TaxTMI 
TaxTMI 
2016 (2) TMI 790
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....on of the proceedings under Section 147 of the Act for assessment of alleged escapement of income. Without prejudice to the generality, the objections, so overruled, are as under: a) The reasons recorded for the re-opening of the assessment, initially framed under Section 143(3), beyond four years after the end of the relevant assessment year, do not allege that the assessee had failed to disclose fully and truly all material facts necessary for the assessment. b) No specific finding has been given by the Assessing Officer (AO) that the assessee had failed to disclose fully and truly all material facts necessary for the assessment. c) Even otherwise, the assessee had disclosed fully and truly all material facts necessary for the assessment. d) The re-assessment, so made, is the result of mere change of opinion. e) The assessee has not been provided with the copy of written sanction, said to have been accorded, under Section 151. 2. Without prejudice to the grievance against the validity of initiation of the proceedings under section 147, the learned CIT(A) has erred in confirming the denial of deduction under Section 10....
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.... u/s. 59 & 65 of the Customs Act for manufacture in Bond of Computer Software which was an essential requirement for 100% EOU, since the manufacturing and export activity from the Mumbai undertaking is already in existence since April, 2005 and the assessee company claimed depreciation of Rs. 15,29,036/- from 01-04-2005 to 30-09- 2005 in respect of the Mumbai undertaking which again reinforces that the assessee company had already acquired assets and continuing with manufacturing of computer software and the deduction u/s 10A of the Act should be disallowed. The assessee company submitted that there is no condition in Section 10A of the Act that deduction is eligible from date of approval from STPI. The assessee company submitted that Mumbai unit is a new unit for which the approval from STPI was received in this year on 19-09- 2005 and therefore, it is eligible for the deduction from this initial year. The AO rejected the contentions of the assessee company and held that company right from its inception was rendering services to its A.E. M/s. Prothious INC, USA and continued its business operation with the same old establishment, same management, same employees, same clients and t....
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....early made a reference in his order DATED 24/1/2013 stating inter-alia that since the return of income was filed u/s. 139 of the Act and the assessee company has not disclosed fully and truly all material facts necessary for its assessment for that year, therefore, there is a prima facie evidence on record that the income has escaped assessment by reason of the omission or failure on the part of the assessee company to truly and fully disclose the material facts. Accordingly, a notice was issued and served u/s. 148 of the Act after recording such reasons which was valid and legal. The manner in which the specific requirements of law, regarding recording of the reasons, the same was not recorded. However, it can be impliedly inferred that the omission was on account of assessee's failure. The CIT(A) also observed that proper permission has been obtained by the AO from CIT-8,Mumbai before initiating proceedings u/s 147/148 of the Act. The CIT(A) observed that AO has brought on record that assessee company since its inception was rendering services to its A.E. M/s. Prothious INC, USA and continued its business operation with the same old establishment, same management, same employees,....
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....umbai and Nashik. In the year under consideration, only the undertaking at Mumbai is registered in the Software Technology Park with effect from October, 2005. Accordingly, the claim for exemption under section 10A is restricted by the assessee to the operations of the Mumbai undertaking for the period after the commencement of operation in the STP. The revenues and expenses have been bifurcated and allocated as per the basis adopted and stated in form no. 56 filed along with the return of income and accordingly, from the total income of Rs. 76,37,920/- the claim is made for exemption under section 10A of Rs. 47,43,192 being the profits and gains of part period of Mumbai STP undertaking". The Ld. Counsel of the assessee company submitted that the AO has duly applied his mind before framing original assessment order u/s 143(3) of the Act and no new tangible material has come to the notice of the AO before reopening the assessment u/s 147/148 of the Act and it is a case of change of opinion on same set of facts before the AO which was there at the time of framing original assessment order dated 28-11-2008 u/s 143(3) of the Act . The Ld. Counsel for the assessee company submitted t....
