Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 2449 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-10-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
H
Assessment Year
2007-2008
Appeal Filed On
02-02-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI PAWAN SINGH, JM ./ I.T.A. NO.725/MUM/2015 ( / ASSESSMENT YEAR: 2007-08) D.C.I.T. -10(1)(1), R. NO.209, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. / VS. M/S. HEXAWARE TECHNOLOGIES LTD. 152, MILLENIUM BUSINESS PARK, SECTOR-3, TTC INDUSTRIAL AREA, MAHAPE, NAVI MUMBAI-400 710. ./ ./PAN/GIR NO. AABCA 3202F ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ARVIND KUMAR / RESPONDENT BY : SHRI VIJAY MEHTA / DATE OF HEARING : 10/10/2016 !'#$ / DATE OF PRONOUNCEMENT : 14/10/2016 / O R D E R PER PAW AN SINGH, J. M.: 1. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)- 17, MUMBAI DATED 08.11.2014 IN RESPECT OF ASSESSMEN T YEAR 2007-08, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE REASSESSMENT IS INVALID W ITHOUT APPRECIATING THAT THE REASONS WERE COMMUNICATED TO THE ASSESSEE VIDE LETT ER DATED 02/07L2012 AND THE ISSUES RAISED THEREIN WERE THE REASONS FOR RE-O PENING. 2 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. 2'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE RE-OPENING OF THE ASSESSMENT WA S BASED ON CHANGE OF OPINION AND NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD WITH OUT APPRECIATING THAT NO OPINION ON THE ISSUES INVOLVED WAS FORMED AT THE TI ME OF ORIGINAL ASSESSMENT AND THE ASSESSMENT WAS RE-OPENED WITHIN A PERIOD OF 4 Y EARS' 3'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 1OA BEFORE COMPUTING THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION WITHOUT APPRECIA TING THAT AFTER THE AMENDMENT, S. 1OA/1 OB HAS BECOME 'DEDUCTION' AND NOT 'EXEMPTI ON' AND THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED AS PER THE COMPUTATION OF INCOME AS DEFINED IN S 2(45) OF THE ACT. ' 4.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 1OA BEFORE COMPUTIN G THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION IGNORIN G THAT THE HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TA X VS. HIMATSINGKA SEIDE LTD. REPORTED IN 286 ITR 255 (2006) WHICH HAS CLARIFIED THAT LOSS OF 10-A UNIT HAS TO BE FIRST SET OFF AGAINST 10- A PROFIT AND ONLY ON BALA NCE AMOUNT DEDUCTION IS AVAILABLE AND IGNORING THE FACT THAT DECISION OF KARNATAKA HI GH COURT WAS UPHELD BY HON'BLE SUPREME COURT IN CA 1501 OF 2008 HOLDING THAT APPEA L IS DEVOID OF ANY MERIT? 5.'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10A BEFORE C OMPUTING THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION IGNORIN G THAT THE CBDT VIDE ITS CIRCULAR NO.7 OF 2013 DATED 16.07.2013 HAS CATEGORI CALLY CLARIFIED AS UNDER: .... 'FIRST THE INCOME/LOSS FROM VARIOUS SOURCES I. E. ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE AGGREGATED IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 70 OF THE ACT. THEREAFTER, THE INCOME FROM ONE AHEA D IS AGGREGATED WITH THE INCOME OR LOSS OF THE OTHER HEAD IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 71 OF THE ACT. IF AFTER GIVING EFFECT TO THE PROVISIONS OF SECTION S 70 AND 71 OF THE ACT THERE IS ANY INCOME (WHERE THERE IS NO BROUGHT FORWARD LOSS TO B E SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT) AND THE SAME I S ELIGIBLE FOR DEDUCTION IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER VIA OR S ECTIONS 10A, 10B ETC. OF THE ACT, THE SAME SHALL BE ALLOWED IN COMPUTING THE TOTAL IN COME OF THE ASSESSEE ... '? 6.'WHETHER ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S 10A BEFORE C OMPUTING THE BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION BY PLAC ING RELIANCE UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OFCIT VS BLACK & V EATCH CONSULTING P LTD 20 TAXMANN.COM 727 (BORN.) IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE RATIO LAID DOWN IN THE SAID CASE. ?' 3 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. 7.'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DIVIDEND DISTRIBUTION TAX WHILE COMPUTING THE BOOK PROFITS U/S. 115JB WITHOUT APPRECIATING THAT THE EX PLANATION 2 BELOW SECTION 115JB WAS ALREADY IN THE STATUTE WHEN THE ASSESSEE FILED ITS REVISED RETURN ON 05/03/2012. ' 8.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DIVIDEND DISTRIBUTION TAX WHILE COMPUTING THE BOOK PROFITS U/S. 115JB WITHOUT APPRECIATING THAT THE EX PLANATION 2 BELOW SECTION 115JB WAS INSERTED BY THE FINANCE ACT, 2008 WITH RETROSPE CTIVE EFFECT FROM 01/04/2001 WHEREAS THE ORDER U/S 14. ALREADY IN THE STATUE WHE N THE ASSESSEE FILED ITS REVISED RETURN ON 05/03/2012. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURN OF INCOME FOR A.Y. 2007-08 ON 31.10.2007 DECLARING TOTAL INCO ME OF RS. 7,52,80,804/-. THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF INCOME TAX ACT, 1961 ON 30.11.2010 DETERMINING ITS TOTAL INCOM E AT RS. 7,90,29,077/-. SUBSEQUENTLY THE ASSESSMENT WAS REOP ENED U/S 147 OF THE ACT. FOLLOWING REASONS WERE RECORDED FOR RE-OPENING OF ASSESSMENT. FROM THE PERUSAL OF THE EASE RECORDS, IT IS SEEN THAT THE ASSESSEE IS ENGAGED IN DESIGN, DEVELOPMENT AND EXPORT OF COM PUTER SOFTWARE ETC. THE ASSESSEE COMPANY IS HAVING THREE 10A UNITS AT MAHAPE, BANGALORE AND CHENNAI. FROM THE SCRUTINY ASSESSMENT RECORDS , IT IS OBSERVED THAT DURING THE SCRUTINY ASSESSMENT, DEPRECIATION AS PER INCOME-TAX ACT WAS THRUSTED AND THE PROFIT IN RESPECT OF BANGA LORE UNIT WAS RECOMPUTED AND ALLOWED THE DEDUCTION OF PROFIT IN R ESPECT OF MAHAPE AND CHENNAI UNITS AS CLAIMED BY THE ASSESSEE COMPANY IN ITS RETURN OF INCOME. IT WAS REVEALED THAT THE CHEN NAI UNITS WAS HAVING BROUGHT FORWARD LOSSES OF RS. 32152293 FOR A Y 2005-06 WHICH WAS NOT SET OFF WHILE ALLOWING 10A DEDUCTION FOR THE CURRENT YEAR. THIS RESULTED IN EXCESS ALLOWANCE OF DEDUCTIO N UNDER SECTION 10A OF RS. 32152293/ - WHICH HAS ESCAPED ASSESSMENT WITH SUBSEQUENT EXCESS CARRY FORWARD OF LOSSES OF THE TH REE UNITS, BANGALORE UNIT WAS TRANSFERRED AND THE ASSESSEE HAS OFFERED SHORT TERM CAPITAL GAINS OF RS. 51563568 ON SLUMP SALE IT S -OF RETURN OF INCOME WHICH WAS ACCEPTED DURING SCRUTINY ASSESS MENT. FROM THE ASSESSMENT RECORDS, IT IS REVEALED THAT THE ASS ESSEE HAD CONSIDERED WDV OF DEPRECIABLE ASSET AS RS. 48583994 ON GROSS 4 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. BASIS. HOWEVER, DURING SCRUTINY ASSESSMENT WHILE AL LOWING DEDUCTION U/S. 10A IN RESPECT OF THE ABOVE UNIT DEP RECIATION OF RS. 26035586 BEING CURRENT YEAR DEPRECIATION AFTER ELAB ORATE DISCUSSION AND TAKING INTO ACCOUNT VARIOUS JUDICIAL PRONOUNCEMENTS. AS SUCH WHILE COMPUTING SHORT TERM CAPITAL GAINS ON SLUMP SALE WDV OF RS. 22548408 NET OF CURR ENT YEAR DEPRECIATION SHOULD HAVE BEEN TAKEN, WHICH HAS RESU LTED IN UNDER ASSESSMENT OF RS. 2,60,35,586 WHICH IN TURN RESULTE D IN EXCESS CARRY FORWARD OF LOSSES OF RS. 2,60,35,586. IN THE COMPUTATION OF INCOME, ASSESSEE HAD CLAIMED DEDUCTION OF RS. 665811431 UNDER SECTION 10A. THE ASSESSEE WA S ALLOWED TO SET OFF BROUGHT FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSS OF RS. 11,84,74,976 PERTAINING TO10A UNITS FRO M THE BALANCE REMAINING AFTER ALLOWANCE OF DEDUCTION UNDER SECTIO N 10A. NO SET OFF OF BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIAT ION WAS MADE WHILE COMPUTING ELIGIBLE PROFITS FOR THE PURPOSE OF SECTION10A. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS HIMATSINGEKE SIEDE LTD [2006 TIOL -448-HC-KAR-IT] H ELD THAT BROUGHT FORWARD UNABSORBED BUSINESS LOSSES AND DEPR ECIATION SHOULD BE SET OFF FIRST WHILE COMPUTING ELIGIBLE PR OFIT UNDER SECTION 10B. IN A RECENT JUDGMENT OF ITAT BANGLORE BENCH IN THE CASE OF M/S. INTELLINET TECHNOLOGIES INDIA PVT. LTD. [2010- TIOL-167- ITAT-BANG], IT WAS HELD THAT THE TOTAL INCOME OF A PARTICULAR ASSESSMENT YEAR HAS TO BE COMPUTED AFTER AGGREGATIO N OF THE PROFITS/LOSSES OF THE CONCERNED ASSESSMENT YEAR UND ER DIFFERENT HEADS OF INCOME AND AFTER THE SET OFF OF BROUGHT FO RWARD BUSINESS LOSSES/UNABSORBED DEPRECIATION RELATING TO ASSESSME NT YEARS AND THE DEDUCTION U/ S. 10A HAS TO BE WORKED OUT AFTER SETTING OFF OF BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION. SIM ILAR VIEW WAS EXPRESSED BY THE DELHI BENCH IN THE CASE OF GLO BAL VANTEDGE PVT. LTD. VS. DCIT 2010-TIOL-24-ITAT-DEL WHERE THE TRIBUNAL HAS HELD THAT UNABSORBED BUSINESS LOSSES IN RESPECT OF ELIGIBLE 10A UNIT HAS TO BE SET OFF AGAINST THE PROFITS FOR DETERMINING THE AMOUNT OF DEDUCTION AVAILABLE U/ S. 10A . THE DELHI BENCH HAD CONSIDERED THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. HIMATSINGEKE SIED E LTD. WHILE GIVING ITS JUDGEMENT. IN VIEW OF THE DECISIONS CITED ABOVE, THE BROUGHT FORWARD LOSSES OF UNITS ELIGIBLE FOR DEDUCTION UNDER SECTIO N10A SHOULD HAVE BEEN ADJUSTED BEFORE ALLOWING FULL DEDUCTION U NDER SECTION 10A. THIS HAD RESULTED IN EXCESS ALLOWANCE OF DEDUC TION OF RS. 118474976. 5 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. IT WAS NOTICED FROM THE COMPUTATION SHEET T HAT ASSESSEE WAS ALLOWED RELIEF UNDER SECTION 90(1) TO THE EXTENT OF RS. 8962633 IN RESPECT OF TAXES PAID OVERSEAS. THIS AMOUNT INCLUDE D RS. 7604853 BEING CREDIT FOR WITHHOLDING TAX PAID IN FOREIGN BR ANCHES AS PER THE DTA. SINCE THE ENTIRE PROFIT EARNED FROM EXPORT ACTIVITIES WERE CLAIMED EXEMPT FROM TAX IN INDIA, ASSESSEE WAS NOT ELIGIBLE TO GET DTA RELIEF IN RESPECT OF SUCH INCOME. WHILE COMPUTING BOOK PROFIT UNDER SECTION 11 5JB, ASSESSEE HAD REDUCED DIVIDEND DISTRIBUTION TAX OF RS. 34686771 F ROM THE BOOK PROFIT. AS PER EXPLANATION 2 BELOW SECTION 115JB, T AX ON DISTRIBUTED PROFIT SHOULD BE TREATED AS INCOME TAX AND THEREFORE CANNOT BE ALLOWED AS DEDUCTION FROM BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB. SINCE THE ASSESSEE HAD CLAIMED DE DUCTION OF MAT CREDIT U/ S. 115JB FROM THE NORMAL INCOME OF CU RRENT YEAR, CORRECT COMPUTATION OF TAX LIABILITY U/ S. 115JB IS RELEVANT IN THIS CASE. ACCORDINGLY, THE EXCESS ALLOWANCE OF DIVIDEND DISTRIBUTION TAX OF RS. 34686771 FROM THE BOOK PROFIT HAS RESULT ED IN ESCAPEMENT OF ASSESSMENT.' THE NOTICE U/S 148 ISSUED ON 01.03.2012 WAS SERVED ON THE ASSESSEE. THE ASSESSEE FILED ITS VIDE REPLY DATED 05.03.2012 CON TENDING THAT RETURN FILED ON 31.10.2007 MAY BE TREATED AS RETURN IN RES PONSE TO THE NOTICE U/S 148. AFTER HEARING THE REPRESENTATIVE OF ASSESSEE, THE AO PASSED THE REASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT . WHILE PASSING THE ORDER OF REASSESSMENT THE AO MADE DISALLOWANCE OF SET OFF OF BROUGHT FORWARD LOSS OF CHENNAI STP UNIT, DISALLOWED BROUGH T FORWARD LOSS AND UNOBSERVED DEPRECIATION OF NON ELIGIBLE UNITS AGAIN ST THE INCOME OF STP UNITS, NOT GRANTED RELIEF IN RESPECT OF TAX PAID OU TSIDE INDIA AND MADE ADDITIONS ON ACCOUNT OF DIVIDEND DISTRIBUTION. AGGR IEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) CH ALLENGING THE VALIDITY OF REOPENING AND THE VARIOUS ADDITIONS MADE IN QUAN TUM REASSESSMENT. THE LD. CIT(A) WHILE DECIDING THE APPEAL DECLARED T HE RE-OPENING OF ASSESSMENT AS INVALID. THE LD. CIT(A) FURTHER DELE TED THE VARIOUS 6 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. ADDITION MADE IN QUANTUM ASSESSMENT. THUS, BEING AG GRIEVED BY THE ORDER OF LD. CIT(A) THE REVENUE HAS FILED PRESENT A PPEAL BEFORE US. 3. WE HAVE HEARD THE LD. DR FOR REVENUE AND THE LD. AR FOR ASSESSEE AND PERUSED THE MATERIAL PLACED ON RECORD. THE LD. DR F OR THE REVENUE WOULD ARGUE THAT LD CIT(A) WRONGLY HELD THE ORDER OF REOPENING AS INVALID. THE ADDITION WAS ALSO DELETED WITHOUT VALI D REASONS. ON THE OTHER HAND THE LD. AR OF THE ASSESSEE WOULD ARGUE THAT REASONS OF REOPENING WAS NOT SUPPLIED TO ASSESSEE DESPITE REQU ESTING IN WRITING TO AO. THE LD. AR FOR ASSESSEE ARGUED THAT DUE TO NON SUPPLY OF REASONS OF REOPENING THE REASSESSMENT ORDER PASSED U/S 143 (3) R.W.S. 147 IS INVALID AND THUS CONSEQUENTIAL ADDITION MADE IN SUC H REASSESSMENT PROCEEDING ARE ILLEGAL. THE LD. AR OF THE ASSESSE E FURTHER ARGUED THAT GROUND AGAINST THE REOPENING IS SQUARELY COVERED IN HIS FAVOUR BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. TREND ELECTRONICS IN ITA NO.1867 OF 2013 DATED 16.09.20 15 REPORTED VIDE [2015] 379 ITR 456 (MUM). 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD AR FOR THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE NOTI CE U/S 148 DATED 01.03.2012 WAS DULY SERVED UPON THE ASSESSEE. IN REPLY TO THE NOTICE U/S 148 THE ASSESSEE SUBMITTED THAT RETURN ALREADY FILED ON 31.10.2007 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE N OTICE U/S 148 OF THE ACT. THE ASSESSEE REQUESTED REASONS RECORDED FOR R EOPENING. THE AO DID NOT PASSED ANY ORDER ABOUT THE REASONS DEMANDED BY ASSESSEE. WE HAVE FURTHER PERUSED THE ORDER OF REASSESSMENT U/S 143(3) R.W.S. 147 DATED 18.03.2013, THE AO HAS NOT RECORDED THAT THE REASONS OF REOPENING WAS SUPPLIED. THOUGH PARA NO.3 OF THE AS SESSMENT ORDER 7 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. CONTAINED THE REFERENCE OF REPLY OF ASSESSEE DATED 05.03.2012. THE LD. CIT(A) WHILE CONSIDERING THIS GROUND OF APPEAL ON T HE ALLEGATION OF ASSESSEE THAT ASSESSEE WAS NOT SUPPLIED REASONS OF REOPENING DESPITE REQUESTING TIME AND AGAIN, FORWARDED THE OBJECTION S RAISED BY ASSESSEE TO THE AO AND DIRECTED TO SUBMIT HIS REPORT. THE AO FILED HIS REPORT DATED 22.09.2014, WHEREIN IT WAS CONTENDED THAT THE AR OF THE ASSESSEE WAS PROVIDED COPY OF REASONS RECORDED DURING THE HE ARING DATED 12.09.2014( DURING REMAND PROCEEDINGS). THE LD. C IT(A) OBSERVED THAT REASONS RECORDED WERE NEVER COMMUNICATED TO TH E ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING DESPITE BEING R EPEATEDLY ASKED BY ASSESSEE. NO SEPARATE ORDER FOR DISPOSING THE OBJEC TION RAISED BY ASSESSEE WAS PASSED BY AO. ON THE MERIT OF THE CAS E, IT WAS OBSERVED BY THE LD CIT(A) THAT AO TRIED TO RECTIFY THE PREV IOUS ORDER WHEREIN HE HAD ALREADY ALLOWED RELIEF TO THE ASSESSEE ON THE SAME FACTS AND RECORD. NOTHING NEW MATERIAL CAME TO THE NOTICE OF AO, THE AO ALSO ADMITTED THAT THE RELIEF WAS GRANTED TO ASSESSEE ON THE BASI S OF INFORMATION PROVIDED TO HIM. THE REASONS RECORDED BY AO ARE ALS O PATENTLY INCORRECT AS THE REASONS WERE NOT PERTAINING TO THE YEAR UNDER CONSIDERATION AND THE SAME WAS RELATED TO EARLIER Y EAR. THE LD. CIT(A) CONCLUDED THAT IF THE REASONS ARE NOT SUPPLIED DURI NG THE ASSESSMENT PROCEEDING, THEN FURNISHING THE REASONS AT SUBSEQUE NT STAGE TO THE ASSESSMENT PROCEEDING WOULD SERVE NO PURPOSE. THE NON SUPPLY OF REASONS AMOUNTS TO DENIAL OF OPPORTUNITY TO THE ASS ESSEE. THE LD. CIT(A) HELD THAT REASSESSMENT WAS COMPLETED WITHOUT FURNISHING THE REASONS ACTUALLY RECORDED BY AO AND THE REOPENING O F ASSESSMENT IS NOT SUSTAINABLE IN LAW. THE AO IS DUTY BOUND TO SUPPLY HIS REASONS FOR 8 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. RECORDED WITHIN REASONABLE TIME AS PER THE DIRECTIO NS OF HONBE APEX COURT. SUBSEQUENT SUPPLY OF REASONS WOULD NOT MAKE GOOD THE ILLEGALITY SUFFERED BY REOPENING OF ASSESSMENT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. TREND ELECTRONICS (SUPRA) HELD: THAT AN ORDER PASSED IN REASSESSMENT PROCEEDI NGS WAS BAD IN LAW IN THE ABSENCE OF REASON RECORDED FOR ISSUING A REO PENING NOTICE UNDER SECTION148 OF THE INCOME-TAX ACT, 1961, BEING FURNISHED TO THE ASSESSEE WHEN SOUGHT FOR. IT IS AXIOMATIC THAT THE POWER TO REOPEN A COMPLETED ASSESSMENT UNDER THE ACT IS AN E XCEPTIONAL POWER AND WHENEVER THE REVENUE SEEKS TO EXERCISE SU CH POWER, IT MUST STRICTLY COMPLY WITH THE PRE-REQUISITE CONDITI ONS, VIZ., RECORDING OF REASONS TO INDICATE THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH WOULD WARRANT THE RE-OPENING OF AN ASSESSMENT. THESE RECORDED REASONS MUST BE FURNISHED TO THE, AS SESSEE WHEN SOUGHT FOR SO AS TO ENABLE THE ASSESSEE TO OBJECT T O THE REASONS BEFORE THE ASSESSING OFFICER. THUS, IN THE ABSENCE OF REASONS BEING FURNISHED WHEN SOUGHT FOR WOULD MAKE AN ORDER OF RE ASSESSMENT BAD IN LAW. THE RECORDING OF REASONS AND-FURNISHING , OF THE REASONS HAS TO BE-STRICTLY COMPLIED WITH T AS IT IS A JURISDICTIONAL ISSUE. I THIS REQUIREMENT IS SALUTARY AS IT NOT ONL Y ENSURES REOPENING NOTICES ARE NOT LIGHTLY ISSUED BUT ALSO W HERE NOTICES HAVE BEEN ISSUED ON SOME MISUNDERSTANDING MISCONCEP TION, THE ASSESSEE IS GIVEN AN OPPORTUNITY TO POINT' OUT THAT THE REASONS TO BELIEVE AS RECORDED IN THE REASONS DO NOT WARRANT ' REOPENING BEFORE THE REASSESSMENT PROCEEDINGS ARE COMMENCED. THE ASSESSING OFFICER DISPOSES OF THESE OBJECTIONS AND IF SATISFIED WITH THE OBJECTIONS, THEN THE REOPENING NOTICE UNDER SEC TION 148 IS DROPPED OR WITHDRAWN OTHERWISE IT IS PROCEEDED WITH FURTHER. IN ISSUES SUCH AS THIS, I.E., WHERE THE JURISDICTIONAL ISSUE IS INVOLVED THIS MUST BE STRICTLY COMPLIED WITH BY THE AUTHORIT Y CONCERNED AND NO QUESTION OF KNOWLEDGE BEING ATTRIBUTED ON THE BA SIS OF IMPLICATION CAN ARISE. THE STAND OF THE' REVENUE CO ULD NOT BE APPRECIATED, THAT THE ASSESSEE HAD ASKED FOR REASON S' RECORDED ONLY 9 ITA NO. 725/MUM/201 5(A.Y. 2007-08) D.C.I.T., VS. M/S. HEXAWARE TECHNOLOGIES LTD. ONCE AND, THEREFORE, SEEKING TO JUSTIFY NON-FURNISH ING OF REASONS. THE STATE IS EXPECTED TO ACT MORE RESPONSIBLY .' 5. IN VIEW OF THE ABOVE DISCUSSION WE FIND THAT THE RA TIO DETERMINED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. TREND ELECTRONICS (SUPRA) IS SQUARELY APPLICABLE ON THE F ACTS OF THE PRESENT CASE. THUS, FOLLOWING THE DECISION OF JURISDICTIONA L HIGH COURT WE SUSTAIN THE ORDER OF LD. CIT(A) THAT REOPENING OF A SSESSMENT PROCEEDING IS INVALID. AS WE HAVE SUSTAINED THAT REOPENING OF ASSESSMENT PROCEEDING IS INVALID, THUS THE DECISION OF OTHER G ROUND OF APPEAL RAISED BY THE ASSESSEE BECOME ACADEMIC. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2016 SD/- SD/- (RAJENDRA) (PAWAN SINGH) / ACCOUNTANT MEMBER '( / JUDICIAL MEMBER MUMBAI; + DATED : 14.10.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT - CONCERNED 5. /01 ((23 , 23$ , / DR, ITAT, MUMBAI 6. 145 6 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) $%, / ITAT, MUMBAI.
