DCIT 15(3), MUMBAI v. CALIBURN SOFTWARE, MUMBAI

ITA 7195/MUM/2011 | 2003-2004
Pronouncement Date: 09-07-2013 | Result: Dismissed

Appeal Details

RSA Number 719519914 RSA 2011
Assessee PAN AACFC9171C
Bench Mumbai
Appeal Number ITA 7195/MUM/2011
Duration Of Justice 1 year(s) 8 month(s) 15 day(s)
Appellant DCIT 15(3), MUMBAI
Respondent CALIBURN SOFTWARE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 09-07-2013
Date Of Final Hearing 09-07-2013
Next Hearing Date 09-07-2013
Assessment Year 2003-2004
Appeal Filed On 24-10-2011
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - C BENCH MUMBAI . .. . . .. . / ! ! ! ! '#$ '#$ '#$ '#$ # # # # BEFORE S/SH. B.R.MITTAL JUDICIAL MEMBER & RAJE NDRA ACCOUNTANT MEMBER /. /./. /. ITA NO. 7195/M/2011 & & & & ' ' ' ' / ASSESSMENT YEAR 2003-04 DCIT 15(3) MATRU MANDIR R.NO. 122 1 ST FLOOR TARDEO ROAD MUMBAI- 40007 VS. CALIBURN SOFTWARE404A APLHA BLDG HIRANANDNAI GARDEN POWAI ANDHERI (E) MUMBAI-400020 PAN: AACFC9171C ( () / // / ASSESSEE ) ( *+() / RESPONDENT) () () () () # # # # / ASSESSEE BY :MS. TRIPURA SUNDARI DR *+() - # /RESPONDENT BY : NONE & & & & - -- - ./ ./ ./ ./ / DATE OF HEARING : 09 .0 7 .2013 01' - ./ / DATE OF PRONOUNCEMENT : 09. 0 7 .2013 & & & & 1961 - -- - 254 )1( # ## # .2. .2. .2. .2. #3 #3 #3 #3 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA A.M: CHALLENGING THE ORDER DT.18.08.2011 OF THE CIT(A)-2 6 MUMBAI ASSESSING OFFICER (AO) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW THE LD. CIT(A) HAS ERRED IN QUASHING TH E RE- ASSESSMENT PROCEEDINGS U/S. 147 OF THE INCOME TAX A CT 1961 THEREBY DELETING THE ADDITION OF RS.1 70 75 070/ MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DENIAL OF EXEMPTION U/S.10A OF THE INCOME TAX ACT 1961 IN RESPECT OF EXPENDITURE OF RS. 1 89 72 302/ INCURRED PRIOR TO REGISTRATION OF THE UNIT IN SOFTWARE TECHNOLOGY PARK 2.THE APPELLANT CRAVES LEAVE TO ADD TO ALTER TO AM END AND TO MODIFY ANY OF THE GROUND OF APPEAL. 2. ASSESSEE HAD FILED RETURN OF INCOME ON 28.11.2003 D ECLARING LOSS OF RS. 61.99 LACS. CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 18.01.2006 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 62.43 LACS. ASSESSMENT WAS REOPENED U/S.147 OF THE ACT AFTER RECORDING THE REASONS AND AFTER OBTAI NING ADMINISTRATIVE APPROVAL OF THE CIT(A)-15 MUMBAI.AO RECORDED FOLLOWING REASONS FOR RE-OPENING : UNDER THE INCOME-TAX ACT 1961 A DEDUCTION OF SUC H PROFIT AND GAIN ARE DERIVED BY AN UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS O R COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASS ESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PROD UCE SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE AS THE CASE BE SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSESSEE THE ASSESSEE FIRM HAS C/AIMED DEDUCTION U/S. 10A ON ACCOUNT OF INCOME GENERATED BY STP UNIT. AS PER FORM 56F THE ASSESSEE CONDUCTS THE BUSINESS OF SOFTWARE DEVELOPMENT SERVICES AS PER ASSESSMENT ORDER THE MANUFACTURE AND EXPORT OF THE COMPUTER SOFTWARE WAS STARTED FOR A USA 2 ITA NO. 7195/MUM/2011 (AY-2003-04) CALIBURN SOFTWARE CLIENT. THE ASSESSEE HAS PAID SERVICE CHARGES TO IT S ASSOCIATE CONCERN FOR CERTAIN SERVICES RENDERED BY IT (WHICH IS ESTABLISHED IN US) FOR MARKETING A ND OUTSIDE HELP RENDERED TO THE CLIENT OF THE ASSESSEE WHO IS ALSO SITUATED IN USA. THE FOLLOWING OBSERVATIONS HAVE BEEN MADE ON GOING THROUGH THE CASE RECORDS OF THE ASSESSEE. THE ASSESSEE HAS DEBITED RS. 8 23 36 875/- AS SERVI CE FEES PAYABLE TO ITS ASSOCIATE CONCERN I.E. PRESCIENT INFO TECH (P) WHICH IS SITUATED IN USA. D URING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED THE LEDGER ACCOUNT SHOWING MONTH WISE SERVICE FEES PAYABLE TO PRESCIENT INFO TECH. AS PER FORM NO. 56F THE DATE OF REGISTRATION OF ST P UNIT AND ITS COMMENCEMENT OF MANUFACTURE IS SHOWN AS 23.07.2007 HOWEVER ON GOING THROUGH THE LEDGER ACCOUNT OF SE RVICE FEES IT WAS OBSERVED THAT THE ASSESSEE HAS DEBITED RS. 1 89 72 302/- TOW ARDS SERVICE FEES FOR THE PERIOD FROM APRIL 2002 TO JULY 2002. SINCE THE ABOVE EXPENDITURE HAS BEEN INCURRED PRIOR TO THE REGISTRATION OF STP IT WAS REQUIRED TO BE DISALLOWED. THE UNDER ASSESSMENT AND TAX EFFECT ON THIS ACCOUNT WORKS OUT TO RS. 18 97 230/- AND RS6 97 232/- RESPECTIVELY. FURTHER INTEREST U/S. 234B WORKS OUT TO RS. 2 47 516/- FURTHER IT WAS ALSO OBSERVED THAT THE ABOVE MENTIO NED SERVICE FEES INCLUDES VARIOUS CHANGES I.E. TO DEVELOP THE MARKET TO OBTAIN ORDERS TO DELIVER TH E SOFTWARE TO PROVIDE AFTER SALES SERVICE TO THE ASSESSEES CLIENTS. AS PER SECTION 10A THE EXPORT TURNOVER SHALL NOT INCLUDE EXPENSE ANY INCURRED IN FOREIGN EXCHANGE IN PROVIDING THE TECHNICAL SERVICE S OUTSIDE INDIA SINCE THE DELIVERING OF SOFTWARE AND PROVIDING AFTER SALES SERVICE IS IN THE NATURE OF TECHNICAL SERVICES IT WAS REQUIRED TO BE EXCLUDED FROM THE EXPORT TURNOVER WHICH WAS NOT DON E HOWEVER THIS MAY BE EXAMINED THEREFORE I HAVE REASONS TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE APPROVAL FROM CIT HAS ALSO BEEN RECEIVED. HENCE IS SUE NOTICE U/S. 148 FOR THE A. Y. 2003-04 ASSESSEE VIDE ITS LETTER DATED 20.05.2010 OBJECTED TO THE RE-OPENING OF THE ASSESSMENT. IT FURTHER SUBMITTED THAT THE RETURN FILED BY IT ON 28.11.03 S HOULD BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT. THE AO FINALISED THE ASSESSMENT ON 28.12.2010 U/S.43(3) R.W.S 147 OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2.33 CRORES. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE REASONS RECORDED BY THE AO THE FINDINGS GIVEN BY H IM IN THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE HE HELD THAT RE-O PENING U/S.147 COULD NOT BE RESTORED DUE TO CHANGE IN OPINION OF THE AO THAT IN VIEW OF PROVIS O TO SECTION 147 RE-OPENING COULD NOT BE DONE AFTER 4 YEARS IF THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE IN MAKING FULL AND TRUE DISCLOSURE THAT IN THE CASE UNDER CONSIDERATION THERE WAS NEIT HER ANY SUPPRESSION OF RELEVANT FACT BY THE ASSESSEE NOR THE AO HAD RECEIVED FRESH INFORMATION FROM ANY SOURCE THAT THERE WAS NO MENTION OF THESE FACTS IN THE REASONS RECORDED BY THE AO / ASS ESSMENT ORDER. RELYING UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASES OF WESTERN OUTDOOR INTERACTIVE PVT. LTD.(286 ITR 620) HE HELD THAT ORDER PASSED BY THE AO U/S.147 OF THE ACT WAS NOT SUSTAINABLE. AS A RESULT HE QUASHED THE RE-OPENING PROCEEDINGS. 2.2. BEFORE US DEPARTMENTAL REPRESENTATIVE (DR) SUBMIT TED THAT IN THE NOTE SENT TO THE CIT AO HAD MENTIONED ABOUT THE FAILURE OF THE ASSESSEE TH AT REASONS RECORDED BY THE AO WERE VALID. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. 2.3 .WE HAVE PERUSED THE MATERIAL ON RECORD AND HEARD T HE SUBMISSIONS OF THE DR. RE-OPENING OF THE COMPLETED ASSESSMENT AFTER 4 YEARS IS ALLOWED BY THE ACT ON FULFILLMENT OF CERTAIN CONDITIONS. PROVISO TO SECTION 147 CLEARLY MENTIONS THAT FOR RE -OPENING AFTER 4 YEARS FAILURE OF THE ASSESSEE HAS TO BE RECORDED IN NOT DISCLOSING TRULY AND FULLY AL L THE DETAILS FOR THE PURPOSE OF COMPUTING TAXABLE INCOME.WE FIND THAT AO HAS NOWHERE IN HIS REASONS R ECORDED MENTIONED THAT ASSESSEE HAD FAILED TO FURNISH TRUE AND FULL DETAILS OF ITS INCOME.COURTS ARE OF THE VIEW THAT RE-OPENING OF THE ASSESSMENTS AFTER A PERIOD OF 4 YEARS HAS TO BE DONE ONLY IN EX CEPTIONAL CIRCUMSTANCES.JUDGMENTS DELIVERED BY VARIOUS HIGH COURT AND HONBLE SUPREME COURT ARE UN ANIMOUS THAT FOR INVOKING PROVISO TO SECTION 147 OF THE ACT AO HAS TO MENTION IN THE REASONS RECORDED BY HIM THAT BECAUSE OF THE FAILURE OF THE ASSESSEE IN NOT DISCLOSING TRULY AND FULLY ALL THE DETAILS TAXABLE INCOME HAD ESCAPED ASSESSMENT.AFTER PERUSING THE REASONS RECORDED AND THE ASSESSMENT ORDER WE FIND THAT IN THE CASE 3 ITA NO. 7195/MUM/2011 (AY-2003-04) CALIBURN SOFTWARE UNDER CONSIDERATION BASIC PRE-CONDITION FOR INVOKIN G PROVISIONS OF SECTION 147 MISSING. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT ORDER OF T HE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. THEREFORE + UPHOLDING HIS ORDER WE DECIDE GROUND NO.1 AGAINST THE AO. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . 5 .6 & 5. 7 8 - 2 5' - '. 9:. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JULY 2013 . #3 - 01' # ; <& 9 ' 2013 1 - 2 B SD/ SD/ ( . .. . . .. . . .. . B.R.MITTAL ) ( '#$ '#$ '#$ '#$ / RAJENDRA ) / JUDICIAL MEMBER # # # # /ACCOUNTANT MEMBER / MUMBAI <& /DATE: 9 TH JULY 2013 SK #3 #3 #3 #3 - -- - *.C *.C *.C *.C D#C'. D#C'. D#C'. D#C'. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / () 2. RESPONDENT / *+() 3. THE CONCERNED CIT (A) / E F 4. THE CONCERNED CIT / E F 5. DR C BENCH ITAT MUMBAI / CG2 *.& . . . 6. GUARD FILE/ 2 H +C. *. //TRUE COPY// #3& / BY ORDER I / 9 ' DY./ASST. REGISTRAR /ITAT MUMBAI