DCIT, Bangalore v. M/s Objectorb Technologies Pvt. Ltd.,, Bangalore

ITA 826/BANG/2012 | 2007-2008
Pronouncement Date: 11-04-2014 | Result: Dismissed

Appeal Details

RSA Number 82621114 RSA 2012
Assessee PAN AAACO2415N
Bench Bangalore
Appeal Number ITA 826/BANG/2012
Duration Of Justice 1 year(s) 10 month(s)
Appellant DCIT, Bangalore
Respondent M/s Objectorb Technologies Pvt. Ltd.,, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-04-2014
Date Of Final Hearing 03-04-2014
Next Hearing Date 03-04-2014
Assessment Year 2007-2008
Appeal Filed On 11-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN JUDICIAL MEMBER AND SHRI JASON P. BOAZ ACCOUNTANT MEMBER ITA NO.666/BANG/2012 ASSESSMENT YEAR : 2002-03 OBJECTORB TECHNOLOGIES P LTD NO.727 61 ST CROSS RAJAJINAGAR 5 TH BLOCK BANGALORE 560 010. PAN : AAACO 2415N VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(2) BANGALORE. APPELLANT RESPONDENT ITA NO.826/BANG/2012 ASSESSMENT YEAR : 2002- 03 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(2) BANGALORE. VS. OBJECTORB TECHNOLOGIES P LTD NO.727 61 ST CROSS RAJAJINAGAR 5 TH BLOCK BANGALORE 560 010. PAN : AAACO 2415N APPELLANT RESPONDENT ASSESSEE BY : SHRI PADAMCHAND KHINCHA C.A. REVENUE BY : SHRI BIJOY KUMAR PANDA ADDL. CIT(DR) DATE OF HEARING : 04.04.2014 DATE OF PRONOUNCEMENT : 11.04.2014 ITA NOS.666 & 826/BANG/2012 PAGE 2 OF 15 O R D E R PER N.V. VASUDEVAN JUDICIAL MEMBER ITA NO.666/B/12 IS AN APPEAL BY THE ASSESSEE WHI LE ITA 826/B/12 IS AN APPEAL BY THE REVENUE. BOTH THESE APPEALS AR E DIRECTED AGAINST THE ORDER DATED 15.03.2012 OF THE CIT(APPEALS)-III BAN GALORE RELATING TO ASSESSMENT YEAR 2002-03. 2. WE WILL FIRST TAKE UP FOR CONSIDERATION THE ISS UE RAISED BY THE ASSESSEE IN ITS APPEAL WHICH CHALLENGES VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT. THE RELEVANT GROUNDS FILED IN THE CONCISE GROUNDS OF APPEALS; VIZ. NO.2.1 & 2 .2 READS AS UNDER:- 2.1 THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSUMING JURISDICTION UND ER SECTION 147 OF THE INCOME TAX ACT. 2.2 WITHOUT PREJUDICE THE LEARNED ASSESSING OFFICE R HAS ERRED IN ISSUING NOTICE U/S. 143(2) BEFORE FILING THE LET TER TO TREAT THE ORIGINAL RETURN OF INCOME AS RETURN FILED IN PURSUA NCE OF NOTICE ISSUED U/S. 148. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ASSE SSMENT WAS REOPENED BY THE ASSESSING OFFICER U/S. 147 OF THE A CT ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DE VELOPMENT AND EXPORT OF SOFTWARE. THE ASSESSEE WAS ENTITLED TO C LAIM DEDUCTION U/S. 10A OF THE ACT IN RESPECT OF THE PROFITS DERIVED FROM M ANUFACTURE AND EXPORT OF COMPUTER SOFTWARE. THE SOFTWARE SERVICES WERE REND ERED BY THE ASSESSEE TO A COMPANY BY NAME MY DOC ONLINE INC. USA [MY D OC FOR SHORT]. ITA NOS.666 & 826/BANG/2012 PAGE 3 OF 15 THERE WAS AN AGREEMENT TITLED PROFESSIONAL SERVICE S AGREEMENT DATED 11.10.2000 IN RESPECT OF RENDERING OF SOFTWARE SERV ICES BY THE ASSESSEE TO MY DOC. CLAUSE 2.5 OF THE AFORESAID AGREEMENT PROV IDES AS FOLLOWS:- 2.5 ANY EQUIPMENT OR SOFTWARE REQUIRED TO SUCCESSF ULLY IMPLEMENT THE PROFESSIONAL SERVICES THAT IS NOT ACC ESSIBLE TO CONTRACTOR WILL BE SUPPLIED BY MYDOC. FOR SERVICES PERFORMED AT CONTRACTORS OFFICE(S) CONTRACTOR WILL USE CONT RACTOR-OWNED PERSONAL COMPUTERS RUNNING WINDOWS NT AND THE JAVA DEVELOPMENT ENVIRONMENT. ALL OTHER SOFTWARE AND AD DITIONAL HARDWARE REQUIRED FOR THE PROJECT WILL BE SUPPLIED BY THE CLIENT. 4. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2002-03 IN WHICH THE ASSESSEE CLAIMED DEDUCTION U/S. 10A OF THE ACT. 5. WE HAVE ALREADY REFERRED TO CLAUSE 2.5 OF THE AG REEMENT FOR RENDERING PROFESSIONAL SERVICES BY THE ASSESSEE TO MY DOC. IT COULD BE SEEN FROM THE AFORESAID CLAUSE THAT ANY EQUIPMENT O R SOFTWARE REQUIRED TO SUCCESSFULLY IMPLEMENT THE PROFESSIONAL SERVICES TH AT IS NOT ACCESSIBLE TO THE ASSESSEE WILL BE SUPPLIED BY MY DOC. ACCORDING TO THE ASSESSEE INSTEAD OF SUPPLYING THE REQUIRED SOFTWARE AND EQUI PMENT MY DOC SUGGESTED TO THE ASSESSEE THAT THE EQUIPMENT COULD BE PURCHASED BY THE ASSESSEE IN ITS OWN NAME AND THAT MY DOC WOULD PAY EXTRA CHARGES OVER AND ABOVE THE AGREED AMOUNT FOR DEVELOPMENT OF SOFT WARE AND SUCH EXTRA AMOUNT WILL BE PAID UNDER THE NOMENCLATURE HIRE FO R USE OF SPECIAL EQUIPMENT. THE ASSESSEE PURCHASED IN ITS NAME EQU IPMENTS AND HAS BEEN CLAIMING DEPRECIATION ON THE SAME. IN RESPECT OF THE EXTRA CHARGES ITA NOS.666 & 826/BANG/2012 PAGE 4 OF 15 FOR THE PURCHASE OF SPECIAL EQUIPMENT THE ASSESSEE RECEIVED THE SAME FROM MY DOC AND THE SAME HAS BEEN SHOWN IN THE PROF IT & LOSS ACCOUNT AS INCOME UNDER THE HEAD HIRING CHARGES. COPY OF TH E P&L ACCOUNT OF THE ASSESSEE IN THIS REGARD IS FOUND AT PAGE 17 OF THE PAPERBOOK. DURING THE PREVIOUS YEAR THE ASSESSEE RECEIVED HIRING CHARGES OF RS.49 76 770/ THE ASSESSEES BUSINESS INCOME AFTER SHOWING THE RECEIP TS FROM HIRING CHARGES HAS BEEN ARRIVED AT A SUM OF RS.5 95 72 846. TO TH IS CERTAIN ADDITIONS AND DELETIONS HAVE BEEN MADE AND THE BUSINESS PROFIT OF THE ASSESSEE HAS BEEN ARRIVED AT A SUM OF RS.5 99 66 621. THIS BUSI NESS PROFIT IS INCLUSIVE OF THE HIRING CHARGES WHICH HAS BEEN SHOWN AS INCOM E IN THE P&L ACCOUNT. AS FAR AS THE TOTAL TURNOVER AND EXPORT TURNOVER IS CONCERNED THE ASSESSEE HAS NOT INCLUDED THE HIRING CHARGES RECEIVED FROM M Y DOC EITHER IN THE TOTAL TURNOVER OR EXPORT TURNOVER FOR THE PURPOSE OF COMP UTING DEDUCTION U/S. 10A OF THE ACT. DEDUCTION U/S. 10A OF THE ACT WAS THUS CLAIMED BY THE ASSESSEE AT RS.5 83 37 639. THE COMPUTATION OF THE ASSESSEE INSOFAR AS DEDUCTION U/S. 10A OF THE ACT IS CONCERNED IS AT P AGE 15 OF THE PAPERBOOK. 