DCIT RG 8(2), MUMBAI V. HEXAWARE TECHNOLOGIES LTD, NAVI MUMBAI

ITA 5055/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5061 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 13-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 07-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: J D MISTRY SHRI SANJIV M SHAH
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI , , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 5055/MUM/2012 ( ( ( ( ( / ASSESSMENT YEAR :2004-05 THE DCIT, RANGE 8(2), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. HEXAWARE TECHNOLOGIES LTD., 152, MILLENIUM BUSINESS PARK, SECTOR-3, TTC INDUSTRIAL AREA, MAHAPE NAVI MUMBAI-400 710 ) !& ./ * ./PAN/GIR NO. : AABCA3203F ( )+ /APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY : ` SHRI PITAMBAR DAS ,-)+ / . ! /RESPONDENT BY : SHRI J.D. MISTRY SHRI SANJIV M. SHAH / 01& / DATE OF HEARING :13.11.2013 23( / 01& / DATE OF PRONOUNCEMENT :20.11.2013 !4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-17, MUMBAI DT.8.5.2012 PERTAINING TO A.Y. 2 004-05. 2. THE REVENUE HAS RAISED FOLLOWING 3 SUBSTANTIVE G ROUNDS OF APPEAL. ITA NO.5055/M/2012 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN QUASHING THE 147 PROCEEDING S WITHOUT APPRECIATION THAT THE ASSESSEE HAD COMPUTED THE EXP ORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S. 1OA IN COMPLETE CONTRAVENTION OF THE PROVISIONS OF THE SAID SECTION, RESULTING IN ESCAPEMENT OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN QUASHING THE PROCEEDINGS U/ S. 147 OF THE ACT, WITHOUT APPRECIATING THAT THE ASSESSEE HAD WRO NGLY CLAIMED AND HAD BEEN ALLOWED EXCESSIVE DEDUCTION U/S. 1OA OF THE ACT IN THE ORIGINAL ASSESSMENT ON ACCOUNT OF FAILURE TO EX CLUDE THE PRESCRIBED EXPENSES FROM THE EXPORT TURNOVER IN TER MS OF EXPLANATION 2(IV) OF SECTION 1OA OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE EXPENSES R EQUIRED TO BE EXCLUDED FROM THE EXPORT TURNOVER IN TERM OF EXPLAN ATION 2(IV) OF SECTION 10A ARE ALSO REQUIRED TO BE EXCLUDED FROM T HE TOTAL TURNOVER IN TERMS OF THE DECISION OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS GEM PLUS JEWELLERY INDI A LTD., 330 ITR 175, WITHOUT APPRECIATING THAT THE DEPARTMENT HAS FILED AN SLP IN RESPECT OF THE SAID DECISION. 3. THE ASSESSEE IS IN THE BUSINESS OF SOFTWARE SOL UTIONS. FOR THE YEAR UNDER CONSIDERATION, THE RETURN WAS FILED ON 1.11.2 004 DECLARING TOTAL INCOME AT RS. 3,88,07,343/- UNDER THE NORMAL PROVIS IONS OF THE ACT AND BOOK PROFIT U/S. 115JB WAS RETURNED AT RS. 1,09,63, 466/- THE SAID RETURN WAS REVISED ON 13.8.2005 DECLARING TOTAL INCOME AT RS. NIL UNDER THE NORMAL PROVISIONS OF THE ACT AND AT RS. 1,09,63,46 6/- AS BOOK PROFIT U/S. 115JB OF THE ACT. THE RETURN WAS SELECTED FOR SCRU TINY ASSESSMENT AND THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETE D ON 11.12.2006 DETERMINING TOTAL INCOME AT RS. NIL UNDER THE NORMA L PROVISIONS AND RS. 15,30,98,232/- AS BOOK PROFIT U/S. 115JB OF THE ACT . THE BOOK PROFIT WAS REVISED AT RS. 14,75,67,792/- IN PURSUANT TO ORDER U/S. 250 OF THE ACT. ITA NO.5055/M/2012 3 4. SUBSEQUENT TO THE ABOVE PROCEEDINGS, PROCEEDING S U/S. 147 WERE INITIATED BY ISSUANCE OF NOTICE U/S. 148 OF THE ACT ON 29.3.2010. THE REASONS FOR REOPENING ARE EXHIBITED AT PARA-4 ON PA GE-2 OF THE ASSESSMENT ORDER. THE ASSESSEE STRONGLY OBJECTED TO THIS REAS SESSMENT PROCEEDINGS AND CONTENDED THAT IT IS MERELY ON CHANGE OF OPINI ON AS THE ASSESSEE HAS FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS IN THE RETURN OF INCOME AND THE SAME HAD BEEN CONSIDERED WHILE FRAMING THE ASSE SSMENT ORDER U/S. 143(3) OF THE ACT. IT WAS FURTHER POINTED OUT THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE ASSESSE E HAS NOT FAILED TO DISCLOSE ANY MATERIAL INFORMATION AND FACTS, BASED ON WHICH THE ASSESSMENT ATTAINED FINALITY BY THE ORDER PASSED U/ S. 143(3) OF THE ACT. 5. THE ASSESSEES SUBMISSIONS WERE NOT ACCEPTED BY THE AO. THE AO WAS OF THE FIRM BELIEF THAT IN THE ORIGINAL ASSESSM ENT, THE AO HAS ACCEPTED ASSESSEES CLAIM OF DEDUCTION U/S. 10A. SUBSEQUENT LY, IT WAS NOTICED THAT IN RESPECT OF BOTH THE UNITS, THE ASSESSEE HAS CLAI MED EXPENDITURE INCURRED IN FOREIGN EXCHANGE WHICH HAVE DIRECT IMPACT ON THE QUANTUM OF DEDUCTION U/S. 10A TO THE ASSESSEE. THEREFORE, THE REOPENING IS BASED ON VALID REASONS. THE AO FURTHER OBSERVED THAT IN THE ORIGINAL ASSESSMENT, THE AO HAS NEVER FORMED ANY OPINION AS TO WHETHER T HE CLAIM OF THE ASSESSEE U/S. 10A IS ADMISSIBLE. THE CLAIM WAS SIM PLY ACCEPTED AND THE ASSESSEE WAS GIVEN DEDUCTION U/S. 10A BECAUSE THE A SSESSEE WAS ALLOWED SIMILAR DEDUCTION IN EARLIER YEARS ALSO. THE AO TH EREAFTER WENT ON TO RECOMPUTED THE DEDUCTION U/S. 10A OF THE ACT AND R ECOMPUTED THE DEDUCTION FOR BANGALORE UNIT AT RS. 5,10,51,545/- A ND IN RESPECT OF CHENNAI UNIT AT RS. 12,88,11,597/-. THE AO NOTICED THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 10A IN RESPECT OF BOTH ITA NO.5055/M/2012 4 THE UNITS AT RS. 21,83,49,609/-. THE AO DISALLOWED THE EXCESS CLAIM OF DEDUCTION AT RS. 3,84,86,467/-. 6. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) AND REITERATED WHAT HAS BEEN STATED DURING THE COUR SE OF REASSESSMENT PROCEEDINGS. IT WAS STRONGLY CONTENDED BEFORE THE LD. CIT(A) THAT REASSESSMENT IS INVALID AS FULL AND TRUE DISCLOSURE WERE MADE BY THE ASSESSEE. IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT IN THE REASSESSMENT PROCEEDINGS, THE AO HAS NOT SHOWN WHIC H MATERIAL FACTS WAS NOT TRULY AND FULLY DISCLOSED. AFTER CONSIDERI NG THE FACTS AND SUBMISSIONS OF THE ASSESSEE AND AFTER DISCUSSING TH E VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE AND CONSIDERE D BY THE AO IN THE REASSESSMENT PROCEEDINGS, THE LD. CIT(A) FINALLY CO NCLUDED THAT IN THE INSTANT CASE THERE ARE NO REASONS ON THE BASIS OF WHICH PRIMA FACIE IT CAN BE SAID THAT INCOME HAS ESCAPED ASSESSMENT. THE LD . CIT(A) WAS ALSO CONVINCED THAT REOPENING IS BASED ON THE FACTS WHI CH WERE ALREADY ON RECORD. THEREFORE, IT CANNOT BE SAID THAT THE ASSE SSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE L D. CIT(A) QUASHED THE IMPUGNED NOTICE U/S. 148 AND THE ASSESSMENT ORDER U /S. 147 WAS CANCELLED. 7. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), REVENU E IS BEFORE US. 8. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. IT IS THE SAY OF THE LD. DR TH AT SINCE IN THE ORIGINAL ASSESSMENT, THE AO HAS NOT FORMED ANY OPINION , THE REFORE IT CANNOT BE SAID THAT REOPENING WAS BASED ON CHANGE OF OPINION. 9. THE LD. SENIOR COUNSEL REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. CO UNSEL THAT EVEN ON FACTS, THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH ITA NO.5055/M/2012 5 COURT IN THE CASE OF CIT VS GEM PLUS JEWELLERY INDI A LTD. 303 ITR 175. THIS WAS WITHOUT PREJUDICE TO THE MAIN CONTENTION T HAT THE REOPENING WAS INVALID. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY, T HE REOPENING OF THE ASSESSMENT IS BEYOND A PERIOD 4 YEARS THEREFORE, TH E PRE-CONDITION FOR THE APPLICABILITY OF SEC. 147 IS THAT THERE MUST BE A F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT. WHEN THE REOPENING IS DONE BEYOND 4 YE ARS MERELY STATING THAT THERE IS AN ESCAPEMENT OF INCOME WOULD NOT SUF FICE. THERE MUST BE A FAILURE TO DISCLOSE ALL MATERIAL FACTS NECESSARY F OR THE ASSESSMENT . UNLESS THIS CONDITION IS FULFILLED, THE REOPENING C ANNOT BE SUSTAINED. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE D ECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD., VS ACIT (WRIT PETITION NO. 71 OF 2005). THE DISCUSSION BY THE LD. CIT(A) FINDS PLACE AT PARA-3.6 OF HIS ORDER. CONSIDERING THE FA CTS AS THEY WERE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND ALSO THE FA CTS AS DISCUSSED BY THE AO IN THE REASSESSMENT PROCEEDINGS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THE LD. CIT(A) HAS CORRECTLY QUASHED THE REASSESSMENT ORDER THEREFORE WE CONFIRM THE FINDINGS OF THE LD. CIT(A). AS THE REASSESSMENT ST ANDS CANCELLED, WE ARE NOT GOING INTO THE MERIT OF OTHER GROUNDS OF APPEAL . ITA NO.5055/M/2012 6 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2013 . !4 / 3( &! 5 6 7 20.11.20133 / = SD/- SD/- ( VIJAY PAL RAO ) ( N.K. BILLAIYA ) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 6 DATED 20 /11 /2013 . . ./ RJ , SR. PS !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. @= ,0 , , / DR, ITAT, MUMBAI 6. =A B / GUARD FILE. !4 !4 !4 !4 / BY ORDER, -0 ,0 //TRUE COPY// C CC C / D D D D (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI