Reassessment order quashed due to failure to dispose of objections, rendering merits issues academic.

The Tribunal quashed the reassessment order due to the Assessing Officer's failure to dispose of the assessee's objections by a speaking order, deeming the reassessment invalid. Consequently, the issues raised on merits were not addressed, rendering them academic. The appeal was partly allowed in favor of the assessee.

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Issues Involved:
1. Reopening of the assessment under section 147 of the ITA.
2. Restriction of deduction under section 35(l)(iv) of the ITA.
3. Reduction of expenses from STP profits for computing deduction under section 10A of the ITA.
4. Reduction of double taxation relief claim.
5. Exclusion of lease rental income from profits for computing deduction under section 80HHE of the ITA.
6. Discrepancy in the total turnover considered.
7. Levy of interest under section 234D of the ITA.

Issue-wise Detailed Analysis:

1. Reopening of the assessment under section 147 of the ITA:
The assessee challenged the reopening of the assessment, arguing that the Assessing Officer (AO) did not dispose of the objections by a speaking order. The Tribunal referred to various case laws and concluded that non-disposal of objections by the AO is fatal to the reassessment process. The Tribunal cited the Hon'ble Jurisdictional High Court's decision, which held that such a procedural lapse cannot be rectified by remitting the matter back to the AO. Hence, the reassessment was deemed invalid, and the assessment order was quashed.

2. Restriction of deduction under section 35(l)(iv) of the ITA:
The CIT(A) confirmed the AO's action in restricting the deduction to Rs. 1,02,86,739 after excluding a government grant of Rs. 61,13,697 from the claimed amount of Rs. 1,64,00,436. The Tribunal did not engage in this issue further as the reassessment itself was quashed.

3. Reduction of expenses from STP profits for computing deduction under section 10A of the ITA:
The CIT(A) upheld the AO's decision to reduce certain expenses from STP profits and directed the AO to follow the ratio of a previous decision in the assessee's case for A.Y. 2004-05. The Tribunal did not delve into this issue due to the quashing of the reassessment.

4. Reduction of double taxation relief claim:
The CIT(A) confirmed the reduction of the double taxation relief claim by Rs. 8,32,990. This issue was also not further examined by the Tribunal following the quashing of the reassessment.

5. Exclusion of lease rental income from profits for computing deduction under section 80HHE of the ITA:
The CIT(A) upheld the AO's action of excluding lease rental income of Rs. 1,20,19,000 from business profits for computing deduction under section 80HHE, stating that lease rentals are not derived from the business of computer software. The Tribunal did not address this issue further due to the invalid reassessment.

6. Discrepancy in the total turnover considered:
The CIT(A) did not decide on ground no. 8(c) raised before him regarding the discrepancy in the total turnover considered for assessment. The Tribunal did not engage in this issue due to the quashing of the reassessment.

7. Levy of interest under section 234D of the ITA:
The CIT(A) confirmed the levy of interest under section 234D, considering it consequential in nature. The Tribunal did not address this issue further following the quashing of the reassessment.

Conclusion:
The Tribunal quashed the reassessment order due to the AO's failure to dispose of the assessee's objections by a speaking order, deeming the reassessment invalid. Consequently, the issues raised on merits were not addressed, rendering them academic. The appeal was partly allowed in favor of the assessee.

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