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Facts
The assessee filed six appeals and the Revenue filed two appeals against the orders of the CIT(A) for assessment years 2003-2004 to 2008-2009. These appeals were consolidated due to common issues. The assessee had also filed writ petitions before the High Court challenging orders related to their assessment.
Held
The Tribunal noted that the Hon'ble High Court had set aside the CBDT's order and declared the assessments for the years 2003-2004 to 2008-2009 as illegal and void ab initio. The High Court directed a re-quantification/re-computation of income based on revised financial statements. Consequently, the Tribunal remitted the appeals back to the Assessing Officer.
Key Issues
Whether the assessment orders are illegal and void ab initio due to procedural irregularities and violations of constitutional provisions, and whether re-assessment based on revised financial statements is warranted.
Sections Cited
119, 265, 147, 148, 143(3), 245
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “B” BENCH : HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
2 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 ORDER PER BENCH : The assessee has filed six appeals ITA.Nos.1252, 1253, 1254 and 1255/Hyd/2010 and ITA.Nos.24 & 25/Hyd./2011 against the respective orders of the learned CIT(A)-1 and learned CIT(A)-VII, Hyderabad dated 02.08.2010 and 20.10.2010 for the assessment years 2003- 2004 to 2006-2007 and for the assessment years 2007- 2008 and 2008-2009, respectively. The Revenue has filed two appeals ITA.Nos.1298 & 1299/Hyd./2010 against the respective orders of the learned CIT(A)-I, Hyderabad dated 06.08.2010, for the assessment years 2005-2006 and 2006- 2007, respectively. Since common issues are involved in all these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.
When these appeals were called upon for hearing, the Learned Counsel for the Assessee Shri A.V. Raghuram, Advocate filed an order passed by the Hon’ble High Court for the State of Telangana at Hyderabad vide W.P.Nos.23255,
3 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 17528, 17526, 19622 of 2011, W.P.No.3906 of 2012 and W.P.No.9667 of 2013, Judgment dated 31.01.2025 and submitted that the issues raised in 6 petitions filed by the assessee has been listed in para-8 of the Judgment and the directors given to the respondents are discussed in Paras 71 to 76 of the Judgment of the Hon’ble High Court for the State of Telangana at Hyderabad and for better understanding of the issue at para-8 raised before the Hon’ble High Court for the State of Telangana at Hyderabad and the findings of the Hon’ble High Court for the State of Telangana at Hyderabad in para nos.71 to 76 are reproduced as under :
“8. Writ Petition No.23255 of 2011 is filed by the petitioner under Article 226 of the Constitution of India praying the Court for the following reliefs, viz., i. to quash the order dated 11.07.2022 bearing No.295/1/2009-IT(INV.I)(Part), passed by the respondent No.1 as arbitrary, illegal, violative of Section 119 of the Income Tax Act, 1961 and 4 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 Articles 14, 19(1)(g), 265 and 300-A of the Constitution of India; ii. to declare the Assessment Orders for the Assessment Year 2003-04 to Assessment Year 2006-07 as illegal, void ab initio, and violative of Article 265 of the Constitution of India; iii. to direct the respondent No.1/respondent No.3 to requantify/re-compute the income by conducting a fresh and proper assessment for the Assessment Year 2003-04 to Assessment Year 2008-09 read together based on the revised financial statements of petitioner for the year ending 31st March, 2009 wherein the irregularities in the financial statements pertaining to Assessment Year 2003- 04 to Assessment Year 2008-09 have been duly adjusted as prior period adjustments; iv. to permit the petitioner to file revised returns for the Assessment Year 2007-08 and Assessment Year 2008-09 based on the audited financial statements for the said years read together with 5 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 the audited financial statements for the year ending 31st March, 2009 prepared pursuant to the orders of the Company Law Board and thereafter conduct a proper assessment excluding the fictitious sales and fictitious interest income; v. to declare the revised audited financial statements of the petitioner which have been approved by the shareholders for the year ended March, 31, 2009, wherein the irregularities in the past financial statements have been rectified as prior period adjustments, be the basis of conducting assessment proceedings and any other proceeding under the Income Tax Act, 1961 for the Assessment Year 2003-04 to Assessment Year 2008-09; vi. to direct the respondents not to proceed with recovery of tax till the income is computed / recomputed pursuant to the reliefs sought in (ii), (iii) and (iv) above;
6 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 vii. to declare the Assessment Orders for the Assessment Year 2002-03 to Assessment Year 2006-07 as illegal, void, abinitio, and violative of Article 265 of the Constitution of India; viii. to declare the Draft Assessment Order passed by the respondent No.3 for the Assessment Year 2002-03 dated 18.08.2011 as illegal, void, ab initio, and violative of Article 265 of the Constitution of India’; ix. to declare the returns filed by the petitioner for the Assessment Years 2002-03 as illegal, vitiated by fraud and void ab initio and no reliance can be placed on the said assessment proceedings; and x. to direct the respondent No.1/respondent No.3 to re-quantify/re-compute the income by conducting a fresh and proper assessment for the Assessment Year 2002-03 based on the report of the Forensic Accountant dated 25.11.2016.”
7 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 “71. Given the fact that the Bombay High Court has in the recent past itself allowed two similar writ petitions and the facts in the instant batch of writ petitions also being almost same, coupled with the series of judicial precedents referred to in the preceding paragraphs dealing with the powers of CBDT and also the judgments of the Hon’ble Supreme Court dealing with the term ‘genuine hardship’ as is referred to under Section 119 of the Income Tax Act, we see no reason why Writ Petition No.23225 of 2011 be not allowed and it is ordered accordingly.
The order dated 11.07.2011 passed by respondent No.1 as a consequence is set aside / quashed being arbitrary, illegal and violative of Section 119 of the Income Tax Act. Further, it is ordered that the assessment orders for the Assessment Year 2003-04 to 2008- 09 are illegal and violative of Article 265 of the Constitution of India and also void ab initio. The respondent No.1 and respondent No.3 are hereby directed to re-quantify / re-compute the income of the 8 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 petitioner Company by conducting a fresh and proper assessment for the Assessment Year 2003-04 to 2008- 09 based upon the revised financial statements of the petitioner Company for the year ending 31st March, 2009. The petitioner Company is further directed to file the revised return for the Assessment Year 2003-04 to 2008-09 based on the audited financial statements for the said years read with the audited financial statement for the year ending 31st March, 2009 and thereafter, conduct a proper assessment excluding the fictitious sales and fictitious interest income reflected in the books of accounts. Meanwhile, it is also ordered that till re-quantification and recomputation of the income is done, the respondents shall not proceed with any recovery of income tax against the petitioner for the said relevant period.
In view of the fact that this Bench finding the action on the part of CBDT in rejecting the petition under Section 119 of the Income Tax Act, 1961 to be bad in law in the given factual matrix of the case, the two
9 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 questions of law framed as is enunciated in paragraph No.63 of this judgment, stands answered accordingly:- a) So far as the question whether the respondents were justified in rejecting the application under Section 119(1) of the Income Tax Act is answered in the negative holding that the rejection of the said application was bad in law and also was not sustainable factually. b) So far as the relief which has been sought for whether can be granted invoking Article 226 of the Constitution of India, the same is answered in the affirmative in the view of the findings given by this Bench in the preceding paragraphs based on the judicial precedents.
This Court is conscious of the fact that post re-assessment; there is a likelihood of inflated values emerging which could possibly show surplus tax having been paid potentially burdening the Revenue. However, the petitioner Company has voluntarily agreed not to 10 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 make any claim for refund. The petitioner Company has filed a memo in this regard dated 15.02.2024 undertaking to waive any such surplus tax having been paid which may arise after assessment. This proactive step by the petitioner Company provides additional compelling ground for allowing this petition, particularly in light of there being no financial implication falling on the Revenue. This gesture on the part of the petitioner to mitigate potential financial implications also shows their commitment only with an intention of getting a fair and genuine assessment so far as the income and the expenditure of the petitioner Company for the relevant period is redone by way of reassessment.
