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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI ABRAHAM P GEORGE
These are appeal and cross objections filed by Revenue and assessee respectively directed against the order dated & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 2 of 9 05/12/2013 of CIT(A)-V, Bangalore, for the impugned assessment year.
Appeal of the revenue is considered first for disposal. It has raised 10 grounds of which its ground No.2 assails the order of CIT(A) insofar as he held the re-assessment done for impugned assessment year to be invalid. Since this ground is on a jurisdictional aspect, it is taken up first.
Facts apropos are that assessee, in the business of manufacture and export of computer software, had filed its return of income for impugned assessment year declaring total income of Rs.9,75,652/- after claiming deduction of Rs.1,14,85,354/- u/s 10A of the IT Act, which return was processed u/s 143(1) on 31/03/2003 accepting the returned income. Assessee filed a revised return of income on 19/11/2003 declaring loss of Rs.62,72,160/-. Said return was also processed u/s 143(1) on 25/3/2004. In the said revised return, assessee mentioned that revision was done in view of para.20 of circular No.7 of 2003 dated 15/9/2003 of CBDT. As per the assessee, deduction u/s 10A of the Act had to be considered on a stand-alone basis for various units wherever it was so available and therefore, the revision.
AO issued a notice u/s 148 of the Act on 22/8/2006. In response to said notice, assessee filed copy of the revised return it had earlier filed. Assessee also objected to the reopening of & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 3 of 9 assessment stating that claim of carry forward of loss was correctly computed in revised return. However, AO was of opinion that deduction u/s 10A could have at best be limited to total income and therefore, claim of loss could not be allowed. As per AO, total income computed by assessee at Rs.1,23,40,815/- whereas deduction claimed u/s 10A came to Rs.1,87,75,166/-. Thereafter assessment was completed inter alia making disallowance of warranty expenses, software expenses and re- working the deduction available to assessee u/s 10A of the Act by excluding communication expenditure, foreign exchange expenses and travelling expenses from export turnover.
4. Aggrieved, assessee moved in appeal before the CIT(A). In one of the grounds, assessee assailed the reopening of assessment. As per the assessee, it was not supplied with copy of reasons for reopening despite asking for. Argument for the assessee was that when notice u/s 148 was received by assessee, it had filed a letter dated 12/9/2006 requesting the AO to inform grounds on which re-assessment was sought to be done. As per assessee, this was never supplied to it. Assessee also submitted before CIT(A) that it had once again approached the AO on 10/12/2007 through a letter dated 08/12/2007 for furnishing reason for issue of notice u/s 148 of the Act. As per assessee, reasons were known to it only through assessment order passed on 24/12/2007 u/s 143(3) read with sec.147. According to the assessee, non furnishing of the reasons rendered the re- & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 4 of 9 assessment proceedings void. Reliance was placed on judgment of the Hon’ble Apex Court in case of GKN Driveshafts (India) Ltd., vs. ITO (259 ITR 19).
Considering the arguments and submissions made, CIT(A) sought remand report from AO. In said remand report, it was mentioned by AO that the assessee had vide its letter dated 17/12/2007 filed objections to reopening of assessment. Therefore, as per AO, assessee had knowledge of the reasons for issue of notice u/s 148. As per AO, he had recorded such reason before issuing such notice. AO also mentioned that assessee had claimed deduction u/s 10A which was not allowable under law,leading to reopening. CIT(A) after considering remand report of AO and argument of assessee, came to a conclusion that AO was duty bound to supply copies of reasons within a reasonable time. As per CIT(A) assessee had made specific request on 12/9/2006 and 10/12/2007 in this regard. CIT(A) also noted that letter dated 17/12/2007 relied on by AO was response of assessee to re-computation of deduction u/s 10A of the Act proposed by AO during the course of re-assessment proceedings. He, therefore, held that re-assessment proceedings were vitiated and held re-assessment to be invalid. CIT(A) also held in favour of assessee on merits.
Now, before us, DR strongly assailing order of CIT(A) submitted that there was no regular assessment on assessee on & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 5 of 9 any of the returns filed by it. As per learned DR, returns were only subjected to processing u/s 143(1) of the Act. Non-supply of reason, as per of learned DR, would only be a supervening illegality. Relying on judgment of Hon’ble Madras High Court in Areva T&D India Ltd. vs. ACIT (294 ITR 233), learned DR submitted that matter had to be remitted back to AO for giving an opportunity to the AO to furnish the reasons and the assessee to file its objections to reopening. According to learned DR, non supply of reasons would not by itself render reopening invalid. Reliance was also placed on decision of Ahmedabad bench of the Tribunal in case of New Gujarat Tin Circle Depot Pvt. Ltd. vs. ACIT (ITA No.2311/AHD/2010 dt.07/10/2010).
