Assessee's Appeal Partially Allowed, Revenue's Appeal Partly Succeeds

The assessee's appeal was allowed in part, with various issues being restored to the CIT(A) or AO for fresh consideration. The revenue's appeal was partly allowed, with some grounds dismissed and others restored for fresh assessment.

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Issues Involved:
1. Reopening of assessment
2. Prior Period Expenditure
3. Disallowances under Section 14A/36(1)(iii)
4. Depreciation on cars
5. Export to Iraq
6. Deduction under Section 80HHC
7. Exclusion of foreign exchange gain from total turnover and export turnover

Issue-wise Detailed Analysis:

1. Reopening of Assessment
- Summary: The assessee did not press this ground, and it was dismissed as not pressed.

2. Prior Period Expenditure
- Summary: The assessee argued that the disallowance of Rs. 61,874 was covered in their favor by a previous tribunal order for AY 2004-05. The Tribunal agreed, directing the AO to allow the prior period expenses in accordance with the order for AY 2004-05, emphasizing the principle of consistency.

3. Disallowances under Section 14A/36(1)(iii)
- Summary: The assessee did not press this ground, and it was dismissed as not pressed.

4. Depreciation on Cars
- Summary: The assessee claimed depreciation on cars purchased in the name of an employee. The Tribunal referred to the previous order for AY 2004-05, which required examining whether the cars were purchased by the company and merely registered in the employee's name. The Tribunal directed the AO to re-examine the issue, following the principle of consistency.

5. Export to Iraq
- Summary: The assessee argued that the disallowance of commission paid for exports to Iraq was covered in their favor by various tribunal and high court decisions. The Tribunal agreed, noting that there was no evidence to prove the payments were illegal, and allowed the ground in favor of the assessee.

6. Deduction under Section 80HHC
- 6.1 Disallowance of Commission: This was considered consequential to the decision on the export to Iraq issue and thus allowed in favor of the assessee.
- 6.2 DEPB/DFRC: The Tribunal noted that this issue was covered by the Supreme Court's decision in Topman Exports vs. CIT. The Tribunal restored the matter to the CIT(A) for fresh consideration in light of the Supreme Court's judgment.
- 6.3, 6.4, 6.5(iv), and 6.6: These grounds were not adjudicated by the CIT(A) and were restored to the CIT(A) for fresh consideration.
- 6.5(i), (ii), (iii), (vi): Similar to the previous grounds, these were restored to the CIT(A) for fresh consideration, following the principle of consistency.

7. Exclusion of Foreign Exchange Gain from Total Turnover and Export Turnover
- Summary: The Revenue's appeal on this issue was dismissed. The Tribunal referred to its previous decision for AY 2003-04, which was upheld by the jurisdictional High Court. The High Court had ruled that foreign exchange gains related to export proceeds should be included in export turnover and profit of business for Section 80HHC calculations.

Additional Points:
- Ground No. 3(a) of Revenue's Appeal: The Tribunal restored this issue to the AO for fresh consideration in line with the jurisdictional High Court's direction in the assessee's own case.
- Ground No. 3(b) of Revenue's Appeal: This ground was rejected as it did not arise from the CIT(A)'s order.

Conclusion:
- Assessee's Appeal: Allowed in part, with several issues restored to the CIT(A) or AO for fresh consideration.
- Revenue's Appeal: Partly allowed, with some grounds dismissed and others restored for fresh consideration.

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