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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
ORDER PER VIKAS AWASTHY, JM: 6573/Mum/2019 This appeal by the assessee is directed against the order of Commissioner of Income Tax(Appeals)-6, Mumbai [in short 'the CIT(A)’] dated 04/09/2019 for the assessment year 2012-13.
Shri J.D.Mistri, Sr.Advocate appearing on behalf of the assessee submitted at the outset that the assessee has raised additional grounds of appeal assailing jurisdiction assumed by the Assessing Officer u/s. 147 of the Income Tax Act,1961 ( in short 'the Act') and validity of the order passed u/s. 143(3) r.w.s. 147 of the Act. At this stage he would be confirning his submissions on the additional grounds raised.
Narrating the facts of the case the ld.Counsel for the assessee submitted that assessment u/s. 143(3) r.w.s. 144C(3) of the Act was completed vide order dated 27/04/2016. Thereafter, notice u/s. 148 of the Act was issued to the assessee on 07/03/2018. In response to the said notice, the assessee filed reply dated 14/03/2018 and furnished copy of revised return of income filed on 14/10/2013 declaring total income as ‘Nil’ under normal provisions and Rs.1301,87,29,580/- u/s. 115JB of the Act. Vide same letter, the assessee requested for reasons recorded for reopening the assessment. The reasons were provided to the assessee by the Assessing Officer vide letter dated 19/07/2018. The ld. Counsel for the assessee submitted that the assessee vide letter dated 13/08/2018 communicated to the Assessing Officer that the name of party/customer “Controladora De Services De Telecomunicaciones” mentioned in the reasons recorded for reopening does not figure in the list of customers in the records of the assessee, hence, asked for additional details like invoice number, invoice date, invoice amount, etc. Since, the said information was not provided to the assessee , the assessee again vide letter dated 26/09/2018 made a request to the Assessing Officer to furnish additional information with regard to the customer/party ,mentioned in the reasons recorded for reopening. The Assessing Officer without providing additional information to enable the assessee to identify the party /customer proceeded to make assessment under section 143(3) r.w.s. 147 of the Act and passed assessment order on 31/12/2018.
2.1 The ld.Counsel for the assessee asserted that in the absence of complete details of the customer/party, the Assessing Officer has erred in completing the assessment. The assessee was deprived of filing objections to the reasons for reopening. Hence, the reassessment proceedings undertaken without affording opportunity to the assessee to file objections against reasons for reopening makes the assessment order null and void.
2.2 The ld.Counsel for the assessee further pointed that in reassessment proceedings the Assessing Officer has made addition of Rs.88,1,5,487/- in respect of receipts from Controladora De Services De Telecomunicaclones/ Radimovil Dipsa SA DE CV (Telemax International) during the period relevant to the assessment year under appeal i.e. assessment year 2012-13. During the course of reassessment proceedings the assessee had furnished ledger extracts from the books maintained by the assessee, copy of invoices issued by the assessee, copy of Foreign Inward Remittance Certificate, etc. The Assessing Officer ignored the submissions and information provided by the assessee and proceeded to make addition of Rs.88,15,483/- u/s. 68 of the Act as unexplained cash credits. During the assessment proceedings it was categorically informed to the Assessing Officer that there is a mismatch in recording revenue from the aforesaid parties as the said parties are follow calendar year for accounting, whereas, the assessee is following Financial Year of accounting. However, the entire receipts have been duly recorded in the year of receipt i.e. Assessment Year 2011-12 and 2012-13. In fact, the total receipts recorded in the books of assessee is higher than the receipts recorded by the aforesaid parties. The assessee has credited a total income of Rs.2,27,51,022/- from the concerned customers during assessment year 2011-12 and 2012-13, as against Rs.1,18,71,675/- as provided by the Assessing Officer. The assessment has been reopened merely to change the head of income i.e. from ‘Business Income’ to ‘Inform from other Sources’. The Assessing Officer without considering the submissions and the documents furnished by the assessee has made addition u/s. 68 of the Act.
2.3 The ld. Authorized Representative for the assessee further submitted that in respect of payments received from same set of customers/parties, the Assessing Officer had invoked the provisions of section 147/148 of the Act in Assessment Year 2011-12 by recording identical reasons. The findings by Assessing Officer for making addition in reassessment proceedings were verbatim, except for the change in figures. The assessee had furnished the same chart giving the details of amounts received from customers during assessment year 2011-12 and 2012-13 during the reassessment proceedings for Assessment Year 2011-12 as was furnished during the reassessment proceedings for Assessment Year 2012-13. The Assessing Officer has reproduced the said chart in its order for Assessment Year 2011-12 as well as for Assessment Year 2012-13. The assessee assailed reopening of assessment. After being unsuccessful before the CIT(A), the assessee carried the issue in appeal before the Tribunal in ITA No.6572/Mum/2019. The Tribunal vide order dated 18/08/2021 after examining the facts held reopening of assessment as invalid. The facts in the impugned assessment year are identical. There is no escapement of income. The assessee has offered the income from foreign entities under the head ‘Business Income’, the same was accepted during the assessment proceedings. The Assessing Officer thereafter decided to change the head of income and initiated reassessment proceedings. In reassessment proceedings, the Assessing Officer made addition u/s. 68 of the Act of the same amount and held the receipts from foreign customers/parties as unexplained cash credits and taxed under ‘Income from other Sources’. The ld.Counsel for the assessee in support of this contention furnished copy of the reasons for reopening for Assessment Year 2011-12, copy of the assessment order dated 30//12/2018 passed u/s. 143(3) r.w.s. 147 of the Act for Assessment Year 2011-12 and the order of Tribunal in for Assessment Year 2011-12.
Per contra, Shri Rajesh Damor representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that the assessee was not able to substantiate the reasons for receipt from overseas customers/parties. No copy of contract note was furnished by the assessee. No documentary evidence was furnished by the assessee to show that the services were provided by foreign entities.
We have heard the submissions made by rival sides and have examined the orders of authorities below. The ld.Counsel for the assessee at this stage has restricted his submissions only with respect to the additional grounds of appeal. The same are reproduced herein below:
“ 1. On the facts of the case and under the circumstances and in law, the Ld. Assessing Officer (Ld. AO) erred in assuming the jurisdiction under Section 147 of the Act and there is no income escaping assessment as per the provisions of the Act. 2. On the facts of the case and under the circumstances and in law, the order passed by the Ld. AO under Section 143 r.w.s. 147 of the Act is illegal, null and void and bad in law and ought to be cancelled.”
The assessee has assailed reopening of assessment on the ground that there is no escapement of income and the overseas parties from whom the assessee had received the amount was offered to tax under the head ‘Business Income’ and the same was accepted by Assessing Officer during assessment proceedings. Now, the Assessing Officer seeks to change the head of income by holding the receipts as unexplained cash credit u/s. 68 of the Act.
Before proceedings further it would be relevant to reproduce the reasons recorded for reopening the assessment in Assessment Year 2012-13. The same reads as under:-
....the assessee company received Rs.8815483.20 as other income from Radiomovil Dipsa and income from independent personal services from Controladora De Services De Telecomunicaciones, residents of Miguel Hidalgo, Distrito Federal in Mexico. Assessee has not disclosed the income of Rs. 8815483.20 in the return of income filed in India. Hence, I have reason to believe that income of Rs.8815483.20 chargeable to tax has escaped assessment by reason of the failure on part of assessee to disclose fully and truly all material facts necessary for assessment for A.Y, 2012-13 within the meaning of section 147 of the Income-tax, 1961. The assessment for A. Y. 2012-13 is therefore required to reopen u/s. 147 of the I. T. Act, 1961 if approved.
The assessee is engaged in the business of development and export of computer software. The units of the assessee from where the assessee is providing services is locate in Special Economic Zone and hence, the assessee is availing the benefit of deduction u/s. 10AA of the Act on profits from export of software. During the period relevant to the assessment year under appeal the assessee had rendered software services to its customers Controladora De Services De Telecomunicaclones/ Radimovil Dipsa SA DE CV (Telemax International). Reassessment proceedings have been initiated by the Assessing Officer for the reason that the assessee has failed to disclose the amount received from the aforesaid customers. Whereas, the contention of the assessee is that the assessee had disclosed the same. The assessee has furnished a table of the amounts received from aforesaid customers in Assessment Year 2011-12 and 2012-13. The same is reproduced hereunder:
Name of the party A.Y.2011-12 A.Y. 2012-13 Total Controladora De Services De Telecomunicaclones/ Radimovil 30,56,192/- 88,15,483/- 1,18,71,675 Dipsa SA DE CV (Telemax International) Tech Mahindra Ltd. 1,99,90,685 27,60,377 2,27,51,022
We find that in respect of the transactions with same parties in the period relevant to the Assessment Year 2011-12, the Assessing Officer had reopened the assessment and had made addition u/s. 68 of the Act for identical reasons. The issue travelled to the Tribunal in (supra). We find that in Assessment Year 2011-12 the Assessing Officer had reopened the assessment by recording identical reasons and even in the assessment order for Assessment Year 2011-12 addition has been made by giving identical findings. The Co-ordinate Bench after examining facts of the case held reopening as invalid. The relevant extract of the Tribunal order for assessment year 2011-12 is reproduced herein below:
“8. We have considered rival submissions and perused materials on record. in the present appeal is confined to addition of Rs.1,99,90,685/-. Undisputedly, assessee is engaged in the business of providing information technology services. In fact, in the original assessment order passed under section 143(3) r.w.s.144C{3) of the Act, the assessing officer has accepted this factual position. In the reasons recorded for reopening of assessment, a copy of which is at page- 6 of the paper book, the assessing officer has stated that though the assessee has received an amount of Rs.30,56,192.24 towards provision of services to a Mexican entity, viz. Controladora De-Services DE Telecommunicaclones & Consertel, however, it has not offered such income to tax in the return of income filed for the impugned assessment year. Whereas, it is the specific assertion of the assessee that in the year under consideration, the assessee has accounted for Rs.1,99,90,685/- received from the Mexican entity and offered it as income. Thus, according to the assessee, it has offered much more than what is referred to by the assessing officer in the reasons recorded.
As could be seen from the assessment order, the assessing officer has accepted that the assessee had furnished copies of foreign inward remittance certificate, ledger and copy of invoices in support of the amount received towards provision of services to the Mexican entity. In fact, the assessing officer has not drawn any adverse inference regarding assessee's claim that the amount of Rs.1,99,90,658/- was offered to tax in the return of income. As it appears, he has only disputed the nature and character of the income received while treating it as unexplained cash credit under section 68 of the Act. In fact, a perusal of the impugned order of learned Commissioner (Appeals) would make it clear that learned appellate authority has not disputed the fact that the assessee has received the disputed amount from the Mexican firm and offered it to tax. In fact, the first appellate authority has clearly accepted that the receipt of money and identity of the payer has been established. However, reiterating the view "expressed by the assessing officer, learned Commissioner (Appeals) has observed that in absence of any contract note towards rendering of services, the amount received cannot be treated as business income, but has to be treated as unexplained cash credit under section 68 of the Act.
10. Thus, it is patent and obvious, though it is not disputed that the assessee has offered the amount of Rs.1,99,90,658/- in the return of income and the amount has also been assessed in the original assessment order; however, only for changing the nature and character of income from business income to unexplained cash credit, the entire exercise of making allegation of escapement of income and reopening of assessment under section 147 of the Act has been made. In fact, in course of proceedings before the first appellate authority, the assesses has furnished a certificate from a chartered accountant certifying that the amount of Rs.1,99,90,658/- forms part of the receipts shown in the profit and loss account for financial year 2010-11. A perusal of the certificate issued by the chartered accountant, a copy of which is placed at page 31 of the paper book clearly demonstrate that not only the auditor has certified that the amount of Rs.1,99,90,658/- has been received from the customers in Mexico, but he has also given the total break up of revenue earned and offered to tax in assessment year 2011-12. 11. Without verifying the authenticity of the chartered accountant's certificate, learned Commissioner (Appeals) has rejected it on a highly technical ground of non- competence with rule 46A of the Rules. When it is not disputed that the amount of Rs.l,99,90,658/-, is the amount received from the Mexican customer and when the amount has also been offered as income in the return of income and assessed to tax, there cannot be any escapement of income. That too, merely for the reason of changing the nature and character of income from business to income from other sources by treating it as unexplained cash credit. Thus, in our considered opinion, not only the reopening of assessment is invalid in absence of any escapement of income, but the impugned addition deserves to be deleted on merits, as well. Grounds are allowed.” 9. In the impugned assessment year, the CIT(A) has confirmed the addition made by the Assessing Officer by placing reliance on his order for assessment year 2011-12, which has now been reversed by the Tribunal. In the impugned assessment year the assessee has furnished the details of the transactions viz. copy of ledger, copy of the invoice and foreign inward remittance certificate, etc. The assessee has discharged its onus to substantiate the transaction. On the contrary, the Assessing Officer has brushed aside all documents furnished by the assessee and remained silent on the veracity of the said documents. The Assessing Officer without recording any findings to disbelieve the same has proceeded to make the addition. Since, the assessee has already offered income to tax, the Assessing Officer has failed to show escapement of income. The transaction for which the addition has been made in assessment proceedings in the impugned assessment year is the part of transaction which was subject matter of reassessment proceedings in assessment year 2011-12. The Co-ordinate Bench has held the reassessment proceedings in assessment year 2011-12 as invalid, there being no contrary material, we see no reason to take a divergent view on same set of facts. For parity of reasons we hold reopening of assessment in assessment year 2012-13 to be invalid. Hence, the additional grounds raised in the appeal are allowed.
In the result, appeal by the assessee is allowed.
Order pronounced in the open court on Thursday the 17th day of March, 2022.