Income Tax Appellate Tribunal - Hyderabad
Spirit Bpo Services Private Limited, ... vs Acit, Circle-13(1), Hyderabad, ... on 10 March, 2017
1
ITA.No.1577/Hyd/2014 M/s. Spirit BPO
Services P. Ltd., Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" (SMC) : HYDERABAD
BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
ITA.No.1577/Hyd/2014
Assessment Year 2008-2009
M/s. Spirit BPO Services P. Ltd., Asst. Commissioner of
Hyderabad. vs. Income Tax, Circle-13(1)
PAN ABEFS6103R Hyderabad.
(Appellant) (Respondent)
For Assessee : Shri C.P. Ramaswami
For Revenue : Shri A. Sitarama Rao
Date of Hearing : 10.01.2017
Date of Pronouncement : 10.03.2017
ORDER
This appeal by the assessee-company is directed against the order passed by the CIT(A)-V, Hyderabad and it pertains to the A.Y. 2008-2009.
2. As could be noticed from Form No.36 as well as the order of the F.A.O, the CIT(A)-V, Hyderabad passed the order on 13.11.2013 whereas the same was claimed to have been communicated to the assessee on 10.01.2014 but the appeal was ultimately filed on 15.10.2015 resulting in a delay of 218 days. The assessee-company filed an affidavit seeking condonation of delay, duly signed by the Whole-time Director of the Company, and also a petition was filed under section 253(5) of the Act. The case of the assessee is that it took 02 months to receive the order of the CIT(A) but the said order was served upon one person by name B. Srinivas, an employee of M/s. Suresh Productions P. Ltd., who does not know about the assessee-company since the 2 ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
Company has become dormant for many years. In the affidavit it was stated that the assessee-company was incorporated in the F.Y. 2005-06 and A.Y. 2008-09 is the first year of business wherein the assessee incurred heavy losses and virtually the assessee-company has gone out of business thereafter. Under these circumstances, there was nobody to look into the day-to-day affairs of the assessee-company and whole-time Director has gone into acting in feature films. In a nutshell, the business of the assessee-company had gone into hibernation.
2.1. It was further sated, in the affidavit, that Shri P. Srinivas, mechanically received the impugned order of the CIT(A) and he did not inform anyone about the said order. Ultimately when the tax audit and statutory audit of the assessee-company was taken-up towards the end of September, 2014 the factum of receipt of appellate order was noticed and thereafter, the in-house Manager approached the Counsel for drafting and filing of appeal before the Hon'ble Tribunal. Ultimately the appeal was filed on 15.04.2014 which resulted in a delay of 218 days. Since the affidavit was based on certain facts which cannot be cross- verified by the Bench, it is the duty of the Revenue to file an appropriate reply. In fact, the Learned Counsel, appearing on behalf of the assessee, contended before us that when the technical issue of delay is pitted against the merits of the case, the merits should prevail and in the instant case, the assessee has a strong case on merits inasmuch as the A.O. has issued a notice under section 148 without even recording reasons and therefore, the re-assessment proceedings deserve to be annulled as void abinitio [320 ITR 561 (SC) ].
2.2. Since the Revenue has not filed any material on those two aspects, the case was adjourned from time to time to enable the D.R. to obtain the material from the A.O. Finally, a letter dated 30th August, 3 ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
2016, addressed to the Senior Authorised Representative, by the Dy. Commissioner of Income Tax, Circle-3(2), Hyderabad (though the respondent herein is Asst. Commisisoner of Income Tax, Circle-13(1), Hyderabad) was placed on record wherein it was clarified as under :
"Sub : Appellate proceedings in the case of M/s Spirit BPO Services Ltd., Hyderabad - Asst. Year 2008-09 - Submission of report
- Reg.
Ref: Sr.AR-II, ITAT, A-Bench's letter in F.No: Sr.AR-II/A-
Bench/Hyd/ITA.No:1577/2016-17 dated 13/07/2016, addressed to DCIT, C-14(1), Hyderabad.
2) Records received on transfer from ACIT, C-14(1), Hyderabad ON 17/08/2016
3) Sr. AR-II, ITAT, A-Bench's letter in F. No: Sr.AR-II/A-
Bench/Hyd/ITA No: 1577/14/2016-17 dated 22/08/2016, received in this office on 29/08/2016.
***** Please refer to the above.
With regard to the clarifications sought for by the Hon'ble ITAT, it is submitted that
1) It is not verifiable from the records received in this office, as to who has received the order of Ld. CIT(A), as the said order of Ld. CIT(A) usually gets served by the O/o. CIT(A). Therefore, the details cannot be verified at this end and the details of the person who had received the order may please be obtained from the O/o.Ld.CIT(A)-V, Hyderabad.
2) In respect of the reasons recorded for re-opening of the assessment u/s 147 of the Act, it is submitted that, except an unsigned copy of the reasons placed on record, no order sheet noting recording the reasons is available on record. However, from the record, it appears that the assessment is re-opened consequent to the directions of CIT-I, Hyderabad dated 05/03/2012, to redress the RAP Objection"
2.3. It is well settled that a statement made in an affidavit has to be taken as correct unless some material is filed by other party to 4 ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
counter the statement made therein whereas, in the instant case, no material was furnished; in fact, no counter affidavit or even letter was filed by the A.O. till date though the affidavit was filed on 3rd December, 2014 along with the covering letter.
