S.V. MEHROTRA, ACCOUNTANT MEMBER 
AND A.T. VARKEY, JUDICIAL MEMBER

ORDER

S.V. Mehrotra, Accountant Member - This appeal has been preferred by the assessee against CIT(A)'s order dated 29-12-2009 relating to A.Y. 2007-08.

2. Brief facts of the case are that the assessee (hereinafter referred to as 'NIPL'), is a 100% subsidiary ofNokia Corporation, OYJ, which is registered under the laws of Finland and, therefore, is a foreign company. The assessee is an Indian company, having its registered office at Delhi and corporate office at Gurgaon and manufacturing plant at Chennai. The assessee has three SEZ undertakings, namely, NokiaEnterprise Solutions Hyderabad, Nokia Technology Platform Bangalore and Nokia CDMA R&D Unit Mumbai.

2.1 Survey u/s 133A was conducted on the Gurgaon Corporate office and Chennai factory premises of assessee on 8-1-2013. The AO has passed order u/s 201/201(1A) read with section 195 of the I.T. Act, on 15-3-2013. The AO pointed out that the main server and the administrator rights of this system were located at Finland. The employees of NIPL were given user rights on need basis. Reports were generated from the system at Chennai, regarding the payments made by NIPL to Nokia Corporation for software required to be installed in the mobile handsets during manufacturing. He has further observed that these reports were cross checked, collated and compiled year-wise by the employees of NIPL. The invoices raised by Nokia Corporation for software payments were also found and impounded during the course of survey at factory premises at Chennai.

2.2 He has further observed that in course of survey it was found that since commencement of operation at its manufacturing facility in Chennai i.e. FY 2006-07 to 2011-12, NIPL had been making payments for software to Nokia Corporation to the tune of US $ 3,36,26,31,484/- for use in its manufacturing operations as detailed hereunder:

S.No.	F.Y.	Amount in USD
1	2006-07	3,29,384,588
2	2007-08	780,931,513
3	2008-09	529,643,621
4	2009-10	584,174,808
5	2010-10	808,576,221
6	2011-12	329,920,733
	Total	3,362,631,484

2.3 He observed that these payments were made without deduction of tax at source. The AO examined the details with respect to commercial agreements submitted by the deductor and on the basis of these agreements and invoices impounded, concluded that payments were made for software downloads made by NIPL under the agreement for use in manufacturing. The AO, inter alia, has observed as under:

'It was thus required to be examined whether these were in the nature of royalty and whether they fall within the purview of section 9 (1)(vi) of Income Tax Act 1961 and the India Finland Double Taxation Avoidance Agreement. Payments for software are typically characterized as Royalty both under the Act and DTAAs as the confer "use simplicitor" or "right to Use" of proprietary software and are thus taxable on source basis.
Perusal of Transfer Pricing documentation, Software Supply Agreement dated 01.01.2006 and R&D sub-contract agreement between M/s. Nokia Corporation, Finland and M/s. Nokia India Ltd will reveal that payments were being made for various intangibles/intellectual property rights supplied by M/s. Nokia Corporation, Finland. However, in the books of account and the Transfer Pricing documentation these payments were camouflage and shown as payments made for purchase of raw material and spare parts.

Although the invoices clearly mentioned software imports, the software imports had not been reflected in Col. no. 9 of Form 3CEB of NIPL for intangibles. The software imported was reported as clubbed with tangibles. ~II the above facts indicated that preparation of invoices "manually by employees of NIPL on behalf of Nokia Corporation OYJ was a deliberate endeavour with the purpose of camouflaging payment for use/right to use the software downloads in manufacture as purchase of raw materials goods.

The issues in these proceedings u/s 201 r.w.s. 195 of the Act can thus be simply summarized as under:
Whether the sums on account of remittances made by NIPL to Nokia Corporation for software downloads are 'sums chargeable to Tax' as laid down in S 195 of the Act and thus whether NIPL can be held to be an "assessee in default" for non-deduction of tax thereon as per law.'

3. The aforementioned observations were based on his detailed examination of how the transaction was executed which has been considered in para 3.2 of his order. The AO took into consideration the various e-mails, agreements, invoices and statements recorded during the course of survey and concluded that payments made to Nokia Corporation were towards royalty, as agreed by both parties, in the nature of royalty or not.

4. At the outset both the parties requested that first the decision be rendered on the preliminary issue concerning the legality of survey proceedings; reliance to be placed on the evidence collected during survey proceedings and observance of principle of natural justice while framing the order u/s 201/201(1A). The appeal was, therefore, heard apropos the grounds concerning these issues.

5. Ld. Sr. Counsel, Shri Porus Kaka submitted that survey could not be made for TDS proceedings. He pointed out that section 133A(2A) has been newly introduced by the Finance (No. 2) Act, 2014 w.e.f. 1-10-2014, which only entitles the income-tax authorities to conduct survey in regard to TDS proceedings. In this regard ld. Sr. Counsel referred to proviso to sub-section (3), which restricts the impounding of books or other documents and also to take inventory of cash, stock or other valuable articles or thing. He submitted that the authorities impounded laptops, mobile phones allotted to Mr. Prakash Katama and Mr. Rahul Sood without authority. Moreover, the statements of employees present at the time of survey could not be recorded on oath. Income-tax authorities had no power to enter the premises. Thus, the survey carried out prior to 1-10-2014 in regard to TDS proceeding was illegal.

5.1 Ld. Sr. Counsel submitted that assessee's employees fully cooperated in all proceedings and, therefore, summons under section 131 could not be issued by taking recourse to the provisions of section 133A(6), unless it is established that persons present at the time of survey, did not co-operate in survey proceedings. However, in the present case since the employees of the company had fully cooperated with the income-tax authorities during survey, afforded opportunity to the Income-tax authorities to examine documents, therefore, there was no question of any non-cooperation on the part of employees and, therefore, summons u/s 131 could not be issued.

5.2 He submitted that all the employees did their very best to answer various queries raised by Income-tax authorities and provided clarifications. He pointed out that the employees assured that the documents not readily available with them would be provided to the tax authorities. The employees of NIPL were not evasive and did not resist the Income-tax authorities.
5.3 In this regard, ld. counsel has relied on following decisions:

-	CIT v. S. Khader Khan Son [2012] 210 Taxman 248/25 taxmann.com 413 (SC).
-	United Chemical Agency v. R.K. Singh, ITO [1974] 97 ITR 14 (All.).
-	N.K. Mohnot v. Dy. CIT [1995] 215 ITR 275/83 Taxman 238 (Mad.)
-	Dr. Vijay Pahwa v. Sanir Mukhopadhyay, Dy. CIT [2001] 250 ITR 354/[1996] 84 Taxman 416 (Cal.)
-	Sri Venkateshwara Tourist Home (P.) Ltd. v. Asstt. DIT (Inv.) [1988] 233 ITR 736/101 Taxman 710 (Kar.)

5.4 Ld. Sr. Counsel further submitted that statements of eight employees were recorded on oath, even though there is no such requirement u/s 133A of the Act and there are judicial precedents, which state that income-tax authorities are not authorized to record statements on oath during survey proceedings u/s 133A of the Act. In this regard he relied on the decision of Hon'ble supreme Court in the case of S. Kadar Khan Son (supra).
5.5 Ld. Sr. Counsel further submitted that in course of survey, only those persons could be examined who were present at the time of survey. Therefore, there was no occasion to question either the auditors of NIPL or Mr. Jitender Grover, who was no longer part of Nokia and, therefore, summon u/s 131 could not be issued to them.
5.6 Thus, in sum and substance, ld. Sr. Counsel submitted that the summons issued u/s 131 were without any authority of law and the statements recorded or documents collected pursuant to the summons cannot be used against assessee in any legal proceedings.

5.7 Ld. Sr. Counsel further submitted that since the assessee filed its returns at New Delhi and is being assessed to tax under Circle 13(1), New Delhi, any proceeding under the Act pertaining to NIPL could be taken by the appropriate jurisdictional officer having territorial jurisdiction over NIPL. He referred to page 1 of PB Vol. I, wherein the summons u/s 131 dated 11-1-2013 addressed to Shri Arja Bjorklund, Chief Financial Officer, M/s Nokia India Sales Pvt. Ltd. from S. Senthil Kumaran, DDIT(Inv.), Unit1(1), Chennai, is contained and submitted that S. Senthi Kumaran was neither the AO of assessee nor having territorial jurisdiction over the assessee and, therefore, summons could not be issued. He referred to page 3 of vol. I, wherein the assessee requested for dropping the summon proceedings u/s 131 initiated against certain employees as well as ex-employees of assessee enumerating various reasons.

5.8 Ld. Sr. Counsel further submitted that the entry of Director of Income-tax (Investigation), along with 10-12 Income-tax department's officials as well as Mr. Sastry K. Pendyala, from CFSL into the factory premises of NIPL at Sriperimbudur, Chennai, was illegal inasmuch as DIT(Inv.), did not produce any warrant for entry into the premises for inspection and did not indicate the reason for his entry into the factory.

5.9 Ld. Sr. Counsel further submitted that DDIT(Inv.) styled the factory premises of NIPL as 'camp office' in the notices/summons issued u/s 131 and recorded the statement of employees on oath. He pointed out that the DDIT had no jurisdiction to record statement as power vests with the AO.

5.10 Ld. Sr. Counsel further referred to CBDT Notification no. S.O. 1189 (E) dated 3-12-2001 to submit that the Director of Income-tax (Inv.), Chennai could exercise his powers vested in him u/s 132 of the Act and perform his functions relating thereto in respect of the territorial areas of whole of India. However, in respect of other provisions of the Act, he could perform his functions relating thereto in respect of Tamilnadu and Pondicherry except Mahe and Yenam. Therefore, the Director of Income-tax (Inv.), Chennai could not carry out survey u/s 133A in respect of assessee, whose jurisdiction lay with AO at Delhi. Therefore, the ld. DDIT (Inv.) Chennai had no territorial jurisdiction over NIPL u/s 131 of the Act.

5.11 Thus, in sum and substance, Ld. Sr. Counsel submitted that since ld. DDIT(Inv.) Chennai did not have territorial jurisdiction over NIPL, since the survey u/s 133A had already been completed on 9-1-2013, ld. DDIT(Inv.), ought not to have entered into the office premises of NIPL. The summons/ notices issued by the ld. DDIT(Inv.) Chennai were without any authority of law and any statement recorded or information collected pursuant to the summons should not be used against NIPL in any legal proceedings. The assessee relied on the decision of Hon'ble Kerala High Court in the case of Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416.

5.12 Ld. Sr. Counsel further submitted that if evidence has been collected by breach of fundamental right of privacy of employee, then the said evidence cannot be used against the assessee, because it is not a question of exercise of irregular jurisdiction but inherent lack of jurisdiction.

5.13 Ld. Sr. Counsel further submitted that the decision of Hon'ble Supreme Court in the case of Pooran Mal v. Director of Inspection [1974] 93 ITR 505, does not deal with the issue regarding breach of privacy, because no such argument was advanced before the Hon'ble Supreme Court on this basis. Ld. counsel relied on the decision in the case of Distt. Registrar and Collector v. Canara Bank AIR 2005 SC 186 and also the decision in the case of R.M. Malkani v. State of Maharashtra AIR 1973 SC 157. Ld. counsel pointed out that the Hon'ble Supreme Court, inter alia, in para 31, observed as under:

"31. … Article 21 was invoked by submitting that the privacy of the appellant's conversation was invaded. Article 21 contemplates procedure established by law with regard to deprivation of life or personal liberty. The telephonic conversation of an innocent citizen will be protected by Courts against wrongful or high handed interference by tapping the conversation. The protection is not for the guilty citizen against the efforts of the police to vindicate the law and prevent corruption of public servants. It must not be understood that the Courts will tolerate safeguards for the protection of the citizen to be imperiled by permitting the police to proceed by unlawful or irregular methods. In the present case there is no unlawful or irregular method in obtaining the tape recording of the conversation."

5.14 He, therefore, submitted that the recording of statement should not be irregular.

5.15. Ld. Sr. Counsel further referred to the decision of Hon'ble Bombay High court in the case ofKrishnadas Shankarraon Abhare (Dr.) v. State of Maharastra, wherein it has, inter alia, been held that statement recorded by unauthorized person is not an admissible evidence. He also relied on the decision of Hon'ble Kerala High Court in the case of Mammu v. Asstt. Collector Central Excise 1984 (17) ELT 54.

5.16. Ld. counsel submitted that revenue's entire case is based on the submissions recorded during survey proceedings and subsequently by issuing summons to various employees/ ex employees and auditors of the assessee (witness). He submitted that without prejudice to assessee's contention that these statements and other contentions had no evidentiary value, the statements cannot be relied upon without affording the assessee an opportunity to cross examine the witnesses whose statements have been relied upon by AO at the time of passing the impugned tax withholding order u/s 201/201(1A) of the I.T. Act or the statements which are proposed to be relied upon by the revenue at any stage of the proceedings. Ld. Sr. Counsel further submitted that assessee was given very limited time to file its responses during the assessment proceedings (time of one or two days only was given between the hearings, and most of these hearings were indicated to be the final hearing). Further AO passed the order without waiting for the final CFSL Report. This was contrary to the judgment of the Hon'ble Supreme Court in CIT v. Bharti Cellular [2011] 330 ITR 239/[2010] 193 Taxman 97 and the instruction of the CBDT (Instruction No. 5/2011 [F. No. 225/6112011-IT (A-11)] dated 30 March 2011). Ld. Sr. Counsel submitted that observance of the principles of natural justice is an integral part of any quasi-judicial proceedings. Ld. Sr. Counsel submitted that this principle has been upheld by the Hon'ble Supreme Court in a number of judicial precedents. InSuraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 the Supreme Court has ruled that assessment proceedings before the Income Tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act. This principle has also been re-emphasized by the Hon'ble Supreme Court in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775and C.B. Gautam v. Union of India [1993] 199 ITR 530/[1992] 65 Taxman 440 (SC). The right to a fair hearing requires that the assessee be given an opportunity to effectively rebut the evidence sought to be relied upon by the revenue against the assessee. An effective right to cross-examine witnesses whose statements are sought to be used against the assessee is a sine qua non of such a right. The Hon'ble Allahabad High Court had occasion to deal with this issue in Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97. In this case, the assessing officer had purportedly obtained information and recorded statements of certain persons which were used against the assessee during the assessment proceedings. The assessee opposed this and asked for an opportunity to cross-examine the witnesses whose statements the assessing officer was relying on. The assessing officer agreed to issue commission for cross examination of witnesses but did not hand over the statements of these witnesses to the assessee. The Hon'ble Allahabad High Court held that an effective right "of cross-examination has not been granted by the assessing officer since the assessee could not effectively cross examine the witnesses in absence of the recorded statements of these witnesses and remanded the matter back to the assessing officer with directions to provide the assessee with an effective right of cross examination. Thus, the Hon'ble Allahabad High Court held that to comply with the principles of natural justice, the assessing officer should have given the statements of the witnesses to the assessee and, thereafter, afforded him an opportunity to cross examine these witnesses. This principle has also received recognition in another decision of the Hon'ble Allahabad High Court in the case of Moti Lal Padampat Udyog Ltd. v. CIT (Central) [2007] 293 ITR 565/160 Taxman 233 Ld. Sr. Counsel further submitted that in a recent decision of the Hon'ble Mumbai Bench of the Tribunal in the case ofIngram Micro (India) Exports (P.) Ltd. v. Dy. DIT (International Taxation) [2013] 31 taxmann.com 2/56 SOT 273, the Tribunal has held that when statements of witnesses are sought to be used against an assessee, the assessee has a right to cross-examine such witnesses. In this case, since an opportunity to cross examine was denied, the Tribunal remanded the matter back to the assessing officer.

5.17 Ld. Sr. Counsel submitted that in the present case, although the Appellant was provided the statements of various witnesses relied upon by the AO or proposed to be relied upon, no opportunity was provided by the AO or CIT(A) to the assessee to cross-examine such witnesses so that the veracity and context of these statements could be established. He submitted that neither the persons whose statement are relied on by the AO/CIT(A) nor the additional statements of the persons filed by the department before the Tribunal have been permitted to be cross examined despite request to cross-examine them by the assessee. The assessee was not provided adequate opportunity to rebut the statements of witnesses used against the assessee in the impugned order, nor was the assessee given an opportunity to' cross examine these witnesses. The cross-examination assumes greater importance especially in a case where an authority is treating the statements as the basis of the order and they are recorded in an illegal survey action. In the present case, the Revenue's entire case is based on statements of witnesses. As a necessary concomitant of the audi alteram partem the assessee has to be afforded the opportunity to cross-examine the witnesses, in the interest of the principles of natural justice. Ld. Sr. Counsel relied on following decisions :—

-	New India Assurance Co. Ltd. v. Nusli Neville Wadia [2008] 3 SCC 279.
-	State of Kerala v. K.T. Shaduli Grocery Dealer [1977] 2 SCC 777
-	Tribunal (TM) in Sunil Agarwal v. Asstt. CIT [2002] 83 ITD 1 (Delhi) (TM)
-	CIT v. Virgin Securities & Credits (P.) Ltd. [2011] 332 ITR 396/[2012] 20 taxmann.com 681 (Delhi) and
-	CIT v. SMC Share Brokers Ltd. [2007] 288 ITR 345/159 Taxman 306 (Delhi)
-	C. Vasantlal & Co. v. CIT [1962] 45 ITR 206 (SC),
-	CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal.).