This Court finds that the petitioner-Company through its Assistant Chief Corporate Counsel (Legal) and Authorized Signatory has unequivocally agreed to waive its rights to claim any refund that may arise after adjusting any tax liability arising from the de novo assessments for Assessment Years 2002-03 to 2008- 09. This waiver is comprehensive and applies to any 11 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 residual refunds that may arise after setting off aggregate demands across the relevant Assessment Years under Section 245 of the Income Tax Act, 1961. This Court finds that this decision of the Assistant Chief Corporate Counsel (Legal) has been duly authorized by the Managing Director of the petitioner Company supported by a valid Power of Attorney dated 22.11.2013. This waiver effectively ensures that there will be no additional financial burden on the Revenue following the completion of the reassessment process.
As a consequence of the lead case i.e. Writ Petition No.23255 of 2011 being allowed, all the other connected Writ Petitions heard analogously also stands allowed and disposed of leaving open the right of the Revenue to initiate appropriate proceedings if required after the re-assessment is done in terms of the order passed today by this Bench in Writ Petition No.23255 of 2011.”
12 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 3. Learned Counsel for the Assessee Shri A.V. Raghuram submitted that after the statement of Shri B. Ramalinga Raju on 07.01.2009 admitting to falsifying corporate accounts and confessed to fudging sales and interest income for many years and on the basis of the said confession, the Government of India, on the same day intervened by filing a petition before the Company Law Board to suspend the existing Board and to take-over the company affairs. The intervention by the Government was aimed to protect the interest of over 53,000 employees and nearly 3 lakh shareholders and also to protect the reputation of India’s I.T. and Corporate Sector. Vide Order dated 09.01.2009 the Company Law Board approved the Government’s application and suspended the existing Board and appointed six eminent persons as Government of India’s nominees on the Board. Since then, the Government of India is actively managed the Company from 09.01.2009 to 16.04.2009. Thereafter, Tech Mahindra Limited participated in a competitive bidding process which was approved by Retired Chief Justice of India and Company 13 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 Law Board. Subsequently, the petitioner filed an application before the Company Law Board requesting for additional time for preparation of financial statements and submission before the appropriate authorities. This including request for compliance under the Indian Companies Act and all other applicable laws including Taxation Laws. Taking into account the Government of India’s affidavit the Company Law Board allowed application filed by the assessee. Thereafter, the appellant-company has filed petition before the Central Board of Direct Taxes [in short “CBDT”] u/sec.119 of the Income Tax Act, 1961 seeking permission to file revised returns along with re-casted books of accounts as an 31.03.2009. The application filed by the appellant-company has been rejected by the CBDT vide order dated 11.07.2011. The appellant-company has challenged the order passed by the CBDT and filed a petition before the Hon’ble High Court for the State of Telangana at Hyderabad and raised various issues including permitting the appellant-company to file revised returns on the basis of revised books of accounts/financial statements 14 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 as an 31.03.2009 and other issues. The Hon’ble High Court for the State of Telangana at Hyderabad vide it’s Judgment dated 31.01.2025 in W.P.Nos.23255, 17528, 17526, 19622 of 2011, W.P.No.3906 of 2012 and W.P.No.9667 of 2013 set- aside the order passed by the CBDT dated 11.07.2011 and also held that the assessments for the assessment years 2003-2004 to 2008 2009 are illegal and violation of Article 265 of the Constitution of India and also void abinitio. The Hon’ble High Court for the State of Telangana at Hyderabad further directed the respondent nos.1 and 3 to re-quantify/ re-compute the income of the petitioner-company by conducting a fresh and appropriate assessment for assessment years 2003-2004 to 2008-2009 based on the revised financial statements of the petitioner-company for the year ending 31.03.2009. Therefore, Learned Counsel for the Assessee submitted that since the Hon’ble High Court for the State of Telangana at Hyderabad has directed the Department to re-assess the correct total income of the appellant-company on the basis of revised financial statements, thus, the present six appeals needs to be 15 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 remitted back to the file of Assessing Officer for reconciliation in light of Judgment of Hon’ble High Court for the State of Telangana at Hyderabad dated31.01.2025.
Learned CIT-DR for the Revenue MS. M. Narmada although, in principle, agreed with the contentions of the Learned Counsel for the Assessee in light of Judgment of Hon’ble High Court for the State of Telangana at Hyderabad, but made a submission that many other issues involved in the appeals filed by the appellant-company and Revenue for these assessment years and, therefore, it cannot be appropriate to remand the issues in total to the file of Assessing Officer. However, she finally agreed to remand the appeals back to the file of Assessing Officer and to decide in light of decision of Hon’ble High Court for the State of Telangana at Hyderabad.
We have heard both the parties, perused the orders of the authorities below and arguments advanced by both the sides, in light of Judgement dated 31.01.2025 of Hon’ble High Court for the State of Telangana at Hyderabad 16 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 in W.P.Nos.23255, 17528, 17526, 19622 of 2011, W.P.No.3906 of 2012 and W.P.No.9667 of 2013. We find that the Hon’ble High Court for the State of Telangana at Hyderabad vide it’s Judgment dated 31.01.2025 has allowed the above mentioned six writ petitions filed by the assessee and took the W.P.No.23255 of 2011 as a “lead” case and framed substantial issues involved in all writ petitions filed by the assessee and answered the issues raised by the appellant-company in paras 71 to 76 of it’s Judgment which has been reproduced hereinabove in the preceding paragraphs. As per the Judgment of the Hon’ble High Court for the State of Telangana at Hyderabad, the assessment for the assessment years 2003-2004 to 2008-2009 are held to be illegal and violative of Article 265 of the Constitution of India and also void abinitio. The Hon’ble High Court for the State of Telangana at Hyderabad directed the respondents no.1 and 3 to re-quantify/re-compute the income of the petitioner-company by conducting a fresh and appropriate assessments for the assessment years 2003-2004 to 2008- 2009 based on the revised financials of the petitioner 17 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 company for the year ending 31.03.2009. The petitioner company has further directed to file a revised return for assessment years 2003-2004 to 2008-2009 based on the audited financial statements for the said years along with the audited financial statements for the year ending 31.03.2009 and thereafter, conduct a proper assessment excluding fictitious sales and interest income reflected in the books of accounts.
Further we note that the appeals filed by the appellant-company and Revenue before the Tribunal are also pertains to very same assessment years which has been considered by the Hon’ble High Court for the State of Telangana at Hyderabad in it’s Judgment dated 31.01.2025 in W.P.Nos.23255, 17528, 17526, 19622 of 2011, W.P.No.3906 of 2012 and W.P.No.9667 of 2013, in our considered view, these appeals needs to be remitted back to the file of Assessing Officer. Thus, we remand all these appeals filed by the appellant-company and Revenue back to the file of Assessing Officer with a direction to the Assessing Officer to reconsider the issues involved in these 18 ITA.Nos.1252 to 1255/Hyd./2010 & ITA.Nos. 24 & 25/Hyd.2011 ITA.Nos1298 & 1299 /Hyd./2010 appeals for the assessment years 2003-2004 to 2008-2009 in light of the judgement of Hon’ble High Court for the State of Telangana at Hyderabad in it’s Judgment dated 31.01.2025 in W.P.Nos.23255, 17528, 17526, 19622 of 2011, W.P.No.3906 of 2012 and W.P.No.9667 of 2013. Accordingly, the appeals filed by the Assessee and Revenue are allowed for statistical purposes.
In the result, appeals filed by the Assessee ITA.Nos.1252, 1253, 1254, 1255 /Hyd/2010 and ITA.Nos.24 & 25/Hyd./2011 and the appeals filed by the Revenue ITA.Nos. 1298 & 1299/Hyd./2010 are allowed for statistical purposes. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 10.03.2025.