HINDUJA VENTURES LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 4894/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75865 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-02-2014
• Assessment Year: misc
• Appeal Filed On: 20-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Reopening of assessment; Transfer pricing; International transaction; Question of law; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 27; 148; 154; 15; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , , BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 4892 /MUM./ 2011 ( / ASSESSMENT YEAR : 20 02 03 ) . / ITA NO. 4893 /MUM./ 2011 ( / ASSESSMENT YEAR : 2003 04 ) . / ITA NO. 4894 /MUM./ 2011 ( / ASSESSMENT YEAR : 2004 05 ) HIND UJA VENTURES LIMITED 49/50, IN CENTRE, MIDC 12 TH ROAD, MAROL, ANDHERI (E) MUMBAI 400 093 .. / APP ELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE 8 (2), AAYAKAR BHAVAN MUMBAI 400 020 .... / RESPONDEN T ./ PERMANENT ACCOUNT NUMBER AAACH2058N / ASSESSEE BY : MR. Y.P. TRIVEDI / RE VENUE BY : MR. K.C.P. PATNAIK / DATE OF HEARING 2 0 .0 3 .201 4 / DATE OF ORDE R 21.03.2014 HINDUJA VENTURES LIMITED 2 / ORDER , / PER AMIT SHUKLA , J.M. THE AFORESAID APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED SEPARATE ORDER S OF EVEN DATE 21 ST FEBRUARY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XVII, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R/W SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2002 03, 2003 04 AND 2004 05. 2 . SINCE ALL THESE APPEALS PE RTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUE S WHICH ARE ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. HOWE VER, IN ORDER TO UNDERSTAND THE IMPLICATION, IT WOULD BE NECESSARY TO TAKE NOTE OF THE FACTS OF ONE APPEAL. WE ARE, ACCORDINGLY, NARRATING THE FACTS, AS THEY APPEAR IN THE APPEAL IN ITA NO. 4892 /MUM./2011, FOR ASSESSMENT YEAR 2002 03 . IN THE APPEAL FOR A SSESSMENT YEAR 2002 03 , FOLLOWING GROUNDS HAVE BEEN RAISED: GROUNDS FOR THE A.Y. 2002 03 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE APPELLANTS GROUND ON RE OPENING AND FURTHER ERRED IN HOLDING THAT THE RE OPENING OF THE ASSESSMENT BY ISSUE OF NOTICE U/S 148 WAS VALIDLY DONE BY THE ASSESSING OFFICER. HINDUJA VENTURES LIMITED 3 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF THE APPELLANTS CLAIM FOR DEDUCTION 10A OF THE ACT AMOUNTING TO ` 30,32,96,418. 3 . FACTS IN BRIEF, QUA THE LEGAL ISSUE ARISING OUT OF GROUND NO .1, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING MEDIA, I.T. ENABLED SERVICES, FINANCE, INVESTMENT ACTIVITY AND CONSULTING SERVICES. DURING THE RELEVANT YEAR, THE ASSESSEES I.T. / I.T.E.S. BUSINESS HAD THREE UNITS V I Z ., UNIT I , FR OM WHERE THE ASSESSEE WAS DOING SOFTWARE DEVELOPMENT SERVICES; UNIT II , FROM WHERE THE INSURANCE CLAIM PROCESSING SERVICES WERE UNDERTAKEN ; AND UNIT III , FROM WHERE CALL CENTRE SERVICES WERE RENDERED. THE ASSESSEE HAS BEEN CLAIMING EXEMPTION UNDER SECTION 10A FOR UNIT II AND UNIT III , SINCE ASSESSMENT YEAR 2001 02 AND 2002 03 RESPECTIVELY. FOR THE ASSESSMENT YEAR 2002 03, THE ASSESSEE HAD FILED ITS RETURN OF INCOME UNDER SECTION 139(1) ON 30 TH OCTOBER 2002, A T AN INCOME OF ` 2,30,23,149. THE RETURN OF INCOM E WAS DULY ACCOMPANIED BY THE AUDITED ANNUAL REPORT UNDER SECTION 44AB AND ALSO AUDIT REPORT IN FORM NO.56F FOR THE PURPOSE OF CLAIMING EXEMPTION / DEDUCTION UNDER SECTION 10A. THE SAID RETURN OF INCOME WAS THE SUBJECT MATTER OF SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) , VIDE ORDER DATED 25 TH MARCH 2005 AFTER ALLOWING DEDUCTION OF ` 3.0,36,36,412 UNDER SECTION 10A. THEREAFTER, THE CASE WAS RE OPENED UNDER SECTION 148 AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R/W SECTION 147 ON 8 TH NOVEMBER 2006, WHICH WAS LATER ON REVISED VIDE ORDER UNDER SECTION 154 , DATED 3 RD DECEMBER 2008 . IN THESE ORDERS ALSO, THE ASSESSEES CLAIM OF DEDUCTION WHICH WAS ALLOWED WAS NOT DISTURBED. THEREFORE, THE EXPIRY OF FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR, THE ASSESSEES CASE WAS RE OPENED VIDE NOTICE DATED HINDUJA VENTURES LIMITED 4 25 TH MARCH 2009, UNDER SECTION 148 , ON THE FOLLOWING REASONS RECORDED : THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2002, DECLARING TOTAL INCOME AT ` 2,30,23,149. THE RETUR N WAS PROCESSED U/S 143(3) OF THE ACT. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT ORDER U/S 143(3) FO THE ACT WAS PASSED ON 25.3.2005, ASSESSING THE TOTAL INCOME AT ` 10,93,05,880, AFTER ALLOWING DEDUCTION U/S 10A OF ` 30,36,36,412 A ND DEDUCTION U/S 80HHE OF ` 1,66,26,219. THEREAFTER, THE ASSESSMENT WAS REOPENED AND ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 WERE COMPLETED ON 8.10.2006, ASSESSING THE TOTAL INCOME AT ` 2,78,66,100, WHICH WAS LATER REVISED TO ` 3,01,89,533 VIDE U/S 15 4 DATED 3.12.2008. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT & IT ENABLED SERVICES. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005 06, THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 10A FOR THE UNITS II & IV SITUATED AT HTMT HOUS E, VAJPAYEE NAGAR, BOMMANAHALLI, HOSUR ROAD, BANGALORE 560068 AND THE ASSESSEE COMPANY HAS OBTAINED REGISTRATION CERTIFICATE VIDE REG. NO.15(63)/92SDA DATED 22.7.1992. ON ENQUIRY WITH STOP AUTHORITIES, IT IS REVEALED THAT THERE WAS NO NEW REGISTRATION CERT IFICATE HAS BEEN OBTAINED AT THE TIME OF SETTING UP OF THE ABOVE TWO NEW UNITS IN THE YEAR 2000. STPI AUTHORITIES FURTHER CLARIFIED THAT THE SO CALLED NEW UNITS SET UP IN 2000 ARE THE EXPANSION OF THE OLD UNITS SET UP IN THE STPI PARK IN THE YEAR 1992. AS PER THE REGISTRATION CERTIFICATE, THE NEW UNIT IS ELIGIBLE FOR DEDUCTION U/S 10A UPTO 1996 ITSELF, AS PER LAW PREVAILING IN THE YEAR 1991. IN VIEW OF THE ABOVE, THE ASSESSEE COMPANY IS CLAIMING THE DEDUCTION U/S 10A WITHOUT ANY REGISTRATION FOR ITS NEW IN DUSTRIAL UNDERTAKINGS SET UP AT HTMT HOUSE, BANGALORE, WHICH IS A CONDITION FOR CLAIMING FOR DEDUCTION U/S 10A. THEREFORE, I HAVE REASONS TO BELIEVE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A, WHICH IS NOT ALLOWABLE TO IT AND THUS, THE INCOME CHARGEAB LE TO TAX TO THE EXTENT OF DEDUCTION ALLOWED U/S 10A HAS ESCAPED ASSESSMENT. FURTHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005 06, IT IS OBSERVED THAT THE ASSESSEE IS HAVING BOTH EXPORT TURNOVER AND THE DOMESTIC SALES. HOWEVER, THE ASSESS EE HINDUJA VENTURES LIMITED 5 COMPANY AS WELL AS THE AUDITORS IN THEIR CERTIFICATE HAVE CLAIMED DEDUCTION UNDER SECTION 10A ON THE PROFITS EARNED BOTH ON THE DOMESTIC AND THE EXPORT TURNOVER. AS PER SEC. 10A(4) THE PROFIT EARNED ON DOMESTIC TURNOVER SHOULD BE EXCLUDED FOR CLAIMING D EDUCTION U/S 10A. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO THE EXTENT OF DEDUCTION UNDER SECTION 10A ALLOWED OF ` 30,36,36,412 HAS ESCAPED ASSESSMENT AND HENCE, IN MY OPINION NIT IS A FIT CASE FOR REOPENING U/S 147 OF THE INCOME TAX ACT, 1961. ACCORDINGLY, PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 ARE HEREBY INITIATED AND A NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 , IS ISSUED TO THE ASSESSEE COMPANY, REQUIRING IT TO FURNISH A RETURN IN RESPONSE. 4 . AFTER RECEIVING THE AFORESAID REASONS , THE ASSESSEE RAISED OBJECTION BEFORE THE ASSESSING OFFICER NOT ONLY ON THE VALIDITY OF NOTICE UNDER SECTION 148 BUT ALSO ON THE MERITS O F RE OPENING THE CASE UNDER SECTION 147 BEFORE THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFIC ER REJECTED THE ASSESSEES OBJECTION AND DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 10A ON MERITS AFTER HOLDING THAT TWO UNITS OF THE ASSESSEE I.E., UNIT II AND UNIT III ARE NOT SEPARATE UNDERTAKINGS FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 10A. SUCH A FINDING WAS BASED ON THE MATERIAL FOUND AND RELIED UPON BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 06. 5 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEES CLAIM UN DER SECTION 10A, HAS BEEN ALLOWED BY THE ASSESSING OFFICER UP TO THE ASSESSMENT YEAR 2004 05, UNDER SCRUTINY PROCEEDINGS PASSED UNDER SECTION 143(3). IT WAS FURTHER SUBMITTED THAT THE ENTIRE DETAILS AND PARTICULARS OF THE CLAIM FOR DEDUCTION U/S 10A WAS GI VEN IN FORM NO.56F , AS PRESCRIBED UNDER THE INCOME TAX RULES, 1962, HINDUJA VENTURES LIMITED 6 WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AFTER DUE EXAMINATION AND APPRECIATION OF LAW. THE NECESSARY CONDITION FOR AC QUIRING JURISDICTION UNDER SECTION 147 HAS NOT BEEN FULFILLED , FIRSTLY , IT AMOUNTS TO CHANGE OF OPINION AND SECONDLY, THE RELIANCE PLACED BY THE ASSESSING OFFICER O N THE FINDING S OF THE ASSESSMENT ORDER FOR THE YEAR 2005 06 IS NOT CORRECT. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) REJECTED THE ASSESSEES CONTENTI ON ON THE RE OPENING OF THE ASSESSMENT AND THE VALIDITY OF PROCEEDINGS INITIATED UNDER SECTION 148. 6 . BEFORE US, THE LEARNED SENIOR COUNSEL, MR. Y.P. TRIVEDI, ON BEHALF OF THE ASSESSEE, SUBMITTED THAT THE ASSESSEE , ALONG WITH THE RETURN OF INCOME HAS FILED ALL THE NECESSARY DETAILS AND AUDIT REPORT IN FORM NO.56F WITH THE RETURN OF INCOME. BESIDES THIS, SUBMISSIONS WERE ALSO GIVEN BEFORE THE ASSESSING OFFICER WITH REGARD TO THE CLAIM OF DEDUCTION / EXEMPTION UNDER SECTION 10A. IT WAS ONLY A FTER PROPER SCRUTI NY AND EXAMINATION OF THE CLAIM, THE DEDUCTION UNDER SECTION 10A WAS ALLOWED BY THE ASSESSING OFFICER , VIDE ORDER PASSED UNDER SECTION 143(3). NOW THE ASSESSMENT HAS BEEN RE OPENED BEYOND THE PERIOD OF FOUR YEARS , WITHOUT ASCRIBING ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. HE DREW OUR ATTENTION TO THE COPY OF THE REASONS RECORDED WHICH HA S BEEN PLACED IN THE PAPER BOOK AT PAGE 143 AND 144 OF THE PAPER BOOK AND SUBMITTED THAT NOWHER E THE ASSESSING OFFICER HAS SPELT OUT OR HAS GIVEN ANY COGENT REASON S AS TO WHAT WAS THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. ONCE THAT HA S NOT BE EN DONE, THEN THE RE OPENING OF THE CASE UNDER SECTION 148 , BEY OND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR , WHERE THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) , HINDUJA VENTURES LIMITED 7 CANNOT BE MADE IN VIEW OF THE CLEAR CUT PROVISIONS OF THE PROVISO TO SECTION 147. IN SUPPORT OF HIS CONTENTION , HE STR ONGLY RELIED UPON THE FOLLOWING DECISIONS , WHICH WERE DIRECTLY ON THIS ISSUE OF PROVISO: I) VOLTAS LTD. V/S CIT, [2012] 349 ITR 656 (BOM.); II) MULTISCREEN MEDIA P LTD. V/S UNION OF INDIA, [2010] 324 ITR 48 (BOM.); III) BHOR INDUSTRIES LTD. V/S ACIT, [20 04] 267 ITR 161 (BOM.); AND IV) CADILA HEALTHCARE LTD. V/S DCIT, [2011] 334 ITR 420 (GUJ.). 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSING OFFICER, IN THE REASONS RECORDED , HAS CATEGORICALLY STATED ABOUT THE AD DITION AL INFORMATION WHICH WAS RECEIVED BY THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 06. IN THAT YEAR, ENQUIRY WAS DONE BY THE ASSESSING OFFICER WITH STPI AUTHORITIES WHO HAVE WRITTEN TO THE ASSESSIN G OFFICER VIDE LETTER DATED 10 TH DECEMBER 2008, THAT THE ASSESSEE HAD ONLY ONE STPI REGISTRATION IN THE YEAR 1992 AND THERE IS NO NEW REGISTRATION FOR SETTING UP THE NEW UNITS IN THE YEAR 2000. THE NEW UNITS WHICH WERE SET UP WERE ONLY EXPANSION OF THE OLD UNIT REGISTERED IN THE YEAR 1992 AND, THEREFORE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE DEDUCTION UNDER SECTION 10A CLAIMED BY THE ASSESSEE IS WITHOUT ANY BASIS AND WITHOUT REGISTRATION AND, HENCE, CANNOT BE ALLOWED. BESIDES THIS, THE ASSE SSING OFFICER HAS ALSO NOTED THAT THE ASSESSEES CLAIM UNDER SECTION 10A ON DOMESTIC TURNOVER ALSO CANNOT BE ALLOWED. ONCE ALL THESE FACTUM HAS BEEN RECORDED IN THE REASONS THEN IT IS IMPLIED THAT THE ASSESSING OFFICER HAD NECESSARY SATISFACTION AND REA SONS TO BELIEVE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL HINDUJA VENTURES LIMITED 8 FACTS . IN FACT, THERE WAS CLEAR CUT FAILURE ON THE PART OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) CONSOLIDATED FINVEST LTD. 281 ITR 34 (DEL.); II) IPCA LAB ORATORIES LTD. V/S DCIT , [ 2001] 251 ITR 420 (DEL ); III) YUVRAJ V/S UNION OF INDIA, [ 2009 ] 315 ITR 84 (BOM.); IV) AMINS PATHOLOGY LABORATORIES V/S JCIT, 252 ITR 67. (BOM.); AND V) EXPORT CREDIT GUARANTEE CORP. OF INDIA LTD. V/S ACIT, [ 2013 ] 350 ITR 651 ( BOM. ). 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE THUS SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY ACQUIRED THE JURISDICTION FOR RE OPENING THE CASE UNDER SECTION 148 ON THESE REASONS AND TH E FACTS AND CIRCUMSTANCES OF THE CASE . ON MERITS, HE SUBMITTED THAT THIS ISSUE IN THE ASSESSMENT YEAR 2005 06, HAS BEEN SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING IT AFRESH. THEREFORE, IN THIS YEAR ALSO, THE MATTER SHOULD ALSO BE RESTORED BACK TO THE FILE OF THE LEARNED COMMISSIONER (APPEALS), BECAUSE IN SET ASIDE PROCEEDINGS, THE MATTER IS ALREADY PENDING WITH THE LEARNED COMMISSIONER (APPEALS). 