M/s Axind Software Development Services Pvt. Ltd., Chandigarh V. CIT-II, Chandigarh

ITA 555/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68498 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: TEJ MOHAN SINGHADV
• Keywords: Assessment record; Prejudicial to interest; Revised return; Revenue expenditure
• Section: 143(3); 10B; 54; 263; 10; 154; 2; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACOCUNTANT MEMBER ITA NO. 555/CHD/2012 ASSESSMENT YEAR:2007-08 M/S AXIND SOFTWARE DEVELOPMENT VS. THE CIT - II SERVICES PVT. LTD. CHANDIGARH, SECTOR- 35 A CHANDIGARH PAN NO.AAFCA5780K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH(ADV.) RESPONDENT BY : SMT. JYOTI KUMARI (CIT,DR) DATE OF HEARING : 11-09-13 DATE OF PRONOUNCEMENT : 13-09-13 ORDER PER BHAVNESH SAINI, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT-II, CHANDIGARH DT. 20/03/2012, FOR ASSESSME NT YEAR 2007-08, CHALLENGING THE ORDER UNDER SECTION 263 OF THE INCO ME TAX ACT ON THE FOLLOWING GROUNDS. 1. THAT THE ORDER UNDER SECTION 263(1) OF THE I.T. ACT, 1961 DATED 20/03/2012 PASSED BY COMMISSIONER OF INCOME TAX-II, CHANDIGARH IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX-II, CHANDIGARH GRAVELY ERRED IN CANCELING THE ASSESSMENT FRAMED U/ S 143(3) AND REOPENING THE SAID ASSESSMENT U/S 263, 2 WHEN THE ALLOWABILITY OF DEDUCTION UNDER SECTION 10 A WAS FULLY DELIBERATED UPON BY THE LD. ASSESSING OFFICER. 3. THAT THE LD. COMMISSIONER OF INCOME TAX GRAVELLY ERRED IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION UNDER SECTION 10 A. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX GRAVELLY ERRED IN HOLDING THAT THE ASSESSING OFFICER ERRED IN NOT EXAMINING THE APPLICABILITY OF PROVISIONS OF SECTIO N 80IA(8) AND 80IA(10). 5. THAT THE PROFIT SHOWN BY ASSESSEE WAS DULY VERIF IED BY THE LD. ASSESSING OFFICER ON THE BASIS OF AUDITE D BOOKS OF ACCOUNTS AND AFTER DUE APPLICATION OF MIND , HE HAD ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSEE, THEREFORE, THE ASSESSMENT FRAMED BY THE LD. ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. ANY OTHER GROUND THAT MAY BE TAKEN AT LATER STAG E WITH THE PERMISSION OF THE HONBLE BENCH. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN DECLARING NIL INCOME FOR THE ASSESSMENT YEAR 2007 -08. LATER THE CASE WAS SELECTED IN SCRUTINY. ASSESSMENT WAS FRAMED U/S 143(3) OF THE INCOME TAX ACT BY ASSESSING OFFICER VIDE ORDER DT. 30/12/2009 AT NIL INCOME AS RETURNED BY THE ASSESSEE. 3. THE LD. CIT ON PERUSAL OF THE ASSESSMENT RECORD, SEEN THAT THE ASSESSEE COMPANY HAD CLAIMED AN INCOME OF RS. 3,98, 53,584,/- AS EXEMPT U/S 10B OF THE INCOME TAX ACT, 1961. HOWEVER , TO BE ELIGIBLE FOR THAT EXEMPTION, IT WAS MANDATORY ON PART OF THE ASSESSEE TO FURNISH A REPORT BY AN ACCOUNTANT IN FORM NO. 56 G ALONG-WI TH RETURN OF INCOME OR IN THE ALTERNATIVE SUBMIT THE SAME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS PER THE PROVISIONS OF SEC TION-10B(5) OF THE 3 INCOME TAX ACT, 1961 R.W. RULE-16 E OF INCOME TAX R ULES, 1962. THE SAID REPORT IN FORM NO. 56 G WAS NOT FURNISHED EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS; THEREFORE THE ASSESSEES CLAIM U/S 10 B WAS NOT ALLOWABLE. ON A PERUSAL OF THE COPY OF THE SUB VENDORS AGREEMENT FILED DURING ASSESSMENT PROCEEDINGS, IT IS NOTICED THAT SERVICES PROVIDED BY THE ASSESSEE COMPANY WAS NOT COVERED WI THIN THE MEANING OF COMPUTER SOFTWARE AS PER EXPLANATION 2 OF SECTIO N- 10 B OF THE ACT. TO QUALIFY AS A 100% EOU, THE ASSESSEE WAS REQUIRED TO SEEK THE APPROVAL OF THE CENTRAL GOVT. UNDER THE INDUSTRIES ACT, 1951 AND AS PER EXPLANATION 2(IV) OF SECTION 10 B. THAT APPRO VAL WAS NOT FURNISHED. THE AO WAS NOT JUSTIFIED IN ALLOWING THE CLAIM U/S 10 B OF THE INCOME TAX ACT, 1961 OF THE ASSESSEE. FURTHER, IT WAS NOTICED THAT TOTAL SERVICES BY THE ASSESSEE COMPANY HAD BEEN PROVIDED TO ITS SISTER CONCERN M/S . AXIND LLC BASED IN USA AND AN ABNORMALLY HIGH NET PROFIT OF 84% ON SALES OF RS. 4.77 CRORE HAD BEEN SHOWN. THE AO DID NOT CAREFULLY EXAM INE THE APPLICABILITY OF THE PROVISIONS OF SECTION 80IA(8) AND 80IA(10) IN THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THE LD. CIT ISSUED A SHOW CAUSE NOTICE ASKING TH E ASSESSEE COMPANY TO EXPLAIN AS TO WHY RECOURSE TO THE PROVIS ION OF SECTION 263 BE NOT TAKEN AS THE ASSESSMENT WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSE E APPEARED BEFORE LD. CIT THROUGH COUNSEL AND FILED REPLIES ON DIFFER ENT DATES. THE INSPECTION OF THE RECORDS MAINTAINED BY AO WAS ALLO WED. 4 5. THE LD. CIT AFTER CONSIDERING THE REPLIES ABOVE AND MATERIAL ON RECORD SET ASIDE THE ASSESSMENT ORDER U/S 143(3) DT . 30/12/2009, WHILE INVOKING JURISDICTION U/S 263 OF THE ITA AND DIRECT ED TO FRAME AFRESH ASSESSMENT AFTER CARRYING OUT PROPER INVESTIGATION AND AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. THE FINDINGS OF LD. CIT IN PARAS 6 TO 9 ARE REPR ODUCED AS UNDER: 6. HERE, IT IS IMPORTANT TO NOTE THAT THE ASSESSE E COMPANY, AS PER COMPUTATION OF INCOME FURNISHED DURING THE ASSESSMENT PROCEEDINGS, CLAIMED EXEMPTION U/S 10B. THE AO ACCEPTED THE ASSESSEES CLAIM WITHOUT REFERENCE TO THE ELIGIBILITY OF THE ASSESSEE AND QUANTUM OF ELIGIBLE EXEMPTION. FOR ACCEPTING THE CLAIM OF HE ASSESSEE TO BE PROPER, THE REQUISITE REPORT HAD TO BE SUBMITTED IN FORM NO. 56 G. IN THE VARIOUS REPLIES SUBMITTED, THE ASSESSEE MAINTAINED THAT THE COMPANY WAS ENTITLED TO EXEMPTION U/S 10 A AND THAT THE REPORT WAS TO BE SUBMITTED IN FORM NO. 56F. IN THIS BACKGROUND, THE REPLY FILED [IN PARTS] BY THE ASSESSEE ARE BRIEFLY DISCUSSED AS UNDER: I) REGARDING ELIGIBILITY FOR EXEMPTION U/S 10B [AS PER COMPUTATION OF INCOME SUBMITTED DURING ASSESSMENT PROCEEDINGS], THE COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AO HAD ALLOWED THE GENUINE CLAIM OF EXEMPTION U/S 10 A [AS PER REPLY DATED 12/03/2012 AFTER DUE APPLICATION OF MIND AND, AS SUCH, THE ASSESSMENT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OR REVENUE. II) REGARDING SER4VICES PROVIDED BY THE ASSESSEE COMPANY TO M/S. AXIND LLC BASED IN USA, THE COMPANY HAD SHOWN HIGH NET PROFIT OF 84% WHICH WAS VERIFIED BY THE AO ON THE BASIS OF THE AUDITED ACCOUNTS, SALES AND EXPENSES. AFTER DUE APPLICATION OF MIND, HE HAD 5 ACCEPTED THE BOOK RESULTS SHOWN BY THE ASSESSEE AND THEREFORE THE ASSESSMENT WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. III) WITH REGARD TO HIGH PROFIT SHOWN BY THE ASSESSEE, IT WAS SUBMITTED BY THE COUNSEL FOR THE ASSESSEE THAT THE ISSUE WAS TAKEN UP BY THE AO DURING THE ASSESSMENT PROCEEDINGS. IT HAS ALSO BEEN SUBMITTED THAT .. TO REBUT IT [HIGH PROFIT SHOWN BY THE ASSESSEE] NO COMPARABLE CASE HAS BEEN BROUGHT OUT BY THE REVENUE IV) THE COUNSEL OF THE ASSESSEE CITED A NUMBER OF JUDGMENTS IN HIS SUPPORT. 7. AFTER CAREFULLY CONSIDERING THE REPLY OF THE COUNSEL VIS--VIS THE FACTS OF THE CASE, I FIND THAT THERE IS NO MERIT IN ASSESSEES SUBMISSION. THE ASSESSEES CLAIM THAT THE ASSESSING OFFICER HAD MADE PROPER ENQUIRIES WITH REGARD TO EXEMPTION U/S 10 B [10A AS PER REPLIES NOW SUBMITTED] AND APPLICABILITY OF PROVISIONS OF SECTION- 80IA(8) AND 80IA(10) AS BEING GENUINE ARE NOT ACCEPTABLE FOR THE FOLLOWING REASONS: I) ON A CAREFUL PERUSAL OF THE ASSESSMENT RECORDS IT IS SEEN THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS NEITHER THE AO CALLED FOR A REPORT U/S 54 G NOR THE ASSESSEE SUBMITTED THE SAME. THE REPORT IN FORM NO. 54 G WAS MANDATORY TO DETERMINE THE ELIGIBILITY OF THE ASSESSEE FOR EXEMPTION U/S 10 B AND THE QUANTUM OF EXEMPTION TO BE ALLOWED. THUS, WHEN THE RELEVANT REPORT IN FORM 56 G IS NOT PLACED ON THE ASSESSMENT RECORD, THE QUESTION OF AO HAVING VERIFIED THE SAME DOES NOT ARISE. II) AS PER THE COMPUTATION OF INCOME SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED EXEMPTION U/S 10B, FOR WHICH REPORT WAS TO BE SUBMITTED IN FORM NO. 56 G. HOWEVER, DURING THE COURSE OF PROCEEDINGS U/S 263, THE VARIOUS REPLIES SUBMITTED BY THE ASSESSEE REFER TO CLAIM OF EXEMPTION U/S 10A, FOR WHICH 6 REQUISITE REPORT WAS REQUIRED TO BE SUBMITTED IN FORM NO. 56F. WHEN , ASSESSEE ITSELF IS NOT CERTAIN AS TO WHICH EXEMPTION IT IS ENTITLED TO, THEREFORE THE AO CAN NOT BE STATED TO HAVE MADE NECESSARY ENQUIRIES IN THAT REGARD . III) ON A PERUSAL OF ASSESSMENT RECORDS, IT IS NOTED THAT THE ASSESSEE HAD SHOWN A VERY HIGH NET PROFIT OF 84% WHICH WAS VERY ASTOUNDING. SINCE THE ENTIRE SERVICES OF THE ASSESSEE COMPANY HAD BEEN PROVIDED TO ITS SISTER CONCERN, THE PROVISIONS OF SECTION 80IA(8) AND 80IA(10) BECOME APPLICABLE. THE AO WAS REQUIRED TO THOROUGHLY VERIFY THE GENUINENESS OF THE HIGH PROFITABILITY. HOWEVER, DURING ENTIRE ASSESSMENT PROCEEDINGS, THERE WAS NO QUESTION ASKED BY THE AO EITHER ABOUT HIGH PROFITABILITY SHOWN OR ABOUT THE APPLICABILITY OF PROVISIONS OF SECTION 80IA(8) AND 80IA(10). THE ASSESSEES CONTENTION THAT THE AO HAD MADE NECESSARY VERIFICATION IN THIS REGARD ARE NOT ACCEPTABLE. IV) THE COUNSEL OF THE ASSESSEE HAS HIMSELF SUBMITTED VIDE REPLY DATED 12/03/2012 REGARDING THE HIGH PROFIT SHOWN BY THE ASSESSEE BY STATING TO REBUT IT [HIGH PROFIT SHOWN BY THE ASSESSEE] NO COMPARABLE CASE HAS BEEN BROUGHT OUT BY THE REVENUE. THIS ITSELF SHOWS THAT THE ASPECT OF HIGH PROFITS SHOWN BY THE ASSESSEE HAS NOT BEEN EXAMINED VIS-- VIS PROVISIONS OF SECTION 80IA(8) AND 80IA(10). V) THE JUDGMENTS CITED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION AND FACTS IN THE PRESENT CASE ARE DISTINGUISHABLE. 8. AFTER CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, SUBMISSIONS OF THE COUNSEL FOR THE ASSESSEE AND RELEVANT PROVISIONS OF THE INCOME-TAX ACT, 1961 [AS DISCUSSED IN DETAIL IN THE PRECEDING PARAGRAPHS] IT IS CLEAR THAT THE AO HAS NOT EXAMINED THE VARIOUS ISSUES REGARDING ASSESSEES CLAIM FOR EXEMPTION U/S 10B [OR 10A AS PER ASSESSEES REPLY IN PROCEEDINGS U/S 263] THE ELIGIBILITY, QUANTUM 7 OF EXEMPTION TO BE GIVEN AND THE APPLICABILITY OF PROVISIONS OF SECTION 80IA(8) AND 80IA(10) WITH REGARD TO THE HIGH PROFIT SHOWN BY THE ASSESSEE. THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS THEREFORE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSING OFFICER HAS FAILED TO GATHER THE FACTS AND CARRY OUT PROPER INVESTIGATIONS. 9. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) ON 30/12/2009 IS HEREBY CANCELLED U/S 263 OF THE INCOME-TAX ACT, 1961, BEING ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. HE IS DIRECTED TO FRAME ASSESSMENT AFRESH AFTER CARRYING OUT PROPER INVESTIGATION AND AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE. 7. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT HE HAS REFERRED TO PAGE 57 OF P APER BOOK WHICH IS REPLY FILED BEFORE LD. CIT DT. 21/02/2012 IN WHICH THE ASSESSEE EXPLAINED THAT THE ASSESSEE COMPANY WAS REGISTERED UNDER SOFTWARE TECHNOLOGY PARK OF INDIA, NOIDA VIDE THERE APPROVAL DT. 21/06/2006 AS 100% EXPORT ORIENTED UNIT UNDER SOFTWARE TECHNOLOGY PARK SCHEME FOR THE DEVELOPING / MANUFACTURING OF COMPUTER SOFTWARE / IT ENABLED SERVICES, COPY OF THE CERTIFICATE IS FILED AT PAGE 31 OF THE PAPER BOOK. IT WAS ALSO EXPLAINED THAT REQUIRED AUDIT REPORT AND B ALANCE SHEET ALONGWITH REPORT OF THE CA IN FORM 56 F WAS SUBMITT ED BEFORE AO COPY OF WHICH IS FILED IN THE PAPER BOOK AT PAGE 18 . IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION UND ER SECTION 10A OF THE INCOME TAX ACT AND FULFILLED ALL THE STATUTORY COMPLIANCES AS PROVIDED IN THE INCOME TAX ACT HE THEREFORE SUBMITT ED THAT ASSESSEE SPECIFICALLY EXPLAINED THAT CLAIM BEFORE AO WAS MAD E FOR EXEMPTION OF INCOME UNDER SECTION 10 A OF THE INCOME TAX ACT AND NOT UNDER 8 SECTION 10B OF THE INCOME TAX ACT. THEREFORE THERE IS NO REQUIREMENT TO FILE FORM NO. 56 G BECAUSE IT IS NOT APPLICABLE TO PROVISION OF SECTION 10 A OF THE INCOME TAX ACT. FURTHER REPLY D ATED 12/03/2012 WAS FILED BEFORE LD. CIT EXPLAINING THE FACTS THAT ASSESSEE IN ALL THE REPLIES MADE A CLAIM OF DEDUCTION UNDER SECTION 10 A OF THE INCOME TAX ACT, COPIES OF WHICH ARE FILED AT PAGE 59 TO 63 OF THE PAPER BOOK. IT WAS ALSO SUBMITTED THAT THE AO EXAMINED COMPLETE BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS AT ASSESSMENT STA GE ALONGWITH THE REPORT OF THE CHARTERED ACCOUNTANT AND AFTER MAKING COMPLETE ENQUIRY INTO THE MATTER ACCEPTED THE RETURN OF INCOME THERE FORE THE REASONABLENESS OF THE PROFIT UNDER SECTION 80IA(8) &(10) OF THE INCOME TAX ACT WERE ALSO EXAMINED BY THE AO, AND IN THE OP INION OF THE AO THE PROFIT WAS REASONABLE. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE EXPLANATION AND EVIDENCES PRODUCED BEFORE HIM. HE HAS SUBMITTED THAT EVEN IN THE RE-ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 263 OF THE INCOME TAX ACT, THE ASSESSEE MADE A SIMILAR CLAIM OF DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT BUT THE AO DID NOT EXAMINING THE CLAIM OF ASSESSEE AND SUMMARILY REJECTED THE CL AIM VIDE ORDER DT. 08/03/2013 (PAPER BOOK 67). LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 10 A (2) O F THE INCOME TAX ACT APPLIES IN THE CASE OF THE ASSESSEE BECAUSE THE ASS ESSEE HAS BEGUN OR BEGINS TO MANUFACTURE OR TO PRODUCE ARTICLE OR THIN GS OR COMPUTER SOFTWARE DURING THE ASSESSMENT YEAR UNDER APPEAL AN D ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER THE SAID PROVISION BY FILING FORM NO. 56 F WHICH WAS FILED BEFORE THE AO. HE HAS SUBMITTED THA T ENTIRE MATERIAL 9 AND EVIDENCES AND EXPLANATION WAS BEFORE LD. CIT EV EN IN THE PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT , WHO HAVE NOT GIVEN FINDING ON THE SAME. SINCE CIT DID NOT GIVE A NY FINDINGS ON THE EXPLANATION OF THE ASSESSEE WITH REGARD TO CLAIM OF EXEMPTION UNDER SECTION 10 A OF THE INCOME TAX ACT, THEREFORE REVIS ION ORDER IS INVALID. HE HAS REFERRED TO PAGE 2 OF PAPER BOOK WHICH IS CO MPUTATION OF INCOME IN WHICH THE ASSESSEE HAS MADE CLAIM OF DEDU CTION / EXEMPTION UNDER SECTION 10,10A,10B AND 11. HE HAS SUBMITTED T HAT SINCE IT WAS A FIRST YEAR OF CLAIM OF EXEMPTION THEREFORE THERE MA Y BE SOME ERROR IN MENTIONING ALL THE ABOVE PROVISION IN THE COMPUTATI ON OF THE INCOME BUT ALL FACTS WERE BEFORE AO IN THE ORIGINAL ASSESS MENT PROCEEDING WHO HAVE EXAMINED THE ISSUE IN DETAIL AND GRANTED EXEMP TION TO THE ASSESSEE UNDER SECTION 10 A OF THE INCOME TAX ACT. HE HAS REFERRED TO PAPER BOOK 72 WHICH IS QUESTIONNAIRE DT. 22/12/2009 ISSUED BY AO IN WHICH ABOUT 27 QUESTIONS HAVE BEEN RAISED BY AO INC LUDING BRIEF HISTORY OF THE ISSUE AND CALLED FOR NOTE ON BUSINES S ACTIVITIES CARRIED ON DURING THE YEAR WITH DETAILS OF ALL SOURCES OF INCO ME. REPLY WAS FILED. THE AO EXAMINED COMPLETE DETAILS FROM BOOKS OF ACCO UNTS AND WAS SATISFIED WITH EXPLANATION OF THE ASSESSEE AND ACCE PTED THE COMPUTATION OF INCOME FILED BY THE ASSESSEE THEREFORE IT IS NOT A CASE OF LACK OF ENQUIRY OR MAKING IMPROPER ENQUIRY INTO THE MATTER. HE HAS SUBMITTED THAT SINCE PROVISION OF SECTION 10 A OR 10 B ARE SI MILAR AND THERE IS NO REVENUE EFFECT THEREFORE IT MAY NOT BE A CASE OF ER RONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE CONDIT ION OF BOTH THE SECTIONS ARE SIMILAR AND 10A HAVE BEEN SATISFIED BY THE ASSESSEE. HE HAS RELIED UPON DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF 10 MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INC OME TAX [2000]243 ITR 83 IN WHICH IT WAS HELD THAT BEFORE C OMMISSIONER TO EXERCISE THE JURISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT THE TWIN CONDITION NAMELY, THE ORDER OF THE AO SOUGHT T O BE REVISED IS ERRONEOUS AND IT IS PREJUDICIAL TO THE INTEREST OF REVENUE HAVE TO BE SATISFIED. IT WAS FURTHER HELD IN THIS CASE THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFIC ER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURS ES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHER E TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S ON ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE U NLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW . HE HAS ALSO SUBMITTED THAT EVEN IF THE ORDER PASSED BY THE AO I S CRYPTIC AND NO ELABORATE DISCUSSION IS MADE BUT WHEN HE HAS APPLIE D MIND TO THE FACTS AND EVIDENCE BEFORE HIM, THE JURISDICTION EXERCISED BY THE CIT UNDER SECTION 263 IS NOT VALID AND ASSESSMENT ORDER CANNO T BE SAID TO BE ERRONEOUS. IN NEXT YEAR CLAIM OF ASSESSEE U/S 10A IS ACCEPTED U/S 143(1). HE HAS RELIED UPON DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. VS. COMM ISSIONER OF INCOME TAX [2003]263 ITR 437 AND DECISION OF BOMBA Y HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GABRI EL INDIA LTD. [1993]203 ITR 108. IN THE CASE OF GABRIEL INDIA LTD . (SUPRA), IT WAS ALSO HELD THAT MOREOVER, IN INSTANT CASE, COMMISSIONER HIMSELF, E VEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARI NG THE ASSESSEE COULD 11 NOT SAY THAT THE ALLOWANCES OF CLAIM OF ASSESSEE WA S ERRONEOUS AND EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPE NDITURE OF CAPITAL NATURE. THAT WAS NOT PERMISSIBLE TO ASK AO TO RE-EX AMINE THE MATTER. TRIBUNAL JUSTIFIED IN SETTING ASIDE ORDER U/S 263 O F CIT. HE HAS ALSO RELIED UPON CERTAIN ORDERS OF THE TRIBUNAL. HE HAS ALSO SUBMITTED THAT IMPUGNED ORDER PASSED BY THE LD. CIT UNDER SECTION 263 IS NOT VALID AND IS LIABLE TO BE QUASHED. ON THE OTHER HAND LD. DR RELIED UPON ORDER OF THE LD. CIT UNDER SECTION 263 OF THE INCOME TAX ACT. LD. DR SUBMITTED THAT IN THE RETURN OF INCOME ASSESSEE MAD E CLAIM OF EXEMPTION UNDER SECTION 10B OF INCOME TAX ACT AND S INCE THE REQUIRED AUDIT REPORT UNDER SECTION 56 G WAS NOT FILED THERE FORE LD. CIT WAS JUSTIFIED IN PASSING THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT. THE CLAIM OF THE ASSESSEE REGARDING EXEMPTION UNDER SECTION 10A HAVE NOT BEEN SUPPORTED BY ANY EVIDENCE. THE EXPLANATION 2(IV) OF SECTION 10B WAS NOT EXAMINED BY THE AO. THE AO ALSO DID NOT EXAMINE THE APPLICABILITY OF SECTION 10 A IN THE CASE OF ASSESS EE. THEREFORE THERE IS NO APPLICATION OF MIND BY THE AO. LD. DR FILED COPY OF ALL THE NOTICES AND ORDER SHEET OF THE ORIGINAL ASSESSMENT ORDER ON RECORD. LD. DR RELIED UPON FOLLOWING DECISIONS: 1. DECISION OF THE SUPREME COURT IN CASE OF RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME-TAX, WEST BENGAL, AND OTHERS.[2002] 67 ITR 84. 2. DECISION OF THE SUPREME COURT IN CASE OF SMT. TARA DEVI AGGARWAL VS. COMMISSIONER OF INCOME- TAX, WEST BENGAL, [1973]88 ITR323 IN WHICH IT WAS HELD, ON THE FACTS, THAT THERE WERE MATERIALS BEFOR E THE COMMISSIONER TO JUSTIFY HIS FINDING THAT THE ORDER OF ASSESSMENT FOR THE YEAR 1960-61 WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 12 3. DECISION OF ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. FIRMA HI- TECH [2012] 343 ITR 507. 4. DECISION OF DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX VS. EASTERN MEDIKIT LTD.[2011] 337 ITR 56 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. 8.1. SECTION 10A OF THE INCOME TAX ACT PROVIDES ABO UT SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED UNDERTAKI NG IN FREE TRADE ZONE ETC. IT PROVIDES DEDUCTION OUT OF PROFIT AND GAINS AS ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE. SUB SECTION (2) OF SECTION 10 A PROVIDES AS UNDER : (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODU CE ARTICLES OR THINGS OR COMPUTER SOFTWARE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR: (A) COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1981, IN ANY FREE TRADE ZONE; OR (B) COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1994, IN ANY ELECTRONIC HARDWARE TECHNOLOGY PARK, OR, AS THE CASE MAY BE, SOFTWARE TECHNOLOGY PARK; (C) COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2001 IN ANY SPECIAL ECONOMIC ZONE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE; PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THER E ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASS ESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PE RIOD OF SPECIFIED IN THAT SECTION; 13 (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BU SINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPO SE. EXPLANATION: THE PROVISIONS OF EXPLANATION 1 AND EXPLANATION 2 TO SUB-SECTION (2) OF SECTION 80-I SH ALL APPLY FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB-SECTIO N AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB-S ECTION. SUB CLAUSE (5) OF SECTION 10A PROVIDES THAT THE DED UCTION UNDER THIS SECTION SHALL NOT BE ADMISSIBLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR AFTER 1/04/2001, UNLESS THE ASSESSEE FURNISHES IN T HE PRESCRIBED FORM (56F) ALONGWITH THE RETURN OF INCOME, THE REPORT OF CHARTERED ACCOUNTANT IN PRESCRIBED FORM NO. 56 F CERTIFYING T HAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE P ROVISIONS OF THIS SECTION. EXPLANATION 2(I) OF SECTION 10A PROVIDES THE DEFINI TION OF COMPUTER SOFTWARE WHICH READS AS UNDER: (I) COMPUTER SOFTWARE MEANS (A) ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE ;OR (B) ANY CUSTOMIZED ELECTRONIC DATA OR ANY PRODUC T OR SERVICE OF SIMILAR NATURE, AS MAY BE NOTIFIED BY THE BOARD SUB CLAUSE (VII) OF EXPLANATION 2 TO SECTION 10 A P ROVIDES THE DEFINITION OF SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP IN ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY. 8.2. SECTION 10 B OF THE INCOME TAX ACT SIMILARLY P ROVIDES THE SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLISHED 1 00% EXPORT ORIENTED 14 UNDERTAKING AND PROVISIONS FOR DEDUCTION OUT OF SUC H PROFITS AND GAINS AS ARE DERIVED BY A 100% EXPORT ORIENTED UNDERTAKIN G FROM THE EXPORT OF ARTICLE OR THINGS OR COMPUTER SOFTWARE. SUB SECTION (2) TO SECTION 10 B OF THE INCOME TAX A CT PROVIDES AS UNDER: (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHI CH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY:- (I) IT MANUFACTURES OR PRODUCES ANY ARTICLES OR THINGS OR COMPUTER SOFTWARE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33 B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED INTHAT SECTION; (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANYPURPOSE. EXPLANATION- THE PROVISIONS OF EXPLANATION 1 AND EXPLANATION 2 TO SUB-SECTION(2) OF SECTION 80-I S HALL APPLY FOR THE PURPOSES OF CLAUSE (III) OF THIS SU B- SECTIONAS THEY APPLY FOR THE PURPOSES OF CLAUSE ( II) OF THAT SUB- SECTION. SUB SECTION (5) OF SECTION 10 B OF THE INCOME TAX A CT SIMILARLY PROVIDES THAT DEDUCTION UNDER THIS SECTION SHALL NO T BE ADMISSIBLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR AFTER THE 01/04 /2001, UNLESS THE ASSESSEE FURNISHING IN THE PRESCRIBED FORM 56 G ALO NGWITH THE RETURN OF INCOME AS PREPARED BY THE CHARTERED ACCOUNTANT CERT IFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. 15 EXPLANATION 2(I) TO SECTION 10 B PROVIDES THE DEFIN ITION OF COMPUTER SOFTWARE WHICH READS AS UNDER: (I) COMPUTER SOFTWARE MEANS- (A) ANY COMPUTER PROGRAMMED RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE; OR (B) ANY CUSTOMIZED ELECTRONIC DATA OR ANY PRODUCT OR SERVICE OF SIMILAR NATURE AS MAY BE NOTIFIED BY THE BOARD, WHICH IS TRANSMITTED OR EXPORTED FROM INDIA TO AN Y PLACE OUTSIDE INDIA BY ANY MEANS; SUB CLAUSE (IV) TO EXPLANATION 2 TO SECTION 10B PR OVIDES 100% EXPORT ORIENTED UNDERTAKING MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED AS A 100% EXPORT ORIENTED UNDERTAKING BY THE BOARD APP OINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES ACT AND RULES MADE UNDER THAT ACT. 8.3 A BARE READING OF THE ABOVE PROVISIONS SHOW THA T THE DEDUCTION UNDER BOTH THE PROVISIONS ARE ENTITLED TO SUCH UNDE RTAKING WHO HAVE BEGUN OR BEGINNING THE MANUFACTURING OR PRODUCE ART ICLES OR THINGS OR COMPUTER SOFTWARES. THERE IS FURTHER REQUIREMENT TO FURNISH AUDIT REPORT FROM THE CHARTERED ACCOUNTANT CERTIFYING CLA IM OF THE ASSESSEE IN FORM 56 F UNDER SECTION 10A AND REPORT 56 G IN C ASE DEDUCTION HAS CLAIMED UNDER SECTION 10B OF THE INCOME TAX ACT. IN CASE OF DEDUCTION CLAIMED UNDER SECTION 10A, THE BUSINESS WHICH HAVE BEEN COMMENCED IN ANY ELECTRONIC HARDWARE, TECHNOLOGY PARK OR AS THE CASE MAY BE SOFTWARE TECHNOLOGY PARK. THEREFORE THE CONDITION OF BOTH THE 16 SECTIONS HAVE SIMILARITY FOR GRANTING OF DEDUCTION / EXEMPTION IN CASE OF THE UNDERTAKING CONNECTED WITH THE COMPUTER SOF TWARE. 8.4. THE ASSESSEE HAS FILED RETURN OF INCOME IN PRE SCRIBED FORM FOR THE ASSESSMENT YEAR UNDER APPEAL WITHIN THE TIME, C OPY OF THE SAME IS FILED AT PAGE 1 OF THE PAPER BOOK AND COMPUTATION O F INCOME IS FILED AT PAGE 2 OF THE PAPER BOOK. IN THE COMPUTATION OF INC OME THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10 B IN ONE PAR T AND IN THE SAME COMPUTATION OF INCOME THE ASSESSEE CLAIMED DEDUCTIO N ON ACCOUNT OF INCOME BEING EXEMPTED UNDER SECTION 10,10A, 10B AND 11. THE ASSESSEE ALSO FILED COPY OF THE AUDIT REPORT UNDER SECTION 44AB AT PAGE 4 OF THE PAPER BOOK IN WHICH IT WAS CERTIFIED THAT THE NATURE OF BUSINESS OF ASSESSEE IS 100% EOU FOR COMPUTER SOFTW ARE. THE ASSESSEE ALSO FILED FORM NO. 56 F IN THE PAPER BOOK AT PAGE 18 IN WHICH THE CHARTERED ACCOUNTANT HAS CERTIFIED THAT THE ASS ESSEE IS ENGAGED IN EXPORT OF ARTICLES THINGS OR COMPUTER SOFTWARE DURI NG THE YEAR ENDED ON 31/03/2007. IT WAS ALSO CERTIFIED THAT THE UNDERTAK ING OF THE ASSESSEE IS SITUATED IN SOFTWARE TECHNOLOGY PARK / SPECIAL ECON OMIC ZONE AND DEDUCTION HAS BEEN CLAIMED UNDER SECTION 10A OF THE INCOME TAX ACT. THE NATURE OF BUSINESS IS CERTIFIED TO BE EXPORT OF COMPUTER SOFTWARE AND IT WAS ALSO EXPLAINED THAT IT WAS THE FIRST YEA R OF DEDUCTION BEING FINANCIAL YEAR 2006-07. IT IS ALSO CERTIFIED THAT S ALE PROCEED OF THE ASSESSEE ARE COMPUTER SOFTWARE. THE ASSESSEES FORM NO. 56 F IS A PART OF THE RECORD. THE ASSESSEE HAS FILED COPY OF THE Q UESTIONNAIRE DATED 22/12/2009 ISSUED BY THE AO AT THE ASSESSMENT STAGE RAISING AS MANY AS 27 QUESTIONS REGARDING HISTORY OF ASSESSEE AND NATU RE OF BUSINESS 17 ACTIVITIES CARRIED ON AND COMPLETE DETAILS RELATED TO THE BUSINESS ACTIVITIES. THE ASSESSEE FILED REPLY BEFORE AO (PAP ER BOOK 27) IN WHICH COMPLETE DETAILS OF NATURE OF BUSINESS AND HI STORY OF THE ASSESSEE WERE EXPLAINED. THE ASSESSEE EXPLAINED BEF ORE AO AT THE ASSESSMENT STAGE THAT ASSESSEE COMPANY IS DOING BUS INESS OF DEVELOPING AND EXPORTING OF COMPUTER SOFTWARE AND O NLINE MAINTENANCE OF SUCH SOFTWARES. THE ASSESSEE COMPANY IS 100% EOU FOR COMPUTER SOFTWARE AND HAS BEEN DULY REGISTERED WITH THE SOFT WARE TECHNOLOGY PARK OF INDIA, COPY OF WHICH IS FILED AT PAGE 31 OF THE PAPER BOOK. THE ASSESSEE, HOWEVER, IN THE REPLY CLAIMED THAT DEDUCT ION HAS CLAIMED UNDER SECTION 10 B OF THE INCOME TAX ACT. THE CERTI FICATE OF SOFTWARE TECHNOLOGY PARK OF INDIA AS NOTED ABOVE FILED AT PA GE 31 OF THE PAPER BOOK CERTIFIED THAT ASSESSEE IS ENGAGED IN 100% EOU FOR MANUFACTURING COMPUTER SOFTWARE. 8.5. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DT. 30/12/2009 HAS SPECIFICALLY MENTIONED THAT THE ASSESSEE COMPANY AT TENDED THE ASSESSMENT PROCEEDING AND FURNISH THE REQUISITE INF ORMATION / DOCUMENTS AS PER QUERY RAISED BY THE AO. THE CASE H AS BEEN DISCUSSED WITH REPRESENTATIVE OF THE ASSESSEE COMPANY AND ALL THE INFORMATION / DOCUMENTS SUBMITTED BY THE ASSESSEE WERE EXAMINED A ND TEST CHECKED. DOCUMENTARY EVIDENCE REGARDING SOURCE OF INCOME WER E OBTAINED. THE AO WAS SATISFIED WITH EXPLANATION OF THE ASSESSEE A ND ACCEPTED THE RETURNED INCOME FILED AT NIL INCOME. THE COPY OF TH E ORDER SHEET ARE FILED BY LD. DR ON RECORD WHICH ALSO SUPPORT THE FA CT AND THE AO EXAMINED THE ISSUE OF DEDUCTION / EXEMPTION BEING C OMPUTER SOFTWARE 18 IN FAVOUR OF THE ASSESSEE AND WAS SATISFIED WITH TH E EXPLANATION OF THE ASSESSEE. THE DOCUMENTS FILED ON RECORD AS NOTED AB OVE CLEARLY REVEALED THAT THE ASSESSEE IN THE FORM NO. 56 F CLE ARLY CERTIFIED THAT ASSESSEE HAS CLAIMED DEDUCTION/ EXEMPTION UNDER SEC TION 10 A OF THE INCOME TAX ACT AND BEING THE FIRST YEAR OF CLAIM OF DEDUCTION THE ASSESSSEE HAS MENTIONED ALL THE PROVISIONS OF ACT, IN THE RETURN OF INCOME CLAIMING DEDUCTION UNDER SECTION 10,10A,10B AND 11 OF THE INCOME TAX ACT. THE ASSESSE HAS MENTIONED ALL THE P ROVISIONS OF THE ACT IN THE COMPUTATION OF INCOME AS WELL AS ALL THE REPLY FILED BEFORE THE AO BUT THE FACT REMAINED THAT THE ASSESSEE COMP LIED WITH THE PROVISIONS OF SECTION 10A OF INCOME TAX ACT BEING A PPROVAL GRANTED BY SOFTWARE TECHNOLOGY PARK OF INDIA. IN THE FACTS AND CIRCUMSTANCES NOTED ABOVE THE ASSESSEE, THEREFORE, WAS ENTITLED F OR DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT. HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, DELHI VS. MAHALAXMI SUGAR MILLS CO. LTD. [1986] 160 ITR 921, HELD AS UNDER: BY THE COURT: THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME-TAX ACT FOR THE PURPOSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEES TAXAB LE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THAT TH E ASSESSEE FAILS TO CLAIM THE BENEFIT OF A SET-OFF CA NNOT RELIEVE THE INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. 8.6. IT IS DUTY OF AUTHORITIES BELOW TO APPLY CORRE CT PROVISIONS OF LAW WHILE CONSIDERING CLAIM OF ASSESSEE ACCORDING TO FA CTS AND CIRCUMSTANCES OF CASE. THE AO TOOK ONE OF VIEW PERM ISSIBLE IN LAW IN FAVOUR OF ASSESSEE ACCEPTING NIL RETURNED INCOME AS PER SECTION 10A 19 OF INCOME TAX ACT, THE ASSESSMENT ORDER COULD NOT B E HELD TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO INTEREST OF R EVENUE. 8.7. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CO MMISSIONER OF INCOME TAX VS. GOYAL PRIVATE FAMILY SPECIFIC TRUST [1988] 171 ITR698 HELD AS UNDER : THE ORDERS OF THE INCOME-TAX OFFICER MAY BE BRIEF AND CRYPTIC, BUT THAT BY ITSELF IS NOT SUFFICIENT R EASON TO BRAND THE ASSESSMENT ORDERS AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WRITING AN ORDER IN DETAIL MAY BE A LEGAL REQUIREMENT, BUT THE ORDER NOT FULFILLING THIS REQUIREMENT, CANNOT BE SA ID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS FOR THE COMMISSIONER TO POINT OUT A S TO WHAT ERROR WAS COMMITTED BY THE INCOME-TAX OFFICER IN HAVING REACHED THE CONCLUSION THAT THE INCOME OF THE TRUST WAS EXEMPT IN ITS HANDS AND WAS ASSESSABLE ONLY IN THE HANDS OF THE BENEFICIARIES. THE COMMISSIONER HAVING FAILED TO POINT OUT ANY ERROR, NO ERROR CAN BE INFERRED FROM THE ORDERS OF THE INCOME-TAX OFFICER FOR THE SIMPLE REASON THAT THEY ARE BEREFT OF DETAILS. IF THE ORDER IS NOT ERRONEOUS, THEN IT CANNOT BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THERE IS NOTHING TO SHOW I N THE ORDER OF THE COMMISSIONER THAT THE INCOME-TAX OFFICER WOULD HAVE REACHED A DIFFERENT CONCLUSION HAD HE PASSED A DETAILED ORDER. SO, THE CONCLUSION OF THE COMMISSIONER THAT THE ORDERS OF THE INCOME-TAX OFFICER ARE ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE ARE BASED MERELY ON SUSPICION AND SURMISES IN THE ABSENCE OF ANY ENQUIRY HAVING BEEN MADE BY HIM. 8.8. HONBLE DELHI HIGH COURT IN THE CASE OF COMMIS SIONER OF INCOME-TAX VS. ANIL KUMAR SHARMA [2011] 335 ITR 83 HELD AS UNDER: THERE IS A DISTINCTION BETWEEN LACK OF INQUIRY A ND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY, EVE N INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION T O THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER: 20 HELD, DISMISSING THE APPEAL, THAT THE PRESENT CASE WOULD NOT BE ONE OF LACK OF INQUIRY EVEN IF THE INQUIRY WAS TERMED INADEQUATE. THE TRIBUNAL FOUND THAT COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER AND THAT HE APPLIED HIS MIND TO T HE RELEVANT MATERIAL AND FACTS, ALTHOUGH SUCH APPLICATION OF MIND WAS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. THE TRIBUNAL HELD THAT THE COMMISSIONER IN PROCEEDINGS UNDER SECTION 263 ALSO HAD ALL THESE DETAILS AND MATERIAL AVAILABLE BEFORE HIM, BUT HAD NOT BEEN ABLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE MATERIAL, FOR ARRIVING AT A CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSESSMENT ON ACCOUNT OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. THE TRIBUNAL WAS RIGHT AND THE ORDER OF REVISION WAS NOT VALID. 8.9. WE MAY ALSO NOTE HERE THAT THE ASSESSEE FILED REPLY BEFORE LD. CIT IN THE PROCEEDING UNDER SECTION 263 OF INCOME T AX ACT DT. 21/02/2012 (PAPER BOOK 57) IN WHICH THE ASSESSE EXP LAINED THAT THE ASSESSEE COMPANY IS REGISTERED UNDER SOFTWARE TECHN OLOGY PARK OF INDIA BEING 100% EXPORT UNIT UNDER SOFTWARE TECHNOL OGY PARK SCHEME FOR DEVELOPING / MANUFACTURING OF COMPUTER SOFTWARE / IT ENABLED SERVICES, COPY OF THE CERTIFICATE WAS ALSO FILED. I T WAS ALSO SUBMITTED THAT THE REPORT AND BALANCE SHEET AS CERTIFIED BY C HARTERED ACCOUNTANT IN FORM NO. 56 F WAS FILED BEFORE AO AND COPY OF TH E SAME WAS ALSO FILED BEFORE LD. CIT. IT WAS ALSO EXPLAINED THAT AS SESSEE COMPANY HAD CLAIMED DEDUCTION UNDER SECTION 10A OF THE INCOME T AX ACT AND COMPLIED WITH PROVISION OF LAW. THE ASSESSEE FURTHE R FILED REPLY BEFORE LD. CIT ON DT. 12/03/2012 (PAPER BOOK-59 AND 63 ) I N WHICH THE ASSESSEE EXPLAINED THAT COMPLETE BOOKS OF ACCOUNTS AND ALL THE MATERIAL WERE FURNISHED BEFORE AO AT THE ASSESSMENT STAGE TO CLAIM DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT. SIMILAR FA CTS WERE EXPLAINED THAT ASSESSEE CLAIMED DEDUCTION UNDER SECTION 10A B EING THE ASSESSEE 21 COMPANY 100% EOU FOR COMPUTER SOFTWARE AND IS DULY REGISTERED WITH SOFTWARE TECHNOLOGY PARK IN INDIA. FORM NO. 56 F WA S ALSO FILED BEFORE AO AND THE AO AFTER EXAMINING THE COMPLETE D ETAILS AND REPLY ALLOWED THE GENUINE CLAIM OF ASSESSEE OF DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT. IT WAS ALSO EXPLAINED THAT T HE AO EXAMINED THE COMPLETE BOOKS OF ACCOUNTS AND WAS SATISFIED WITH T HE EXPLANATIONS OF ASSESSEE AND PROFIT EARNED OUT OF SAID BUSINESS. TH E AO WAS SATISFIED WITH REASONABLENESS OF THE PROFIT EARNED BY THE ASS ESSEE. THEREFORE ASSESSEE WAS RIGHTLY GRANTED DEDUCTION UNDER SECTIO N 10A OF THE INCOME-TAX ACT. WHEN THE MATTER WAS TAKEN UP BY THE AO IN RE- ASSESSMENT PROCEEDING UNDER SECTION 143(3)/263 DT. 08/3/2013 THE ASSESSEE MADE SIMILAR CLAIM OF DEDUCTION UNDER SECT ION 10A BUT IT WAS NOT ALLOWED BEING NO REVISED RETURN HAVE BEEN FILED . IT WOULD THEREFORE SHOW THAT THE ASSESSEE SINCE BEGINNING BEFORE AO AS WELL AS BEFORE LD. CIT CLAIMED THAT DEDUCTION WAS CLAIMED UNDER SECTIO N 10 A OF THE INCOME- TAX ACT AND THE CLAIM OF ASSESSEE WAS SUPPO RTED BY FORM NO. 56F AND APPROVAL BY SOFTWARE TECHNOLOGY PARK OF IND IA. NEITHER THE LD. CIT NOR THE AO IN THE RE-ASSESSMENT PROCEEDING HAS BEEN ABLE TO POINT OUT DEFECTS IN THE CLAIM OF ASSESSEE FOR DEDU CTION UNDER SECTION 10A OF INCOME TAX ACT. THE LD. CIT DID NOT DEAL WIT H THE EXPLANATION / SUBMISSION OF THE ASSESSEE FOR CLAIMING DEDUCTION UNDER SECTION 10A OF THE INCOME TAX ACT. THE ASSESSEE FILED COMPLETE DETAILS BEFORE THE AUTHORITIES BELOW IN SUPPORT OF THE CONTENTION AND ON GOING THROUGH THE SAME IN THE LIGHT OF PROVISION OF SECTION 10A, WE F IND THAT ASSESSEE DULY COMPLIED WITH THE PROVISIONS OF SECTION 10A, T HEREFORE THE AO AT THE ORIGINAL ASSESSMENT STAGE EVEN IF PASSED A CRYP TIC ORDER WAS 22 JUSTIFIED IN GRANTING DEDUCTION IN FAVOUR OF THE AS SESSEE IN ACCORDANCE WITH PROVISION OF SECTION 10A OF THE INCOME-TAX ACT . THE LD. CIT IN PROCEEDING UNDER SECTION 263 OF THE INCOME TAX ACT ALSO HAD ALL THESE DETAILS AND MATERIAL BEFORE HIM, BUT HAD NOT BEEN A BLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE MATERIAL / EVIDENCES F OR ARRIVING AT A CONCLUSION THAT EXEMPTION UNDER SECTION 10 A IS NOT ALLOWABLE IN THE CASE OF THE ASSESSEE. THEREFORE THE REVISION ORDER UNDER SECTION 263 OF THE INCOME TAX ACT CANNOT BE SUSTAINED. 8.10. WE RELY UPON DECISION OF HONBLE GAUHATI HIGH COURT IN CASE OF SMT. LILA CHOUDHURY VS. COMMISSIONER OF INCOME-TAX AND OTHERS [2007] 289 ITR 226 IN WHICH IT WAS HELD THAT IN THE ORDER THE COMMISSIONER HAD NOT RECORDED ANY OPINION THAT THE ORDER OF ASSESSMENT OF THE PETITIONER FOR THE ASSESSMENT YEAR 1992-93 WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THAT WAS THE OPINION RECORDED IN THE NOTICE DATED AUGUST 14/19, 1996, BUT THE OPINION BEING RECORDED IN A NOTICE ISSUED TO THE PETITIONER ASKING TO SHOW CAUSE, MUST BE UNDERSTOOD TO BE RELIABLE. SUCH OPINION WAS REQUIRED TO BE REITERATE D AFTER HEARING THE PETITIONER AND AFTER HOLDING THE NECESSARY ENQUIRY. ON RECEIPT OF THE SHOW-CAUSE NOTICE, THE PETITIONER SUBMITTED AN ELABORATE REPLY . THE COMMISSIONER ON RECEIPT OF THE REPLY OF THE PETITIONER COULD NOT HAVE IGNORED THE SAME. RATHER, IT WAS INCUMBENT ON THE COMMISSIONER TO CONSIDER THE EXPLANATIONS OFFERED AND ON THAT BASIS TO RECOR D HIS OPINION / CONCLUSION. MOREOVER, THE COMPETENT CRIMINAL COURT HAD EXONERATED THE SON-IN-LAW OF THE PETITIONER FROM ANY LIABILITY ON ACCOUNT OF THE HOU SE PROPERTY IN QUESTION HOLDING IT TO BELONG TO THE PETITIONER. THE FINDINGS RECORDED BY THE CRIMINAL COURT IN THIS REGARD COULD NOT BE BRUSHED ASIDC. HENCE, ANY DE NOVO PROCEEDINGS AT THIS STAGE WOULD BE FUTILE. THE ORDER OF REVISION HAD TO BE QUASHED. THE ASSESSMENT OF THE PETITIONER FOR THE ASSESSMENT YEAR 1992-93 MADE BY ORDER DATED MAY 16, 1994, HAD TO BE CONSIDERED COMPLETE AND FINAL. 23 8.11. HONBLE DELHI HIGH COURT IN THE CASE OF COMMI SSIONER OF INCOME TAX VS. VIKAS POLYMERS [2012] 341 ITR 537 HE LD AS UNDER: THAT THE COMMISSIONER HAD MENTIONED THAT THE INCOME-TAX OFFICER HAD NOT EXAMINED THE CASH CREDITS OF THE PARTNERS OR DEPOSITS OF CHIT FUND. ASSUMING THIS TO BE SO, THIS MIGHT MAKE THE ORDER ERRONEOUS, BUT HOW IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAD NOT BEEN STATED BY THE COMMISSIONER AS HE DID NOT DEAL WITH THE EXPLANATION GIVEN BY THE ASSESSEE IN THE COURSE OF THE SECTION 263 PROCEEDINGS. THE COMMISSIONER OBSERVED IN HIS ORDER THAT THE ASSESSEE HAD NOT FIL ED CERTAIN DOCUMENTS ON THE RECORD AT THE TIME OF ASSESSMENT. ASSUMING THIS WAS SO IT DID NOT JUSTIFY THE CONCLUSION ARRIVED AT BY THE COMMISSIONER THAT THE ASSESSING OFFICER HAD SHIRKED HIS RESPONSIBILIT Y OF EXAMINING AND INVESTIGATION THE CASE. MORE SO, I N VIEW OF THE FACT THAT THE ASSESSEE EXPLAINED THAT T HE CAPITAL INVESTMENT MADE BY THE PARTNERS, WHICH HAD BEEN CALLED INTO QUESTION BY THE COMMISSIONER, AND THIS WAS DULY REFLECTED IN THE RESPECTIVE ASSESSMEN TS OF THE PARTNERS WHO WERE INCOME-TAX ASSESSES AND THE UNSECURED LOAN TAKEN FROM THE CHIT FUND WAS DUL Y REFLECTED IN THE ASSESSMENT ORDER OF THE CHIT FUND WHICH WAS ALSO AN ASSESSEE. THE ORDER OF REVISION WAS NOT VALID. 8.12. HONBLE GAUHATI HIGH COURT IN THE CASE OF B A ND A PLANTATION AND INDUSTRIES LTD. AND ANOTHER VS. COMMISSIONER OF INCOME TAX AND OTHERS [2007]290 ITR 395 HELD AS UNDER: THAT IT WAS AFTER EXAMINATION OF THE BOOKS OF ACCOUNT UNDER SECTION 43 B THAT THE ASSESSING AUTHORITY HAD ALLOWED THE DEDUCTION ON ACCOUNT OF BONUS IN EXERCISE OF ITS POWERS UNDER SECTION 143(3 ). THE ASSESSING OFFICER, HAVING ACTED WITHIN HIS JURISDICTION, IN ALLOWING THE CLAIM OF BONUS AS DEDUCTION, IT WAS NOT OPEN TO THE COMMISSIONER TO CONSIDER THE SAID ORDER AS ERRONEOUS MERELY BECAUSE IN HIS VIEW A CERTAIN AMOUNT OF BONUS ALLOWED AS DEDUCTION SHOULD HAVE BEEN DISALLOWED, PARTICULARLY WHEN THE ORDER OF THE COMMISSIONER DID NOT SHOW HOW THE ORDER OF ASSESSMENT COULD BE SAID TO BE AN ORDER PASSED WITHOUT JURISDICTION OR AN ORDER PASSE D BEYOND JURISDICTION OR WHOLLY CONTRARY TO JURISDICTION. A RECTIFICATION PROCEEDING WAS 24 INITIATED, UNDER SECTION 154 OF THE ACT, BY THE JOI NT COMMISSIONER AT THE INITIATIVE OF THE AUDIT PARTY. THE JOINT COMMISSIONER, AFTER MAKING NECESSARY ENQUIRY, DROPPED THE PROCEEDINGS. THE ASSESSING AUTHORITY WAS SATISFIED THAT THERE WAS NO MISTAKE APPARENT FROM THE RECORD IN ALLOWING THE CLAIM OF DEDUCTION ON ACCOUNT OF BONUS. INITIATION OF THE SU O MOTU REVISIONAL PROCEEDINGS, IN THE SAME MATTER, AMOUNTED TO ENTRENCHING UPON THE POWERS OF THE ASSESSING AUTHORITY. THERE WAS NOTHING IN THE NOTIC E OR THE ORDER TO SHOW THAT THE COMMISSIONER HAD APPLIED HIS INDEPENDENT MIND AND HAD COME TO THE CONCLUSION THAT THE ASSESSMENT NEEDED TO BE REVISED . WHEN A RECTIFICATION PROCEEDING IS INITIATED UNDER SECTION 154 AND A FINAL ORDER DROPPING THE RECTIFICATION PROCEEDING IS PASSED, THE EFFECT IS T HAT THE ASSESSMENT ORDER HAS MERGED INTO THE ORDER MADE IN THE RECTIFICATION PROCEEDING. IN THE CASE A T HAND, THE ASSESSMENT ORDER DATED MARCH 11, 1998, HAD MERGED IN THE ORDER DATED JANUARY 7, 2000. IN SUCH CIRCUMSTANCES, WITHOUT INTERFERING WITH THE ORDER DATED JANUARY 7, 2000, THE ORDER DATED MARCH 11, 1998, COULD NOT HAVE BEEN REACHED BY THE REVISIONAL AUTHORITY AND SET ASIDE. THE NOTICE DATE D JANUARY 24,2000 AND THE ORDER DATED MARCH 28,2000, PASSED BY THE COMMISSIONER, UNDER SECTION 263, WERE ABSOLUTELY WITHOUT JURISDICTION AND NOT TENABLE IN LAW. THE NOTICE AND ORDER WERE LIABLE TO BE QUASHED. 8.13. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF THE ABOVE CASE LAWS, WE ARE OF THE VIEW THAT WHEN ALL THE EVIDENCE AND MATERIAL ON RECORD CLEARLY SUPPORT THE CASE / EXPLANATION OF TH E ASSESSEE THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10 A OF THE INCOME-TAX ACT, THE LD. CIT SHOULD HAVE EXAMINED THE EXPLANATI ON OF THE ASSESSEE AND PASSED THE ORDER OF REVISION IN ACCORDANCE WITH LAW. MERELY BECAUSE AO PASSED A CRYPTIC ORDER OR MIGHT HAVE MAD E INADEQUATE ENQUIRY WOULD NOT BE A GROUND TO SET ASIDE THE ASSE SSMENT ORDER. LD. COUNSEL FOR ASSESSEE ALSO CONTENDED THAT IN NEXT YE AR SIMILAR CLAIM OF ASSESSEE HAS BEEN ACCEPTED U/S 143(1) BY REVENUE DE PT. HAS NOT BEEN DISPUTED BEFORE US. 25 8.14. THE ORDER PASSED BY THE AO THUS CANNOT BE TER MED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE REVISION ORDER PASSED BY THE LD. CIT IN THE FACTS AND CIRCUM STANCES OF THE CASE IS NOT SUSTAINABLE IN LAW. WE ACCORDINGLY SET ASIDE THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT DT. 20/03/2012 AN D QUASHED THE SAME. RESULTANTLY THE ORIGINAL ASSESSMENT ORDER DT. 30/12/2009 UNDER SECTION 143(3) IS RESTORED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 13/09/2013 SD/- SD/- (T.R. SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH SEPTEMBER, 2013 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR.