Frontier Informatics Ltd., (formerly Frontier Informatics Technologies Ltd), Hyd, Hyderabad V. DCIT, Circle-1(3), Hyderabad, Hyderabad

ITA 560/HYD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6050 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-05-2018
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Difference of opinion; Change of opinion
• Section: 234B; 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 560/HYD/2016 ASSESSMENT YEAR: 2002-03 M/S. FRONTIER INFORMATICS LTD., (FORMERLY M/S. FRONTIER INFORMATICS TECHNOLOGIES LTD) HYDERABAD [PAN: AAACF5186B] VS DCIT, CIRCLE-1(3), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI R. MOHAN REDDY, DR DATE OF HEARING : 10-05-2018 DATE OF PRONOUNCEMENT : 06-06-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD, DATED 16-12-2011. THE APPEAL WAS PREFERRED WITH A DELAY O F 1514 DAYS. THE REASONS FOR DELAY WERE EXPLAINED IN AN A FFIDAVIT STATING THAT THE COMPANY WAS BADLY HIT BY THE MAJOR RECES SION IN IT INDUSTRY THAT TOOK PLACE IN THE YEAR 2001 AND WAS PRACTICALLY OUT OF OPERATIONS FOR THE PAST FIVE YEARS A ND THE MANAGING DIRECTOR, WHO HAVE ACQUAINTED WITH THE FACTS O F THE CASE WAS RUNNING AROUND FOR VARIOUS AFFAIRS OF THE C OMPANY I.T.A. NO. 560/HYD/2016 :- 2 - : DUE TO THE LITIGATION OF THE CREDITORS OF THE COMPANY; S ERVICE OF LOANS TO BANKS, RESIGNATION OF ALL WORKING DIRECTORS, DELAY IN DEPOSITING EMPLOYEES PF, NON-PAYMENT OF SALARIES WHI CH ULTIMATELY TRIGGERED INTO STATE OF DEPRESSION AND HOSPITALIZATION. DUE TO HEALTH PROBLEMS AND VARIOUS PROCEEDINGS INITIATED, THE MANAGING DIRECTOR COULD NO T ATTEND TO ANY OF THE MATTERS AND AFTER SLOWLY ACCLIMATIZING WI TH THE ISSUES TOOK STEPS TO PREFER AN APPEAL WITH A DELAY OF 1514 DAYS. IT WAS PRAYED THAT THE DELAY MAY BE CONDONED AND THE APPEAL MAY BE HEARD ON MERITS. LD.DR, HOWEVER, OBJE CTED TO THE SAME. 1.1. CONSIDERING THE FACT THAT THOUGH ASSESSEE HAS P REFERRED AN APPEAL ON ORDER U/S. 263 EARLIER, IT WAS NOT PURSU ED AND WAS DISMISSED EX-PARTE CONFIRMING THE SAID ORDER U/S. 263, WE ARE OF THE OPINION THAT THERE ARE GENUINE DIFFICULTIES FACED BY THE COMPANY AND THE MANAGEMENT IN NOT PURSUING THE APPEA L IN TIME. KEEPING IN MIND THE AVERMENTS MADE IN THE AF FIDAVIT, WE ARE OF THE OPINION THAT THERE IS SUFFICIENT CAUSE FO R PREFERRING THE APPEAL BELATEDLY AND ACCORDINGLY, THE DELAY IS CONDONED AND APPEAL IS ADMITTED. 2. COMING TO THE MERITS OF THE APPEAL, ASSESSEE ORIGIN ALLY FILED RETURN OF INCOME SHOWING NET LOSS OF RS. 61,21, 720/- UNDER THE NORMAL PROVISIONS OF THE ACT AND TAXABLE INCO ME AT NIL U/S. 115JB OF THE ACT. THE ASSESSMENT WAS COMPLET ED ON 11-12-2007 REDUCING THE NET LOSS TO RS. 17,18,952/-. LD.CIT NOTICED THAT ASSESSEE HAS NOT OFFERED INCOME U/S. 115J B OF THE I.T.A. NO. 560/HYD/2016 :- 3 - : ACT AND ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT. IN THOSE PROCEEDINGS, ASSESSEE MADE CERTAIN NE W CLAIMS AND ALSO SUBMITTED THAT BOOKS OF ACCOUNT WERE NO T PREPARED AS PER THE PROVISIONS OF COMPANY LAW AND I F THESE CLAIMS ARE ENTERTAINED, THERE WILL BE NO INCOME WHICH CAN BE SUBJECTED TO SECTION 115JB. AFTER LISTING OUT THE CLAI MS IN PARA 5 AND 6 OF THE ORDER U/S. 263, LD.CIT SET ASIDE THE ASSESSMENT, DIRECTING AS UNDER: 7. IN VIEW OF THE ABOVE, I SET ASIDE THE ASSESSMEN T FOR THE ASSESSMENT YEAR 2002-03 AND DIRECT THE ASSESSING OF FICER TO MAKE THE ASSESSMENT AFRESH BY COMPUTING THE PROFIT CHARG EABLE TO TAX UNDER SECTION 115JB AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AFTER FINALIZATION OF ASSESSMENT THE ASS ESSING OFFICER WILL RECOVER THE DEMAND AS PER LAW. 2.1. THIS ORDER WAS SUBJECT MATTER OF APPEAL BEFORE TH E ITAT, WHO DISMISSED THE SAME EX-PARTE BUT CONSIDERED THE ISSUE ON MERITS ALSO. IN THAT ORDER, ITAT HAS HELD THAT : '7. .IN OUR CONSIDERED OPINION, NON COMPUTAT ION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT IS AN ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS NOT A CASE OF CHANGE OF OPINION BUT NON APPLICATION OF PROVISIONS OF THE AC T AND THEREFORE THE ORDER PASSED BY THE ASSESSING OFFICER IS AN ERROR W HICH IS PREJUDICIAL TO THE INTEREST OF REVENUE. WE FIND THAT THE ASSESS EE COMPANY HAS MADE TWO FRESH CLAIMS DURING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT BEFORE THE CIT. THE POWER OF THE COMMISSION ER UNDER SECTION 263 OF THE ACT IS RESTRICTED ONLY TO THE ERRORS SO FAR AS THEY ARE PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF T HERE WAS ANY OTHER ERROR, IT IS FOR THE ASSESSEE TO TAKE UP THE ISSUE IN OTHER APPROPRIATE PROCEEDINGS. OUR VIEW IS SUPPORTED BY THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF HINDI BANK KARUR LIMITED VS. ADDL CIT REPORTED IN 103 ITR 553. .... ..... . ..... THUS, THE CIT AFTER CONSIDERING THE FACTS ELABORATE LY IN HIS ORDER, RIGHTLY SET ASIDE THE ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND DIRECTED THE ASSESSING OFFICER TO MAKE THE I.T.A. NO. 560/HYD/2016 :- 4 - : ASSESSMENT AFRESH BY COMPUTING THE PROFIT CHARGEABL E TO TAX UNDER SECTION 115JB OF THE ACT AFTER GIVING AN OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE IN AGREE MENT WITH THE ORDER OF THE CIT AND HENCE, NO INTERFERENCE IS CALL ED FOR. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT AND DISMISS THE APP EAL FILED BY THE ASSESSEE.' 2.2. IN THE CONSEQUENTIAL ORDER PASSED BY THE AO, ASS ESSEE HAS RAISED THE FRESH CONTENTIONS WHICH WERE NOT ACCEPTE D. ASSESSEE FURTHER CONTESTED BEFORE THE LD.CIT(A) AND R AISED VARIOUS GROUNDS. LD.CIT(A) IN THE IMPUGNED ORDER WA S OF THE OPINION THAT THE GROUNDS RAISED BY ASSESSEE ARE VAGUE AND NOT ON ANY SPECIFIC ISSUE AND EFFECTIVE GROUNDS OF APPEA L ARE THE LEGALITY OF THE ASSESSMENT PROCEEDINGS BASED ON THE OR DER U/S. 263 AND LEVY OF INTEREST U/S. 234B AS PER MAT PROVISI ONS. LD.CIT(A) AFTER EXTRACTING THE ORDER OF THE ITAT HELD TH AT ASSESSEE HAS NOT CONTESTED ON MERITS OF THE CASE. TH EREFORE, THE APPEAL WAS DISMISSED. 3. IT WAS THE CONTENTION OF LD. COUNSEL THAT GROUND NO. 6 RAISED BEFORE CIT(A) IS ON THE MERITS OF THE ISSUE WHI CH WAS NOT ADJUDICATED BY THE LD.CIT(A) AND IF GIVEN A CHANCE, A SSESSEE WOULD RE-AGITATE THE ISSUE BEFORE THE CIT(A). WITH REF ERENCE TO INTEREST ALSO IT WAS THE CONTENTION THAT INTEREST IS NOT WARRANTED. 4. LD.DR, HOWEVER, RELIED ON THE ORDERS OF THE LD.CIT (A). 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF TH E OPINION THAT THE ORDER OF CIT(A) CANNOT BE UPHELD AS AS SESSEE I.T.A. NO. 560/HYD/2016 :- 5 - : HAS RAISED THE GROUND NO. 6 WITH REFERENCE TO ADJUSTMEN TS OF RS. 4,30,99,233/- FROM BOOK PROFITS. WHEN THIS GROUN D WAS RAISED SPECIFICALLY, THE CIT(A) SHOULD HAVE CONSIDER ED THE GROUND WHETHER IT IS A VALID CLAIM OR NOT. NOTHING WA S MENTIONED ABOUT THE CLAIM OF ASSESSEE AND IN FACT THE CIT(A) WAS OF THE OPINION THAT NO ISSUE ON MERIT WAS CONTESTE D. CONSIDERING THAT GROUND NO. 6 HAS NOT BEEN ADJUDICAT ED, WE ARE OF THE OPINION THAT MATTER CAN BE RESTORED TO CIT(A) TO CONSIDER WHETHER ASSESSEE HAS ANY MERITS IN MAKING T HE CLAIMS, WHILE CONSIDERING THE ISSUE ON MERITS KEEPIN G IN MIND THE ORDER OF THE ITAT AND ALSO THE ORDER U/S. 263. S INCE THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE CIT(A), WE SET ASIDE THE ISSUE TO THE FILE OF CIT(A) TO CONSIDER THE GROUNDS AFRESH, AFTER GIVING DUE OPPORTUNITY TO ASSESSEE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH JUNE, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 6 TH JUNE, 2018 TNMM I.T.A. NO. 560/HYD/2016 :- 6 - : COPY TO : 1. M/S. FRONTIER INFORMATICS LTD., (FORMERLY M/S. F RONTIER INFORMATICS TECHNOLOGIES LTD) C/O. M/S. SEKHAR & CO ., 133/4, R.P. ROAD, SECUNDERABAD. 2. DCIT, CIRCLE-1(3), HYDERABAD. 3. CIT(APPEALS)-II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.