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2015 (5) TMI 620 - BOMBAY HIGH COURT

2015 (5) TMI 620 - BOMBAY HIGH COURT - TMI - Reopening of assessment - claim of deduction under section 10A disallowed - Held that:- We fail to understand as to how the Respondents justify the issuance of the notice under section 148 of the IT Act and by referring to such details including of the claim of deduction under section 10A of the IT Act. If these details and pertaining to deduction in question were not furnished and were not available with the Assessing Officer, then, one fails to unde .....

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d furnished by the Petitioner itself. In these circumstances and when material facts relevant to the assessment year were disclosed and were on record, then, one fails to understand as to why this notice has been issued. From the reasons itself, it is apparent that it is issued to revisit this claim of deduction under section 10A of the IT Act and as put forward by the Petitioner/Assessee.

From the affidavit in reply, we have taken specific paragraphs, where the Petitioner's version b .....

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the Respondents and for which they want to reopen the assessment. Such a course is clearly impermissible. - Decided in favour of assessee. - Writ Petition (L) No. 944 of 2015 - Dated:- 6-5-2015 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Petitioner : Mr. Percy Pardiwalla Senior Counsel with Mr.Jitendra Jain and Mr. P. C.Tripathi i/b. Mr.Atul K. Jasani For the Respondent : Mr. Anil Singh Additional Solicitor General with Mr. Suresh Kumar and Mr. Arvind Pinto JUDGMENT ( Per S. C. Dharmadhika .....

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es, we dispose of this Writ Petition finally. 3) Rule. Respondents waive service. 4) On 21st April, 2015, we had passed an order inviting the attention of the Respondents to the averments in the Writ Petition and particularly in para 12. Thereafter, we indicated to the Respondents that in view of authoritative pronouncements by this Court as also by the Hon'ble Supreme Court in the case of Asian Paints vs. Deputy Commissioner of Income Tax and Anr. reported in (2008) 296 ITR 90 and in the ca .....

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followed, we had called upon the Respondents' Counsel then appearing to take appropriate instructions and inform the Court as to whether that assessment order should be set aside by consent or appropriate corrective steps would be adopted. 5) The matter was placed today for passing orders, because we were not happy with the stand taken by the Respondents in the affidavit in reply. We had also noticed that in several matters the Respondents have been adopting similar course. There could be d .....

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s which are said to be recorded, annexed to this notice, came to be furnished to the Petitioner on 29th October, 2014. Thereafter, the Petitioner raised the objections on 12th December, 2014. The order passed by the Respondents, rejecting these objections, is dated 12th February, 2015. The Respondents were obliged to abide by the above directions and not passed an order of assessment for a period of 4 weeks from the date of service of this order rejecting the objections. In the instant case, if .....

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es, we are not in agreement with the contention that the assessment order having now been passed, the Writ Petition should not be entertained and the Petitioner must be relegated to the statutory remedies. We are of the firm opinion that having regard to the factual statements in para 12 of the Writ Petition and there being absolutely no reply thereto in the affidavit in reply, this contention of the Respondents cannot be accepted. 6) On the earlier occasion, the learned Additional Solicitor Gen .....

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ints Ltd. (supra) and Aroni Commercials Ltd. vs. Deputy Commissioner of Income Tax reported in (2014) 44 Taxman 304. It is in these circumstances that we have proceeded to ignore the assessment order and on perusal of the notice under section 148 of the IT Act as well we are satisfied that this is a fit case for interference in our Writ Jurisdiction. 7) Turning to the legality and validity of the notice under section 148 of the IT Act and the proceedings in pursuance thereof, we find that the no .....

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t that the Assessing Officer could have reopened the assessment only on recording his satisfaction that the income chargeable to tax has escaped assessment for the relevant assessment year by reason of the failure of the Assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. The reasons recorded and copy of which is at Annexure 198 of the paper book read as under: ANEXURE M/s. Capegemini India Pvt. Ltd. Reason for issue of notice u/s 148 of .....

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ration, it is seen that the assessee company had claimed deduction u/s 10A of the Act for its Unit II & III without setting off losses of Unit IV from the profits derived by the eligible units. As per the provisions of section 10A of the Act, deduction u/s 10A of the Act is allowable on the net profit derived by the assessee company from eligible units after setting off of losses from other eligible units. I have therefore, reasons to believe that the failure on the part of the assessee to d .....

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r, 2007. The admitted factual position was that it declared an income of ₹ 2,76,74,434/under normal provision of the IT Act. The case was selected for scrutiny and the assessment was completed under section 143(3) read with section 144C(13) of the IT Act on 14th October, 2011 assessing the total income at ₹ 115,90,05,170/. The Petitioner company is engaged in the business of development and export of software. The Petitioner pointed out that the return of income, which was furnished .....

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on 10A of the IT Act was disclosed and it was pointed out that during the course of assessment proceedings, there was a questionnaire and which was forwarded to the Petitioner Assessee. This was attached to a notice under section 142(1) of the IT Act dated 14th July, 2010. That raised a specific query in relation to the deduction claimed under section 10A of the IT Act. The query is also reproduced in the Petitioner's letter dated 12th December, 2014. The response to this query is contained .....

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the claim is raised for the 4th year. Chennai Unit is known as Unit IV and the claim raised is in the 7th year in relation thereto. The Petitioner company set off the losses of Unit IV (Chennai) against the profits of Unit I, namely, the Unit of Pune. The Petitioner also pointed out that there was a draft assessment order under section 143(3) r.w.s. 144C(1) dated 31st December, 2010. The paragraphs of the draft assessment order were reproduced. Thus, the complete claim of deduction was reflecte .....

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referred in the course of passing of the assessment order. If there were no particulars nor was the disclosure complete, truly and fully pertaining to material facts, it would not have been possible for the Assessing Officer to make an assessment and pass an assessment order. The Petitioner pointed out that though it has been called upon to comply with the notice under section 148(1) of the IT Act, it is incumbent upon the Respondents to deal with the objections and pass a speaking order thereon .....

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their right to seek redressal against the order, which is stipulated by law, namely of dealing with their objections. They, therefore, informed the Assessing Officer that if he proceeds and passed an order of reassessment in furtherance of the impugned notice, that course is impermissible. He should first deal with the objections and in the event he is inclined to reject them, he shall not proceed further for a period of 4 weeks. That is equally the communication at page 226 of the paper book. 1 .....

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O. 2, PHIROJSHA NAGAR, WESTERN EXPRESS HIGHWAY, VIKHROLI EAST, MUMBAI - 400 079 Sir, Sub : Removal of objections in your case for the A.Y. 200-708 - reg. Ref : Your letter dated 09-02-2015 Please refer to the above. Vide your letter dated 09-02-2015, you have objected to the reassessment proceedings pending in your case for the A. Y. 2007-08. Your submission has been perused. However, the objection is not acceptable. In this regard, the objection is replied/removed as under: 1. Regarding Exempti .....

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o keep the issue alive, the deduction claimed by you is not allowable for this year also. 2. Amalgamation with M/s. Accurum India Private Limited :According to information received in this office; it is seen that M/s. Kanbay Software (India) Private Limited has amalgamated with M/s. Accurum India Private Limited in the year 2007 vide order of the High Court of Madras dated 23-03-2007 sanctioning the scheme of amalgamation with effect from the appointed date 01-04-2006 subject to approval of the .....

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of amalgamation, the whole of the undertaking of M/s. Accurum India Private Limited [Transferor Company] comprising its business all assets and liabilities of whatsoever nature and wheresoever situated shall be transferred and vested in the Transferee company (yourself). All the profits or income accruing or arising to the Transferor Company or expenditure or losses arising to or incurred, including the effect of taxes by the Transferor Company with effect from the appointed dated shall for all .....

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is also seen that you have claimed amalgamation expenses totaling to ₹ 22,01,126/for your amalgamation with M/s. Accurum India Limited. Hence, an adhoc disallowance in this respect is proposed to be made. 3. Regarding deduction claimed under section 35DD : You have claimed deduction of professional expenses of ₹ 2201126/incurred in connection with amalgamation with Accurum India Private Limited as a revenue expense citing Supreme Court judgment in the case of Bombay Dyeing & Manu .....

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Act. 5. In the light of the above facts, the objections raised by the assessee is dismissed. [Jessie A. Ninan] Assistant Commissioner of Income tax, 14[1][2], Mumbai 11) It is in the light of the above undisputed factual position that we have heard Mr. Pardiwalla - learned Senior Counsel for the Petitioner and the learned Additional Solicitor General for the Respondents. 12) Mr. Pardiwalla's contention is that the notice under section 148 is totally vitiated as the Assessing Officer has fai .....

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andatory satisfaction. That is a precondition, inasmuch as, the reasons to believe cannot merely chant the words of the section. It must be indicated as to how the Assessee failed to disclose fully and truly all material facts necessary for the assessment. Mr. Pardiwalla criticised the reasons recorded by terming them as nothing but after thought or based on change of opinion. The Assessing Officer proposed to reopen the assessment so as to deal with the return of income furnished and for the as .....

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gned notice cannot be sustained. It must be quashed and set aside for the failure to comply with the mandatory precondition. The reasons recorded did not reflect that there is any failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment. Mr. Pardiwalla sought to justify the course adopted by the Petitioner/Assessee during the course of the original assessment by relying on a Division Bench Judgment of this Court in the case of Hindustan Un .....

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as a questionnaire issued by the Assessing Officer in the original assessment but states that the same was a general one. The Petitioner has replied to this questionnaire and submitted general information. According to the Respondents, the Petitioner did not give information regarding the losses of Unit IV neither did the Petitioner adjust the losses of Unit IV with the profits of other units. The reply admits that the draft assessment order is faulty for the Assessing Officer for failing to adj .....

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he Tribunal have been referred to. 14) It is thus contended that the Tribunal, in the order passed in Appeal, did not consider the issue of adjustment of the losses of Unit IV against the profits of Units II and III, which is the subject matter of issuance of notice under section 148 of the IT Act. Therefore, this notice is justified by urging that the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment for failure of the Petitioner/Assessee to disclose t .....

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with the Assessing Officer, then, one fails to understand as to from where the data and the computation has been taken and for reference by the Respondents themselves. In the reasons recorded, it is clear that the Assessing Officer is aware that the Petitioner Assessee is engaged in the business of development and export of software. The Assessing Officer was aware of the Units set up by the Assessee/Petitioner before us. He has derived the figures of profits and losses from the relevant records .....

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wable on the net profit derived by the Assessee company from eligible units, after setting off lossess from other eligible units, then, it is apparent that all the particulars and profits were before the Assessing Officer at the time of the original assessment. The Petitioner has, while disputing the reasons recorded and raising objections thereto, pointed out in details as to how the relevant facts were before the Assessing Officer. We do not find any material to the contrary and which falsifie .....

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