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS , QUA THE VALIDITY OF RE OP ENING OF ASSESSMENT UNDER SECTION 147 AND ALSO , PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE RETURN OF INCOME UNDER SECTION 13 9 (1) WAS FILED ON 30 TH OCTOBER 2002, AFTER CLAIMING DEDUCTION UNDER SECTION 10A WITH RESPECT TO INCOME FROM UNIT II AND III. THE SAID RETURN OF INCOME WAS DULY ACCOMPANIED BY THE AUDI T REPORT IN FORM NO.56F AND ALSO AUDITED STATEMENT OF ACCOUNTS UNDER SECTION 44AB. THE ASSESSEES HINDUJA VENTURES LIMITED 9 CLAIM FOR DEDUCTION UNDER SECTION 10A WAS ALLOWED BY THE ASSESSING OFFICER , VIDE ORDER DATED 25 TH MARCH 2005 , PASSED UNDER SECTION 143(3). NOT ONLY THIS, THE CASE WAS RE OPENED UNDER SECTION 148 AND THE SECOND ASSESSMENT WAS COMPLETED VIDE ORDER DATED 8 TH NOVEMBER 2006, WHEREIN THE ASSESSEES CLAIM UNDER SECTION 10A WAS MA INTAINED . NOW, AFTER THE EXPIRY OF MORE THAN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, SECOND NOTICE UNDER SECTION 148 HAS BEEN ISSUED ON 25 TH MARCH 2009 ON THE REASONS WHICH HAS BEEN INCORPORATED IN THE FORGOING PARAGRAP H. ON A CAREFUL PERUSAL OF THE REASONS RECORDED, IT IS SEEN THAT THE ASSESSING OFFICER HAS RELIED UPON THE MATERIAL WHICH WERE GATHERED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 06 , INASMUCH AS THAT TWO UNITS OF THE ASSES SEE ARE NOT SEPARATE UNDERTAKINGS BUT HAVE BEEN SET UP ON THE EXPANSION OF THE OLD UNIT FOR WHICH REGISTRATION CERTIFICATE WAS GRANTED BY THE STPI IN THE YEAR 1992 AND THERE IS NO REGISTRATION FOR ITS NEW INDUSTRIAL UNDERTAKING. NOWHERE IN THE REASONS TH E ASSESSING OFFICER HAS ASCRIBED ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT IS NOW A TRITE LAW THAT THE CONDITIONS LAID DOWN UNDER SECTION 147 MUST BE SATISFIED BEFORE ISSUING NOT ICE UNDER SECTION 148 , AS THESE CONDITIONS ARE JURISDICTIONAL FACTS , WHICH NEEDS TO BE EXAMINED FOR RE OPEN ING A COMPLETED ASSESSMENT. ONCE THE VITAL CONDITIONS OF THE SECTION 147 STANDS FULFILLED, THEN THE FIRST PROVISO CARVES OUT FURTHER LIMITATION THAT IN THE CASES WHERE THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) OR 147, NO ACTION CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THERE ARE ONLY TWIN CONDITIONS TO WAIVE TH IS LIMITATION OF FOUR YEARS, FIR STLY , ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT HINDUJA VENTURES LIMITED 10 YEAR BY THE REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE RETURN UNDER SECTION 139 OR IN RESPONSE TO THE NOTICE UNDER SECTION 143(1) AND SECONDLY, THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. IF THESE TWIN CONDITIONS ARE NOT FULFILLED, THEN ANY PROCEEDINGS INITIATED BY ISSUING NOTICE UNDER SECTION 148 ARE VOID AB INITI O . WHETHER THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT , HAS TO BE CLEARLY SPELT OUT BY THE ASSESSING OFFICER IN THE REASONS RECORDED ITSELF. SUCH AN ASSIGNMENT OF FAILURE IN THE REASONS RECORDED IS MANDATORY AND CANNOT BE INFERRED FROM ANYWHERE ELSE. ONCE THE REASONS RECORDED CLEARLY DISCLOSES AS TO WHAT IS THE FAILURE ON THE PART OF THE ASSESSEE, THEN ONLY THE COURTS CAN EXAMINE , WHETHER THERE WAS ANY SUCH FAILURE ON TH E PART OF THE ASSESSEE OR NOT , BECAUSE THE REASONS RECORDED ALONE GIVES JURISDICTION TO THE ASSESSING OFFICER UNDER THE STATUTE TO RE OPEN THE COMPLETED ASSESSMENT. THIS PROPOSITION OF LAW THAT IT IS MANDATORY FOR THE ASSESSING OFFICER TO ASCRIBE THE FAI LURE OF THE ASSESSEE IN THE REASONS RECORDED HAD BEEN SETTLED BY THE NUMEROUS COURTS , SOME OF THEM , WHICH WERE RELIED UPON BY THE LEARNED COUNSEL ARE AS UNDER: I) VOLTAS LTD VS. ACIT (2012) 349 ITR 656 (BOM) IN THE ABOVE CASE, THE BOMBAY HIGH COURT HAS HELD THAT BEYOND A PERIOD OF FOUR YEARS, THE POWER OF THE ASSESSING OFFICER IS STRUCTURED BY THE REQUIREMENT THAT THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. NEITHER THE REASONS WHICH HAVE BEEN COMMUNICATED TO THE ASSESSEE NOR FOR THAT MATTER THE ORDER PASSED ON THE OBJECTIONS RAISED CONTAINS ANY ALLEGATION OR STATEMENT THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACT S NECESSARY FOR THE ASSESSMENT. HINDUJA VENTURES LIMITED 11 II) MULTISCREEN MEDIA (P) LTD V/S UNION OF INDIA (2010) 324 ITR 48 (BOM) IN THE ABOVE CASE, THE BOMBAY HIGH COURT HAS HELD THAT, THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 148 DOES NOT STATE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR ASSESSMENT YEAR 2002 - 03. THE ASSESSMENT WAS SOUGHT TO BE REOPENED AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN SUCH A CASE THE JURISDICTIONAL CONDITION PRECEDENT STIPULATED BY THE PROVISO TO SECTION 147 IS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR CONSE QUENT UPON WHICH INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THAT HAS NOT BEEN FULFILLED. THE NOTICE DOES NOT EVEN PURPORT TO STATE SO. III) BHOR INDUSTRIES LTD. VS. ACIT (2004) 267 ITR 161 (BOM) IN THE ABOVE CASE, THE BOMBAY HIGH COURT HAS HELD T HAT, IN THE ENTIRE REASONS SUBMITTED IN SUPPORT OF THE NOTICE UNDER SECTION 148, THERE WAS NO ALLEGATION OF INCOME HAVING ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE REOPENING OF ASSESSMENT WAS MADE AFTER FOUR YEARS. THE ASSESSEE HAD FILED ITS ANNUAL REPORT BEFORE THE ASSESSING OFFICER INDICATING SPREAD OVER OF THE EXPENDITURE OVER A PERIOD OF 60 MONTHS. THE ASSESSING OFFICER ACTED ON THAT REPORT BY GRANTING DEDUCTION TO THE EXT ENT OF AMOUNT WRITTEN OFF FOR THE RELEVANT YEAR. IN THE CIRCUMSTANCES, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS. IV) CADILA HEALTHCARE LTD. VS. DCIT (2011) 334 ITR 420 (GUJ) IN THE ABOVE CASE, THE GUJARAT HIGH COURT HAS HELD THAT IN THE OBJECTIONS FILED BY THE ASSESSEE AGAINST THE NOTICE UNDER SECTION 148, IT WAS THE SPECIFIC CASE OF THE ASSESSEE THAT IT HAD NOT DEFAULTED IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMEN T. HOWEVER, THE ORDER DISPOSING OF THE OBJECTIONS WAS TOTALLY SILENT IN RESPECT OF THE SAME. THUS, NEITHER THE REASONS FOR REOPENING THE ASSESSMENT NOR THE ORDER DISPOSING OF THE OBJECTIONS INDICATE THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR ITS ASSESSMENT. HINDUJA VENTURES LIMITED 12 10 . FURTHER, THE DUTY OF THE ASSESSEE IS ONLY TO MAKE FULL AND TRU E DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, HOWEVER, TH IS ACT DOES NOT REQUIRED THAT THE ASSESSEE SHOULD INFORM THE ASSESSING OFFICER AS TO WHAT LEGAL INFERENCE SHOULD BE DRAWN FROM THE FACTS DISCLOSED BY HIM . THE ASSESSEE CANNOT GIVE ADVISE TO THE ASSESSING OFFICER ON QUESTION OF LAW. THUS, IN THE FACTS OF THE PRESENT CASE AND FROM THE REASONS RECO RDED, THE IMPLICIT CONCLUSION IS THAT THE ASSESSING OFFICER HAS COMPLETE LY FAILED TO ASCRIBE ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS AND, THEREFORE, SUCH REASON RECORDED DO NOT CLOTHE HIM T O ACQUIR E JURISDICTION UNDER SECTION 147. THUS, THE IMPUGNED ASSESSMENT ORDER PASSED IN PURSUANCE OF NOTICE UNDER SECTION 148 IS HEREBY QUASHED AS BEING VOID AB INITIO . 11 . NOW, COMING TO THE CASE LAWS RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS SEEN THAT SOME OF THESE CASE LAWS ARE MAINLY ON THE ISSUE OF CHANGE OF OPINION WHICH ARE NOT MUCH OF RELEVANCE IN VIEW OF THE FACT THAT THE NOTICE UNDER SECTION 148 ITSELF IS BARRED BY LIMITATION IN VIEW OF THE PROVISO TO SECTION 147. THESE DECISIONS CANNOT BE HELD TO BE APPLICABLE IN THE PRESEN T CASE. 12 . REGARDING THE ISSUE RAISED IN GROUND NO.2 ON MERITS, THE SAME HAS BECOME ACADEMIC IN VIEW OF THE FACT THAT THE ASSESSMENT ITSELF HAS BEEN QUASHED BY US. 13 . I N THE ASSESSMENT YEAR 2003 04 ALSO THE ASSESSEE HAS CHALLENGED THE RE OPENING FOR THE ASSESSMENT UNDER SECTION 147 ON SIMILAR GROUND. THE FACTS AND CIRCUMSTANCES IN THIS YEAR ARE EXACTLY SAME AND HINDUJA VENTURES LIMITED 13 THE FINDINGS GIVEN IN THE ASSESSMENT YEAR 2002 03 WILL ALSO APPLY MUTATIS MUTANDIS IN THIS YEAR ALSO. FOR THE SAKE OF READY REF ERENCE, FOLLOWING EVENTS, WHICH ARE RELEVANT, ARE AS UNDER: I) THE RETURN OF INCOME WAS FILED U/S 139(1) ON 27 TH NOV. 2003 II) THE ASSESSMENT U/S 143 (3) WAS COMPLETED ON 24 TH MARCH 2005 , AFTER ACCEPTING THE ASSESSEES CLAIM FOR EXEMPTION UNDER SECTION 1 0A ON THE BASIS OF MATERIAL PLACED ON RECORD III) NOTICE UNDER SECTION 148 HAS BEEN ISSUED ON 20 TH MARCH 2009 WHICH IS MUCH BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 14 . EVEN T HE REASONS RECORDED IN THIS YEAR ALSO ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2002 03, WHICH FOR THE SAKE OF READY REFERENCE, IS REPRODUCED HEREIN BELOW: 'THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT & IT ENABLED SERVICES. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR A. Y. 2005 - 06, THE ASSESSEE COMPANY CLAIMED DEDUCTION ULS.I0A FOR THE UNITS II & IV SITUATED AT HTMT HOUSE, VAJPAYEE NAGAR, BOMMANAHALLI, HOSUR ROAD, BANGALORE 560068 AND THE ASSESSEE COMPANY HAS OBTAINED REGISTRATION CERTIFICATE VIDE REG. NO. 15(63)192SDA DATED 22/ 07 / 1992. ON ENQUIRY WITH STPI AUTHORITIES, IT IS REVEALED THAT THEE WAS NO NEW REGISTRATION CERTIFICATE HAS BEEN OBTAINED AT THE TIME OJ SETTING UP OF THE ABOVE TWO NEW UNITS IN THE YEAR 2000. STPI AUTHORITIES FURTHER CLARIFIED THAT THE SO CALLED NEW U NITS SET UP IN 2000 ARE THE EXPANSION OF THE OLD UNITS SET UP IN THE STPI PARK IN THE YEAR 1992. A PER THE REGISTRATION CERTIFICATE, THE NEW UNIT IS ELIGIBLE FOR DEDUCTION U/S 10A UPTO 1996 ITSELF, AS PER LAW PREVAILING IN THE YEAR 1991. IN VIEW OF THE A BOVE, THE ASSESSEE COMPANY IS CLAIMING THE DEDUCTION U/S 10A WITHOUT ANY REGISTRATION FOR ITS NEW INDUSTRIAL UNDERTAKINGS SET UP AT HTMT HOUSE, BANGALORE, WHICH IS A CONDITION FOR CLAIMING FOR DEDUCTION U/S 10A. THEREFORE, I HAVE REASON TO BELIEVE THAT HINDUJA VENTURES LIMITED 14 THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A, WHICH IS NOT ALLOWABLE TO IT AND THUS, THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF DEDUCTION ALLOWED U/S 10A HAS ESCAPED ASSESSMENT. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005 06, IT IS O BSERVED THAT THE ASSESSEE IS HAVING BOTH EXPORT TURNOVER AND ALSO DOMESTIC SALES. HOWEVER, THE ASSESSEE COMPANY AS WELL AS THE AUDITORS IN THEIR CERTIFICATE HAVE CLAIMED DEDUCTION U/S 10A ON THE PROFITS EARNED BOTH ON THE DOMESTIC AND THE EXPORT TURNOVER. AS PER SEC. 10A(4), THE PROFIT EARNED ON DOMESTIC TURNOVER SHOULD BE EXCLUDED FOR CLAIMING DEDUCTION UNDER SECTION 10A. 15 . IN THE AFORESAID REASONS ALSO, THE ASSESSING OFFICER HAS NOT ASCRIBED ANY FAILURE ON THE PART OF THE ASSESSEE AND, THEREFORE, SUCH REASONS RECORDED ARE NOT IN ACCORDANCE WITH LAW AS DISCUSSED ABOVE. THUS, IN THIS YEAR ALSO, THE ASSESSMENT ORDER DATED 11 TH DECEMBER 2009 PASSED UNDER SECTION 143(3) R/W SECTION 147 IS HEREBY QUASHED. 16 . 2002 03 2003 04 16. IN THE RESULT, ASSESSEES APPEAL S FOR THE ASSESSMENT YEAR 2002 03 AND 2003 04 ARE ALLOWED. NOW COMING TO THE APPEAL IN ITA NO. 4894 /MUM./ 2011 , FOR THE ASSESSMENT YEAR 2004 05, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE APPELLANTS GROUND ON RE OPENING AND FURTHER ERRED IN HOLDING THAT THE RE OPENING OF THE ASSESSMENT BY ISSUE OF NOTICE U/S 148 OF THE ACT WAS VALIDLY DONE BY THE ASSESSING OFFICER. 2. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF THE APPELLANTS CLAIM OF DEDUCTION U/S 10A AMOUNTING TO ` 66,63,24,606. HINDUJA VENTURES LIMITED 15 17 . INSOFAR AS GROUND NO.1 IS CONCERNED, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT IN THI S YEAR RE OPENING HAS BEEN DONE BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND, THEREFORE, THE PROVISO TO SECTION 147 WILL NOT APPLY. THE ASSESSEES MAIN CONTENTION IN THIS REGARD IS ON ACCOUNT OF CHANGE OF OPINION . ON M ERITS, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 06 , WHEREIN THE TRIBUNAL HAS RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN PURSUANCE OF THE TRIBUNAL ORDER DATED 31 ST JANUARY 2012, FOR THE ASSESSMENT YEAR 2005 06, THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER , WITHOUT CARRYING OUT THE DIRECTIONS GIVEN BY THE TRIBUNA L IN THE FIRST APPEAL, THE LEARNED COMMISSIONER (APPEALS) HAS CALLED FOR THE REMAND REPORT BY THE ASSESSING OFFICER TO STRICTLY GIVE HIS COMMENT AND EXAMINE THE ISSUE BASED ON THE DIRECTIONS GIVEN BY THE TRIBUNAL, THEREFORE, IN THIS YEAR ALSO, THE MATTER S HOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR STRICTLY COMPLYING WITH THE DIRECTION GIVEN BY THE TRIBUNAL. 18 . THE LEARNED SENIOR COUNSEL ALSO FILED COPY OF CIRCULAR NO.1 OF 2013 ISSUED BY THE CBDT ON 17 TH JANUARY 2013 AND ALSO INSTRUCTION N O.3 OF 2014 DATED 14 TH MARCH 2014 , WHEREIN THE CBDT HAS GIVEN GUIDELINES WHICH THE ASSESSING OFFICER IS BOUND TO FOLLOW , THE CLARIFICATION GIVEN BY THE CBDT IN RESPECT OF THE CLAIM OF EXEMPTION UNDER SECTION 10A. THE ASSESSING OFFICER, WHILE ADJUDICATING T HE ISSUE SHOULD ALSO TAKE INTO CONSIDERATION THE SAID CBDT CIRCULAR. 19 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE FILE OF THE LEARNED COMMISSIONER HINDUJA VENTURES LIMITED 16 (APPEALS) AS THE LEARNED COMMISSIONER (APPEALS) HAS ALSO CALL ED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER . I N THIS YEAR ALSO, HE CAN DECIDE THE ISSUE ON THE BASIS OF THE REMAND REPORT GIVEN BY THE ASSESSING OFFICER AND SUCH AN EXERCISE WILL SAVE LOT OF TIME. ON THE ISSUE OF RE OPENING, HE REITERATED HIS SUBMI SSIONS AND THE CASE LAWS AS WAS SUBMITTED BY HIM IN THE COURSE OF ARGUMENT FOR THE ASSESSMENT YEAR 2002 03. 20 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. INSOFAR AS TH E ISSUE OF RE OPENING UNDER SECTION 147 IS CONCERNED, WE FIND THAT CASE WAS REOPENED ON THE FOLLOWING REASONS WHICH ARE QUITE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2002 03, WHICH FOR THE SAKE OF READY REFERENCE, IS REPRODUCED HEREIN BELOW: THE ASSESS EE COMPANY FILED ITS RETURN OF INCOME ON 30.10.2004, DECLARING TOTAL INCOME AT RS.6,63,25,330 / - IN THE OFFICE OF DCIT - 6(3), MUMBAI. THE RETURN WAS PROCESSED ULS.143(L) OF THE ACT ON 09.08.2008, DETERMINING A REFUND PAYABLE TO THE ASSESSEE OF RS. 1 ,02,02,436 / - AND ACCORDINGLY, REFUND WAS ISSUED TO THE ASSESSEE. THE CASE WAS SELECTED FOR SCRU T IN Y AND SUBSEQUENT LY THE CASE WAS TRANSFERRED TO DC I T - 8(2), MUMBAI. ON 22.05.2006, THE CASE WAS REFERRED BY THE ADDL. CIT RANGE 8(2), MUMBAI TO THE TPO IV, MUMBAI, FOR DE TERMINING THE ARM'S LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS AND THE TPO IV, MUMBAI VIDE ORDER ULS.92CA(3) DATED 27.10.2006 HAS MADE TOTAL ADJUSTMENT OF RS.2,84,70,000 / - TO THE TRANSACTION VALUES. SUBSEQUENTLY, THE ORDER ULS.143(3) OF THE ACT WAS PASSED ON 29.12.2006, ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 11 ,70,12,950 / - AND RAISING A DEMAND OF RS.3,70,85,599 / - . SUBSEQUENTLY, THE ASSESSMENT HAS BEEN RECTIFIED ULS.154 OF THE INCOME TAX ACT, 1961 ON 21.02.2007, REVISING THE TOTAL INCO ME TO RS. 1 0,37,83,450 / - AND RAISING A DEMAND OF RS.3,07,73,309 / - . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING IT & IT ENABLED SERVICES. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005 06, THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S 10A FOR THE UNITS II & IV SITUATED AT HTMT HOUSE, VIJPAYEE NAGAR, BOMMANAHALLI, HOSUR ROAD, BANGALORE 560 068 AND THE ASSESSEE COMPANY HAS OBTAINED REGISTRATION HINDUJA VENTURES LIMITED 17 CERTIFICATE VIDE REG. NO. 15(63) 192SDA DATED 22/0711992. ON ENQUIRY WITH STPI AUTHORITIES, IT IS REVEALED THAT TH ERE WAS NO NEW REGISTRATION CERTIFICATE HAS BEEN OBTAINED AT THE TIME OF SETTING UP OF THE ABOVE TWO NEW UNITS IN THE YEAR 2000. STPT AUTHORITIES FURTHER CLARIFIED THAT THE SO CALLED NEW UNITS SET UP IN 2000 ARE THE EXPANSION OF THE OLD UNITS SET UP IN THE STPI PARK IN THE YEAR 1992. A PER THE REGISTRATION CERTIFICATE, THE NEW UNIT IS ELIGIBLE FOR DEDUCTION U /S 10 A UPTO 1996 ITSELF, AS PER LAW PREVAILING IN THE YEAR 1991. I N VIEW OF THE ABOVE, THE ASSESSEE COMPANY IS CLAIMING THE DEDUCT ION ULS. 10 A WITHOUT ANY RE G ISTR A TION FOR ITS NEW INDUS T RIAL UNDERTAKIN G S SET UP AT HTMT HOUSE , BAN G ALORE , WHIC H IS A CONDITION FOR CLAIMING FOR DEDUCTION ULS.10A. THEREFORE, 1 HAVE REASON TO BELIEVE THAT THE ASSESSEE HAS CLAIMED DEDUCTION ULS.L0A, WHICH IS NOT ALLOWABLE TO IT AND THUS, THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF DEDUCTION ALLOWED ULS.L0A HAS ESCAPED ASSESSMENT. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 2005 - 06, IT IS OBSERVED THAT THE ASSESSEE IS HAVING BOTH EXPORT TUR NOVER AND ALSO DOMESTIC SALES. HOWEVER, THE ASSESSEE COMPANY AS 'WELL AS THE AUDITORS IN THEIR CERTIFICATE HAVE CLAIMED DEDUCTION ULS. 10A ON THE PROFITS EARNED BOTH ON THE DOMESTIC AND THE EXPORT TURNOVER. AS PER SEC. 10A(4), THE PROFIT EARNED ON DOMESTIC TURNOVER SHOULD BE EXCLUDED FOR CLAIMING DEDUCTION ULS.10 A. WITHOUT PREJUDICE TO THE ABOVE, FURTHER, IT IS OBSERVED FROM THE CASE RECORDS, THAT THE ASSESSEE COMPANY HAS BEEN ALLOWED DEDUCTION ULS.10 A OF RS.66,63,24,606 / - IN RESPECT OF THREE UNITS OF IT DIVISION BY THE ASSESSING OFFICER VIDE ITS ORDER DATED 9.12.2006 AND THE TAXABLE INCOME WAS COMPUTED AT RS.11,70,12,950 / - AFTER SETTING OFF OF LOSS ULS. 10 A OF UNIT - 1. SECTION 10 A OF THE INCOME TAX ACT, 1961 PROVIDES DEDUCTION OF SUCH PROFITS & GAINS AS AR E DERIVED FROM T HE ELIGIBLE ACTI V I TI ES PE R FORMED BY AN UNDERTAKING. SINCE T HE DEDUCTION ALLOWED U/S. 10 A, DOES NO T FORM PAR T OF THE TOTAL INCOME, THE LOSS IN RESPE CT OF SEE. 10 A UNDERTAKING, (WHICH IS RATHER EXCESS OR EXPENDITURE O VER INCOME) SHOULD ALSO BE IGNORED WHILE COMPUTING TOTAL INCOME. AS THE 10A INCOME IS EXEMPT FROM TAX, THE LOSS SHOULD ALSO HAVE BEEN IGNORED, WHICH HAS NOT BEEN DONE. THIS HAS RESULTED IN UNDERASSESSMENT OF INCOME BY RS,5,62,75,564 / - . THEREFORE, I HAVE REASON TO BELIEVE THAT INCOM E TO THE EXTENT OF RS,5,62,75,564 / - HAS ESCAPED ASSESSMENT AND IN MY OPINION, IT IS A FIT CASE FOR REOPENING U /S 147 OF THE INCOME TAX ACT, 1961. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND IN MY OPINION, IT IS A FIT CASE FOR REOPENING UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. ACCORDINGLY, PROCEEDINGS ULS.147 OF THE INCOME TAX HINDUJA VENTURES LIMITED 18 ACT, 1961 ARE HEREBY INITIATED . 21 . IN THIS CASE, THE RETURN OF INCOME WAS FILED ON 30 TH NOVEMBER 2004 AND THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) ON 29 TH DECEMBER 2006 , AFTER ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 10A. ON A PERUSAL OF THE ORIGINAL ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT SPECIFICALLY DEALT UPON THE ISSUE OF CLAI M OF EXEMPTION UNDER SECTION 10A , HOWEVER, HAS ALLOWED ON THE BASIS OF THE MATERIAL AVAILABLE WITH HIM . IN THIS CASE, THE ASSESSING OFFICER HAS CLEARLY BROUGHT OUT NEW MATERIAL FACT IN THE REASONS WHICH WAS MADE AVAILABLE TO HIM DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 06. THESE MATERIALS, PRIMA FACIE, ARE SUFFICIENT TO ACQUIRE JURISDICTION UNDER SECTION 147 , BECAUSE THEY GIVE RISE TO REASON TO BELIEVE THAT THE PRIMA FACIE ASSESSEES CLAIM FOR EXEMPTION HAS NOT BEEN E XAMINED PROPERLY IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IF SOME NEW MATERIAL FACTS COMES IN LIGHT, WHICH HAS A DIRECT NEXUS AND LIVE LINK WITH THE CLAIM ALLOWED EARLIER, THEN SUCH A MATERIAL DO GIVE RISE TO REASONS TO BELIEVE. HENCE, IT CANNOT BE H ELD THAT SUCH REASON S ARE BASED ON CHANGE OF OPINION . CONSEQUENTLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 22 . REGARDING GROUND NO.2, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT THIS MATTER HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OF FICER FOR DECIDING THE ISSUE AFRESH IN VIEW OF THE DIRECTION IS GIVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 06 WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED BELOW: 13. WE HAVE CAREFULLY CONSIDERED FACTS OF THE CASE AN D ORDERS OF AUTHORITIES BELOW IN THE LIGHT OF SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. WE FINE SUBSTANCE IN THE SUBMISSION OF LD. AR THAT HINDUJA VENTURES LIMITED 19 AO HAS NOT EXAMINED AS TO WHETHER UNIT NOS. II & III SET UP BY ASSESSEE ARE INDEPENDENT UNITS OR EXPANSION O F EXISTING UNDERTAKING OF ASSESSEE. WE OBSERVE THAT AO HAS CONSIDERED THE CORRESPONDENCE AND DOCUMENTS OF ASSESSEE WITH STPI AND ALSO INFORMATION SOUGHT BY AO FROM DIRECTOR STPI AND HAS HELD THAT BOTH THESE UNITS ARE MERELY AN EXPANSION OF EXISTING UNIT AN D NOT INDEPENDENT UNDERTAKINGS. THEREFORE, WE CONSIDER IT PRUDENT TO SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE THE MATTER TO FILE OF AO FOR THE LIMITED PURPOSE TO RE - EXAMINE AS TO WHETHER UNIT NOS. II & III SET UP BY ASSESSEE ARE INDEPENDENT UN ITS TO THE EXISTING UNDERTAKING OR MERELY AN EXPANSION OF THE EXISTING UNDERTAKING IN THE LIGHT OF PRINCIPLES LAID DOWN BY CO - ORDINATE BENCH DECISION IN THE CASE OF PATNI COMPUTERS LTD. (SUPRA) AND ALSO IN THE LIGHT OF LETTERS INCLUDING LETTER DT. 10.12.2 008 ISSUED BY DIRECTOR STPI AND ALSO ON THE BASIS OF SUCH EVIDENCES AS MAY BE FILED BY ASSESSEE AFTER GIVING DUE OPPORTUNITY OF HEARING. WITH THESE DIRECTIONS, THE MATTER STANDS RESTORED TO AO AND ACCORDINGLY GROUND NO.1 OF APPEAL TAKEN BY ASSESSEE IS AL LO WED FOR STATISTICAL PURPOSES. 23 . IN VIEW OF THE ABOVE, WE ALSO SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AND DIRECT HIM TO STRICTLY COMPLY WITH THE DIRECTIONS GI VEN BY THE TRIBUNAL ON THIS ISSUE TO EXAMINE , WHETHER UNIT II AND III WERE SET UP BY THE ASSESSEE AS INDEPENDENT UNITS OR NOT AND ALSO TAKE INTO CONSIDERATION THE APPLICABILITY OF THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN PATNI COMPUTERS V/S DCIT, ITA NO.426 AND 1131/PN./2006, ORDER DATED 30 TH JUNE 2011. THE ASSESSING OFFICER WILL ALSO TAKE INTO CONSIDERATION THE CBDT CIRCULAR NO.1 OF 2013 DATED 17 TH JANUARY 2013 AND I NSTRUCTION NO.3 OF 2014 DATED 14 TH MARCH 2014 WHILE ADJUDICATING THE ISSUE. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 24 . 20 04 05 HINDUJA VENTURES LIMITED 20 24. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004 05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 21 ST MARCH 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 21 ST MARCH 2014 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - + AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 21 ST M ARCH 2014 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI