WALCHAND NETSOFT P.LTD, MUMBAI V. DCIT CIR 2(3), MUMBAI

ITA 1525/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71733 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 29-10-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MANJUNATH KARKIHALII
• Assessee Lawyers: V G GINDE
• Keywords: Reopening of assessment; Business income; Depreciation; Difference of opinion; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 32; 147; 148

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI . , ! '#$ % & ' , ( '#$ ') BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER '. : 1525 / / 2012 A.Y. 2002-2003 ITA NO. : 1525/MUM/2012 (ASSESSMENT YEAR: 2002-2003) '. : 1526 / / 2012 A.Y. 2003-2004 ITA NO. : 1526/MUM/2012 (ASSESSMENT YEAR: 2003-2004) '. : 1527 / / 2012 A.Y. 2004-2005 ITA NO. : 1527/MUM/2012 (ASSESSMENT YEAR: 2004-2005) WALCHAND NETSOFT PRIVATE LIMITED, CONSTRUCTION HOUSE, 5, WALCHAND HIRACHAND MARG, BALLARD ESTATE, MUMBAI - 400 001 PAN: AAACW 2997 H VS DEPUTY CIT, CIRCLE -2(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.G. GINDE RESPONDENT BY : DR. MANJUNATH KARKIHALII /DATE OF HEARING : 29-10-2013 / DATE OF PRONOUNCEMENT : 13-11-2013 # , O R D E R PER BENCH : THE THREE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF CIT(A) 6, MUMBAI, ALL DATED 26.12.2011. SINCE THE BASIC ISSUE INVOLVED IN ALL THE THREE APPEALS ARE COMMON, WE, FOR THE SAKE OF CO NVENIENCE AND BREVITY ARE PASSING A CONSOLIDATED ORDER. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 2 2. IN ALL THE THREE APPEALS THE FOLLOWING GROUNDS HAVE BEEN TAKEN: FOR AY 2002-03 : BEING AGGRIEVED BY THE ORDER DATED 26.12.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI. [CIT(A)] UNDER SECTIO N 250 OF THE INCOME-TAX ACT, 1961 (ACT), YOUR APPELLANT PREFERS THIS APPEAL, AMON G OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSMENT PROCEEDING S UNDER SECTION 147 INITIATED BY THE LEARNED AO WAS VALID IN LAW. THE LEARNED CIT(A) FAILED TO APPRECIATE, AND OUGHT TO HAVE HELD, THAT THE PROCEED INGS UNDER SECTION 147 WAS NOT SUSTAINABLE IN LAW. YOUR APPELLANT, THEREFORE, PRAYS THAT REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 24,42,8 98/- MADE BY THE LEARNED AO OUT OF TOTAL TECHNOLOGY EXPENSES OF RS. 33,03,623/ -, ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND WAS COVERED BY S ECTION 35D OF THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT SAID EXPENDITURE BE F ULLY ALLOWED AS REVENUE EXPENDITURE. FOR AY 2003-04 : BEING AGGRIEVED BY THE ORDER DATED 26.12.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI. [CIT(A)] UNDER SECTIO N 250 OF THE INCOME-TAX ACT, 1961 (ACT), YOUR APPELLANT PREFERS THIS APPEAL, AMON G OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSMENT PROCEEDIN GS UNDER SECTION 147 INITIATED BY THE LEARNED AO WAS VALID IN LAW. THE LEARNED CIT(A) FAILED TO APPRECIATE, AND OUGHT TO HAVE HELD, THAT THE PROCEED INGS UNDER SECTION 147 WAS NOT SUSTAINABLE IN LAW. YOUR APPELLANT, THEREFORE, PRAYS THAT REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 BE QUASHED. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 20,67,5 20/- MADE BY THE LEARNED AO OUT OF TOTAL TECHNOLOGY EXPENSES OF RS. 25,84,398/ -, ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND WAS COVERED BY S ECTION 35D OF THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT SAID EXPENDITURE BE F ULLY ALLOWED AS REVENUE EXPENDITURE. FOR AY 2004-05 : BEING AGGRIEVED BY THE ORDER DATED 26.12.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 6, MUMBAI. [CIT(A)] UNDER SECTIO N 250 OF THE INCOME-TAX ACT, 1961 (ACT), YOUR APPELLANT PREFERS THIS APPEAL, AMON G OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSMENT PROCEEDING S UNDER SECTION 147 INITIATED BY THE LEARNED AO WAS VALID IN LAW. THE LEARNED CIT(A) FAILED TO APPRECIATE, AND OUGHT TO HAVE HELD, THAT THE PROCEED INGS UNDER SECTION 147 WAS NOT SUSTAINABLE IN LAW. YOUR APPELLANT, THEREFORE, PRAYS THAT REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 16,36,1 62/- MADE BY THE LEARNED AO OUT OF TOTAL TECHNOLOGY EXPENSES OF RS. 20,45,201/ -, ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND WAS COVERED BY S ECTION 35D OF THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT SAID EXPENDITURE BE F ULLY ALLOWED AS REVENUE EXPENDITURE. 3. THE FACTS, COMMON IN THE THREE IMPUGNED YEARS ARE T HAT THE ASSESSEE HAS A WEBSITE AND BESIDES USING ITS OWN WEBSITE , IT TAKES ON LEASE, NETWORK FROM RELIANCE COMMUNICATION INFRASTRUCTURE L TD. (RCIL) AND PAYS LEASE CHARGES AND TECHNICAL EXPENSES, TO RCIL, FOR WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 3 PROVIDING AND MANAGING THE NETWORK. THIS USAGE OF LEASED N ETWORK SYSTEM IS DONE ONLY FOR THE EXTENSION OF THE EXISTING BUSINESS. 4. THESE FACTS HAVE REMAINED THE SAME AND IDENTICAL IN ALL THE THREE IMPUGNED YEARS. ACCORDING TO THE AR, THE MODUS OP ERANDI REMAINED UNCHANGED IN ALL THE THREE YEARS. 5. THE CASE HISTORY IS AS FOLLOWS: S. NO. ASST. YEAR DATE OF FILING OF RETURN SECTION UNDER WHICH ASSESSMENT IS FRAMED DATE OF REGULAR ASST. DATE OF ISSUING NOTICE UNDER SECTION 148 DATE OF ASST. FRAMED UNDER SECTION 143(3) READ WITH SEC. 148 1 2002-03 29.10.02 143(3) 21.03.05 20.03.09 23.11.09 2 2003-04 28.11.03 143(1) - 20.03.09 20.11.09 3 2004-05 30.10.04 143(3) 28.12.06 19.03.09 20.11.09 6. FROM THE ABOVE CHART, WE FIND THAT: (A) IN ASSESSMENT YEAR 2002-03, REGULAR ASSESSMENT WAS FRA MED AND THE REVENUE AUTHORITIES PROCEEDED TO REOPEN THE PROCEEDINGS AFTER THE LAPSE OF 4 YEARS. (B) IN ASSESSMENT YEAR 2003-04, SUMMARY ASSESSMENT WAS MA DE UNDER SECTION 143(1) AND THE REOPENING OF THE PROCEEDINGS IS AFTER THE LAPSE OF 4 YEARS, BUT WITHIN SIX YEARS. (C) IN ASSESSMENT YEAR 2004-05, REGULAR ASSESSMENT WAS FRA MED AND THE REVENUE AUTHORITIES PROCEEDED TO REOPEN THE PROCEEDINGS WITHIN THE 4 YEARS. 7. FROM THE ABOVE FACTS, THAT IN EACH YEAR LAW PERTAINING TO TIME LIMIT FOR REOPENING IS DIFFERENT, THEREFORE, EACH YEAR HAS TO BE TAKEN UP SEPARATELY. ASSESSMENT YEAR : 2002-2003 : ITA 1525/MUM/12 : 8. THE AR SUBMITTED THAT, FOR REOPENING THE ASSESSM ENT PROCEEDINGS, THE AO HAS TAKEN THE FOLLOWING REASONS FOR REOPENING OF THE ASSESSMENT REASONS FOR REOPENING OF THE ASSESSMENT IN THIS CASE RETURN OF INCOME HAS BEEN FILED DECLARING A LOSS OF RS. 1,09,59,468/-. THE SAME WAS PROCESSED UNDER SECTION. 143(1) ON 26-02-2003. THEREAFTER, ASSESSMENT UNDER SECTION. 143(3) WAS COM PLETED ON 21-03-2005 DETERMINING TOTAL LOSS OF RS. 64,95,630/-. ON PERUSAL OF THE RECORDS IT WAS OBSERVED FOR THE FIRS T TIME FROM THE RECORDS FOR AY 2004-05 THAT THE ASSESSEES BUSINESS IS DEDICATED PORTAL AND E-COMMERCE WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 4 AND EARNING INCOME FROM ADVERTISEMENT, WEB-CASTING, USER DATABASE, EVEN MANAGEMENT, CELEBRITY MANAGEMENT FEE, SPONSOR SHIP, SALE OF CONTENT AND COMMISSION ON E-COMMERCE. ASSESSEE, HAS HIS OWN WEBSITE. BESIDES IT HAS TAKEN ON RENTAL BASE, A NETWORK FROM RELIANCE COMMUNICATION INFRASTRUCTURE LTD, AND PAY ING RENTAL SERVICE CHARGES AND PAYING TECHNOLOGY EXPENSES MAINLY FOR PROV IDING MANAGING THE NETWORK SO TAKEN ON RENTAL BASIS. THE NETWORK TAKEN ON RENTAL IS NOTHING BUT HIS EXISTING BUSINESS. THE PROVISIONS OF SECTION 35D(I)(II) R.W. SUB-SECTION 3(IV) IS APPLICABLE IN THE CASE OF THE ASSESSEE. DURING THE A.Y.2002-03, IT IS SEEN FROM P & L A/C AT SCHEDULE J IS WEBSITE DEVELOPMENT AND MAINTENANCE COST THAT ASSESSEE HAS D EBITED RS. 47,89,477/- AND THE WHOLE SUCH EXPENDITURE WAS ALLOWED INSTEAD OF R ESTRICTING IT TO 1/5 TH FOR THE EACH YEAR AND 4/5 TH FOR REST OR NEXT FOUR YEARS. THUS, WITHIN THE MEANING OF THE ABOVE SAID PROVISIONS LA ID DOWN IN THE I. T. ACT, HAS RESULTED IN EXCESS DEDUCTION OF RS. 38,31,581/- BEIN G HANDED OVER TO THE ASSESSEE FOR A.Y 2002-03 WHICH HAS RESULTED IN TO SHORT LEVY OF TAX ACCORDINGLY. THEREFORE, I AM SATISFIED AND HAVE REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX, AMOUNTING TO RS. 38,31,581/- HAS ESCAPED ASSESS MENT FOR THE A.Y. 2002- 03. THE TOTAL INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE AY 2002-03 AMOUNTS TO RS. 38,31,581/-. AS SUCH, THE ASSE SSMENT FOR THE A.Y. 2002-03 NEEDS TO BE REOPENED. ON THE BASIS OF THE ABOVE MENTIONED REASONS RECORDED BY ME, I AM SATISFIED THAT THIS IS A FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE I.T. ACT, 1961. 9. THE ASSESSEE VIDE LETTER DATED 12.10.2009, OBJECTED T O THE REOPENING PROCEEDINGS WHEREIN IT WAS SUBMITTED, 2.1 AT THE OUTSET, WE SUBMIT THAT THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION. 147 OF THE ACT IS LEGALLY NOT SUSTAINABLE, AS THE SAME DOES NOT COMPLY WITH THE MANDATE OF THE PROVISO TO S. 147. FOR THE ABOVE ASS ESSMENT YEAR, ASSESSMENT WAS COMPLETED UNDER SECTION. 143(3) OF THE ACT VIDE TH E ASSESSMENT ORDER DATED 21.03.2005. THE NOTICE UNDER SECTION.148 HAS BEEN ISSU ED ON 20.03.2009, I.E. CLEARLY BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR, WHICH PERIOD, TO BE PRECISE, EXPIRED ON 31/3/2007. AS SUCH OUR CASE IS CLEARLY COVERED BY THE PROVISO TO S 147 OF THE ACT, WHICH, IN TER ALIA, PROVIDES THAT WHERE AN ASSESSMENT UNDER SECTION. 143(3) HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, THEN NO ACTION SHALL BE TAKEN UNDER S ECTION 147 BEYOND 4 YEARS, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. IN OTHER WORDS, THE ESCAPEMENT OF INCOME MUST BE CAUSED BY THE FAILURE OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOS URE OF THE MATERIAL FACT 2.2 IN OUR CASE, IT IS SEEN FROM THE REASONS RECORD ED UNDER SECTION. 148(2), A COPY OF WHICH HAS BEEN PROVIDED BY YOU, THAT THERE IS NO MENTIO N THAT THE INCOME HAS ESCAPED ASSESSMENT DUE TO ANY SUCH FAILURE ON OUR PAR T TO FULLY AND TRULY DISCLOSE THE MATERIAL FACTS. THE REASON GIVEN IS THAT T HE IMPUGNED EXPENSES ARE COVERED BY S.35D AND, THEREFORE, ONLY 115TH OF THE S AME ARE ALLOWABLE IN AY 2002-03 INSTEAD OF THE WHOLE OF THE EXPENSES. THIS VIE W IS BASED ON THE DETAILS ALREADY FURNISHED BY US DURING THE COURSE OF THE ORIGIN AL ASSESSMENT PROCEEDINGS, AND HAS EMANATED OUT OF MERE CHANGE OF OPINION BY THE SUCCESSOR AO. IT IS NOW WELL SETTLED THAT ANY CHANGE OF OPINION ON REAPPRAISAL OF THE SAME MATERIAL ALREADY ON RECORD DOES NOT EMPOWER THE AO TO INITIATE PROCEEDINGS ULS.147. IN ANY EVENT, WHERE THE ACTION IS TAKEN BEYON D THE PERIOD OF 4 YEARS, THEN THE REASONS MUST CLEARLY SHOW THAT THERE WAS FAILU RE ON THE PART OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL F ACTS, AND THAT THE INCOME ESCAPED ASSESSMENT DUE TO SUCH FAILURE. IN OTHER WORD S, THE FACT OF ESCAPEMENT MUST BE CLEARLY ATTRIBUTABLE TO SUCH FAILURE. IT IS, THE REFORE, SINE QUA NON THAT THIS SPECIFIC REQUIREMENT OF THE IA .V MUST BE FULFILLED BEFORE ASSUMPTION OF LAWFUL JURISDICTION UNDER SECTION. 147. MERE CHANGE OF OP INION, THEREFORE, IS NOT SUFFICIENT TO TRIGGER ACTION UNDER SECTION.147. IN THIS CONTEXT, WE RELY ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: SR.N. CASE LAWS COVERED BY WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 5 1 GRINDWELL NORTON LTD. V/S. JAGDISH PRASAD JANGID, ACIT 267 ITR 673(BOM) 2 SHRI WARANA SAHAKARI DUDH UTPADAK SANG V/S. ACIT 284 ITR 477(BOM) 3 MANGALORE REFINERY & PETROCHEMICALS V/S. ACIT 282 ITR 516(BOM) 4 HINDUSTAN LEVER LTD. V/S. R. B. WADKAR, ACIT 268 I TR 332(BOM) 5 BHOR INDUSTRIES LTD. V/S. DCIT 267 ITR 161(BOM) 6 CAPRIHANS INDIA LTD. V/S. TARUN SEEM, DY. CIT 266 ITR 566(BOM) 7 ICICI BANK LTD. V/S. K. J. RAO, DY. CIT 268 ITR 2 03(BOM) 2.3 IN VIEW OF THE ABOVE, WE SUBMIT THAT THE REOPEN ING OF THE ASSESSMENT IS NOT VALID IN LAW, AND, THEREFORE, SHOULD BE DROPPED. WE FUR THER REQUEST YOU TO KINDLY DISPOSE OF OUR PRELIMINARY OBJECTION TO THE REOPEN ING BEFORE CONSIDERING THE MATTER ON MERITS. 3. EXPLANATION WHY THERE IS NO ESCAPEMENT OF INCOME : 3.1 WITHOUT PREJUDICE TO OUR ABOVE SUBMISSIONS OBJECT ING TO THE VERY REOPENING OF THE ASSESSMENT UNDER SECTION. 147, WE WOULD ALSO LIKE TO PLACE OUR SUBMISSIONS ON THE MERIT OF THE MATTER, AS UNDER. 3.2 WE SUBMIT THAT TECHNOLOGY EXPENSES OF RS. 47,89, 477/- CHARGED DURING THE YEAR, DETAILS OF WHICH WERE SUBMITTED IN THE COURSE OF O RIGINAL ASSESSMENT, CONSISTED OF TWO COMPONENTS. OUT OF THE TOTAL EXPEND ITURE OF RS. 47,89,477/-, THE EXPENSES OF RS. 33,05,472/- WERE ACTUALLY INCURRED IN THE PREVIOUS YEAR PERTAINING TO AY 2002-03, AND BALANCE OF RS. 14,84,005 /- WERE IN THE NATURE OF DEFERRED REVENUE EXPENSES, WHICH WERE INCURRED IN PRE CEDING PREVIOUS YEAR, BUT WERE WRITTEN OFF IN THE CURRENT YEAR. IT WAS FURTHER SUBMITTED VIDE LETTER DATED 14.02.2005 THAT THE AMOUNT OF RS. 25,27,517/- PAID T O SEARCH INTERNET DEVELOPMENT SERVICES PVT. LTD., INCLUDED RS. 11,00,000 /- PAID IN EARLIER YEAR BUT AMORTIZED IN THIS YEAR. 3.3 IN THIS CONNECTION WE INVITE YOUR ATTENTION TO THE COMPUTATION OF INCOME, MORE SPECIFICALLY TO NOTE 4, IN WHICH IT IS STATED THAT: IN ACCORDANCE WITH THE GUIDANCE NOTE ISSUED BY THE IN STITUTE OF CHARTERED ACCOUNTANTS OF INDIA FOR DOT. CORN COMPANIES, THE WE BSITE DEVELOPMENT COST OF RS. 29,68,011/- INCURRED DURING THE PREVIOUS ASSESSME NT YEAR 2001- 02, IS AMORTISED IN THE BOOKS OF OVER A PERIOD OF 2 YEARS, FO R THE PURPOSE OF INCOME TAX, THE COST IS CONSIDERED AS CAPITAL EXPENDITURE: ACC ORDINGLY, THE SUM OF RS. 14,84,005/-, BEING THE AMORTISED EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT IS DISALLOWED WHILE ARRIVING AT THE BUSINESS EXPENDIT URE. ACCORDINGLY, AN AMOUNT OF RS. 29,68,011/- WHICH WAS INCU RRED IN THE PREVIOUS YEAR PERTAINING TO AY 2001-02 WAS AMORTIZED IN TWO YEAR S I.E. AY 2001-02 AND AY 2002-03. THUS, AMOUNT OF RS. 47,89,477/- INCLUDES RS. 14,84,005/- BEING AMORTIZED AMOUNT INCURRED IN THE PRECEDING PREVIOUS YEAR . 3.4 IT IS FURTHER SUBMITTED THAT DURING THE PREVIOUS YEAR ENDED 31.03.2001, THE COMPANY SET UP THE WEBSITE AT A COST OF RS. 84,30,0 70/-, WHICH INCLUDED RS. 29,68,011/- INCURRED ON TECHNOLOGY EXPENSES, ALONG WIT H OTHER COST OF RS. 54,62,059/-. SAID EXPENDITURE WAS TREATED AS CAPITAL E XPENDITURE AND THE COMPANY CLAIMED DEPRECIATION AS SPECIFIED UNDER SECTION 32(1) OF THE ACT. KINDLY REFER TO NOTE NO. 6 OF THE COMPUTATION OF INCOM E. THUS, FOR THE PURPOSE OF ACCOUNTS THE COMPANY TREATED THE TECHNOLOGY EXPENDITU RE INCURRED IN AY 2001- 02 OF RS. 29,68,011/- AS DEFERRED REVENUE EXPENSES T O BE WRITTEN OFF OVER A PERIOD OF TWO YEARS, BUT FOR TAX PURPOSES, IT WAS TRE ATED AS CAPITAL EXPENDITURE, AND CLAIMED DEPRECIATION THEREON AS PER IT RULES. HOWE VER, THE AMOUNT DEBITED TO THE P&L A/C. AS DEFERRED REVENUE EXPENDITURE WAS DISALLOWED IN COMPUTING THE BUSINESS INCOME. THUS, OUR COMPANY HAS ACTUALLY CL AIMED EXPENSES OF RS.33,05,4721-IN THE CURRENT FINANCIAL YEAR AS REVENUE EXPENDITURE, WHICH IN FACT WAS THE ACTUAL EXPENDITURE INCURRED DURING THE CU RRENT YEAR. 3.5 WE FURTHER INVITE YOUR KIND ATTENTION TO THE FACT THAT IN THE COURSE OF ORIGINAL ASSESSMENT UNDER SECTION 143(3), THE THEN ASSESSING OFFICER DISALLOWED RS. 9,11,988/- OUT OF THE RS.25,27,517/- PAID TO SEARCH IN TERNET DEVELOPMENT SERVICES PVT. LTD (SIDS). THIS AMOUNT WAS DEBITED AS A PART OF TOTAL TECHNOLOGY EXPENSES OF RS.47,89,477/-. SAID AMOUNT WAS DISALLOWED F OR WANT OF RECONCILIATION OF THE AMOUNT PAID TO SIDS AS SHOWN IN TH E EXPENDITURE STATEMENT SUBMITTED IN THE COURSE OF HEARING AND AMOUNT CONFIRME D BY SIDS. THE MATTER WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 6 WAS CARRIED BEFORE THE HONBLE ITAT IN ITA NO. 4592/M/ 06 AND IT WAS HEARD ON 07.07.2009. THE ORDER IS AWAITED, 3.6 WE ARE RESUBMITTING THE STATEMENT OF TECHNOLOGY EXPENSES, GIVING THE BREAK-UP OF THE EXPENSES ACTUALLY INCURRED IN THE AY 2002-03 AN D EXPENSES INCURRED IN PRECEDING PREVIOUS YEAR BUT CHARGED TO THE PROFIT AND LOSS ACCOUNT IN CURRENT YEAR AS A PART OF DEFERRED REVENUE EXPENDITURE. WE F URTHER SUBMIT THAT EXPENDITURE INCURRED IN THE CURRENT YEAR AND CLAIMED A S REVENUE EXPENDITURE IS BASICALLY MAINTENANCE COST OF THE WEBSITE AND COST OF FEEDING /INSERTING LATEST DATA ON THE WEBSITE FOR THE BENEFIT OF ITS USERS. THU S, THE EXPENDITURE WAS RIGHTLY CLAIMED BY THE COMPANY AS REVENUE EXPENDITURE . 3.7 AS REGARDS THE ISSUE OF APPLICABILITY OF THE PROVIS IONS OF S. 35D, WE REITERATE THE SAME SUBMISSIONS AS ARE MADE FOR THE AY 2003-04, VIDE OUR SUBMISSIONS OF EVEN DATE, SEPARATELY BEING SUBMITTED TO YOU, AND WE WISH NOT TO REPEAT THE SAME FOR SAKE OF BREVITY. 3.8 IN VIEW OF THE ABOVE EXPLANATION, WE STATE THAT A SSESSEE-COMPANY HAS RIGHTLY CLAIMED THE TECHNOLOGY EXPENSES AS REVENUE EXPENDITURE , AND THERE IS NO NEED TO REASSESS THE INCOME OF THE COMPANY. ACCORDINGLY, NO INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AS ALLEGED IN THE NOTICE UNDER SECTION.148. WE THEREFORE REQUEST YOU TO DROP THE PROCEEDINGS INITIATE D UNDER SECTION 147/148. THE AO REJECTED THE OBJECTIONS, AS RAISED BY THE ASSES SEE AFTER OBSERVING, THE MERE PRODUCTION OF THE BALANCE-SHEET, PROFIT AND LOSS ACCOUNT OR ACCOUNT BOOKS AND DETAILS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. IN THE PRESENT CASE, AS CAN BE SEEN FROM THE RECORDS THE ASSESSING OFFICER OVERLOOKED THE AFORESTATED ITEM UND ER RE-ASSESSMENT. THEREFORE, AT THE TIME OF PASSING THE ORIGINAL ORDER OF ASSESSMENT, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. THIS ISSUE IS SUPPORTED BY HONBLE BOMBAY HIGH COURTS DECISION IN THE CASE OF DR. AMINS PAT HOLOGY LABORATORY VS. JCIT AND OTHERS REPORTED IN 252 ITR 673. THE ASSESSEES OBJECTIONS ARE, THEREFORE, REJECTED. THE AO, ON REJECTING THE OBJECTIONS OF THE ASSESSEE PRO CEEDED TO FRAME THE ASSESSMENT UNDER SECTION 143(3) UNDER REASSESSMENT PROCE EDINGS. 10. THE ASSESSEE APPROACHED THE CIT(A) ON THE ISSUES O F REASSESSMENT AND MERITS. 11. THE CIT(A), DEALING WITH THE REASSESSMENT ISSUE HELD, THE APPELLANT HAS CLAIMED WEBSITE DEVELOPMENT OF RS. 47 ,89,477/- AS REVENUE EXPENSE WHEREAS THE AO AFTER BEING SATISFIED THAT THE EXPENSE IS A CAPITAL EXPENSE IN NATURE, RECORDED THE REASONS FOR REOPENI NG THE ASSESSMENT AND ISSUED NOTICE UNDER SECTION. 148 TO THE APPELLANT. THE APPELLANT FILED A LETTER REQUESTING TO TREAT THE RETURN OF INCOME FILED ORIGINALL Y AS FILED IN RESPONSE TO NOTICE UNDER SECTION.148. THE APPELLANT FILED A LETTER B EFORE AO DATED 12.10.2009 STATING THAT THERE WAS NO FAILURE OF ASSESS EE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS AND THE CASE CANNOT BE RE OPENED BEYOND 4 YEARS. THE AO PASSED A DETAILED ORDER REBUTTING ASSESSEES OB JECTION DATED 11.02.2009 AND THE SAME IS ALSO REPRODUCED IN THE AS SESSMENT ORDER AND THE AO AT PARA 5 OBSERVED AS UNDER: THE MERE PRODUCTION OF THE BALANCE-SHEE4 PROFIT AND LOS S ACCOUNT OR ACCOUNT BOOKS AND DETAILS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. IN THE PRESENT CASE, AS CAN BE SEEN FROM THE RECORDS THE ASSESSING OFFICER OVERLOOKED THE AFORESTATED ITEMS UND ER RE-ASSESSMENT. THEREFORE, AT THE TIME OF PASSING THE ORIGINAL ORDER OF ASSESSMENT, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. THIS ISSUE IS SUPPORTED BY HONBIE WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 7 BOMBAY HIGH COURTS DECISION IN THE CASE OF DR. AMINS P ATHOLOGY LABORATORY VS. JCIT AND OTHER REPORTED IN 252-ITR-673. THE ASSESSEES OBJECTIONS WERE, THEREFORE, REJECTED. 2.1 IN COURSE OF APPEAL PROCEEDINGS, THE APPELLANT RE ITERATED THAT IT HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY F OR ASSESSMENT AND AS ALL MATERIAL FACTS WERE DISCLOSED IN THE ASSESSMENT MADE ULS .143(3) THE REOPENING IS BAD IN LAW. 2.2 I HAVE GONE THROUGH THE ORDER OF THE AO AND SUB MISSION OF THE APPELLANT. IT IS OBVIOUS THAT IN THE ASSESSMENT PROCEEDINGS UNDER SE CTION.143(3), THE MATERIAL FACT ABOUT THE WEBSITE DEVELOPMENT COST BEING CAPITAL EXPENDITURE WAS NOT EXAMINED NOR THE APPELLANT DISCLOSED THE MATERIAL FACT OF WEBSITE DEVELOPMENT COST BEING A CAPITAL EXPENDITURE. THE APPELLANTS SUBMISS ION, THAT IT HAS DISCLOSED ALL MATERIAL FACTS, IS FOUND TO BE FACTUALLY NOT CORRECT. THE MATERIAL FACT IN THE PRESENT CASE WAS THAT THE WEBSITE DEVELOPMENT COST WAS A CAPITAL EXPENDITURE AND THIS MATERIAL FACT WAS NOWHERE DISCLOSED IN THE ACCOUNTS OF THE ASSESSEE OR EVEN IN THE ASSESSMENT PROCEEDINGS. THE AO IN COURSE OF ORIGINAL PROCEEDINGS UNDER SECTION.143(3) NEVER EXAMINED THE IS SUE OF WEBSITE DEVELOPMENT EXPENSE BEING CAPITAL OR REVENUE IN NAT URE. THEREFORE THE APPELLANTS ARGUMENT THAT IT IS A CASE OF CHANGE OF OP INION IS FOUND TO BE NOT VALID. THE AO HAS RECORDED THE REASONS FOR REOPENING THE ASSESSMENT AND HAS FOLLOWED ALL PROCEDURES FOR REOPENING THE CASE, THE REA SSESSMENT IS THEREFORE FOUND TO BE VALID. GROUND I IS, THEREFORE, DISMISSED 12. THE CIT(A), ALSO REJECTED THE GROUND PERTAINING TO TH E MERITS OF THE CASE. 13. AGGRIEVED, THE ASSESSEE IS BEFORE THE ITAT. 14. BEFORE US, THE AR SUBMITTED THAT THE BASIC FACT, PERT AINING TO REASSESSMENT PROCEEDINGS IN THE CURRENT YEAR IS THAT T HERE WAS A REGULAR ASSESSMENT & THE AO PROCEEDED TO INITIATE AND REOPEN T HE ASSESSMENT AFTER THE LAPSE OF 4 YEARS FROM THE END OF TH E ASSESSMENT YEAR. HENCE THE CASE CAME WITHIN PROVISO TO SECTION 147. TO PROVE THIS POINT OF ARGUMENT, THE AR REFERRED TO THE REPLIES GIVEN BY THE ASSESSEE DURING THE REGULAR ASSESSMENT PROCEEDINGS AND POINTED O UT THAT IN THE COMPUTATION ATTACHED TO THE RETURN OF INCOME, THE ASSE SSEE HAD ADDED BACK COST OF WEBSITE DEVELOPMENT EXPENDITURE CONSIDERED AS CAPITAL EXPENDITURE AND DEFERRED REVENUE EXPENSES AND HAD APP ENDED APPROPRIATE NOTES TO THE COMPUTATION. THE AR FURTHER RE FERRED TO THE LETTER DATED 08.11.2004 WRITTEN TO THE AO GIVING/SUBMITTING DETAILS ASKED FOR WHICH INCLUDED TECHNOLOGICAL EXPENDITURE, THE DET AIL HAS ALSO BEEN PLACED AS MARKED AS SEPARATE ANNEXURES. IN FURTHE R REPLY DATED 21.02.2005, THE ASSESSEE FURTHER PRODUCED THE DETAILS ON TECHNOLOGICAL EXPENSES ALONG WITH THE DETAILS OF REMITTANCES. THE AR, TH EREFORE, WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 8 SUBMITTED COMPLETE DETAILS HAD BEEN FILED PERTAINING TO TECH NOLOGICAL EXPENSES. 15. THE AR ALSO SUBMITTED THAT THE EXPENSES WERE DEFER RED IN THE TWO PRECEDING YEARS AND IN THE CURRENT YEAR, IT HAD BEE N CLAIMED, WHICH BECAME THE SUBJECT MATTER OF INVESTIGATIONS, CONDUC TED BY THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS. 16. ON THE REASONS, THE AR SUBMITTED THAT IN THE REASO NS, THERE IS NO MENTION WITH REGARD TO THE FACTUM THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATER IAL FACTS NECESSARY FOR ASSESSMENT AND ALSO THAT SUCH FAILURE CAUS ED ESCAPEMENT OF INCOME. THE FACT THAT THERE HAS TO BE APP LICATION OF SECTION 35D AND 1/5 TH EXPENSE HAD TO BE ALLOWED WAS THE SUBJECT MATTER OF DISPUTE IN THE REGULAR ASSESSMENT PROCEEDINGS, WHICH HAD REACHED THE ITAT. 17. THE MERE FACT THAT THE REOPENING WAS INITIATED ON TH IS ASPECT, IT IS A CHANGE OF OPINION, WHICH BARS THE DEPARTMENT TO SUCH FACTS OF REOPENING. IT WAS SUBMITTED THAT A BURDEN HAS BEEN CA ST ON THE DEPARTMENT TO PROVE, (A) THERE WAS AN ESCAPEMENT OF INCO ME IN THE RETURN OF INCOME AND (B) THIS FACT CAME TO LIGHT IN THE INTER IM PERIOD BETWEEN COMPLETION OF REGULAR ASSESSMENT AND RECORDING O F REASONS FOR REOPENING. THIS BURDEN, THE DEPARTMENT HAS FAILED TO DISCHARGE. 18. THE DR PLACED RELIANCE ON THE ORDERS OF THE REVENU E AUTHORITIES AND SUBMITTED THAT THE ISSUE PERTAINING TO THE CLAIM WAS NEVER LOOKED INTO BY THE AO, AND THAT ITSELF, OPENS THE DOORS FOR THE REVENUE AUTHORITIES, TO RESORT TO AND TAKE RECOURSE TO THE INIT IATION OF REASSESSMENT PROCEEDINGS AND HENCE THE REVENUE AUTHO RITIES WERE CORRECT TO RESORT TO REOPENING UNDER SECTION 148/147. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 9 19. WE HAVE HEARD THE ARGUMENTS FROM EITHER SIDE AND H AVE PERUSED THE PAPERS PLACED IN THE APB AND THE CORRESPONDENCES AND ORDERS OF THE REVENUE AUTHORITIES. 20. THE BASIC ISSUE PERTAINS TO THE TREATMENT OF TECHNO LOGY EXPENSES INCURRED BY THE ASSESSEE. IT IS AN UNDISPUTED FACT THAT ENTIRE MATERIAL AND EVIDENCE PERTAINING TO THE TREATMENT OF THE EXPENSE WAS EXAMINED BY THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS, COMPLET E WITH ALL DETAILS AND VOUCHERS. SINCE THE AO WAS STILL NOT CONVINCED, HE MADE CERTAIN ADDITIONS. THE ADDITION AS MADE, ON THE ISSUE, TRAV ELED UPTO ITAT STAGE, WHERE, HOWEVER, THE ISSUE WAS SET ASIDE BY T HE COORDINATE BENCH. 