BLUE STAR INFOTECH LTD, MUMBAI V. DCIT CIR 6(1), MUMBAI

ITA 5380/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0712 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHR I PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5380/MUM/2015 (ASSESSMENT YEAR-2005-06) M/S BLUE STAR INFOTECH LTD. 8 TH FLOOR, THE GREAT OASIS, PLOT NO. D-13, MIDC, ANDHERI (EAST), MUMBAI-400093. PAN: AAACB6385J VS. DCIT CIRCLE- 6(1), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.S. TIWARI WITH MS. RUTUJA N. PAWAR (AR) REVENUE BY : SHRI T.A. KHAN (DR) DATE OF HEARING : 14.12.2017 DATE OF PRONOUNCEMENT : 12.01.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER LD. CIT(A)-12, MUMBAI DATED 14.08.2015 FOR ASSESSMENT YEAR (AY) 2005-06, WHICH ARISES FROM THE ORDER OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 147 DATED 25.03. 2013. THOUGH, THE ASSESSEE HAS RAISED AS MANY AS NINE GROUNDS OF APPE AL, HOWEVER, AS PER OUR CONSIDERED OPINION THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL ARE THE SUBSTANTIAL GROUNDS OF APPEALS: 1. THE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 14 7 IS BAD-IN-LAW AND ON FACTS. 2. THE LD. CIT(A) ERRED IN CONCLUDING THE REASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 IS VALID UNDER THE LAW. 3. THE LD. CIT(A) ERRED IN LAW AND DENYING THE SET-OFF OF LOSSES OF 10A UNIT AGAINST THE INCOME OF NON-10A UNIT. ITA NO. 5 380/M/2015- M/S BLUE STAR INFOTECH LTD. 2 4. THE LD. CIT(A) ERRED IN UPHOLDING THE REOPENING AND NOT ALLOWING THE SET-OFF OF LOSSES IN VIEW OF BINDING DECISION OF JURISDICTIONA L HIGH COURT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 1,96,67,460/- ON 31.10.2005. THE ASSESSMENT WAS COMPLETED ON 26.12.2008. THE AO WHILE PASSING THE ASSESSMENT ORD ER DISALLOWED EXEMPTION UNDER SECTION 10A IN RESPECT OF SDF-V UN IT OF RS. 2,98,90,596/- AND ALSO ADDED INTEREST INCOME ON ACCOUNT OF DELAY IN RECEIPT OF PAYMENT FROM ITS ASSOCIATE ENTERPRISES (AE) IN UK & USA. SU BSEQUENTLY, THE ASSESSMENT ORDER WAS REVISED BY AO ON 25.03.2013 UN DER SECTION 147. NOTICE UNDER SECTION 148 WAS ISSUED FOR RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON 14.03.2012. IN RESPONSE TO THE NO TICE UNDER SECTION 148, THE ASSESSEE VIDE ITS REPLY DATED 04.04.2012 CONTENDED THAT THE ORIGINAL RETURN FILED BE TREATED AS RETURN OF. THE ASSESSEE DEMANDE D THE REASONS OF RE- OPENING. THE FOLLOWING REASONS OF RE-OPENING WAS SU PPLIED TO THE ASSESSEE: SUBSEQUENTLY, FOLLOWING FACTS WERE FOUNDS FROM THE RECORDS; (I) ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A IN RESPECT OF 4 UNITS. IN ONE OF THE UNIT VIZ HNG WAS UNDER LOSS. SINCE, I NCOME IS EXEMPT UNDER SECTION 10A, THIS LOSS SHOULD NOT HAVE BEEN I NCLUDED IN THE INCOME FOR COMPUTATION OF INCOME FOR TAX. THUS THIS LOSS FROM EXEMPTED UNIT WAS ADJUSTED AGAINST THE TAXABLE INCO ME. THIS OMISSION HAS RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 4 0,29,444/-. THE ASSESSEE FILED ITS OBJECTION AGAINST THE REOPEN ING AND CONTENDED THEREIN THAT PROCEEDING UNDER SECTION 148 CAN ONLY BE MADE IF, IT COULD BE PROVED THAT THERE IS FAILURE ON THE PART OF ASSESSEE IN DISCLOS ING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE OBJECTION OF AS SESSEE WAS REJECTED BY AO. ITA NO. 5 380/M/2015- M/S BLUE STAR INFOTECH LTD. 3 THE AO PROCEEDED TO MAKE THE RE-ASSESSMENT PROCEEDI NG. THE RE-ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 WAS COMPLETED ON 25 .03.2013. IN THE REASSESSMENT PROCEEDING, THE AO DISALLOWED THE SET OF LOSS OF RS. 40,29,444/- FROM THE HNG UNIT AGAINST THE ELIGIBLE UNIT UNDER SECTION 10A. AGGRIEVED BY THE ORDER OF RE-ASSESSMENT THE ASSESSE E CHALLENGED THE RE- OPENING OF THE ASSESSMENT AS WELL AS ADDITION OF RS . 40,29,444/- ADDED BY WAY OF DENYING THE SET-OFF OF LOSES FROM ELIGIBLE U NIT UNDER SECTION 10A BEFORE FIRST APPELLATE AUTHORITY/ LD CIT(A). THE LD . CIT(A) CONFIRMED THE RE- OPENING AND THE DENIAL OF SET-OFF OF LOSSES FROM EL IGIBLE UNIT. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT ASSESSMENT FOR RELEVANT AY WAS COMPLETED ON 26.12.2008 UNDER SECTI ON 143(3). THE AO ISSUED NOTICE UNDER SECTION 148 ON 14.03.2012. THE AO ISSUED A VAGUE NOTICE. IN THE NOTICE, THE AO HAS NOT DISCLOSED AS TO WHAT INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IT WAS ARGUED THAT ASSESSEE WAS SUPPLIED REASONS FOR RE-OPENING VIDE L ETTER DATED 28.09.2012. THE REASONS OF RE-OPENING ARE ALSO VAGUE. THE REASO NS OF RE-OPENING ITSELF DISCLOSED THAT SUBSEQUENTLY, FOLLOWING FACTS WERE FOUND FROM THE RECORD. FROM THE CONTENTS OF REASONS FOR RE-OPENING, IT IS CLEAR THAT THERE WAS NO ESCAPEMENT OF ASSESSMENT BY THE REASONS TO FAILURE ON THE PART OF ASSESSEE. ITA NO. 5 380/M/2015- M/S BLUE STAR INFOTECH LTD. 4 THE ASSESSEE HAS FURNISHED ALL THE DETAILS ALONG WI TH COMPUTATION OF INCOME AND TAX AUDIT REPORT. THE ASSESSEE FURNISHED ALL CL AIM/DEDUCTION IN RESPECT OF ALL ELIGIBLE AND NON-ELIGIBLE UNITS AND THE LOSS . THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MA TERIAL FOR THIS ASSESSMENT OF INCOME OF THE ASSESSEE. IT WAS ARGUED THAT THE RE-O PENING WAS BASED ON THE MARE CHANGE OF OPINION, WHICH IS ITSELF BAD-IN-LAW AND IS LIABLE TO DECLARE AS SUCH. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF T HE ASSESSEE RELIED UPON THE DECISION OF (I) SIEMENS INFORMATION SYSTEM LTD. VS. ACIT [2018] 172 TAXMAN 315 (BOMBAY HC) (II) SIEMENS INFORMATION SYS TEM LTD. VS. ACIT [2008] 168 TAXMAN 209 (HC BOM.) (III) CIT VS. BLACK & VEATCH CONSULTING P. LTD. (20 TAXMANN.COM 141 (HC BOM.) (IV) CIT VS. KELVINATOR OF INDIA LTD. (123 TAXMAN 433 (HC DEL.) & (V) CIT VS. KELVINATOR OF INDIA LTD. (1`87 TAXMAN 312 (SC). ON MERIT, IT WAS ARGUED THAT THE A SSESSEE WAS ENTITLED FOR SET-OFF OF LOSSES AGAINST THE ELIGIBLE UNIT UNDER S ECTION 10A AND IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED U PON THE DECISION OF HINDUSTAN UNILEVER LTD. VS. DCIT [2010] 191 TAXMAN 119 (HC BOM.), CIT VS. GALAXY SURFACTANTS LTD. [2012] 19 TAXMANN.COM 1 41 (HC BOM., CIT VS. BLACK & VEATCH CONSULTING P. LTD. ON THE OTHER HAN D, THE LD. DR FOR THE REVENUE RELIED UPON THE DECISION OF LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 & 2 OF T HE APPEAL RELATES TO VALIDITY OF RE-ASSESSMENT PROCEEDING. THE ASSESSMEN T UNDER SECTION 143(3) WAS COMPLETED ON 26.12.2008. NOTICE UNDER SECTION 1 48 WAS ISSUED ON ITA NO. 5 380/M/2015- M/S BLUE STAR INFOTECH LTD. 5 14.03.2012. SINCE NOTICE UNDER SECTION 148 WAS ISSU ED AFTER FOUR YEARS FROM THE END OF RELEVANT AY. HENCE, IN OUR VIEW, THE FIR ST PROVISO OF SECTION 147 IS APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE PE RUSAL OF NOTICE UNDER SECTION 148 AND THE REASONS OF RE-OPENING NOWHERE STATES TH AT THE INCOME CHARGEABLE TO TAX HAS ESCAPED FOR THE RELEVANT ASSESSMENT YEAR ON FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT. THE HONBLE APEX COURT IN CASE OF CIT VS. KELVINATO R OF INDIA LTD. (SUPRA) HELD THAT AFTER 01.04.1989, THE AO HAS POWER TO RE- OPEN, PROVIDED THERE IS TANGIBLE MATERIAL CAME TO CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REASONS MUST HAVE LINKED WITH THE F ORMATION OF BELIEF. AS WE HAVE NOTED THAT NO TANGIBLE MATERIAL WHICH MIGHT HA VE CAME TO THE NOTICE OF AO HAS BEEN MENTIONED EITHER IN THE NOTICE OR IN TH E REASONS OF RE-OPENING. THERE IS NO WHISPER IN THE REASONS OF RE-OPENING TH AT THERE IS ANY FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY AB OUT THE ANY MATERIAL. WE HAVE NOTED THAT ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 26.12.2008. THE AO MADE CERTAIN DISALLOWANCE AFTER CONSIDERING THE CLAIM OF ELIGIBILITY UNDER SECTION 10A IN RESPECT OF FOUR UN ITS AND ALLOWED SET OFF OF LOSS FROM NON ELIGIBLE UNIT. THE AO ALSO DISALLOWED /ADDED INTEREST ON ACCOUNT OF DELAYED PAYMENT FROM ITS AE. THUS, A DETAILED AS SESSMENT ORDER WAS PASSED WITH DUE APPLICATION OF MIND BY THE AO. THUS , IN OUR VIEW, THE RE- OPENING WAS MERE A CHANGE OF OPINION AND THUS, THE RE-OPENING IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE IS NOT VALID. ITA NO. 5 380/M/2015- M/S BLUE STAR INFOTECH LTD. 6 5. WE HAVE NOTED THAT EVEN ON MERIT, THE ASSESSEE IS E NTITLED TO SET-OFF OF LOSSES FROM NON ELIGIBLE UNIT, AGAINST THE PROFIT FROM THE ELIGIBLE UNIT UNDER SECTION 10A AS HAS BEEN HELD IN VARIOUS DECISIONS OF JURISD ICTIONAL HIGH COURT VIZ; IN HINDUSTAN UNILEVER LTD. VS. DCIT (SUPRA), CIT VS. G ALAXY SURFACTANTS LTD. (SUPRA), CIT VS. BLACK & VEATCH CONSULTING P. LTD. (SUPRA) & CIT VS. TECHNO TARP AND POLYMERS PVT. LTD. [ITA NO. 2134 OF 2013 ( HC BOM.)]. THUS, IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT RE-OPENI NG UNDER SECTION 147 WAS INVALID AS IT WAS MERE CHANGE OF OPINION AND EVEN O N MERIT THE ASSESSEE WAS ENTITLED FOR SET-OFF OF LOSSES FROM THE NON-ELIGIBL E UNIT WITH UNIT UNDER SECTION 10A OF THE ACT. THUS, THE ASSESSEE IS SUCCEEDED ON MERIT AS WELL. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DAY OF JANUARY 2018. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 12/01/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. /TRUE COPY/