Per contra, AR stated that awareness of reasons cannot substitute need for furnishing reasons by AO. Further, as per AR, letter dated 17/12/2007 was filed before AO during course of re- assessment and replies given there-in were in response to information called by AO during course of reassessment proceedings. It could not be construed as objection to reopening. Reliance was placed on judgment of Hon’ble Delhi High Court in case of CIT(Central) vs. Chetan Gupta (ITA No.72 of 2014 dated 15/09/2015).
We have perused orders and heard rival contentions. It is not disputed by revenue that assessee had vide its letters dated 12/9/2006 and 10/12/2007 requested AO to furnish reasons for & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 6 of 9 which reopening was being attempted. Extracts from these letters are reproduced here:
“In connection with your above referred notice for the AY 2002-2003, we request you to kindly treat our revised return filed with ITO ward 12(2) u/s 139(5) vide Receipt No.1331 dated 19-November-2003 (Original return filed on 31-October-2002 vide receipt No.01885), as the return under section 148 in compliance with your above referred notice. In this connection, we also would request you to inform us of the grounds on which the reassessment of income is sought to be made.”
“We refer to the above notice received by and also the letter dated September 12, 2006 in response to the same. In our said letter, a copy of which has been enclosed for your ready reference, we had requested you to treat the revised return filed with ITO Ward 12(2) vide Receipt No.1331 dated November 19, 2003 as the return u/s 148 and had also requested you to inform us of the grounds on which the reassessment of income is sought to be made. Subsequent to our telephonic discussion, we are herewith filing a copy of the revised income-tax return stated above, in compliance of the notice u/s 148.”
Thus there could be no dispute that assessee had sought from the AO reasons for reopening. Case of the revenue is that assessee was aware about reason and this was evidenced from letter dated 17/12/2007 filed before AO. We have made a walk-through of this letter. The said letter itself mentions that assessee was furnishing the information called for by AO. Specific reference was made to a letter dated 11/12/2007 of AO. There is no case for revenue that letter dated 11/12/2007 written by AO had given & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 7 of 9 the reason for reopening to assessee. In the letter dated 17/12/2007, assessee had not only dealt with deduction claimed by u/s 10A of the Act but also on various other disallowances which were proposed by AO during the course of re-assessment proceedings. Thus, claim of revenue that assessee was clearly aware about exact reasons for which reopening was attempted to, falls flat. In any case, even if we presume that assessee was aware about exact reason for which notice u/s 148 was issued, this is still not be sufficient to satisfy the requirement in this regard. No doubt Hon’ble Madras High Court in case of Areva T&D India Ltd. (supra) as well as CIT vs. C.Palaniappan (241 CTR 207) had held that non-furnishing of reasons was only a supervening illegality and would not render the proceedings void by itself. However, both Hon’ble Delhi High Court in case of Chetan Gupta (supra) as well as Hon’ble Mumbai High Court in the case of CIT vs. Trend Electronics (ITA 1867 of 2013 dated 16/09/2014) had held that jurisdictional aspects should be strictly complied with by the authorities concerned and no question of knowledge could be attributed on the basis of implication. In taking this view, we are also fortified by judgment of jurisdictional High Court in CWT vs. case of Kothari Metal (WA No.218/2015(IT) dated 14/8/2015. In the said case, reopening was attempted on a return which was subject to processing u/s 143(1) of the Act. Their Lordships had held as under at paragraph 6 of its judgment: & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 8 of 9 “6. The question of non-furnishing the reasons for re- opening an already concluded assessment goes to the very root of the matter. After filing of the return in response to the notice issued under Section 148 of the Act or on request of the assessee requesting that the return of income initially filed be treated as a return of income filed in response to such notice, the assessee is entitled to be furnished the reasons for such re- opening, which can also be challenged independently. Since such reasons had not been furnished to the appellant, even though a request for the same had been made, we are of the opinion that proceedings for the re-assessment could not have been taken further on this ground alone.”
We are, therefore, of the opinion that ld.CIT(A) was justified in taking a view that necessary jurisdictional requirement for initiating a reopening proceedings u/s 147 of the Act was not satisfied. Ground No.2 of the revenue is dismissed.
Since we have upheld the order of CIT(A) with regard to jurisdictional aspect, other grounds raised by revenue have become academic and are not dealt with.
Coming to cross objections of the assessee, since we have upheld the order of CIT(A) holding the re-assessment proceeding to be invalid, cross objections have become infructuous. & CO 70/Bang/2015 M/s.Sasken Communication Technology Ltd. Page 9 of 9 12. In the result, appeal of the revenue as well as cross- objections of assessee are dismissed.
Pronounced in the open court on 11th December, 2015.