportunity was given by the ld. CIT(A)

before making adverse observations in respect of profit and

loss account showing different amount of profit. The ld. AR

draw our attention to various pages of the paper book to

impress upon that papers found during the course of search

clearly established that there was a manufacturing process

under taken by the assessee.
                             21   ITA Nos. 4888 to 4894/D/2013,
                                           5160 to 5165/D/13 &
                                      C.O. Nos. 44 & 45/D/2014

6.1      Ld. DR supported the orders of the AO as well as

CIT(A) and pleaded that no inference is called for.

6.2      We have heard both the sides on this issue we have

considered the material available on record. We find that this

issue was decided without providing adequate opportunity of

being heard to the assessee. Adverse observations were also

not confronted with the assessee. Having regard to the totality

of facts and circumstances and in the interest of justice and

equity, we are restoring this issue to the file of AO to be

decided afresh in accordance with law after providing

adequate opportunity of being heard to the assessee.

7.       The other major issue involved in all the assessment

years is with regard to not allowing deduction u/s 80IA of the

I.T. Act. The claim of 80IA disallowed in different years is as

under:

         "Deduction u/s 80IA Rs.3,88,42,563/- for AY
         2004-05, Rs.915,41,646/- for A.Y. 2005-06,
         Rs.49,47,67,515/-      for    A.Y.      2006-07,
         Rs.82,71,60,478/-      for     AY       2007-08,
         Rs.175,65,34,572/-      for    A.Y.     2008-09,
         Rs.122,56,29,345/-      for    A.Y.     2009-10,
         Rs.81,16,21,935/- for A.Y. 2010-11 aggregating to
         Rs.524,60,98,054/-."

7.1      Before us the ld. Counsel for the assessee submitted that

for the interest of justice and equity the issue of deduction u/s
                             22    ITA Nos. 4888 to 4894/D/2013,
                                            5160 to 5165/D/13 &
                                       C.O. Nos. 44 & 45/D/2014

80IA needs to be restored to the file of the AO for fresh

adjudication. The ld. AR submitted that the time given by the

CIT(A) was too in adequate for deciding the issue as the

appeal proceedings before the CIT(A) started at the end of the

March till the beginning of the June, 2013 only and the ld. AR

pointed out our attention towards the adverse observations of

the CIT(A) with regard to that no opportunity was given to the

assessee. These adverse observations narrated by the ld. AR as

under:

         "Adverse observations for which no opportunity
         was given:

         1.    Ld. CIT(A) has mentioned at page 43 of the
         appeal order that the photocopies of Form No.
         10CCB do not contain the enclosures namely
         balance sheet, profit and loss account and other
         schedules of "Tulip Connect" and that copies of
         balance sheet and profit and loss account of "Tulip
         Connect" available in the departmental assessment
         records are photocopies.

         2.     Ld. CIT(A) has mentioned at page 43 of the
         appeal order that copies of balance sheet and
         profit & loss account of "Tulip Connect" though
         are bearing signatures of two directors and the seal
         of the company but the same has not been signed
         by the auditor and, therefore, such new kind of
         claim by filing photocopy of C.A. Certificate in
         Form No. 10CCB would not be correct.

         3.    Ld. CIT(A) has mentioned at page 69 in
         para 18 of the appeal order that annual reports of
         the assessee show that it offers many kinds of
         services and he has made description of such
                      23   ITA Nos. 4888 to 4894/D/2013,
                                    5160 to 5165/D/13 &
                               C.O. Nos. 44 & 45/D/2014

services which according to him do not qualify for
deduction u/s 80IA.

4.     Ld. CIT(A) has mentioned in para 19-26 at
page 69-73 of the appeal order that trial balance
filed by the assessee showed the income stream as
80IA income and non 80IA income, consolidated
account of cost of goods and does not show the
break up. He has also referred the seized material
showing the share of DOT.

5.     Ld. CIT(A) has mentioned in para 28 at
page 75 of the appeal order that assessee was
requested during the appeal proceeding to make
available the copies of the sales-tax/VAT and
service tax returns, which were not made available.
In reply, it is submitted that this requirement was
asked on 10.06.2013 just giving one day's time
and it was submitted vide letter dated 11.06.2013
at PB 1515 that it is not possible to collect all these
returns from various locations scattered around the
country within such short time.             However,
summary of the sales as desired by ld. CIT(A) for
F.Y. 2008-09 was furnished to him which are at
PB 1629-1630.         Appellant is having twenty
branches throughout the country and these returns
are filed at respective locations and it was not
possible within such short time to retrieve them.

