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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)-4, Vadodara, dated 20/03/2017 (in short “Ld.CIT(A)”) arising in the matter of assessment order dated 31/12/2015 passed under s.143(3) rws 147 of the Income Tax Act, 1961 (here-in- after referred to as "the Act") relevant to the Assessment Year 2009-2010.
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The revenue has raised the following grounds of appeal:
On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting addition made on account of disallowance of exemption u/s.10B amounting to Rs.39,20,823/- of the I.T. Act, 1961 ignoring the fact that the assessee has flouted the basic prerequisite condition laid down for claiming due exemption u/s.10B of the I.T. Act regarding authority granting approval as a 100% export oriented undertaking. 2. The Ld.CIT(A) has passed the order without considering the decision of Hon’ble Apex Court in the case of Goetze(India), 2006 157 Taxmann 1(SC)/ 2006 284 ITR 323 (SC). 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT(Appeals) be set aside and that of the Assessing Officer be restored.
Solitary issue raised by the Revenue is that the learned CIT (A) erred in deleting the disallowances of exemption by the AO under section 10B of the Act for Rs. 39,20,823/- without appreciating the judgment of Hon’ble supreme court in case of Goetze (India) [2006] 157 taxmann.com 1 (SC)
The fact in brief for adjudication is that the assessee is partnership firm engaged in business of information technology enabled service provider and also registered under STPI Gandhinagar. For the year under consideration the assessee claimed exemption under section 10B for Rs. 39,20,823/- being 100% export oriented unit (EOU). The contention of the assessee is that it is registered with and approved under STPI as 100% export oriented and fulfils all the condition prescribed under section 10A and 10B of the Act. Hence it is eligible for exemption in either section 10A or 10B of the Act.
4.1 However the AO rejected the claim of the assessee by holding that, though the assessee is a 100% export oriented unit and approved by the director of the STPI. But the assessee failed to get the approval from Board as defined under section 14 of Industries Development & Regulation as mandated under explanation
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to section 10B of the Act or from Development Commissioner under Ministry of commerce and industry as mentioned under CBDT instruction dated 09-03-2009 in this respect. Thus the exemption claimed by the assessee for Rs. 39,20,823/- was allowed by the AO and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A).
5.1 The Assessee before learned CIT (A) submitted that it has been approved as EOU by STPI Gandhinagar since A.Y. 2000-01 and it has been claiming exemption under section 10B of the Act in each of previous years and the same was allowed. The assessee again reiterated that it fulfills all the conditions prescribed under section 10B or section 10A of the Act. Hence it is eligible to claim exemption in either section. The Assessee further contended that the reading of the STP scheme as published reveal that Chief executive officer of STP rank pari pasu with the Development Commissioner as mentioned in the CBDT instruction and accordingly claimed that all the conditions required under 10B have been fulfilled. The assessee also placed its reliance on order of this tribunal in case of Quality BPO Services Pvt. Ltd. vs. ACIT reported in (OSD) (2015_ 45 CCH 0187 (Ahd-Trib) where it was held that approval from STPI is sufficient enough to claim exemption under section 10B of the Act. The assessee alternatively contended that if exemption not allowed under section 10B of the Act then the same can be allowed under section 10A of the Act as it fulfils all the criteria to claim exemption. The assessee placed reliance on various judicial judgment in this respect.
The learned CIT (A) after considering the finding of the AO and assessee’s submission was pleased to allow the claim of the assessee by observing that assessee’s claim under section 10B of the Act was allowed in past. Further the assessee made alternate claim under section 10A of the Act by contending that it fulfills the conditions prescribed under both section i.e. 10A and 10B of the Act. But the AO remained silent on this issue. Thus in the circumstances where assessee fulfills the criteria of section 10A of the Act but inadvertently made claim under
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section 10B of the Act can’t be prohibited from availing the benefit of section 10A of the Act as held by Ahmadabad tribunal in case of Tarun V shah in ITA No. 925/Ahd/2014 in this respect.
6.1 The learned CIT (A) further held that the case of the assessee are squarely covered by the judgment of the Ahmadabad ITAT in case of Quality BPO Services Pvt. Ltd. in ITA No. 120/Ahd/2012 where it was held that the approval by the STPI comes under the ministry of communication of information technology which is a competent authority to grant approval to avail benefit of section 10B of the Act being 100% EOU.
Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal before us.
The learned DR before us contended that the assessee has not taken the approval from the Board which was necessary for claiming the deduction under section 10B of the Act.
The learned AR before us claimed that the assessee was allowed the deduction under section 10 B of the Act earlier years. Accordingly, the same should be allowed in the year under consideration as there was no change either in the facts or in the law.
Both the learned DR and AR before us supported the action of the authorities below to the extent favorable to them.
We have heard the rival contentions and perused the material on record and gone through the judicial pronouncements referred by the ld. AR and DR. The issue under appeal relates to examination of the claim of assessee under section 10B of the Act for Rs. 39,20,823/- which was allowed by the learned CIT(A). From perusal of the order of the authorities below we find that assessee is and STPI approved
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100% EOU and has been claiming deduction u/s 10B of the Act since the last several years and the same has been consistently allowed by the Assessing Officer except being disallowed after reopening of the assessment under section 147 in the current A.Y. i.e. 2009-10 for the reason that it does not possess proper approval as a 100% export oriented undertaking by the Board appointed by the Central Government in exercise of powers conferred by section 14 of the Industries (Development & Regulation) Act, 1951 (65 of 1951) and the rules made under that Act. The question arise whether a claim of the assessee which consistently allowed in past years can be rejected without being any material change in fact and circumstances of law? In our considered view the answer stands negative as held by various court of law that the principle of consistency must prevail. In this respect we find support and guidance from the order of the Hon’ble Bombay High court in case of PCIT vs. Quest Investment Advisors (P) Ltd. reported in [2018] 409 ITR 545 [Bom] where it was held as under:
The principle accepted by the revenue for 10 earlier years and 4 subsequent years to the assessment years 2007-08 and 2008-09 was that the entire expenditure is to be allowed against business income and no expenditure is to be allocated to capital gains. Once this principle was accepted and consistency applied and followed, the revenue was bound by it. Unless of course it wanted to change the practice without any change in law or change in facts therein, the basis for the change in practice should have been mentioned either in the assessment order or atleast pointed out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistency applied for the earlier assessment years and also for the subsequent assessment years. Therefore, the view of the Tribunal in allowing the respondent's appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273. 11.1 Moving further we note that the ld. AR of the assessee has referred to order of this tribunal in case of Quality BPO Services Pvt. Ltd. in ITA No. 120/Ahd/2012 and contended that the assessee case is covered by this order wherein it was held that the letter of approval received from STPL is a proper approval, as required by the provisions of section 10B of the Act. The relevant finding of the tribunal is reproduced as under:
In the light of decisions of Co-ordinate Bench as well as other Benches of the Tribunal, wherein it has been categorically held that approval by Software Technology Parks of India comes under the Ministry of Communication & Information Technology & is a competent
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authority to grant approval to such units for claiming benefits u/s 10B as 100% Export Oriented Undertaking and the same is possessed by assessee and also looking to the facts of the case of assessee wherein assessee has been allowed deductions u/s 10B in Asst. Years 2007-08, 2010-11 & 2011-12 consistently, we are of the considered view that the assessee's claim of deduction under section 10B at Rs.67,08,733/- is justified and accordingly the order of CIT(A) is quashed and the appeal of assessee is allowed. 11.2 Further In the case of Regency Creators Ltd. vs. ACIT in ITA No.1588/Del/2010, ITAT, Delhi Bench has held as under:
"7. We have heard both the parties and have perused the material on record. No doubt, the CBDT Clarification (supra) states that exemption in respect of a unit set up in Software Technology Park is granted to a unit approved u/s 10A of the Act and not u/s 10B thereof. However, the Press Notes 5 & 2 (supra) are to the contrary. Press Note No.5 (1997 Series) was issued on 21.5.97 by the Deputy Secretary to the Government of India, whereas Press Note No.1993 Series), was issued on 9.3.93 by the Deputy Economic Adviser. Further, vide the aforesaid communication dated 31.3.2011, it has been stated by the CPIO and Director under the RTI, as follows : "Subject: RTI application received from Shri Mahesh Shrivastaa, Keshavpuram, Delhi, regarding approval or ratification of STPL, approval by BOA formed by MOC to claim benefits of 100% EOU Scheme. Please refer to your RTI application dated March 10,2011 received on 17.03.2011 on the subject mentioned above and to inform that no approval/ratification of STPI approval is required from BOA formed by Ministry of Commerce by power conferred Asst. Year 2008-09 under section 14 of IDR Act, 1951. Inter-Ministerial Standing Committee for EHTPs and ESTPs (IMSC) is competent in grant approval for STPI unit to claim all benefits under 100% EOU Scheme as per Press Note 2 of 1993 (copy enclosed)". 8. In view of the above, we find the grievance of the assessee to be justified and it is accepted as such. We hold that the assessee is entitled to claim of deduction u/s 10B of the Act." In view of the above and in the light of the above judgments, we safely hold that the assessee is eligible to claim deduction under section 10B of the Act by virtue of being 100 % EOU approved by the STPI.
11.3 Without prejudice to the above, we also note that the assessee has also made alternate claim under section 10A of the Act before authorities below. The assessee contented that condition prescribed under section 10A and 10B of the Act are more or less same and it fulfills all the conditions specified under section 10A of the Act. Thus it should be allowed exemption under section 10A of the Act if not allowed under section 10B of the Act. As such we note that the AO was allowed opportunity
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vide remand report to verify the fulfillment of the condition specified under section 10A of the Act. But he restrained himself from making any comment as the same was already verified by him during assessment proceeding. From, this we safely assume that the all condition has been fully met by the assessee. Now the question arise that can the assessee be allowed exemption under section 10A alternatively where it has made claim under other section inadvertently? In our considered view the answer stand positive in view of the fact that the matter has come to various judicial authority wherein it has held that a valid claim of the assessee cannot be deprived merely because, the assessee has not made such claim in return of income filed under section 139 of the Act. In this respect we take guidance and support from the order of this tribunal in the case of Tarun V shah in ITA No. 925/Ahd/2014 (supra).
11.4 In view of the above discussion we do not find any infirmity in the finding of the learned CIT (A). Accordingly we direct the AO to delete the addition made by him. Hence ground of appeal of the Revenue is dismissed.
Coming to the Assessee ground raised under Rule 27 of ITAT rule 1963.
The assessee has challenged the validity of the assessment framed under section 143(3) read with section 147 of the Act in terms of the rule 27 of the ITAT rules 1963 on the reasoning that the reopening is not valid.
The facts in brief are that the assessee in the present case filed the return of income for the year under consideration at Rs. 4,35,360/- after claiming exemption for Rs. 39,20,883/- under section 10B of the Act which was assessed under section 143(3) of the Act by the AO vide order dated 01-12-2011 at the same amount.
13.1 The AO subsequently found that the income of the assessee has escaped assessment on account of being not eligible to claim exemption under section 10B
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of the Act for Rs. 39,20,883/- and therefore the AO initiated the proceedings under section 147 of the Act by issuing notice under section 148 of the Act dated 27-03- 2015 after recording the reasons for the escapement of income.
13.2 However the assessee challenged the initiation of the proceedings under section 147 of the Act by contending that during the assessment proceedings under section 143(3) of the Act its claim under section 10B of the Act was allowed after necessary enquiry by the AO. Hence reopening of assessment on the basis of claim on which AO has already applied his mind represents mere change of opinion which is not permissible under the law. However the AO rejected the contention of the assessee by holding that as per explanation 1 to section 147(1) of the Act that mere production of books of account before AO is not sufficient to hold that assessee has fully disclosed material fact. Further it was due diligence of the AO that he found on subsequent verification that the assessee is not possessing necessary approval to claim exemption under section 10B of the Act. Thus by virtue explanation 2 to section 147 of the Act the AO is empowered to reopen the assessment.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the validity assessment framed under section 147 of the Act by observing as under: The present case is more similar to the judgment in the case of Anusandhan Investments Ltd. v. DOT [2006] 287 1TR 482 (Bom.). The issue there was the challenge to the notice under section 148 of the Act. Admittedly, the issue regarding the capital gains arising from the sale of shares pursuant to the agreement dated 3-1-1992, was neither raised nor discussed in the assessment order for the assessment year 1992-93. On those facts, the court refused to intervene in the extraordinary jurisdiction. Reliance is also placed the case of CIT Vs P.V.S. Beedies (P.) Ltd. [19991 237 ITR 13 (SC). Notice for reopening of assessment was based on the report of the internal audit party. The court held that it would be permissible. Similar was the view taken by the Delhi High Court in the case of New Light Trading Co. Vs CIT [2002] 256 ITR 391 (Del). It is necessary to refer to the judgment of the Supreme Court in Ess Ess Kay Engg. Co. (P.) Ltd. Vs CIT [2001] 247 ITR 818 (SC). In this case fresh material was obtained based on which the Supreme Court held that mere fact that the case of the assessee was accepted as correct in original assessment for the assessment year would not preclude the Assessing Officer to reopen the assessment on the basis of fresh materials obtained in the course of assessment for the next assessment years. Considering these decisions, it is held that the Assessing Officer while passing assessment order u/s 143(3) had not formed any opinion about the allowability of deduction u/s 10A when the appellant was registered under STPI. The appellant had not objected the reopening of the assessment and had cooperated with the Assessing Officer in reassessment
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proceedings, it is held that action of the Assessing Officer u/s!47 was justified. The reliance placed by the Authorized Representative on Techspan India P Ltd Vs ITO [2006] 283 ITR 212 (Del) and Siemens Information System Ltd Vs ACIT [2007] 295 ITR 333 (Bom) was misplaced and after considering the material before me and judicial decisions cited in this para, it is held that the reopening of the assessment was valid and the same is upheld.
Being aggrieved by the order of the learned CIT (A) the learned AR for the assessee objected on the validity of the initiation of the proceedings in pursuance to the provisions of rule 27 of ITAT rules.
The learned AR at the outset contended that the assessee is authorized to raise any issue which has been decided against the assessee despite being the final outcome was decided in its favour without making any application in writing. The learned AR in support of his contention relied on the judgment of Hon’ble Gujarat High Court in the case of PCIT vs. Sun Pharmaceuticals reported in 86 taxmann.com 148.
16.1 On the basis of above contention the learned AR further submitted that the reopening of the case for the year under consideration was not based on any new tangible material which came notice of the AO suggesting that income of the assessee has escaped assessment. As such the AO after necessary verification during the assessment proceeding under section 143(3) of the Act allowed the claim under section 10B vide order dated 01-12-2012. The only reason to reopen is stated to that the AO subsequently found that the assessee does not possess valid approval as provided under section 10B of the Act for claiming deduction. For this purpose the learned AR drew attention on page 34 of the paper book where reasons recorded by the AO for initiating the proceedings under section 147 of the Act were placed.
16.2 The learned AR further contended that the opening in the present case has been initiated beyond the period of 4 year from the end of relevant assessment year and there was no finding of the AO in the reasons recorded that the assessee has failed to disclose material facts truly and materially in the income tax return which
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was mandatory as per proviso 1 to section 147 of Act and as held by the Hon’ble Gujarat High Court in the case of Gujarat Lease Financing Ltd vs. DCIT reported in 36 taxmann.com 359.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The 1st issue that arises for our consideration whether the assessee can invoke the provisions of rule 27 of ITAT rules without making any application therein in writing. For this purpose, we are inclined to refer the rule 27 of ITAT rules which is reproduced as under: Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.
18.1 On perusal of the above rule, we find that there is no requirement for making any application in writing to the ITAT for invoking the provisions of rule 27 of ITAT rules. However, we are of the view that in the absence of any application under rule 27 by the assessee as in the present case challenging the validity of the assessment framed under section 147 of the Act, the learned DR might not be ready for representing his contentions. It is because the learned DR might take the oral submission of the assessee as a surprise for the reason that there was no prior information from the side of the assessee. Thus, in our considered view such intimation to the learned DR from the side of the assessee well beforehand is required keeping in view the principles of natural justice.
18.2 However in the case on hand, the learned DR at the time of hearing did not raise any objection for not providing any advance notice to him by the assessee on the issue raised by the learned AR for the assessee, challenging the validity of the assessment framed under section 147 of the Act. Thus in the absence of any objection from the side of the learned DR, we admit the request of the assessee
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made under the provisions of rule 27 of ITAT rules and accordingly proceed to adjudicate the same.
18.3 The Provisions of Section 147 of the Act, authorizes the AO, if he has "reasons to believe" that the income has escaped assessment, to assess or reassess the income escaped from assessment. Now to form the reasons to believe for the escapement of income, the AO first, should be in possession of some /fresh new material which was previously not available with him viz a viz it impacts the aspect, that there is some undisclosed income.
18.4 Now the question comes what is fresh material. It refers the material which comes to the AO from the outside. Meaning thereby, information which was not available on record at the time of making the assessment and the assessment is completed initially, without taking into consideration the alleged information. Such information, can be called as new information, which requires fresh investigation/observation.
18.5 In the light of the above discussion, we proceed to adjudicate the issue on hand. For this purpose we refer to the reasons recorded by the AO for initiating the proceedings under Section 147/148 of the Act which are reproduced herein below:
“ On verification of the case records for A.Y. 2009-10, it is noticed that the assessee has claimed deduction of Rs.39,20,823/- under section 10B of the Act. The assessee was granted approval as a 100 per cent expert oriented Unit by the Director, Software Technology Parks of India (STPI), Gandhinagar for computer software and IT enabled services on 01-03-2000. STPI was a society formed under the Software Technology Park Schemes (STP) for granting permission to units engaged in computer software and enabled services and registered under the Societies Registration Act,1860. STPI was administered by the Department of Information Technology, Ministry of communication and Information Technology, Govt. of India. Explanation 2(iv) to section 10B of the act, envisages deduction to a hundred percent export oriented undertaking approved by the “Board”. In the instant case, the approval was not for an “undertaking” by the Board as envisaged in section 10B but for a “unit” by a society. A “unit under STP was not the same as an “undertaking” envisaged in section 10B of the Act. As such income of Rs.3920823/- claimed by the assessee as deduction u/s.10B of the Act has resulted in under assessment of income of Rs.39,20,823/- 18.6 On perusal of the reasons recorded by the AO, we find that the AO at the threshold has reopened the assessment under section 147 of the Act on verification
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of case records which were available during the original assessment proceedings as discussed above.
18.7 From the above details, we note that all the materials used by the AO in the initiation of reassessment proceedings were available before him during the assessment proceedings and after application of his mind the AO framed the assessment under section 143(3) of the Act vide order dated 01-12-2011. Therefore, the same cannot be used for initiating the proceedings under Section 147 of the Act. As such there has to be some new/fresh information on record, which requires a fresh examination. When there is no change in the facts and circumstances of case, the power to re-open u/s. 147/148 cannot be exercised, since at the time of initial assessment a view was formed on the available facts, and the same cannot be re-viewed again.
18.8 Before parting, we also note that the assessee before the AO during the assessment proceedings has challenged the validity of the initiation of the proceedings under section 147 of the Act. The relevant extract of the submission made by the assessee before the AO during the assessment proceedings is reproduced as under:
Further, it may please be noted that our case was duly assessed for A.Y. 2009-10 by the ld.A.O and assessment order u/s.143(3) of the Act was passed dated 01.12.2011. Deduction under section 10B was allowed in the original assessment after enquiry. Now the assessee has been served with notice u/s.147 of the Act stating that the deduction u/s 10B was not allowable. The reassessment proceedings initiated on this ground are not valid reliance is placed in the case of Techspan India P Ltd. V. ITO (2006) 283 ITR 212 (Del) Siemens Information System Ltd. V. ACIT (2007) 295 ITR 333 (Bom). Thus, the action u/s.147 of the Act for A.Y. 2009-10 is not legal. Thus from the above it is inferred that the assessee has not agreed before the AO for the initiation of proceedings under section 147 of the Act as alleged by the learned CIT (A) in his order as discussed above.
18.9 In view of the above and after considering the facts in totality the ground of appeal of the assessee raised in terms of rules 27 of ITAT rules is allowed.
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In the combined result, the appeal filed by the Revenue is dismissed and the ground raised by the assessee in rule 27 of ITAT Rules is allowed.
Order pronounced in the Court on 24/02/2021 at Ahmedabad.
Sd/- Sd/- (JUSTICE P.P. BHATT) (WASEEM AHMED) PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 24/02/2021 manish