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

ITA 7117/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8497 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Keywords: Services rendered outside India; Difference of opinion; Change of opinion
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , . BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 7117/MUM/2011 / ASSESSMENT YEAR 2004-05 AC. CIR.6(1), R.NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. BLUE STAR INFOTECH PVT. LTD., 4 TH FLOOR, BAND BOX HOUSE, DR. A.B. ROAD, WORLI, MUMBAI - 18. PAN: AAACB 6385 J ( / APPELLANT ) ( ! / RESPONDENT ) REVENUE BY : SHRI SURINDER JIT SINGH ASSESSEE BY : SHRI NIRAJ SHETH ' #$% / DATE OF HEARING : 25 -09-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 03 -10-2012 () / O R D E R PER RAJENDRA, A.M. FOLLOWING GROUNDS OF APPEAL WERE FILED BY THE ASSES SING OFFICER (AO) AGAINST THE ORDER DATED 14-07-2011 OF THE CIT(A)-14 ,MUMBAI : 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A)S DECISION IN ANNULLING THE ORDER U/S. 143 R.W.S. 147 OF THE ACT IS ERRONEOUS AND CONTRARY TO THE DECISION OF THE HONBLE HIGH COURT DELHI IN THE CASE OF CONSOLIDATED PHOTO & FINVEST LTD. ACIT (2006) 281 ITR 394 (DEL.) ITA NO. 7117/MUM/2011 M/S. BLUE STAR INFOTECH PVT. LTD., 2 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF SOFTWA RE DEVELOPMENT, CONSULTANCY SUPPORT AND MAINTENANCE SERVICE, FILED ITS RETURN OF INCOME ON 30-10- 2004 DECLARING TOTAL INCOME OF RS. 1,92,55,173/-. ASSESSMENT WAS FINALIZED ON 20- 12-2006 U/S. 143 (3) OF THE INCOME TAX ACT, 1961 (A CT) ASSESSING TOTAL INCOME AT RS. 4,89,16,110/- BY THE AO. LATER ON AO INITIATED PROC EEDINGS U/S. 147 OF THE ACT BY ISSUING NOTICE U/S. 148(DT.26-03-2010)IN RESPECT OF INCOME ALLEGED TO HAVE BEEN ESCAPED ASSESSMENT. RE-ASSESSMENT ORDER WAS PASSED ON 29-12-2010 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 27.72 CRORES. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). ASSESSEE-COMPANY CHALLENGED THE VALIDITY OF RE-OPEN ING BEFORE THE FAA. GROUND NOS. 1,2,3 AND 5 OF THE APPEAL FILED BY THE ASSESSE E-COMPANY WERE RELATED TO THE VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS INITIATED U/S. 148 AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR (AY) IN THE LIGHT O F FIRST PROVISO TO SEC.147 OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE, RE-ASSESSMENT ORDER, REASONS RECORDED BY THE AO AND THE OBJECTIONS OF THE ASSESS EE, FAA HELD THAT THE ISSUE ON THE BASIS OF WHICH, THE AO HAD RE-OPENED THE ASSESSMENT HAD BEEN CONSIDERED BY HIM/HIS PREDECESSOR IN ORIGINAL ASSESSMENT PROCEEDINGS, THA T THE AO HAD NO WHERE DEMONSTRATED THAT INCOME HAD ESCAPED BY REASON OF F AILURE ON THE PART OF THE ASSESSEE- COMPANY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR ASSESSMENT, RE- OPENING WAS BASED ON MERE CHANGE OF OPINION, THAT T HERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS, ALL MATERIAL FACTS WERE ALREADY AVAILABLE AT THE TIME OF ORIGINAL ASSESSMEN T PROCEEDINGS, THAT AO HAD NOT ONLY CONSIDERED THE CLAIM OF DEDUCTION U/S. 10A OF THE A CT-BUT AFTER DUE CONSIDERATION, THE CLAIM WAS ALLOWED AT A REDUCED FIGURE OF RS. 15.26 CRORES (AS AGAINST THE APPELLANT CLAIM OF RS. 18.23 CRORES), THAT CASE LAWS RELIED U PON BY THE AO WERE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. HE F URTHER HELD THAT FRESH MATERIAL WAS NOT AVAILABLE TO THE AO WHILE RE-OPENING ASSESSMEN T OF THE APPELLANT, THAT IT WAS A CASE OF CHANGE IN OPINION. RELYING ON THE CASES OF KELVINATOR OF INDIA LTD.(320ITR561), RALLIS INDIA (323ITR54), TANNA BUI LDERS (P) LTD (198CTR541) AND HINDUSTAN LEVER (NOW UNILEVER) LTD. (268ITR332) HE ALLOWED THE APPEAL FILED BY THE ASSESSEE-COMPANY. 3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMI TTED THAT RE-ASSESSMENT PROCEEDINGS WERE INITIATED AS PER THE PROVISIONS OF SECTION 147/148 OF THE ACT THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE-COMPA NY TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS. HE RELIED UPON THE CASE OF CONSOLI DATED PHOTO AND FINVEST LTD., (281 ITR 394). AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ASSESSEE-COMPANY HAD FURNISHED ALL THE NECESSARY DETAILS DURING THE ORIG INAL ASSESSMENT PROCEEDINGS, THAT REASONS RECORDED BY THE AO DO NOT REVEAL FAILURE ON THE PART OF THE ASSESSEE, RE- ASSESSMENT PROCEEDINGS WERE INITIATED AS A RESULT C HANGE IN OPINION OF THE AO, THAT ITA NO. 7117/MUM/2011 M/S. BLUE STAR INFOTECH PVT. LTD., 3 PROVISO WITH SECTION 147 CLEARLY WAS IN FAVOUR OF T HE ASSESSEE-COMPANY. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIA L PUT BEFORE US BEFORE DECIDING THE ISSUE, WE WILL LIKE TO MENTION THE BASIC FACTS OF T HE CASE: I) ORIGINAL ASSESSMENT WAS FINALISED ON 20-12-2006 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 4.89 CRORES AS AGAINS T THE DECLARED INCOME OF RS. 1.92 CRORES. II) AT THE TIME OF ORIGINAL ASSESSMENT CLAIM MADE B Y THE ASSESSEE U/S. 10A OF THE ACT WAS CONSIDERED BY THE AO. HE REDUCED THE C LAIM BY RS. 2.96 CRORES (APPELLANTS CLAIM WAS FOR RS. 18.23 CRORES, WHEREA S AO ALLOWED RS. 15.26 CRORES ONLY). III) PROVISIONS OF SECTION 148 WERE INVOKED WITH R EFERENCE TO SECTION 10A OF THE ACT. 4. WHILE RECORDING THE REASONS AO MENTIONED THAT THE A SSESSEE HAD REDUCED THE EXPENSES INCURRED IN FOREIGN EXCHANGE IN PROVIDING TECHNICAL SERVICE OUTSIDE INDIA FROM THE EXPORT TURN-OVER AS WELL AS TOTAL TURN-OVE R OF THE UNDERTAKING, THAT THE ABOVE EXPENDITURE COULD BE DEDUCTED FROM EXPORT TURN-OVER ONLY, THAT DEDUCTION OF THE ABOVE EXPENDITURE FROM TOTAL TURN-OVER WAS INCORREC T, THAT WHILE COMPUTING THE DEDUCTION U/S. 10A ASSESSEE HAD NOT REDUCED OTHER I NCOME. 5. IN THE CASE UNDER CONSIDERATION NOTICE U/S. 148 WAS ISSUED AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IF WE CONS IDER THE ABOVE FACTUAL POSITION, IT IS CLEAR THAT THE RE-OPENING WAS RESULT OF CHANGE O F OPINION AND NOT RESULT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULL Y MATERIAL FACTS. AS PER THE AO, ASSESSEE SHOULD HAVE REDUCED OTHER INCOME WHILE COM PUTING THE PROFIT OF THE BUSINESS FOR CLAIMING DEDUCTION U/S.10A OF THE ACT. OTHER R EASON OF RE-OPENING, RECORDED BY THE AO, WAS ABOUT REDUCTION OF THE EXPENSES INCURRE D IN FOREIGN EXCHANGE FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA FROM THE EXPORT TURN-OVER AS WELL AS THE TOTAL TURN-OVER. WE FIND THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, DETAILS ABOUT EXPORT TURN-OVER WERE EXAMINED BY THE THEN AO FROM THE RECORDS AVAILABLE, IT IS CLEAR THAT DEDUCTION CLAIMED BY THE APPELLANT U/S. 10A HA D BEEN EXAMINED AND FULLY VERIFIED DURING THE REGULAR ASSESSMENT PROCEEDINGS.AO HAD GR ANTED DEDUCTION TO THE ASSESSEE- COMPANY AFTER CAREFUL SCRUTINY OF THE CLAIM AFTER G OING THROUGH FORM NO. 56(F).THUS, IT IS CLEAR THAT APPELLANT HAD FULLY AND TRULY DISC LOSED ALL THE MATERIAL FACTS TO THE AO. FOR THE PURPOSE OF EVALUATING THE CLAIM MADE U/S. 1 0A,AO HAD APPLIED HIS MIND. FROM THE REASONS RECORDED BY THE AO, IT IS EVIDENT THAT THERE HAD BEEN NO NEW/FRESH MATERIAL AVAILABLE WITH HIM FOR FORMATION OF A BELI EF RELATING TO ESCAPEMENT OF INCOME FOR ASSESSMENT. IN ABSENCE OF ANY NEW MATERIAL, AO S ACTION IN INITIATING REASSESSMENT PROCEEDING, IS HELD TO BE ENTIRELY BAS ED ON MERE CHANGE OF OPINION AND HENCE INVALID. AS PER THE SETTLED PRINCIPLE OF JUR ISPRUDENCE, PROCEEDINGS U/S. 147 CANNOT BE INITIATED BY THE AO TO REVIEW THE EARLIER ORDERS. IN THE CASE UNDER CONSIDERATION, AO HAS ACTUALLY DONE THE REVIEW OF THE ORIGINAL ASSESSMENT ORDER AND THAT IS NOT PERMITTED AS PER THE PROVISIONS OF THE ACT. CASE LAWS RELIED UPON BY THE FAA SUPPORT HIS VIEW. RESPECTFULLY FOLLOWING THE D ECISIONS OF KELVINATOR OF INDIA LTD. AND IPCA LABS LTD., (SUPRA) WE HOLD THAT RE-AS SESSMENT PROCEEDINGS INITIATED BY ITA NO. 7117/MUM/2011 M/S. BLUE STAR INFOTECH PVT. LTD., 4 THE AO FOR THE AY UNDER CONSIDERATION WAS NOT BASED ON ANY SOUND FOOTINGS IT WAS RESULT OF CHANGE OF OPINION. UPHOLDING THE ORDER OF THE FAA, WE DECIDE GROUND NO S. 1-3 AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD OCTOBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 3 RD OCTOBER, 2012 TNMM () () () () ' '' ' #, #, #, #, -,# -,# -,# -,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR B BENCH, ITAT, MUMBAI 6. GUARD FILE !,# # //TRUE COPY// () () () () / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI