RHYTHM AND HUES STUDIOS INDIA P. LTD,MUMBAI vs. ITO 8(3)3, MUMBAI

Briefly stated, assessee is an Indian company. For the assessment year under consideration. Assessee filed its return of income originally on 30th September 2009, declaring income at nil under normal provisions and Rhythm and Hues Studios India P. Ltd. 2 book profit of ` 3,72,52,856 under section 115JB. Subsequently, assessee filed a revised return on 1st October 2009. During the assessment proceedings, Assessing Officer noticing that assessee in the relevant previous year has enetered into international transaction with its associated enterprises (A.E) made a reference to the Transfer Pricing Officer (TPO) to determine the arm's length price of the international transaction. The Transfer Pricing Officer, it seems, was not satisfied with the benchmarking done by the assessee, hence, made an independent analysis which resulted in upward adjustment of the price charged by assessee by an amount of ` 2,28,11,222. In pursuance to the order passed by Transfer Pricing Officer, Assessing Officer completed the assessment by making addition of transfer pricing adjustment proposed by Transfer Pricing Officer. Of–course, Assessing Officer also made few other additions which enhanced the business profits to ` 7,47,13,440.

Being aggrieved of the assessment order so passed assessee preferred an appeal before the learned Commissioner (Appeals). However, learned Commissioner (Appeals) noticing that appeal memo was not signed by the authorized person in terms of rule 45(2) r/w section 140(c), dismissed assessee’s appeal in limine observing as under:–

Learned Counsel for the assessee submitted that the company has no managing director. He submitted, at the time of filing of appeal since none of the directors were available verification of the appeal memo was signed by authorized signatory. He submitted, learned Commissioner (Appeals) without giving an opportunity to the assessee to rectify the defect dismissed the appeal in limine. He further submitted, subsequently assessee has filed revised appeal memo in form no.35, verified by one of the directors. He therefore requested for restoring the matter back to the learned Commissioner (Appeals) for deciding on merit.

Learned Departmental Representative while justifying dismissal of assessee’s appeal in limine, however, submitted that the mater can be restore back to the first appellate authority for giving an opportunity to the assessee to rectify the defect so that assessee’s appeal can be decided on merit.

We have considered the submissions of the parties and perused the material available on record. As per section 249(1) r/w rule 45, a memorandum of appeal before the learned Commissioner (Appeals) has to be verified by a person who is authorized under section 140 to verify the Rhythm and Hues Studios India P. Ltd. 4 return of income. As per section 140(c) in case of a company the person who can verify is the managing director and if it has no MD then by any one of the directors. In the present case, it is stated before us that company has no managing director. Therefore, as per section 140(c), any one of the directors can sign the appeal memo. It transpires from paragraph–3 of the learned Commissioner (Appeals)’s order, when the defect in the appeal was pointed out to the assessee in course of hearing on 25th September 2014, assessee agreed to rectify the defect by filing a revised form no.35 signed by the director. As it appears, learned Commissioner (Appeals) without granting any opportunity to the assessee to rectify the defect, dismissed assessee’s appeal in limine on the very same day. Such approach of the learned Commissioner (Appeals), in our view, is not correct. When the assessee had sought an opportunity to rectify the defect, in all fairness, it should have been granted to it. Be that as it may, learned Counsel for the assessee has stated before us, assessee in the meanwhile has filed a revised appeal memo signed by the director before learned Commissioner (Appeals). It is also relevant to note, learned Commissioner (Appeals) in the operating part of his order has granted liberty to the assessee to rectify the defect in form no.35 by getting it signed and verified either by the managing director, or director as the case may be. In the aforesaid view of the matter, we consider it appropriate to set aside the impugned order of the learned Commissioner (Appeals) and restore the matter back to his file. The first appellate authority must allow opportunity to the assessee to rectify the Rhythm and Hues Studios India P. Ltd. 5 defect in form no.35, in case it has not been rectified, and thereafter decide the appeal on merits in accordance with law and only after due opportunity of being heard to the assessee.

In the result, appeal is allowed for statistical purposes. Order pronounced in the open Court on 20.11.2015