DCIT, CHENNAI V. Laser Soft International P Ltd., CHENNAI

ITA 2532/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96665 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 01-12-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 07-10-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Keywords: Reopening of assessment; Rectification of order; Difference of opinion; Change of opinion
• Section: 143(3); 148; 6; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 2532/MDS/2014 / ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CORPORATE CIRCLE-4(1), CHENNAI. APPELLANT) V. M/S.LASER SOFT INFOSYSTEMS LTD. NO.100-A, RADHA AVENUE, SRI LAKSHMI NAGAR, VALASARAVAKKAM, CHENNAI 87. PAN AAACL5896N RESPONDENT) / APPELLANT BY : SHRI A.B.KOLI, JCIT / RESPONDENT BY : SHRI S.P.CHIDAMBARAM, ADVOCATE ! / DATE OF HEARING : 01.12.2015 '# ! / DATE OF PRONOUNCEMENT: 31.12.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 10 .9.2013 - - ITA 2532/14 2 FOR THE ASSESSMENT YEAR 2003-04. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE ID . CIT(A) FAILED TO APPRECIATE THAT THE NOTICE U/S 148 WAS ISSUED ON 25 . 03.2008 AND THAT THE ORDER OF THE HON'BLE ITAT WAS DATED 04.07 . 2008 REMITTING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER . 2.2 THE ID. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSMENT HAS BEEN REOPENED WITHIN FOUR YEARS AND THEREFORE THE ISSUE OF PROVING FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FACTS DOES NOT ARISE. 2 . 3 THE ID. CIT(A) FAILED TO APPRECIATE THAT ONLY AFT ER REOPENING OF THIS ASSESSMENT , THE AO HAD RECEIVED THE ITAT ORDER AND HENCE COMBINED ORDER U/S 143(3) R . W.S . 147 R.W.S. 254 WAS PASSED ON 22/12/2008. 2 . 4 THE ID . CIT(A) FAILED TO APPRECIATE THAT THE HON'BLE ITAT HAD VIDE ITS ORDER IN ITA NO . 84/MDS/2008, DATED 04 . 07.2008 DIRECTED THE AO TO CONSIDER THE ISSUE OF DEDUCTION U/S 10A AFRESH , WHICH HAS BEEN DONE IN THIS ASSESSMENT ORDER. 2.5 THE ID. CIT(A) OUGHT TO HAVE GONE I NTO THE MERITS ON THE OTHER ISSUES WH I CH RELATE TO THE RE- WORKING OF DEDUCTION U/S10A . 2 . 6 THE ID . CIT(A) FAILED TO APPRECIATE THAT THE DECISIONS IN THE CASE OF M/S. CHOLAMANDALAM INVESTMENT AND FINANCE CO . LTD ., AND M/S . KELV I NATOR OF INDIA LTD ., A R E DISTINGUISHABLE FROM THAT OF THE CASE IN HAND. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRODUCTION AND DEVELOPMENT OF SOFTW ARE, MORE PARTICULARLY DEVELOPMENT OF PRODUCTS FOR THE BANKIN G AND - - ITA 2532/14 3 FINANCIAL SERVICE SECTOR, FILED THE RETURN OF INCOM E FOR A.Y. 2003- 04 ON 1.12.2003 ADMITTING TOTAL INCOME OF RS 2,43,7 8,380/-. THE RETURN WAS PROCESSED U/S.143(1) AND ASSESSMENT COMP LETED U/S.143(3) ON 30.3.2006 DETERMINING THE TOTAL INCOM E AT `4,51,46,920/-. AN ORDER U/S.154 WAS PASSED LATER ON 9.8.2006 REVISING THE TOTAL INCOME TO ` 3,22,53,810/-. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S.147 A ND NOTICE U/S.148 WAS ISSUED ON 25.3.2008. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN OF INCOME ON 25.4.2008 AD MITTING AN INCOME OF ` 2,43,78,381/-. THE ASSESSEE REQUESTED THE AO TO PROVIDE IT WITH THE REASONS FOR REOPENING THE ASSES SMENT WHICH WAS FURNISHED. IT FILED OBJECTION TO SUCH REOPENIN G ON 10.12.2008. AGAINST THE ORIGINAL ASSESSMENT, THE A SSESSE HAD FILED APPEAL TO THE CIT(A) AND SUBSEQUENTLY TO THE ITAT, CHENNAI. THE TRIBUNAL VIDE ITS ORDER DATED 4.7.200 8 IN ITA NO.84/MDS/2008 REMITTED CERTAIN ISSUES FOR FRESH CO NSIDERATION TO THE AO. THE REASSESSMENT WAS COMPLETED ON 22.12 .2008 DETERMINING TOTAL INCOME AT ` 4,71,76,259/- BY MAKING THE DISALLOWANCES. THE AO ALSO GAVE EFFECT TO THE ORDE R OF THE TRIBUNAL IN THE SAME REASSESSMENT ORDER DATED 22.12 .2008. - - ITA 2532/14 4 AGGRIEVED, THE ASSESSE PREFERRED AN APPEAL BEFORE T HE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT T HE ORIGINAL RETURN OF THE ASSESSEE WAS PROCESSED U/S 1 4 3(1) O N 28.06.2004 AND ASSESSMENT WAS COMPLETED U/S 143(1) ON 30 . 03.2006 . THE AO DURING THE ASSESSMENT PROCEEDINGS HAD CALLED FOR INFORMATIO N ' ON VARIOUS ISSUES IN RESPONSE TO WHICH THE ASSESSEE HAD FILED VARIOUS DETAILS. AFTER CONS IDERING THE DETAILS, THE AO FINALIZED THE ORDER U/S 143(3) BY M AKING VARIOUS DISALLOWANCES AND REDUCING THE QUANTUM OF DEDUCTION CLAIMED U/S L0A . IN THE REPLIES DATED 23.12.2005 AND 8.2.2006, THE ASSESSEE HAD FILED DET AILS REGARDING STPI AND NON-STPI UNITS AND DETAILS OF VA RIOUS EXPENSES. IN THE SAID ORDER, THE AO MADE VARIOUS DISALLOWANCES INCLUDING SOME ADJUSTMENTS TO THE COMPUTATION OF DEDUCTION U/S L0A. HE HAS APPORTIONE D THE EXPENDITURE BETWEEN THE STPI AND NON-STPI UNIT ON T HE BASIS OF TUMOVER . , HE ALSO RECOMPUTED THE EXPORT TURNOVER . THE DEDUCTION U/S L0A WAS ACCORDINGLY RESTRICTED TO ` 1,92,39,079/- AS AGAINST THE CLAIM OF ` 2,18,37,320/-. - - ITA 2532/14 5 SUBSEQUENTLY, THE AO PASSED A RECTIFICATION ORDER U /S 154 ON 9.8.2006. THE ASSESSEE HAD FILED APPEAL AGAINST THE ABOVE ORDER BEFORE THE CIT(A), WHO PARTLY ALLOWED THE APP EAL . ON FURTHER APPEAL, THE TRIBUNAL SET ASIDE THE ISSUE OF DEDUCTION U/S L0A TO THE FILE OF THE AO FOR FRESH CONSIDERATI ON. IN THE MEANWHILE, THE AO REOPENED THE ASSESSMENT TAKING TH E TOTAL TURNOVER OF THE COMPANY TO ` 14,02,93,709/- FOR THE PURPOSE OF COMPUTING DEDUCTION U/S L0A . 4.1 . THE CIT(APPEALS) OBSERVED THAT THE REASONS STATED B Y AO FOR REOPENING TH E ASSESSMENT I.E., RECALCULATION OF DEDUCTION U/S L0A HAD ALREADY BEEN DEALT BY HIM IN THE REGULAR ASSESSMENT ITSELF. THE CIT(APPEALS) FURTHER OBSERVE D THAT THE A O HAD SPECIFICALLY DISCUSSED REGARDING CLAIM OF DEDUC TION U/S L0A AND HAD ALSO MADE ADJUSTMENTS TO THE ABOVE CLAI M. FURTHER, THE AO HAD SPECIFICALLY CALLED FOR VARIOUS DETAILS IN RESPECT OF THE STPI AND NON-STPI UNITS TO ASCERTAIN THE CORRECTNESS OF CLAIM OF DEDUCTION U/S L0A AND THE ASSESSEE HAD FURNISHED THE DETAILS CALLED FOR. CALLING FOR T HE DETAILS AND MAKING SUCH ADJUSTMENTS IN THE ASSESSMENT ORDER IND ICATE THAT - - ITA 2532/14 6 THE AO HAD VERY MUCH APPLIED HIS MIND, IN RECOMPUTING THE DEDUCTION U/S.L0A, WHILE PASSING THE ORDER U/S 143( 3). FURTHER, THIS ISSUE WAS THE MATTER OF APPEAL BEFORE THE CIT( A) AS WELL AS BEFORE THE ITAT. FURTHER, THE CIT(APPEALS) OBSERV ED THAT THE AO IN THE ORDER, MERELY MENTIONED THE OBJECTION OF THE ASSESSEE, BUT DID NOT GIVE ANY REASONS FOR REJECTIN G THE OBJECTIONS. TAKING INTO ACCOUNT ALL THESE FACTS, TH E CIT(APPEALS) OBSERVED THAT THE REOPENING ON THE SAME SET OF FACT S IS DUE TO CHANGE OF OPINION, AS RIGHTLY CONTENDED BY THE AR. FURTHER THE CIT(APPEALS) OBSERVED THAT THE ASSESSE HAS RAISED V ARIOUS OTHER GROUNDS, MOSTLY PERTAINING TO THE COMPUTATION OF DEDUCTION U/S.10A AND THE TREATMENT OF SOFTWARE EXPENSES, ETC . HOWEVER, THE CIT(APPEALS) HELD THAT THE REOPENING IS NOT VAL ID AND HENCE, OTHER ISSUES HAVE BECOME ACADEMIC IN NATURE AND NOT ADJUDICATED UPON. 5. THE GRIEVANCE OF THE DEPARTMENT IS THAT THE AO PASSED THE COMBINED ORDER FOR THE REOPENING AS WELL AS FOR GIVING EFFECT TO THE ORDER OF THE TRIBUNAL IN ITA N O.84/2008 DATED 4.7.2008, WHICH WAS REMITTED BY THE TRIBUNAL TO AO FOR FRESH CONSIDERATION BY ISSUING NOTICE FOR THIS ASSE SSMENT - - ITA 2532/14 7 YEAR. THE CIT(APPEALS) WHILE QUASHING THE REASSESS MENT ORDER WHICH WAS CLUBBED WITH THE PRESENT IMPUGNED O RDER, VACATED THE FINDINGS OF THE AO IN GIVING EFFECT TO THE TRIBUNAL ORDER, WHICH HE CANNOT DO AND IT AMOUNTS TO SIT OVE R THE JUDGMENT OF THE TRIBUNAL, A HIGHER FORUM. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ANNULLING OF THE REASSESSMENT ORDER IS PROPER IN VIEW OF THE JUDGMEN T OF THE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. (320 ITR 561). IT IS ONLY DUE TO CHANGE OF OPINION , THE AO REOPENED THE ASSESSMENT. HOWEVER, HE CANNOT DISTUR B THE FINDINGS OF THE TRIBUNAL BY ANNULLING THE WHOLE ASS ESSMENT ORDER, AS IT INCLUDES AN ORDER GIVING EFFECT TO THE TRIBUNALS ORDER CLUBBED WITH THE REASSESSMENT ORDER. AS HE CANNOT SIT OVER THE TRIBUNALS ORDER, WE VACATE THE ORDER OF THE CIT(AP PEALS) WHICH EFFECTS GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. ON THE OTHER HAND, THE FINDING OF THE CIT(APPEALS) RELATING TO A NNULLING OF - - ITA 2532/14 8 REOPENING OF ASSESSMENT IS UPHELD. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC., 2015 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) (DUVVURU RL REDDY) ( CHANDRA POOJARI) - ./ /JUDICIAL MEMBER ! ./ /ACCOUNTANT MEMBER )- /CHENNAI, 0. /DATED, THE 31 ST DEC., 2015. MPO* .1 2343 /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. 56 /CIT(A) 4. 5 /CIT 5. 378 9 /DR 6. 8(: /GF.