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....the undertakings. Further, it was observed that Mumbai undertaking got letter of permission from STPI, Navi Mumbai on 19-09-2005 for 100% Export Oriented Unit. Licence u/s. 59 & 65 of the Customs Act for Manufacture in Bond of Computer Software which was an essential requirement for 100% EOU. As the manufacturing and export activity from the Mumbai undertaking is already in existence since April, 2005 and assessee claimed depreciation of Rs. 15,29,036/- from 01-04-2005 to 30-09-2005 in respect of Mumbai undertaking which again reinforces the assessee had already acquired assets and continuing with manufacturing of computer software, it is obvious that the claim of assessee for deduction of profit in respect of its Mumbai unit u/s. 10A is not in order and same should be disallowed. 3. The objection raised by the revenue audit is not acceptable. F.Y. 2005-06 is the first year of operation of the assessee company. It is pertinent to mention here that assessee has commenced business from April, 2005 as per the Registration Certificate of Establishment dated 05-04-2005 by the Sr. Inspector Shops & Estt. K/W. Bombay Shops and Establishments Act, 1948 wherein it can be seen that ....
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.... AO has asked for the details of deduction claimed by the assessee company u/s.10A of the Act. The assessee company has duly replied vide reply dated 10-12-2007 to the AO in original assessment proceedings and on being satisfied, the assessment has been framed u/s. 143(3) of the Act by the AO vide orders dated 28-11-2008 whereby deduction of Rs. 47,43,192/- u/s 10A of the Act was duly granted to the assessee company by the AO. The assessee company has duly submitted form no 56F being report under Section 10A of the Act dated 10.10.2006 issued by auditors-chartered accountants of the assessee company certifying that the assessee company is entitled for deduction u/s 10A of the Act of Rs. 47,43,192/- during the assessment year. It is also emerging from the records and also from the orders of the authorities below that the assessee company has set up a new undertaking for the manufacture and export of the computer software under bond at Mumbai which was set up in April 2005 but the assessee company obtained STPI approval on 19-09- 2005 and claimed deduction u/s 10A of the Act w.e.f. 01-10-2005. In our considered opinion, the assessee has truly and fully disclosed all the material fact....
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.... 2005 while the deduction u/s. 10A of the Act was claimed w.e.f. 1st October 2005 and hence the revenue is contending that when STPI approval was received by the assessee company on 19th September 2005, it was already an existing unit being set up in April 2005 i.e. anterior to the receipt of STPI approval on 19-09-2005 and Mumbai unit cannot be classified as the new unit and it will be deemed to be old unit at that time and hence there is reconstruction of business from domestic tariff area unit to 100% EOU when STPI permission was received, thus making it ineligible for deduction u/s 10A of the Act as the same is hit by Section 10A(2) of the Act. However, in our considered view, the assessee company is not hit by the Section 10A(2) of the Act as it could not be said that it is formed by splitting up or reconstruction of business already in existence nor it is brought on records that there is transfer to a new business of machineries or plant previously used for any purpose. The circular no 1 of 2005 issued in context of Section 10B of the Act which is reproduced below supports the stand of the assessee company : "Certain clarification regarding Tax holiday under section ....
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....restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. Moreover, the deduction to such units in any case will not be available after assessment year 2009-10. 5. To clarify the above position, certain illustrations are given as under:- (i) Undertaking 'A' is set up in Domestic Tariff Area and starts manufacture or production of computer software in Financial Year 1999-2000 relevant to assessment year 2000-01. It gets approval as 100% EOU on 10th September, 2004 in the financial year 2004-05 relevant to assessment year 2005-06. Accordingly, it shall be eligible for deduction under section 10B from assessment year 2005-06 i.e., the year in which it fulfils the basic condition of being a 100% EOU. Further, the deduction shall be available only for the remaining period of ten years i.e. from assessment year 2005-06 to assessment year 2009-10. This deduction under section 10B for assessment year 2005-06 shall be restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. (ii) Undertaking 'B' set up in Domestic Tariff Area, begins to manufacture or prod....