3. I have carefully considered the affidavit as well as the petition seeking condonation of delay. We are of the opinion that there is a reasonable cause for not filing the appeal intime and therefore, we admit the appeal and proceed to dispose of the grounds urged before us.
4. Vide ground Nos. 2 and 3, the assessee contends that the reopening of assessment is bad in law. The relevant grounds are reproduced hereunder :
1. "The order of the learned Commissioner of Income-tax (Appeals), is against law, weight of evidence and probabilities of the case.
2. The Ld. CIT(A) erred in dismissing the appeal without appreciating the fact that there was no failure on the part of the appellant to disclose fully and truly all the material facts and the jurisdiction was assumed without any fresh tangible .-material.
Consequently, the impugned reassessment has to be annulled as void ab initio.
3. The Ld. CIT(A) failed to appreciate that the impugned reassessment is bad in law in view of the fact that on the same set of material original scrutiny assessment was completed and an application u/s. 154 pending before the Assessing Officer was not being disposed of. Consequently, he erred in upholding the reassessment without adducing any reason instead of annulling it."
5. The case of the assessee is that the original return was processed under section 143(1) on 11.05.2009 and thereafter, the case was selected for scrutiny and assessment was completed u/s. 143(3) on 22.12.2010. Therefore, he has no jurisdiction to reopen the assessment 5 ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
unless there are valid reasons. In fact, the A.O. erred in proceeding with the assessment even without furnishing reasons recorded and even before obtaining the assessee's objection against the reopening. Though this ground was urged before the Ld. CIT(A), a non-speaking order was passed in this regard by merely observing as under :
5. "The Ground Nos.14 regarding levy of interest u/s.234B is only consequential in nature. Ground Nos.15 & 16 are general in nature and hence not adjudicated. The Ground Nos.1, 2, 3, 4 and 5 are with regard to validity of reopening of assessment u/s.147 of the Act.
5.1. I have carefully considered the reasons for reopening of the assessment u/s.147 and find no infirmity in the action of the A.O. Hence, these grounds are dismissed."
6. Aggrieved assessee is in appeal before the Tribunal. The case of the assessee is that no reasons were recorded by the A.O. to reopen the assessment apart from the fact that there was no failure on the part of the assessee to disclose fully and truly all the material facts and thus the jurisdiction assumed by the A.O. is without any tangible material.
7. The Ld. D.R. placed before us a copy of letter dated 30th August, 2016 of the DCIT, Circle-3(2), Hyderabad wherein it was admitted that no reasons were recorded in the order sheet.
8. Having regard to the circumstances of the case, I am of the view that the notice under section 148 was issued without recording reasons in the order sheet which is mandatory as per section 148(2) of the Act which reads as under :
"The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so."6
ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
9. The Ld. D.R. however submitted that reopening was made consequent to the directions of CIT-I, Hyderabad to readdress the RAP objection and that would form the reason for reopening of the assessment. He thus strongly relied upon the order passed by the Ld. CIT(A).
10. The Learned Counsel for the Assessee, on the other hand, relied upon the order of the Apex Court in the case of Kelvinator India Ltd., 320 ITR 561 as well as the decision of Hon'ble Delhi High Court (Full Bench) in the case of Usha International Ltd., 348 ITR 485 wherein the Court observed that even if an assessment was to be reopened within 04 years, it cannot be based on mere change of opinion and particularly when the facts are on record at the time of original assessment any reopening is not valid; in particular the recording of reasons is a must before initiating the proceedings under section 148 of the Act. In the instant case, the A.O. has not applied his mind and issued notice under section 148 merely because of audit objection, without independently verifying as to whether there was reason to believe that income has escaped assessment.
11. I have carefully considered the rival submissions and perused the record. The case of the Learned Counsel, appearing on behalf of the Assessee, is that the reopening is bad in law in view of the fact that reasons were not recorded and in fact copy was not supplied to the assessee in order to file its objections. Letter dated 30th August, 2016 addressed by the DCIT, Circle-3(2), Hyderabad to the Senior Authorised Representative clearly indicate that no such reasons were recorded by the A.O. in the order sheet and, at any rate, the reasons if any, recorded was not served upon the assessee to enable the assessee to file its objections. Even otherwise there is no fresh tangible material 7 ITA.No.1577/Hyd/2014 M/s. Spirit BPO Services P. Ltd., Hyderabad.
to come to the conclusion that income of the assessee has escaped assessment. Under these circumstances and having regard to the principles laid down by various Courts, while dealing with the scope and ambit of section 147 r.w.s.148 of the Act, I am of the firm view that reopening of assessment is bad in law. We, therefore, quash the assessment order and consequently set aside the order passed by CIT(A). Since the reopening is held to be bad in law, it is not necessary for me to go into the additions made therein.
12. In the result, appeal of the assessee is treated as allowed.
Order pronounced in the open Court on 10.03.2017 Sd/-
(D. MANMOHAN) VICE PRESIDENT Hyderabad, Dated 10th March, 2017.
VBP/-
Copy to
1. M/s. Spirit BPO Services P. Ltd., Door No.8-2-293/82/J 111/6, Ramanaidu Studios, Jubilee Hills, Film Nagar, Hyderabad-033.
2. The Asst. Commissioner of Income Tax, Circle-13(1), Hyderabad.
3. CIT(A)-V, Hyderabad
4. CIT-IV, Hyderabad
5. D.R. ITAT "A" (SMC)Bench, Hyderabad.
6. Guard File.