TaxTMI 
TaxTMI 
2018 (1) TMI 709
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.... 2. As regards, reopening of assessment beyond time limit prescribed under proviso to Section 147 of the Act: 2. 1. The Learned CIT(A) is not justified in upholding the action of the Learned Assessing officer in reopening the assessment beyond the time limit prescribed under Section 147 of the IT Act. 2.2. The Learned CIT(A) has failed to appreciate that the assessment has been reopened on the basis of findings recorded by the Addl. CIT for the Assessment year 2009-10, which cannot be considered as a failure on the part of the assessee to disclose fully and truly all the materials facts necessary for the assessment. 2.3. The finding of Learned CIT(A) that the appellant misrepresented the facts with regard to the nature of business activities carried out by it is perverse being based on surmises and conjectures and without bringing out any evidence whatsoever against the appellant. 2.4. Without prejudice to the above, the Learned CIT(A) has failed to appreciate that even if the reassessment is initiated after the expiry of four years, it is the Assessing Officer who has to establish that there was failure on the part of assessee to disclo....
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....s per the specifications provided by the clients is not justified in rejecting the claim under section 10B on the premise that the said activity does not involve manufacture/ production of computer software or providing any IT enabled services. 4.4. The Learned CIT(A) is not justified in failing to consider Board Circular No. 1/2013, dated 17.01.2013 wherein it is clarified that the 'Engineering and Design' has the inbuilt elements of Research and Development and that any Research and Development activity embedded in the 'Engineering and Design', would also be covered under the said Notification No. SO 890(E) for the purpose of Explanation 2 to Section l0B. 4.5. The Learned CIT(A) is not justified in perversely and contrary to records, stating that the director of the company has confirmed in the statement recorded on 1.8.2011 that the appellant's activity could not be held to be in the nature of manufacturing computer software or providing any IT enabled services 4.6. Without prejudice to the above, the Learned CIT(A) is not justified in failing to appreciate that the Appellant receives the required information, specification and data....
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....support the business activities of its customers, thereby qualifying as a 'Support Centre' or 'Back Office Operations' or data processing services' within the meaning of Notification No. SO 890 (E) dated 26 September 2000 for the purpose of Section 10B of the Act. 4. 10. Without prejudice to the above, the Learned CIT(A) has erred in holding that the Appellant is not engaged in the manufacture or production of any article or thing. The Learned Commissioner (Appeals) has failed to appreciate that the result of the activities carried out by the Appellant arc captured in CAD and other software platforms in the form of drawings and reports, bring into existence a distinct 'article or thing' so as to be entitled to deduction under Section l0B as the export of "computer software". 4. 11. The Learned CIT(A) is not justified in failing to consider the acknowledgement issued by the Development Commissioner, Cochin, SEZ to the effect that the Appellant exported computer software. 4.12. The Learned CIT(A) is not justified in failing to appreciate that the provisions of Section l0B being beneficial provisions require to be liberally interp....
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.... assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to notice under sub section 1 of section 142 or section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. Undisputedly, for the impugned assessment year, assessment under section 143(3) was completed on 25.11.2008, therefore the assessment can only be reopened in the 4 years from the end of the relevant assessment year. The impugned assessment year is 2005-06 therefore the reopening is possible only upto 31.03.2010. If the AO is required to reopen the assessment thereafter, he has to record the reasons that income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. During the course of hearing, the learned counsel for the assessee invited my attention to reasons recorded by the AO while reopening the assessment. In the entire proceedings, the AO has not made out the case that income chargeable to tax has escaped the assessment by the reason of t....
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....e Bombay High Court in the case of Hindustan Lever Ltd. (supra) observed as follows:- "7. It is observed in the said judgment that the reason recorded by the Assessing Officer no where state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment 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 whether there was failure on the part of the assessee to disclose fully 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 unambiguous and should not suffer from any vagueness. The reasons recorded must disclose, his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The order p....
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....assessment year. In the case of the assessee, the condition 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 fully and truly all the material facts necessary for the assessment. Thus, the Assessing Officer had clearly acted in excess of jurisdiction in purporting to reopen the assessment, beyond a period of four years for the assessment year 2004-05 by his notice." 12. It was thus submitted by the ld. counsel for the assessee that reopening of the assessment should be held to be bad in law, as the AO in the present case has not recorded specifically that escapement of income ITA No. 1416/Bang/2010 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. 1996-97. 13. The ld. DR, on the other hand, relied on the order of the CIT(Appeals) and decisions referred to by him in his order. We have already seen that the decisions referred to by the CIT(A) in his order did not deal with the proviso to Sec.147 of the Act where there is no recording in the reason....
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....ailure on the part of the assessee to disclose fully and truly all necessary facts relevant to the assessment, reopening of assessment after 4 years is not a valid reopening and on the basis of the assessment framed consequent to the bad reopening, the assessment can be quashed. In the instant case, since the AO has not recorded the specific satisfaction that income chargeable to tax has escaped the assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the reopening is invalid. Therefore, the assessment framed consequent to the invalid reopening deserves to be quashed. We, accordingly, quash the assessment. Since the assessment is quashed, I find no justification to deal with the other issues on merit. 7. ITA No.1811//Bang/2017 In this appeal, the assessee has assailed the order of the CIT(A), inter alia, on the following grounds: 1. The Order of the Learned Commissioner (Appeals) in so far as it is prejudicial to the interest of the Appellant is not justified in law and on facts and circumstances of the case. 2. The Learned Commissioner (Appeals) is not justified in up....
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....in the meaning of 'computer software' as per Explanation 2(1) to Section lOB read with Notification No. SO 890(E) dated 26.09.2000. 2.7. Without prejudice to the above, the Learned CIT(A) is not justified in failing to appreciate that the activities carried out by of the Appellant would fall within the ambit of clause (a) of item (i) of Explanation 2 to Section 10B of the IT Act, i.e., "any computer programme recorded on any disc, tape, perforated media or other information storage device", by virtue of the extended meaning of 'computer programme' provided under Section 10BB and therefore includes the processing and management of electronic data so as to qualify to be regarded as an eligible activity for the purpose of Section 10B. The final output produced by the Appellant is in an electronic format using IT enabled devices which is capable of causing a computer to perform a particular task or achieve a particular result. 2.8. Without prejudice to the above, the Learned CIT(A) is not justified in failing to appreciate that the activities of engineering and design of the Appellant are regarded as IT enabled services by NASSCOM in its publication ti....
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....llowance is not legally sustainable. 8. During the course of hearing, the learned counsel for the assessee candidly admitted that this ground is covered against the assessee by the order of the Tribunal in the case of IMI R & D Centre India P. Ltd., V. ITO in ITA Nos. 560, 561, 1749 & 1750/Bang/2013 in which the Tribunal has examined the issue of claim of deduction under section 10B of the Act. Relevant observation is extracted hereunder for the sake of reference: " 7.2 We heard the rival submissions and gone through relevant material. For claiming the deduction u/s 10B, the assesse has to establish that it has manufactured or produced articles or things or computer software, derived profits and gains from a hundred percent export-oriented undertaking on export of such articles or things or computer software. The assessee has not produced any document to prove that it has manufactured or produced articles or things or computer software. It has also not produced any document, invoice or sale bill towards export of articles or things or computer software which was either manufactured by it or produced by it . The assesse also not produced any certificate from any regulato....
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....Developer This Agreement sets out the detail of the arrangements already in existence and includes the terms on which the costs of such services are to be calculated. (B) Cornelius wishes to commission the Developer to carry out on its behalf certain development work on the terms set out in this Agreement. (C) The Developer agrees to undertake the development work on the terms set out herein, (D) Cornelius and the Developer agree that these terms and conditions shall apply to all work undertaken by Developer for Cornelius. IT IS AGREED as follows:- 1. INTERPRETATION 1.1 In this Agreement the terms set out below shall mean:- "Cost" As defined under schedule 3, "Foreground Information" (1) all information, data, results, know-how, discoveries, reports and all deliverables and output of a Project and (2) all IPR including without limitation in relation to the above: arising or produced during the course of a Project including without limitation such of (1) and (2) above conceived, first reduced to practice or writing or developed in whole or in part during the course of a Project whether by or on behalf o....
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....ractor attaining a Milestone or other tasks detailed in the relevant Project Proposal no such payment shall be made by Cornelius until such time as a Milestone or other task has been met or completed to the reasonable satisfaction of Cornelius. 5.4 The Cost shall be paid by Cornelius in $ (US Dollars). 5.5 All Cost shall be calculated as detailed under the Schedule 3 Cost. 5.6 The amounts determined in accordance with Schedule 3 are exclusive of VAT and it is the responsibility of the Developer and Cornelius to ensure that the correct VAT treatment (II applicable) is applied to any charge in respect of Project or services provided. 5.7 The Cost is exclusive of any value added (or like) tax which may be payable on them and shall be paid gross without deduction of any withholding or other income taxes, Cornelius shall ensure that such sum is paid to the Developer as shall, after deduction of such withholding or other income tax, be equivalent to the-Cost otherwise payable under the Agreement ...................................................................................................................................................................
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.... the parties in relation to this Agreement at the date of termination; and 12.1.2 the continued existence and validity of the following clauses of this agreement: Clause 1 - Definitions Clause 7 - Confidentiality Clause 8 - Intellectual Property Clause 9 Further Assurance Clause 10 Liability Clause 12 Consequences of Termination Clauses 14.1 and 14,5 - General Clause 15 - Governing Law and Jurisdiction 12.2 Upon the expiry or termination of this Agreement howsoever occasioned: 12.2.1 the Developer shall immediately deliver up to Cornelius all output and deliverables from a Project including without limitation documents, reports, data and information (whether in hard or soft copy) and any prototypes: 12.2.2 each party shall immediately deliver up to the other all property loaned or provided by the other party for the purpose of a Project; 12.2.3 all outstanding Development Fees payable by Cornelius to the Developer shall become due and payable immediately and upon the Developer complying with its obligations under clauses 12.21 and 12.2.2 herein; 12.2.4 the Developer shall not for a....