6.     Ld. CIT(A) has mentioned in para 29-30 at
page 75-76 of the appeal order that the revenue
shown to DOT is not comparable to the kind of
income shown for claiming deduction u/s 80IA
and that appellant has not submitted the details of
different types of revenue receipts to AO/CIT(A).

7.    Ld. CIT(A) has mentioned in para 31-32 at
page 76 of the appeal order that the trial balance
for F.Y. 2008-09 has breakup of twenty one
services but these are consolidated figures in
respect of different branches and three out of them
just mentions the amounts under the head
Recurring charges. Further, he has mentioned that
                    24    ITA Nos. 4888 to 4894/D/2013,
                                   5160 to 5165/D/13 &
                              C.O. Nos. 44 & 45/D/2014

it is not possible to ascertain the account heads
under income streams which have been taken to
80IA income and that information provided to
DOT as per seized material are such that they
cannot be reconciled with profit and loss account.

8.    Ld. CIT(A) has mentioned in para 33-34 at
page 76-77 of the appeal order that assessee has
supplied net working equipment to HDFC banks
under EDICS Unit and has claimed deduction u/s
80IA which according to ld. CIT(A) is not
available to the assessee and thus, ld. CIT(A) held
that accounts are not verifiable with regard to
service income from eligible telecom service.

9.    Ld. CIT(A) has mentioned in para 35-36 at
page 77-78 of the appeal order that assessee did
not produce the relevant details during post search
proceedings in spite of lapse of four and a half
months.

10. Ld. CIT(A) has further mentioned in para
35-36 at page 77-78 of the appeal order that
account of Golf Technologies P. Ltd. seized as
Annexure A-9 from the Registered Office is
different than the ledger account filed in appeal
proceeding in as much as there are certain
narrations like sales others, purchases VPN South
are mentioned in the ledger account filed in appeal
proceedings, whereas ledger account seized does
not mention "Tulip Connect" only is mentioned in
the case of plant and machinery and thus assessee,
according to ld. CIT(A), has changed its accounts
and further that similar discrepancies have been
noticed in the case of the ledger accounts of copies
of other sister concerns filed during the appeal
proceeding and those contained in seized
annexures.

11. Ld. CIT(A) has mentioned in para 3 at
page 92 of the appeal order that the appellant has
not given any specific date as the commencement
date for its new undertaking both during search
                    25   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

proceedings and during assessment proceeding and
also about the closure of EDICS undertaking.
In reply, it is submitted that ld. CIT(A) has not
mentioned in this para that such date of
commencement was asked from the assessee and
yet was not given. There is no mention of any
precise data etc. in the appeal order.

12. Ld. CIT(A) has mentioned at para 9 at page
94-95 of the appeal order that mere technical note
without any supporting documents cannot be an
evidence to establish that the appellant started a
new undertaking Tulip Connect and there has to be
agreement, tender acceptance letter, logistics
involved etc. Ld. CIT(A) has further contended
that possessing ISP Licenses does not mean that
appellant has actually started providing VPN
Services, more so when Mumbai, Kolkata ISP
Services were not even started as per application
dated 31.1.2005 filed to DOT for obtaining VPN
license.

13. Ld. CIT(A) has mentioned in para 2(i), (ii),
(iii), (iv), (v) at page ­ 97,98 of the appeal order
that obtaining ISP Licenses does not establish that
the appellant started Tulip Connect Undertaking
for providing VPN Services and it was necessary
on the part of the appellant to show evidences of
providing VPN Services, more so when assessee in
its application to DOT dated 31.1.2005 has
mentioned that it has not yet started. Further that
under Kerala license, business started on which
date was not established.

14. Ld. CIT(A) has mentioned in para 3(ix)(i)
at page 101 to 102 of the appeal order that letter
of M/s Pan Indian Network Infravest P. Ltd. PB
485-487 was in two different fonts.

15. Ld. CIT(A) has mentioned in para 3(ix)(ii)
at page 102 of the appeal order that purchase
order of bank of Punjab Ltd. PB 488 is in different
fonts and does not mention the location, for which
                    26   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

these services were to be obtained and information
in the purchase order is vague.

16. Ld. CIT(A) has mentioned in para 3(ix)(iii)
at page 102 of the appeal order that order of Tata
Finance Ltd. was in the same fonts as that of Bank
of Punjab and was for Gurgaon office.

17. Ld. CIT(A) has mentioned in para 3(ix)(iv)
at page 102-103 of the appeal order that the
purchase order from HDFC Bank, PB 490
mentions the name of the assessee as Tulip
Telecom Ltd. whereas at the relevant time the
name of the appellant was Tulip IT Services Ltd.

18. Ld. CIT(A) has mentioned in para 3(ix)(v)
at page 103 of the appeal order that purchase
order from M/s Glenmark Pharmaceuticals Ltd.
mentioned only "installation" and "recurring" at
PB 491.

19. Ld.CIT(A) has mentioned in para
3(x)(i)(ii)(iii)(iv) at page 103-105 of the appeal
order that purchase orders from M/s Excel India
P. Ltd. PB 639, M/s B.D. PB 642, mention the
word "Tata" in the list of deliverables.

20. Ld. CIT(A) has mentioned in para
3(xi)(i)(ii)(iii) at page 106 of the appeal order
that purchase orders of Philips India (PB 202-203)
from Zicom (PB 204, 205-207, 208), M/s Excel
(PB 211) are for different cities in India whereas
All India License was given to the assessee on
02.11.2004.

21. Ld. CIT(A) has mentioned in para 3(xi) at
pge 106-107 of the appeal order that only
photocopies of the purchase orders were given and
original were not produced. Therefore, their
authenticity is in doubt.

22. Ld. CIT(A) has mentioned in para 1 of 3
(xii) at page 107 of the appeal order that the
                    27   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

letter of intent (LOI) from M/s Air Liquide North
India P. Ltd. dt. 07.09.2005 includes scope written
as "128 KBPS radio-frequency link between New
Delhi to Alwar with uptime of 99%", thus, alleging
that this service is same as was being provided by
the appellant during F.Y. 2003-04, more so when
there is no mention of providing internet or VPN
Services.

23. Ld. CIT(A) has mentioned in para 2 of
3(xii) at page 107 of the appeal order that there
is letter from the appellant dt. 19.12.2005 to M/s
Mirza Tanners Ltd. Noida, wherein the appellant's
introduction (reproduced at page 107 of the
appellate order) has absolutely no mention of the
appellant being provider of VPN Services and all
the features mentioned by the appellant were
provided even during F.Y. 2003-04 under the
name EDICS.

24. Ld. CIT(A) has mentioned in para 3(xii)(3)
at page 108 of the appeal order that the customer
namely HT Media Ltd. has agreed for taking radio
link at their Mumbai Office, and this is the same
service which the appellant was providing even
during F.Y. 2003-04 and there is no mention of
providing internet or VPN Services.

25. Ld. CIT(A) has mentioned in para 3(xii)(4)
at page 108 of the appeal order that the
agreement between the appellant company in M/s
E.I. Dupont India P. Ltd. says that the appellant
was engaged for providing round-the-clock radio
connectivity and related maintenance and supports
services and this is the same service which the
appellant was providing even during F.Y. 2003-04
and there is no mention of providing internet or
VPN Services.

26. Ld. CIT(A) has mentioned in para 3(xii)(5)
at page 108 of the appeal order that in the master
service agreement dated 21.07.2005 between the
appellant and ONGC Videsh Ltd. (217-18 of
                     28   ITA Nos. 4888 to 4894/D/2013,
                                   5160 to 5165/D/13 &
                              C.O. Nos. 44 & 45/D/2014

appeal order). It is mentioned that DOT has
issued Category-A ISP/NLD/ILD Licenses to
Tulip whereas as per the copies of the licenses, the
appellant had not even got license for providing
VPN Service, leave alone NLD/ILD Services and
that the appellant made applications seeking
license for NLD Service only on 10.01.2006.
Further, ld. CIT(A) has relied upon the covering
letter enclosed with the application to DOT for
NLD services (PB 2477-2484) which states that
the company wishes to migrate to NLD Service
license from the provisional IP/VPN license issued
vide provisional license no. 820-820/05-LR dated
06.10.2005 (PB 2484) and alleges that whether it
was a black dated agreement and that there was
incorrect mentioning of the status of the affairs
while entering into a back dated agreement.

27. Ld. CIT(A) has mentioned in para 3(xiii) at
page 109 of the appeal order has mentioned that
photocopies of agreements/letters/purchase orders
submitted during the appeal proceedings cannot be
relied upon as originals were not produced on the
ground that they were not readily available and
that it could not be established that Tulip connect
undertaking was started for 13.04.2004.

In reply, it is submitted that originals could not be
produced as the time given was not adequate and
in any case all these agreements/letters are from
reputed companies and direct verification could
have been made. In any case evidences/pleadings
referred earlier clearly indicate the commencement
of Tulip Connect Undertaking.

28. Ld. CIT(A) has mentioned in para-4 at
page 109-110 of the appeal order that installation
of towers as claimed by the assessee could not
establish anything as towers were under EDICS
also.

29. Ld. CIT has mentioned in para-5 at page
110 of the appeal order that assessee was already
                    29    ITA Nos. 4888 to 4894/D/2013,
                                   5160 to 5165/D/13 &
                              C.O. Nos. 44 & 45/D/2014

using leased line/bandwidth under EDICS also
and, therefore, how can it be said that by incurring
expenditure on lease line/bandwidth, assessee has
commenced new undertaking.

30. Ld. CIT(A) has mentioned at page 110-111
of the appeal order that the note on Tulip
Connect and EDICS submitted by the appellant
gives a list of different types of ISPs as Dial up
ISP, DSL, ISP, Cable/Fiber-Optic ISP, Wifi ISP
and Satellite ISP but it does not say to which
category the appellant belongs to or whether it
provides all the types of services and if so where
and when and to whom such services had been
provided and the same has not been provided
earlier before the AO nor during the appellate
proceedings.

31. Ld.CIT(A) has mentioned at page 111-112
of the appeal order that the claim of the appellant
that EDICS business did not require
license/permission from DOT is not correct.

32. Ld.CIT(A) has mentioned at page 113-115
of the appeal order that though assessee has
confirmed that there were only four ISP licenses
issued by DOT but on the basis of enquiries made
with DOT, the assessee was served a copy of
DOT's letter giving provisional permission for
VPN Services which was dated 06.10.2005 and
that on the one hand assessee claimed that it was
rendering VPN Services immediately on receipt of
ISP license & on the other hand in the application
submitted before DOT dated 31.10.2005, assessee
has mentioned that it has not yet started providing
VPN Services, which later on was allowed by
separate license dated 06.10.2005.

33. Ld. CIT(A) has mentioned at page 127, 128
of the appeal order that though the assessee has
claimed that a new undertaking by the name tulip
connect was started in F.Y. 2004-05 for providing
VPN Services but DOT letter shows that the
                     30    ITA Nos. 4888 to 4894/D/2013,
                                    5160 to 5165/D/13 &
                               C.O. Nos. 44 & 45/D/2014

assessee was given provisional approval on
06.10.2005 to enable providing VPN Services
which shows that the appellant could have started
VPN Services only in F.Y. 2005-06 and this fact is
corroborated from director's report for F.Y. 2005-
06, which mentions that the company has launched
its wireless based VPN Services branded as Tulip
Connect and that assessee was already offering
VPN Services to its customers since 1999-2000
using traditional technologies and that the assessee
has already taken the lease lines from
MTNL/BSNL from A.Y. 2000-01.

34. Ld. CIT(A) has mentioned at page 132-133
of the appeal order that though the annual
reports/directors reports for F.Y. 2003-04 mention
about the closure of EDICS but enquiry made by
CIT(A) with ROC, BSE, SEBI, and NSE revealed
NSE forwarding such annual reports and there was
no mention of closure of EDICS business found in
the notes to the accounts was also missing in the
annual report of F.Y. 2004-05 filed before the said
authorities.

35. Ld. CIT(A) has mentioned in para 2(v) at
page 147 to 148 of the appeal order as under:
"The consumption of electricity of per month was
in the range of Rs. 2000 per month and thus the
process cannot be termed as carried out with the
aid of power. The details of the electricity charges
paid as per their electricity bills recovered from the
premises is as under:

      August 2009-        Rs. 1956/-
      July 2009 -         Rs. 1617/-
      June 2009 -         Rs. 1314/-
      May 2009 -          Rs. 1923/-
      April 2009 -        not available
      March 2009 -        Rs. 1300/-

36. Ld. CIT(A) has mentioned in para 2(vi) at
page 148 of the appeal order as under:
                    31   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

      "The only activity if it all can be called as
      being carried out with the aid of power (as
      required u/s 80IB (2) (iv) is soldering of
      connector to the PCB Board, which cannot
      be termed, in the given circumstances of the
      case, as a manufacturing process carried on
      with the aid of power. No expenses relating
      to generator work debited in the P&L
      account."

37. Ld. CIT(A) has mentioned in para 2(vii) at
page 148 of the appeal order as under:

      "The total number of employees who were
      actually working at the premises was only
      six as against 11 mentioned in the
      attendance register. Even here the survey
      party also noted that only two of the
      employees were employed for the purpose
      of assembling activity."

38. Ld. CIT(A) has mentioned in para 2(viii) at
page 148 of the appeal order as under:

      "It was also noted that the total salary
      actually paid and received by the employees
      working in the unit was 7.14 lacs as against
      Rs. 11.15 lacs debited in the P&L account of
      the said premises."

39. Ld. CIT(A) has mentioned in para 7 at
page 152 & 153 of the appeal order.

40. Ld. CIT(A) has mentioned in para 1 at
page 174-175 of the appeal order that some of
the suppliers' premises were also covered in search
and said action revealed that the appellant and its
associates had obtained accommodation entries.

41. Ld. CIT(A) has mentioned in para 1 at
page 174-175 of the appeal order that three
associate concerns of the appellant i.e. M/s Pine
Wood Information Systems P. Ltd. M/s Golf
                          32   ITA Nos. 4888 to 4894/D/2013,
                                        5160 to 5165/D/13 &
                                   C.O. Nos. 44 & 45/D/2014

      Technologies P. Ltd. andM/s Fire Pro Wireless and
      Technologies P. Ltd. have accepted that they were
      not in position to substantiate the purchases from
      some of the companies and they were not in
      position to produce the suppliers along with the
      books of accounts for confirmation and that three
      associates concerns accepted to have taken
      accommodation entries without actual supply of
      material and that some of the suppliers were
      common.

      42. Ld. CIT(A) has mentioned in para 4 at
      page 177 of the appeal order that mode of
      delivery has been shown by hand, which could not
      have been delivered by hand.

      43. Ld. CIT(A) has mentioned para 4 at page
      177 of the appeal order that associate concerns
      are operating from the registered office of the
      assessee company and were employing only one or
      two employees.

      44. Ground relating to alleged suppression of
      profit on purchase and sale from/to M/s XL
      Telecom & Energy Ltd. Rs. 3701589 & Rs.
      105455-Our C.O. (Relevant to A.Y. 2006-07 &
      2008-09). This ground has been dealt by ld. AO at
      page 35 of A.Y. 2006-07 and page 36 of A.Y.
      2008-09 whereas ld. CIT(A) has discussed this
      issue at page 177-178 of the appeal order."

The ld. AR has also submitted a copy of letter received by

him from the ld. CIT(A)-XXXI, New Delhi which is also

reproduced as under :

      "With reference to the letter of CIT-Central -1,
      New Delhi dated 16.04.2014, forwarding the letter
      of CIT(DR) H Bench ITAT New Delhi dated
      16.04.2014, it is to state that sufficient number of
      opportunities were given to the appellant to lead
      evidences in support of various grounds taken by
                    33   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

them. The notings in the order sheets of the appeal
folder show that 38 hearings in all have been held
and on each occasion detailed discussions have
taken place on all the matters involved in the
appeal. The proceedings were in fact conducted
on priority in order to meet the deadline fixed by
the Hon'ble High Court of Delhi. The entire set of
note sheets containing notings of the 38 hearings
held between 27/02/2013 to 13/06/2013 containing
37 pages is enclosed herewith for reference.

       I may recall here that due to the conduct of
the appellant and the complexity of the issues
involved, the undersigned had approached the
Hon'ble High Court of Delhi to do away with the
time limit fixed by Hon'ble High Court which was
vehemently opposed by the appellant and the
Hon'ble Court gave only one month's extension.
When the dead line was approaching, I had moved
the Hon'ble High Court to further extend the time
by 1 more month which again was also opposed by
the appellant.

       It was the appellant who had filed the appeal
and was allowed several opportunities to lead
evidences in support of grounds raised. It has been
stated by the appellant, in the note forwarded by
the CIT(DR), that issue of deduction u/s 80IA was
taken by CIT(A) for the first time which is
contrary to the facts on records. I had only
brought into the order the evidences which were
already part of the assessment records and which
were lead by the appellant during the appeal
proceedings. The adverse observations referred to
in the said appellant's note are observations on the
evidences which are already forming part of the
assessment records or which have been furnished
during the appeal proceedings by the appellant's
themselves. These are in reality narration or
description of such evidences and their relevance
to the facts in issue. Incidentally it is noted that
the comments of the appellant at point no. 5 is
incorrect. The requirement of copies of the Sales
                    34   ITA Nos. 4888 to 4894/D/2013,
                                  5160 to 5165/D/13 &
                             C.O. Nos. 44 & 45/D/2014

Tax/VAT and Service Tax returns was formally
made on 06.05.2013 itself and not on 10.06.2013
as mentioned by them (May like to see order sheet
noting of 06.05.2013 in this regard).

      The issue of providing adequate opportunity,
the manner in which the same has been availed by
the appellant can be made out from the body of the
appeal order.       However, for the sake of
convenience and ready reference, the following
paragraphs may be referred to.

      1.    para 3 on page 13
      2.    para 6 on page 15
      3.    page 8 on page 15 & 16
      4.    para 9 on page 16
      5.    para 10 on page 16
      6.    para 11 on page 16
      7.    last sentence of para 1 of ground no.
            1.2 on page 22
      8.    para 4 on page 23
      9.    para C on page 35
      10.   para 1 (last sentence) on page 36
      11.   para 2 on page 36
      12.   para 25 on page 73 & 74
      13.   para 26, 27 on page 74
      14.   para 36 & 37 on page 78
      15.   para 2 on page 92
      16.   para 5 on page 93
      17.   para 8 on page 94
      18.   para (ii) on page 99
      19.   para (vi) on page 100
      20.   First new para without any numbering
            on page 107 (starting with "The above
            photocopies....")
      21.   para 7 on page 152

It is also mentioned here that as an appellate
authority I am not a party before the Hon'ble ITAT
Delhi. The above factual details are therefore,
forwarded herewith as requested by CIT(Central)-
1, Delhi."
                           35   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

7.2   On the other hand, ld. DR submitted that CIT(A) has

provided adequate opportunities. He also submitted a copy of

order sheet of proceedings before the ld. CIT(A).

7.3   We have heard both the sides from the issue, we find

that although the disallowance was made by the AO for claim

of deduction u/s 80IA.     However, the CIT(A) has sought

compressive details/information from the assessee.          The

CIT(A) has tried to give effective hearing to the assessee.

However, the time period of hearing before the ld. CIT(A)

was just over three months which in our considered view was

not adequate having regard to the complex nature of the

business of the assessee and geographical scattered branches

of the assessee from where the assessee was required the

details to be submitted before the CIT(A). In our considered

view in such a short period the required/asked details could

not have been collected by the assessee to comply the query

raised by CIT(A).    We have also considered the synopsis

which has been reproduced in the earlier paras.         Certain

requirements of confronting the assessee were not specifically

met by the CIT(A) by giving specific opportunity on these

issues. We have also gone through the order sheet entries

recorded by the CIT(A) on day to day basis. In considering all
                           36   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

these aspects we are of the view that for making such a huge

addition for not allowing deduction u/s 80IA of the Act, which

was allowed in some of the assessment years while framing

the assessment u/s 143(3) of the Act a detailed and adequate

opportunity needs to be provided to the assessee.        In our

considered view this entire issue requires thorough enquiries

at the level of the AO. Having regard to the totality of facts

and circumstances of the present case and considering the

nature of business and the requirement of the enquiries to be

conducted on the various aspects of the issue we hold that

assessee could not get effective and adequate opportunities of

being heard before the CIT(A) to meet the adverse

observations made by the CIT(A). Therefore, considering all

these aspects we hold that a fresh adjudication is necessary on

this issue. We, therefore, restore the issue to the file of the

AO for deciding fresh in accordance with law after providing

adequate opportunity of being heard to the assessee.        We

hereby clarified that none of our observation are on the merits

of the addition.

Cross Objections : -

8.    The sole issue in both the cross objections of the

assessee is with regard to suppression of the profit by making
                           37   ITA Nos. 4888 to 4894/D/2013,
                                         5160 to 5165/D/13 &
                                    C.O. Nos. 44 & 45/D/2014

transactions of purchases / sales from M/s XL Telecom and

Energy Limited. The addition involved is of Rs. 37,01,589/-

and Rs.1,05,431/- for A.Y. 2006-07 & 2008-09 respectively.

The ld. AR submitted that no incrementing material found

during the course of search hence no disallowance is to be

made while framing the assessment u/s 143 (3) / 153A of the

I.T. Act. It was also pleaded that no adequate opportunity was

given by the Assessing Officer on this issue. It was also

submitted that factually wrong findings have been recorded

with regard to purchases. The ld. AR submits that sales were

not more than purchases for the same he referred to the ledger

account of M/s XL Telecom and Energy Ltd. in the assessee's

books of account. On the other hand, ld. DR relied on the

order of the AO as well as CIT(A).



8.1   After hearing both sides on this issue we hold that this

issue also requires a re-look at the level of the AO. We remit

this issue to the file of the AO to be decided afresh in

accordance with law after providing adequate opportunity of

being heard to the assessee.



Departmental Appeals : -
                             38   ITA Nos. 4888 to 4894/D/2013,
                                           5160 to 5165/D/13 &
                                      C.O. Nos. 44 & 45/D/2014

9.    In these appeals there is a ground with regard to the

disallowance u/s 10A of the I.T. Act which was allowed by

the CIT(A).

10.   In the A.Y. 2004-05 the ground is relating to

disallowance u/s 10A of the I.T. Act. The disallowance was

made by the AO without any discussion. The CIT(A) deleted

the same. Ld. DR submitted that if all other major issues if

considered for restoring to the file of the AO then this issue

may also be restored to the file of the AO for fresh

adjudication. After hearing both the sides, we are of the view

that this issue is also required to be considered at the level of

the AO afresh. Therefore, we restored the issue to the AO's

file for a fresh adjudication as per law. The AO shall provide

adequate opportunity of being heard to the assessee before

finalization of the issue.

11.   In all the assessment years under appeal except the

assessment year 2005-06 the Revenue also raised the issue

relating to addition on account of reduction in profit by

rotating purchase and sales within the group companies which

was deleted by the CIT(A). Ld. DR submitted that AO has

made the addition based on evidences and pleaded that

CIT(A) was not justified in deleting the addition.          After
                                   39   ITA Nos. 4888 to 4894/D/2013,
                                                 5160 to 5165/D/13 &
                                            C.O. Nos. 44 & 45/D/2014

       hearing both the sides, we find it appropriate to set aside this

       issue also to the file of the AO for deciding afresh as per law

       after providing adequate opportunity of being heard to the

       assessee.

       12.   The other issue in the revenue's appeal relevant for

       A.Y. 2009-10 and 2010-11 is with regard to deleting the

       disallowance made by the AO in respect of expenses relating

       to external commercial warrant (ECB) and deleting the

       disallowance of interest equal to the gain on by back of

       Foreign Currency Bond (FCB). After hearing both the sides

       from this issue we find it appropriate in the interest of justice

       and equity to remit the issue to the file of AO to be decided in

       accordance with law after providing adequate opportunity of

       being heard to the assessee.


9.     In the result, all the appeals by assessee and revenue and cross

objection filed by the assessee are allowed for statistical purposes in

the above terms.

Order pronounced in the open court on this 28th day of August, 2014.

             Sd/-                                 sd/-
       (C.M. GARG)                          (B.C. MEENA)
     JUDICIAL MEMBER                    ACCOUNTANT MEMBER

Dated: the 28th day of August, 2014
TS
                              40   ITA Nos. 4888 to 4894/D/2013,
                                            5160 to 5165/D/13 &
                                       C.O. Nos. 44 & 45/D/2014


Copy forwarded to: -
1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(A)
5.   DR, ITAT

                  TRUE COPY
                                                        By Order,


                                    ASSISTANT REGISTRAR

 
 
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