M/s Spirit BPO Services Private Limited, Hyderabad V. ACIT, Circle-13(1), Hyderabad, Hyderabad

ITA 1577/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6063 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 15-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Reopening of assessment; Reasonable cause; Tangible material; Reason to believe
• Section: 143(3); 147; 148; 154

Judgement Text

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., HYDERABAD. PAN ABEFS6103R VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1) 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 AG AINST THE ORDER PASSED BY THE CIT(A)-V, HYDERABAD AND IT PERTA INS TO THE A.Y. 2008-2009. 2. AS COULD BE NOTICED FROM FORM NO.36 AS WELL AS TH E 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 F ILED ON 15.10.2015 RESULTING IN A DELAY OF 218 DAYS. THE AS SESSEE-COMPANY FILED AN AFFIDAVIT SEEKING CONDONATION OF DELAY, DULY SIGNE D 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 TOO K 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. SUR ESH PRODUCTIONS P. LTD., WHO DOES NOT KNOW ABOUT THE ASSESSEE-COMPANY S INCE THE 2 ITA.NO.1577/HYD/2014 M/S. SPIRIT BPO SERVICES P. LTD., HYDERABAD. COMPANY HAS BECOME DORMANT FOR MANY YEARS. IN THE AFF IDAVIT 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 WHEREI N THE ASSESSEE INCURRED HEAVY LOSSES AND VIRTUALLY THE ASSESSEE-COMP ANY HAS GONE OUT OF BUSINESS THEREAFTER. UNDER THESE CIRCUMSTANCES, THER E WAS NOBODY TO LOOK INTO THE DAY-TO-DAY AFFAIRS OF THE ASSESSEE-COMPA NY AND WHOLE-TIME DIRECTOR HAS GONE INTO ACTING IN FEATURE FILMS. IN A N UTSHELL, 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 TOW ARDS THE END OF SEPTEMBER, 2014 THE FACTUM OF RECEIPT OF APPELLATE ORDER WAS NOTICED AND THEREAFTER, THE IN-HOUSE MANAGER APPROACHED THE CO UNSEL FOR DRAFTING AND FILING OF APPEAL BEFORE THE HONBLE TRIB UNAL. ULTIMATELY THE APPEAL WAS FILED ON 15.04.2014 WHICH RESULTED IN A D ELAY OF 218 DAYS. SINCE THE AFFIDAVIT WAS BASED ON CERTAIN FACTS WHICH C ANNOT 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 BEH ALF OF THE ASSESSEE, CONTENDED BEFORE US THAT WHEN THE TECHNICAL ISSUE OF DE LAY 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 I NASMUCH AS THE A.O. HAS ISSUED A NOTICE UNDER SECTION 148 WITHOUT E VEN RECORDING REASONS AND THEREFORE, THE RE-ASSESSMENT PROCEEDINGS D ESERVE 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 ENAB LE THE D.R. TO OBTAIN THE MATERIAL FROM THE A.O. FINALLY, A LETTER DA TED 30 TH AUGUST, 3 ITA.NO.1577/HYD/2014 M/S. SPIRIT BPO SERVICES P. LTD., HYDERABAD. 2016, ADDRESSED TO THE SENIOR AUTHORISED REPRESENTATIV E, 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 CLARI FIED AS UNDER : SUB : APPELLATE PROCEEDINGS IN THE CASE OF M/S SPI RIT BPO SERVICES LTD., HYDERABAD - ASST. YEAR 2008-09 - SUBMISSION O F REPORT - REG. REF: SR.AR-II, ITAT, A-BENCH'S LETTER IN F.NO: SR.A R-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.A R-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 T HIS OFFICE, AS TO WHO HAS RECEIVED THE ORDER OF LD. CIT(A), AS THE SA ID ORDER OF LD. CIT(A) USUALLY GETS SERVED BY THE O/O. CIT(A). THER EFORE, THE DETAILS CANNOT BE VERIFIED AT THIS END AND THE DETA ILS OF THE PERSON WHO HAD RECEIVED THE ORDER MAY PLEASE BE OBT AINED FROM THE O/O.LD.CIT(A)-V, HYDERABAD. 2) IN RESPECT OF THE REASONS RECORDED FOR RE-OPENING O F THE ASSESSMENT U/S 147 OF THE ACT, IT IS SUBMITTED THAT , EXCEPT AN UNSIGNED COPY OF THE REASONS PLACED ON RECORD, NO O RDER 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 DA TED 05/03/2012, TO REDRESS THE RAP OBJECTION' 2.3. IT IS WELL SETTLED THAT A STATEMENT MADE IN AN AFFIDA VIT 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 INSTAN T 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 FIL ED ON 3 RD 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 OP INION 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 TH AT THE REOPENING OF ASSESSMENT IS BAD IN LAW. THE RELEVANT G ROUNDS ARE REPRODUCED HEREUNDER : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), IS AGAINST LAW, WEIGHT OF EVIDENCE AND PROBABILITIE S OF THE CASE. 2. THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL WITHO UT APPRECIATING THE FACT THAT THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATER IAL FACTS AND THE JURISDICTION WAS ASSUMED WITHOUT ANY FRESH TANGIBLE .