21. SUBSEQUENTLY, AS LATE AS 20.03.2009, THE AO INITIATES THE REASSESSMENT PROCEEDING ON THE SAME ISSUE. AS OBSERVED EARLIER, THE ISSUE WAS EXAMINED BY THE AO THREAD BEAR, IS APPARENT FR OM THE FACT THAT THE DISALLOWANCE MADE BY THE AO ON TECHNOLOGICAL EX PENSES TRAVELED UPTO THE ITAT, ITSELF PROVES THE ISSUE AGAINST TH E REVENUE AUTHORITIES, THAT THEY WERE PROCEEDING ON THE ASPECT WIT H A DIFFERENT REASONING. THIS, HAS BEEN EXAMINED BY THE VARIOUS AUTHOR ITIES AND FORA, FROM TIME IMMEMORIAL, AND IN CATENA OF DECISIONS, THAT T HE LAW DOES NOT ALLOW PROCEEDINGS BASED ON CHANGE OF OPINION FROM ONE INCUMBENT TO THE OTHER. FULL BENCH OF HONBLE DELHI HIGH COU RT IN THE CASE OF KELVINATOR OF INDIA VS CIT REPORTED IN 256 ITR 1 IS ON THIS ISSUE AND WHICH NOW STANDS APPROVED BY THE HONBLE SUPREME COURT IN CIT VS KALVINATOR OF INDIA, REPORTED IN 320 ITR 561. WE ARE T HEREFORE OF THE OPINION THAT THE AO IN THE INSTANT CASE TRAVELED BEYOND THE STATUTORY ACCORD. 22. WE, THEREFORE, QUASH REASSESSMENT PROCEEDINGS AND A S A CONSEQUENCE THEREOF, THE CONSEQUENTIAL PROCEEDINGS ARE ANNULLED. 23. SINCE WE HAVE QUASHED THE REASSESSMENT PROCEEDING S, WE ARE NOT GOING INTO THE MERITS, WHICH BECOME INFRUCTUOUS. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 10 24. THE APPEAL FILED BY THE ASSESSEE IS, THEREFORE, ALLOWED. ASSESSMENT YEAR: 2004-2005 : ITA 1527/MUM/12 : 25. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: BEING AGGRIEVED BY THE ORDER DATED 26.12.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI. [CIT(A)] UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 (ACT), YOUR APPELLANT PREFERS THIS APPEAL, AMON G OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSMENT PROCEEDING S UNDER SECTION 147 INITIATED BY THE LEARNED AO WAS VALID IN LAW. THE LEARNED CIT(A) FAILED TO APPRECIATE, AND OUGHT TO HAVE HELD, THAT THE PROCEED INGS UNDER SECTION 147 WAS NOT SUSTAINABLE IN LAW. YOUR APPELLANT, THEREFORE, PRAYS THAT REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 16,36, 162/- MADE BY THE LEARNED AO OUT OF TOTAL TECHNOLOGY EXPENSES OF RS. 20,45,201/ -, ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND WAS COVERED BY S ECTION 35D OF THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT SAID EXPENDITURE BE F ULLY ALLOWED AS REVENUE EXPENDITURE. 26. IN THE INSTANT YEAR REGULAR ASSESSMENT WAS FRAMED UNDER SECTION 143(3) ON 28.12.2006. THE AO INITIATED THE REASSESSMENT PRO CEEDINGS BY THE ISSUE OF NOTICE UNDER SECTION 148 ON 19.03.2009. T HE ASSESSEE AFTER SUBMITTING THE LETTER DATED 26.03.2009, TO TREAT THE ORIGINAL RETURN AS RETURN IN RESPONSE TO SECTION 148, REQUESTED THE AO TO SUPPLY THE REASONS AS RECORDED FOR REOPENING THE ASSE SSMENT. THE AO SUPPLIED THE REASONS AS RECORDED, WHICH ARE, REASONS FOR REOPENING OF THE ASSESSMENT IN THIS CASE RETURN OF INCOME HAS BEEN FILED DECLARING A LOSS OF RS. 1,48,18.130/-. THE SOME WAS PROCESSED UNDER SECTION.1 43(1). THEREAFTER, ASSESSMENT UNDER SECTION. 143(3)(II) WAS COMPLETED ON 2 8-12-2006 DETERMINING TOTAL LOSS OF RS. 1,26,41,780/-. ON PERUSAL OF THE RECORDS IT WAS, OBSERVED FROM THE R ECORDS FOR Y 2004-05 THAT THE ASSESSEES BUSINESS IS OF DEDICATED PORTAL AND E-COM MERCE AND EARNING INCOME FROM ADVERTISEMENT, WEB-CASTING, USER DATABASE, EVENT MANAGEMENT. CELEBRITY MANAGEMENT FEE, SPONSOR SHIP, SALE OF CONTEN T AND COMMISSION ON C- COMMERCE. ASSESSEE HAS, HIS OWN WEBSITE. BESIDES IT HAS TAKEN ON RENTAL BASE, A NETWORK FROM RELIANCE COMMUNICATION INFRASTRUCTURE LTD. AND PAY ING RENTAL SERVICE CHARGES AND PAYING TECHNOLOGY EXPENSES MAINLY FOR PROV IDING MANAGING THE NETWORK SO TAKEN ON RENTAL BASIS. THE NETWORK TAKEN ON RENTAL IS NOTHING BUT HIS FURTHER EXTENSION OF HIS EXISTING BUSINESS. THE PR OVISIONS OF SECTION 35D(I)(II) R.W. SUB-SECTION 3(IV) IS APPLICABLE IN THE CASE OF THE ASS ESSEE. DURING THE A.Y.2004-05, IT IS SEEN FROM P L AL C AT SCH EDULE M IS WEBSITE DEVELOPMENT AND MAINTENANCE COST THAT ASSESSEE HAS D EBITED RS. 20,45,201/- AND THE WHOLE SUCH EXPENDI1URE WAS ALLOWED INSTEAD OF RE STRICTING IT TO 1/5 TH FOR THE EACH YEAR AND 4/5 TH FOR REST OF NEXT FOUR YEARS. THUS, WITHIN THE MEANING OF THE ABOVE SAID PROVISIONS L AID DOWN IN THE I.T. ACT, HAS RESULTED IN EXCESS DEDUCTION OF RS.16,36,161/- BEING HANDED OVER TO THE ASSESSEE FOR AX 2004-05 WHICH HAS RESULTED IN TO SHORT LEVY OF TAX ACCORDINGLY. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 11 THEREFORE, I AM SATISFIED AND HAVE REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX, AMOUNTING TO RS.1 6,36. 61/- HAS ESCAPED ASSESSM ENT FOR THE A.Y.- 2004- 05. THE TOTAL INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE Y 2004-05 AMOUNTS TO RS. 16,36,161/-. AS SUCH, THE ASSE SSMENT FOR THE Y. 2004-05 NEEDS TO BE REOPENED. ON THE BASIS OF THE ABOVE MENTIONED REASONS RECORDED BY ME, I AM SATISFIED THAT THIS IS A FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE I.T. ACT,1961.. 27. THEREAFTER, THE ASSESSEE FILED ITS OBJECTIONS, WHICH ARE AS FOLLOWS , OBJECTION TO REOPENING OF ASSESSMENT UNDER SECTION. 147: 2.1 WE OBJECT TO THE REOPENING OF THE ASSESSMENT U NDER SECTION.147 SINCE THE SAME IS BASED ON MERE CHANGE OF OPINION FORMED BY THE SUCCE SSOR AO ON THE SAME SET OF FACTS/MATERIAL ALREADY ON RECORD. 2.2 IN OUR CASE, FOR THE ABOVE ASSESSMENT YEAR; AS SESSMENT ORDER UNDER SECTION. 143(3) WAS PASSED ON 28.12.2006. DURING THE COURSE O F THE ASSESSMENT, WE HAD FURNISHED COMPLETE DETAILS OF THE TECHNOLOGY EXPENS ES, WHICH WERE CONSIDERED BY THE THEN AU. THIS IS EVIDENT FROM THE FA CT THAT IN RESPECT OF ONE OF THE ITEMS, THE AU HELD THE SAME TO BE CAPITAL EXPENDIT URE AND DISALLOWED THE SAME; THOUGH HE ALLOWED DEPRECIATION @ 60%. THIS DISALLOWAN CE WAS CONTESTED BY US IN APPEAL BEFORE THE LEARNED CIT(A). THUS, IT IS S UBMITTED THAT THE ORIGINAL ASSESSMENT WAS PASSED AFTER DULY CONSIDERING THE MATE RIAL PLACED ON RECORD AND TAKING A CERTAIN VIEW OF THE MATTER BY THE THEN AO . NOW, ON PERUSAL OF THE REASONS RECORDED UNDER SECTION. 148(2), IT IS SEEN THAT THE ASSESSMENT HAS BEEN REOPENED BECAUSE THE VERY SAME TECHNOLOGY EXPENSES A RE NOW BEING CONSIDERED AS COVERED UNDER SECTION.35D. WHETHER THIS NEW VIEW IS CORRECT OR NOT IS A DIFFERENT MATTER, WHICH HAS BEEN DEALT WITH IN OUR SUBMISSIONS TO FOLLOW HEREINAFTER. HOWEVER, IT IS CLEAR THAT THE WHOLE BASIS OF THE REOPENING IS MERE CHANGE OF OPINION FORMED ON THE SAME SET OF FACTS MA TERIAL ON RECORD. THIS IS CLEARLY NOT PERMISSIBLE IN LAW. 2.3 IN VIEW OF THE ABOVE, WE SUBMIT THAT THE REOPEN ING OF THE ASSESSMENT IS NOT VALID IN LAW, AND, THEREFORE, THE SAME SHOULD BE DROPPE D. WE FURTHER REQUEST YOU TO KINDLY DISPOSE OF OUR PRELIMINARY OBJECTION TO THE REOPENING BEFORE CONSIDERING THE MATTER ON MERITS. 3. EXPLANATION WHY THERE IS NO ESCAPEMENT OF INCOME: 3.1. IN THIS CONNECTION WE SUBMIT THAT THE TECHNOLOGY EXPENSES OF RS. 20,45,202/- WERE CLAIMED DURING THE YEAR, DETAILS OF WHICH WERE SUB MITTED IN A SEPARATE STATEMENT DURING THE COURSE OF ASSESSMENT PROCEEDING S UNDER SECTION 143(3), ALONG WITH HIGH VALUE INVOICES. WE ARE RESUBMITTING THE S AID STATEMENT OF EXPENSES FOR YOUR READY REFERENCE. FROM THE STATEMENT, IT MAY BE OBSERVED THAT THE PAY MENTS WERE MADE DIRECTLY TO RELIANCE COMMUNICATION INFRASTRUCTURE LIMITED. OR REIM BURSED TO WALCHAND CAPITAL LIMITED, WHO IN-TURN PAID TO RELIANCE COMMUNICATION INFRASTRUCTURE LIMITED, A UNIT OF RELIANCE INFOCOM LIMITED. 3.2 AS REGARDS THE ISSUE OF APPLICABILITY OF THE PROVISI ONS OF S.35D, WE REITERATE THE SAME SUBMISSIONS AS ARE MADE FOR THE AY 2003-04, VIDE OUR SUBMISSIONS OF EVEN DATE, SEPARATELY BEING SUBMITTED TO YOU, AND WE WISH NOT TO REPEAT THE SAME FOR SAKE OF BREVITY. 3.3 FROM STATEMENT YOU WILL FIND THAT RS.1,260/- WERE PAID TO M/S DIRECT INFORMATION PVT. LIMITED FOR RENEWAL OF THE DOMAIN NAME S OWNED BY THE COMPANY. 3.4 THE COMPANY HAS REIMBURSED RS. 344,495/- TO M/S WALCHAND CAPITAL LIMITED WHICH IN TURN PAID TO M/S RELIANCE COMMUNICATION INFRASTRU CTURE LIMITED. THE CHARGES PAID TO THEM WERE MAINLY CONSISTING OF WEB HOST ING CHARGES, DATA TRANSFER CHARGES AND LOAD BALANCING CHARGES. 3.5 THE COMPANY HAS ALSO PAID RS. 1,811/- FOR ACQUIRING SOFTWARE, WHICH IS UTILIZED FOR UPDATING DATA ON THE WEB SITE. THIS IS NOTHING BUT UTILIZATION OF THE DATA CONTENTS ON THE WEBSITE IN BETTER MANNER AND IS PURELY IN THE NATURE OF REVENUE EXPENDITURE. 3.6 THE COMPANY HAS ALSO PAID RS. 35,000/- M/S TECH GYAN, FOR BUYING LICENSED VERSION OF SOFTWARE NAMELY, ADOBE PHOTOSHOP VER. 7.0 . COPY OF BILL WAS GIVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3). SAID EXPENDITURE IS BASICALLY INCURRED TO ENHANCE UTILITY VALUE OF THE WEBS ITE OWNED AND RUN BY WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 12 THE COMPANY. IT MAY BE RELEVANT TO NOTE THAT LEARNED A O, WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS CONSID ERED THIS AS CAPITAL EXPENDITURE AND DISALLOWED UNDER SECTION 37. THE TEAMED AO, HOWEVER, ALLOWED DEPRECIATION UNDER SECTION 32 @ 60% OF ACT. THE COMPANY CARRIED THE MATTER BEFORE HONBLE CIT(A), WHO ALLOWED THE AFORESAID EXPENDITURE AS REVENUE EXPENDITURE VIDE HIS APPELLATE ORDER NO. CIT(A)-XXX/IT2O7 /RG.2(3)/07..08 DATED 15.12.2008 FOR THE SAID YEAR. TO THIS EXTENT TH E ASSESSMENT ORDER PASSED UNDER SECTION 143(3) IS MERGED WITH THAT OF THE ORDER OF CIT(A). 3.7 FROM THE EXPLANATIONS SUBMITTED ABOVE IT CRYSTAL C LEAR THAT WHAT HAS BEEN CLAIMED IS PURELY REVENUE EXPENDITURE. THERE IS NO ACQU ISITION OR DESIGNING OF ANY NEW WEBSITE, WHICH CAN BE REGARDED AS CAPITAL EXP ENDITURE, MUCH LESS AS PRELIMINARY EXPENSES AS SOUGHT TO BE CONSIDERED BY YOU. 3.8 IN VIEW OF THE ABOVE EXPLANATION, WE STATE THAT A SSESSEE-COMPANY HAS RIGHTLY CLAIMED THE TECHNOLOGY EXPENSES AS REVENUE EXPENDITURE , AND THERE IS NO NEED TO REASSESS THE INCOME OF THE COMPANY. ACCORDINGLY, NO INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT AS ALLEGED IN THE NOTICE UNDER SECTION 148. WE THEREFORE REQUEST YOU TO DROP THE PROCEEDINGS INITIATE D UNDER SECTION L47/L48- 28. THE AO, ON RECEIPT OF THE OBJECTIONS FROM THE ASSESS EE DISPOSED IT OFF, REJECTING THEM, AS FOLLOWS, 4.3 THE ASSESSEE HAS MAINLY BASED ITS ARGUMENT ON THE DOCTRINE OF MERGER, I.E. THE MERGER OF THE ASSESSMENT ORDER WIT H THAT OF THE CIT(A). THE SUBJECT MATTER OF THE CIT(A) S ORDER I N THIS CASE WAS DISALLOWANCE OF SOFTWARE EXPENSES OF RS. 35,000/- P AID TO ONE M/S. TECHGYAN WHICH WAS TREATED AS CAPITOL EXPENDIT URE BY THE A.O. THE OTHER EX-EXPENDITURES, WHICH WERE PART OF EXPENDITURES OF RS. 20,45,201/-, WERE NEITHER CONSIDERED BY THE A.O. NOR WAS THE SUBJECT OF APPEAL. THE DOCTRINE OF MERGER HAS N O APPLICABILITY IN THIS CASE. 4.4 FURTHER, MERE PRODUCTION OF THE BALANCE-SHEET, PROFIT AND LOSS, ACCOUNT OR ACCOUNT. BOOK AND DETAILS WILL NOT NECES SARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. IN THE PRESENT CASE, AS CAN BE SEEN FROM THE RECORDS THE ASSESSING OFFICER OVERLOOKED THE AFORESTATED ITEMS UNDER RE-ASSESSMEN T. THEREFORE, AT THE TIME OF PASSING THE ORIGINAL ORDER OF ASSESS MENT, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. THIS VIEW IS SUPPORTED BY HONBLE BOMBAY HIGH COURTS DECISION I N THE CASE OF DR. AMINS PATHOLOGY LABORATORY VS. JCIT AND OTH ERS REPORTED IN 252 ITR 673. 5.0 THE ASSESSEES OBJECTIONS ARE, THEREFORE, REJE CTED. 29. THE BASIC FACTS PERTAIN TO THE TREATMENT OF TECHNOLOG Y EXPENSES, WHICH IN THE CURRENT HAS BEEN EXAMINED BY THE AO IN TH E REGULAR ASSESSMENT. THE INVESTIGATION HAVING BEEN CONDUCTED ON THE IMPUGNED EXPENSES WERE EXACTLY IN THE LINES ADOPTED BY THE AO AS IN ASSESSMENT YEAR 2002-03. THESE DETAILS AND FIGURES HAVE BEEN PICKED UP BY THE AO FROM THE COMPUTATION OF INCOME ATTACHED TO THE ROI AND THE ANNEXURES APPENDED TO THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 13 30. THE BASIC ISSUE PERTAINS TO THE TREATMENT OF TECHNOLO GY EXPENSES INCURRED BY THE ASSESSEE. IT IS AN UNDISPUTED FACT THAT ENTIRE MATERIAL AND EVIDENCE PERTAINING TO THE TREATMENT OF THE EXPENSE WAS EXAMINED BY THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS, COMPLET E WITH ALL DETAILS AND VOUCHERS AND THAT BASIS, AS A RESULT OF WHICH, THE AO MADE CERTAIN ADDITIONS. THE ISSUE HAS TRAVELED UPTO ITAT STAGE , WHERE, HOWEVER, THE ISSUE WAS SET ASIDE BY THE COORDINATE BENCH. 31. SUBSEQUENTLY, AS LATE AS 20.03.2009, THE AO INITIATES THE REASSESSMENT PROCEEDING ON THE SAME ISSUE. AS OBSERVED EARLIER, THE ISSUE WAS EXAMINED BY THE AO THREAD BEAR, IS APPARENT FR OM THE FACT THAT THE DISALLOWANCE MADE BY THE AO ON TECHNOLOGICAL EX PENSES TRAVELED UPTO THE ITAT, ITSELF PROVES THE ISSUE AGAINST TH E REVENUE AUTHORITIES, THAT THEY WERE PROCEEDING ON THE ASPECT WIT H A DIFFERENT REASONING. THIS, HAS BEEN EXAMINED BY THE VARIOUS AUTHOR ITIES AND FORA, FROM TIME IMMEMORIAL, AND IN CATENA OF DECISIONS, THAT THE LAW DOES NOT ALLOW PROCEEDINGS BASED ON CHANGE OF OPINION FROM ONE INCUMBENT TO THE OTHER. FULL BENCH OF HONBLE DELHI HIGH COU RT IN THE CASE OF KELVINATOR OF INDIA VS CIT REPORTED IN 256 ITR 1 IS ON THIS ISSUE AND WHICH NOW STANDS APPROVED BY THE HONBLE SUPREME COURT IN CIT VS KALVINATOR OF INDIA, REPORTED IN 320 ITR 561. WE ARE T HEREFORE OF THE OPINION THAT THE AO IN THE INSTANT CASE TRAVELED BEYOND THE STATUTORY ACCORD. 32. WE, THEREFORE, QUASH REASSESSMENT PROCEEDINGS AND AS A CONSEQUENCE THEREOF, THE CONSEQUENTIAL PROCEEDINGS ARE ANNULLED. 33. SINCE WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS , WE ARE NOT GOING INTO THE MERITS, WHICH BECOME INFRUCTUOUS. 34. THE APPEAL, AS FILED BY THE ASSESSEE, IS ALLOWED. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 14 ASSESSMENT YEAR: 2003-2004 : ITA 1526/MUM/12 : 35. INSTANT YEAR IS FACTUALLY DIFFERENT FROM ASSESSMENT YEA RS 2002- 03 AND 2004-05, AS, THERE WAS NO REGULAR ASSESSMENT FRA MED UNDER SECTION 143(3). THE AO, PROCEEDED TO INITIATE REASSESSMENT PROCEEDINGS IN THE INSTANT YEAR, PRIMARILY ON THE REASONS, AS RECORDE D FOR REOPENING, PERTAINING TO ASSESSMENT YEARS 2002-03 AND 2 004-05, WHERE REGULAR ASSESSMENTS HAD BEEN FRAMED UNDER SECTION 143(3 ). 36. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: BEING AGGRIEVED BY THE ORDER DATED 26.12.2011 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI. [CIT(A)] UNDER SECT ION 250 OF THE INCOME-TAX ACT, 1961 (ACT), YOUR APPELLANT PREFERS THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE T O, AND INDEPENDENT OF, THE OTHER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE RE-ASSESSMENT PROCEEDIN GS UNDER SECTION 147 INITIATED BY THE LEARNED AO WAS VALID IN LAW. THE LEARNED CIT(A) FAILED TO APPRECIATE, AND OUGHT TO HAVE HELD, THAT THE PROCEED INGS UNDER SECTION 147 WAS NOT SUSTAINABLE IN LAW. YOUR APPELLANT, THEREFORE, PRAYS THAT REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AN D ALSO IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 16,36,1 62/- MADE BY THE LEARNED AO OUT OF TOTAL TECHNOLOGY EXPENSES OF RS. 20, 45,201/-, ON THE GROUND THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND WAS COVERED BY SECTION 35D OF THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT SA ID EXPENDITURE BE FULLY ALLOWED AS REVENUE EXPENDITURE. THE AR SUBMITTED THAT THE AO, AS IN THE OTHER ASSESSME NT YEARS, INITIATED REASSESSMENT PROCEEDINGS IN THE CURRENT YEAR A S WELL, WHICH FOR THE SAKE OF RECORD, IT WAS SUBMITTED THAT THE INITIATION WAS AFTER THE LAPSE OF FOUR YEARS. THE REASONS, AS SUPPLIED TO THE ASSE SSEE, ARE AS FOLLOWS : REASONS FOR REOOENINA OF THE ASSESSMENT IN THIS CASE RETURN OF INCOME HAS BEEN FILED DECLARING A NET LOSS OF RS. 2,46,16,610/- AS SEEN FROM PROFIT & LOSS ACCOUNT. THE SOME WAS ONLY PROCESSED UNDER SECTION.143(1) OF THE IT ACT ON PERUSAL OF THE RECORDS IT WAS OBSERVED FROM THE R ECORDS FOR AY 2003-04 THAT THE ASSESSEES BUSINESS IS OF DEDICATED PORTAL AND E-COM MERCE AND EARNING INCOME FROM ADVERTISEMENT, WEB-CASTING, USER DATABASE E VENT MANAGEMENT, CELEBRITY MANAGEMENT FEE, SPONSOR SHIP, SOLE OF CONTEN T AND COMMISSION ON E- COMMERCE. ASSESSEE HAS HIS OWN WEBSITE. BESIDES IT HAS TOKEN ON R ENTAL BASE A NETWORK FROM RELIANCE COMMUNICATION INFRASTRUCTURE LTD. AND PAY ING RENTAL SERVICE CHARGES AND PAYING TECHNOLOGY EXPENSES MAINLY FOR PROV IDING MANAGING THE NETWORK SO TAKEN ON RENTAL BASIS. THE NETWORK TAKEN ON RENTAL IS NOTHING BUT HIS FURTHER EXTENSION OF HIS EXISTING BUSINESS. THE PR OVISIONS OF SECTION 35D(I)(II) R.W. SUBSECTION 3(IV) IS APPLICABLE IN THE CASE OF THE AS SESSEE. DURING THE AY.2003-04, IT IS SEEN FROM P & L A/C OF SC HEDULE J IS WEBSITE DEVELOPMENT AND MAINTENANCE COST THAT ASSESSEE HAS D EBITED RS. 25.84,398/- WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 15 AND THE WHOLE SUCH EXPENDITURE WAS ALLOWED INSTEAD OF R ESTRICTING IT TO 1/5 TH FOR THE EACH YEAR AND 1/5 TH FOR REST OF NEXT FOUR YEARS. THUS, WITHIN THE MEANING AT THE ABOVE SAID PROVISIONS LAI D DOWN IN THE I.T. ACT, HAS RESULTED IN EXCESS DEDUCTION OF RS. 20,67,515/- BEIN G HANDED OVER TO THE ASSESSEE FOR A.Y 2003-04 WHICH HAS RESULTED IN TO SHORT LEVY OF TAX ACCORDINGLY. THEREFORE. I AM SATISFIED AND HOVE REASON TO BELIEVE T HAT INCOME CHARGEABLE TO TAX, AMOUNTING TO RS. 20,67,518/- HAS ESCAPED ASSESS MENT FOR THE A.Y. 2003- 04. THE TOTAL INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED A SSESSMENT FAR THE AY 2003-04 AMOUNTS TO RS. 20,67,518/-. AS SUCH THE ASSES SMENT FOR THE A.Y. 2003-04 NEEDS TO BE REOPENED . ON THE BASIS OF THE ABOVE MENTIONED REASONS RECORDED BY ME, I AM SATISFIED THAT THIS IS A FIT CASE FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE I.T. ACT, 1961. 37. THEREAFTER, THE ASSESSEE FILED ITS OBJECTIONS, WHICH ARE AS FOLLOWS, 2. BEFORE WE PROCEED TO EXPLAIN THE NATURE OF TECHN OLOGY EXPENSES UNDER THE HEAD WEBSITE DEVELOPMENT & MAINTENANCE EXPENSES, IT IS NECESS ARY TO GIVE BACKGROUND OF OUR BUSINESS ACTIVITIES. THE COMPANY DUR ING THE RELEVANT PREVIOUS YEAR CARRIED ON THE BUSINESS OF RUNNING A WEBS ITE CALLED CRICKETNEXT.COM DEDICATED TO THE GAME OF CRICKET, WHER E INFORMATION, DATA AND LIVE CRICKET MATCHES WERE BEING UPLOADED FOR THE BENEFIT OF VISITORS TO THIS WEBSITE THE WEBSITE WAS LAUNCHED IN THE AY 2001-02, TH E UNTIL COST OF SETTING UP AND LAUNCHING THE SAME WAS DULY CAPITALIZED FOR THE PURPOSE OF INCOME TAX THOUGH IN THE BOOKS IT WAS WRITTEN OFF AS DEFERRED RE VENUE EXPENDITURE OVER TWO YEARS, AS EXPLAINED IN OUR SUBMISSIONS OF EVEN DATE FOR THE AY 2002-03. 3. IN THE ABOVE BACKGROUND, WE SUBMIT THAT THE TECH NOLOGY EXPENSES OF RS. 25,84,398/- CHARGED DURING THE YEAR, DETAILS OF WHICH ARE SUBMITTED IN A SEPARATE STATEMENT ATTACHED HEREWITH, WERE NIT FOR S ETTING UP OR ESTABLISHING THE NEW WEBSITE, BUT MERELY TO MAINTAIN THE EXISTING OPE RATING WEBSITE. FROM THE STATEMENT IT MAY BE NOTICED THAT PAYMENTS WERE MIN1Y MADE/REIMBURSED TO WALCHAND CAPITAL LIMITED, A GROUP COMPANY, WHO IN TURN PAID TO GTL LTD AND RELIANCE INDUSTRIES LIMITED. 4. OUR EXPLANATION IS NOW SOUGHT AS TO WHY THESE EXPE NSES SHOULD NOT BE COVERED UNDER SECTION 35D OF THE IT ACT, 1961 AS ALLEGEDLY INCUR RED FOR EXTENSION OF AN INDUSTRIAL UNDERTAKING. THIS IS FACTUALLY AND LEGALLY NO T CORRECT. TO FALL UNDER SECTION. 35D, ASSESSEE MUST OWN INDUSTRIAL UNDERTAKING , AND EXPENSES ARE TO BE INCURRED FOR EXTENSION THEREOF. IT IS CLARIFIED THAT ASSESSEE DOES NOT OWN ANY INDUSTRIAL UNDERTAKING; HENCE THE QUESTION OF ITS EXTENS ION DOES NOT ARISE AT ALL. 5. EXPENSES SOUGHT TO BE BRANDED AS FOR EXTENSION O F INDUSTRIAL UNDERTAKING IS NOTHING BUT NORMAL RECURRING EXPENDITURE INCURRED FOR M AINTAINING OUR WEBSITE AND CONTINUOUS UPDATING THEREOF WITH FRESH MEW DATA C ONTENT TO BE USED/VIEWED BY THE WEB VISITOR. THE EXPENSES INCURRED A RE MERELY IN THE NATURE OF WEB HOSTING CHARGES CHARGED PERIODICALLY BY THE SER VICE PROVIDER WITH WHOM SERVERS ARE HOSTED. 6. FROM STATEMENT YOU WILL FIND THAT RS.2,090/- WERE P AID TO M/S DIRECT INFORMATION PVT LTD. FOR THE RENEWAL OF THE DOMAIN NA ME OWNED BY THE COMPANY. THE COMPANY HAS REIMBURSED RS. 14,46,290/- TO M/S WALCHAND CAPITAL LIMITED WHICH WERE IN TURN PAID BY THEM TO M/S GTL LIMITED. THE CHARGES PAID TO THEM WERE MAINLY CONSISTING OF QUARTERLY WEB HOSTING CHARGES, DATA TRANSFER CHARGES. IT ALSO INCLUDES BANDWIDTH USA GE CHARGES FOR HANDLING ADDITIONAL TRAFFIC DURING THE ICC CHAMPIONSHIP TROPHY PL AYED BETWEEN CRICKET PLAYING COUNTRIES. YOU WILL APPRECIATE THAT ALL THOSE EXP ENSES ARE INHERENTLY IN THE NATURE OF REVENUE EXPENSES, AND HAD NOTHING TO D O WITH ANY EXTENSION OF ANY INDUSTRIAL UNDERTAKING. 7. IN THE COURSE OF THE YEAR THE COMPANY MIGRATED W .E.F. O1.12.2002 FROM M/S GTL LTD TO M/S RELIANCE COMMUNICATIONS INFRA LIMITED OF RELIANCE INFOCOM LTD AS ITS SERVER HOSTING STATION FOR BETTER SERVICES AND LOWER COST. DURING THE YEAR COMPANY HAS REIMBURSED RS. 11,31,791/- TO M/S WALCHAND CAPITAL LIMITED WHICH WERE IN TURN PAID BY THEM TO M/S RELIANCE COMMUNIC ATIONS INFRASTRUCTURE LIMITED, A UNIT OF RELIANCE INFOCOM LTD. . THE CHARGES PAID TO THEM WERE MAINLY CONSISTING OF QUARTERLY WEB HOSTING CHARGE S, DATA TRANSFER CHARGES. IT ALSO INCLUDES PROVISION CHARGES FOR SERVERS TO HANDL E ADDITIONAL LOAD ARISING ON ACCOUNT ICC CRICKET WORLD CUP PLAYED DURING THE RELE VANT PERIOD. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 16 8 THE COMPANY HAS ALSO PAID RS 4227/- FOR ACQUIRING SOF TWARE, WHICH WAS UTILIZED FOR DATA SYNCHRONIZATION AND AUTOMATIC DATA BACK -UP ON THE WEBSITE. THIS IS NOTHING BUT UTILIZATION OF THE DATA CONTENTS ON THE WEBSITE IN A BETTER MANNER. 9. FROM THE EXPLANATIONS SUBMITTED ABOVE IT CRYSTAL C LEAR THAT WHAT HAS BEEN CLAIMED IS PURELY REVENUE EXPENDITURE. THERE IS NO ACQU ISITION OR DESIGNING OF ANY NEW WEBSITE, WHICH CAN BE REGARDED AS CAPITAL EXP ENDITURE, MUCH LESS AS PRELIMINARY EXPENSES AS SOUGHT TO BE COVERED UNDER SEC TION.35D IN VIEW OF THE ABOVE EXPLANATION, WE STATE THAT ASSESS EE-COMPANY HAS RIGHTLY CLAIMED THE TECHNOLOGY EXPENSES AS REVENUE EXPENDITURE , AND THERE IS NO NEED TO REASSESS THE INCOME OF THE COMPANY. WE THEREFORE REQUEST YOU TO DROP THE PROCEEDINGS INITIATED UNDER SECTION 147/148. 38. IT IS IMPORTANT TO NOTE THAT THE FACTS PERTAINING TO THE INSTANT YEAR ARE EXACTLY THE SAME AS THAT IN THE YEARS, WHERE THE ASSESSMENTS HAD BEEN REOPENED. IT IS MATTER OF FACT THAT COMPLETE DE TAILS HAD BEEN BEFORE THE AO, WHICH WERE PART OF THE COMPUTATION AND AP PENDED THEREWITH, AS THE DETAILS WERE APPENDED IN THE TWO CORRE SPONDING YEARS, AND THE MATTER TRAVELLED UPTO THE APPELLATE STAGES. 39. IT IS ALSO A FACT THAT NEITHER THE AO NOR THE DR WAS ABLE TO PINPOINT, AS TO WHAT MATERIAL WAS GATHERED OR CAME TO LIGH T, WHICH WAS RESULTED OR INDICATED THAT THERE WAS AN ESCAPEMENT OF IN COME, TO ATTRACT REASSESSMENT PROCEEDINGS. ALSO, THE ISSUE WHICH T RAVELLED UPTO THE ITAT LEVEL, ITSELF PROVES THAT THERE ARE DOUBTS WITH R EGARD TO ESCAPEMENT OF INCOME. IN OUR CONSIDERED OPINION THAT ONCE THE ASSESSEE HAS PRODUCED COMPLETE DETAILS, ON WHICH THE CLAIM HAS BEEN MADE AND TILL SUCH TIME THOSE DETAILS ARE NOT DERAILED BY T HE REVENUE AUTHORITIES, THE BURDEN STAYS ON THE REVENUE AUTHORITIES TO PROVE THEIR CASE, WHICH HAS NOT BEEN DISCHARGED BY THEM. 40. IN SUCH A CASE, WE CANNOT SUSTAIN THE REOPENING OF A SSESSMENT EVEN IN SUMMARY ASSESSMENTS. WE ALSO GATHER STRENGTH T O DEMOLISH THE CASE OF THE REVENUE AUTHORITIES, FROM THE FACT THAT WE HAVE QUA SHED REASSESSMENT PROCEEDINGS ON THE IDENTICAL FACTS AND GROU NDS IN THE PRECEDING YEAR AND IN THE SUBSEQUENT YEAR IN THIS CONSOLIDATED OR DER. WALCHAND NETSOF T LIMITED ITAS NO.1525 TO 1527/M/2012 17 41. ON THE BASIS OF THE ABOVE OBSERVATIONS, WE QUASH TH E REASSESSMENT PROCEEDINGS IN THE INSTANT YEAR AS WELL. 42. SINCE WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS , WE DO NOT FIND ANY REASON TO GO INTO AND ADJUDICATE ON THE GROUND RAISED ON MERITS, WHICH HAS BECOME INFRUCTOUS. 43. THE APPEAL, AS FILED BY THE ASSESSEE IS ALLOWED. IN THE RESULT, APPEALS FILED BY THE ASSESSEE IN ITA NO. 1525/MUM/2012 IS ALLOWED ITA NO. 1526/MUM/2012 IS ALLOWED ITA NO. 1527/MUM/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2013. SD/- SD/- ( . ) ( & ' ) ! '#$ '#$ (D. KARUNAKARA RAO) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER !!' MUMBAI, #$ DATE: 13 TH NOVEMBER, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) % %& ( ) - 6, MUMBAI / THE CIT (A)-6, MUMBAI. 4) THE CIT-2,/CONCERNED _____, MUMBAI, 5) ()* + , , % + , !-' / THE D.R. G BENCH, MUMBAI. 6) *. / COPY TO GUARD FILE. %$01 / BY ORDER / / TRUE COPY / / 2 / 3 -, % + , !-' DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *563 . .