TMI Blog2011 (9) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for Assessment Years 2006-07 and 2007-08. These proceedings under Article 226 of the Constitution have been instituted in order to question the validity of the action initiated by the Assessing Officer of reopening the assessments. 3. The Petitioner filed its return of income tax for Assessment Year 2002-03 and claimed a deduction under Section 10A of the Income Tax Act, 1961. During the course of the assessment proceedings, queries were raised by the Assessing Officer, inter alia, on 7 March 2005. The Petitioner was called upon to explain how the services rendered by the Petitioner while engaged in Domain name registrations and Web Hosting Services were covered within the meaning of the expression "web-site services" under a circular issued by the Central Board of Direct Taxes. The Petitioner responded by a letter dated 14 March 2005 clarifying the circumstances in which it provides web-site services within the meaning of a CBDT circular dated 26 September 2000. The circular was issued, inter alia, in exercise of powers conferred by clause (b) of item (i) of Explanation 2 of Section 10A. By the circular several information technology enabled products or services came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturned a business loss. Nonetheless, the Assessing Officer sought to determine as to whether the Petitioner would have been entitled to a deduction under Section 10A on the ground that a major part of the revenue came from domain registration activity. According to the Assessing Officer, the Petitioner would not have been entitled to a deduction under Section 10A were it to have any profits from business, on the ground that it did not fulfil the conditions laid down in the section. However, for the year in question the Petitioner had declared a loss from business and it had not claimed any deduction under Section 10A. 9. By a notice dated 18 March 2011, the Assessing Officer has sought to reopen the assessment for the Assessment Year 2006-07. A similar notice has been issued on 18 March 2011 for Assessment Year 2007-08. The reasons on the basis of which the assessment is sought to be reopened were disclosed to the Petitioner by a letter dated 29 April 2011 of the Assessing Officer. Those reasons are as follows :- "On perusal of the records and details, it is seen the assessee is engaged in domain registration activity. Assessee functions as domain registrar, authorized by a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 10A of the Act. Further, the assessee contention that the deduction u/s 10A was allowed in earlier years, hence the reopening of the case is bad in law. In this regard, the Hon'ble ITAT Chennai "B" spl. Bench 040 DTR 0001 in the case of ACIT v. Mahindra Holidays Resorts (India) Ltd. held that the view taken in a particular assessment year cannot bind the A.O. for subsequent assessment years. The Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Limited (320 ITR 561) held that the A.O. has power to reopen the case provided that there is tangible material to come to conclusion that there is escapement of income from assessment. In the instant case, during the assessment proceedings for A.Y. 2008-09, the issue of Domain registry is examined and found to be not eligible for exemption u/s 10A of the Act as discussed above. Accordingly, the exemption was disallowed for A.Y.2008-09". 10. Learned Counsel appearing on behalf of the Petitioner submitted that (i) The assessments for Assessment Years 2006-07 and 2007-08 are sought to be reopened on the basis of a mere change of opinion, something that is impermissible in view of the judgment of the Supreme Court in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage is that Section 10A provides for a deduction over a period of ten consecutive years. The issue as to whether the Petitioner conducts a web-site service was considered in a significant amount of detail by the Assessing Officer when he disallowed the deduction for Assessment Year 2002-03. The view of the Assessing Officer was that the activities of domain name registration and web hosting services were not covered under the head of 'web-site services'. These activities, according to the Assessing Officer did not constitute 'software export' and he was of the view that the income generated from the sale of domain name registrations and web hosting would not qualify for deduction under Section 10A. The Assessing Officer followed the same view for the Assessment Year 2003-04. The Assessee carried the matter in appeal. The Commissioner (Appeals) held that the assessee was entitled to the benefit of the deduction since the service of domain name registration as well as web hosting constitutes an integral part of 'web-site services' within the meaning of the notification dated 26t September 2000 issued by the CBDT. The order of the Commissioner (Appeals) for Assessment Year 2002-03 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es do not do not fall under the category of web-site services and (iv) In the case of the Assessee. during the course of Assessment Year 2008-09 a deduction under Section 10A has been disallowed. 15. The challenge of the Assessee is that the reasons constitute a mere change in opinion. On the basis of the record, as it stands, that challenge has substance and would have to be accepted. As the narration of the facts would indicate the Assessing Officer had disallowed a deduction under Section 10A for Assessment Year 2002-03 and 2003-04. That view was reversed by Commissioner (Appeals). Hence for those years and for the succeeding years, the Assessee was granted a deduction under Section 10A. The reasons which have been furnished to the Assessee do not contain any new or tangible material or a reference to any new facts which have come on record which were not present to the mind of the Assessing Officer when the earlier assessments were finalised. The power of the Assessing Officer to reopen an assessment under Section 148 is even within a period of four years conditioned by the requirement that there must be reason to believe that income has escaped assessment. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the belief." 17. The order passed by the Assessing Officer on the objections of the Assessee adverts to two considerations. First, the Assessing Officer notes that IT enabled services necessitate a value addition, something which, according to him, the activity of a domain registry does not fulfill. This reason, is a mere change of opinion. As a matter of fact, in the assessment order for Assessment Year 2003-04, the Assessing Officer had taken the same view holding that the business of the Assessee in itself is a mere purchase and sale, the only value addition being the manual service of assessee. This view was reversed in appeal by the Commissioner (Appeals). The second consideration which has weighed with the Assessing Officer is that a decision taken in a particular year cannot bind the Assessing Officer for subsequent years. Now, it is true that each Assessment Year constitutes a separate unit in itself and the principles of res judicata as such are inapplicable. Equally, though the principles of res judicata do not strictly apply, as in the case of different Assessment Years, there is some value to be placed on the need for uniformity even in tax adjudication. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding for reassessment or by way of rectification of mistake. A mere change of opinion on an interpretation of a provision by itself without anything more, cannot give rise to 'reason to believe'. The power of reopening an assessment has been conferred by the legislature not with the object of enabling the ITO to reopen the full declaration made against the Revenue in respect of questions raised that arose directly for consideration in the earlier proceedings. If that were not the legal position, it would result in placing an unrestricted power of review in the ands of the assessing authorities depending on their changing moods." We are in respectful agreement with that view of the Division Bench. 19. For these reasons, we are of the view that the Assessing Officer has sought to reopen the assessment for Assessment Years 2006-07 and 2007-08 purely on the basis of a change of opinion. There is justification in the grievance of the Assessee that by relying on the assessment order for Assessment Year 2008-09 the Revenue has put into place a contrived attempt to reopen the assessment for Assessment Year 2008-09. The issue as to whether the Assessee was entitled to a deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