-MATERIAL. CONSEQUENTLY, THE IMPUGNED REASSESSMENT HAS TO BE A NNULLED AS VOID AB INITIO. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE IMPUGN ED REASSESSMENT IS BAD IN LAW IN VIEW OF THE FACT THAT ON THE SAME SET OF MATERIAL ORIGINAL SCRUTINY ASSESSMENT WAS CO MPLETED AND AN APPLICATION U/S. 154 PENDING BEFORE THE ASSESSIN G OFFICER WAS NOT BEING DISPOSED OF. CONSEQUENTLY, HE ERRED I N UPHOLDING THE REASSESSMENT WITHOUT ADDUCING ANY REASON INSTEA D 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 THER EAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETE D U/S. 143(3) ON 22.12.2010. THEREFORE, HE HAS NO JURISDICTION TO REO PEN 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. ERRE D IN PROCEEDING WITH THE ASSESSMENT EVEN WITHOUT FURNISHING REASONS RECORDED AND EVEN BEFORE OBTAINING THE ASSESSEES OBJECTION AGAINST THE REOPENING. THOUGH THIS GROUND WAS URGED BEFORE THE LD. CIT(A), A NON-SP EAKING 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 AR E 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 RE OPENING OF THE ASSESSMENT U/S.147 AND FIND NO INFIRMITY IN THE ACT ION OF THE A.O. HENCE, THESE GROUNDS ARE DISMISSED. 6. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL. THE CASE OF THE ASSESSEE IS THAT NO REASONS WERE RECORDED BY TH E A.O. TO REOPEN THE ASSESSMENT APART FROM THE FACT THAT THERE WAS NO FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MAT ERIAL FACTS AND THUS THE JURISDICTION ASSUMED BY THE A.O. IS WITHOUT ANY TAN GIBLE MATERIAL. 7. THE LD. D.R. PLACED BEFORE US A COPY OF LETTER D ATED 30 TH AUGUST, 2016 OF THE DCIT, CIRCLE-3(2), HYDERABAD WHER EIN IT WAS ADMITTED THAT NO REASONS WERE RECORDED IN THE ORDER SHEE T. 8. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, I A M OF THE VIEW THAT THE NOTICE UNDER SECTION 148 WAS ISSUED WITHOUT RECORDING REASONS IN THE ORDER SHEET WHICH IS MANDATORY AS PER S ECTION 148(2) OF THE ACT WHICH READS AS UNDER : THE ASSESSING OFFICER SHALL, BEFORE ISSUING ANY NO TICE 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 REOPENIN G WAS MADE CONSEQUENT TO THE DIRECTIONS OF CIT-I, HYDERABAD TO READ DRESS THE RAP OBJECTION AND THAT WOULD FORM THE REASON FOR REOPENING OF THE ASSESSMENT. HE THUS STRONGLY RELIED UPON THE ORDER PASS ED 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 HONBLE DELHI HIGH COURT (FULL BENCH) IN THE CASE OF USHA INTERNATIONAL LTD., 3 48 ITR 485 WHEREIN THE COURT OBSERVED THAT EVEN IF AN ASSESSMENT WAS TO BE R EOPENED WITHIN 04 YEARS, IT CANNOT BE BASED ON MERE CHANGE O F OPINION AND PARTICULARLY WHEN THE FACTS ARE ON RECORD AT THE TIME OF ORIGINAL ASSESSMENT ANY REOPENING IS NOT VALID; IN PARTICULAR TH E RECORDING OF REASONS IS A MUST BEFORE INITIATING THE PROCEEDINGS UN DER 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 AUD IT OBJECTION, WITHOUT INDEPENDENTLY VERIFYING AS TO WHETHER THERE WAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 11. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS 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 30 TH AUGUST, 2016 ADDRESSED BY THE DCIT, CIRCLE-3(2), HYDERABAD TO THE SENIOR AUTHORISED REPRESENTATIVE CLEARLY INDICATE THAT NO SUCH R EASONS 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 ENA BLE THE ASSESSEE TO FILE ITS OBJECTIONS. EVEN OTHERWISE THERE IS NO FRES H 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 REGAR D TO THE PRINCIPLES LAID DOWN BY VARIOUS COURTS, WHILE DEALIN G 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 A S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.03. 2017 SD/- (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED 10 TH 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, HYDERA BAD-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.