6. IN THE COURSE OF ASSESSMENT PROCEEDINGS BY ITS LETTER DATED 19.08.2004 (COPY PLACED AT PAGE 81 OF THE ASSESSEE S PB) THE ASSESSEE CLAIMED THAT THE HIRING CHARGES SHOULD ALSO BE TREA TED AS PART OF EXPORT TURNOVER FOR THE PURPOSE OF ALLOWING DEDUCTION U/S. 10A OF THE ACT AS IT HAS ALL THE INGREDIENTS OF EXPORT TURNOVER. IN PARTICU LAR THE ASSESSEE POINTED OUT THAT HIRING CHARGES DID NOT ARISE INDEPENDENTLY BUT IT IS PART AND PARCEL ITA NOS.666 & 826/BANG/2012 PAGE 5 OF 15 OF THE OVERALL TRANSACTION OF DEVELOPMENT OF SOFTWA RE AND INCIDENTAL TO THE SAME. 7. THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDE R DATED 24.08.2004 U/S. 143(3) OF THE ACT IN WHICH HE HAS N OTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 10A OF THE ACT AS FOLLO WS:- THE ASSESSEE IS EXPORTING SOFTWARE FROM REGISTERED SOFTWARE TECHNOLOGY PARK AND IS ELIGIBLE FOR BENEFIT U/S. 10 A. IT IS DEVELOPING SOFTWARE FOR M/S. MYDOC ONLINE INC. U.S .A. THE CONTRACT REQUIRES THAT THE ASSESSEE PURCHASE HARDWA RE IN ITS OWN NAME. THE FOREIGN COMPANY PAYS HIRE CHARGES FOR TH E HARDWARE OVER AND ABOVE THE AGREED AMOUNT FOR DEVELOPMENT OF SOFTWARE. THE HIRE CHARGES GO TOWARDS USE OF THE HARDWARE BEL ONGING TO THE ASSESSEE FOR THE DEVELOPMENT OF SOFTWARE. DURING T HE YEAR THE ASSESSEE HAS RECEIVED RS.49 76 770/- TOWARDS SUCH H IRE CHARGES. SECTION 10A IS APPLICABLE PROFITS DERIVED FROM EXPO RT OF COMPUTER SOFTWARE. IT DOES NOT COVER INCOME FROM H IRE CHARGES. IN LETTER DT. 19.08.2004 THE ASSESSEE CLAIMS THAT IT IS ONLY BIFURCATION OF THE GROSS BILLABLE AMOUNT FOR DEVELO PMENT OF SOFTWARE. HOWEVER THE INCOME HAS BEEN ACCOUNTED A S HIRE CHARGES OF HARDWARE OWNED BY THE ASSESSEE AND THE N ATURE OF THAT INCOME CANNOT BE CHARGED BY NOMENCLATURE. ACCORDIN GLY THE HIRE CHARGES OF RS.49 76 770/- RECEIVED BY THE ASSE SSEE TOWARDS USE OF ITS HARDWARE WILL NOT FALL WITHIN THE AMBIT OF SECTION 10A. THE AO ULTIMATELY COMPUTED THE DEDUCTION U/S.10A OF THE ACT AS FOLLOWS: ITA NOS.666 & 826/BANG/2012 PAGE 6 OF 15 COMPUTATION OF DEDUCTION U/S. 10A NAME OF THE ASSESSEE : M/S. OBECTROB TECHNOLOGIES P VT. LTD. 2/1 DR. RAJKUMAR ROAD RAJAJI NAGAR BANGALORE 560 010. ASST. YEAR : 2002-03 ADJUSTED PROFITS 5 99 66 621 A TOTAL TURNOVER 11 92 92 694 B TOTAL TURNOVER REALIZED IN FOREIGN CURRENCY 11 60 52 130 LESS: HIRE CHARGES 49 76 770 11 10 75 360 C DEDUCTION U/S. 10A A*B/C 5 58 35 892 8. ON 06.02.2009 THE AO RECORDED THE FOLLOWING REA SONS U/S. 147 OF THE ACT BEFORE ISSUE OF NOTICE U/S. 148 OF THE ACT ON 05.03.2009. THE REASONS RECORDED BY THE AO READS THUS:- IN THIS CASE IT IS SEEN WHILE COMPUTING THE DEDUC TION U/S. 10A THE HIRE CHARGES OF RS.49 76 770 WAS NOT REDUCE D FROM PROFITS OF THE BUSINESS & ALSO EXPENSES INCURRED IN FOREIGN CURRENCY RELATING TO COMMUNICATION CHARGES & FOREIG N TRAVEL HAVE NOT BEEN EXCLUDED FROM THE EXPORT TURNOVER WHI LE COMPUTING DEDUCTION U/S. 10A. LETTER TO CIT SEEKING INSTRUCTIONS FOR REOPENING U /S. 147. 9. IT WAS THE PLEA OF THE ASSESSEE BEFORE THE CIT(A PPEALS) THAT INITIATION OF THE PROCEEDINGS U/S. 147 OF THE ACT W ERE NOT VALID BECAUSE THE AO WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF T HE ACT HAD GONE INTO ALL ASPECTS OF DEDUCTION U/S. 10A OF THE ACT AND IN PARTICULAR THE QUESTION OF ITA NOS.666 & 826/BANG/2012 PAGE 7 OF 15 HIRING CHARGES BEING CONSIDERED AS PART OF THE EXPO RT TURNOVER. IT WAS SUBMITTED THAT THERE WAS NO MATERIAL WHICH CAME TO THE POSSESSION OF THE AO TO NOW TAKE A RELOOK AT DEDUCTION U/S. 10A OF TH E ACT. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) . 10. THE CIT(APPEALS) HOWEVER DID NOT AGREE WITH T HE SUBMISSIONS SO MADE BY THE ASSESSEE. HE HELD THAT WHILE CONCLUDIN G THE ORIGINAL ASSESSMENT THERE WAS NO OPINION EXPRESSED ON THE I SSUE SOUGHT TO BE RAISED IN THE REASONS RECORDED BY THE AO AND THEREF ORE THERE WAS NO QUESTION OF CHANGE OF OPINION. HE WAS OF THE VIEW THAT THE REASONS RECORDED WERE SUFFICIENT AND RELEVANT AND THE REASS ESSMENT PROCEEDINGS WERE INITIATED AS DEDUCTION U/S. 10A OF THE ACT HAS NOT BEEN CORRECTLY COMPUTED. THE ACTION OF THE AO IN TAKING REMEDIAL MEASURE U/S. 147 OF THE ACT TO BRING THE ESCAPED INCOME TO TAX WAS HELD TO BE VALID BY THE CIT(APPEALS). 11. BEFORE US SEVERAL CONTENTIONS WERE RAISED REGA RDING THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. REFERENCE TO SEVERAL DECISIONS OF HONBLE SUPREME COURT HIGH COURTS AND TRIBUNAL WER E BROUGHT TO OUR NOTICE. WE TAKE UP FOR CONSIDERATION THE FIRST OF T HE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. THE FIRST ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT ASSESSMENT IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2002-03 WAS ITA NOS.666 & 826/BANG/2012 PAGE 8 OF 15 COMPLETED U/S. 143(3) OF THE ACT BY ORDER DATED 24. 08.2004. HE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 147 OF THE A CT AND PROVISO TO SECTION 147 WHICH READS AS UNDER:- 147:INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 1 53 ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHAR GEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE AS THE CASE MAY BE FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR: 12. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE WAS THAT AS PER THE PROVISO TO SECTION 147 OF THE ACT WHERE AN ASS ESSMENT U/S. 143(3) OF THE ACT HAS BEEN MADE IN ANY ASSESSMENT YEAR AND IF AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ACTION IS SOUGHT TO BE TAKEN U/S. 147 OF THE ACT SUCH ACTION CAN BE ONLY IN CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T ASSESSMENT YEAR. HE ITA NOS.666 & 826/BANG/2012 PAGE 9 OF 15 DREW OUR ATTENTION TO THE REASONS RECORDED BY THE A O U/S. 147 OF THE ACT BEFORE ISSUE OF NOTICE U/S. 148 OF THE ACT AND SUBM ITTED THAT IN THE REASONS SO RECORDED BY THE AO THERE HAS BEEN NO ALLEGATION THAT THERE WAS ESCAPEMENT OF INCOME DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT OF INCOME OF THE ASSESSEE FOR A.Y. 2002-03. OUR ATTEN TION WAS DRAWN TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR (2004) 137 TAXMANN 479 (B OM ) . IN THE AFORESAID CASE THE QUESTION THAT AROSE FOR CON SIDERATION WAS WITH REGARD TO THE VALIDITY OF THE INITIATION OF REASSES SMENT PROCEEDINGS U/S. 147 OF THE ACT IN A CASE WHERE ASSESSMENT HAD ALREADY B EEN COMPLETED U/S. 143(3) OF THE ACT AND NOTICE U/S. 148 WAS ISSUED AF TER EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE HONBLE BOMBAY HIGH COURT AFTER NOTICING THAT THE CONDITION LAID DOWN IN THE PROVISO WAS NOT SATISFIED OBSERVED AS FOLLOWS:- THE REASONS RECORDED BY THE ASSESSING OFFICER NOWH ERE STATED THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT OF THAT ASSESSMENT YEAR. THE REASONS ARE REQUIRED TO BE REA D AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REAS ONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASO NS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLO SE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPE AK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REA CH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. I T IS FOR THE ITA NOS.666 & 826/BANG/2012 PAGE 10 OF 15 ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HI M TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS R ECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFF ER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS M IND. REASONS ARE THE MANIFESTATIONS OF MIND OF THE ASSESSING OFF ICER. THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHO ULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROV IDE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORD ED MUST BE BASED ON EVIDENCE. THE ASSESSING OFFICER IN THE EV ENT OF CHALLENGE TO THE REASONS MUST BE ABLE TO JUSTIFY T HE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE I N THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY T HE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT AS SESSMENT YEAR SO AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS A ND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE A SSESSING OFFICER CANNOT BE SUPPLEMENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION OTHERWISE THE REASONS WHICH WERE LACKIN G IN MATERIAL PARTICULARS WOULD GET SUPPLEMENTED BY THE TIME THE MATTER REACHES THE COURT ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSION ADVANCED. 13. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ACIT V. HEWELETT PACKARD DIGITAL GLOBAL SOLUTIONS LTD. ITA NO.406 OF 2007 JUDGMENT DATED 19.09.2011 WHEREIN THE HONBLE KARNATAKA HIGH COURT AFTER MA KING A REFERENCE TO THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF HINDUSTAN LEVER LTD. (SUPRA) OBSERVED AS FOLLOWS:- 7. IT IS OBSERVED IN THE SAID JUDGMENT THAT THE R EASON RECORDED BY THE ASSESSING OFFICER NO WHERE STATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSME NT YEAR. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH THE CONCLUSION AS TO WHE THER THERE WAS ITA NOS.666 & 826/BANG/2012 PAGE 11 OF 15 FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE -CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNA MBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASO NS RECORDED MUST DISCLOSE HIS MIND. THE REASONS ARE THE MANIFE STATION OF THE MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE G UESSING FOR THE REASONS. REASONS PROVIDE THE LINK BETWEEN CONCL USION AND EVIDENCE. THE ORDER PASSED BY THE ASSESSING AUTHORI TY DID NOT STATE ANYWHERE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR THE ASSESSMENT OF THAT YEAR. ALL THAT HAS BEEN STATED I N THE ORDER IS THAT THE ASSESSEE HAS APPENDED THE NOTE AND AT NO P OINT OF TIME THE ASSESSEE HAS DISCLOSED AS TO THE NEXUS BETWEEN THE AMOUNT OF RS. 10 06 617/- AND THE 10A UNIT. THE DISCLOSURE HA S TO BE FULL AND TRUE. BOTH THE CRITERIA HAVE TO BE MET. IN THE ASSESSEES CASE BY FAILING TO BRING OUT THE NEXUS BETWEEN THE 10A U NIT AND THE INTEREST INCOME THE ASSESSEE HAS NOT DISCHARGED IT S RESPONSIBILITY OF FURNISHING FULL DISCLOSURE OF FACTS. AS SET OUT ABOVE THE NOTE CLEARLY SETS OUT THE INTEREST INCOME EARNED BY THE STP UNIT AND THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTI ON 10A. IT IS NOT THE REQUIREMENT OF LAW THAT FURTHER THE ASSESSE E SHOULD SHOW THE NEXUS BETWEEN THE AMOUNT CLAIMED AND 10A UNIT. WHEN HE HAS CATEGORICALLY STATED THAT THE INTEREST WHICH I S EARNED FROM STP UNIT IS ELIGIBLE FOR EXEMPTION UNDER SECTION 1 0A EVEN THAT NEXUS IS MANIFEST. THE ASSESSING AUTHORITY HAS NOT PROPERLY APPLIED HIS MIND TOWARDS THE STATUTORY PROVISIONS A ND HAS NOT TAKEN INTO CONSIDERATION THAT THE ORIGINAL ASSESSME NT PASSED UNDER SECTION 143(3) WHICH WAS ALSO REOPENED ONCE AND ADJ USTMENT WAS MADE. IT IS FOR THE SECOND TIME HE WAS RAISING ALL THESE OBJECTIONS. WHEN ADMITTEDLY THE SECOND REOPENING OF THE ASSESSMENT IS BEYOND FOUR YEARS UNDER LAW IT IS B ARRED BY TIME AND THE FINDINGS RECORDED BY THE TRIBUNAL IS LEGAL AND VALID AND DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. IN THAT V IEW OF THE MATTER NO SUBSTANTIAL QUESTION OF LAW ARISES FOR C ONSIDERATION IN THESE APPEALS. ACCORDINGLY THE APPEALS ARE DISMISS ED. ITA NOS.666 & 826/BANG/2012 PAGE 12 OF 15 14. BESIDES THE ABOVE SEVERAL OTHER DECISIONS WERE BROUGHT TO OUR NOTICE ON IDENTICAL PROPOSITION AS LAID DOWN IN THE AFORESAID DECISIONS. WE ARE NOT MAKING A REFERENCE TO THOSE DECISIONS. WE WOULD HOWEVER MAKE A REFERENCE TO THE RECENT DECISION OF THE HONBLE B OMBAY HIGH COURT IN THE CASE OF LOK HOUSING & CONSTRUCTION LTD. V. DCIT 348 ITR 33 5 (BOM) WHEREIN IT WAS OBSERVED AS FOLLOWS:- THE POWER OF THE ASSESSING OFFICER TO REOPEN BEY OND A PERIOD OF FOUR YEARS IS EVEN MORE RESTRICTED THAN WHEN THE REOPENING TAKES PLACE WITHIN A PERIOD OF FOUR YEARS OF THE EN D OF THE RELEVANT ASSESSMENT YEAR. IN THE CASE OF THE ASSESSEE THE C ONDITION PRECEDENT TO THE INVOCATION OF THE JURISDICTION WAS CLEARLY ABSENT SINCE THERE WAS NOT EVEN AN AVERMENT TO THE EFFECT THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE F ULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. TH US THE ASSESSING OFFICER HAD CLEARLY ACTED IN EXCESS OF JU RISDICTION IN PURPORTING TO REOPEN THE ASSESSMENT BEYOND A PERIO D OF FOUR YEARS FOR THE ASSESSMENT YEAR 2004-05 BY HIS NOTICE . 15. IT WAS THUS SUBMITTED BY THE LD. COUNSEL FOR TH E ASSESSEE THAT REOPENING OF THE ASSESSMENT SHOULD BE HELD TO BE BA D IN LAW AS THE AO IN THE PRESENT CASE HAS NOT RECORDED SPECIFICALLY THAT ESCAPEMENT OF INCOME WAS DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A.Y. 2002-03. 16. THE LD. DR ON THE OTHER HAND SUBMITTED THAT TH ERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOS E MATERIAL FACTS WITH REGARD TO HIRE CHARGES RECEIPT FROM MY DOC AND THE ACCOU NTS AND NOTES TO THE ITA NOS.666 & 826/BANG/2012 PAGE 13 OF 15 ACCOUNTS ARE SILENT IN THIS REGARD ABOUT THE NATURE OF THE HIRE CHARGES RECEIVED. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FROM A PERUSAL OF THE REASONS RECORDED BY THE AO BEFORE ISSUING NOTICE U/ S. 148 OF THE ACT IT IS CLEAR THAT THE AO HAS NOT IN THE REASONS RECORDED MADE AN ALLEGATION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE ASSESSEES FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. I T IS NOT IN DISPUTE THAT FOR A.Y. 2002-03 AN ASSESSMENT U/S. 143(3) HAD ALR EADY BEEN MADE IN THE CASE OF THE ASSESSEE BY AN ORDER OF ASSESSMENT DATE D 24.8.2004. ADMITTEDLY NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 5.3.2009 WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR (2002-03). THE PROVISO TO SECTION 147 WAS THE REFORE CLEARLY ATTRACTED. IT IS CLEAR FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS WELL AS THE HONBLE KARNATAKA HIGH COURT REFERRED TO BY TH E LD. COUNSEL FOR THE ASSESSEE BEFORE US THAT THERE SHOULD BE A SPECIFIC AVERMENT IN THE REASONS RECORDED THAT ESCAPEMENT OF INCOME CHARGEAB LE TO TAX WAS BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. SUCH AN ALLEGATION IS ADMITTEDLY ABSENT IN THE REAS ONS RECORDED. THE LAW IS WELL SETTLED THAT VALIDITY OF INITIATION OF REAS SESSMENT PROCEEDINGS HAVE TO BE JUDGED ON THE BASIS OF REASONS RECORDED BY THE A O AND IT IS NOT POSSIBLE TO SUBSTITUTE DELETE OR ADD ANYTHING TO SUCH REASO NS RECORDED BY THE AO. ITA NOS.666 & 826/BANG/2012 PAGE 14 OF 15 IT IS ALSO NOT POSSIBLE TO DRAW ANY INFERENCE BASED ON THE REASONS NOT RECORDED. IN THE LIGHT OF THE LAW AS LAID DOWN IN THE AFORESAID DECISIONS WE ARE OF THE VIEW THAT INITIATION OF REASSESSMENT PRO CEEDINGS BY THE AO IN THE PRESENT CASE IS NOT IN ACCORDANCE WITH THE LAW. TH E ORDER OF REASSESSMENT IS THEREFORE LIABLE TO BE ANNULLED AND THE SAME IS HEREBY ANNULLED. 18. IN VIEW OF THE ABOVE CONCLUSION ON THE PRELIMIN ARY ISSUE OF THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS THE OTHER ISSUES RAISED BY THE ASSESSEE ON MERITS IN ITS APPEAL AND THE ISSUES RAISED BY THE REVENUE IN ITS APPEAL DO NOT REQUIRE ANY CONSIDERATION. 19. IN THE RESULT THE APPEAL BY THE ASSESSEE IS AL LOWED AND THE APPEAL BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF APRIL 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE DATED THE 11 TH APRIL 2014 . /D S/ ITA NOS.666 & 826/BANG/2012 PAGE 15 OF 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT BANGALORE.