New Delhi Television Ltd., New Delhi V. CIT, New Delhi

ITA 5126/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97548 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L MEENA
• Keywords: Business income; Principle of natural justice; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 80HHC; 234B; 147; 148; 263; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH E NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU , ACCOUNTANT MEMBER ITA NO S . 1023/DEL./2013 ASSTT. YEAR : 2003 - 04 NEW DELHI TELEVISION LTD., VS. A.C.I.T., CIRCLE 13(1), 207, OKHLA INDUSTRIAL ESTATE, NEW DELHI. PHASE - III, NEW DELHI. [PAN : AAACN0865 D] ITA NO S . 5126/DEL./2011 ASSTT. YEAR : 2003 - 04 NEW DELHI TELEVISION LTD., VS. COMMISSIONER OF 207, OKHLA INDUSTRIAL ESTATE, I NCOME - TAX - V, NEW DELHI. PHASE - III, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARANDEEP SINGH, C.A. RESPONDENT BY : SHRI R.L. MEENA, CIT/DR DATE OF HEARING : 18.08.2015 DATE OF PRONOUNCEMENT : 30 .09.2015 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: APPEAL NO. 1023/DEL/2013 BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.01.2013 OF LEARNED CIT(A) - XVI, DELHI FOR THE ASSESSMENT YEAR 2003 - 04 IN THE MATTER OF REASSESSMENT U/S. 147 OF THE INCOME - TAX ACT, 1961, WHERE AS THE APPEAL NO. 5126/DEL./2011 IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 11.10.2011 OF LEARNED CIT - V, NEW DELHI PASSED U/S. 263 OF THE INCOME - TAX ACT, ITA NO. 5126/DEL./11 & 1023/DEL./2013 2 1961, REVISING THE REASSESSMENT ORDER DATED 24.12.2010. SINCE BOTH THESE APPEALS WERE HEARD TOGETHER, BOTH THE APPEALS ARE DECIDED BY THIS CONSOLIDATED ORDER. 2. THE BRIEF FACTS OF CASES ARE THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF PRODUCING CUSTOMIZE SOFTWARE/PROGRAMS FOR BROADCASTERS LIKE STAR TV, BBC, VIJAY TELEVISION ETC. TH E ASSESSEE FILED ITS RETURN OF INCOME ON 02.12.2003, DECLARING TOTAL INCOME AT RS.14,41,49,689/ - . IN THIS RETURN DEDUCTION UNDER SECTION 80HHF OF RS 12,01,29,653/ - WAS CLAIMED BY THE ASSESSEE. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT ORDER U/S . 143(3) WAS COMPLETED ON 28.02.2006, ASSESSING THE TOTAL INCOME AT RS.26,55,52,542/ - . IN HIS ORDER OF ASSESSMENT DEDUCTION UNDER SECTION 80HHF OF THE ACT WAS RE - COMPUTED BY THE AO AT RS 12,06,49,803/ - . 2.1 SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED TH E ASSESSMENT OF ASSESSEE U/S. 147 BY ISSUING NOTICE U/S. 148 OF THE ACT AFTER RECORDING FOLLOWING REASONS : RETURN OF INCOME IN THIS CASE FOR A.Y. 2003 - 04 WAS FILED ON 02.12.2003 DECLARING INCOME OF RS.14,41,49,689/ - AFTER CLAIMING DEDUCTION U/S 80HHF OF T HE I.T. ACT. ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT WAS MADE ON 28.02.2006 AT A TOTAL INCOME OF RS.14,49,02,740/ - . ON PERUSAL OF ASSESSMENT RECORDS FOR THE YEAR UNDER CONSIDERATION, IT HAS BEEN REVEALED THAT ASSESSEE HAS CLAIMED TO HAVE MADE EXPORT / T RANSFER OF SOFTWARE PROGRAMMES COMPRISING 24 HOURS NEWS CHANNEL TO STAR TV, HONG KONG. IT ALSO CLAIMED TO HAVE EXPORTED SOFTWARE PROGRAMMES FOR OTHER BROADCASTERS LIKE BBC ETC. THE ASSESSEECLAIMED DEDUCTION U/S 80HHF TO THE TUNE OF RS.12.01 CRORES. IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSMENT YEAR 2003 - 04, THE TOTAL INCOMES (SALES HAVE BEEN SHOWN AS UNDER : INCOME : ITA NO. 5126/DEL./11 & 1023/DEL./2013 3 SERVICE INCOME - EXPORT 97,47,73,359/ - 86,79,59,924/ - - DOMESTIC 5,55,08,692/ - 7,74,76,227/ - 1,03,02,82,051/ - 94,54,36,151/ - - OTHER INCOME II 2,44,93,043 3,76,55,503/ - 1,05,47,75,094/ - 98,30,91,654/ - HOWEVER, IN THE AUDIT REPORT IN FORM NO.10 CCAI, THE TOTAL TURNOVER AND EXPORT TURNOVER OF THE BUSINESS HAS BEEN DECLARED AT RS.1,04,22,46,692/ - . RS.1,19,64,641/ - . IT HAS BEEN NOTICED THAT THIS AMOUNT IS ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE GAINS WHICH HAS BEEN SHOWN UNDER THE HEAD OTHER INCOME . THE TURNOVERS DECLARED FROM ANY GAIN OR LOSS ON ACCOUNT OF FLUCTUATION IN FOREIGN EXCHANGE CANNOT VARY THE FIGURE OF SALES R ECORDED IN THE SALES ACCOUNT ON THE BASIS OF EXCHANGE RATES PREVALENT ON THE RELEVANT DATES OF TRANSACTIONS. THIS FACT OF CASE IS TOTALLY AGAINST THE ACCOUNTING PRINCIPLES AND HAS BEEN ACTUATED BY THE DESIRE TO CLAIM UNDESERVED AND ILLEGITIMATE DEDUCTION U NDER SECTION 80HHF ON FOREIGN EXCHANGE GAINS WHICH IS NOT ELIGIBLE FOR DEDUCTION. IT IS ALSO A MATTER OF ACCOUNTING PRINCIPLES THAT WHILE SALES ARE RECORDED IN THE TRADING AND MANUFACTURING ACCOUNTS, ANY GAIN OR LOSS ON ACCOUNT OF FLUCTUATION IN FOREIGN EX CHANGE IS DEPICTED UNDER SOME APPROPRIATE HEAD IN THE PROFIT & LOSS ACCOUNT. THIS INCOME OF RS.1,19,64,641/ - ON ACCOUNT OF GAINS IN FOREIGN EXCHANGE FLUCTUATIONS IS OF THE NATURE OF ANY OTHER RECEIPT MENTIONED IN CLAUSE (D) OF EXPLANATION, (BAA) IN SECTION 80HHF. AS PER THE PROVISIONS OF THE ACT, 90% OF THE SAID AMOUNT WAS LIABLE TO BE EXCLUDED FOR THE PURPOSES OF COMPUTATION OF DEDUCTION. THE ASSESSEE HAS DELIBERATELY INCLUDED THIS AMOUNT IN TOTAL TURNOVER AND EXPORT TURNOVER AS A RESULT OF WHICH THE ASSES SEE WAS WRONGLY ALLOWED EXCESS DEDUCTION UNDER SECTION 80HHF. MOREOVER, IN PARA (6) OF SCHEDULE 15 OF AUDITED ACCOUNTS, IT HAS BEEN CLEARLY MENTIONED THAT THE COMPANY IS IN THE BUSINESS OF PRODUCING TELEVISION SOFTWARE. IT NOWHERE STATES THAT IT IS IN THE BUSINESS OF EXPORT OF TELEVISION SOFTWARE. NOWHERE IN THE RETURN OF INCOME HAS IT BEEN CLEARLY MENTIONED THAT THE DEDUCTION UNDER SECTION 80HHF HAS BEEN CLAIMED EXCESS THAT THE ADJUSTED PROFITS OF RS.26,37,75,032/ - ON WHICH DEDUCTION UNDER SECTION 80HHF H AS BEEN CLAIMED INCLUDE THE AMOUNT ON ACCOUNT OF GAINS ON FOREIGN EXCHANGE FLUCTUATION. THUS, THE ASSESSEE HAS FAILED TO DISCLOSE THIS MATERIAL FACT THAT GAINS OF RS.1,19,64,641/ - HAVE ALSO BEEN INCLUDED FOR ITA NO. 5126/DEL./11 & 1023/DEL./2013 4 CLAIMING DEDUCTION UNDER SECTION 80HHF. THOUGH I T HAS BEEN MENTIONED THAT FOREIGN EXCHANGE FLUCTUATION GAINS ON REMITTANCE ARE INCLUDED IN THE EXPORT TURNOVER, BUT HAS NOT BEEN MENTIONED ABOUT THE AMOUNT ON WHICH FOREIGN EXCHANGE FLUCTUATION HAS BEEN GAINED BY ELIGIBLE PROFIT FOR THE PURPOSES OF COMPUTA TION OF DEDUCTION UNDER SECTION 80HHF WORKED OUT BY THE ASSESSEE. THUS, IT IS CLEAR CUT CASES WHERE INFLATED DEDUCTION HAS BEEN CLAIMED BY SUPPRESSING MATERIAL FACTS AND INCOME ESCAPING ASSESSMENT IS OF THE ORDER OF OVER RS.60 LAKHS ON THIS ACCOUNT ONLY. THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR RELATING TO EXPORT INCOME AND FAILED TO DISCLOSE ALL MATERIAL EVIDENCES TO SHOW THAT ELIGIBLE ITEMS I.E., FILM SOFTWARE, TELEVI SION SOFTWARE, MUSIC SOFTWARE, TELEVISION NEWS SOFTWARE INCLUDING TELECAST RIGHTS WERE EXPORTED BY THE ASSESSEE COMPANY OUTSIDE THE COUNTRY. THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY THAT ELIGIBLE ITEMS WERE ACTUALLY EXPORTED OUTSIDE THE COUNTRY. FURTHER IT WAS ALSO NOT EXPLAINED WHETHER THE WORLDWIDE COPY RIGHTS OF ITEMS WERE TO CONTINUE WITH THE ASSESSEE COMPANY AFTER THE EXPORT OR NOT. ALL THESE FACTS WERE CRUCIAL FOR DETERMINING THE ELIGIBILITY OF DEDUCTION U/S 80HHF OF THE ACT, WHICH WERE NOT EXAMINED BY THE AO WHILE MAKING ASSESSMENT U/S 143(3) OF THE ACT. THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY THE ISSUE OF ACTUAL EXPORT OF ELIGIBLE ITEM AND ELIGIBILITY OF DEDUCTION U/S 80HHF IN CASE OF EXPORT OF LIMITED RIGHTS. ON THE BASIS OF EXAMINATION OF THE FACTS AND CIRCUMSTANCES FOR A.Y. 2002 - 03 AS ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY FOR CLAIMING DEDUCTION U/ S 80HHF OF THE I.T. ACT, ON THE EXPORT CLAIMED TO HAVE BEEN MADE TO STAR T.V. HONG KONG AND OTHER EXPORTS MADE APART FROM OTHER ISSUES RECORDED IN THE PRECEDING PARAGRAPHS. 2.2 THE ASSESSEE OBJECTED TO THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT VIDE WRITTEN OBJECTIONS DATED 12 TH NOVEMBER 2010 WHICH WERE DISPOSED OF BY THE LD. AO VIDE ORDER DATED 03.12.2010. THEREAFTER, VIDE REASSESSMENT ORDER DATED 24 TH DECEMBER, 2010 THE AO REASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.14,94,40,960/ - AFTER RESTRICTING THE CLAIM FOR DEDUCTION U/S 80HHF TO RS.11,48,38,379/ - AS AGAINST CLAIM OF RS.12,01,29,653/ - MADE BY THE APPELLANT IN ITA NO. 5126/DEL./11 & 1023/DEL./2013 5 ITS RETURN OF INCOME. THE AO WAS OF THE OPINION THAT THE SALES ARE CREDITED TO THE PROFIT AND LOSS ACCOUNT AS PER THE INVOICE AMOUNTS AND THE FOREIGN EXCHANGE FLUCTUATION GAIN IS NOT A PART OF THE SALES. HE OBSERVED THAT AS PER EXPLANATION (F) TO SUB - SECTION (6) OF SECTION 80HHF, PROFIT OF THE BUSINESS IS WORKED OUT AFTER REDUCING 90% OF ANY RECEIPT BY WAY OF BROKERAGE, C OMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPTS OF THE SIMILAR NATURE INCLUDED IN THE PROFITS AND THE FOREIGN EXCHANGE FLUCTUATION GAIN COMES UNDER ANY OTHER RECEIPTS OF THE SIMILAR NATURE MENTIONED IN THE SECTION ITSELF. HENCE, FOREIGN EXCHANGE FLUCTUATION GAIN WILL NOT FORM PART OF THE EXPORT TURNOVER AND TOTAL TURNOVER. HE, THUS, FOUND THAT THE ASSESSEE HAD WRONGLY COMPUTED THE ADJUSTED PROFIT BECAUSE THE FOREIGN EXCHANGE FLUCTUATION GAIN WAS NOT INCLUDED IN OTHER INCOME AND ALSO THE ADJUSTED PROFIT WERE WRONGLY CALCULATED BY NOT EXCLUDING 90% OF FOREIGN EXCHANGE FLUCTUATION GAINS. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASS ESSMENT YEAR. THEREFORE, THE AO FORMED THE REASON TO BELIEVE THAT THE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT BECAUSE OF THE EXCESS DEDUCTION CLAIMED BY ASSESSEE AND ALLOWED BY AO U/S. 80HHF IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3). THE CRUX OF AO S FINDINGS IS THAT FOREIGN EXCHANGE FLUCTUATION GAINS OF RS.1,19,64,641/ - WERE NOT ELIGIBLE FOR DEDUCTION U/S 80HHF OF THE ACT. WHILE RE - COMPUTING THE SAID DEDUCTION IN REASSESSMENT ORDER DATED 24 TH DECEMBER, 2010 THE AO, THEREFORE, REDUCED THE FIGUR ES OF EXPORT TURNOVER AND TOTAL TURNOVER AS DISCLOSED BY THE APPELLANT IN FORM NO.10CCAI BY THE AMOUNT OF FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.1,19,64,641/ - . IN ADDITION TO THIS THE LD. AO FURTHER REDUCED 90% OF INCOME DERIVED FROM FOREIGN EXCHANGE FLUC TUATION GAIN FROM THE FIGURE OF PROFITS OF BUSINESS ELIGIBLE FOR CLAIMING BENEFIT OF DEDUCTION U/S 80HHF. THUS, THE AO WORKED OUT EXCESS CLAIM OF DEDUCTION U/S. 80HHF AMOUNTING TO RS.52,91,274/ - (RS.12,01,29,653 11,48,38,379) AND ADDED THE SAME BACK TO THE ITA NO. 5126/DEL./11 & 1023/DEL./2013 6 TOTAL INCOME OF THE ASSESSEE VIDE REASSESSMENT ORDER DATED 24.12.2010 PASSED U/S. 147/143(3) OF THE ACT. 2.3 THE ASSESSEE CHALLENGED THE REASSESSMENT ORDER IN APPEAL BEFORE THE LEARNED CIT(A) BOTH ON VALIDITY OF REASSESSMENT PROCEEDINGS AND ON MERITS OF THE ADDITION MADE ON ACCOUNT OF EXCESS CLAIM OF DEDUCTION U/S. 80HHF OF THE ACT. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND VARIOUS DECISIONS IN THE CASES OF A.G. HOLDINGS (P) LTD. VS. ITO IN W.P.(C)8031/2011, ESS KA Y ENGINEERING CO. (P) LTD. VS. CIT(SC) 247 ITR 818, REVATHY C.P. EQUIPMENTS LTD. VS. DCIT & ORS. (MAD) 241 ITR 856 AND EMA INDIA LTD. VS. ACIT(ALL) 30DTR 82, DISMISSED THE ASSESSEE S PLEAS RAISED ON VALIDITY OF RE - ASSESSMENT PROCEEDINGS AS PER OBSERVATIONS MADE IN PARA 5.2 AND 5.3 OF THE IMPUGNED ORDER. THE LEARNED CIT(A) FURTHER CONSIDERING THE RIVAL SUBMISSIONS AND THE FACTS OF THE CASE, ALSO DISMISSED THE GROUNDS RAISED BY THE ASSESSEE ON MERITS OF THE ADDITION OBSERVING AS UNDER : 6.2. THEREFORE, THE ISSUE TO BE DECIDED IN THIS APPEAL IS WHETHER FOREIGN EXCHANGE FLUCTUATION GAIN FORMS PART OF THE PROFIT DERIVED FROM THE BUSINESS OF EXPORT/TRANSFER SPECIFIED IN SEC 80HHF. THE SEC 80HHF CLEARLY PROVIDES THAT THE DEDUCTION SHALL BE ALLOWED TO THE EXTENT O F PROFITS REFERRED TO IN SUB - SEC 1A DERIVED BY THE ASSESSEE FROM THE BUSINESS OF EXPORT OR TRANSFER OF FILM SOFTWARE, TELEVISION SOFTWARE, MUSIC SOFTWARE ETC. THEREFORE, PROFITS HAVE TO BE DERIVED FROM THE ELIGIBLE BUSINESS OF EXPORT OF SOFTWARE. 6.3. IN VIEW OF ABOVE PROVISIONS DUE REGARD MUST BE HAD TO THE INTENDMENT OF PARLIAMENT AS EVIDENCED BY THE LANGUAGE USED IN SUB - SECTION (1) OF SECTION 80HHF. THE STATUTE CONTEMPLATES A DEDUCTION WHERE AN ASSESSEE, BEING AN INDIAN COMPANY OR A PERSON RESIDENT IN I NDIA, IS ENGAGED IN THE BUSINESS OF EXPORT OUT OF INDIA OF ANY SOFTWARE TO WHICH THE SECTION APPLIES. IN SUCH A CASE, THE ASSESSEE IS ALLOWED, IN COMPUTING THE TOTAL INCOME, A DEDUCTION TO THE EXTENT OF PROFITS DERIVED BY THE ASSESSEE FROM THE EXPORT OF EL IGIBLE ITEMS. THE DEDUCTION, IN OTHER WORDS, RELATES TO ITA NO. 5126/DEL./11 & 1023/DEL./2013 7 THE PROFITS THAT ARE DERIVED BY THE ASSESSEE FROM EXPORT. NOW IT IS A WELL SETTLED PRINCIPLE OF LAW THAT THE EXPRESSION DERIVED FROM IS OF NARROWER CONNOTATION THAN THE EXPRESSION ATTRIBUTABLE TO . THE EXPRESSION DERIVED POSTULATES THE EXISTENCE OF A DIRECT AND PROXIMATE NEXUS WITH THE EXPORT ACTIVITY. THE EXPRESSION DERIVED FROM WAS EXPLAINED IN THE JUDGMENT OF HON BLE SUPREME COURT IN PANDIAN CHEMICALS LTD. V. CIT [2003] 129 TAXMAN 539 IN THE CONTEXT OF THE USE OF THAT EXPRESSION IN SECTION 80HH. IN THAT CASE THE ASSESSEE HAD PLACED A DEPOSIT WITH AN ELECTRICITY BOARD FOR OBTAINING THE SUPPLY OF ELECTRICITY AND THE SUBMISSION OF THE ASSESSEE WAS THAT THE UNDERTAKING ITSELF COULD NOT RUN IN THE ABSENCE OF ELECTRICITY. CONSEQUENTLY, IT WAS URGED THAT THE INTEREST RECEIVED ON THE DEPOSITS PLACED WITH THE ELECTRICITY BOARD MUST BE REGARDED AS BEING DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE SUPREME COURT REJECTED THIS SUBMISSION, HOLDING THAT THE EXPRESSION DERIVED FROM MUST BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIATE NEXUS . THE COURT HELD THAT THOUGH ELECTRICITY MAY BE REQUIRED FOR THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR SUCH SUPPLY IS A STEP REMOVED FROM THE BUSINESS AND THE DERIVATION OF PROFITS ON THE DEPOSIT MADE CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF . THE SAME PRINCIPLE HAS BEEN REITERATED BY HON BLE SUPREME COURT IN CIT V. K. RAVINDRANATHAN NAIR [2007] 295 ITR 228 SPECIFICALLY I N THE CONTEXT OF THE PROVISIONS OF SECTION 80HHC. 6.4. THE TRANSACTION OF EXPORT IN THE CASE OF THE APPELLANT IS COMPLETE IN ALL RESPECTS UPON THE REPATRIATION OF THE PROCEEDS. IT LIES WITHIN THE DISCRETION OF THE APPELLANT AS TO WHETHER THE EXPORT PROCEE DS SHOULD BE RECEIVED IN A RUPEE EQUIVALENT IN THE ENTIRETY OR WHETHER A PORTION SHOULD BE MAINTAINED IN CONVERTIBLE FOREIGN EXCHANGE IN THE APPELLANT S FOREIGN CURRENCY BANK ACCOUNT. THE EXCHANGE FLUCTUATION THAT ARISES IS AFTER THE EXPORT TRANSACTION IS COMPLETE AND THE SALES ARE CREDITED IN THE P&L ACCOUNT AS PER THE INVOICE AMOUNT. UPON THE COMPLETION OF THE EXPORT TRANSACTION, WHAT THE SELLER DOES WITH THE PROCEEDS, UPON REPATRIATION, IS A MATTER OF HIS OPTION. THE EXCHANGE FLUCTUATION ARISES AFTER THE COMPLETION OF THE EXPORT ACTIVITY AND DOES NOT BEAR A PROXIMATE AND DIRECT NEXUS WITH THE EXPORT TRANSACTION SO AS TO FAIL WITHIN THE EXPRESSION DERIVED BY THE ASSESSEE IN SUB - SECTION (1) OF SECTION 80HHF. THE EXCHANGE FLUCTUATION AROSE SUBSEQUENT TO TH E TRANSACTION OF EXPORT. IN OTHER WORDS, THE EXCHANGE FLUCTUATION WAS NOT ON ACCOUNT OF A DELAYED REALIZATION OF EXPORT PROCEEDS. THE GAIN IN EXCHANGE FLUCTUATION WHICH HAS ARISEN AFTER THE DEPOSIT OF THE RECEIPTS IN THE APPELLANT S FOREIGN CURRENCY ACCOUN T CANNOT BE REGARDED AS BEING PART OF THE PROFITS DERIVED BY THE ASSESSEE ITA NO. 5126/DEL./11 & 1023/DEL./2013 8 FROM THE EXPORT OF SOFTWARE OF ELIGIBLE ITEMS. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHAH ORIGINALS [2010] 191 TAXMAN 81 (BOM) AND HON BLE ITAT CHENNAI IN THE CASE OF DCIT V. ASTRON DOCUMENT MANAGEMENT (P) LTD. [2011] 16 TAXMANN.COM 33 (CHENNAI) WHERE IT IS HELD THAT THE EXCHANGE FLUCTUATION IN EEFC ACCOUNT ARISING AFTER COMPLETION OF EXPORT ACTIVITY, DID NOT BEAR A PROXI MATE AND DIRECT NEXUS WITH THE EXPORT TRANSACTION SO AS TO FALL WITHIN THE EXPRESSION DERIVED BY THE ASSESSEE. THE ABOVE DECISIONS ARE SQUARELY APPLICABLE IN THE CASE OF THE APPELLANT. 2.4 THE LEARNED CIT(A) ALSO CONSIDERED VARIOUS DECISIONS RELIED UPO N BY THE ASSESSEE ON THE ISSUE AND OBSERVED THAT THE DECISIONS RELIED ON BY THE ASSESSEE ARE NOT APPLICABLE IN THE INSTANT CASE AND AS SUCH HELD THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN CANNOT BE REGARDED AS PROFITS DERIVED BY THE ASSESSEE FROM THE EXPOR T OF ELIGIBLE SOFTWARE ITEMS. THE LEARNED CIT(A), THEREFORE, CONFIRMED THE REASSESSMENT ORDER VIDE IMPUGNED ORDER DATED 10.01.2013. THE ASSESSEE HAS ASSAILED THIS ORDER BY WAY OF APPEAL NO. 1023/DEL/2014 BEFORE US, INTER ALIA, ON THE FOLLOWING GROUNDS : 1 . THAT ON FACTS AND IN LAWS, THE ORDERS PASSED BY BOTH THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO ) AND THE COMMISSIONER OF INCOME TAX (APPEALS) {HEREINAFTER REFERRED TO AS THE CIT(A)} ARE BAD IN LAW AND VOID AB - INITIO. 2. THAT ON FACTS AN D IN LAWS, THE CIT(A) ERRED IN UPHOLDING THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT BY THE AO. 2.1. THAT ON FACTS AND IN LAWS, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE PREREQUISITES OF ASSUMPTION OF VALID JURISDICTION IN TERMS OF PROVISO TO SE CTION 147 ARE NOT MET RENDERING THE REASSESSMENT ORDERS PASSED THERETO AS BAD IN LAW. 2.2 THAT ON FACTS AND IN LAWS, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE IMPUGNED REASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO AS A RESULT OF A MERE CHANGE OF O PINION ON SIMILAR SET OF FACTS. ITA NO. 5126/DEL./11 & 1023/DEL./2013 9 3. THAT ON FACTS AND IN LAWS, THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80HHF OF THE ACT TO THE TUNE OF RS.52,91,274/ - . 3.1 THAT ON FACTS AND IN LAWS, THE CIT(A) ERRED IN NOT APPRECIATING THAT WHILE C OMPUTATION OF DEDUCTION U/S 80HHF OF THE ACT FOREIGN EXCHANGE FLUCTUATION GAINS ARE NOT TO BE EXCLUDED FROM : (A) PROFITS OF THE BUSINESS AS DEFINED IN EXPLANATION (F) (B) EXPORT TURNOVER AS DEFINED IN EXPLANATION (C), AND (C) TOTAL TURNOVER AS DEFINED IN EXPLANATION (J) 4. THAT ON FACTS AND IN LAW THE CIT(A) ERRED IN UPHOLDING LEVY OF INTEREST U/S 234B, 234D OF THE ACT. 3. THE BRIEF FACTS PERTAINING TO APPEAL NO.5126/DEL./2011 ARE THAT THE LEARNED COMMISSIONER OF INCOME - TAX, INVOKING HIS R EVISIONARY POWERS UNDER SECTION 263 ISSUED A SHOW CAUSE NOTICE DATED 21.07.2011 REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY THE RE - ASSESSMENT ORDER DATED 24.12.2010 PASSED BY THE ASSESSING OFFICER MAY NOT BE REVISED U/S. 263 AND THE CLAIM OF DEDUCTION U/S . 80HHF ALLOWED MAY NOT BE WITHDRAWN, IN AS MUCH AS THE ASSESSING OFFICER FAILED TO EXAMINE /VERIFY THE ADMISSIBILITY OF DEDUCTION U/S. 80HHF AMOUNTING TO RS.11,48,38,379/ - . THE SHOW CAUSE NOTICE ISSUED U/S. 263 READS AS UNDER : I). THERE WAS NOTHING ON T HE RECORD TO SHOW THAT ONLY ELIGIBLE ITEMS I.E. FILM SOFTWARE, TELEVISION SOFTWARE, MUSIC SOFTWARE, TELEVISION NEWS SOFTWARE INCLUDING TELECAST RIGHTS WERE EXPORTED BY THE ASSESSEE CO. II). THERE WAS NO EVIDENCE TO SHOW THAT SUCH ELIGIBLE ITEMS WERE ACTUA LLY EXPORTED OUTSIDE THE COUNTRY. III). FROM THE AGREEMENT DATED 21.02.1997 BETWEEN THE ASSESSEE CO. AND M/S. STAR TV IT WAS SEEN THAT THERE WAS NO MENTION OF THE SPECIFIC ITEMS TO BE EXPORTED AND FURTHER THE WORLD WIDE COPY RIGHTS OF ITEMS WERE TO CONTI NUE WITH THE ASSESSEE CO. AFTER THE EXPORT. ITA NO. 5126/DEL./11 & 1023/DEL./2013 10 IV). THE ASSESSEE HAS NOT FILED FIRC S TO THE EXTENT OF RS.10.73 CRORES ($30,00,000) OUT OF TOTAL EXPORT CLAIMED TO HAVE BEEN MADE TO M/S. STAR TV IN A.Y. 2003 - 04. V). THE CREDIT OF ADVANCE MONEY OF RS.10.73 CR ORES RECEIVED IN YEAR 1997 AND 1999 IN RESPECT TO EARLIER AGREEMENTS BETWEEN M/S. NDTV AND M/S. NTVI HAVE BEEN CLAIMED AS EXPORT TURNOVER OF THE YEAR. VI). M/S. NTVI IS SUBSIDIARY OF M/S. STAR TV AND ORIGINAL AGREEMENT (ON STAMP PAPER) WAS BETWEEN M/S. NDTV AND M/S. NTVI. SUBSEQUENT AGREEMENTS ARE ONLY INTERNAL ARRANGEMENTS BETWEEN M/S. NTVI AND M/S. STAR TV. THEREFORE, SALE MADE IN CONSEQUENCE OF AGREEMENT BETWEEN M/S. NTVI AND M/S. NDTV DT. 21.02.1997 CANNOT BE TERMED AS EXPORT TURNOVER. 3.1 THE LEA RNED COMMISSIONER OBSERVED THAT THE ASSESSING OFFICER FAILED TO EXAMINE THESE ISSUES WHICH WERE VERY CRUCIAL FOR DETERMINATION OF THE ELIGIBILITY OF DEDUCTION U/S. 80HHF OF THE ACT. THE LEARNED COMMISSIONER AFTER GOING THROUGH CLAUSE 17 OF THE AGREEMENT DA TED 21.02.1997, FURTHER OPINED THAT SINCE NTVI PVT. LTD. WHICH IS AN INDIAN COMPANY, WAS SOLELY RESPONSIBLE FOR UPLINKING, TRANSMISSION AND DISTRIBUTION OF THE 24 HOURS NEWS CHANNEL PROGRAMME AND THAT US $ 8.5 MILLION HAS BEEN RECEIVED FROM NTVI PVT. LTD., THE SUPPLY OF PROGRAMMES TO NTVI PVT. LTD. OR ANY OTHER ENTITY ON THEIR INSTRUCTIONS BY THE ASSESSEE CANNOT BE TREATED AS EXPORT FOR THE PURPOSES OF SECTION 80HHF. HE FURTHER STATED THAT THERE IS DIFFERENCE OF RS.10,73,74,270/ - BETWEEN THE DECLARED EXPOR T RECEIPTS FROM STAR TV AND THE AMOUNT RECEIVED AS PER BANK CERTIFICATES AND THEREFORE, IF THE EXCESS EXPORT TURNOVER RECEIPTS FROM STAR ARE EXCLUDED THEN THE DEDUCTION U/S. 80HHF WOULD WORK OUT TO RS.10,21,88,579/ - INSTEAD OF RS.11,48,38,379/ - AS ASSESSED BY AO U/S. 147 OF THE ACT. HE, THEREFORE, OBSERVED THAT EXCESS CLAIM OF RS.1,26,49,799/ - WAS ALLOWED BY THE AO IN THE REASSESSMENT ORDER ONLY ON THIS COUNT. THE LD. COMMISSIONER AFTER RELYING ON VARIOUS DECISIONS FINALLY HELD THAT THE ASSESSING OFFICER HA S ALSO ERRONEOUSLY ALLOWED DEDUCTION U/S. 80HHF OF ITA NO. 5126/DEL./11 & 1023/DEL./2013 11 RS.10,21,88,579/ - TO THE ASSESSEE. THE MATTER WAS, THEREFORE, SET ASIDE TO THE FILE OF THE AO VIDE IMPUGNED ORDER DATED 11.10.2011, FOR EXAMINATION AND VERIFICATION AFRESH, HOLDING THE REASSESSMENT ORDER A S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. BEING AGGRIEVED, THE ASSESSEE HAS COME UP IN APPEAL NO.5126/DEL./2011, INTER ALIA, ON THE FOLLOWING GROUNDS: 1. THAT ON FACTS AND IN LAW THE COMMISSIONER OF INCOME TAX, NEW DELHI (HEREINAFTER REFERRED TO AS THE CIT ) ERRED IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO ) U/S. 147/143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT THE CIT ERRED IN OBSERVING THAT: A . THE ASSESSING OFFICER HAD FAILED TO EXAMINE WHETHER ACTUAL EXPORT OF TELEVISION SOFTWARE/VIDEO ELIGIBLE FOR CLAIM OF DEDUCTION U/S. 80HHF HAD TAKEN PLACE. B. THE SALES MADE PURSUANT TO AGREEMENTS DATED 21 ST FEBRUARY 1997, 21 ST FEBRUARY 1998 AND 24 TH NOVEMBER 1999 CANNOT BE TERMED AS EXPORT. C. THE ASSESSEE HAD INFLATED ITS EXPORT TURNOVER RECEIPTS BY RS.10,73,74,279/ - , AND D. NO ENQUIRY WAS MADE BY THE AO ON THE ABOVE ISSUES. 3. THAT ON FACTS AND IN LAW THE CIT ERRED IN DIRECTING DE NOVO EXAMINAT ION WITHOUT FINDING ANY ERROR IN THE VIEW ADOPTED BY THE AO. 4. THAT ON FACT AND IN LAW THE ORDER PASSED BY CIT U/S. 263 OF THE ACT IS BAD IN LAW AND VOID AB - INITIO. 5. THAT ON FACTS AND IN LAW THE ORDER U/S. 263 OF THE ACT IS BAD IN LAW IN AS MUCH AS TH E ORDER SOUGHT TO BE REVISED ITSELF IS BAD IN LAW AND SANS JURISDICTION. ITA NO. 5126/DEL./11 & 1023/DEL./2013 12 4. FROM THE ABOVE NARRATION OF FACTS, WE FIND THAT SINCE THE REASSESSMENT ORDER U/S 147/143(3) DATED 24.12.2010 HAS BEEN THE SUBJECTED MATTER OF REVISION ORDER U/S 263, WE WOULD CONVENIENTLY LIKE TO TAKE UP ITA 1023/DEL/2013 FIRST. ITA 1023/DEL/2013 5. DU RING THE COURSE OF HEARING BEFORE US, IT WAS ARGUED BY THE L D. AR THAT AS REGARDS FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.1,19,64,641/ - FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS WAS MADE BY THE ASSESSEE . IN THIS REGARD, OUR ATTENTION WAS INVITED TOWAR DS THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE PLACED AT PAGES 11 AND 17 OF THE PAPER BOOK WHEREIN THE SAID INCOME WAS SPECIFICALLY CREDITED. LD. AR ALSO REFERRED TO THE CA CERTIFICATE IN FORM NO.10CCAI PLACED AT PAGE 2 OF THE PAPER BOOK, WHEREIN, THE FIGU RE OF EXPORT TURNOVER OF RS.98,67,38,000/ - INCLUDED THE GAINS DERIVED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION (I.E RS . 97,47,73,359/ - PLUS RS1,19,64,641/ - ). REFERENCE WAS ALSO MADE TO THE COMPUTATION OF TOTAL INCOME, COPY OF WHICH IS PLACED AT PAGES 4 & 5 OF THE PAPER BOOK TO POINT OUT THAT THERE IS A SPECIFIC DISCLOSURE FOR INCLUSION OF FOREIGN EXCHANGE FLUCTUATION GAIN IN THE FIGURE OF EXPORT TURNOVER. AS TO THE OBJECTION OF THE AO THAT THE MATERIAL ON RECORD DO ES NOT EVIDENCE FACTUM OF EXPORT, IT WAS S UBMITTED BY THE ASSESSEE THAT THE RELEVANT DISCLOSURE TO THIS EFFECT WAS ALSO FULLY AND TRULY MADE IN THE RETURN OF INCOME ITSELF. IN THIS REGARD, OUR ATTENTION WAS INVITED TO NOTE NO.19 OF THE AUDITED FINANCIAL ACCOUNTS , WHICH READS AS UNDER: - 19. DURING THE YEAR THE COMPANY RECEIVED A DEMAND FROM THE INCOME TAX AUTHORITIES IN PURSUANCE OF THE ORDER OF CIT(APPEALS) FOR THE ASSESSMENT YEAR 1999 - 2000 ON ACCOUNT OF DISALLOWANCE OF THE COMPANY S CLAIM FOR A DEDUCTION OF RS.157,617,840/ - UNDER SECTION 80HHC OF THE INCOME TAX ACT. THE COMPANY HAD CLAIMED IN ITS ASSESSMENT THAT IT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHE, SINCE ITS EXPORT FELL UNDER THE DEFINITION OF COMPUTER SOFTWARE AS DEFINED THEREIN BASED ON THE LEGAL OPINION / ADVICE OF ITS COUNSEL . ITA NO. 5126/DEL./11 & 1023/DEL./2013 13 THE ASSESSING OFFICER REJECTED THIS CONTENTION AND DISALLOWED THE CLAIM ON THE PRIMARY GROUND THAT IT WAS NEWS SOFTWARE AND NOT COMPUTER SOFTWARE AS DEFINED IN THAT SECTION. THE CIT(A) IN HIS ORDER DATED FEBRUARY 28, 2003 HAS UPHELD THE ASSESSING O FFICER S CONTENTION. THE AMOUNT DEMANDED (INCLUDING INTEREST) AS PER THE AFORESAID ORDER IS RS.95,613,626/ - , OF WHICH THE COMPANY HAS PAID RS.44,060,158/ - UNDER PROTEST. THE COMPANY HAS FILED AN APPEAL AGAINST THE AFORESAID ORDER OF CIT (APPEALS) WITH THE INCOME TAX APPELLATE TRIBUNAL. IN THE EVENT THAT THE COMPANY IS UNSUCCESSFUL IN ITS DEFENSE , IT WOULD BE REQUIRED TO PAY ADDITIONAL TAX INCLUDING INTEREST AMOUNTING TO RS.51,553,468/ - TILL THE DATE OF AFORESAID ORDER. 5.1 IT WAS FURTHER SUBMITTED BY THE LD. AR THAT COMPLETE DISCLOSURES WERE MADE PURSUANT TO SPECIFIC QUERIES RAISED BY THE LD. AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. IN THIS REGARD, OUR ATTENTION WAS INVITED TOWARDS SUBMISSIONS DATED 2 2 ND FEBRUARY, 2006 AND SUBMISSIONS DATED 20 TH JANUARY, 2005 FILED BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. OBJECTING TO THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT, IT WAS SUBMITTED BY THE LD. AR THAT AS REGARDS FOREIGN EXCH ANGE FLUCTUATION GAIN NO NEW FACT HAS COME TO THE KNOWLEDGE OF AO SO AS TO JUSTIFY ASSUMPTION OF JURISDICTION U/S. 147 AFTER FOUR YEARS OF THE RELEVANT ASSESSMENT YEAR. IT WAS ARGUED THAT BASED UPON THE EXISTING MATERIAL IN THE RETURN OF INCOME ITSELF WHIC H WAS IN KNOWLEDGE OF THE AO DURING THE COURSE OF PROCEEDINGS U/S 143(3) OF THE ACT, THE SUBSEQUENT AO HAS MERELY TRIED TO CONDUCT A FISHING EXPEDITION. IN THIS REGARD, LD. AR RELIED UPON DECISIONS OF DELHI HIGH COURT IN THE CASE OF NORTHERN STRIPS LTD. R EPORTED IN 331 ITR 224 (DEL) AND SATNAM OVERSEAS REPORTED IN 329 ITR 237 (DEL). AS REGARDS FACTUM OF EXPORT BEING MADE , THE LD. AR SUBMITTED THAT THE NOTICE U/S 148 WAS ISSUED BY THE AO ON 31 ST MARCH, 2010 AND AS ON THAT DATE ITAT IN APPELLANT S OWN CASE FO R A.YS. 1999 - 2000 AND 2002 - 03 VIDE ORDERS DATED 26 TH JULY, 2004 AND 31 ST ITA NO. 5126/DEL./11 & 1023/DEL./2013 14 MARCH, 2008 RESPECTIVELY (COPIES PLACED IN PAPER BOOK) HAD ACCEPTED THE STAND OF THE APPELLANT THAT ELIGIBLE ITEM S WERE BEING EXPORTED OUT OF INDIA THEREBY SATISFYING THE CONDITIONS S TIPULATED IN SECTION 80HHF OF THE ACT. AS REGARDS REASONS TO BELIEVE THAT FOREIGN EXCHANGE FLUCTUATION GAINS ARE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80HHF OF THE ACT , IT WAS SUBMITTED BY THE LD. AR THAT THIS ISSUE IS NO MORE RES INTEGRA. IN THIS REGARD , OUR INTENTION WAS INVITED TO FOLLOWING JUDICIAL PRONOUNCEMENTS: (I). SMT. SUJATA GROVER REPORTED IN 74 TTJ 347 (DEL) (II). PRIYANKA GEMS REPORTED IN 367 ITR 575 (GUJ) (III). ALPS CHEMICALS LTD. REPORTED IN 367 ITR 594 (GUJ) (IV). NOVELS SOFTWARE DEVELOP MENT REPORTED IN 355 ITR 339 (KAR) (V). PANTASOFT TECHNOLOGIES LTD. REPORTED IN 347 ITR 578 (MAD) 6. ON THE OTHER HAND LD. CIT (DR) VEHEMENTLY OPPOSED THE ABOVE SUBMISSIONS ADVANCED BY THE LD. AR. IT WAS SUBMITTED BY HIM THAT THE LD. CIT(A) HAS FOR JUST R EASONS REJECTED THE ARGUMENTS ADVANCED AND THE DECISIONS RELIED UPON BY THE ASSESSEE AND AS SUCH NO INTERFERENCE IN THE IMPUGNED ORDER IS CALLED FOR . 7. WE HAVE CA REFULLY CONSIDERED THE RIVAL SUBMISSIONS , RELEVANT MATERIAL ON RECORD AND THE DECISIONS CITED BY BOTH THE PARTIES . IN THE INSTANT CASE, PROCEEDINGS U/S 147 OF THE ACT W ERE INITIATED BY THE L D. AO AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. AS SUCH THE INSTANT CASE HAS TO BE TESTED ON THE ANVIL OF PROVISO TO SECTION 147 OF THE ACT WHICH STIPULATES FOR AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS A NY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB - SECTION (1) OF SECTION 142 OR SECTION ITA NO. 5126/DEL./11 & 1023/DEL./2013 15 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR 7.1 IN THE INSTANT CASE, IN THE RETURN OF INCOME ITSELF THE ASSESSEE HAD FURNISHED SUFFICIENT MATERIAL ADEQUATELY DISCLOSING THE FACT THAT IT HAD CLAIMED D EDUCTION U/S 80HHF ON FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.1,19,64,641/ - . IT IS ALSO MATTER OF FACT THAT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE THEN AO HIMSELF RECOMPUTED THE DEDUCTION U/S 80HHF TO RS.12,06,49,803/ - AS AGAINST THE CLAIM OF RS.12,01,29,653/ - MADE BY THE APPELLANT IN HIS RETURN OF INCOME. THIS INCREASE IN DEDUCTION WAS ALLOWED BY THE THEN AO OWING TO CERTAIN ADDITION / DISALLOWANCES MADE TO THE BUSINESS INCOME IN HIS ORDER UNDER SECTION 143(3). IT IS THUS HARD TO COMPREHEND THAT THE AO FRAMING THE ORIGINAL ASSESSMENT DID NOT APPLY HIS MIND TO THE COMPUTATION OF INCOME AND FORM 10CCAI FURNISHED ALONG WITH THE RETURN OF INCOME. IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT IF CONSCIOUS APPLICATION OF MIND IS MADE TO THE RELEVANT FACTS AND MATERIAL AVAILABLE WHILE MAKING THE ASSESSMENT AND AGAIN A DIFFERENT OR DIVERGENT VIEW IS TAKEN, IT WOULD AMOUNT TO NOTHING BUT CHANGE OF OPINION. IN THE INSTANT CASE, THE SUBSEQUENT AO APPEARS TO HAVE INITIATED REASSESSMENT PROCEEDINGS ON ACCOUNT OF MERE CHANGE OF OPINION. MOREOVER, WE CONCUR WITH THE SUBMISSIONS OF THE LD. AR THAT NO NEW FACTS HAVE COME TO THE KNOWLEDGE OF THE AO JUSTIFYING ASSUMPTION OF JURISDICTION AFTER FOUR YEARS. HON BLE DELHI HIGH COURT IN THE CASE OF SATNAM OVERSEAS (SUPRA) HAS CLEARLY LAID DOWN IN THIS REGARD AS UNDER : - WE FEEL THAT THE WRIT PETITIONS HAVE TO SUCCEED BECAU SE THE CONTENTIONS AS RAISED ON BEHALF OF THE COUNSEL FOR THE PETITIONER ARE WELL FOUNDED. THE ONLY REASON WHICH HAS BEEN GIVEN SEEKING REOPENING OF THE ASSESSMENT FOR THE YEARS 1997 - 98 AND 1998 - 99 IS THAT SUPPRESSION OF SALES HAVE TAKEN PLACE ON ACCOUNT O F THE FACT THAT WHEN AVERAGE PRICE OF THE CLOSING STOCK IS MULTIPLIED WITH THE QUANTITY OF THE SALES IN THE YEAR THEN THE VALUE OF THE SALES WOULD BE AT A HIGHER FIGURE THAN THAT AS DECLARED BY THE ASSESSEE. CLEARLY, THERE IS NO NEW MATERIAL WHICH IS ALLEG ED TO HAVE COME TO THE ITA NO. 5126/DEL./11 & 1023/DEL./2013 16 NOTICE OF THE ASSESSING OFFICER WHICH HAS CAUSED HIM TO SEEK REOPENING OF THE ASSESSMENT. ADMITTEDLY, THE REASONS GIVEN FOR SEEKING REOPENING OF THE ASSESSMENT CONTAINS THE EXPRESSION 'PERUSAL OF THE CASE RECORD REVEALS' CLEARLY SHOW ING THAT IT IS ON THE BASIS OF THE SAME ASSESSMENT RECORD AS WAS FILED BY THE ASSESSEE, DURING THE RELEVANT ASSESSMENT YEARS AND ALSO SCRUTINIZED BY THE ASSESSING OFFICER BEFORE PASSING THE ORDERS UNDER SECTION 143(3) IS THE BASIS FOR SEEKING REOPENING OF THE ASSESSMENT. FURTHER THE NEW LOGIC, RATIONALE AND OPINION, WHICH HAS BEEN FORMED BY THE ASSESSING OFFICER FOR SEEKING REOPENING OF THE ASSESSMENT IS NOTHING BUT A CHANGE OF OPINION AND A NEW APPROACH TO THE EXISTING FACTS AND MATERIAL WHICH THE ASSESSIN G OFFICER COULD WELL HAVE DONE DURING THE REGULAR ASSESSMENT PROCEEDINGS OF THE RELEVANT ASSESSMENT YEARS. NOT ONLY THIS, THE RATIONALE/LOGIC/REASONS GIVEN THAT SALE PRICE OF STOCKS DURING THE ENTIRE ASSESSMENT YEAR WOULD REMAIN CONSTANT IS SOMETHING WHICH INDEED CONFOUNDS US. IT CANNOT STAND TO REASON THAT THE PRICE OF SALE OF PADDY/RICE/PULSES REMAINED CONSTANT THROUGHOUT THE YEAR SO THAT ON THE BASIS OF AN AVERAGE PRICE OF THE CLOSING STOCK THE SALE PRICE FOR THE ENTIRE YEAR COMPRISING OF 12 MONTHS, 48 W EEKS AND 365 DAYS CAN BE ASCERTAINED IN THAT THE SAME WOULD HAVE REMAINED FIXED THROUGHOUT THIS PERIOD. EVEN ASSUMING THAT THIS LOGIC IS CORRECT, IT WAS SURELY AN EXERCISE WHICH THE ASSESSING OFFICER COULD HAVE DONE ON THE BASIS OF MATERIALS WHICH HE IS NO W PRESENTLY SEEKING TO DO BECAUSE THE SAME VERY MATERIALS WERE AVAILABLE TO HIM IN THE RELEVANT ASSESSMENT YEARS AND MERELY BECAUSE THE ASSESSING OFFICER FEELS THAT HE HAS FAILED TO DO WHAT HE OUGHT TO HAVE DONE CANNOT BE A VALID GROUND FOR SEEKING INITIAT ION OF REASSESSMENT UNDER SECTION 147/148 OF THE ACT. 7.2 MOREOVER, A BARE READING OF FIRST PROVISO TO SECTION 147, SHOWS THAT THE LAW MERELY CASTS A DUTY ON THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THE DU TY OF THE ASSESSEE DOES NOT EXTEND BEYOND THE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IT IS THEREAFTER THE DUTY OF AO TO PROPERLY APPLY THE LAW THERETO. EVEN IF ONE PRESUMES FOR A MOMENT THAT IN PROCEEDINGS U/S 143(3) OF THE ACT, TH E THEN AO DID NOT PROPERLY APPRECIATE THE LAW THAT INCOME FROM FOREIGN EXCHANGE FLUCTUATION IS NOT DERIVED FROM THE ACTIVITIES OF EXPORT THEN ASSUMPTION OF JURISDICTION U/S 147 IS UNSUSTAINABLE IN THE INSTANT CASE IN VIEW OF THE DECISION OF HON BLE DELHI H IGH COURT IN THE CASE OF ITA NO. 5126/DEL./11 & 1023/DEL./2013 17 PUROLATOR INDIA LTD. REPORTED IN 343 ITR 155 (DEL) WHEREIN IT HAS BEEN HELD AS UNDER: - 10. IN THE PRESENT CASE, THERE IS NO INDICATION THAT THE ASSESSEE HAD FAILED OR OMITTED TO DISCLOSE THE MATERIAL OR PRIMARY FACTS. THESE WERE A VAILABLE ON RECORD. THE ASSESSING OFFICER, IT IS STATED, HAD FAILED TO DRAW CORRECT LEGAL INFERENCES AT THE TIME OF ORIGINAL ASSESSMENT FROM THE SAID PRIMARY FACTS. THIS IS NOT AN ERROR OR OMISSION ON THE PART OF THE RESPONDENT - ASSESSEE. IT IS NOT ALLEGED THAT THE ASSESSEE HAD SUPPRESSED, MISREPRESENTED OR FALSIFIED THE RECORD/FACTS. IT IS NOT ALLEGED THAT THERE WAS ANY SUBSEQUENT FACTUAL INFORMATION ON THE BASIS OF WHICH IT WAS FOUND THAT THE ASSESSEE HAD NOT FULLY DISCLOSED THE PRIMARY FACTS OR HAD FALSIF IED OR DISCLOSED INCORRECT PRIMARY FACTS. . .. 11. RECENTLY IN ATMA RAM PROPERTIES (P.) LTD. V. DY. CIT [2011] 203 TAXMAN 408 (DELHI) AND IT HAS BEEN OBSERVED AS UNDER : '15. THE REASONS RECORDED ABOVE DO STATE THAT THE APPELLANT ASSESSEE HAD FAILED TO F ULLY AND TRULY DISCLOSE THE FACTS BUT DO NOT INDICATE WHY AND HOW THE ASSESSEE HAD FAILED TO MAKE FULL AND TRUE DISCLOSURE OF THE MATERIAL FACTS. MERE REPETITION OR QUOTING THE LANGUAGE OF THE PROVISO IS NOT SUFFICIENT. THE BASIS OF THE AVERMENT/STATEMENT SHOULD BE EITHER STATED OR SHOULD BE APPARENT/LUCID/EXPLAINED FROM THE RECORD. 16. IN THE PRESENT APPEAL, EXPLANATION (1) TO SECTION 147 ALSO DOES NOT HELP OR ASSIST THE REVENUE. ALL MATERIAL FACTS WERE AVAILABLE ON RECORD AND NO MATERIAL FACTS HAD TO BE INFERRED OR DISCOVERED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IN SPITE OF BEING AWARE OF THE FACTS, FAILED TO APPLY OR, AT BEST FAILED TO CONSIDER WHETHER SECTION 2(22)(E) OF THE ACT WAS ATTRACTED. FAILURE TO APPLY LAW OR A SECTION TO ADMITTED FAC TS ON RECORD IS NOT COVERED BY EXPLANATION (1). EXPLANATION (1) APPLIES WHEN THE ASSESSING OFFICER ON THE BASIS OF ACCOUNT BOOKS OR OTHER EVIDENCE FAILS TO DISCOVER OR INFER MATERIAL FACTS WHICH WITH DUE DILIGENCE COULD HAVE BEEN DISCOVERED. EXPLANATION (1) DEALS WITH FAILURE OF THE ASSESSING OFFICER TO DISCOVER OR INFER ALL MATERIAL FACTS ON THE BASIS OF BOOKS OF ACCOUNTS OR OTHER EVIDENCE PRODUCED BY THE ASSESSEE. DIFFERENCE BETWEEN FACTS AND LAW IS WELL RECOGNIZED AND UNDERSTOOD. EXPLANATION (1) REFLE CTS THE SAID DIFFERENCE.' ITA NO. 5126/DEL./11 & 1023/DEL./2013 18 8. AS FAR AS THE OBJECTION AS TO THE FACTUM OF EXPORT AND ISSUE RELATING TO COPYRIGHT BEING NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY , AGAIN WE FIND NO MERIT IN THE CASE OF AO. DURING THE COURSE OF PROCEEDINGS U/S 143(3) OF T HE ACT, THE ASSESSEE HAD CLEARLY DECLARED THE NATURE OF BUSINESS AND ITEMS BEING EXPORTED BY IT. IN THIS REGARD WE WOULD LIKE TO REFER THE DETAILED SUBMISSIONS OF ASSESSEE DATED 22 ND FEBRUARY, 2006 AS UNDER : JUSTIFICATION OF CLAIM UNDER SECTION 80HHF O F THE INCOME TAX ACT 1. AS IN PAST, THE ASSESSEE CONTINUES TO EXPORT / TRANSFER SOFTWARE PROGRAMMES COMPRISING THE 24 HOURS NEWS CHANNEL TO STAR TV HONG KONG. IT ALSO EXPORTS SOFTWARE PROGRAMMES FOR OTHER BROADCASTERS LIKE BBC ETC. ALL SUCH PROGRAMMES ARE PAID FOR IN CONVERTIBLE EXCHANGE RECEIVED IN THE ASSESSEE'S BA N K ACCOUNT THROUGH PROPER BANKING CHANNELS. DURING THE YEAR EXPORT INCOME EQUIVALENT TO INR 974,773,359/ - WAS EARNED. DETAIL OF PARTY WISE SALES INCLUDING EXPORTS HAS ALREADY BEEN SUBMITTED. THE ASSESSEE FULFILLS ALL THE CONDITIONS FOR THE CLAIM OF DEDUCTION U/S 80HHF WHICH HAS ALREADY BEEN ALLOWED IN THE ASSESSMENT OF AY 2000 - 01, 2001 - 02 & 2002 - 03. THE ESSENTIAL CONDITIONS FOR THE DEDUCTIONS ARE SUMMARIZED AS UNDER : - A) THE ASSESSEE BEING AN INDIA N COMPANY IS ENGAGED IN THE BUSINESS OF TELEVISION NEWS SOFTWARE / TELEVISION SOFTWARE. B) THE CONSIDERATION AGAINST THE EXPORT OF SOFTWARE IS RECEIVED IN INDIA IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE PREVI OUS YEARS. C) I T IS REITERATED THAT THE FACTS AND CIRCUMSTANCES FOR THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2003 - 04 ARE EXACTLY THE SAME AS WERE FOR THE YEARS RELEVANT TO ASSESSMENT YEARS 2000 - 01, 2001 - 02 & 2002 - 03 FOR WHICH DEDUCTION HAS ALREADY BEEN ALLOWED IN THE ASS ESSMENTS UNDER SECTION 143(3). THE SAME MAY KINDLY BE ALLOWED FOR THIS YEAR ALSO. WE HAVE BEEN DIRECTED VIDE QUESTIONNAIRE TO FURNISH THE EVIDENCE IN SUPPORT OF EXPORT / TRANSMISSION MADE BY THE ASSESSEE COMPANY AND ALSO EVIDENCE IN SUPPORT OF THE FOREIGN EXCHANGE REALIZATION WITH IN TIME LIMITS AS PRESCRIBED UNDER THE ACT. IT MAY BE KINDLY NOTED THAT THE ASSESSEE ITA NO. 5126/DEL./11 & 1023/DEL./2013 19 COMPANY HAS RECEIVED THE FOREIGN EXCHANGE THROUGH NORMAL BANKING CHANNELS IN THE PRESCRIBED MANNER WITHIN THE PRESCRIBED TIME LIMITS IN ALL INST ANCES. WE ARE ENCLOSING HEREWITH THE FOLLOWING FOR YOUR KIND PERUSAL: - I. DETAIL OF PARTY WISE EXPORT INVOICES II. COPIES OF EXPORT INVOICES III. COPY OF BANK CERTIFICATE OF EXPORT AND REALIZATION (EXPORT TO STAR, & SAMPLE FOR BBC IBR PROGRAMME) IV. FOREIGN INWARD REMI TTANCE CERTIFICATE ISSUE BY THE BANK THE ASSESSEE FULFILS ALL THE CONDITIONS, FOR THE CLAIM UNDER SECTION 80HHF WHICH HAS ALREADY BEEN ALLOWED TO THE ASSESSEE COMPANY IN THE ASSESSMENT FOR IMMEDIATELY PRECEDING ASSESSMENT YEARS 2000 - 01, 2001 - 02 AND 2002 - 03 ON THE SAME FACTS. (ANENXURE - I). FURTHER, VIDE SUBMISSIONS DATED 20 TH JANUARY, 2005 IT WAS SUBMITTED BY THE ASSESSEE AS UNDER : - 1. A NOTE ON BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY UNDERTAKEN DURING THE YEAR ALONG WITH A BRIEF HISTORY OF THE CASE ARE ENCLOSED. THE ACTIVITIES OF THE COMPANY ARE EXACTLY THE SAME AS WERE IN LAST YEAR (S). THE DETAILS OF PREMISES CONNECTED WITH BUSINESS ARE ALSO GIVEN IN THE SAID NOTE (ANNEXURE - I) .. .. 2. A NOTE ON STATUS OF THE AGREEMENT & EXPORTS / TRANSMISSION BY TH E ASSESSEE TO STAR TV, HONG KONG IS ENCLOSED. 8.1 ONCE THESE FACTS WERE PRESENTED AND CONSIDERED BY THE AO IN THE PROCEEDINGS U/S 143(3) OF THE ACT, THEN THE IMPUGNED REASSESSMENT PROCEEDINGS U/S. 147 WOULD CLEARLY FIT INTO THE CLASS OF A CHANGE OF OPINION , WHICH IS NOT PERMISSIBLE UNDER LAW . MOREOVER, WE FIND THAT ITAT IN ASSESSEE S OWN CASE FOR A.Y. 2002 - 03 VIDE ORDER DATED 31 ST MARCH, 2008 IN ITA NO.2481/DEL/2007 HELD AS UNDER : 6. RIVAL SUBMISSIONS HAVE BEEN CONSIDERED AND, MATERIAL PLACED ON RE CORD HAS BEEN PERUSED. THE PRIMARY ISSUE WHICH REQUIRES TO BE RESOLVED AT THE THRESHOLD IN THIS APPEAL REVOLVES AROUND THE VALIDITY OF THE ASSUMPTION OF JURISDICTION BY THE COMMISSIONER OF INCOME TAX ON INVOKING ITA NO. 5126/DEL./11 & 1023/DEL./2013 20 THE POWERS LAID DOWN UNDER SECTION 263 OF TH E ACT. BEFORE DELVING ON THE ISSUE INVOLVED, IT WOULD BE RELEVANT TO STATE THE FACTUAL MATRIX, IN BRIEF. THE APPELLANT IS A COMPANY ENGAGED, INTER - ALIA, IN THE PRODUCTION OF NEWS SOFTWARE FOR TELEVISION PROGRAMMES. THE APPELLANT COMPANY HAD ENTERED WITH TH E AGREEMENT DATED 21ST OF FEBRUARY 1997 WITH M/S NEWS TELEVISION (INDIA) PVT. LTD. (HEREINAFTER REFERRED TO AS 'NTVI'), INDIAN ARM OF STAR TV OF HONG KONG. ACCORDING TO THE AGREEMENT, NDTV I.E. THE APPELLANT COMPANY WAS RESPONSIBLE FOR THE PRODUCTION OF TH E ENTIRE SOFTWARE (PROGRAMMING FOR A 24 HRS. INDIAN NEWS CHANNEL, WHICH WILL BE SUPPLIED TO NTVI WHO WOULD BROADCAST IT THROUGH STAR TV OR ANY OTHER COMPANY. IN FACT CLAUSE (IV) OF THE AFORESAID AGREEMENT PROVIDES AS UNDER: 'NDTV SHALL EXPORT TO STAR TV P ROGRAMME/FOOTAGE TAPES RELATING TO THE CHANNEL; FOR THE PURPOSES OF BROADCASTING OVERSEAS STAR TV SHALL HAVE THE RIGHT TO BROADCAST OVERSEAS ONLY ON ANY CHANNEL OWNED BY IT OR ITS ASSOCIATED COMPANIES, ANY COMPLETE STORY OR PROGRAMME ON THE 24 HOURS INDIAN NEWS CHANNEL CONTEMPLATED UNDER THIS AGREEMENT. THIS WILL BE A LIMITED NON - EXCLUSIVE FOR SUCH RIGHT SHALL BE USD 3 MILLION PAYABLE TO NDTVB, WHICH SHALL BE PAID IRRESPECTIVE OF ACTUAL BROADCASTS OR USAGE BY STAR TV. THE TOTAL CONSIDERATION FOR THE FIVE YE AR AGGREGATING TO USD 15 MILLION WILL BE PAID...............' 7. THEREAFTER, ANOTHER AGREEMENT WAS SIGNED ON 21ST OF MARCH' 1998 BETWEEN THE APPELLANT COMPANY, STAR TV OF HONG KONG AND NTVI IN INNOVATION OF THE EARLIER AGREEMENT. AS PER THE SECOND AGREEME NT THE RIGHTS UNDER THE FIRST AGREEMENT WERE ASSIGNED BY NTVI TO STAR TV. HONG KONG AND, AS SUCH AFTER THIS AGREEMENT, NTVI HAD NO ROLE TO PLAY IN FULFILLING, EXECUTING AND ENFORCING TERMS AND CONDITIONS OF THE CONTRACT. IN OTHER WORDS, APPELLANT WAS TO EX PORT THE TELEVISION NEWS SOFTWARE TO STAR TV, HONG KONG THROUGH SATELLITE DIRECTLY FROM ITS FACILITIES AT NEW DELHI. THE SATELLITE SPACE AND UPLINKING FACILITIES TO UPLINK THE SIGNALS HAD BEEN CONTRACTED DIRECTLY BY THE APPELLANT FROM VSNL AND, SUCH UPLINK WERE ON A POINT TO POINT BASIS, I.E. DELHI TO HONG KONG. ACCORDINGLY, AS A RESULT OF THE AFORESAID AGREEMENT WITH M/S STAR TV OF HONG KONG, THE APPELLANT COMPANY HAD RECEIVED CONSIDERATION FOR PRODUCTION OF NEWS SOFTWARE FOR THE FIRST TIME IN ASSESSMENT Y EAR 1999 - 2000. DURING THAT YEAR THE APPELLANT CLAIMED DEDUCTION OF RS. 15,76,17,840/ - U/S 80HHE OF THE ACT. HOWEVER THE ASSESSING OFFICER DENIED THE AFORESAID CLAIM OF DEDUCTION WHICH WAS UPHELD BY CIT(A) BY HOLDING AS UNDER: ITA NO. 5126/DEL./11 & 1023/DEL./2013 21 'IN VIEW OF THE ABOVE FACTS & CIRCUMSTANCES AND LEGAL POSITION. I HOLD THAT THOUGH THE APPELLANT COMPANY IS EXPORTING TELEVISION NEWS SOFTWARE DIRECTLY TO THE STAR TV AT HONG KONG AND GETTING THE AMOUNTS IN CONVERTIBLE FOREIGN EXCHANGE, NEVERTHELESS, IT IS NOT COVERED WITHIN THE MEANI NG OF SECTION 80HHE BECAUSE NEITHER IT IS COMPUTER PROGRAMME NOR THE CUSTOMIZED ELECTRONIC DATA. THEREFORE, BENEFIT OF SECTION 80HHE CANNOT BE GIVEN TO THE APPELLANT COMPANY DURING THIS YEAR. THE AO WAS THEREFORE, JUSTIFIED IN DISALLOWING THE APPELLANT THE BENEFIT OF DEDUCTION U/S 80HHE. THE ACTION OF THE AO HEREBY CONFIRMED.' 8. ON APPEAL. TRIBUNAL ACCEPTED THE CLAIM OF THE APPELLANT THAT, THE PRODUCTION OF TELEVISION NEWS SOFTWARE CAN BE DESCRIBED AS COMPUTER SOFTWARE WITHIN THE MEANING OF EXPLANATION (B) TO SECTION 80HHE OF THE ACT. INFACT IN PARA 2 OF THE ORDER OF THE ITAT, IT HAS BEEN OBSERVED THAT ASSESSING OFFICER IN THE ORDER OF ASSESSMENT HAS HELD THAT, TELEVISION SOFTWARE HAS BEEN COVERED U/S 80HHF OF THE ACT WITH EFFECT FROM ASSESSMENT YEAR 200 0 - 01. THUS, IT WAS UNDISPUTED IN THE FIRST YEAR ITSELF THAT, APPELLANT WAS ENGAGED IN THE BUSINESS OF PRODUCTION AND, EXPORT OF TELEVISION SOFTWARE, WHICH WAS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80HHF OF THE ACT. ACCORDINGLY, ASSESSING OFFICER ALLOWED THE CLAIM OF DEDUCTION U/S 80HHF OF THE ACT IN RESPECT OF CONSIDERATION RECEIVED BY THE APPELLANT FROM PRODUCTION AND EXPORT OF TELEVISION NEWS SOFTWARE IN A.Y. 2000 - 01 BY OBSERVING IN THE ORDER OF ASSESSMENT AS UNDER: 'DEDUCTION CLAIMED U/S 80HHE DURING THE ASSESSMENT YEAR 1999 - 2000 WAS NOT ALLOWED AS IT WAS HELD THAT ASSESSEE WAS NOT ENGAGED IN THE PRODUCTION AND EXPORT OF COMPUTER SOFTWARE. IT WAS HELD THAT THE ASSESSEE WAS ENGAGED IN THE PRODUCTION OF TELEVISION NEWS SOFTWARE. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2000 - 01 IT WAS SUBMITTED THAT W.E.F. 01.04.2000. SECTION 80HHE HAS BEEN BROUGHT ON THE STATUTE WHICH SPECIFICALLY INCLUDES 'TELEVISION SOFTWARE' AND TELEVISION NEWS SOFTWARE AS ELIGIBLE BUSINESS ACTIVITIES. IT WAS TH EREFORE, PLEADED THAT IN CASE THERE WAS ANY DOUBT ON THE ELIGIBILITY FOR DEDUCTION U/S 80HHE, THE DEDUCTION COULD BE ALLOWED U/S 80HHF. IT WAS ALSO MENTIONED IN THE TAX AUDIT REPORT FILED WITH THE RETURN OF INCOME. THE DEDUCTION CLAIMED AFTER CONSIDERING A LL RELEVANT FACTS IS ALLOWED.' ITA NO. 5126/DEL./11 & 1023/DEL./2013 22 9. LIKEWISE IDENTICAL CLAIM OF DEDUCTION U/S 80HHF OF THE ACT WAS ALLOWED IN ORDER OF ASSESSMENTS FOR ASSESSMENT YEAR 2001 - 02 AND, FOR THE INSTANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2002 - 03. IT MAY BE PERTINENT TO STATE HE RE THE CONSIDERATION RECEIVED BY THE APPELLANT FOR PRODUCTION OF TELEVISION SOFTWARE FROM M/S STAR TV HONG KONG FOR SUCCESSIVE ASSESSMENT YEARS NAMELY A.Y. 2000 - 01 TO 2002 - 03 WAS UNDER THE AGREEMENT DATED 21ST OF MARCH' 1998 .. . . WE FURTHER DISAGREE WITH THE OBSERVATION OF THE COMMISSIONER THAT, ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE THAT, SINCE WORLDWIDE COPY RIGHTS REMAINED WITH THE APPELLANT COMPANY UNDER THE AGREEMENT, THEREFORE APPELLANT WAS NOT ENTITLED TO CLAIM OF DEDUCTION U/S 80HHF OF T HE ACT, IN VIEW OF THE PAST HISTORY, STATED ABOVE. IN FACT, IN THIS REGARD SPECIFIC SUBMISSION WAS ALSO MADE BY THE APPELLANT BEFORE THE COMMISSIONER THAT, THERE IS NO SPECIFIC PRECONDITION WHICH, ON SUCH FACTS, DISENTITLES THE CLAIM OF DEDUCTION U/S 80HHF OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISION OF BOMBAY BENCH IN THE CASE OF K. R. FILMS 102 ITD 426, WHEREIN IT HAS BEEN OBSERVED AS UNDER: IN THE PRESENT CASE, YASH RAJ FILMS INTERNATIONAL LIMITED OF UK HAS CATEGORICALLY CONFIRMED THAT THE ASSESSEE HAD HANDED OVER THE SAID TAPE TO THEIR REPRESENTATIVE IN INDIA, NAMELY, YASH RAJ FILMS PRIVATE LIMITED, AND THAT, SUBSEQUENTLY, THE TAPE WAS COU RIERED BY YASH RAJ FILMS PRIVATE LIMITED TO YASH RAJ FILMS INTERNATIONAL LIMITED UK. THE EXPORT OR TRANSFER OUT OF INDIA BY ANY MEANS OUTSIDE INDIA OF CASSETTE IS ANYWAY NOT RELEVANT BECAUSE THE CLAIM FOR DEDUCTION UNDER SECTION 80HHF IS NOT IN RESPECT OF TELEVISION SOFTWARE PER SO BUT IS ON ACCOUNT OF TRANSFER OF TELEVISION SOFTWARE RIGHTS . THE AGREEMENT IN QUESTION PERTAINS TO THE TRANSFER OF RIGHTS AND NOT THE SOFTWARE. IN THIS BACKGROUND, IT IS DIFFICULT TO COMPREHEND AS TO ON WHAT BASIS THE CIT(A) CO MES TO THE CONCLUSION THAT THE CASSETTES, EVEN IF THEY ARE BEING SENT THROUGH COURIER, HAVE TO BE SCREENED AND CLEARED BY THE CUSTOM AUTHORITIES . AS FOR THE ASSESSING OFFICER S RELIANCE ON HON BLE BOMBAY HIGH COURT S JUDGMENT IN THE CASE OF ABDULGAFAR A. NADIADWALA, WE FIND THAT IT IS WHOLLY MISCONCEIVED INASMUCH AS, IN THE SAID CASE. THEIR LORDSHIPS WERE DEALING WITH DEDUCTION UNDER SECTION 80HHC WHICH HAS MATERIALLY DIFFERENT REQUIREMENTS. THE CASSETTE BEING SENT OUT OF INDIA IS, IN OUR HUMBLE UNDERSTAN DING, IS NOT AT ALL A PRECONDITION FOR GRANT OF DEDUCTION UNDER SECTION 80HHF. THERE IS THUS NO NEED ON THE PART OF THE ASSESSEE TO PRODUCE ANY EVIDENCE FOR ITA NO. 5126/DEL./11 & 1023/DEL./2013 23 THE SAME. IT IS SUFFICIENT FOR THE ASSESSEE TO DEMONSTRATE THAT THE TELEVISION SOFTWARE RIGHTS AR E TRANSFERRED AND THAT THE RECEIPTS IN CONVERTIBLE FOREIGN EXCHANGE ARE IN RESPECT OF SUCH TRANSFER. THE RIGHTS ARE TRANSFERRED BY MEANS OF A LAWFUL AGREEMENT WHICH WAS AVAILABLE FOR VERIFICATION OF THE ASSESSING OFFICER. THE CIT(A) S OBSERVATION THAT THE MEANS OF TRANSFER HAVE TO BE LEGITIMATE MEANS AND IT WAS ESSENTIAL FOR THE APPELLANT TO ADDUCE EVIDENCE TO THE EFFECT THAT THE CASSETTES WERE CLEARED THROUGH THE OFFICIAL CHANNELS IS ALSO THUS DEVOID OF ANY LEGALLY SUSTAINABLE BASIS. THE CIT(A) HAS COMPL ETELY IGNORED THE CRUCIAL DISTINCTION BETWEEN TRANSFER OF TELEVISION SOFTWARE RIGHTS AND TRANSFER OF TELEVISION SOFTWARE . 13. THE COMMISSIONER HAS THEREAFTER ONLY STATED THAT, THE AFORESAID DECISION HAS NOT BEEN ACCEPTED BY REVENUE. IN OUR OPINION, SUC H AN APPROACH IS NOT A VALID APPROACH FOR ASSUMPTION OF JURISDICTION U/S 263 OF THE ACT. IN ANY CASE, THE FINDING DOES NOT SHOW THAT THE VIEW ADOPTED BY THE AO WAS NOT A POSSIBLE VIEW . 8.2 S INCE THE ABOVE ORDER OF ITAT WAS PASSED ON 31 ST MARCH, 2008 , THE AO WHILE RECORDING OF REASONS ON 31 ST MARCH, 2010 COULD NOT HAVE REASONS TO BELIEVE DOUBTING FACTUM OF EXPORT. LAW RELATING TO CHANGE OF OPINION BEING NOT PERMISSIBLE FOR INVOKING PROCEEDINGS U/S 147 OF THE ACT IS NOW WELL SETTLED. SUPPORT IN THIS REGA RD CAN BE DERIVED FROM THE DECISIONS OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA REPORTED IN 320 ITR 561(SC) AND THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF USHA INTERNATIONAL LTD. REPORTED IN 348 ITR 485(DEL)(FB). MOREOVER AFTE R INITIATING REASSESSMENT PROCEEDINGS DOUBTING FACTUM OF EXPORT THE AO THEREAFTER IN THE REASSESSMENT ORDER HAS ACCEPTED THE SUBMISSION OF ASSESSEE ON THIS ISSUE IN PARA 3.4 AND RESTRICTED HIS FINDINGS ONLY ON THE ISSUE OF FOREIGN EXCHANGE FLUCTUATION GAIN . 9. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE INITIATION OF PROCEEDINGS U/S 147 IS BAD IN LAW AND DESERVES TO BE QUASHED . THE CONSEQUENTIAL ADDITION MADE BY AO, THUS, HAS TO BE DELETED ON THIS COUNT ONLY. ACCORDINGLY , GROUNDS NOS .1 TO 2.2 ARE DECIDED IN FAVOUR OF THE APPELLANT. ITA NO. 5126/DEL./11 & 1023/DEL./2013 24 10 . ADVERTING TO GROUNDS NOS. 3 AND 3.1 AGITATING THE MERITS OF ADDITION , ALTHOUGH NO SEPARATE ADJUDICATION IS REQUIRED SINCE THE ISSUE OF VALIDITY OF REASSESSMENT PROCEEDINGS BEING WITHOUT JURISDICTION HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT, HOWEVER, SINCE BOTH THE PARTIES HAVE ADVANCED DETAILED SUBMISSIONS IN THIS REGARD, WE ARE INCLINED TO ANSWER THE SAME ALSO. IT IS NOW WELL SETTLED PRINCIPLE THAT INCOME DERIVED FROM FOREIGN EXCHANGE FLUCTUATION GAIN IS NOTHING BUT AN ACCRETION TO THE TURNOVER OF THE APPELLANT AND, AS SUCH, FORMS PART OF EXPORT TURNOVER AND TOTAL TURNOVER WHILE COMPUTING DEDUCTION U/S 80HHF. MOREOVER, SAID INCOME CANNOT BE CLASSIFIED AS ANY OTHER RECEIPTS OF SIMILAR NATURE SO AS TO JUSTIFY EXCLUSION UNDER EXPLANATION TO THE SAID SECTION AS DONE BY THE AUTHORITIES BELOW . IN THIS REGARD, WE MAY REFER TO THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRIYANKA GEMS (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER : UNDER THE CIRCUMSTANCES, WE HAVE NO HESITATION IN UPHOLDING THE VIEW OF THE TRIBUNAL. QUITE APART, THE ISSUE IS SUBSTANTIALLY COVERED BY THE DECISION OF THE AMBAIMPEX ( SUPRA ).CONSISTENT AND AT TIMES INDEPENDENT TREND OF THE JUDICIAL PRONOUNCEMENTS OF COUR TS ACROSS THE COUNTRY NEED NOT BE DISTURBED. EVEN INDEPENDENTLY, WE ARE OF THE VIEW THAT THE FOREIGN EXCHANGE GAIN ARISING OUT OF THE FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE CANNOT BE DIVESTED FROM THE EXPORT BUSINESS OF THE ASSESSEE. AS NOTED, ONCE EX PORT IS MADE, DUE TO VARIETY OF REASONS, THE REMISSION OF THE EXPORT SALE CONSIDERATION MAY NOT BE MADE IMMEDIATELY. UNDER THE ACCOUNTING PRINCIPLES, THEREFORE, THE ASSESSEE, ON THE BASIS OF ACCRUAL, WOULD RECORD SALE CONSIDERATION AT THE PREVAILING EXCHAN GE RATE ON THE QUOTED PRICE FOR THE EXPORTED GOODS IN THE FOREIGN CURRENCY RATES. IF DURING THE SAME YEAR OF THE EXPORT, THE REMISSION IS ALSO MADE, THE DIFFERENCE IN THE RATE RECORDED IN THE ACCOUNTS OF THE ASSESSEE AND THAT EVENTUALLY RECEIVED BY WAY OF REMISSION EITHER POSITIVE OR NEGATIVE, WOULD BE DULY ADJUSTED. MAY BE THE ACCOUNTING STANDARDS REQUIRE THAT THE SAME MAY BE RECORDED IN SEPARATE FOREIGN EXCHANGE FLUCTUATION ACCOUNT. NEVERTHELESS ANY DEVIATION EITHER POSITIVE OR NEGATIVE MUST HAVE DIRECT R ELATION TO THE EXPORT ACTUALLY MADE. PAYMENT WOULD BE DUE TO THE ASSESSEE ON ACCOUNT OF THE FACTUM OF EXPORT. CURRENT PRICE OF THE GOODS SO EXPORTED WOULD ALSO BE PRE - DECIDED IN THE FOREIGN EXCHANGE CURRENCY. THE EXACT REMITTANCE IN INDIAN RUPEES WOULD DEP END ON ITA NO. 5126/DEL./11 & 1023/DEL./2013 25 THE PRECISE EXCHANGE RATE AT THE TIME WHEN THE AMOUNT IS REMITTED. THIS FLUCTUATION AND POSSIBILITY OF INCREASE OR DECREASE, IN OUR OPINION, CAN HAVE NO BEARING ON THE SOURCE OF SUCH RECEIPT. PRIMARILY AND ESSENTIALLY, THE RECEIPT WOULD BE ON ACCOUN T OF THE EXPORT MADE. IF THIS IS SO, ANY FLUCTUATION THEREOF ALSO MUST BE SAID TO HAVE ARISEN OUT OF THE EXPORT BUSINESS. MERE PERIOD OF TIME AND THE VAGARIES OF RATE FLUCTUATION IN INTERNATIONAL CURRENCIES CANNOT DIVEST THE INCOME FROM THE CHARACTER OF TH E INCOME FROM ASSESSEE'S EXPORT BUSINESS. IN THAT VIEW OF THE MATTER, THE REVENUE'S CONTENTION THAT SUCH INCOME CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE EXPORT BUSINESS MUST FAIL. IF THIS IS THE POSITION WHEN THE REMITTANCE IS MADE DURING THE SAME YEAR OF THE EXPORT, WE FAIL TO SEE WHAT MATERIAL CHANGE CAN IT BRING ABOUT IF WITHIN THE TIME PERMITTED UNDER SUB - SECTION (2) OF SECTION 80HHC, THE REMITTANCE IS MADE BUT IN THE PROCESS ACCOUNTING YEAR HAS CHANGED. TO OUR MIND MERE CHANGE IN THE ACCOUNTING YEA R CAN HAVE NO REAL IMPACT ON THE NATURE OF THE RECEIPT. THE CONCLUSION OF THE ASSESSING OFFICER THAT SINCE THE YEAR DURING WHICH SUCH SALE PROCEEDS WERE RECEIVED BY THE ASSESSEE EXPORT WAS NOT MADE, WOULD NOT IN ANY MANNER CHANGE THE SITUATION. THE ASSESSE E BEING ENGAGED IN THE BUSINESS OF EXPORT AND HAVING MADE THE EXPORT, MERE FACT OF THE REMITTANCE BEING MADE AFTER 31ST OF MARCH OF THE YEAR WHEN EXPORT WAS MADE, WOULD NOT CHANGE THE SITUATION INSOFAR AS, RELATION OF SUCH INCOME TO THE ASSESSEE'S EXPORT B USINESS IS CONCERNED. CLAUSE (BAA) TO THE EXPLANATION TO SECTION 80HHC PROVIDES FOR EXCLUSION OF CERTAIN INCOMES FOR COMPUTATION OF EXPORT PROFIT UNDER SECTION 80HHC. SUB - CLAUSE (1) OF CLAUSE (BAA) THEREOF PERTAINS TO 90% OF THE SUM REFERRED TO IN CLAUSES (IIIA), (IIIB),(IIIC),(IIID) AND (IIIE) OF SECTION 28 OR ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF SIMILAR NATURE INCLUDED IN SUCH PROFITS. THE TERM 'FOREIGN EXCHANGE DIFFERENCE' IS NOT SPECIFIED IN ANY O F THE CATEGORIES SPECIFICALLY MENTIONED IN THE SAID CLAUSE. THE REVENUE, HOWEVER, CONTENDED THAT THE SAME MUST BE INCLUDED BY NECESSARY IMPLICATION AS PART OF OTHER RECEIPTS. LEGISLATURE, HOWEVER, HAS USED THE TERM 'ANY OTHER RECEIPT OF SIMILAR NATURE'. TH IS EXPRESSION 'SIMILAR NATURE' WOULD HAVE CONSIDERABLE BEARING ON THE ULTIMATE CONCLUSION THAT WE ARRIVE IN THIS RESPECT. WHAT IS TO BE EXCLUDED UNDER THE SAID SUB - CLAUSE (1) OF CLAUSE (BAA) IS ANY OTHER RECEIPT OF A NATURE SIMILAR TO THE BROKERAGE, COMMIS SION, INTEREST, RENT OR CHARGES. THE RECEIPT BY WAY OF FOREIGN EXCHANGE FLUCTUATION NOT BEING SIMILAR TO ANY OF THESE RECEIPTS MENTIONED ABOVE, APPLICATION OF CLAUSE (BAA) MUST BE EXCLUDED. SUB - RULE (1) OF RULE 115 ONLY PROVIDES FOR ADOPTING THE RATE OF EX CHANGE FOR CALCULATION OF VALUE OF RUPEE OF ANY INCOME ACCRUING OR ARISING IN CASE OF AN ASSESSEE AND PROVIDES THAT THE SAME SHALL BE TELEGRAPHIC TRANSFER OF BUYING RATE OF SUCH CURRENCY ON THE SPECIFIED DATE. THE TERM 'SPECIFIED DATE' HAS ITA NO. 5126/DEL./11 & 1023/DEL./2013 26 BEEN DEFINED IN EXPLANATION - 2 TO THE SAID SUB - RULE (1). RULE 115 OF THE INCOME - TAX RULES, 1962 THUS HAS APPLICATION FOR A SPECIFIC PURPOSE AND HAS NO BEARING WHILE JUDGING WHETHER FOREIGN EXCHANGE RATE FLUCTUATION GAIN CAN FORM PART OF THE DEDUCTION UNDER SECTION 80HHC OF THE ACT .. 10.1 FURTHER WE FIND THAT ITAT DELHI BENCH IN THE CASE OF SUJATA GROVER (SUPRA) HAS ALSO CONSIDERED THIS ISSUE HOLDING AS UNDER : - BY APPLYING THE SAID RULE TO THE PRESENT SITUATION IT IS SEEN THAT THE EXPRESSION 'ANY OTHER RECEIPT OF A SIMILAR NATURE' AS USED IN EXPLANATION ( BAA ) IS ACCOMPANIED BY THE RECEIPTS OF BROKERAGE, COMMISSION, INTEREST AND RENT, ETC. THEREFORE, THIS EXPRESS ION SHOULD MEAN ONLY SUCH ITEM WHICH ARE OF THE NATURE OF BROKERAGE, COMMISSION, ETC. AND DO NOT DIRECTLY ADD TO THE EXPORT TURNOVER. THE FOREIGN EXCHANGE FLUCTUATION INCOME, THE SUBJECT OF CONTENTION BEFORE US IS RELATED TO THE EXPORTS EFFECTED IN EARLI-E R YEARS. THERE IS NO DISPUTE AND NATURALLY CANNOT BE, INSOFAR AS THE AMOUNT REPRESENTING FOREIGN EXCHANGE RATE FLUCTUATIONS INCOME IN RELATION TO EXPORTS EFFECTED DURING THE CURRENT YEAR IS CON-CERNED BECAUSE THAT CANNOT BE CONSIDERED FOR EXCLUSION TO THE EXTENT OF 90 PER CENT FOR COMPUTING 'PROFITS OF THE BUSINESS' AND THE CIT HAS HIMSELF LEFT OUT THE SAME. WE FAIL TO UNDERSTAND AS TO HOW THE EXCHANGE RATE FLUCTUATION INCOME RELATING TO EXPORTS EFFECTED IN THE EARLIER YEARS CAN BE DIFFERENTIATED FROM THE E XCHANGE RATE DIFFERENCE IN RELATION TO EXPORTS EFFECTED IN THE CURRENT YEAR. BASICALLY EXCHANGE RATE FLUCTUATION DIFFERENCE IS NOTHING BUT PART OF SALES. WHEN THE GOODS ARE EXPORTED TO A COUNTRY OUTSIDE INDIA, THE INVOICE HAS TO BE RAISED IN TERMS OF THE F OREIGN CURRENCY PREVALENT IN THAT COUNTRY AND AT THE TIME OF MAKING EXPORTS. THE EXPORTER CONVERTS THAT CURRENCY INTO INDIAN RUPEES AT THE EXCHANGE RATE PREVALENT AT THAT TIME AND ACCORDING-LY TAKES COGNIZANCE OF THAT AMOUNT AS ITS EXPORT FIGURE IN ITS BOO KS OF ACCOUNT. HOWEVER, WHEN THE INVOICE IS ACTUALLY REALISED FROM FOREIGN COUNTRY AND THE AMOUNT IS REMITTED TO INDIA, THE EXCHANGE RATE PREVALENT ON THAT DATE MAY BE EQUAL TO OR MORE OR LESS THAN THE ONE RECORDED IN THE BOOKS OF ACCOUNT AT THE TIME OF MA KING THE SALES. IF THE EXCHANGE RATE IS MORE IT RESULTS INTO INCOME FROM THE EXCHANGE RATE FLUCTUATION AND IN THE REVERSE CASE IT BECOMES LOSS ON THAT ACCOUNT. UNDER ALL CIRCUMSTANCES THE BASIC CHARACTER OF THE RECEIPT OF FOREIGN CURRENCY REMAINS THE SAME I.E., IT REMAINS ATTRIBUTABLE TO THE EXPORT EFFECTED BY THE ASSESSEE. WHETHER THERE IS A PROFIT OF A LOSS, IT ULTIMATELY GOES TO INCREASE OR REDUCE THE FIGURE OF EXPORT TURNOVER RECORDED INITIALLY BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. IT, THERE-FORE, SH OWS THAT THE INCOME FROM THE ITA NO. 5126/DEL./11 & 1023/DEL./2013 27 FOREIGN CURRENCY FLUCTUATION IS NOTHING BUT PART OF EXPORT TURNOVER AND IS A SORT OF ADDITION-AL SALES PRICE. NOW WHEN WE READ THE EXPLANATION ( BAA ) BELOW SECTION 80HHC(4B) IT IS NOTED THAT 90 PER CENT OF THE SUMS RE-FERRED TO ARE OF THE NATURE OF BROKERAGE AND COMMISSION, ETC. IN OTHER WORDS, THESE SUMS ARE IN NO WAY PART OF EXPORT TURNOVER AND HENCE DO NOT CONTRIBUTE TO THE MAKING OF EXPORTS. THESE ITEMS ARE INDEPENDENT RECEIPTS AND ARE IN THE NATURE OF INCOME AND NOT TURNOVER OR ITS PART. SO TO PLACE INCOME FROM EXCHANGE RATE FLUCTUATION IN RELATION TO EXPORTS OF EARLIER YEARS IN THIS CATEGORY BY CLASSIFYING IT UNDER THE EXPRESSION 'ANY OTHER RE-CEIPTS OF A SIMILAR NATURE' IS NOT IN ACCORDANCE WITH RULE OF EJUSDEM GENERIS A DI SCUSSED ABOVE. 11. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE DO NOT CONCUR WITH THE FINDINGS RECORDED BY THE AUTHORITIES BELOW ON THIS ISSUE. PER CONTRA , THE DECISIONS RELIED UPON BY THE LD . CIT(A) , BEING DISTINGUISHABLE ON FACTS, ARE NOT FOUND APP LICABLE TO THE CASE IN HAND. ACCORDINGLY, GROUND NOS. 3 & 3.1 ARE DECIDED IN FAVOUR OF THE ASSESSEE . 1 2 . IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST U/S 234B & 234D OF THE ACT. TO THIS WE DIRECT THE AO TO ALLOW CONSEQUENTIAL RELIEF. AS A RESULT THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED. ITA NO.5126/D/2011 1 3 . IN THIS APPEAL, THE A SSESSEE IS AGGRIEVED BY THE ACTION OF LD. CIT IN HOLDING THAT REASSESSMENT ORDER DATED 24 TH DECEMBER, 2010 PASSED BY THE AO U/S 147 / 143(3) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE IN ITA NO.1023/D/2013 WE HAVE HELD ABOVE THAT INITIATION OF PROCEEDINGS U/S 147 OF THE ACT ITSELF STOOD VITIATED BEING WITHOUT J URISDICTION , IN OUR VIEW THE LD. CIT THUS CANNOT INVOKE JURISDICTION U/S 263 AGAINST SUCH VOID OR NON - EST ORDER. SUPPORT IN THIS REGARD IS DERIVED FROM THE DECISION OF ITAT, LUCKNOW BENCH IN THE CASE OF INDER KUMAR BACHANI (HUF) REPORTED IN 99 ITD 621 (LUC K NOW ).THIS APPEAL ITA NO. 5126/DEL./11 & 1023/DEL./2013 28 THEREFORE MERITS TO BE DISPOSED OF ON THIS ASPECT ITSELF. HOWEVER, SINCE ELABORATE ARGUMENTS HAVE BEEN ADVANCED BEFORE US WE ARE INCLINED TO RENDER OUR OPINION ON MERITS OF THE APPEAL AS WELL. 1 4 . ACTION UNDER 263 OF THE ACT HAS BEEN INIT IATED BY THE LD. CIT IN THE INSTANT CASE VIDE SHOW CAUSE NOTICES DATED 21 ST JULY, 2011 AND 10 TH AUGUST, 2011. BEFORE US WRITTEN PROPOSITIONS WERE FILED BY THE LD AR. RELYING UPON THE SAME IT WAS PLEADED BY LD AR THAT ASSUMPTION OF JURISDICTION U/S 263 OF TH E ACT IS BAD IN LAW. PER CONTRA , LD . CIT /DR SUPPORTED ASSUMPTION OF JURISDICTION U/S 263 AND RELIED UPON THE ORDER PASSED BY LD CIT. WE FIND THAT ON AN IDENTICAL ISSUE ACTION U/S 263 WAS INITIATED BY THE LD. CIT IN APPELLANT S OWN CASE FOR A.Y. 2002 - 03 WHI CH WAS SUBJECT MATTER OF DISPUTE BEFORE THIS COURT IN ITA NO. 2481/DEL/2007. TH E ITAT VIDE ORDER DATED 31 ST MARCH 2008 (SUPRA) QUASHED THE ORDER OF LD CIT HOLDING THAT ASSUMPTION OF JURISDICTION WAS BAD IN LAW. THIS ORDER HAS NOW SUBSEQUENTLY BEEN APPROVED BY THE HON BLE DELHI HIGH COURT IN JUDGMENT REPORTED IN 360 ITR 44(DEL). THE FACTUAL POSITION AS WAS PREVALENT IN AY 2002 - 03, STANDS PARI MATERIA IN THE YEAR UNDER CONSIDERATION ALSO AND AN EXHAUSTIVE ENQUIRY INTO THE CLAIM FOR DEDUCTION U/S 80HHF WAS MA DE BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) AND ALSO DURING THE COURSE OF PROCEEDINGS U/S 143(3)/147 OF THE ACT. THIS IS CLEARLY EVIDENT FROM SUBMISSIONS DATED 20 TH JANUARY 2005 AND 22 ND FEBRUARY 2006 FILED BEFORE AO DURING THE COURSE OF PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND FROM SUBMISSIONS DATED 12 TH NOVEMBER 2010 FILED BEFORE AO DURING THE COURSE OF PROCEEDINGS U/S 147/143(3) OF THE ACT. THE RATIO PROPOUNDED BY HON BLE DELHI HIGH COURT WILL THUS APPLY WITH EQUAL FORCE TO THE YEAR UNDER CONSIDERATION. 1 4 .1 FROM A PERUSAL OF THE IMPUGNED ORDER PASSED BY CIT UNDER SECTION 263 OF THE ACT WE FIND THAT ALL THE ALLEGATIONS / OBJECTIONS RAISED BY THE LD CIT , BARRING ITA NO. 5126/DEL./11 & 1023/DEL./2013 29 ONE , ARE SIMILAR TO THOSE LEVIED BY HIM IN CASE OF APP ELLANT FOR AY 2002 - 03. IN THE IMPUGNED ORDER IN PARA 9 , THE LD. CIT HAS ALLEGED THAT ASSESS E E HAS INFLATED EXPORT TURNOVER BY RS 10.73 CRORES EQUIVALENT TO USD 30,00,000. LD CIT HAS ALSO HELD THAT ASSESS E E HAS NOT FURNISHED FIRC S TO THIS EXTEND. IN OUR C ONSIDERED OPINION ASSUMPTION OF JURISDICTION U/S 263 CANNOT BE SUSTAINED FOR THE SIMPLE REASON THAT NO SHOW CAUSE NOTICE WAS ISSUED BY LD. CIT ON THIS ISSUE. WE FIND THAT THE S HOW CAUSE NOTICES DATED 21 ST JULY, 2011 AND 10 TH AUGUST, 2011 ISSUED BY THE LD. C IT IN THE INSTANT CASE DO NOT PUT THE ASSESSEE TO SHOW CAUSE ON THIS ISSUE. IN THIS REGARD WE NOTE THAT HON BLE DELHI HIGH COURT IN THE CASE OF CONTIMETER ELECTRICAL PVT. LTD . REPORTED IN 317 ITR 249(DEL) HAS HELD AS UNDER: 10. THE TRIBUNAL CONSIDERED THE RIVAL CONTENTIONS AND REFERRED TO THE SUPREME COURT S DECISION IN THE CASE OF COMMISSIONER OF CUSTOMS V. TOYO ENGG. INDIA LTD. [2006] 7 SCC 592 WHEREIN THE SUPREME COURT NOTED THAT THE DEPARTMENT CANNOT TRAVEL BEYOND THE SHOW - C AUSE NOTICE. THE TRIBUNAL WAS OF THE VIEW THAT THE GROUND THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS LAID DOWN UNDER SECTION 80 - IA DID NOT FORM PART OF THE SHOW - CAUSE NOTICE. THE TRIBUNAL ACCEPTED THE ARGUMENT OF THE ASSESSEE THAT THE COMMISSIONER OF INCOME - TAX DID NOT EVEN CALL FOR ANY EXPLANATION ON THIS ISSUE AND, THEREFORE, THE ASSESSEE DID NOT HAVE ANY OPPORTUNITY TO MEET THIS GROUND. THE TRIBUNAL WAS OF THE VIEW THAT IT WOULD BE AGAINST THE PRINCIPLES OF NATURAL JUSTICE THAT A PERSON WHO HAS N OT BEEN CONFRONTED WITH ANY GROUND BE SADDLED WITH THE LIABILITY THEREOF. CONSEQUENTLY THE TRIBUNAL HELD THAT AS THE SAID ISSUE DID NOT FORM PART OF THE SHOW - CAUSE NOTICE AND THE ASSESSEE WAS NOT EVEN CONFRONTED WITH IT, EVEN BEFORE THE CIT, IT CANNOT FORM THE BASIS FOR REVISION OF THE ASSESSMENT ORDER UNDER SECTION 263 MOREOVER WE ALSO FIND THAT IN YEARS 1997 AND 1999 APPELLANT HAD RECEIVED ADVANCES FROM STAR TV HONG KONG TO THE TUNE OF USD 85,00,000. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) VIDE SUBMISSIONS DATED 22 ND FEBRUARY 2006 , ASSESS E E HAD FILED DETAIL S AS TO HOW THIS ADVANCE WAS OFFERED TO TAX GOING FORWARD. RELEVANT DETAILS ARE ALSO FILED BEFORE US , WHICH ARE PLACED AT PAGE ITA NO. 5126/DEL./11 & 1023/DEL./2013 30 78 OF THE PAPER BOOK. FROM A PERUSAL OF THIS IT I S SEEN THAT ADVANCE TO THE EXTENT OF USD 30,00,000 WAS OFFERED TO TAX THIS YEAR. SINCE ADEQUATE ENQUIRIES WERE CONDUCTED BY THE AO IN ORIGINAL ASSESSMENT PROCEEDINGS HENCE EVEN ON MERITS ALSO WE FIND THAT THE ORDER OF ASSESSMENT U/S 147/143(3) CANNOT BE TE RMED AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE . IN VIEW OF THIS DISCUSSION AND RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH AND THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ASSESSEE ITSELF, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDER OF LD. CIT DOES NOT STAND ON SOUND FOOTINGS. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE ALSO DESERVES TO BE ALLOWED. 1 5 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.2015 . SD/ - SD/ - ( I.C. SUDHIR ) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30.09.2015 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES , NEW DELHI