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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 has raised the following grounds of appeal: 1. “On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in directing the AO not exclude in computation of deduction u/s. 10A Rs. 3,22,32,500/- being export proceeds realized in convertible foreign exchange after & 7187/M/2011- M/s Blue Star Infotech Pvt. Ltd. six months from export date without providing opportunity to the AO for verification of the details filed before him and thereby violating the provisions u/s 46A of Income Tax Rules. 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. 2. The Revenue in its appeal has raised 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 reassessment (Ground No. 2.1 to 2.3).
3. Erroneous conclusion on best-judgement assessment (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 (Ground 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 Company, engaged in the business of Software Consultancy, design and development services, 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 determining 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 on record. Subsequently, the assessment was re-opened u/s 147 of the Act on 31.05.2010. 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 the reasons for initiation of re- assessment proceeding. The following reasons were supplied 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 credits 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 amount 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 an income of Rs. 1,88,98,732/- has escaped assessment.
& 7187/M/2011- M/s Blue Star Infotech Pvt. Ltd.
Initiate proceedings u/s. 147 and issue notice u/s. 148”.
The assessee on receipt of reasons of reopening filed objection on 05.10.2010. In the objection, the assessee specifically pleaded that 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 brought the issue on taxability of sale tax of Rs. 1,88,98,732/- to the tax liability in the year under consideration. The AO further examined the deduction u/s 10A and concluded that the assessee has claimed deduction u/s 10A and was wrongly worked 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 well as issue on tax of sale tax of Rs. 1,88,98,732/- as well as disallowance of deduction u/s 10A of the Act. The ld. CIT(A) upheld the action of re-opening as well as taxability of issue of sale tax and as well as issue of taxability of sale tax in AY 2006-07, however, the deduction u/s 10A was allowed. Further, aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us challenging 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 deletion of disallowance u/s 10A.
We have heard the ld. Authorized Representative (AR) of assessee and ld. Departmental Representative (DR) for Revenue and perused the material available on record. First Ground of appeal
by assessee is that order u/s 143(3) r.w.s. 147 & 144 is bad-in-law. The ld. AR of the assessee submitted that this ground of appeal is general in nature and need no specific adjudication. Considering the contention of ld. AR of assessee, this ground of appeal is dismissed being general in nature.
6. Ground No.2 relates to the validity of re-assessment order passed u/s 143(3) r.w.s. 147 of the Act. The ld. AR of the assessee argued that the assessment order for AY 2006-07 and 2007-08 were pending with the same AO. 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 brought in the notice of AO that the & 7187/M/2011- M/s Blue Star Infotech Pvt. Ltd. impugned sale tax liability of Rs. 1,88,98,732/- was offered by assessee for taxation for AY 2007-08. The Ld. AR of the assessee 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-opening is bad-in-law. There was no tangible material on record, so that subsequent 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 assessment was passed u/s 143(3) on 02.12.2009. The ld. AR has further invited our attention on the Notes of Audit report related with the issue of Sale tax which 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 Hon’ble jurisdictional High Court in Jindal 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 that income escaped from assessment. The ld. DR for the Revenue argued that the ld. CIT(A) while considering the contention of assessee has elaborately discussed the issue in para 71.5 and 716 of its order. The ld. CIT(A) rightly appreciated that AO has power to re-open the assessment for the reasons that the item of income chargeable to income-tax, which was not the subject matter of original assessment proceeding has escaped from assessment.
We have considered the rival contention of the parties with the help of ld. representatives and gone through the orders of authorities below. We have also perused the various documentary evidences placed on record. We have perused the reasons of re-opening. The careful reading of reasons revealed that from the record, the AO found that the Performa Credit of Refund of Sale tax due from the authorities on account of Karnataka Sale Tax collected 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 & 7187/M/2011- M/s Blue Star Infotech Pvt. Ltd.
proceeding. The assessee in the Note of Tax Audit Report 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 the Revenue is not entitled to tax the same amount twice. The Hon’ble Apex Court in 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 accounting 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 the public coffer.
Thus, from the above factual discussion and the legal position, we hold that no income was escaped from the assessment. Moreover, the impugned income (Sale tax liability) was offered by assessee in the subsequent AY was merely a change of opinion. The re-opening based on change of opinion 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-opening 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. Appeal By Revenue :
9. We have already held that re-opening of assessment was invalid. Thus, all consequential addition/disallowance including the discussion 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 and the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 26th day of April 2017. Sd/- Sd/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 24/04/2017 S.K.PS & 7187/M/2011- M/s Blue Star Infotech Pvt. Ltd.