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

ITA 7187/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0848 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7187/MUM/2011 (ASSESSMENT YEAR- 2006-07) M/S BLUE STAR INFOTECH PVT. LTD., 4 TH FLOOR, BAND BOX HOUSE, DR. A.B. ROAD, WORLI, MUMBAI-400018. PAN: AAACB6385J VS. ACIT, CIRCLE-6(1), ROOM NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) ITA NO.7215/MUM/2011 (ASSESSMENT YEAR- 2006-07) ACIT, CIRCLE-6(1), ROOM NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. VS. M/S BLUE STAR INFOTECH PVT. LTD., 4 TH FLOOR, BAND BOX HOUSE, DR. A.B. ROAD, WORLI, MUMBAI-400018. PAN: AAACB6385J (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.C. TIWARI WITH MS. RUTUJA N. PAWAR (AR) REVENUE BY : SH. N.P. SINGH (SR.CIT- DR) DATE OF HEARING : 24.04.2017 DATE OF PRONOUNCEMENT : 26.04.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE CROSS APPEAL UNDER SECTION 253 OF INCOME TAX ACT ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A)-14, MUMBAI DATED 14.07.2011 FOR AY-2006-07. THE ASSESSEE IN ITA NO.7187/M/2011 HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING THE AO NOT EXCLUDE IN COMPUTATIO N OF DEDUCTION U/S. 10A RS. 3,22,32,500/- BEING EXPORT PROCEEDS REALIZED IN CON VERTIBLE FOREIGN EXCHANGE AFTER ITA NO. 7215 & 7187/M/2011- M/S BLUE STAR INFOTECH PVT. LTD. 2 SIX MONTHS FROM EXPORT DATE WITHOUT PROVIDING OPPOR TUNITY TO THE AO FOR VERIFICATION OF THE DETAILS FILED BEFORE HIM AND THEREBY VIOLATI NG THE PROVISIONS U/S 46A OF INCOME TAX RULES. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE REVENUE IN ITS APPEAL ITA NO 7215/M/2011 HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL: 1. ORDER BAD IN LAW AND ON FACTS (GROUND NO. 1.1 TO 1. 2). 2. ERRONEOUS CONCLUSION ON THE VALIDITY OF THE REAS SESSMENT (GROUND NO. 2.1 TO 2.3). 3. ERRONEOUS CONCLUSION ON BEST-JUDGEMENT ASSESSMEN T (GROUND NO. 3.1 TO 3.2) 4. ERRONEOUS TAXATION OF SALES TAX (GROUND NO. 4.1 TO 4.3). 5. ENTIRE RE-ASSESSMENT PROCEEDINGS INVALID IF THE BASIS FOR RE-OPENING ASSESSMENT FAIL (GROUND NO. 5.1 TO 5.4). 6. ERRONEOUS ADJUSTMENT U/S. 145A OF THE ACT (GROUN D NO. 6.1 TO 6.4). 7. SHORT CREDIT OF PREPAID TAX (7.1 TO 7.2). 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMP ANY, ENGAGED IN THE BUSINESS OF SOFTWARE CONSULTANCY, DESIGN AND DEVELOPMENT SERVIC ES, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 30.11.2006 DECLARING NIL INCOME. THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 02.12.2009 DETERMIN ING THE TOTAL INCOME OF RS.2,46,77,140/-. THE ASSESSEE FILED RECTIFICATION APPLICATION ON 15.01.2010 FOR SEEKING RECTIFICATION OF CERTAIN MISTAKE APPARENT O N RECORD. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT ON 31.0 5.2010. IN RESPONSE TO THE NOTICE U/S 148, THE ASSESSEE VIDE ITS LETTER DATED 07.06.2010 CONTENDED THAT THE ORIGINAL RETURN WAS FILED ON 30.11.2006 BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE ASSESSEE DEMANDED TH E REASONS FOR INITIATION OF RE- ASSESSMENT PROCEEDING. THE FOLLOWING REASONS WERE S UPPLIED TO THE ASSESSEE: M/S. BLUE STAR INFOTECH LTD. A.Y.2006-07 PAN : AACB6385J 31/5/2010. ASSESSMENT WAS COMPLETED U/S.143(3) ON 2 .12.2009 ON A TOTAL INCOME OF RS. 2,46,77,410/-. FROM THE RECORDS IT IS FOUND THAT THE PROFORMA CRED ITS OR REFUND OF SALES TAX ADMITTED AS DUE BY AUTHORITIES AMOUNTED TO RS. 1,88 ,98,732/- ON ACCOUNT OF KARNATAKA SALES TAX COLLECTED IN EARLIER YEARS AND NOT REQUIRED TO BE DEPOSITED WITH SALES TAX AUTHORITIES IN THE LIGHT OF DECISION OF ASSTT. COMMISSIONER OF COMMERCIAL TAXES, BANGALORE DATED 19.5.2005. THE AM OUNT OF RS. 1,88,98,732/- WAS NOT CREDITED IN P & L A/C THOUGH THE AMOUNT WAS REQUIRED TO BE BROUGHT TO TAX. THEREFORE, I HAVE REASON TO BELIEVE THAT AT LEAST A N INCOME OF RS. 1,88,98,732/- HAS ESCAPED ASSESSMENT. ITA NO. 7215 & 7187/M/2011- M/S BLUE STAR INFOTECH PVT. LTD. 3 INITIATE PROCEEDINGS U/S. 147 AND ISSUE NOTICE U/S. 148. 4. THE ASSESSEE ON RECEIPT OF REASONS OF REOPENING FI LED OBJECTION ON 05.10.2010. IN THE OBJECTION, THE ASSESSEE SPECIFICALLY PLEADED TH AT THE TAX LIABILITY TO THE EXTENT OF RS. 1,88,98,732/-( SALES TAX REFUND) IS OFFERED FOR TAXATION FOR AY 2007-08, WHICH IS REFERRED IN THE REASONS OF RE-OPENING. THE ASSESSING OFFICER (AO) PROCEEDED WITH THE RE-ASSESSMENT PROCEEDING AND BRO UGHT THE ISSUE ON TAXABILITY OF SALE TAX OF RS. 1,88,98,732/- TO THE TAX LIABILI TY IN THE YEAR UNDER CONSIDERATION. THE AO FURTHER EXAMINED THE DEDUCTION U/S 10A AND C ONCLUDED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 10A AND WAS WRONGLY WORKE D OUT, THE EXCESS DEDUCTION OF RS. 3,43,53,853/- . THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S 10A. THE AO PASSES ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE OBJECTED FOR RE-OPENING AS WE LL AS ISSUE ON TAX OF SALE TAX OF RS. 1,88,98,732/- AS WELL AS DISALLOWANCE OF DEDUCT ION U/S 10A OF THE ACT. THE LD. CIT(A) UPHELD THE ACTION OF RE-OPENING AS WELL AS T AXABILITY OF ISSUE OF SALE TAX AND AS WELL AS ISSUE OF TAXABILITY OF SALE TAX IN A Y 2006-07, HOWEVER, THE DEDUCTION U/S 10A WAS ALLOWED. FURTHER, AGGRIEVED B Y THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US CHA LLENGING THE VALIDITY OF REOPENING AND AS WELL AS TAXABILITY OF SALE TAX OF RS 1,88,98,732. THE REVENUE HAS ALSO FILED CROSS APPEAL CHALLENGING THE DELETIO N OF DISALLOWANCE U/S 10A. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. FIRST GROUND OF APPEAL BY ASSESSEE IS TH AT ORDER U/S 143(3) R.W.S. 147 & 144 IS BAD-IN-LAW. THE LD. AR OF THE ASSESSEE SUBMI TTED THAT THIS GROUND OF APPEAL IS GENERAL IN NATURE AND NEED NO SPECIFIC ADJUDICAT ION. CONSIDERING THE CONTENTION OF LD. AR OF ASSESSEE, THIS GROUND OF APPEAL IS DIS MISSED BEING GENERAL IN NATURE. 6. GROUND NO.2 RELATES TO THE VALIDITY OF RE-ASSESSMEN T ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT. THE LD. AR OF THE ASSESSEE ARGUED T HAT THE ASSESSMENT ORDER FOR AY 2006-07 AND 2007-08 WERE PENDING WITH THE SAME A O. THE ASSESSMENT ORDER IN BOTH THE YEARS WAS PASSED ON 29.12.2010. IT WAS ARGUED THAT THE ASSESSEE VIDE HIS APPLICATION DATED 05.10.2010 SPECIFICALLY BROUG HT IN THE NOTICE OF AO THAT THE ITA NO. 7215 & 7187/M/2011- M/S BLUE STAR INFOTECH PVT. LTD. 4 IMPUGNED SALE TAX LIABILITY OF RS. 1,88,98,732/- WA S OFFERED BY ASSESSEE FOR TAXATION FOR AY 2007-08. THE LD. AR OF THE ASSESSE E INVITED OUR ATTENTION TO THE COPY OF SAID LETTER/OBJECTION FILED BEFORE AO, COPY OF WHICH IS AVAILABLE AT PAGE NO. 124/125 OF PB. THE APPLICATION/ LETTER DATED 05 .10.2010 IS DULY ACKNOWLEDGED.. THE LD. AR SUBMITTED THAT THE RE-OPE NING IS BAD-IN-LAW. THERE WAS NO TANGIBLE MATERIAL ON RECORD, SO THAT SUBSEQU ENT AO MAY MAKE HIS BELIEF ABOUT THE ESCAPEMENT OF INCOME FROM ASSESSMENT. THE AO HAS NO POWER TO REVIEW THE ORDER U/S 147 OF THE ACT. THE ORDER OF A SSESSMENT WAS PASSED U/S 143(3) ON 02.12.2009. THE LD. AR HAS FURTHER INVITE D OUR ATTENTION ON THE NOTES OF AUDIT REPORT RELATED WITH THE ISSUE OF SALE TAX WHI CH IS AVAILABLE AT PAGE NO. 82 OF THE PB. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN JI NDAL PHOTO FILMS LTD. VS. DCIT (1998) 234 ITR 170) (DEL.). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE ARGUED THAT AO WAS HAVING SUFFICIENT REASONS TO BELIEF THA T INCOME ESCAPED FROM ASSESSMENT. THE LD. DR FOR THE REVENUE ARGUED THAT THE LD. CIT(A) WHILE CONSIDERING THE CONTENTION OF ASSESSEE HAS ELABORAT ELY DISCUSSED THE ISSUE IN PARA 71.5 AND 716 OF ITS ORDER. THE LD. CIT(A) RIGHTLY A PPRECIATED THAT AO HAS POWER TO RE-OPEN THE ASSESSMENT FOR THE REASONS THAT THE ITE M OF INCOME CHARGEABLE TO INCOME-TAX, WHICH WAS NOT THE SUBJECT MATTER OF ORI GINAL ASSESSMENT PROCEEDING HAS ESCAPED FROM ASSESSMENT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES WITH THE HELP OF LD. REPRESENTATIVES AND GONE THROUGH THE ORDERS OF AUTH ORITIES BELOW. WE HAVE ALSO PERUSED THE VARIOUS DOCUMENTARY EVIDENCES PLACED O N RECORD. WE HAVE PERUSED THE REASONS OF RE-OPENING. THE CAREFUL READING OF R EASONS REVEALED THAT FROM THE RECORD, THE AO FOUND THAT THE PERFORMA CREDIT OF RE FUND OF SALE TAX DUE FROM THE AUTHORITIES ON ACCOUNT OF KARNATAKA SALE TAX COLLEC TED IN EARLIER NOT REQUIRED TO BE DEPOSITED WITH SALE TAX AUTHORITIES. IN VIEW OF THE DECISION OF ACIT (BANGALORE) DATED 19.05.2005. THE AMOUNT WAS CREDITED IN P&L A/ C, THOUGH IT WAS REQUIRED TO BE BROUGHT TO TAX. FROM THE REASONS RECORDED, IT IS APPARENT CLEAR THAT NOTHING NEW MATERIAL HAS CAME IN THE NOTICE OF AO, SUBSEQUENTLY IN THE COURSE OF ASSESSMENT ITA NO. 7215 & 7187/M/2011- M/S BLUE STAR INFOTECH PVT. LTD. 5 PROCEEDING. THE ASSESSEE IN THE NOTE OF TAX AUDIT R EPORT HAS CLEARLY MENTIONED THIS FACT. MOREOVER, THE ASSESSEE IN ITS OBJECTION DATED 05.10.2010 CLEARLY STATED THAT THE SALES TAX LIABILITY TO THE EXTENT OF RS. 1 ,88,98,732/- WAS OFFERED FOR TAXATION FOR AY 2007-08. THE SAME AO TAXED THE SALE TAX COLLECTED IN EARLIER YEAR IN THE AY 2007-08. AS PER OUR CONSIDERED OPINION TH E REVENUE IS NOT ENTITLED TO TAX THE SAME AMOUNT TWICE. THE HONBLE APEX COURT I N CIT VS. EXCEL INDUSTRIES LTD. [358 ITR 295 (SC)] HELD THAT WHEN THE RATE OF TAX REMAIN THE SAME AND THE ASSESSEE HAS PAID THE TAX IN THE SUBSEQUENT ACCOUNT ING YEAR THEN THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC AND THEREFORE, THERE IS NO NEED FOR REVENUE TO CONTINUE WITH THE LITIGATION WHEN IT IS QUITE CLEAR THAT NOT ONLY IT WAS FRUITLESS BUT ALSO THAT IT MEANING HAVE ADDED ANYTHING MUST TO TH E PUBLIC COFFER. 8. THUS, FROM THE ABOVE FACTUAL DISCUSSION AND THE LEG AL POSITION, WE HOLD THAT NO INCOME WAS ESCAPED FROM THE ASSESSMENT. MOREOVER, T HE IMPUGNED INCOME (SALE TAX LIABILITY) WAS OFFERED BY ASSESSEE IN THE SUBSE QUENT AY WAS MERELY A CHANGE OF OPINION. THE RE-OPENING BASED ON CHANGE OF OPINI ON CANNOT PER SE BE REASONS OF RE-OPENING U/S 147 THUS IT WAS INVALID. THUS WE ACCEPTED THE APPEAL OF THE ASSESSEE ON GROUND NO.2. AS WE HAVE HELD THAT RE-OP ENING OF THE ASSESSMENT AS INVALID. HENCE, THE DISCUSSION ON OTHER GROUNDS OF APPEAL IS BECOME ACADEMIC. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 7215/MUM/2011 APPEAL BY REVENUE : 9. WE HAVE ALREADY HELD THAT RE-OPENING OF ASSESSMENT WAS INVALID. THUS, ALL CONSEQUENTIAL ADDITION/DISALLOWANCE INCLUDING THE D ISCUSSION ON DEDUCTION U/S 10A HAS BECOME ACADEMIC. HENCE, THE APPEAL FIELD BY REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AN D THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF APRIL 2017. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 24/04/2017 S.K.PS ITA NO. 7215 & 7187/M/2011- M/S BLUE STAR INFOTECH PVT. LTD. 6 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/