5.18 Ld. Sr. Counsel submitted that Revenue has made a claim that the assessee does not have a right to cross-examine its own employees. Ld. Sr. Counsel submitted that this is factually incorrect. Major reliance was placed by the AO/CIT(A) and the department on the statements of Mr Jitendra Grover who was not an employee even at the time of the survey or during the assessment proceedings. In addition most of the additional statements now being relied upon are of ex-employees. He submitted that in view of the decision of Hon'ble Supreme Court in Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 the burden is on the department to produce these witnesses and not the assessee. He submitted that in any event the right of the assessee to cross-examine witnesses is not dependent on its relationship with the witnesses, but on the fact that the statements of such witnesses have been used against the assessee to prejudice its case. He submitted that although the majority of witnesses were employees of the assessee, they are the witnesses of the Revenue and hence, the assessee has a right to cross-examine them. In this context, he placed reliance on the decision of the co-ordinate bench of the Delhi Bench of the Tribunal inSunrise Tooling Systems (P.) Ltd. v. ITO [IT Appeal No. 3136 (Delhi) of 2010]. While dealing with an assessee's right to cross-examine witnesses, the Tribunal opined that the right to cross-examine cannot be denied on the ground that such right only exists when a third party is involved or a party not known to the assessee or a hostile witness is involved. Further, he placed reliance on the decision of the Mumbai Bench of the Tribunal in Smt. Madhu Gupta v. Dy. CIT [2006] 8 SOT 691. The Tribunal ruled in favour of an assessee's right to cross-examine its own employees where their statements were purported to be used against the assessee. Similarly in ITO v. Cloth Distributors [1989] 45 Taxman 151 (Mag.) the Ahmedabad Bench of the Tribunal has upheld the right of a partnership firm to cross-examine its partners. Therefore, the distinction between an assessee and its employees or its constituent partners is well recognized and this cannot be a basis to deny the Appellant the right to cross-examine its employees.

5.19 The assessee has filed written submissions on this issue on 17-12-2014 which are placed on record.
6. Ld. Spl. Counsel Shri G. Dave vehemently opposed the submissions advanced by ld. representatives of the assessee.

6.1 At the outset Shri Dave submitted that the Tribunal being creature of statute has no power to look into the validity of survey. Shri Dave referred to section 253 of the I.T. Act, which enumerates various orders which can be assailed before Tribunal by way of appeal. He pointed out that none of the action taken by DDIT has been enumerated in section 253 and, therefore, Tribunal cannot examine the validity of survey.

6.2 Shri Dave further submitted that assessee has not taken any ground in form no. 36 challenging the validity/ legality of survey. In this regard he submitted as under:

"In ground No.1, the allegation is against the DDIT (International Taxation) of having not followed principles of natural justice in the course of proceedings under section 201/201(A). In ground No.2, non-cooperation on the part of the employees as alleged by the Officers conducting survey is denied. In ground No.3, it is stated that learned CIT (A) erred in law by holding that the learned DDIT, Chennai had territorial jurisdiction over the appellant under section 131 of the Act. In ground No.4, it is appealed that learned CIT(A) erred in holding that the statements of employees recorded under section 133A as well of employees, ex-employees and auditors recorded under section 131 had evidentiary value. In no other ground there is any challenge to the conduct of survey under section 133A of the Act. The appellant has also not filed any additional ground in the course of hearing of the appeals before Hon'ble Bench. Therefore, it is submitted that the appellant has not taken any ground challenging the validity/legality of survey under section 133A of the Act."

6.3 Shri Dave further submitted that in the present appeal, the order u/s 201/201(1A) passed by the DDIT Circle 2(1), International Taxation, New Delhi, who is the assessing officer, has been assailed. He pointed out that the AO was not competent to examine, the correctness or otherwise, of the acts performed by the DDIT(Inv.), Chennai, while conducting survey u/s 133A of the Act, as the latter was acting at the instance of Addl. DIT(Inv.), Chennai on the basis of authorization issued. He submitted that both the authorities i.e. DDIT (International Taxation), New Delhi, making order u/s 201/201(1A) of the Act and the DDIT (Inv.), Chennai, conducting the survey u/s 133A of the Act, are two separate, distinct and independent statutory authorities, performing their respective functions assigned to them under the Act and one or the other cannot sit in judgment of each other's actions and functions.

6.4 The AO has made use of material made available to him by the DDIT (Inv.), which the latter collected in the course of proceedings u/s 133A of the Act. If there were any contraventions by DDIT (Inv.), Chennai of the provisions of the Act, as alleged by the company, the redress lay in other judicial forum like filing a writ petition before the Hon'ble High Court of Delhi but never made any such allegation which now it was raising. He pointed out that an analogy may be drawn from the decisions given in the context of challenge of validity of search u/s 132 before the Tribunal, wherein it has been held that while hearing of appeal against an order of assessment, the ITAT cannot question the validity or otherwise of any administrative decision for conducting search, as same may be subject matter of challenge in independent proceedings where the question of validity or otherwise of administrative order could be gone into. In this regard he placed reliance on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v.Paras Rice Mills [2009] 313 ITR 182/176 Taxman 181.

6.5 In sum and substance, the ld. Spl. Counsel submitted that though orders u/s 201/201(1A) can be assailed before Tribunal, but the actions taken u/s 133A cannot be assailed because for the purposes of section 133A, the DDIT(Inv.), Chennai was only an authorized person.

6.6 Without prejudice to aforementioned arguments ld. Special Counsel submitted that survey u/s 133A of the Act at Chennai and Gurgaon were authorized by the Addl. Director of Investigation, Chennai and Addl. Director of Income-tax (International Taxation), New Delhi separately. He filed before us authorization issued by these authorities. Ld. Spl. Counsel also filed notification issued by the CBDT notifying the territorial jurisdiction of the Director of Income-tax (Inv.), Chennai to demonstrate that the DIT(Inv.) Chennai's territorial jurisdiction extended to Tamil Nadu and Pondicherry except Mahe and Yenam. He, therefore, submitted that the officers entering the premises were not unauthorised officers in any manner.

6.7 As regards the assessee's plea that survey could not be conducted for verifying the compliance of TDS provisions, particularly because the provisions of section 133A(2A) were inserted by Finance (no.2) Act, 2014, authorizing the survey for ensuring compliance of TDS provision, Ld. Spl. Counsel submitted that sub-section (2A) does not curtail the powers of authorities who can conduct survey otherwise under the provisions of sub-section (1) of the Act but additionally provides restrictive power to certain designated officers under sub-section (1A), who were functioning only for the purpose to ensure TDS compliance and defaults committed there under. Ld. Spl. Counsel referred to the explanatory notes to Finance (No. 2) Act, 2014 to demonstrate that while carrying out the survey, in order to ensure TDS compliance, Income-tax authority cannot impound and retain in his custody any books of account or documents inspected by him or make inventory of any cash, stock or other valuable. He also referred to the extracts from Circular no. 1 of 2015 dated 21-1-2015 explaining the purpose, intent and rationale for inserting sub-section (2A) to section 133A.

6.8 Ld. Spl. Counsel further pointed out that prior to the insertion of sub-section (2A) to section 133A, survey for ensuring or checking compliance for provisions of TDS could be done, is proved from the following decisions:

-	Reckitt Colman of India Ltd. v. Asstt. CIT (TDS) [2001] 252 ITR 550/[2002] 124 Taxman 496 (Cal.)
-	Reckitt & Colman of India Ltd. v. Asstt. CIT [2001] 251 ITR 306/119 Taxman 403 (Cal.)
-	CESC Ltd. v. ITO [2005] 272 ITR 513/[2004] 140 Taxman 646 (Cal.)
-	Karnataka Rural Infrastructure Development Ltd. v. ITO [2015] 370 ITR 222/[2014] 51 taxmann.com 497 (Kar.)
-	CIT v. Kingfisher Airlines [2014] 49 taxmann.com 49 (Kar.).

6.9 As regards the plea of the ld. counsel for the asessee regarding material collected during illegal search/ survey, ld. Spl. Counsel submitted that this plea cannot be taken because the survey was not at all illegal. However, without prejudice, ld. Spl. Counsel relied on the decision of Hon'ble Supreme Court in the case of Pooran Mal (supra), wherein it has been held that material collected during illegal search can be utilized in assessment proceedings. He also relied on following decisions:

-	CIT v. Kamal & Co. [2009] 308 ITR 129/[2008] 168 Taxman 246 (Raj.)
-	Smt. Kusum Lata Singhal v. CIT [1990] 185 ITR 56/51 Taxman 300 (SC)
-	Dr. Pratap Singh v. Director of Enforcement [1985] 155 ITR 166/22 Taxman 30 (SC)
-	ITO v. U.K. Mahapatra & Co. [2010] 186 Taxman 181 (SC).

6.10 As regards the plea of ld. counsel for the assessee that in course of survey u/s 133A statements could not be recorded on oath and if so, recorded, have no evidentiary value, ld. Spl. Counsel submitted that Hon'ble Bombay High Court in the case of Dr. Dinesh Jain v. ITO [2014] 363 ITR 210/226 Taxman 27/45 taxmann.com 442 considered this issue and has, inter alia, observed as under:

'The requirement of recording a statement on oath is found in section 132 of the Act, i.e. during search and seizure proceeding and such a requirement is not found in section 133A of the Act. Nevertheless a statement under section 133A of the Act does not lose its evidentiary value merely because it is made on oath. Besides the statement in this case is one of the evidences being relied upon and not the sole evidence. The Tribunal in the impugned order has recorded that the addition of income is based not only on the statement of the appellant-assessee but also based on "page 17".

The case law relied upon by the appellant in the matter of CIT v. S. Khader Khan Son [2013] 352 ITR 480 (sq arising from the decision of the Madras High Court in CIT v. S. Khader Khan Son[2008] 300 ITR 157 (Mad) proceeded on the fact that the authorities did not accept the retraction made by a deponent of a statement made on oath during the survey proceedings under section 133A of the Act. This was on the ground that the statement was made on oath. Besides the sole evidence against the assessee in that case was the statement made on oath during the survey proceedings which is not the case in the present facts. Further, in this case, the appellant-assessee has not been able to show that the statement made is not correct and/or unbelievable. Therefore, the case law relied upon by the appellant-assessee is completely distinguishable and not applicable to the present facts.
(ii) In view of the above, we do not find that question (A) raises any substantial question of law. Accordingly, we do not entertain question (A).'

6.11 With reference to above decision ld. Spl. Counsel pointed out that in the present case also, the conclusion drawn by AO regarding nature of payment made by assessee to Nokia Corporation is not solely based on statements of employees but on other evidences. The statements have been used as corroborative evidence. He, therefore, submitted that a statement made u/s 133A of the Act does not lose its evidentiary value merely because it is made on oath.

6.12 Ld. Spl. Counsel further referred to the decision of Hon'ble Kerala High Court in the case of CIT v.Hotel Samrat [2010] 323 ITR 353 wherein it has been held that the decision in the case of Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 (Ker.), does not lay down correct position of law because in the view of Hon'ble Court, the statement recoded u/s 133A(3)(iii) though cannot be treated as independent evidence like evidence recorded u/s 132(4), it has corroborative value in assessment and can be used by the Department as well as by the assessee also, if it helps an assessee.

6.13 As regards the plea of assessee that when survey ended on 9-1-2013, where was the question of invoking of section 133A(6), ld. Spl. Counsel pointed out that DDIT resumed inquiries from 17th January to February 2013. He pointed out that these proceedings were taken u/s 131(1A). In this regard ld. Spl. Counsel pointed out that the inquiries u/s 131(1A) were necessitated because, as is evident from the statements recorded in course of survey, one person was referring name of other person who would be in know of facts. He further pointed out that it was only on 24-1-2013 that Mrs. Arja Bjorklund, the CFO of the assessee, brought on record two documents, being software supply agreement of 1-1-2006 and another undated document titled "Agreement for software Delivery Procedures", therefore, her statement on 24-1-2013 was necessitated. He further submitted that since the genuineness of these documents required inquiries in view of the attendant circumstances in which these were produced and documented, the DDIT (Inv.), Chennai made enquiries by recording the statements of all the seven technical personnel responsible for downloading of the software on 7-2-2013. He submitted that in any proceedings the statements recorded are need based and sometimes for further enquiries or confirmation.

6.14 Ld. Spl. Counsel in sum and substance submitted that under the provisions of section 131(1A), the DDIT (Inv.) Chennai was fully authorized to record the statements.

6.15 Ld. Spl. Counsel vehemently submitted that revenue has serious objections to the raising of such contentions in the course of reply by the revenue when ld. sr. counsel had fully argued his appeal for many days on all issues including merits and had completed his arguments without raising any such plea in the course of his arguments. Ld. Special Counsel extensively referred to the submissions of assessee on various dates and pointed out that assessee at no stage asked for cross-examination of the employees or ex-employees who in fact left service around the same time but were associated with the transactions which came to notice in the course of survey. He submitted that it is a classic case of dilatory tactics. Ld. Special Counsel submitted that Cross-examination of Mr. Krishna Sastry Pendyala, an Officer from Central Forensic Scientific Laboratory was asked for by the assessee at the stage of the appeal proceedings before the CIT (Appeals) and was, accordingly, allowed by him. Ld. Special Counsel referred to the filing of Writ Petition by assessee before Hon'ble High Court of Delhi against the Notice of Demand, allowing 5 days as against statutory period of 30 days for payment of demand pursuant to order under section 201 of the Act. Writ was allowed by Hon'ble Court by holding that the Department shall not take any coercive measure till the next date of hearing for the recovery of demands. He further pointed out that another set of writ petitions were filed challenging orders under section 201 of the Act on various grounds but in none of the grounds in these writ petitions, the assessee sought to seek quashing of the order on the basis of absence of cross-examination of the witnesses, who were employees of the assessee at the time of depositions taken or at the time of survey. These petitions were dismissed as withdrawn by the assessee-company on 17.4.2013 with liberty to file the appeals before the CIT (Appeals) as requested by and on behalf of the assessee-company. The CIT (Appeals) was directed to dispose of the appeals latest by 31.05.2013. As regards Proceedings before CIT (Appeals) on the issue of cross-examination, Ld. Special Counsel pointed out that in their submission dated 2.5.2013, the assessee had requested that it may be allowed cross-examination of all the persons whose statements were relied upon while framing the assessment. On a perusal of the records of the CIT (Appeals) it was noticed that CIT (Appeals) asked the authorised persons appearing on behalf of the appellant to specify whose cross-examination they would be seeking for. Copy of this noting made by the CIT (Appeals) as obtained from the file of the CIT (Appeals) on this letter has been filed by Revenue. However, the assessee did not specify the employees to whom assessee wanted to cross examine. Only cross examination of technical expert Mr Krishna Sastry Pendyala was seriously asked for which was allowed by ld. CIT(A). As regards others the asseessee had pointed out that it will be in a position to take this call only after cross-examining Mr. Sastry. He submitted that on 20.05.2013, Mr Sastry was examined and on 21.05.2013, he was re-examined. After the cross-examination of Mr Sastry, the assessee-company filed letters to the CIT(Appeals) on 23.05.2013, 24.05.2013 & 27.05.2013. In none of these letters, the Company sought to cross-examine any person other than Mr Sastry. Ld. Special Counsel pointed out that before CIT(A) assessee had, inter-alia, submitted as under ;

"appellant may not have the need of cross-examination any other witnesses once the appellant cross-examines Mr. Sastry, In any case, the appellant will be in a position to take this call only after cross-examining Mr. Sastry. After examination of Mr. Sastry, no request for cross-examination was made."

6.16 Ld. Special Counsel further submitted that it is now being argued that in its letter dated 17.05.2013 assessee repeated its request to allow cross-examination of the persons whose statements were recorded. However, such an argument is misplaced inasmuch as the letter dated 03.05.2013 very clearly indicates that after cross-examination of Mr. Sastry, the appellant-Company would decide whether it requires cross-examination of other persons and cross-examination of Mr. Sastry got concluded only on 21.05.2013. Though it filed three letters thereafter before the CIT (Appeals), in none of the letters, there is any request to this effect.

6.17 As regards the submission of ld. Sr. Counsel for the assessee that the cross-examination should have been allowed by the AO and at subsequent stages of the case, such alleged "illegality" cannot be cured, for which reliance has been placed on the decisions of Tin Box Co. v. CIT [2001] 249 ITR 216/116 Taxman 491 (SC) and in the case of Ingram Micro (India) Exports (P.) Ltd. v. Dy. DIT (International Taxation) [2013] 31 taxmann.com 2/56 SOT 273 (Mum.), ld. Special Counsel submitted that in the judgment of Hon'ble Apex Court, it is not clear as to in what context, the lack of proper opportunity was found by Hon'ble Court, which was considered incurable in subsequent proceeding before First Appellate Authority. In the present case, the assessee-Company withdrew its writ petition filed before Hon'ble High Court of Delhi with liberty to file appeal before CIT (Appeals). It could have pleaded before the Hon'ble Court to restore the case to the AO which it did not. In the case of Ingram Micro (India) Exports (P.) Ltd. (supra), the issue was before the DRP which is extension of assessment proceedings and not an appellate authority and, therefore, Hon'ble Bench restored the matter to the file of the AO. Facts in the present case are entirely different.

6.18 As regards the proceedings before the Assessing Officer (AO), ld. Special Counsel pointed out that in Para 3.2 of the order under section 201 of the Act, concluding the discussion on the nature of the Transaction, the AO has held that from the Transfer Pricing documentation, Software Supply Agreement dated 01.01.2006 and R&O sub-contract agreement between M/s. Nokia Corporation, Finland and M/s.Nokia India Ltd, emails and Statements that the payments for various intellectual property rights supplied by M/s. Nokia Corporation, Finland were being made regularly. Thus, Assessing Officer did not solely relied on the statements of employees only but used them to corroborate his findings. Ld. Special Counsel further submitted that at page 22 of his order, the AO has clearly stated that the statements without exception are relied upon not to establish the default, but to corroborate certain aspects such as the manufacturing process, the software downloads, the manual preparation of invoices, basis of preparation and that there was no material change in the whole process of doing so since inception. The AO at page (22) of his order has held that the contention of the assessee was not acceptable for reasons as under:

1.	The individuals in whose case statements have been recorded are responsible and accountable employees of the company, who have recorded without any fear, coercion and influence;
2.	The statements have been corroborated with the other enquiries and business activities of the enterprise before deriving any conclusions;
3.	The statements are not made under any misconception of facts but to explain the facts; and
4.	Statements are one of the best forms of evidence that an opposing party can rely upon and though not conclusive are decisive unless successfully withdrawn or proved erroneous. Reliance was be placed on Narayan Bhagwantrao Gasavi Batajiwale v. Gopal AIR 1960 SC 100 and Pranav Construction Co. v. Asstt. CIT [1998] 96 Taxman 323 (Mag.) (Mum.).

6.19 Ld. Special Counsel further submitted that the conclusions drawn by the AO are quite clear. It was not necessary for the AO to specifically point out which statement he was relying upon. It was for the assessee to state clearly as which fact averred by the persons whose statements were recorded was erroneous or incorrect. The statements were provided to it. The statements were not the only basis for the conclusions drawn by the AO as is evident from his order.

6.20 Likewise, the AO has allowed sufficient time to explain the case and this is evident from Para 1.2 with its sub-paras at pages 10 to 13 of his order. He further submitted that to attribute mala fide in the recordings of statements of technical personnel and allege coercion and duress without any affidavit on the part of these personnel requires outright rejection of such contentions. The Persons whose statements were recorded are all highly educated persons and cannot be coerced as alleged. None of these persons has levelled any allegation to this effect so far. Such irresponsible statements must be avoided if there is no support, either oral or document, in proof. The circumstance for identical text in replies to certain questions put to these technical personnel has been explained by the then DDIT (Inv.), Chennai who was responsible for the conduct of survey. He pointed out that his explanation obtained in compliance to the directions of the Bench has been filed. The contention of the appellant and innuendo expressed are misplaced and unwarranted. It was never raised either before the AO or before CIT (Appeals) and even in the grounds of appeal before us. In regard to assessee's plea that the matter should be remanded back to the AO where in the opinion of the assessee irregularity has occurred, ld. Special Counsel submitted that such an argument has some ulterior motive. It is well settled that appellate proceedings before first appellate authority constitutes continuation of the assessment proceedings as has been so held by Hon'ble Apex Court in the case of CWT v. Smt. Vimlaben Vadilal Mehta [1984] 145 ITR 11/[1983] 15 Taxman 20 .Therefore, this argument deserves rejection.

6.21 He further submitted that natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. This was so held by Hon'ble Apex Court on the issue of natural justice in the case of Chairman, Board of Mining v. Ramjee AIR 1977 SC 965.

6.22 Ld. Special Counsel further submitted that it seems quite interesting that in the VTT report furnished before CIT (Appeals) as additional evidence by the assessee-Company at Page (31), the VTT researchers have obtained inputs beside a few other individuals on need basis at Chennai, from two lead presenters, namely, (1) Shri E. Umashankar and (2) Shri Nikhil Gopalakrishnan, who also explained the process of download of software to the officers of the Department in the course of survey. There is no reference to the process explained by these two persons as to whether their explanation to the officers of the Department were incorrect or suffered with any error, nor any rebuttal by the appellant-Company on the correctness of their version. Whether they made different presentations to VTT team or their presentations were same as were explained to survey team but the VTT team understood it differently.

6.23 Ld. Special Counsel relied on following Case Laws on issue that absolute right of Cross-examination can't be claimed by the subject—

1.	G. Sridhar v. Collector of Customs 1992 (43) ECR 95 (Tri. - Chennai).
2.	Nath Mishra v. Principal, Rajendra Medical AIR 1973 SC 1260.
3.	Kisanlal Agarwalla v. Collector of Land Customs AIR 1967 & Cal. 80
4.	Satellite Engg. Ltd. v. Union of India 1984 (3) ECC 217,
5.	M.K. Thomas v. State of Kerala [1977] 6 CTR Ker. 267

6.24 Ld. Special Counsel further submitted that the assessee by making fresh arguments on the issue of cross examination on 17th December 2014 has only delayed the prosecution of appeal and only assessee and none else must share blame for the same. He submitted that the Hon'ble Bench had asked the assessee to submit the names of persons for cross-examination next day (18th December). The Revenue has received response on this issue only on 30.01.2015, after nearly one & a half month. In this letter also, the appellant "deviously" requests Hon'ble Bench to grant it an opportunity to cross-examine any or all of the afore-mentioned 22 persons. What purpose the appellant wishes to serve by cross-examining "any" of the 22 persons, if so considered by Hon'ble Bench. There appears some design even in this plea, which only the appellant can explain.

6.25 The Revenue has filed detailed written submissions dated 10-2-2015, which are placed on record.
6.26 In his submissions of 12-3-2015 ld. Spl. Counsel again submitted that statements recorded in the course of survey may be used by way of corroboration for the purpose of making assessment to the extent the same deal with the facts and have not been challenged by the assessee or proved as not correct by submitting other evidence. Ld. Spl. Counsel referred to the order passed u/s 201 and pointed out that in "The Fact Matrix" considered in para 3.1 at page 38 of his order along with his finding in para 3.2.3 at page 47, as well as discussion in para 3.3 under the heading "How is the transaction executed" and his finding in para 3.3.6 at page 57 & 58 all the aspects have been dealt in detail and the assessee has not pointed out any factual inaccuracy in any of the statements relied upon by AO for arriving at his conclusion. The assessee did not spell out either before the AO or before CIT(A) as to how the statements made by the persons adversely affected it; that something has been said which does not borne out from the factual situation.

6.27 The assessee has not taken any ground to this effect in form no. 36. At no stage of proceedings the assessee was able to spell out as to in what way it feared that the statement given by its employees or ex-employees did not provide true and correct state of affairs though these were made available to the assessee well in time with show cause notice.

6.28 At the stage of appeal proceedings before ld. CIT(A) despite his instructions, the assessee never came forward to indicate names of persons whose cross-examination would be required for reasons to be given. In course of hearing, ld. Standing Counsel produced before us the noting made by ld. CIT(A) in course of hearing wherein he required the assessee to specify the persons to whom it wanted to cross-examine. This fact has not been denied by assessee but the only allegation of the assessee is that ld. CIT(A) did not give in writing. He submitted that this kind of approach adopted by assessee is wholly uncalled for and, therefore, the assessee's plea for cross-examination of various employees deserves to be rejected.

6.29 Ld. Special counsel submitted that assessee has adopted similar procedure before this Bench; particularly at the first instance assessee did not provide names but furnished a letter giving a choice to the Bench to choose one or all the persons whose statements were recorded. However, action indicated that all 22 persons be made available for cross-examination.
7. We have considered the rival submissions and have perused the record of the case.

7.1 First we take the issue regarding legality of survey raised by assessee. Ld. Spl. Counsel has raised a preliminary objection on this count by submitting that the assessee has not taken any ground to this effect. In this regard we find that though there is no specific ground to this effect but in ground no. 3 the assessee did assail ld. CIT(A)'s finding in holding that the ld. DDIT (Inv.), Chennai had territorial jurisdiction over the assessee u/s 133A(1) of the Act. The assessee has also assailed the finding of ld. CIT(A) in holding that the employees of the assessee did cooperate during survey proceedings and, therefore, statement recorded u/s 131 taken by the survey parties at Chennai were not in accordance with law. The assessee has also assailed the findings of ld. CIT(A) in holding that the statements of employees/ ex-employees and auditors recorded u/s 131 had evidentiary value. Therefore, though assessee has not very specifically taken ground that for TDS purpose, the resort could not be had to survey proceedings, particularly in view of the amendment being made u/s 133A by inserting sub-section (2A) by the Finance (No. 2) Act, 1914 w.e.f. 1-10-2014 but assessee did challenge the actions taken in course of survey proceedings.

7.2 Be that as it may, this being purely legal issue, we grant leave to assessee to raise this issue under Rule 11 of the ITAT Rules. Accordingly, we reject this objection raised by ld. Spl. Counsel.

7.3 The second objection raised by ld. Spl. Counsel is that Tribunal is not entitled to go into the legality of the survey proceedings, this being purely an administrative action and u/s 253 no appeal lies against the administrative action taken by the authorities below. The submission is that the Tribunal being creature of statute and, therefore, it is to confine itself for entertaining the appeals which have been provided u/s 253 of the I.T. Act.

7.4 Ld. Spl. Counsel has drawn the analogy on this aspect from the decision of various courts in holding that while hearing an appeal against an order of assessment, Tribunal cannot go into the question or otherwise of any administrative decision for conducting the search as same may be subject matter of challenge in independent proceedings where question of validity or otherwise of administrative order could be gone into. Ld. Spl. Counsel has placed reliance on the decision of Hon'ble Punjab & Haryana High court in the case of Paras Rice Mills (supra).

7.5 We are not inclined to accept the proposition advanced by ld. Spl. Counsel because Tribunal u/s 253(1)(a) entertains the appeals filed against order of CIT(A). U/s 246(1)(i). The appealable orders before CIT(A) include an order passed u/s 201. When an order u/s 201 has been passed solely on the basis of survey being carried out, therefore, it cannot be held that Tribunal is not entitled to examine the validity of actions taken during the course of survey, which ultimately culminated in the passing of the order u/s 201. In our opinion, all the incidental actions taken by the revenue authorities are subject matter of challenge before Tribunal and, therefore, Tribunal, while deciding appeals against the orders passed by ld. CIT(A) in appeals against the order u/s 201, is fully empowered to examine these issues. The powers of Tribunal for examination of incidental issues flows from the appeal provided u/s 253(1)(a) against the CIT(A)'s order passed u/s 201. The term 'order' encompasses within its ambit consideration of all actions taken by authorities which culminated into the lis and, therefore, while passing the order all such actions have to be taken into consideration. Ld. Spl. Counsel has relied on the decision of Hon'ble Punjab & Haryana High Court in the case of Paras Rice Mills (supra), which decision was rendered with reference to the search & seizure action carried out u/s 132(1) and not with reference to survey u/s 133A. In that case Tribunal held that the search and seizure was illegal and no material was produced before the Tribunal to show that the requirements of section 132(1) of the Act were complied with. In that case the Tribunal had gone into the question as to whether the circumstances warranted the initiation of search & seizure and whether the requirements of section 132(1) were fulfilled or not. Thus, Tribunal had entered into the administrative domain of authorities authorizing the search. The power for carrying out search per se was not questioned. However, in the present case the validity of survey has been challenged on the ground that there was no provision for carrying out survey for ensuring compliance with TDS provisions. The power for survey per se has been challenged on the ground of being without authority of law. Moreover, power of search & seizure of Income-tax authorities cannot be equated with the power of survey, because search can be carried out only if the specific authorities mentioned u/s 132 have information in their possession, on the basis of which they have reason to believe that if a person who is required to do certain acts as contemplated under clauses (a) and (b) of section 132(1), would not comply with the directions and has in his possession certain money, bullion, jewellery or other valuables or things, which had not been or would not be disclosed. Whereas, in case of survey u/s 133A, designated authorities can enter into the business premises for checking and verification purpose of cash, stock, documents, books of a/c etc.

7.6 Therefore, it is evident that survey is part and parcel of proceedings which include assessment proceedings as well as the action taken u/s 201/201(1A). We, accordingly, are not in agreement with ld. Special counsel that the validity of survey action cannot be examined while deciding the correctness of the order passed u/s 201. Therefore, Tribunal is well within its powers to examine the challenge to validity of survey. We, therefore, proceed to examine the same.

7.7 The first objection of assessee regarding validity of survey is that under the Income-tax Act, there was no power conferred on Income-tax authorities for conducting survey to verify whether the tax has been deducted or collected at source in accordance with the provisions under subheading 'B' of chapter XVII or under sub-heading 'BB' of Chapter XVII, as the case may be. The submission is that this power has been conferred on income-tax authorities by the Finance (No. 2) Act, 2014 w.e.f. 1-10-2014 by inserting section 133A(2A), which reads as under:
"Power of survey. 133A.

**

**

**

(2A) Without prejudice to the provisions of sub-section (1), an income-tax authority acting under this sub-section may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work, —

(i)		to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and
(ii)		to furnish such information as he may require in relation to such matter."

7.8 Per contra, the submission of ld. Spl. Counsel is that surveys were conducted prior to insertion of this sub-section and the only object of insertion of this sub-section is to curtail the powers of AO in regard to following:
"(3) An income-tax authority acting under this section may, —

"(ia)	impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him:
	Provided that such income-tax authority shall not —

(a)

impound any books of account or other documents except after recording his reasons for so doing; or

(b)

retain in his custody any such books of account or other documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General or the Principal Commissioner or the Commissioner or the Principal Director or the Director therefore, as the case may be,

(ii)

make an inventory of any cash, stock or other valuable article or thing checked or verified by him,"

7.9 He, therefore, submitted that it is beneficial in the interest of assessee only.

7.10 The object of survey is also to obtain information in respect of any matter which may be useful for or relevant to any proceedings under the Act. The word 'proceedings' has been defined as under:

'(b) "proceeding" means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.'

7.11 On examination of the entire scheme of the Act, we are of the considered opinion that the plea advanced by ld. counsel for the assessee deserves to be rejected for the simple reason that the term 'proceeding', defined u/s 133A, includes the TDS proceedings also. The survey, thus, could be conducted for obtaining information in regard to TDS proceedings also as mandated u/s 133A sub-section (1) clause (iii). We are in agreement with the submission of ld. Spl. counsel that this amendment has been inserted by way of abundant precaution so as to ensure that while carrying out the survey proceedings, for ensuring compliance with TDS provisions, cash and stock is not examined. Further, we find from the case laws relied by ld. Special Counsel that survey was carried out for TDS purposes even prior to introduction of sub-section (2A) to section 133A and Hon'ble Supreme Court has also taken cognizance of the same. We, accordingly, hold that the survey could be conducted even prior to insertion of subsection (2A) of section 133A.

7.12 The next objection of ld. counsel for the assessee is regarding authorization to DDIT, Chennai for conducting the survey. In this regard, on examination of the provisions of section 133A, we find that there is no requirement under this section read with rules for issuing of authorisation. As per proviso to section 133A, the survey can be carried out by the authorities mentioned in the section itself and only if the survey is carried out by an Asstt. Director or a Dy. Director or AO, or tax recovery officer or Inspector of Income-tax, then the approval of the Joint Director or the Joint Commissioner, as the case may be, is required. In the present case, the DDIT Chennai was authorized by the Addl. Director of Income-tax (Inv.), which was in accordance with the CBDT Notification no. S.O. 1189(E) dated 3-12-2001, the relevant portion of which is reproduced hereunder:

"MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 3rd December, 2001
(INCOME-TAX)

S.O. 1189(E). - In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 120 of the Income-tax Act 1961 (43 of 1961) and in supersession of No. S.O 703(E) dated 6th September, 1989 and any order issued by the Directors-General of Income-tax (Inv.) so far it relates to the jurisdiction of Directors the Central Board of Direct Taxes hereby

(a)	directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested in them under section 32 of the said Act - perform their functions relating thereto in respect of the territorial areas or whole of India;
(b)	directs that the Directors specified in column (2) of the Schedule hereto annexed shall exercise their powers vested till them under all other provisions of the said Act (other than section 132) and perform their functions relating thereto in respect of the territorial areas specified in the (corresponding entries in column C') of the said Schedule.
(c)	authorises the Directors specified in column (2) of tile Schedule hereto annexed to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the Income-tax authorities who are subordinate to them in respect of such territorial areas as may be specified in to such orders.

2. This notification shall come into force on the date of publication in the Official Gazette.
SCHEDULE

Sl. Nos.	Designation of Directors of Income-tax (Inv.)	Territorial Area
1.	2.	3.
. . . . . . .
5. Director of Income-tax (Inv.), Chennai		Tamil Nadu and Pondicherry except Mahe and Yenam."

7.13 Therefore, it cannot be said that DDIT, Chennai was not duly authorized to carry out the survey. A bare reading of section 133A(1) makes it clear that survey can be carried out at the place where business or profession is carried on irrespective of the fact whether the place of business or profession is separate from its registered office. The object of survey is to gather information in regard to the proceedings under the Act which is enumerated in clauses (i),(ii) & (iii) to section 133A(1), as reproduced above and, therefore the powers cannot be restricted in any manner, particularly when sufficient safeguards have been provided by legislature itself while drafting section 133A, as is evident from bare reading of various clauses of section 133A.

7.14 The survey at Gurgaon was duly authorized by Addl. Director of Income-tax (International Taxation), New Delhi. Therefore, both these authorities i.e. DDIT Chennai as well as ITO, TDS could enter the premises occupied by the company to conduct survey on the strength of authorization issued to them. The assessee has also alleged that Shri Sastry from CFSL could not enter the premises. In our opinion, this objection deserves to be rejected because in view of provisions of sec. 131(1A) and the decision of Hon'ble Supreme Court in Bharti Cellular case (supra), it cannot be said that DDIT(Inv.) exceeded his jurisdiction by taking Shri Sastry to the factory premises.

7.15 Next objection of ld. counsel for the assessee is that statement u/s 131 could not be recorded because there was no non-cooperation of persons present at the time of survey as is contemplated u/s 133A(6),which only entitles the authority conducting survey to record statement u/s 131. The submission is that in view of section 133A(6) only non-cooperation of persons present at the time of survey triggers invoking of section 131. In this regard we find in the letter dated 21-2-2013, contained at page 19 to 24 of the PB of DDIT, inter alia, informed as under to the assessee:

"1. A survey under section 133A of the Income Tax act was conducted at the factory and corporate office premises of MIs. Nokia India Private Limited (NIPL) in Chennai and Gurgaon respectively on 08-01-2013. During the course of survey it was found that NIPL neither had a principal officer nor had any Executive I Officer having overall control and management. Though there was an apparent co-operation (by being physically present) from the employees, in effect there was an absolute non-cooperation as mentioned below:—

i.	For any information called for, the employees kept on saying that the information was not available with them and he / she was not responsible/ authorized to deal with matters relating to taxation.
ii.	No books of account were found maintained in physical form at both the premises. When questioned, it was stated that books of account were ever maintained in physical form and they were always maintained in the SAP system.
iii.	When it was requested to show the computerized accounts in the SAP system, the next excuse was that none of them had access to the books of account in the system as per the protocol.
iv.	When questioned about the agreements entered in to regarding supply of software and other intangibles, everyone feigned ignorance and no such agreements were produced.
v.	When all the Executives present were requested to explain and show the basis for software pricing along with relevant documentation, all of them evaded to explain and show such basis on one pretext or the other.

2. As a result of such non co-operation, the books of account could not be seen and the survey team could not carry their duties as mentioned under section 133A(3) of the Act. In view of the above, summons under section 131 of Income tax Act, 1961 were issued to the employees and their statements were recorded. Subsequently, some other employees were summoned and examined in the office of the undersigned. Even during these enquiry proceedings, non cooperation continued and the crucial information required or various proceedings under the Act, as mentioned below, have been withheld and not submitted till date:—

i.	Xerox copies of software supply agreements were filed. by Mrs. Arja Bjorklund (CFO) on 24.01.2013. When the original agreements were desired to be produced, Mrs. Arja Bjorklund (CFO) sought a week's time. But neither she nor anyone from NIPL filed the same so far and no explanation is given regarding their failure to comply with the requirement.
ii.	From some of the official mails (Seen in the impounded laptops) browsed by the Officers of the Department, few mails were found to be very incriminating in terms of decisions regarding shifting of profits to the parent company, concealment of income by manipulating the actual profits to certain predetermined/ desired levels, manipulating software - voices etc. As such, the official mail correspondence entered into by the executives of NIPL, as recorded in the server, was required to be produced. It is a matter of record that the mail dump has been withheld deliberately for reasons best known to the management.
iii.	The details regarding month wise production of mobile handsets, number handsets exported, number of handsets sold in domestic tariff area, underlying documents for software pricing etc, were sought for from time to time. So far they have not been supplied without any valid reason.
iv.	The month-wise software invoices impounded during the survey contained consideration in terms of US $. It was requested to produce/ file the invoice wise consideration in INR as recorded in the books of account of NIPL. No such details have been produced so far.

It is not out of place to mention here that all -the details/ information requested as above is readily available with NIPL and it does not require any extra/ special effort to furnish the same. However, it was chosen not to company with the requirements of law for the reasons best known to NIPL only. In your letter dated 18.01.2013 too it was stated that the employees co-operated to the extent possible, qualifying the degree of co-operation and thereby admitting that it was not full co-operation."

7.16 Therefore, the DDIT, Chennai has clearly demonstrated that there was non-cooperation of employees in furnishing the information and, therefore, u/s 133A(6), DDIT, Chennai had powers to record statements u/s 131. Even otherwise u/s 131(1A), the DDIT, Chennai could exercise the powers. This sub-section reads as under:

"(1A) If the Director General or Director of Joint Director or Assistant Director or Deputy Director, or the authorized officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub-section, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that subsection, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority."

7.17 These powers are given to specific authorities for making any inquiry or investigation relating to income concealed. In the present case main thrust of entire enquiry was to find out true import of payments made by assessee to Nokia Corporation and, accordingly to find out the tax deductible at source.

7.18 The assessee has also submitted that the statement of ex-employee Mr. Jintendra Agarwal, auditor, being not present at the time of survey, could not be recorded. In our opinion, this plea deserves to be rejected at the very outset, because once the powers are exercised u/s 131(1A) in order to gather the information, the designated authorities could issue summons to any person. DDIT is one of the designated authority and, therefore, no irregularity/ illegality can be imputed.

7.19 In view of above discussion, we hold that there was no illegality in carrying out survey and the statements recorded u/s 131 at Chennai were validly recorded.

8. Now the next issue is in regard to the evidentiary value of statements recorded during survey. As we have already held that survey was validly conducted, therefore, this objection of assessee does not survive. However, even otherwise, it is well settled law, as held in the case of Pooran Mal (supra) and Dr. Pratap Singh (supra), that evidence collected during illegal surveys also can be relied upon. We are not inclined to accept the plea of ld. Authorised Representative on the ground of breach of fundamental right of privacy because of the decision of Hon'ble Supreme Court in above cases.

9. The next objection of ld. counsel for the assessee is that statement on oath could not be recorded in course of survey. The assessee has relied on various case laws which we have considered in the submissions of assessee. However, we find that now this issue is covered by the decision of Hon'ble Bombay High court in the case of Dr. Dinesh Jain (supra) and, therefore, this objection raised by assessee does not survive.

10. The last objection of assessee is regarding cross-examination being not provided in respect of various statements used in framing the order u/s 201/201(1A). The challenge is on the ground that there was denial of principles of natural justice.

11. The objection is that entire proceedings from the initiation of survey to the passing of order u/s 201/201(1A) were completed within 41 days and secondly on the ground that assessee had not been offered any opportunity to cross-examine the employees whose statements had been relied upon by AO for arriving at the conclusion that the impugned payments made by NIPL to Nokia Corporation were on account of royalty payments. The revenue's main contention on this count is that assessee was provided with all the statements taken during the course of survey which were mainly of technical persons who explained the manufacturing process, but submission of revenue is that assessee never objected or pointed out any error in the statements of these employees and there is no need for any cross-examination of the technical persons, who were primarily incharge of the operations. The revenue has strongly objected to the time of raising the plea regarding cross-examination being not provided to employees before Tribunal.

11.1 In sum and substance the submission of revenue is that statements had only corroborative value and the conclusion was not drawn solely relying upon the said statements and, therefore, there is no need for cross examination of employees.

12. Before we embark upon to examine the contentions of both the parties on this count, it would be useful to discuss the scope of principles of natural justice. Rules of natural justice traditionally comprised of the rules audi alterm partem and nemo judex in causa sea. Rule of audi alterm partem requires the maker of a judicial or quasi judicial decision to give prior notice of the decisions to persons affected by it and an opportunity for those persons to make representations. No man is to be deprived of his property without his having an opportunity of being heard. The object is that authority must do its best to act justly and to reach just ends by just means. This rule is of universal application and founded upon the plainest natural justice. There is no gainsaying that AO must act in good faith and give fair hearing to assessee, for that is a duty cast upon every authority who decides anything. Authorities under the Act have been given powers under various sections viz. 131, 132, 133A, 133B etc. in the manner prescribed by law. All the information obtained by the authorities are required to be provided to assessee and also the statements and further to provide opportunity to assessee as well as persons whose statements were recorded for correcting or contradicting any relevant statement prejudicial to their view. The underlying principle is that there should be fair play in the process of decision making. Whenever a challenge is made to the non-adherence to principles of natural justice, two basic issues are involved:—

(a)		Does the rule applied to a particular situation; and
(b)		If so, what is the precise content of the rule in the situation.

12.1 It is to be examined, whether a rule has been observed with reference to above two issues or not. The function of court is to examine the actions of authorities to find out whether, in the given circumstances, the principles of natural justice have been complied by authorities or not, but the court cannot impose its own method on administrative or executive authorities, else it would amount to usurpation of powers of authorities. The authority is the best judge to decide the extent to which the principles of natural justice have to be applied in the given circumstances, the function of court being limited to examine whether substantial justice has been imparted or not. It entirely depends on the nature of issue to be determined. Diplock J. in the case of R.V. Dy. Industrial Injuries Commissioner, Exp. Moore [1965] 1 QB 456, summarized the Commissioner's obligations in conducting a hearing as follows:

"The deputy Commissioner is required (a) to consider such 'evidence' relevant to the question to be decided as any person entitled to be represented wishes to put before him; (b) to inform every person represented of any 'evidence' which 'the deputy commissioner proposes to take into consideration, whether such 'evidence' be proffered by another person represented at the hearing, or is discovered by the deputy commissioner as a result of his own investigations; (c) to allow each person represented to comment upon any such 'evidence' and, where the 'evidence' is given orally by witnesses, to put questions to those witnesses; and (d) to allow each person represented to address argument to him on the whole of the case. This in the context of the Act and the regulations fulfils the requirement of the second rule of natural justice to listen fairly to all sides."

12.2 Whether, the decision be based on evidence of some probative value, he further held:
"[The] technical rules of evidence, however, form no part of the rules of natural justice. The requirement that a person exercising quasi judicial functions must base his decision on evidence means no more than it must be based upon material which tends logically to show the existence or non-existence of facts relevant to the issue to be determined, or to show the likelihood or unlikelihood of the occurrence of some future event the occurrence of which would be relevant. It means that he must not spin a coin or consult an astrologer, but he may take into account any material which, as a matter of reason, has some probative value in the sense mentioned above. If it is capable of having any probative value, 'the weight to be attached to it is a matter for the person to whom Parliament has entrusted the responsibility of deciding the issue. The supervisory jurisdiction of the High Court does not entitle it to usurp this responsibility and to substitute its own view for his."

12.3 In this context we refer to the decision of ITAT Mumbai Bench in the case of GTC Industries Ltd. v.Asstt. CIT [1998] 65 ITD 380, wherein Tribunal has elaborately considered the issue of affording cross-examination in those cases where the evidence used by AO is collateral/ secondary in nature. Relevant observations are reproduced hereunder:

'"84. We now deal with the dictum :"Audi Alterm Partem". While arguing the 'opportunity' aspect, Shri Dastur stated that the principles of natural justice have been was not given to the assessee. To support this the learned counsel relied on precedents. We examine the applicability of the same in the facts of the present case.

85. In the case of Vasanji Ghela & Co. (supra) the Court held :
"The rules of natural justice do require that normally speaking, if the statement of a person is intended to be used as evidence against a party, it must be made available to the party against whom it is intended to be used and such party must be given a fair opportunity to explain the same or comment on it. What would amount to fair opportunity would depend upon the facts and circumstances of each case. If such a party makes a request to be allowed to cross-examine the person, who made the statement, for the purpose of meeting the statement or with a view to commenting thereon, such a request cannot, save in exceptional or special cases, be denied without violating the principles of natural justice."

86. In the case of V.K. Batcha Mohideen v. Joint Commercial Tax Officer [1971] 28 STC 450 (Mad.) the Court held :

"The principles of natural justice have a very wide and extensive field for action. They enfold within their net the activities of the revenue in problems of taxation as well. They are not circumscribed to civil actions, since their arms can extend even to correct errors committed by taxing authorities in exercise of statutory powers under the taxation laws of the State."

87. Shri Desai in this connection invited our attention on the ratio of T.Devasahaya Nadar v. CIT[1964] 51 ITR 20 (Mad.), wherein it was held :

"It cannot be laid down as a general proposition of law that the Income-tax Department cannot rely upon any evidence which has not been subjected to cross-examination. An ITO occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it. He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an informant for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case."

88. In the case of State of Punjab v. Bhagat Ram [1975] 1 SCC 155, the respondent was dismissed as a result of departmental enquiry and he filed a suit for declaration that his dismissal was illegal on the ground that copies of the statements recorded by the Vigilance Department during preliminary enquiry were not supplied. The dismissal was set aside by the trial Court and the decision was upheld by the Court. Thereafter, the State filed appeal for the certificate. The Apex Court held that :

"Unless the previous statements of witnesses are supplied the dismissed person will not be able to have an effective and useful cross-examination and therefore, it is unfair to deny the Government servant copies of the earlier statements of witnesses. Synopsis of the statements will not satisfy the requirements of reasonable opportunity to show cause against the action proposed to be taken."

We now come to the cases relied upon by the revenue.
89. In the case of Mohanlal Jitamalji Porwal (supra). It was held as under (at page 488) :
"Ends of justice are not satisfied only when the accused in a criminal case is acquitted. The Community acting through the State and the Public Prosecutor is also entitled to justice. The cause of the Community deserves equal treatment at the hands of the Court in the discharge of its judicial functions. The Community of the State is not a persona-non-grata whose cause may be treated with disdain. The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National interest."

90. In the case of Kisanlal Agarwalla (supra). The Court held :
"Ordinarily the principle of natural justice is that no man shall be a Judge in his own cause and that no man should be condemned unheard. This letter doctrine is known as audi alteram partem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is - record must be placed on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of, audi alteram partem. That no party should be condemned unheard. No natural justice requires that there should be a kind of a formal cross-examination. Formal cross-examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice.Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it wheather it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement, or record on which the charge is being made against him, the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness box."

91. In the case of Satellite Engg. Ltd. (supra). The jurisdictional High Court has held that :
"It is true that the Department must disclose every information to the petitioner in which the Department intend to rely in the departmental proceedings. If the copies of the letters containing the price offered were handed over to the petitioner with a slip pasted on the name of the intended importer. From this material, it was for the petitioners to establish that the value quoted in these quotations was not the proper value and in case the Department is compelled to give the name or to produce such intending importers for cross-examination in departmental proceedings, it will well-nigh be impossible together any material in future. Therefore, it cannot be said that there was violation of natural justice specially when the name of the exporter sending the quotations was disclosed to the petitioner."
92. In the case of Kanungo & Co. (supra). It was held :

"...The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them."

In our opinion, the principles of natural justice do not require that in matters like this the persons who have been given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statement made before the Custom Authorities. Accordingly, we hold that there is no force in the third contention of the appellant. There is no force in the second point because we do not read the impugned order as having wrongly placed the burden on the appellant. What the impugned order does is that it refers to the evidence on the record which militates against the version of the appellant and then states that the appellant had not been able to meet the inferences arising therefrom. In our opinion, the High Court was right in holding that the burden of proof had shifted on to the appellant after the Custom Authorities had informed appellant of the results of the enquiries and investigations.
93. In the case of Tulsiram Patel (supra). The Apex Court has held that:

"So far as the 'audi alteram partem' rule is concerned, both in England and in India, it is well-established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. This right can also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion; nor can the audi alteram partem rule be invoked if importing it would have the effect of paralysing the administrative process or where the need for promptitude or the urgency of taking action so demands."
94. DCW Ltd.'s case (supra), para 11 of the said decision (p. 237) is reproduced here as under :

"The Supreme Court had an occasion to consider the applicability of the principles of natural justice in a recent case in R.S. Dass v. Union of India AIR 1967 SC 593. The Supreme Court in Chairman, Board of Mining Examination v. Ramjee AIR 1977 SC 965 held as follows :

'Natural justice is no unruly horse, no lurking land mine, nor a judicial cure all. If fairness is shown by the decision maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditional by the facts and circumstances of such situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor financial but should be flexible yet firm in this jurisdiction. . . .'"

95. Sri Desai submitted that the rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and background of statutory provision, nature of the right which may be effected and the consequences which may entail its application depends upon the facts and circumstances of each case. It was stressed that natural justice is mistress and not the master of justice. It is used to support the cause of justice. It can never be used to defeat the cause of justice. Sri Dastur pointed out that the Apex Court in K.T. Shaduli Grocery Dealer's case (supra) made it clear that cross-examination, if asked for, must be granted. In the case of Hira Nath Mishra v. Principal, Rajendra Medical College AIR 1973 SC 1260, the Supreme Court came across with an unusual situation which demanded a highly particular approach. The Court was concerned with the complaints regarding molestation of girl students. In exceptional cases the requirement may be waived. The case of the assessee does not fall in the category of exceptional cases. In the light of cases discussed hereinbefore, it was pleaded that great injustices given to the assessee.

We have perused the decisions cited before us. The judicial climate on this point is thickly clouded with plethora of precedents. This point has created chaos in judicial cosmos. The result is that, as was observed in the case of Kisanlal Agarwalla (supra), "the danger of confusion has become real and natural justice is on the misleading road of sentimental potentiates."

We recollect the famous saying of Justice Bernard Botein :
"The law will never be entirely clear to any judge, just as a beautiful woman is always a bit of mystery to her lover. Were it otherwise each would lose part of her charm. But the wise judge, like the wise lover, will be the master of his true love, although he may not understand her completely and though she is sometimes too difficult for him." - Trial Judge (at page 27)

96. The appellant's basic contention is that the statement of witnesses and materials which are relied upon by the Assessing Officer in the assessment order to reach the conclusions and findings which are adverse to the assessee should be disclosed to the appellant and the witnesses should be offered for cross-examination. Supreme Court in the case of Suraj Mall Mohta & Co. (supra) laid down :

"the assessee ordinarily has the fullest right to inspect the records and all documents and materials that are to be used against him. Under the provisions of section 37 of the Indian Income-tax Act the proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. In other words, the assessee would have a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal."
97. In the case of K.T. Shaduli Grocery Dealer (supra), it was held (at p.1631) :

"... the usual mode recognized by law for proving fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness of completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Salestax Officer. Here in the present case the return filed by the assessee appeared to the STO to be incorrect and incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the books of account of the assessee. The STO relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining Hazi Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete the assessee was entitled to an opportunity to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross-examination. It can hardly be disputed that cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. Here, it was not disputed on behalf of the revenue that the assessee in both cases applied to the STO for summoning Hazi Usmankutty and other wholesale dealers for cross-examination but his application was turned down by the STO. This act of the STO in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee."

98. It is pertinent to note that in the case of M.K. Thomas (supra), it was held that the decision inK.T. Shaduli Grocery Dealer's case (supra), cannot be understood as recognising a right of cross-examination as an invariable attribute of the requirements of reasonable opportunity. The Apex Court has stated the rule with sufficient elasticity and amplitude as to make the right depend on the terms of the statute, the nature of the proceedings or of the function exercised, the conduct of the party and the circumstances of the case.
99. "Whether in a particular case the particular party should have the right to cross-examine or not depends upon the facts and circumstances of a particular case. This is so, because the right to cross-examine is not necessarily a part of reasonable opportunity." This view was taken by the Calcutta High Court in the case of Manindra Nath Chatterjee (supra). Thus in a given case the rule of audi alteram partem may impost a requirement that witnesses whose statements are sought to be relied upon by the authority holding the enquiry should be permitted to be cross-examined by the party affected while in some other case it may not.

100. In the case of Kishanchand Chellaram (supra), the Apex Court was concerned with the evidence which was to be used against the assessee. This was in the form of letter from the Manger of a Bank through which money was remitted. This letter was not shown to the assessee. Therefore, evidence was held not to be admissible. It was held that opportunity to controvert should be given to the assessee.
101. In the case of Dr. Rash Lal Yadav (supra), it was held :

"The concept of natural justice is not a static one but is an ever expanding concept. In the initial stages it was thought that it had only two elements, namely, (i) no one shall be a judge in his own cause, and (ii) no one shall be condemned unheard. With the passage of time a third element was introduced, namely of procedural reasonableness because the main objective of the requirement of rule of natural justice is to promote justice and prevent its miscarriage."
102. In the case of Mahendra Electricals Ltd. (supra), it was held that :
"The opportunity to cross-examine the witness who has made adverse report should not be denied, to the opposite party."

103. The concept and contents of natural justice go on changing. Natural justice is a living organism, advanced from time to time. Courts are giving new dimensions to the principles of natural justice. The principles embodied reflect the value of the society accepted for time being. The change is a fact of life. Every living thing takes new shape, new dimension with the flux of time. Hon'ble Supreme Court has observed in 44 STC 61 (sic) :

"It must be remembered that law is not a mausoleum. It is not an antique to be taken down, dusted, admired and put back on the shelf. It is rather like and old but vigorous tree, having its roots in history yet continuously taking new grafts and putting out new sprout and occasionally dropping dead words. It is essentially a social process, the end product of which is justice and hence, it must keep on growing and developing with changing social concepts and values. Otherwise, there will be estrangement between law and justice and law will cease to have legitimacy."

104. 'No riddle is more difficult to solve, none has more persistently engaged the attention of thoughtful mind', says Allen, than the problem of the natural sense of justice. We have carefully considered the profile of the subject in the light of the latest developments. Principles of justice prohibit, determination without hearing. [Terminer sans over] Similarly, hearing without determination [Over sans Terminer] is also interdicted by the finer norms of justice. That all is required is impartial and fair hearing, and determination of disputes with utmost promptitude. The question whether or not any rules of natural justice had been contravened, should be decided not under any preconceived notions but in the light of the statutory rules and provisions. The violation or otherwise of any rule of natural justice must be a matter of substance not of mere form. It is important to keep inmind the caveat issued by the Apex Court AIR 1977 SC 965 that unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating.

105. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, 'audi alteram partem'. The principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature.

106. Adverting to the facts of the present case, we find that the Assessing Officer made addition on account of the clandestine premium alleged to have been received by the assessee on the sale of cigarettes. The factum of the premium collection is mainly based on the edifice of the following facts: -

(i)	Analysis of the assessee's finance results revealed that the assessee sustained "Loss From Sale of Cigarettes", to the tune of Rs. 20,59,57,913. (see para-6);
(ii)	Invoice price of the cigarettes as reflected by the assessee in its record was less than the manufacturing cost. (see para-7);
(iii)	Impact of Excise Duty on the trade, and the observation of the Technical Study Group of Central Excise Tariff, 1985. (see paras-8 and 9);
(iv)	Twin Branding System. (see paras 10, 11, 12 and 13).

107. It is relevant to see that how the amount of premium was calculated. On what basis it was worked out. We find that the entire calculation [as given on page No. G-22A, of the assessment order] is based on the 'Twin Branding Principle'. First the difference between the ex-factory price of a particular brand and its high price twin was worked out. Amount so arrived at was multiplied by the volume. Resultantly came the figure of Rs. 29,11,68,078. Out of that Rs. 2,91,16,807 [10 per cent] got deducted. It was attributed to the share of WB's who were privy to such clandestine operations. Finally a sum of Rs. [29,11,68,078 - 2,91,16,807] = Rs. 26,20,51,271 rounded off to Rs. 26,20,51,000 added in the total income.

108. To support the addition on account of premium recourse was made to the Pricing and Marketing Policies, adopted by the assessee and other incidental details. Modus operandi was examined. It was found that -

(i)	Large amount was remitted by different unrelated and unconnected WB's, in the form of demand drafts, in fictitious names to Bombay, Calcutta, Delhi, etc., and these demand drafts were encashed either through bank account standing in the same name as that of the payees or else were discounted.
(ii)	The advertisement expenses of the assessee-company were incurred through these secret bank accounts.
(iii)	Assessee-company donated the funds out of these secret bank accounts, viz., donation to Methodist Church out of transfer of funds from the a/c. of H.K. Patel (in assessment year 1984-85) and donation to the Festival of India Committee out of transfer of funds from the a/c. of Shree Associated [current A/c. No. 1724 in Indian Overseas Bank, Bandra West]. This amount was given at the behest of Sri Sanjay Dalmia, President-cum-Director-General of the Company.
(iv)	One of such bank a/c. was in the name of Moonlight Finance. This was with the Punjab & Sind Bank, Scindia House Branch, New Delhi. The account holder given the following address :
	B-72, Himalaya House (7th Floor)
	23-Kasturba Gandhi Marg,
	New Delhi.
	[Current A/c. No. 787]
	This was also the office address of Mr. Umesh Khaitan, Sitting Director of the assessee-company.
(v)	Amounts in the shape of commissions, profits on sale of goods other than cigarettes, technical and supervision charges, etc., were reintroduced in the assessee's a/c by means of havala entries.

In view of the above, Assessing Officer concluded that assessee-company had nexus with the secret Bank a/c's. Thus he supported the 'premium theory' with reference to the abovesaid facts. Out of the total amount of addition on account of premium, Assessing Officer deducted, inter alia, the following :

(i)		Bogus income shown from commissions, trading and supervision charges Rs. 8,66,32,171
(ii)		Advertisement expenses outside books Rs. 2,60,00,000

109. The material gathered by the DRI in the course of search which was passed on the Income-tax Department given the clue. Assessing Officer made independent investigation. The analysis of the financial results revealed that the assessee sustained loss from the sale of cigarettes to the tune of Rs. 20,59,57,973. Besides the invoice price of the cigarettes as reflected in the records was less than the manufacturing cost. These facts were examined with reference to the observation of the Technical Study Group of Central Excise Tariff, 1985. The impact of the Excise Duty on the trade was considered. The outcome of the enquiry indicated that the premium was generated by the use of the 'Twin Branding System'. The basis of addition was the difference between the ex-factory price of a particular brand and its high price twin. There was no addition on account of alleged bogus income shown from commissions, trading and supervision charges. Similarly advertisement expenses found outside the books were not considered for the purpose of addition. These amounts were considered for the purpose of deduction from the so-called clandestine commission. In short, the case of the revenue is, that the assessee-company by using twin branding system, collected clandestine premium on the sale of cigarettes. This commission was collected through the WB's. It was kept in the secret bank accounts. It was utilised for meeting the expenditure, viz., advertisement, donation, etc. Some amount was re-introduced in the assessee's account by means of havala entries and reflected as commission and trading income.

110. From the aforesaid discussion, it is clear, that addition was not made merely on the basis of findings given apropos the secret bank accounts, disbursement made out of such account's or on the strength of havala entries, by which the bogus commission and trading income said to have been reintroduced in the books of the assessee. These aspects are only secondary, subordinate and were used to buttress the main matter connected with the amount of addition. The violation or otherwise of any rule of natural justice must be a matter of substance not of mere form. Natural justice should always be used for the furtherance of the cause of justice. The palladium of justice requires, that law suits be not protracted, otherwise treat oppression might be done under the colour and pretence of law [interest republica ut sit finis litum]. These loafty principles which are harbinger of justice cannot be used for dragging the justice in the labyrinth. We have already indicated that adverse evidence and material, relied upon in the order, to reach the finality should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of collateral nature. Having regard to the facts and circumstances of the case, we are of the opinion that there was no denial of the principles of natural justice.'

12.4 In the backdrop of above legal proposition now we proceed to examine the facts of the present case. The hearing of this appeal commenced on 28-10-2014 and then continued on 29-10-2014, 30-10-2014, 11-11-2014, 12-11-2014. Upto 12-11-2014, the ld. Sr. Counsel argued the appeal on merits and also referred to the issues relating to legality of survey. Revenue began its reply from 12-11-2014 and then continued on 13-11-2014. Thereafter, the appeal was refixed for hearing on 15-12-2014 on which date ld. Sr. Counsel raised a plea regarding no cross-examination being provided to employees, as will be evident from following order-sheet notings.
15-12-2014:-
Present:

For assessee:	Shri P.Kaka Sr. Adv. along with Shri Vikash Srivastava Adv.
For Department:	Shri G. Dave Adv. (Spl. Counsel ) along with Shri Sanjeev Sharma CIT(DR).

Ld. Sr. counsel submits that on the first day of hearing he had raised objection in regard to the certificate given in respect of the paper book filed by the department, which was not in accordance with Rule 18 of the ITAT Rules.

On resumption of hearing, ld. Sr. Counsel referred to the certificate filed by the department dated 7-11-2014 and pointed out that again department has not filed the certificate in accordance with the ITAT Rules. Ld. Sr. Counsel further pointed out that in the paper book, filed by the department, there are certain statements/ documents, which have neither been referred to in the assessment order nor in CIT(A)'s order and, thus, they are in the shape of additional evidence.

Ld. Special Counsel for the department vehemently opposed these submissions and submitted that the entire proceedings u/s 201/201(1A) have been initiated on the basis of survey carried out by the department. He also filed a copy of survey report as per the direction of the Bench. He further submitted that in the revenue's paper book (Vol. I), the following documents have been referred to by CFO in her statement and, therefore, it cannot be said that they are not relevant:

1.	R&D Sub-contracting Agreement dated 01-04-2001
2.	R&D Sub-contracting Agreement dated 01-09-2003.
3.	Service Agreement dated 01-01-2006
4.	Service Agreement dated November, 2010
5.	Minutes of meeting of the Board of Directors, September 2005, September 2007, December 2007, March 2008 and
6.	Note on Sponsorships Service Agreement April 2009.
	Ld. Spl. Counsel further pointed out that there is no objection to the documents contained at sl. Nos. 8 & 10 which are as under:
8.	All the E-mails of Ms. Arja Bjorklund with Anssi found at the time of survey and emails of other employees.
10.	Software Delivery & Procedures which is part of the Agreement dated Ist January,2006.

As far as other three documents i.e. at sl. 7, 9 & 11are concerned, Ld. Special Counsel stated that the same may be ignored.

Ld. Sr. Counsel further submitted that the assessee be provided cross-examination of the employees, whose statements were recorded during the course of survey and relied upon by AO.
Ld. Special Counsel submitted that since the statements are of assessee's employees only, who were associated with the actual operations of the assessee's business, therefore, no cross-examination needs to be provided.

Ld. Senior Counsel, in reply, submitted that the employees were not knowing as to what were the settings in SAP, how the software product was manufactured and sealed in binary coding, which was not capable of tempering with and other aspects.
After hearing both the parties, the Bench directed the assessee's representative to file a detailed note on his preliminary objections, with a copy to ld. Special Counsel for Revenue, so that the issues may be crystallized."

"10/2/15:

The assessee counsel: Shri P.Kaka Sr. Adv. Deptt. Sh. G. Dave Adv. (Spl. Counsel)

The Ld. G. Dave (Spl. Counsel) files the reply of the revenue on contentions raised by & on behalf of the appellant in their undated letter filed in the course of hearing on 17/12/14 on the issue of opportunity for cross examination.

The ld. Sr. Counsel for assessee referred to the petition filed on 30.1.15 in the office, a copy of which was provided to the department on 31/1/15, in response to the direction of Bench to specify particular employees whom the assessee want to cross examine, ld. Special counsel pointed out that assessee has not specified the employees to whom they want to cross examine and advanced his arguments on this preliminary objection of assessee. Ld. Senior counsel for assessee is replying for further hearing. Adjourned to 11/02/15."

12.5 At this juncture, we may point out that in the written submissions filed by revenue, the dates of hearings have not been correctly mentioned. In view of the above proceedings, the revenue's contention is that the time of raising this plea, at such a late stage, raises serious doubt on the purpose of appeal being pursued by the assessee. The impact of this submission of revenue will be considered while arriving at final conclusion on this issue.

13. As we have already discussed earlier that whether cross-examination is to be provided or not depends upon the facts of each case and there is no thumb rule or straight tight jacket formula for arriving at this conclusion. We have considered all the case laws relied upon both the sides to arrive at our conclusion. However, we are not discussing the various case laws because it all depends on facts of each case whether principles of natural justice have been complied with or not. If decision making authority has provided due opportunity to the person complaining of non-observance of principles of natural justice then it is for the person so complaining to demonstrate the same and show the prejudice caused to him. Mere bald assertion of non-observance of the principles of natural justice is of no consequence.

13.1 In course of survey it was found that assessee had made payments to Nokia Corporation for software required to be installed in the mobile handsets during manufacturing. It was found that the accounts of assessee were maintained in the SAP erp system. The main server and the administrative rights of this system were located at Finland. The employees of NIPL were given user right of need base. In course of survey the reports were generated from the system at Chennai in regard to the payments made by NIPL toNokia Corporation. These reports were cross checked and verified by the employees of NIPL in course of survey. The invoices were also impounded which were raised by Nokia Corporation of software payments at Chennai Factory. These invoices were raised at Chennai factory. The AO examined the various details with respect to commercial agreement submitted by the assessee. All these preliminary details led to the AO's belief that payments were made for down loads made by NIPL under the agreement for use in manufacture of mobile phones. He, therefore, examined the TP documentation software supply agreement dated 1-1-2006 and R&D sub-contract agreement between M/s Nokia Corporation Finland and NIPL to find out the true nature of payment made by assessee to M/s Nokia Corporation. He also noticed one important aspect that he invoices were prepared manually by employees of NIPL on behalf of NokiaCorporation OYZ. The assessee's claim was that the payments made for software was on account of purchase of raw-material and, therefore, it was not covered u/s 195 of the Act, attracting TDS provisions.

13.2 In the backdrop of above facts now we have to examine the role of statements recorded by the survey authorities in arriving at AO's conclusion particularly in the backdrop of assessee's plea that entire addition made by AO is based on statements.

13.3 The AO at page 8 of his order has observed that copies of statements recorded at Gurgaon were provided to the AR on 12-2-2013. Copies of statements received from Chennai were provided to the assessee on 14-2-2013. On 20-2-2013, the copy of report of Director CFSL Hyderabad was provided to assessee's representative. On 25-2-2013, the AR of assessee was provide with copies of hard disc received from Chennai Investigation Wing.

13.4 On 26-2-2013 the AO served a show cause notice for AYs 2007-08, 2009-10, 1010-11 & 2011-12 incorporating therein extracts from statements received on 19-2-2013 and also relied upon CFSL report.

14. At page 38 of his order, the AO has observed that during the course of survey, the employees of NIPL were asked as to whether there existed any agreement between NIPL and Nokia Corporation governing the transfer of software and payments thereof. He has observed that no such agreement was found at the survey premises either at the Chennai factory or Gurgaon corporate office. None of the executives knew about the existence of any such agreements. M/s Acha Bjorklund CFO NIPL till 21-12-2012 expressed her ignorance, though specifically asked about such agreement on the date of survey. However, during the course of post survey inquiry proceedings, she produced a copy of the software supply agreement dated 1-1-2006. The AO observed that when questioned about the existence and whereabouts of the original agreement with NIPL, she could not provide any convincing reply. Therefore, the statement of CFO was recorded on oath by AO. The AO has observed that veracity and genuineness of this software supply agreement was doubtful. However, AO elaborately examined the agreement after it was produced before him post survey. At present we are not going into the details of this software supply agreement and are only referring to the same to demonstrate the background in which the statement of Ms. Acha Bjorklund CFO is to be considered. Therefore, AO's findings are primarily based on agreement and not on CFO's statement which was used only to corroborate his findings.

14.1 As noted earlier, the invoices raised by Nokia Corporation were impounded during the course of survey on 8-1-2013 at Nokia factory Chennai. The invoices were submitted before the SEZ Customs authorities along with bill of entry. These invoices specified the details for software payments made by NIPL. This was also used by AO to arrive at his conclusions.

14.2 As noted earlier, the main issue was to find out the nature of transaction and, therefore, it was necessary to find out the manufacturing process at the factory premises. In this regard AO relied upon the statements of technical experts, the extracts from which are reproduced hereunder to demonstrate that there was no contradiction between statements of various top ranking technical experts of asessee-company.

14.3 In this regard the first statement of factory head and director operation Prakash Katama was recorded. This statement is contained at pages 602 to 604 of the PB. The question no. 1, 3,4,5,6,9 and 10 are to be reproduced.

Q.l Please furnish the list of Top employees working at Chennai Plant?
Ans. Top employees are myself Director (Operations), Shri.Subbiah C and Shri.Ritchie Rice are Heads of Production,
Shri.Vishal Mankotia, Head of Logistics and Planning/ Shri.Sembian V, Head of Product and Process Engineering,
Shri. Suresh Muppala, Head of Quality Function, Shri Rahul Sood, Head of Business Control, Shrt.Indraqlri, Head of Corporate Affairs, Shri.D.Soundararajan, Head of HR.

Q..3 Please mention the person involved in the decision making at affects the day to day affairs of the Chennai Plant.
Ans. Myself is involved in the decision making in the areas of education, planning/ product and process equipment, man power planning. Shri D. Sbundararajan involves in decision making process in respect of HR related issues. Shri Rahul Sood involves in cost management works .

Q. 4. Whether any Employment letter or employment agreernent are issued to the employees. If yes, by whom?
Ans. Employment letter or employment agreement are issued by HR Central team placed at Perungudi Office.
Q.5 Please furnish the details of person(s) who decides the pricing and source of the bill of material (SoM) for hardware components and software that are used for manufacture / assembly of mobile phones at Chennai Plant.

Ans. Pricing on the BoM for hardware components and software are decided by mobile phones R&D programme, sourcing and global finance. Mr. Dirk is the Head of R&D programme who sits in Beijing, Mr.Jarkko Sakki is the Head of Sourcing, who sits in Espro, Finland. Mr.Kristian Pullola is the global finance antroller, who sits in Espro, Finland .

Q. 6 Is there any agreement for supply of software that is used by the Chennai Plant, if yes, please furnish the same.
Ans. I have not seen or access any such document for supply of softwre..
Q.9 Whether the subsidiary (Nokia India Private Limited, Chennai Plant) is used for the activities of the parent company Nokia OYJ, Finland?
Ans. Though Nokia India Pvt. Ltd., is wholly owned subsidy of M/s. Nokia OYJ, Rnland, I am not aware of any activities being carried out on behalf of M/s.Nokia OYJ, Finland by M/s.Nokia IndiaPvt. Ltd., Chennai.

Q.10 Whether any document I paper pertaining to Nokia OYJ, Finland is maintained at Nokia IndiaPrivate Limited, Chennai plant?
Ans. I am not aware of any document pertaining to M/s.Nokia OYJ are maintained at Nokia IndiaPrivate Limited, Chennai.
14.3.1 On 18-1-2013 contained at page 693-697 of PB- again statement of Shri Prakash Katama has been recorded on oath.

15. The next statement relevant in the present context is of Ms. Arja Bjorklund in course of survey on 8 & 9 and subsequently on 24-1-2013 and 31-1-2013 . The statement is contained at pages 565 to 569 and at pages 605 to 632 of the PB. Relevant questions and answers thereof are reproduced hereunder:
"Q.1: Please furnish details of your association with Nokia group of companies.

Ans: I am associated with Nokia Group of companies since Nov. 2004. I was working with NokiaCorporation, Finland from 2004 to 2010, stationed at Finland. From April, 2010 to April, 2012, I was working with Nokia India Pvt. Ltd. In April, 2012, I became CFO of Nokia India Pvt. Ltd. since 1st January, 2013, I 'm posted as CFO of Nokia India Sales Pvt. Ltd.

Q.2: What is your present role in the affairs of Nokia India Pvt. Ltd?
Ans: In Nokia Sales India Pvt. Ltd., presently I'm supporting the whole India support in compliance matters when needed, for example in training, compliance roles etc. Till March, 2013, the person in the helm of affairs of accounting matters of Nokia India Pvt. Ltd. i.e. Mr. Tanuj Patro, will be reporting to me.
Q.5: Please furnish a detailed description of manufacturing activities of 'Nokia India Pvt. Ltd'?

Ans: Nokia Chennai factory was set up in around 2006, it was established in SEZ because it was supposed to be an 100% EOU. It was a unit of Nokia India Pvt. Ltd. It purchases components from various suppliers, initial there were no Indian suppliers, but presently, I understand, it has both Indian and other offshore suppliers. Those components are assembled in Chennai factory, then they are exported and sold to Nokia Corporation and then to various customers.

Q.6: Please state how the models to manufacture are decided?
Ans: Nokia Corporation develops, design and through their R&D also develops software etc. for different models, furnish those particulars to "NIPL and orders for manufacturing of desired number of pieces of a particular model. This is done under contract manufacturing.

Q.7: Is the above contract is through some written instruments?
Ans: Yes, we have that. We'll provide the same to you.
Q.9: Please state how the process of developing and selection of software take place for any particular model of handset, that are manufactured in Chennai factory?
Ans: I do not know where the software are developed, but it is embedded in the handset in the course of manufacturing of the handset.
Q. 15: We are given to understand that earlier invoices raised by Nokia Corp. to Indian company NIPL contained price of software, however, afterwards this process was discontinued. Please state the entire facts in details.

Ans: My understanding is that at some point, due to the cost getting high, NIPL could not get that most components any more, but I do not have any evidence in this regard, because it is related to manufacturing activities. Probably this happened when Nokia group started making losses and Symbian was no longer cost competitive.

Q16: From when this started, who took decisions in this regrd, whether there was any written agreement for not charging any cost for delivering software to NIPL any more?

Ans: It started sometimes in 2012. Who took decisions, I don't know. People at Nokia Corp. might be knowing it. I have no knowledge of any such agreements.

Q17: Who in NIPL might be knowing about any such agreement? Was there any other form of understanding between Nokia Corp. and NIPL?
Ans: It is not in my knowledge.
Q.18: Please state what are the agreements that have been made between Nokia Corp. and NIPL. Pl. produce copies of all such agreements.

Ans: There are usually four agreements, one should be regarding "Contract Manufacturing agreement", second should be on sales and distribution agreement, third should be on R&D and services and fourth should, be service agreements. I shall produce copies of those agreements we have in place in India.
15.1 Next statement of Jitendra Grover recorded by the DDIT, Chennai u/s 131(1A) of the Act on 4-2-2013 and 5-2-2013, is contained at pages 665 to 680 of the PB. Relevant questions and answers thereto are reproduced below:
Q.2: Kindly tell me about yourself?

Ans: I am Chartered Accountant by profession. I completed my CA. in Jan. 98. I first worked with Siemens telecom for two years, then two years with KPMG. In 2003 I moved to Ariba India Pvt. Ltd. In 2005, I was with Ericsson. In May 2008, I joined NIPL and was with NIPL up to 10th Sept., 2012. Now I am working with Aricent Technologies, Gurgaon.

Q. 3: What were your roles and responsibilities as Taxation Head in M/s NIPL from 2008 to 2012?
Ans: I was Tax manager for India corporate tax and was responsible for planning, commenting on business model change, transfer pricing etc. from India Tax perspective. Tax compliance was part of the responsibility of shared accounting services team in Finance.

Q. 4: Please explain about the position of withholding tax on the software supplied by M/s Nokia OYJ since the F.Y. 2006-07 to the date of your joining in M/s NIPL. Please explain about the Change if any on the withholding tax issue on the software supplied subsequent to the date of your joining in M/s NIPL.

Q.16. I am showing the mail by Mrs. Rinne sari to Mr. Kambhampati Shiva. It clearly states that Mr. Jitendra Grover trained Mrs. Bindu in the factory to do software invoicing with the basis that each mobile phone has a unique software license and further stated that Mr. Jitendra's invoicing model is being implemented. It also mentions about the payments to be made for the purpose of availing IPR toNokia Global. Hence please explain how the software invoicing was made as per your instruction to Mrs. Bindu? Also explain why the basis of Unique sortware license should not be considered as a mere documentary proof created for the purpose of circumventing Tax liability?

Ans: As explained above the software invoicing was done by Nokia Corp. Finland based on the information they received from factory Finance team in India. I emphasize that there was no change in the methodology for working out software price since inception in 2006 till 2011. There was no new process for computing software price suggested or implemented by me. The instruction Mrs. Sari is referring to in her email is probably the change in the description of invoice which was effected after the process of supply of software key came into vogue. The only change that happened in the software delivery process from mid of 2009 was supply of software keys along with the software. Probably Mrs. sari is referring this change when she mentions user license key. About the comment on IPR in my understanding, the rights and obligations should be seen in the contractual relationship between M/s NIPL and Nokia Corp.

Q.17. Which you meant to say software price is a balancing figure in order to arrive the required margin of profit as per the global Transfer Pricing policy of Nokia OYJ?

Ans. The software in discussion is Nokia Proprietary software. So what I was informed is that there is no way to appropriately value a "proprietary software" as there are no valuation methods or bench marks. In such a scenario, since 2006 the method followed was to value every item around excluding the software and in accordance with global transfer pricing policy, Nokia gave cost Plus margin toIndia factory. The balance part of cost was billed in the form of software. Software pricing therefore is based on variable costing and India manufacturing was functioning as low entity. The answer to the question above is yes.

Q.18. Please explain whether there was any agreement for the purpose of limited risk contract manufacturing by M/s NIPL with Nokia OYJ?

Ans. The risk profile of Nokia India manufacturing can be understood on the Global Transfer Pricing Policy. It is clearly stated in the policy that manufacturing functions will be compensated on cost plus basis and all the risks in business are being assumed by Nokia Corporation. To the best of my understanding and memory, I have not seen any contract between Nokia Corp. and NIPL for contract manufacturing.
Q. 23. What is the role of F&C in NIPL?

Ans: NIPL F&C is responsible for three primary functions. 1) Sales Controllership including pricing of products in India, 2) Investment Controller, 3) ARC (Accounting, Reporting and Compliance). F&C team in NIPL is responsible for providing support to business in terms of pricing, financial analysis, forecast, budgets, funding, etc. In addition, F&C's role is also to ensure all tax compliances and reporting requirements (Internal & External reporting). This would also include statutory and tax audits.

15.2 Next statement of E. Uma Shankar recorded by the DDIT, Chennai u/s 131 of the Act on 7-2-2013, is contained at pages 660 to 664 of the PB. Relevant questions and answers thereto are reproduced below:
2. Please identify yourself

Ans: I am E. Uma shankar, s/o Shri N. Elumalai, aged 34 residing at No. 45, Housing Board, Near collector office, Pallava Nagar, Kanchipuram. I am the variant manager of Chennai plant of M/s NokiaIndia Private Limited working since December 2008.
3. As variant Manager, Chennai plant of M/s Nokia India Private Limited (NIPL), what are the various activities that you look after?

Ans: I am managing the engineering change management in the factory. Whenever there is any change in either the software or the hardware aspects of a model of the handset being manufactured in the factory, it is executed through our department namely, the engineering change management department, which I am heading. The Change is initially communicated to me through an intranet communication called as PDM (product data management system). This in fact comes as an ECN Number (Engineering Change Note). Once, I see that I update the existing process as per the required.

4. Please explain the process through which you update the software in the existing models or in new models.

Ans: As I told earlier, any change in the existing model or the introduction of new model is communicated to me through PDM via ECN. As far as software is concerned, it IS directly downloaded into the local IMES Server located in the Chennai factory. I along with my team access it and check it for the presence of any functional irregularities/defects. In case, there are any, we get them rectified by the global R&D team by highlighting the same. In a", my role as far as software is concerned to make it ready to be used in the Chennai factory production. Once this is over, the software is ready for flashing into the handsets by the production team.

5. Please explain the manufacturing/assembling process of the mobile phones manufactured in the Chennai plant of M/s Nokia India Private limited (NIPL)?
Ans: The manufacturing process consists of the following steps,

1.	First of all, the printed circuit boards are imported from china/taiwan.
2.	These are loaded to magazine, that is, screen impression for soldering purposes.
3.	Then it will go through the process of SMT (surface mount technology) wherein, the capacitors, ICs, resistors, shield, light protective caps etc are placed.
4.	After this process, the component is placed at automated 'optic inspection for position and quality testing.
5.	After this process, they same will be passed through final heat shield connection and protective cap through reflow oven/heater.
6.	After above process is over, on the said component, the dome sheet is placed
7.	Next, ACF-(assembling the LCD to the board) is done. Up to this, the process is called as Module. After the module, in the process of Panel Flash, the core software is downloaded from the server, located in the factory, to the Chip. This panel flash is the heart of the Mobile Phone. The Product Serial Number .(PSN) is assigned during the Panel Flash.
8.	Subsequently, light guide, protective shield, D-Cover, Connector, Mic, Speaker are placed.
9.	Then, Final User Interface tests are carried out. At this Stage, the semi finished product is called as the Engine.
10.	Now this engine is flashed with label software, where the customer settings are loaded in the Mobile Phone.
11.	The final assembly tool mechanics, which is Key Mat, A-Cover and B-Cover, are placed.

6. What are the software that are used in the manufacturing of the Mobile phones that are made out of Chennai and at what stages, the software are used?

Ans: The mobile phones that are manufactured out of the Chennai Plant are based on Series-30 and Series-40 Platforms. For any Mobile Phone that is launched, the software is designed and developed by Nokia R&D. This software is stored in the global server in Finland. When a new model of mobile phone is launched in the Chennai factory, the basic software is downloaded from the global server and stored in the local server in the Chennai factory. Each time a mobile phone is being manufactured; the software is flashed and tested in the handset at four different stages during the Manufacturing Process, pulling the software from the local server located in the Chennai factory.

1.	The first phase of software is the Panel Flash, where the core software is downloaded from the local server located in the factory into the chip. The product Serial number is generated at this stage.
2.	The Second stage is the alignment testing stage where the software aligns the radio frequency of the mobile handsets.
3.	The Third Phase is called as the final user interface wherein, the software checks the functionality of the mobile handsets.
4.	The fourth and final Phase is called the Labeling of the Mobile Handsets, wherein, the customer settings are downloaded in the Mobile Handsets and the IMEI number is also generated.

7. Please explain, where from these softwares, which are used in, the Mobile handsets are obtained and how are they stored and finally into the Mobile Handsets? And also, explain how are they paid for?

Ans: These software are designed and developed at various R& D Sites of Nokia Corporation. Then, these softwares are stored at the global server of Nokia Corporation located in Finland. As explained earlier, for each model, the software is downloaded from the global server to the local server located in the Chennai factory and stored therein. In turn, each time a mobile handset is being manufactured; the software is being incorporated into each mobile handset. With regard to the payment for the software, I don't know the basis, quantum and nature of these payments.

15.3 Next statement of V. Sembian recorded by the DDIT, Chennai u/s 131 on 7-2-2013, is contained at pages 702-708 of the PB. Relevant questions and answers thereto are reproduced below:
2. Please identify yourself

Ans: I am V. Sembian 5/0. M. Venkatesan residing at CF1, Casa XS Apartrnent, Manapakkam Road, Manapakkam. I am the Product and process engineering manager of Chennai plant of M/sNokia India Private Limited. I am working in NIPL since-August 2005 .
3. Product and process engineering Manager, Chennai plant of M/s Nokia India Private Limited (NIPL), what are the various activities that you look after?

Ans: My role is ensuring the overall engineering capability of the factory which involves new product launch support, maintenance engineering, industrial engineering support and equipment installation.
4. Please explain the manufacturing/assembling process of the mobile phones manufactured in the Chennai plant of M/s Nokia India Private Limited (NIPL)?
Ans: The manufacturing process consists of the following steps,

1.	First of all, the printed circuit boards are imported from china/taiwan.
2.	These are loaded to magazine, that is, screen impression for soldering purposes.
3.	Then it will go through the process of SMT (surface mount technology) wherein, the capacitors, ICs, resistors, shield, light protective caps etc are placed.
4.	After this process, the component is placed at automated 'optic inspection for position and quality testing.
5.	After this process, they same will be passed through final heat shield connection and protective cap through reflow oven/heater.
6.	After above process is over, on the said component, the dome sheet is placed
7.	Next, ACF-(assembling the LCD to the board) is done. Up to this, the process is called as Module. After the module, in the process of Panel Flash, the core software is downloaded from the server, located in the factory, to the Chip. This panel flash is the heart of the Mobile Phone. The Product Serial Number .(PSN) is assigned during the Panel Flash.
8.	Subsequently, light guide, protective shield, D-Cover, Connector, Mic, Speaker are placed.
9.	Then, Final User Interface tests are carried out. At this Stage, the semi finished product is called as the Engine.
10.	Now this engine is flashed with label software, where the customer settings are loaded in the Mobile Phone.
11.	The final assembly tool mechanics, which is Key Mat, A-Cover and B-Cover, are placed.

5. What are the software that are used in the manufacturing of the Mobile phones that are made out of Chennai and at what stages, the software are used?

Ans: The mobile phones that are manufactured out of the Chennai Plant are based on Series-30 and Series-40 Platforms. For any Mobile Phone that is launched, the software is designed and developed by Nokia R&D. This software is stored in the global server in Finland. When a new model of mobile phone is launched in the Chennai factory, the basic software is downloaded from the global server and stored in the local server in the Chennai factory. Each time a mobile phone is being manufactured; the software is flashed and tested in the handset at four different stages during the Manufacturing Process, pulling the software from the local server located in the Chennai factory.

1.	The first phase of software is the Panel Flash, where the core software is downloaded from the local server located in the factory into the chip. The product Serial number is generated at this stage.
2.	The Second stage is the alignment testing stage where the software aligns the radio frequency of the mobile handsets.
3.	The Third Phase is called as the final user interface wherein, the software checks the functionality of the mobile handsets.
4.	The fourth and final Phase is called the Labeling of the Mobile Handsets, wherein, the customer settings are downloaded in the Mobile Handsets and the IMEI number is also generated.

6. Please explain, where from these softwares, which are used in, the Mobile handsets are obtained and how are they stored and finally into the Mobile Handsets? And also, explain how are they paid for?

Ans: These software are designed and developed at various R& D Sites of Nokia Corporation. Then, these softwares are stored at the global server of Nokia Corporation located in Finland. As explained earlier, for each model, the software is downloaded from the global server to the local server located in the Chennai factory and stored therein. In turn, each time a mobile handset is being manufactured; the software is being incorporated into each mobile handset. With regard to the payment for the software, I don't know the basis, quantum and nature of these payments.

7. Are you aware of any software key numbers being supplied by Nokia ration and are being used in the manufacturing process?

Ans: I do not know any software keys supplied by Nokia"
15.4 Next statement of Nikhil Gopalkrishnan recorded by the DDIT, Chennai u/s 131 of the Act on 18-1-2013, is contained at pages 688 to 692 of the PB. Relevant questions and answers thereto are reproduced below:
2. Please identify yourself

Ans: I am Nikhil Gopalakrishnan, s/o Shri T, Gopalakrishnan, aged 33 residing at No.10, Second Floor, New Bethania Nagar, Valasaravakkam, Chennai. I am the Product manager of Chennai plant of M/s Nokia India Private Limited. I am working since November 2007.
3. As Product Manager, Chennai plant of Mis_Nokia India Private Limited NIPL), what are the various activities that you look after?
Ans: I am responsible for the new product launches, variant management and process engineering .
4. Please explain the process through which you update the software in the existing models or in new models.

Ans: Any change in the existing model or the introduction of new model is communicated to my team through POM via ECN. As far as software is concerned, it is directly downloaded into the local IMES Server located in the Chennai factory. My team accesses it and checks it for the presence of any functional irregularities/defects. In case, there are any, we get them rectified by the global R&D team by highlighting the same. In all, my team role as far as software is concerned to make it ready to be used in the Chennai factory production. Once this is over, the software is ready for flashing into the handsets by the production team.

Please explain the manufacturing/assembling process of the mobile phones manufactured in the Chennai plant of M/s Nokia India Private Limited (NIPL)?
Ans: The manufacturing process consists of the following steps,

1.	First of all, the printed circuit boards are imported from china/taiwan.
2.	These are loaded to magazine, that is, screen impression for soldering purposes.
3.	Then it will go through the process of SMT (surface mount technology) wherein, the capacitors, ICs, resistors, shield, light protective caps etc are placed.
4.	After this process, the component is placed at automated 'optic inspection for position and quality testing.
5.	After this process, they same will be passed through final heat shield connection and protective cap through reflow oven/heater.
6.	After above process is over, on the said component, the dome sheet is placed
7.	Next, ACF-(assembling the LCD to the board) is done. Up to this, the process is called as Module. After the module, in the process of Panel Flash, the core software is downloaded from the server, located in the factory, to the Chip. This panel flash is the heart of the Mobile Phone. The Product Serial Number .(PSN) is assigned during the Panel Flash.
8.	Subsequently, light guide, protective shield, D-Cover, Connector, Mic, Speaker are placed.
9.	Then, Final User Interface tests are carried out. At this Stage, the semi finished product is called as the Engine.
10.	Now this engine is flashed with label software, where the customer settings are loaded in the Mobile Phone.
11.	The final assembly tool mechanics, which is Key Mat, A-Cover and B-Cover, are placed.

6. What are the software that are used in the manufacturing of the Mobile phones that are made out of Chennai and at what stages, the software are used?
Ans: The mobile phones that are manufactured out of the Chennai Plant are based on Series-30 and Series-40 Platforms. For any Mobile Phone that is launched, the software is designed and developed by Nokia R&D. This software is stored in the global server in Finland. When a new model of mobile phone is launched in the Chennai factory, the basic software is downloaded from the global server and stored in the local server in the Chennai factory. Each time a mobile phone is being manufactured; the software is flashed and tested in the handset at four different stages during the Manufacturing Process, pulling the software from the local server located in the Chennai factory.

1.	The first phase of software is the Panel Flash, where the core software is downloaded from the local server located in the factory into the chip. The product Serial number is generated at this stage.
2.	The Second stage is the alignment testing stage where the software aligns the radio frequency of the mobile handsets.
3.	The Third Phase is called as the final user interface wherein, the software checks the functionality of the mobile handsets.
4.	The fourth and final Phase is called the Labeling of the Mobile Handsets, wherein, the customer settings are downloaded in the Mobile Handsets and the IMEI number is also generated.

7. Please explain, where from these softwares, which are used in, the Mobile handsets are obtained and how are they stored and finally into the Mobile Handsets? And also, explain how are they paid for?

Ans: These software are designed and developed at various R& D Sites of Nokia Corporation. Then, these softwares are stored at the global server of Nokia Corporation located in Finland. As explained earlier, for each model, the software is downloaded from the global server to the local server located in the Chennai factory and stored therein. In turn, each time a mobile handset is being manufactured; the software is being incorporated into each mobile handset. With regard to the payment for the software, I don't know the basis, quantum and nature of these payments.

15.5 Next statement of Subbaiah Chokalingam recorded by the DDIT, Chennai u/s 131 of the Act on 7-2-2013, is contained at pages 709-710 of the PB. Relevant questions and answers thereto are reproduced below:
2. Please identify yourself

Ans: I am Subbaiah Chokkalingam, sto Shri M. Chokkalingam, aged 41 residing at C-1S, Shanti Niketan, West Woods, Kuntrathur Road, Mathanandapuram, Porur. I am, the supply operations manager of Chennai plant of fv1/s Nokia India Private Limited, I am working since March 2011.
3. As supply operation Manager, Chennai plant of M/s Nokia India Private Limited (NIPL), what are the various activities that you look after?
Ans: I am responsible for producing phones as per order book and production plan.
4. Explain about the process of getting order book and how do you plan your production?
Ans: Order book is a consolidation of need, from customers and channel partners (distributors). Based on the order book, the production plan is prepared.
5. Please explain the manufacturing/assembling process of the mobile phones manufactured in the Chennai plant of M/s Nokia India Private Limited (NIPL)?
Ans: The manufacturing process consists-of the following steps,

1.	First of all, the printed circuit boards are imported from china/taiwan.
2.	These are loaded to magazine, that is, screen impression for soldering purposes.
3.	Then it will go through the process of SMT (surface mount technology) wherein, the capacitors, ICs, resistors, shield, light protective caps etc are placed.
4.	After this process, the component is placed at automated 'optic inspection for position and quality testing.
5.	After this process, they same will be passed through final heat shield connection and protective cap through reflow oven/heater.
6.	After above process is over, on the said component, the dome sheet is placed
7.	Next, ACF-(assembling the LCD to the board) is done. Up to this, the process is called as Module. After the module, in the process of Panel Flash, the core software is downloaded from the server, located in the factory, to the Chip. This panel flash is the heart of the Mobile Phone. The Product Serial Number .(PSN) is assigned during the Panel Flash.
8.	Subsequently, light guide, protective shield, D-Cover, Connector, M/s, Speaker are placed.
9.	Then, Final User Interface tests are carried out. At this Stage, the semi finished product is called as the Engine.
10.	Now this engine is flashed with label software, where the customer settings are loaded in the Mobile Phone.
11.	The final assembly tool mechanics, which is Key Mat, A-Cover and B-Cover, are placed.

6. What are the software that are used in the manufacturing of the Mobile phones that are made out of Chennai and at what stages, the software are used?

Ans: The mobile phones that are manufactured out of the Chennai Plant are based on Series-30 and Series-40 Platforms. For any Mobile Phone that is launched, the software is designed and developed by Nokia R&D. This software is stored in the global server in Finland. When a new model of mobile phone is launched in the Chennai factory, the basic software is downloaded from the global server and stored in the local server in the Chennai factory. Each time a mobile phone is being manufactured; the software is flashed and tested in the handset at four different stages during the Manufacturing Process, pulling the software from the local server located in the Chennai factory.

1.	The first phase of software is the Panel Flash, where the core software is downloaded from the local server located in the factory into the chip. The product Serial number is generated at this stage.
2.	The Second stage is the alignment testing stage where the software aligns the radio frequency of the mobile handsets.
3.	The Third Phase is called as the final user interface wherein, the software checks the functionality of the mobile handsets.
4.	The fourth and final Phase is called the Labeling of the Mobile Handsets, wherein, the customer settings are downloaded in the Mobile Handsets and the IMEI number is also generated.

7. Please explain, where from these softwares, which are used in, the Mobile handsets are obtained and how are they stored and finally into the Mobile Handsets? And also, explain how are they paid for?

Ans: These software are designed and developed at various R& D Sites of Nokia Corporation. Then, these softwares are stored at the global server of Nokia Corporation located in Finland. As explained earlier, for each model, the software is downloaded from the global server to the local server located in the Chennai factory and stored therein. In turn, each time a mobile handset is being manufactured; the software is being incorporated into each mobile handset. With regard to the payment for the software, I don't know the basis, quantum and nature of these payments.

15.6 Next statement of K.S. Narayanmurthy recorded by the DDIT, Chennai u/s 131 of the Act on 7-2-2013, is contained at pages 681-685 of the PB. Relevant questions and answers thereto are reproduced below:

2. Please identify yourself
Ans: I am K S Narayanamurthy, s/o N. Sambamorthy, aged 35 residing at No.4, Bharathydasan Street, New perungalathur, Chennai-63. I am the capability manager for factory support and deployment of Chennai plant of M/s Nokia India Private Limited. I am working in NIPL since March 2007.

3. As capability manager for factory support and deployment, Chennai plant of M/s Nokia IndiaPrivate limited (NIPL), what are the various activities that you look after?

Ans: I am managing a team which supports tier-2 model for manufacturing and execution system, data center (server room), printer and net work .

4. As the data center manager, what are the different servers that you maintain?
Ans:- As the data center manager, I maintain around 50 servers of the factorv, which include mainly IMES server, domain controller, 885, DCT4, etc.
5. Please explain the process through which you update the software in the existing models or in new models in the IMES server.

Ans: In fact, the updating of the software either new or existing is done the variant manager and his team (namely Mr. E. Uma Shankar). As I understand from what he told me that any change in the existing model - the introduction of new model is communicated to him through PDM via ECN. As far as software is concerned, it is directly downloaded into the local IMES Server located in the Chennai factory. He along with his team access it and check it for the presence of any functional irregularities/defects. In case, there are any, he gets them rectified by the global R&D team by highlighting the same. In all, his role as far as ware is concerned to make it ready to be used in the Chennai factory production. Once this is over, the software is ready for flashing into the handsets by the production team.

6. Please explain the manufacturing/assembling process of the mobile phones manufactured in the Chennai plant of M/s Nokia India Private limited (NIPL)?

1.	First of all, the printed circuit boards are imported from china/taiwan.
2.	These are loaded to magazine, that is, screen impression for soldering purposes.
3.	Then it will go through the process of SMT (surface mount technology) wherein, the capacitors, ICs, resistors, shield, light protective caps etc are placed.
4.	After this process, the component is placed at automated 'optic inspection for position and quality testing.
5.	After this process, they same will be passed through final heat shield connection and protective cap through reflow oven/heater.
6.	After above process is over, on the said component, the dome sheet is placed
7.	Next, ACF-(assembling the LCD to the board) is done. Up to this, the process is called as Module. After the module, in the process of Panel Flash, the core software is downloaded from the server, located in the factory, to the Chip. This panel flash is the heart of the Mobile Phone. The Product Serial Number .(PSN) is assigned during the Panel Flash.
8.	Subsequently, light guide, protective shield, D-Cover, Connector, Mic, Speaker are placed.
9.	Then, Final User Interface tests are carried out. At this Stage, the semi finished product is called as the Engine.
10.	Now this engine is flashed with label software, where the customer settings are loaded in the Mobile Phone.
11.	The final assembly tool mechanics, which is Key Mat, A-Cover and B-Cover, are placed.

7. What are the software that are used in the manufacturing of the Mobile phones that are made out of Chennai and at what stages, the software are used?

Ans: The mobile phones that are manufactured out of the Chennai Plant are based on Series-30 and Series-40 Platforms. For any Mobile Phone that is launched, the software is designed and developed by Nokia R&D. This software is stored in the global server in Finland. When a new model of mobile phone is launched in the Chennai factory, the basic software is downloaded from the global server and stored in the local server in the Chennai factory. Each time a mobile phone is being manufactured; the software is flashed and tested in the handset at four different stages during the Manufacturing Process, pulling the software from the local server located in the Chennai factory.

1.	The first phase of software is the Panel Flash, where the core software is downloaded from the local server located in the factory into the chip. The product Serial number is generated at this stage.
2.	The Second stage is the alignment testing stage where the software aligns the radio frequency of the mobile handsets.
3.	The Third Phase is called as the final user interface wherein, the software checks the functionality of the mobile handsets.
4.	The fourth and final Phase is called the Labeling of the Mobile Handsets, wherein, the customer settings are downloaded in the Mobile Handsets and the IMEI number is also generated.

7. Please explain, where from these softwares, which are used in, the Mobile handsets are obtained and how are they stored and finally into the Mobile Handsets? And also, explain how are they paid for?

Ans: These software are designed and developed at various R& D Sites of Nokia Corporation. Then, these softwares are stored at the global server of Nokia Corporation located in Finland. As explained earlier, for each model, the software is downloaded from the global server to the local server located in the Chennai factory and stored therein. In turn, each time a mobile handset is being manufactured; the software is being incorporated into each mobile handset. With regard to the payment for the software, I don't know the basis, quantum and nature of these payments.

15.7. Next statement of Lasitha P. Ashokan recorded by the DDIT, Chennai u/s 131 of the Act on 7-2-2013, is contained at pages 686-687 of the PB. Relevant questions and answers thereto are reproduced below:
"2. Please identify yourself

Ans: I am Lasitha P Ashokan, w/o Sarath Mohan, aged 38 residing at D- - Southern shelters, 2/137, Mount Poonamallee Road, kattupakkam, Chennai-56 . I am the availability head' electro mechanics, in the team of mechanics solutions sourcing availability management in Chennai plant of M/s Nokia IndiaPrivate Limited. I am working in NIPL since May 2006.
2. As availability head electro mechanics in Chennai plant of M/s Nokia India Private Limited (NIPL), what are the various activities that you look after?
Ans: My role is to ensure availability of electro mechanics commodity used in the mobile handsets produced at Nokia factories all over the world, namely Chennai, Beijing in China, Dongguan in China, Masan in Korea and Manaus in Brazil."
15.8 Next statement of Vishal Mankhotia recorded by the DDIT, Chennai u/s 131 of the Act on 7-2-2013, is contained at pages 709-710 of the PB. Relevant questions and answers thereto are reproduced below:
"2. Please identify yourself
Ans: I am Vishal Mankotia S/o Lt. General PC Mankotia aged 41 resident at W-45, 7th Street, Anna Nagar, Chennai. I am the Manager planning and logistics in Chennai plant of M/s Nokia India Private Limited. I am working in NIPL since May 2011.
3. As manager planning and logistics in Chennai plant of M/s Nokia India Private Limited (NIPL), what are the various activities that you look after?
Ans: My role is to plan for the production in the factory, looking after the logistics of finished goods."

16. We have extensively extracted from the statements in order to demonstrate that all the persons whose statements were recorded were either controlling the operations or were in direct charge of the manufacturing of the mobile phones. They have specifically pointed out the role played by them in the manufacturing process and were fully conversant about the intricacies of the whole manufacturing process. They were all technical persons, controlling the entire manufacturing process. Detailed direct questions were put to them to which they replied without any reservations. Wherever they were not conversant with the facts, they replied so. There was no occasion for them to distort, in any manner, the technical aspects and, therefore, there was no occasion to putting them for cross-examination. Further, these technical persons never questioned, either themselves or through their employer, the replies so recorded or complained of any coercion, undue influence or threat. The contents and facts of these statements have never been questioned by them. We find considerable force in the submission of ld. Spl. Counsel that assessee never pointed out any factual inaccuracy in any of the statements and never came out with any material to prove otherwise. Further, the employees only stated about the manufacturing process and about their role in the same and these statements have been utilized as a corroborative evidence by the AO in arriving at his conclusion. Therefore, here it is not a case where only on the basis of statements of employees any conclusion has been drawn by the AO. He has taken support from these statements for arriving at his conclusion on the basis of agreements, E-mails, invoices, technical expert's report etc. . It is well settled law that before the plea of cross examination is advanced, it has to be shown that the party seeking cross examination is an adversely affected party by the evidence (in present case statements of employees) placed on record. In the present case the contents of statements have not at all been disputed by assessee and, therefore, it cannot be said that assessee is an adversely affected party by these statements.

17. Now coming to the issue regarding timing for raising the plea regarding cross-examination by assessee. In this regard we find that all the statements were duly provided to assessee and during the proceedings before the AO, the assessee never asked for cross-examination.

17.1. It was only after filing of appeal that the assessee in detailed submissions dated 2-5-2013 before CIT(A)-29, contained at pages 221 to 260 of the PB, in para 2.1, requested for cross-examination. Thereafter vide letter dated 3-5-2013, the assessee again requested for cross-examination of such individuals, as was necessary. The assessee further stated as under:

"It is, therefore, imperative as a basic prerequisite that in the interest of administration of justice and the principles of natural justice, the appellant should be allowed to present its case in a more effective manner before your goodself. In order to enable the appellant to present its case in an effective manner, the appellant should be provided:

Adequate opportunity to file additional evidence in support of its claims, for which no opportunity was granted during the course of assessment proceedings and to explain various intricacies and complex legal issues involved in the matter. Opportunity to cross-examine the individuals whose statements were relied upon, while framing the assessment. Opportunity to cross-examine the members of Cyber Forensic Division of the Central Forensic Science Laboratory ("CFSL") who prepared interim report on end user software download procaess;

Opportunity to rebut various observations and interpretations of the Ld. AO"
17.2. Thereafter vide letter dated 6-5-2013 the assessee again primarily requested for providing an opportunity to cross-examine Mr. Sastri K. Panjala. Vide letter dated 8-5-2013 the assessee again, inter alia, submitted as under:

"Äs regards the hearing we had already requested your goodself to clarify if the appellant will be given an opportunity to cross-examine witnesses and tender additional evidence in letters dated 3-5-2013 and 6-5-2013. In this regard, we had submitted that our submissions on merits will depend on the afore-mentioned opportunities and we humbly "request your goodself to clarify the above. Without prejudice to the above and our rights to cross examine witnesses, tendering additional evidence and submitting additional submissions, we will also request your goodself time till next week to submit our case on merits."

17.3 From the contents of above letters it is evident that assessee had requested for providing cross examination but the main thrust was on the cross-examination of Mr. Shastri and after his cross-examination only, the assessee clearly stated that it would be in a position to take a call for cross-examination of other persons.

17.4 Vide letter dated 17-5-2013 ( page 271 to 428 of the PB), the assessee again requested for cross-examination as requested in letters dated 2-3-2013, 3-5-2013, 6-5-2013 and 8-5-2013.

17.5 On 20-5-2013 Mr. Shastri was cross-examined by the assessee. On 21-5-2013 again Mr. Shastri was re-examined by the assessee. On 23-5-2013 the assessee made interim submissions before ld. CIT(A) and again filed detailed reply, inter alia, submitting that final response could be submitted after cross-examining Mr. Shastri. However, it is to be noted that as per the notings made by ld. CIT(A) in his order, Mr. Shastri was cross-examined on 20 & 21-5-2013. Thereafter, assessee filed a detailed reply on 24-5-2013 in response to queries raised by ld. CIT(A) and further submissions based on cross-examination and re-examination of Mr. Shastri and also response to the supplementary replies filed by the DDIT, Internatiional Taxation, Circle 2(1) dated 23-5-2013. It is pertinent to note at this juncture that assessee did not ask for cross-examination of other employees in this letter and, therefore, did not pursue its claim regarding cross-examination of other employees.

Further, the department has filed before us, copy of letter dated 2-5-2013, obtained from the file of ld. CIT(A) and pointed out that in para 2.1 ld. CIT(A) by his hand has written as under:
"Please specify …… ?"
17.6 However, the assessee did not point out as to which employee it wanted to cross-examine. Ld. counsel pointed out that in the order-sheet notings ld. CIT(A) has not mentioned about this fact. In our opinion, considering the complexities of proceedings, these technical aspects have no relevance.

Further, before us also the asessee was asked to specify the employees to whom they wanted to cross-examine and in response thereof, the assessee has filed the following letter:
"The Honourable Members
Bench 'E"
Income Tax Appellate Tribunal
Loknayak Bhawan, Khan Market
New Delhi
Dear Sirs,
Sub: Submission of names of persons the appellant wishes to cross-examine
Re: Submissions of arguments on the opportunity to cross-examine persons submitted to the Hon'ble Tribunal on 18th December, 2014.

As directed by the Hon'ble Bench to submit the names of the persons the appellant wishes to cross-examine; we on behalf of and under instructions of the appellant submit as follows:

In continuation of the submissions filed on 18th December requesting an opportunity to cross-examine witnesses whose statements have been relied upon by the Respondent; we would like to point out that the Respondent has relied on all the statements recorded during the survey and post survey proceedings against the appellant. Further, the Respondent has on page 47 of the order (illustratively for A Y 2007-08) has stated that all the statements recorded by the income tax authorities have been provided to the appellant and are being relied upon. Similarly, on page 56 of the order the Respondent has again stated that the factual matrix of the case has been gathered from the recorded statements.

However, the Respondent in the assessment orders dated 15.03.2013 has expressly relied on the statements of the following persons:

1.	Jitendra Grover
2.	Arja Bjorklund
3.	Prakash Katama ~
4.	E. Uma Shankar
5.	K.S. Narayanamurthy
6.	V. Sembian
7.	Nikhil Gopalkrishnan -'
8.	Subbiah Chokhalingam
9.	Lasitha P. Ashokan
10.	Vishal Mankhotia
	The persons appearing in Serial No. 3-10 have commented upon he technical process of manufacturing phones whereas Mr. Jitendra Grover has commented upon the pricing of the software purchased by the appellant and Ms. Arja Bjorklund has commented upon the agreement for purchase of such software.
	The respondent during the course of hearing before this Tribunal has further filed the statements of the following persons with the intention of relying upon them:
11.	P. Ravindran
12.	Santosh Kulkarni
13.	Gerald Lawrence
14.	N. Ganesh
15.	Usha Rajeev
16.	Anupam Dhawan
17.	Avijit Mukerji
18.	Tarun Arora
19.	D. Indragiri Raj Kumar
20.	Rahul Sood
21.	P. Balaji
22.	R. Ramachandran

While the Respondent has maintained that all statements have been relied upon, we wish to limit our cross-examination to such witnesses whose statements have been specifically relied upon or will be relied upon. In this regard, we would request the Bench to grant us an opportunity to cross-examine any or all of the aforementioned 22 persons.

We would like to submit that the appellant has always maintained that it be allowed to cross-examine such persons whose statements the income tax authorities are relying upon and hence, the present request is in consonance with our earlier requests. We would further humbly request the Bench to direct the Respondent to not rely on statements of any other witnesses (other than the 22 persons mentioned above) without first affording the appellant an opportunity to cross-examine them."
17.7 In this letter also the assessee has not specified specific employees to whom it wanted to cross-examine.

18. We have gone through the proceedings from inception and find that authorities below have acted justly to assessee by providing statements of all employees, ex employees, CFL reports etc. Having regard to the nature of dispute, we are of the opinion that principles of natural justice have been complied with by affording fair hearing to assessee. The assessee has been imparted substantial justice on this count. In course of hearing Ld. Counsel fairly accepted that the witnesses were not hostile. This was so because they were the assessee's employees and were occupying the senior most position in the operation. Considering all these aspects, we find considerable force in the contention of ld. Special Counsel that timing of raising this plea at such a later stage of proceedings is not justified . If the assessee was very serious about this plea then it should have been taken on the very first date of hearing and not when Revenue was replying to the detailed submissions advanced by assessee on merits.

18.1. The submissions of ld. Counsel, however, is that they were not knowing as to what were the settings in SAP; how the software product was manufactured and sealed in binary coding, which could not be tampered with. Ld. Counsel has also in its written submissions submitted that while instructing the CFSL investigator, the Ld. DDIT, Chennai did not give him a complete brief, and the same is true for the examination of witnesses as well. Although the Ld. DDIT, Chennai was aware that the software id key could be generated from the database and linked to the IMEI and PS number of the phones and these facts and details were present in the database, this aspect was completely ignored and suppressed. Further, the details given by the Process Engineering Manager, V. Sembian on February 8, 2013 in the course of actual survey in relation to the two mobile handsets clearly showing the IMEI, the PSN and Software ID numbers were mentioned. There were no follow-up questions in this regard and the fact that the Ld. DDIT, Chennai was shown these facts and details after they were downloaded from the database is not borne out by the statement of Mr. V. Sembian. Facts and details like these could emerge from the cross-examination and would go on to support the Appellant's case. It is submitted that Ld. DDIT, Chennai grilled the witnesses on the same set of questions and got pre meditated answers. The questions were one-sided and leading, and were designed to prove non-existence only of software keys in the phone. Therefore, he submitted that complete facts like the ones mentioned above have not been brought out by the statements recorded by Ld. DDIT, Chennai and they can only be brought out by cross-examining the witnesses.

As far as submissions with reference to CFSL report are concerned, Mr. Shastri was cross examined by assessee before ld. CIT(A) and, therefore, the objections qua CFSL report cannot be sustained. However, a close examination of ld. Sr. Counsel's submission makes it very clear that primarily assessee's endeavour is to seek certain clarifications from employees on technical aspects. The employees, whose statements were relied by AO, were highly technical persons, controlling the entire manufacturing operations and, therefore, it cannot be accepted that they were not aware of various technicalities of the entire manufacturing process. The replies given by them have not been disputed/ controverted by assessee in any manner. The submission is that questions put during recording of statements were not taken to its logical end. Therefore, taking an holistic view of the entire gamut of proceedings, we are of the opinion that no irregularity has crept in during course of proceedings before AO/ CIT(A) and, therefore, the orders of both the lower authorities are not required to be set aside, as the matter is not required to be restored to AO/ CIT(A) to correct any irregularity. However, keeping in view the submissions of ld. Sr. Counsel, noted above, in order to impart substantial justice to both the parties, we are of the opinion that a supplementary report should be submitted by AO on various issues pointed out by ld. Sr. Counsel in his written submissions placed on record, if necessary, after seeking clarifications from employees. If so required by AO, the assessee will provide the AO, complete details of employees, from whom clarification is to be sought. We may clarify that the onus will be solely on assessee to produce them before AO, if so required by him, on the date fixed by him. The department shall submit the supplementary report as expeditiously as possible. The Registry is directed to fix the appeal in regular course after the report is received from AO.