HONEYWELL AUTOMATION INDIA LTD (FORMERLY KNOWN AS TATA HONEYWEL LTD.), Pune V. DCIT,Cir.7, Pune

ITA 400/PUN/2007

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9760 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 14-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR
• Assessee Lawyers: D P BAPAT; R D ONKAR
• Keywords: Reopening of assessment; Opportunity of being heard; Retrospective amendment; Difference of opinion; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 145; 148; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.399 & 400 /PN/2007 (ASSTT.YEARS : 1999-2000 AND 2000-2001) HONEYWELL AUTOMATION INDIA LIMITED, 56 & 57, HADAPSAR INDUSTRIAL ESTATE, HADAPSAR, PUNE 411 013. .. APPELLANT PAN NO. AAACT 3904F VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE .. RESPONDENT APPELLANT BY : SRI D.P. BAPAT & R.D. ONKAR RESPONDENT BY : SRI NARENDRA KUMAR, CIT DATE OF HEARING : 12-06-2012 DATE OF PRONOUNCEMENT : 10 -08-2012 ORDER PER R.K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 29-12-2006 OF THE CIT(A)-III, PUNE REL ATING TO ASSESSMENT YEAR 1999- 2000 AND 2000-01 RESPECTIVELY. SINCE IDENTICAL GRO UNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THESE APPEALS, THEREFORE, THESE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 399/PN/2007 (A.Y. 1999-2000) : 2. GROUNDS OF APPEAL BY THE ASSESSEE ARE AS UNDER : I. THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE I NITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT FOR THE REASSESSMENT OF INCO ME ALLEGED TO HAVE ESCAPED ASSESSMENT. II.B. WITHOUT PREJUDICE THE LEARNED CIT(A) HAS ERRE D IN UPHOLDING THE DIMINUTION OF THE AMOUNT OF INCOME EXEMPT U/S.10A OF THE ACT FROM 780 .37 LAKHS AS CLAIMED BY THE ASSESSEE, TO RS. 422.89 LAKHS AS DETERMINED BY THE ASSESSING OFFICER 1) THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DI MINUTION OF THE AMOUNT OF INCOME EXEMPT U/S.10A OF THE ACT FROM 780.37 LAKHS AS CLAIMED BY THE APPELLANT, TO RS. 422.89 LAKHS AS DETERMINED BY THE ASSESSING OFFICER . 2 WITHOUT PREJUDICE TO THE GENERALITY, THE LEARNED C IT(A) HAS ERRED IN PARTICULAR: A. IN UPHOLDING THE ACTION OF THE AO IN REJECTING T HE BOOKS OF ACCOUNT BY RESORT TO THE PROVISIONS OF SECTION 145 OF THE ACT. B. IN UPHOLDING THE ACTION OF THE AO OF ADOPTING AN ESTIMATED MEASURE OF THE PROFITS DERIVED FROM THE STP UNIT BASED ON THE PROFITABILIT Y RATIOS, PERTAINING TO A.Y. 2001-02, OF TWO OTHER ENTERPRISES REJECTING THE APPELLANTS CON TENTION THAT THE SAID COMPARISON WAS INAPPROPRIATE AND INVALID IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 2) THE LEARNED CIT(A) HAS FURTHER ERRED IN UPHOLDIN G THAT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80HHC OF THE ACT, THE TURNO VER OF STP UNIT IS INCLUDIBLE IN THE AMOUNT OF TOTAL TURNOVER 3) THE LEARNED CIT(A) HAS FURTHER ERRED IN UPHOLDIN G THAT INTEREST U/S.234D OF THE ACT IS CHARGEABLE FOR THE PERIOD BEGINNING FROM 01- 06-2003. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GR OUNDS RELATE TO THE ORDER OF THE CIT (A) IN UPHOLDING THE REASSESSMENT PROCEEDINGS U /S.147 OF THE INCOME TAX ACT INITIATED BY THE AO. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE COMPANY IS PROMOTED BY THE TATA GROUP IN TECHNICAL AND FINANCIAL COLLABORATION WITH HONEYWELL INC., USA AND IS ENGAGED IN AUTOMATION AND CONTROL INDUSTRY. THE COMPANY WAS ESTABLISHED IN 1988 AND ENJOYED DOMINANT POSITION IN INDUSTRIAL AU TOMATION AND CONTROL INDUSTRY AS WELL AS HOME AND BUILDING CONTROL EQUIPMENTS. T HE COMPANY IS ALSO ENGAGED IN ENGINEERING AND SOFTWARE EXPORT SERVICES FOR ITS OV ERSEAS CLIENTS, MAINLY TO HONEYWELL INC, USA AND ITS SUBSIDIARIES WORLD WIDE. FOR THIS PURPOSE THE COMPANY HAS SET UP A UNIT DURING THIS YEAR UNDER TH E SOFTWARE TECHNOLOGY PARK OF INDIA SCHEME AT PUNE. THE ENTIRE PROFITS OF THE SA ID UNIT ARE CLAIMED AS EXEMPT U/S. 10A OF THE I.T. ACT, 1961. 4.1 THE ASSESSEE FILED ITS RETURN OF INCOME DECLARI NG LOSS OF RS. 7,40,56,692/-. THE ASSESSMENT U/S. 143(3) WAS COMPLETED DETERMININ G THE TOTAL INCOME AT RS. 10,93,47,716/-. THE ASSESSEE PREFERRED APPEAL BEFO RE THE LEARNED CIT(A) WHO GAVE PARTIAL RELIEF TO THE ASSESSEE. AFTER GIVING APPEA L EFFECT OF CIT(A)S ORDER AND SUBJECTING TO RECTIFICATION U/S.154 THE TOTAL INCOM E WAS COMPUTED AT RS. 3 7,76,62,230/-. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S.148 OF THE ACT FOR THE FOLLOWING REASONS : IN THE CASE OF THE ABOVE MENTIONED ASSESSEE COMPAN Y THE ASSESSMENT FOR A.Y. 1999- 2000 WAS COMPLETED U/S. 143(3) OF THE INCOME TAX AC T, 1961 ON 25-02-2002. IN THE SAID ASSESSMENT THE CLAIM OF THE COMPANY FOR EXEMPTION U /S.10A WAS ALLOWED AT RS. 7,95,99,535/- AS PER THE RETURN. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S FOR THE A.Y. 2001-02 IN THE CASE OF THE ASSESSEE IT WAS NOTICED FROM THE SUBMISSION MAD E BY THE ASSESSEE THAT THE PROFITS SHOWN BY THE COMPANY IN THE STP UNIT WERE AS FOLLOW S : A.Y. PERCENTAGE OF PROFIT ON COST 1998-99 56% 1999-00 127% 2000-01 145% 2001-02 232% 2002-03 199% 2003-04 105% PROFITS OF THE STP UNITS HAVE BEEN CLAIMED AS EXEMP T U/S. 10A. DURING ASSESSMENT PROCEEDINGS OF THE A.Y. 2001-02 IT WAS NOTICED THAT THE ASSESSEE COMPANY HAD REPORTED TO THEIR ALLIANCE PARTNER M/S. HONEYWELL INC, USA, A P ROFIT MARGIN OF 40% ON COST EARNED BY THEM AS PER ACTUAL WORKING. THE PROFIT SHOWN BY THE ASSESSEE FOR A.Y. 1999-2000 IS MUCH IN EXCESS OF THE LEVEL OF PROFITABILITY REPORT ED BY THE ASSESSEE. DURING ASSESSMENT PROCEEDINGS FOR A.Y. 2001-02 A NU MBER OF MISTAKES/ERRORS WITH RESPECT TO MAN POWER COST ALLOCATED BETWEEN THE STP UNITS AND DOMESTIC BUSINESS WERE NOTICED, WHICH WERE ALSO ADMITTED BY THE ASSESSEE C OMPANY. THESE ERRORS/MISTAKES HAD THE EFFECT OF REDUCING THE COST OF THE STP UNITS AN D ENHANCING THEIR PROFITS, WHICH WERE CLAIMED AS EXEMPT U/S.10A. IT WAS ALSO NOTICED THA T THE MAN POWER COST SHOWN IN THE BOOKS OF THE STP UNITS WAS MUCH LESSER THAN THE MAN POWER COST REPORTED BY THE ASSESSEE TO THE SOFTWARE TECHNOLOGY PARK OF INDIA. IN VIEW OF THESE AND OTHER MISTAKES FOUND DURING TH E ASSESSMENT PROCEEDINGS FOR THE A.Y. 2001-02 IT WAS FOUND THAT THE BOOK RESULT OF STP UN ITS WAS NOT CORRECT AND RELIABLE AND THEREFORE THE BOOK RESULT WAS REJECTED AND PROFITS WERE ESTIMATED IN LINE WITH THE PROFITS REPORTED BY THE ASSESSEE TO THEIR ALLIANCE PARTNER. IT WAS ALSO NOTICED THAT PROFITS EARNED BY THE STP UNITS OF OTHER ESTABLISHED COMPANIES LIK E WIPRO TECHNOLOGIES AND GEOMETRIC SOFTWARE WERE 24.77% AND 19.85% RESPECTIVELY ON SAL ES. IN THE ASSESSMENT YEAR 1999-2000, THE PROFITS OF TH E STP UNITS SHOWN BY THE ASSESSEE IS 123% ON COST, WHICH IS ALSO MUCH IN EXCESS OF THE F ACTS STATED ABOVE, AND ON WHICH EXEMPTION U/S.10A HAS BEEN CLAIMED BY THE ASSESSEE. I, THEREFORE, HAVE REASONS TO BELIEVE THAT INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y. 1999-2000 DUE TO EXCESSIVE CLAIM OF EXEMPTION U/S.10A OF THE INCOME TAX ACT. ACCORDINGLY, PROCEEDINGS U/S.147 O F THE INCOME TAX ACT, 1961 ARE INITIATED. 5. THE ASSESSEE FILED RETURN IN RESPONSE TO NOTICE U/S. 148 DECLARING INCOME OF RS.7,58,23,420/-. IN THE SAID RETURN THE PROFITS C LAIMED EXEMPT U/S.10A OF THE ACT WERE SHOWN AT RS. 7,80,37,312/- AGAINST THE PROFITS OF RS. 7,95,99,535/- CLAIMED AS 4 EXEMPT IN THE ORIGINAL RETURN. THE ASSESSMENT U/S. 143(3) R.W.S. 147 WAS COMPLETED ON A TOTAL INCOME OF RS. 12,95,86,540/-. 6. BEFORE THE CIT(A) THE ASSESSEE CHALLENGED THE VA LIDITY OF THE REOPENING OF THE ASSESSMENT. IT WAS SUBMITTED THAT THE REASSESS MENT PROCEEDINGS HAVE BEEN INITIATED BY THE AO DUE TO CHANGE OF OPINION AS A R ESULT OF ASSESSMENT ORDER PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001 -02. IT WAS ACCORDINGLY SUBMITTED THAT THE REASSESSMENT PROCEEDINGS INITIAT ED BY THE AO BE CANCELLED. 7. HOWEVER, THE LEARNED CIT(A) WAS NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT THE AO HAS RE-OP ENED THE ASSESSMENT U/S.148 OF THE INCOME TAX ACT FOLLOWING THE RESULTS OF DETAILE D ENQUIRIES MADE BY HIM IN THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2001-02. IN THE SAID PROCEEDINGS THE ASSESSEE HAD ITSELF ADMITTED OCCURR ENCE OF SEVERAL ERRORS IN THE COMPUTATION OF PROFITS CLAIMED AS EXEMPT U/S.10A OF THE ACT. AS A RESULT OF THIS FINDING IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2001-02 THE AO CAME TO A VERY FAIR AND REASONABLE CONCLUSION THAT SUCH MISTAKES W OULD HAVE BEEN PREVALENT IN THE OTHER YEARS AS WELL. THEREFORE, IT CANNOT BE SAID THAT THE FOUNDATION FOR REOPENING OF THE ASSESSMENT ORDER PASSED WAS MERELY ON CHANGE OF OPINION. HE ACCORDINGLY UPHELD THE ACTION OF THE AO IN REOPENING THE ASSESS MENT. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFOR E US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE NOTICE HAS BEEN ISSUED BY THE AO WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT ORDER. HOWEVER, HE SUBMITTED THAT THE S AME IS INVALID SINCE THE AO DID NOT HAVE REASONS TO BELIEVE. HE ONLY AT BEST MAY H AVE REASONS TO SUSPECT. REFERRING TO THE REASONS RECORDED BY THE AO WHILE I SSUING NOTICE U/S.148 WHICH HAS BEEN REPRODUCED EARLIER HE SUBMITTED THAT WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001-02 THE PROFIT WAS ESTIMATE D DUE TO DEFECTIVE BOOKS OF 5 ACCOUNT. HOWEVER, FOR THE IMPUGNED ASSESSMENT YEAR THERE IS NO FINDING BY THE AO THAT THERE IS SUCH MISTAKE OR DEFECT IN THE BOOK S OF ACCOUNT. THE AO HAS ONLY ASSUMED THAT SUCH TYPE OF MISTAKES WHICH WERE PREVA LENT DURING ASSESSMENT YEAR 2001-02 MIGHT HAVE OCCURRED DURING THE IMPUGNED ASS ESSMENT YEAR. HE SUBMITTED THAT THE TURNOVER OF THE STP UNIT IS RS.12.63 CRORE S AND THE TURNOVER OF NON STP UNIT IS RS. 217.13 CRORES. HE SUBMITTED THAT DURIN G ASSESSMENT YEAR 1999-2000 THERE WERE NO DEFECTS IN ACCOUNTS AND THE ASSESSEE ONLY HAS NOT ALLOCATED THE EXPENSES. RELYING ON THE DECISIONS REPORTED IN 280 ITR 77 (ALLAHABAD), 312 ITR 166 (DELHI) AND 266 ITR 332 (BOMBAY) HE SUBMITTED T HAT THE AO CANNOT REOPEN THE ASSESSMENT ON MERE SUSPICION. HE SUBMITTED THA T THE AO NEVER SAYS THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DEFECTIVE. 9. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS REPORTED IN 291 ITR 50 HE SUBMITTED THAT HONBLE SUPREME COURT HAS HELD THAT BELIEF SHOULD NOT BE AR BITRARY AND IMPRUDENT. HOWEVER, IN THE CASE OF THE ASSESSEE THERE IS NO BE LIEF AT ALL. IT IS ONLY A MERE SUSPICION. SINCE THE ASSESSMENT HAS BEEN INVALIDLY REOPENED HE SUBMITTED THAT THE SAME SHOULD BE QUASHED. 10. THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTI NG THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE HAS CLAIMED EXCESS ALLO WANCE BY NOT ALLOCATING THE EXPENSES PROPERLY BETWEEN THE STP AND NON STP UNIT. HE SUBMITTED THAT SUFFICIENCY OF THE REASONS CANNOT BE QUESTIONED SIN CE THE ASSESSEE HIMSELF IN THE REVISED RETURN FILED HAS DECLARED HIGHER INCOME WHI CH PRIMA-FACIE INDICATES THAT THE ASSESSEE HAD VERY MUCH FOLLOWED THE SAME WRONG PATT ERN WHICH HE HAD FOLLOWED IN THE ASSESSMENT YEAR 2001-02. VARIOUS DECISIONS REL IED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLIC ABLE TO THE FACTS OF THE PRESENT 6 CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF T HE LEARNED CIT(A) ON THIS ISSUE SHOULD BE UPHELD. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THE ONLY DISPUTE IN THE IMPUGNED GROUNDS IS AS TO WHETHER TH E REASSESSMENT PROCEEDINGS INITIATED BY THE AO AND UPHELD BY THE LEARNED CIT(A ) IS JUSTIFIED OR NOT. IN THE INSTANT CASE THERE IS NO DISPUTE TO THE FACT THAT T HERE WERE CERTAIN MISTAKES IN THE ACCOUNTS FOR A.Y. 2001-02 WHICH LED TO HIGHER CLAIM OF DEDUCTION U/S.10A OF THE INCOME TAX ACT. IN VIEW OF THE ABOVE THE AO CAME T O THE CONCLUSION THAT THE ASSESSEE IS FOLLOWING THE SAME PATTERN OF ACCOUNTIN G FOR WHICH HE ISSUED NOTICE U/S. 148 OF THE INCOME TAX ACT. IT IS ALSO AN ADMITTED FACT THAT IN RESPONSE TO THE NOTICE U/S.148 THE ASSESSEE FILED THE RETURN REVISING THE TOTAL INCOME AT RS. 7,58,23,420/-. FURTHER THE PROFIT CLAIMED AS EXEMPT U/S.10A OF THE INCOME TAX ACT WERE SHOWN AT RS. 7,80,37,312/- AS AGAINST PROFIT OF RS. 7,95,99, 535/- CLAIMED AS EXEMPT IN THE ORIGINAL RETURN WHICH WERE ALLOWED AS SUCH. THEREF ORE, WE DO NOT FIND ANY FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT THE AO DID NOT HAVE ANY REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T AND HE HAS ONLY REASON TO SUSPECT. 12. THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. REPORTED IN 291 ITR 50 AT ITEM NO. 16 HAS HELD AS UNDER : SECTION 147AUTHORISES AND PERMITS THE ASSESSING OF FICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER H AS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT. THE EX PRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCE RTAINED THE FACT BY LEGAL EVIDENCE OF CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE C. LTD., VS. ITO [1991] 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (S THE PROVISION STOOD AT THE RELEVANT TIME) FULFILMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT 7 THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BE LIEVE, BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOT ICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION. RELYING ON THE ABOVE DECISION WE HOLD THAT THE REAS SESSMENT PROCEEDINGS INITIATED BY THE AO AND UPHELD BY THE CIT(A) IS JUSTIFIED AND WITHIN THE FRAMEWORK OF LAW. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) ON TH IS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 13. THE SECOND ISSUE IN THE GROUNDS RAISED BY THE A SSESSEE RELATES TO THE ORDER OF THE CIT(A) IN UPHOLDING THE REJECTION OF BOOK RESUL TS BY AO U/S. 145 OF THE I.T. ACT AND THEREBY CONFIRMING THE REDUCTION OF CLAIM U /S.10A OF THE INCOME TAX ACT FROM RS. 780.37 LAKHS TO RS. 422.89 LAKHS. 14. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT IN THE ASSESSMENT PRO CEEDINGS FOR ASSESSMENT YEAR 2001-02 IT WAS NOTICED THAT THE ASSESSEE COMPANY WA S SHOWING EXTREMELY HIGH PROFITS IN THE STP UNITS IN COMPARISON TO THE PROFI TS IN THE DOMESTIC BUSINESS. THE POSITION OF TURNOVER AND PROFIT SHOWN BY THE COMPAN Y FOR ASSESSMENT YEAR 2001-02 WAS AS UNDER : (IN CRORES) DOMESTIC STP UNIT TOTAL TURNOVER 258.8 17.09 275.89 PROFIT AS PER COMPUTATION OF INCOME 5.41 11.95 17.36 PERCENTAGE OF PROFIT ON SALES 2.09% 69.92% 6.29% PERCENTAGE OF PROFIT ON COST 2.13% 232.49% 6.71% 8 IT WAS ALSO FOUND THAT IN THE ANNUAL REPORT OF THE COMPANY SUBMITTED TO STP OF INDIA THE MANPOWER COSTS RELATING TO THE STP UNIT W AS SHOWN AT RS. 5.11 CRORES WHEREAS IN P&L ACCOUNT FOR THE STP UNIT THE MANPOWE R COSTS WAS SHOWN AT RS. 2.96 CRORES ONLY. THUS THERE WAS AN INFLATION OF S TP PROFITS TO THE TUNE OF RS. 2.15 CRORES. CONSIDERING THE VARIOUS DEFECTS, THE BOOK RESULTS OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2001-02 WERE REJECTED AND P ROFIT FROM STP UNITS WERE ESTIMATED AT RS. 5.69 CRORES AS AGAINST RS. 11.59 C RORES SHOWN BY THE ASSESSEE. THIS WAS DETERMINED BY COMPARING THE RESULTS OF SOM E OTHER COMPANIES ENGAGED IN SIMILAR TYPE OF BUSINESS. 15. THE AO COMPARED THE PERCENTAGE OF PROFIT IN THE DOMESTIC UNIT AS WELL AS STP UNIT FOR THE IMPUGNED ASSESSMENT YEAR ACCORDING TO WHICH THE SAME WAS 3.70% FOR DOMESTIC BUSINESS AND 123.06% FOR STP BUS INESS. IN THE REVISED RETURN SUCH PERCENTAGE OF PROFIT ON COST IN STP UNIT WAS S HOWN AT 159.83% AND PERCENTAGE OF PROFIT ON COST IN DOMESTIC BUSINESS W AS SHOWN AT 3.58%. 16. THE AO ASKED THE ASSESSEE TO EXPLAIN THE REASON S FOR REDUCTION OF CLAIM OF EXEMPTION U/S.10A OF THE ACT. IT WAS SUBMITTED THA T CERTAIN EXPENSES REMAINED TO BE ALLOCATED TO THE STP UNITS WHICH THE ASSESSEE HA S NOW ALLOCATED AND WHICH HAS THE EFFECT OF REDUCING THE PROFITS OF STP UNITS AND CONSEQUENT EXEMPTION U/S.10A WAS REDUCED BY RS. 15,62,223/- FOR THE ASSESSMENT Y EAR 1999-2000 AND RS. 25,75,659/- FOR THE ASSESSMENT YEAR 2000-2001. THE AO COMPARED THE ANNUAL RETURN FILED BY THE ASSESSEE COMPANY BEFORE THE SOF TWARE TECHNOLOGY PARK OF INDIA (STPI) THE AUTHORITY UNDER WHOM THE ASSESSEE IS REG ISTERED AS A STP UNIT AND BASED ON WHICH EXEMPTION U/S.10A HAS BEEN CLAIMED BY THE ASSESSEE. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT THERE A RE DISCREPANCIES BETWEEN THE FIGURES OF SALES AND MANPOWER COST REPORTED BY THE ASSESSEE TO STPI AND THOSE SHOWN IN THE P&L ACCOUNT. 9 17. ON BEING FURTHER QUESTIONED BY THE ASSESSEE IT WAS SUBMITTED THAT DUE TO OVERSIGHT THE ASSESSEE HAD MADE CERTAIN MISTAKES AN D THEY EXPRESSED REGRET FOR COMMITTING MISTAKES. THE AO ALSO COMPARED THE RATE CHARGED BY THE ASSESSEE TO HONEY WELL WE WELL AS NON-HONEY WELL CUSTOMERS AND FOUND THAT THERE IS WIDE VARIATION FOR SUCH CHARGE. IN VIEW OF THE VARIOUS DEFECTS NOTICED IN THE BOOKS OF ACCOUNTS THE AO CAME TO A CONCLUSION THAT THE ASSES SEE FAILED TO JUSTIFY THE ABNORMALLY HIGH PROFITS OF STP UNITS OR THE DIFFERE NCE BETWEEN PROFIT AS PER STP P&L ACCOUNT AND THE FIGURE OF PROFIT REPORTED BY IT TO THE ALLIANCE PARTNER AND PROMOTERS. HE THEREFORE REJECTED THE BOOK RESULTS U/S.145(3) OF THE INCOME TAX ACT AND DETERMINED THE INCOME EARNED BY THE STP UNI T AS UNDER : STP TURNOVER (AS PER REVISED RETURN) RS. 12,68,69, 193/- PROFITS ESTIMATED @50% OF COSTS RS. 4,22,89,731/ - DISALLOWANCE = 7,80,37,312 (-) 4,22,89,731/- = RS. 3,57,47,581/- THUS HE DISALLOWED RS. 3,57,47,581/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE BEING EXCESS EXEMPTION CLAIMED U/S.10A OF THE INCOME TAX ACT. 18. BEFORE THE CIT(A) THE ASSESSEE TRIED TO EXPLAIN THE DIFFERENCE IN REPORTING THE GROSS REVENUE AND REPORTING OF WAGES. FURTHER IT WAS SUBMITTED THAT THE EXPLANATION FURNISHED DURING THE COURSE OF APPEAL P ROCEEDINGS FOR ASSESSMENT YEAR 2001-02 SHALL BE APPLICABLE FOR THIS YEAR ALSO. 19. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED W ITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. FOLLOWING HIS ORDER FOR A.Y. 2001-02 HE UPHELD THE DISALLOWANCE OF RS. 3,57,47,581/- MADE BY THE AO. THE RELEVANT OBSERVATION OF THE CIT(A) READS AS UNDER : THE SUBMISSION HAS BEEN CONSIDERED. ADMITTEDLY, T HE PROCEEDINGS U/S.147 WERE INITIATED IN THE YEAR UNDER CONSIDERATION PURSUANT TO THE FINDINGS IN THE CASE OF THE APPELLANT IN A.Y. 2001-02 IN RESPECT OF THE EXCESS CLAIM OF EXEMPTION U/S.10A. IN THE RETURN FILED AGAINST NOTICE U/S.148, THE CLAIM OF D EDUCTION U/S.10A, ORIGINALLY MADE AT RS. 7,95,99,535/- HAS BEEN REDUCED TO RS. 7,80,37,312/- -- A FACT INDICATING THAT CLAIM MADE IN THE ORIGINAL RETURN OF INCOME WAS NOT THE CORREC T CLAIM. THIS REVISION HAS NOT BEEN MADE BY THE APPELLANT VOLUNTARILY AND WILLINGLY BUT IN PURSUANCE OF THE FINDINGS OF THE 10 ASSESSING OFFICER IN A.Y. 2001-02 IN RESPECT OF INC ORRECT ALLOCATION OF EXPENSES. THIS SHOWS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE DID NOT REFLECT CORRECT RESULTS. FURTHER, FROM THE ASSESSEES SUBMISSION VIDE LETTERS DATED 2 8-12-2004 AND 30-12-2004 WRITTEN TO THE ASSESSING OFFICER AND ITS EXPLANATION VIDE LETT ER DATED 10-10-2000 ADDRESSED TO STPI (AS MENTIONED IN THE ASSESSMENT ORDER), THE ASSESSI NG OFFICER HAS MADE IT CLEAR THAT ASSESSEES ACCOUNTING/REPORTING SUFFERS FROM SERIOU S DEFECTS. UNDER THESE CIRCUMSTANCES, I FIND NO MERIT IN THE CLAIM OF THE APPELLANT THAT ITS BOOK RESULTS ARE ACCEPTABLE. I, THEREFORE, HOLD THAT, ON THE FACTS AND UNDER THE CI RCUMSTANCES OF THE CASE, THE ASSESSING OFFICER IS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145 AND THEREAFTER WORKING OUT PROFIT OF STP UNITS BY APPLYING RATE OF 50% OF COST S AS DONE BY HIM IN THE CASE OF THE APPELLANT IN A.Y. 2001-02. IN THE LIGHT OF THE DIS CUSSION MADE IN APPELLANTS CASE IN A.Y. 2001-02, THE DISALLOWANCE OF RS. 3,57,47,581/- IS C ONFIRMED. 19.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 20. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO FOLLOWING THE ORDER FOR A SSESSMENT YEAR 2001-02 DISALLOWED AN AMOUNT OF RS. 3,57,47,581/- BEING EXC ESS CLAIM OF DEDUCTION U/S.10A OF THE INCOME TAX ACT. THE LEARNED CIT(A) FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2001-02 UPHELD THE DISALLOWANCE MAD E BY THE AO. WE FIND WHEN THE MATTER CAME TO THE TRIBUNAL THE TRIBUNAL VIDE I TA NO. 401/PN/2007 AND 402/PN/2007 ORDER DATED 07-09-2011 FOR A.Y. 2001-02 AND 2002-03 RESTORED THE ISSUE TO THE FILE OF THE AO BY HOLDING AS UNDER : 21. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDE RS OF THE REVENUE, PAPERS AVAILABLE BEFORE US AND THE WRITTEN SUBMISSIONS OF THE PARTIES IN THE DISPUTE. FROM THE DATA TABULATED IN THE PRECEDING PARAGRAPHS FOR THE AY 2001-02, WE FIND THAT THE TURNOVER IS 17.09 CR AND PROFITS WORKS OUT TO RS 11.95 CR IE WORKS OUT TO 69.92%. CONSIDERING THE COST AS PER THE ASSESSEE, T HE % OF PROFIT OF THE STP UNITS ON COST WORKS OUT TO 232.49%. WHEREAS THE ASS ESSEES DATA OF THE % OF PROFIT OF THE STP UNITS ON COST WORK AS PER THE CRP IS ONLY 40%. FURTHER, THE ASSESSEES REJECTED BOOKS ADVOCATES FOR 69.96% OVER THE COST. HOWEVER, REJECTING ABOVE CLAIMS, THE AO ALLOWED THE % OF PRO FIT OF THE STP UNITS ON COST AT RS 50% FOR THE AY 2001-02. ALL THESE DATA WORKED OUT WITHOUT CONSIDERING THE REIMBURSEMENT OF THE EXPENDITURE, WHICH IS THE SUBJ ECT MATTER OF DISPUTE BEFORE US. AO CONSIDERED THE COMPARABLE CASES, WHICH ARE O THER ARE NOT ACCEPTED BY THE ASSESSEE AS COMPARABLES ON MANY GROUNDS. WITH R EGARD TO THESE REIMBURSED EXPENSES, THE CASE OF THE ASSESSEE IS THAT IF THE SAME ARE CONSIDERED THE GAP IN THE PROFITS MARGINS ARE GREAT LY RECONCILABLE AND CONSEQUENTLY, THE UNRECONCILED GAP WORKS OUT TO NEG LIGIBLE ONE AND IT SHOULD BE IGNORED AND CONSEQUENTLY, THE BOOK RESULTS SHOULD B E ACCEPTED. FURTHER, THE ASSESSEE IS OF VIEW THAT THE AO ACCEPTED THE NEED F OR CONSIDERING SUCH REIMBURSED EXPENDITURE, WHICH OF COURSE THE DR REJ ECTS SUCH AN UNDERSTANDING OF THE ASSESSEE. OTHERWISE, THE DR RAISED VARIOUS S UBMISSIONS BEFORE US STATING THAT THESE REIMBURSED EXPENDITURE HAS NO PROFIT COM PONENT, THESE ARE OUTSIDE THE SCOPE OF THE EXEMPTION PROVISIONS U/S 10A OF TH E ACT ETC AS EXTRACTED IN THE 11 PRECEDING PARAGRAPHS OF THIS ORDER. ON THE CONTRARY , THE ASSESSEE RAISED VARIOUS OTHER COUNTER SUBMISSIONS AND IN FAVOUR OF THE ASSE SSEE. 22. THUS, GROUND 1 HAS TWO LIMBS AND FIRST ONE RELA TES TO THE VALIDITY OF THE INVOKING OF THE PROVISIONS OF SECTION 145 OF THE AC T AND WE HAVE UPHELD THE DECISION OF THE AO IN THIS REGARD. THE SECOND LIMB OF THE GROUND RELATES TO THE BEST JUDGMENT IN THE MANNER OF THE PROVISION OF SEC TION 144 OF THE ACT. AS PER THE REVENUE, PROFIT PERCENTAGE @ 232.49% IS TOO HIGH AN D THEY HELD THAT THE % OF PROFIT OF THE STP UNITS ON COST @ 50% IS REASONABLE . THIS IS AGAINST THE 40% AS PER THE CRP MADE BY THE ASSESSEE DURING THE AY 2 002-03. FURTHER, THE AO RELIES ON THE COMPARABLE CASES OF WIPRO AND GEOMETR IC SOFTWARE COMPANIES, OF COURSE, THE CIT(A) SUMMARILY REJECTED WITHOUT PROPE R ANALYSIS OR REASONING. PER CONTRA, THE CASE OF THE ASSESSEE IS THAT THE SAID C OMPARABLE CASES ARE IN FACT NOT COMPARABLE ONES CONSIDERING THE SERVICES, PRODUCT L INES ETC. FURTHER, AS PER THE ASSESSEE, THE PROFIT % OF 232.49 HAS TO BE ADJUSTED DOWNWARDS, IF THE REIMBURSEMENT OF EXPENDITURE IS CONSIDERED. IN TH AT CASE, THE GAP IS REDUCED MARGINALLY. CONSIDERING THE ABOVE DIVERGENT POSITIO NS, WE HAVE PERUSED THE ORDER OF THE CIT(A) AND FIND THAT THE SAME HAS NOT MET VARIOUS ARGUMENTS OF THE ASSESSEE. EVEN DURING THE PROCEEDINGS BEFORE US, TH E PARTIES HAVE FAILED TO DEMONSTRATE VARIOUS ASPECT RELATING TO THE SAID REI MBURSEMENTS AND ITS IMPACT ON THE PROFIT MARGIN OF RS 232.49%. THUS, SO FAR AS THE REIMBURSED EXPENDITURE IS CONCERNED, WE FIND THERE IS LACK OF FACTUAL CLAR ITY. IT IS NOT CLEAR WHY ONLY RS 54 LAKHS WERE MENTIONED N THE BOOKS INITIALLY, WHICH W AS SUBSEQUENTLY REVISED TO RS. 2.29 CRORES. WHY THE DEBIT NOTES WERE AVAILAB LE FOR ONLY RS 2.09 CR AGAINST THE CLAIM OF RS 2.29 CR? WHAT EXACTLY IS THE NATURE OF THESE REIMBURSEMENTS AND WHETHER THEY ARE DISCOUNTS ALLOCATED BY THE PRINCIP LE COMPANY TO THE STP UNITS OF THE ASSESSEE OR OTHERWISE?. IF THEY ARE NOT DISC OUNTS WHICH IS IN THE NATURE OF THE PROFIT, HOW THEY ARE PROFITS, DERIVED FROM THE ASSESSEES ELIGIBLE UNDERTAKINGS AND ELIGIBLE FOR EXEMPTION? CIT(A) HAS NOT ATTENDED TO THIS PART OF THE ARGUMENTS RAISED BEFORE HIM DESPITE THE MATTER REMANDED BY HI M TO THE ASSESSING OFFICER DURING THE FIRST APPELLATE PROCEEDINGS. WHAT ARE TH E FACTS OF THESE REIMBURSED EXPENDITURE, WHETHER THESE REIMBURSEMENTS OF THE TR AVEL EXPENDITURE OF THE EMPLOYEE OF THE COMPANY HAVE PROFIT ELEMENT, AT ALL IF SUCH PROFITS AND IF THE ANSWER IS POSITIVE, IF SUCH PROFITS, UNRELATED TO T HE EXPORT ACTIVITY PER SE, CONSTITUTES PROFITS AND GAINS DERIVED FROM THE UND ERTAKING FROM THE EXPORT OF SUCH ARTICLE OR THINGS OR COMPUTER SOFTWARE AND TH EREFORE ELIGIBLE PROFITS FOR CLAIM OF EXEMPTION U/S 10A OF THE ACT ETC. CIT(A) HAS NOT DEALT WITH RELEVANT SUBMISSIONS BEFORE REJECTION OF THE ASSESSEES SUBM ISSIONS. 23. SO FAR AS THE ADMISSION OF THE ADDITIONAL EVIDE NCE IS CONCERNED, WE FIND THERE IS NO ERROR ON PART OF THE CIT(A) IN BOTH ADMITTING , REMANDING AND CONSIDERING THE SAME WHILE DECIDING THE ISSUE. HOWEVER, WE OBJECT T HE ORDER OF THE CIT(A) IN HIS FAILURE TO REASON OUT AS TO HOW SUCH REIMBURSEMENTS ARE TAKEN CARE OF BY THE 10% SET OFF ALLOWED BY THE AO OVER ABOVE THE PROFIT @ 40% OVER THE COST. HIS ORDER IS SILENT ON THIS ISSUE. SINCE THE AO AND CIT(A) HAVE FOLLOWED THEIR RESPECT IVE ORDERS FOR THE ASSESSMENT YEAR 2001-02 AND SINCE THE TRIBUNAL IN THE ORDER F OR A.Y. 2001-02 HAS RESTORED THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WITH CERTAIN DIRECTION, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL IN 12 ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02. T HE GROUNDS BY THE ASSESSEE ON THIS ISSUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 21. THE THIRD ISSUE IN THE GROUNDS RAISED BY THE AS SESSEE RELATES TO THE ORDER OF THE CIT(A) IN HOLDING THAT FOR PURPOSE OF COMPUTING DEDUCTION U/S.80HHC OF THE I.T. ACT, THE TURNOVER OF STP UNIT IS INCLUDIBLE IN THE AMOUNT OF TOTAL TURNOVER. 22. AFTER HEARING BOTH THE SIDES, WE FIND THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CHANDIGARH BENC H OF THE TRIBUNAL IN THE CASE OF ACIT VS. MAHARASTRA SPINNING MILLS LTD., REPORTED I N 110 ITD 211 WHEREIN IT HAS BEEN HELD THAT TURNOVER OF AN EXPORT ORIENTED UNIT WHOSE INCOME IS EXEMPT U/S.10B CANNOT BE INCLUDED IN THE TURNOVER CALCULATED FOR T HE PURPOSE OF DEDUCTION U/S.8HHC. IN ABSENCE OF ANY CONTRARY DECISION BROU GHT TO OUR NOTICE BY THE LEARNED DR, WE, RESPECTFULLY FOLLOWING THE DECISION CITED (SUPRA) HOLD THAT TURNOVER OF AN EXPORT ORIENTED UNIT WHOSE INCOME I S EXEMPT U/S.10A CANNOT BE INCLUDED IN TURNOVER CALCULATED FOR THE PURPOSE OF DEDUCTION U/S.8HHC. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 23. THE LAST ISSUE IN THE GROUNDS RAISED BY THE ASS ESSEE RELATES TO THE ORDER OF THE CIT(A) IN UPHOLDING THAT INTEREST U/S.234D OF THE I NCOME TAX ACT IS CHARGEABLE FOR THE PERIOD BEGINNING FROM 01-06-2003. 24. AFTER HEARING BOTH THE SIDES WE FIND THE AO CHA RGED INTEREST OF RS. 13,08,979/- U/S.234D OF THE INCOME TAX ACT. BEFORE THE CIT(A) IT WAS SUBMITTED THAT SINCE SECTION 234D WAS INSERTED W.E.F.01-06-20 03 THE SAME CANNOT BE APPLIED FOR ASSESSMENT YEAR 1999-2000 BEING THE YEAR UNDER APPEAL. IT WAS ALSO SUBMITTED THAT PROVISIONS OF SECTION 234D CANNOT BE APPLIED W HEN THE REASSESSMENT FOLLOWS THE REGULAR ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT. HOWEVER, THE LEARNED 13 CIT(A) WAS NOT FULLY CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT SINCE PROVISIONS OF SECTION 234D HAVE BEEN BROUGHT TO STATUTE W.E.F. 01-06-2003, THEREFORE, INTEREST U/S.234D CAN BE CH ARGED ONLY FROM THIS DATE. HE ACCORDINGLY DIRECTED THE AO TO CALCULATE INTEREST U /S.234D FOR THE PERIOD BEGINNING FROM 01-06-2003 TO THE DATE OF ASSESSMENT AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 25. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIM E OF HEARING DREW THE ATTENTION OF THE BENCH TO THE EXPLANATORY MEMORANDUM TO FINAN CE ACT 2012 RELATING TO CHARGING OF INTEREST ON RECOVERY OF REFUNDS GRANTED EARLIER WHICH READS AS UNDER : UNDER THE EXISTING PROVISIONS OF SECTION 234D OF T HE INCOME TAX ACT (INSERTED WITH EFFECT FROM 01-06-2003, VIDE FINANCE ACT, 2003), WH ERE ANY REFUND HAS BEEN GRANTED TO THE ASSESSEE UNDER SUB-SECTION (1) OF SECTION 143 A ND SUBSEQUENTLY ON REGULAR ASSESSMENT, NO REFUND OR LESSER AMOUNT OF REFUND IS FOUND DUE TO THE ASSESSEE, THEN, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE-HALF PER CENT ON THE EXCESS AMOUNT SO REFUNDED FOR THE PERIOD STARTING F ROM THE DATE OF REFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. IN A RECENT DECISION OF THE COURT, IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 234D INSERTED WITH EFFECT FROM 01-06-2003 WOULD BE APPLI CABLE FROM THE ASSESSMENT YEAR 2004- 05 ONLY AND ACCORDINGLY NO INTEREST COULD BE CHARGE D FOR EARLIER ASSESSMENT YEARS EVEN THOUGH THE REGULAR ASSESSMENTS FOR SUCH YEARS WERE FRAMED AFTER IST JUNE 2003 OR REFUND WAS GRANTED FOR THOSE YEARS AFTER THE SAID DATE. THIS IS NOT IN CONFORMITY WITH THE LEGISLATIVE INTE NT OF THE PROVISION. IT IS, THEREFORE, PROPOSED TO CLARIFY THAT THE PROV ISIONS OF SECTION 234D WOULD BE APPLICABLE TO ANY PROCEEDING WHICH IS COMPLETED ON OR AFTER IST JUNE 2003, IRRESPECTIVE OF THE ASSESSMENT YEAR TO WHICH IT PERTAINS. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M THE IST DAY OF JUNE, 2003. 26. REFERRING TO THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF EKTA PROMOTERS REPORTED IN 113 ITD 719 (SB) HE SUBM ITTED THAT SINCE THE ORIGINAL PROCEEDINGS WERE COMPLETED ON 25-02-2002, I.E. BEFO RE 01-06-2003, THEREFORE, THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL CITED ABOVE SHALL BE APPLICABLE. 14 27. THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTI NG THE ORDER OF THE CIT(A) SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FI LE OF THE AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE RETROSPECTIVE AMENDMENT TO PROVISIONS OF SECTION 234D BY THE FINANCE ACT 2012 AND THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF EKTA PROMOTERS (SUPRA). 28. AFTER HEARING BOTH THE SIDES, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE ISSUE AF RESH IN THE LIGHT OF THE RETROSPECTIVE AMENDMENT TO PROVISIONS OF SECTION 23 4D AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. ITA NO. 400/PN/2007 (A.Y. 2000-01) : 29. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS RAISED BY THE ASSESSEE IN THE IMPUGNED APPEAL ARE IDENTICAL TO GROUNDS OF APP EAL IN ITA NO. 399/PN/2007 FOR ASSESSMENT YEAR 1999-00. WE HAVE ALREADY DECID ED THE ISSUES. THE GROUNDS RELATING TO REOPENING OF ASSESSMENT HAVE BEEN DISMI SSED AND THE GROUNDS RELATING TO INCLUSION OF TURNOVER OF 10A UNIT IN THE TURNOVE R FOR DEDUCTION U/S.80HHC HAVE BEEN ALLOWED. THE OTHER GROUNDS HAVE BEEN RESTORED TO THE FILE OF THE AO. FOLLOWING THE SAME RATIO, THE GROUNDS RAISED BY THE ASSESSEE IN THE ABOVE APPEAL ARE DECIDED IN THE SAME RATIO. 30. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 10 TH DAY OF AUGUST 2012. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PAND A) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED THE 10 TH AUGUST 2012 SATISH 15 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. D.R. A BENCH, PUNE 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE