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2016 (11) TMI 1044 - ITAT MUMBAI

2016 (11) TMI 1044 - ITAT MUMBAI - [2016] 50 ITR (Trib) 403 - Claim of assessee u/s. 80HHE - not having any knowledge about the development of software and the appellant firm had no previous expertise in development and export of software's - Held that:- Both the allegations of AO that no business could be carried on without having any previous knowledge for the same as well as the business proposition should come only through efforts or knowledge are baseless. The Assessing Officer has not brou .....

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affidavit dated 30.08.05 was prompted by an alleged mistaken claim u/s. 80HHE of the Act without analyzing merit of claim. It is for that reason that in the answer to question 78 Mr R.R. Chaturvedi made the disclosure. Subsequently, in consultation with Chartered accountants, when it was realized by Shri R. R. Chaturvedi that the claim made by the assessee firm was very much in accordance with law, the statement was retracted by filing an affidavit dated 30-8-05 which is forming part of paperbo .....

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ition. LNSEL issued disclaimer certificate in form 10CCAG to assessee company with respect to appellant company's share in software export. The copy of Form 10CCAG is forming part of paperbook page nos. 44-60. In this regard, during the appellate proceedings, CIT(A) had corresponded with the Assessing Officer of LNSEL, Kolkata wherein he was intimated vide letter dated 10.12.2008 that there was no dispute pending with regard to the claim of deduction u/s.10B of the Act and no recourse was taken .....

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ossession of the Department from the date of the search Operations itself. This fact has been completely overlooked by the Assessing Officer, which is not justified. So, CIT(A) was justified on taken favourable view. - The assessee firm was never in direct touch with M/s. Aapkidukaan.com Corporation and hence to providing such information was beyond the scope of assessee firm. CIT(A) rightly held that the report of FTD does not falsify the claim of export made by LNSEL and it concerns itself .....

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to assessee. - The assessing officer has also overlooked the fact that TDS was duly deducted and paid to the government account. Nothing has been brought on record to suggest that all such facts borne from the books of account were bogus or incorrect as the books of account have not been rejected. Moreover, there is nothing to show that the appellant was allowed the opportunity to cross examine the said persons as per request made during the assessment proceedings though the statement of the .....

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h cheques cannot be considered to be sacrosanct in the absences of failure of assessee to prove the creditworthiness of lender as also the genuineness of transaction. The burden is on assessee to rebut the same, but assessee has not discharged the burden cast upon him in this regard to addition is question. Taking all facts and circumstances into consideration, even though transaction is through banking channel, as assessee could not prove the same with cogent evidence, so, CIT(A) was justified .....

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, not to speak of any export has been carried on during the relevant year. Moreover, there was no corroborative evidence to show that assessee was running any such business activity during the relevant year. Each year is independent in its facts and circumstances. Thus, not much importance can be attributed to such a declaration which also appears to have been made on estimate and ad hoc basis only with a bona fide business expediency. Accordingly, addition deleted by CIT(A) needs no interferenc .....

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2003-04. Since, all appeals pertain to same assessee and on almost similar issue, so they are being disposed of by common order for the sake of convenience. 2. In ITA No.1481/Mum/2009 for A.Y.2000-01, Revenue has filed the appeal on the following grounds: 1) On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 69,20,471/- on account of disallowance of the claim u/s.80HHE of the I.T. Act, 1961, made by the Assessing Officer. 2) On the facts and cir .....

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lant. The appellant prays that the disallowance of ₹ 86,825 may please be allowed, as the car was used for the purpose of the appellants business. ITA No.1481/Mum/2009 for A.Y.2000-01 (Revenue s appeal) 3. A search and seizure action u/s.132(1) was undertaken on 23.03.2005. Assessee filed the return declaring total income of ₹ 19,60,460/-. The firm was stated to be conducting computer training courses and other related activities under the head Computer Training Division. It has stat .....

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ware (Export) Ltd. Kolkata (hereinafter after called as LNSEL ) and its three units viz. (i) M/s. Raj Software & Services, (ii) M/s. L & T Software Services & (iii) M/s. Software Services. Assessing Officer found that these exporters had received export order from one Apkidukan.com Corporation , an America based company. Assessee supposedly developed the software for these concerns, which in turn exported it to Apkidukan.Com as under: Name of exporter Exported in A.Y. 2000-01 Exporte .....

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r A.Y. 2004-05 and had also given disclaimer certificate to the assessee u/s.80HHE of the Act. The profit shown from development of software by assessee were ₹ 84,76,015/- for A.Y. 2000-01, 9,92,51,800/- for A.Y. 2001-02 and ₹ 15,11,25,880/- for A.Y. 2002-03. The Assessing Officer was of the opinion that both the concerns including assessee were not eligible for exemption. Assessing Officer observed that job charges for development of software were bogus. Moreover, in the recorded st .....

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- in F.Y. 2000-01, ₹ 16,00,000/- in F.Y. 2001-02 and ₹ 15,00,000/- in F.Y. 2002-03. However, against these exports, assessee had credited exports in its books ₹ 10,16,00,000/- in F.Y. 2000-01, ₹ 15,57,46,280/- in F.Y. 2001-02 and for F.Y. 2002-03. Assessing Officer also found other deficiencies with regard to present claim of assessee u/s. 80HHE of the Act. In response to above allegations, assessee made a detailed reply during assessment proceedings which is being narrat .....

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work and day to day activities has got the work executed by various staff and agencies. He was authorized to make necessary payment to the staff and the expenses incurred in vouchers seized for the same are accounted in the books of accounts towards expenses and has been reflected in the profit & loss account and balance sheets. Further, TDS has also been deducted and paid on such job work charges. 3) Late Shri. C.L. Deshpande was only aware of technical details and from whom the work has b .....

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taff, the same may be made available to us and an opportunity to crossexamining the deponents may also be given to us. (4) As regard the letter from STP Bhuwaneshwar it was stated that the onus of getting the exports certified by STP is on the LNSEL and not on the supporting manufacture. The assessee had developed software and submitted the same as supporting manufacturer to the exporters. (7) The documents seized from the Kolkata office of LNSL were relevant to it only. The claim of expenses of .....

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rm was formed somewhere in the year 1992-93 with the object of earning income through business of development of software and by running training institute by appointing Shri.C. L. Deshpande as Technical Director and initially, the revenue was earned only by running training institute. Subsequently, one of the partners of the assessee firm came in the contact of Shri. S.M. Gupta, Director of M/s. Lee & Nee Software (Export) Ltd. as they were in the same field. Shri. S.M. Gupta proposed for t .....

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t oriented unit under Software Technology Park of India (STPI), Bhubaneshwar, which was done vide application dated 16-12-2000 and the STPI granted permission on 1/1/2001. It has enclosed copies of 4 agreements with Lee & Nee Group dated 28-7-2000 and also the scope of work carried out. Further, it is reiterated that Shri C.L. Deshpande was the whole and sole person to manage the said division, who is no more. Further, it is staled that the premises were taken on lease, electricity expenses .....

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and exported. 3.2 On taking into consideration of above reply, Assessing Officer observed that assessee did not know anything about the development of software, did not know the precise nature of business or technical activities of M/s. Shreepati Computer Centre, as per the statement of main partner Sri R. R. Chaturvedi recorded during course of survey. It had no previous expertise in development of software or export thereof, still it had entered into a correct with LNSL for development of soft .....

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he provisions of the Act. 3.3 It was also stated that Shri S. M. Gupta, Principal Officer of LNSEL had not authority under any provisions of Act to issue a disclaimer u/s.80HHE of the Act to M/s. Shreepati Computer Centre as it claimed exemption u/s.10B of the Act. On the same profit for same export, double exemption cannot be allowed. Furthermore, LNSEL was itself having in-house facilities at Calcutta, Bhuvaneswar and Rourkela and its centres were in existence at Software Technology Parks at t .....

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CBDT, New Delhi, who in turn had made the enquiries and submitted its report which is narrated as under: 1. Does Aapkidukaan.Com Corpn. Exist at the following address: Aapkidukaan.com 545 Lawrence Express Way Sunville, CA 90468, USA Yes, The company was incorporated in California on April 10, 2000, but was dissolved on March 21, 2005. 2 If so, what business is being carried out by Aapkidukaan.Com Corporation. The Company was set up to sell consumer goods via interne, however, the company was nev .....

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p; complete address of the directors/partners of the company/firm, if the account holders are of any company/firm See item No.3 6 Copies of statements of their bank accounts. The company has two bank accounts, however, the owners of Aapkidukaan. Com were not the owners of these accounts. They do not know the names and addresses of the directors/partners of the company/firm, of these bank accounts. 7 Nature of the business carried out by the holders of the above said two accounts in U.S.A. Copies .....

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sessing Officer that Aapkidukaan.com Corporation was never active. LNSEL had exported nothing and alternatively, assessee did not develop any software and nor exported. In response to further query made in this regard, assessee contended that as Aapkidukaan.Com Corporation dealt with LNSL, who issued disclaimer Certificate to assessee. 3.6 After taking into account the above explanation of the assessee, Assessing Officer observed that though assessee stressed on the admissibility of exemption u/ .....

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department, therefore, the assessee was not in a position to provide any further clarification. According to Assessing Officer, a prudent businessman could not forget the basic ingredients of any products manufactured by him by which he has flourished and therefore, the plea that documents were with the department could not be accepted by him. Regarding export of software, it had enclosed a copy of Softex Form certified by the STPI, in which name of the assessee appeared as supporting manufactur .....

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rted and received foreign exchange for claiming exemptions/deductions as it stated that it was not able to explain how the two bank accounts were operated by Aapkidukaan.com Corporation, but receipts of foreign exchange were received by LNSL for export of software to Aapkidukaan.com Corporation. If the assessee had developed the software transmitted to LNSEL, who in turn transmitted to Aapkidukaan.com Corporation, there would have been any instance detected during the course of inquiry by Foreig .....

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g June, 2002 to March, 2005, but assessee claimed deduction U/S.80HHE on above receipts for AY 2002-03. 3.9 It was further stated by Assessing Officer that the managing partner of firm viz. Shri Rajendra Chaturvedi in his statement recorded under sec.132(4) of the Act on 24.03.2005 was confronted on this issue and assessee had made disclosure of additional income of ₹ 7crore. However, assessee retracted the declaration made vide its affidavit dated 30.08.2005 on the count that it was made .....

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firm had not developed and exported any software as assessee engaged a number of under graduate students both at Mumbai and Bhubaneswar. They totally denied having developed any software and they did not know the assessee firm. In addition to above, summons were issued and statements were recorded certain other persons who also denied having developed any software for assessee. Even these persons did not know Shri. C. L. Deshpande at all. Assessing Officer further observed from the documents imp .....

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aneshwar seeking report on the performance of assessee and impounded from the office of the Lee & Nee Software that assessee had made export during the F.Y.2000-01 to 2002-03 of ₹ 15,00,000/-, 16,00,000/- and ₹ 15,00,000/- respectively and as against the above exports, the assessee has credited in its books exports of sale of Rs,10,16,00,000/- in F.Y. 2000-01 and ₹ 15,57,46,280/- in F.Y.2001-02, which itself proves that the exports claimed to have been made by LNSL of the s .....

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tentions were raised on behalf of assessee. CIT(A) has allowed the claim of assessee by observing as under: 7. I have carefully considered the above facts and find sufficient force in the contentions of the appellant. The disallowance made by the Assessing Officer is based on half baked findings and without appreciating the facts of the case properly. The conclusion is drawn against the appellant mainly on presumptions and surmises and is not substantiated with cogent evidences. The observations .....

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could not offer plausible answers to certain technical questions which is not so unusual as he having many other business affairs to handle, there is nothing to disbelieve that such affairs were taken care of by Sri Deshpande. The said person expressed his inability to answer such querries is understandable but cannot be brushed aside and made the basis for doubting the entire transaction entered into with LNSEL. Thus, not much significance is attributed such observation of the Assessing Office .....

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s not essential requirement of the partners to be conversant with technicalities of such job. 7.2 As regards undue importance attached to the disclosure of additional income by the managing partner, I find sufficient merits in the submissions of the appellant. On careful consideration of the stated facts, it is evident that the Assessing Officer has heavily relied upon the disclosure made by the managing partner in the course of search, though it is also stated that such disclosure was retraced .....

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s. In the retracted affidavit, it is clearly stated that the statement u/s 132(4) was made subject to detection of undisclosed income from the books of account and documents found during search. It was stated that export proceeds received were duly recorded in the regular books of account on accrual basis and as and when the income accrued, deduction was claimed as per the Act and was also allowed in respective assessment orders. No addition could be made on the basis of such statement unless an .....

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7.3 It may be stated here that similar disclosure and subsequent retraction has been a matter of dispute before various courts from time to time. Reference could be made to the case of DCIT vs Samita Marine Kakinada(2007) 10 SOT 335(Mum) where it was held that even though the assessee had made certain declaration during survey regarding the expenditure incurred being bogus and had also surrendered such expenses as undisclosed income, the Assessing Officer was not found justified in making such .....

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filing the return, it was held that no addition could be justified merely on the basis of such a statement, in absence of any evidence regarding charging of on money by the said builder. The partner made the disclosure under utter state of confusion. Therefore, not much significance could be attached to such disclosure and the matter needs to be evaluated in the light of the evidences gathered consequent to the search operations. Reliance could also be placed on Kailashben M.Choksi vs CIT(2008) .....

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ission was made under a mistake or misconception of facts, no addition can be made solely on the basis of such admission, Further, addition based on retracted declaration is not safe. In another case of ITO vs Leela Devi Badola(2008) 116 TTJ 214(Jodh) it was observed that though a surrender on the basis of the statement recorded during survey is binding on the assessee, he is entitled to retract from the same, if the assessee leads infallible evidence to show that the surrender was extracted by .....

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0/Exim Policy etc such type of business is required to make a declaration of export of software in Softex form which is necessarily to be submitted to the designated official of the Department of Electronics, Government of India at the Software Technology Parks of India (STPIs) etc. Perusal of such forms submitted by LNSEL and related concerns clearly shows that the competent authority on behalf of Department of Electronics, in the space provided in the said form, has duly certified that the sof .....

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he appellant. Such a certificate is duly authenticated by the respective Principal Officers and the auditors. In the Disclaimer certificate, it is categorically stated that the said concerns would not claim and export performance for issue of i) export performance certificate ii) Export/Trading Certificate and iii) Special import license. Nothing has been brought on record by the Assessing Officer in this regard to show that such documents and declarations were false or fabricated. Thus, there i .....

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ted by the department in the assessments made and there was no dispute in this regard excepting in AY 2000-01 in the case of one of the erstwhile amalgamating company, M/s L.T. Estate P.Ltd in which disallowance of deduction u/s 10B was on account of non-receipt of foreign exchange was allowed by the Hon'ble ITAT, Kolkata Bench in its order dated 12.5.2004.It may also be stated here that on correspondence made by the undersigned with the Assessing Office/ concerned of LNSEL, Kolkata, it has .....

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r that if LNSEL had been granted permission by STPI vide letter dated 30-4-92, what was the fate of certificate of recognition of Software Export House w.e.f. 1-4-02 vide letter dt. 3-4-2003 issued by Jt. Director General of Foreign Trade, Kolkata, has been duly rebutted by the appellant. I find that the issue raised by the Assessing Officer is not relevant at all. Apart from the certificate being irrelevant for the years under consideration, the Assessing Officer cannot ignore the certificate i .....

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any counter comments on such unavoidable circumstances stated by the appellant and went on to link up such non-production to the genuineness of the export itself though the same was a fait accompli. Had in his opinion source code carried such an importance, nothing prevented him to verify the contentions of the appellant which appears to have been completely overlooked. No effort seems to have been made with the Investigation Wing of the department which carried out the search and survey operati .....

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ire factum of export cannot be brushed aside lightly, as done by the Assessing Officer. The genuineness of the certificates has .not been disputed by the Assessing Officer who jumped to an adverse conclusion based on report which suited his purpose, Moreover, it may also be stated here that the report of FTD is directly pertaining to the transactions of LNSEL vis-a-vis Aaapkidukaan.com and not to the appellant. As slated in preceding paras, the Assessing Officer of LNSEL did not find any infirmi .....

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much significance vis-a-vis the appellant, so long as the export made by LNSEL have been accepted to been genuine by the Assessing Officer concerned in its case. He has not brought on record any contrary fact. 7.9 In so far as statements of certain job workers is concerned, I have carefully considered the above facts. It is evident that the Assessing Officer has heavily relied upon the statements of certain persons to show that no software was developed by the appellant and also on the letter o .....

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ayments. The Assessing Officer has also overlooked the fact that TDS was duly deducted and paid to the government account. Nothing has been brought on record to show that all such facts borne from the books of account were bogus or incorrect as the books have not been rejected either. Moreover, there is nothing to show that the appellant was allowed the opportunity to cross-examine the said persons as per request made during assessment proceedings though the statement of the said persons were us .....

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fficer is under obligation to comply with the principles of natural justice in reaching the conclusion. In another case of K.I.Shepherd vs Union of India AIR 1988 SC 686, it was observed that natural justice requires that persons liable to be directly affected by proposed administrative act, decision or proceedings be given adequate notice of what is proposed so that they may be in a position to make representation on their own behalf or to appear at a hearing or enquiry and effectively prepare .....

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not summon and such an evidence could not be used against the assessee and in the absence of affording opportunity of a reasonable opportunity of being heard, the assessment order was vitiated. Similar decision was rendered in the case of Dharam Pal Prem Chand Ltd(2008) 295 ITR 105(Del) and Heirs and LRs late Lakshmibai S. Patel vs CIT(2008) 174Taxman 206(Guj). 7.2 Moreover, the matter requires to be considered in the light of the fact that Department of Electronics, Govt. Of India as well as th .....

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y lost sight of affidavits of as many as five persons which included software experts who have, in no uncertain terms admitted having done such job for the appellant. One Sri Rajesh Chaturvedi in the affidavit dated 3.12.2007 submitted to the Assessing Officer has stated he was associated with the appellant during the year 2000 to 2003 as computer professional and had undertaken job work under the supervision of Sri Deshpande. From the TDS certificate dated 31.3.2003 issued by the appellant, it .....

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pped such activity long time back. Thus, it could not be expected to do an impossible task. However, it has to be appreciated that the appellant had to undergo search and seizure operation and the vouchers and bills relating to such job work were found during search. In fact, presence of such evidences at the time of search only strengthens the contentions of the appellant that actual work in this regard was done or else no such evidences could have been found, had the claim been bogus and cooke .....

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rns of income of the relevant assessment years and the said exports were duly accepted to be genuine in the original assessment orders. Thus, not much importance can be attributed to such a declaration which also appears to have been made on estimate and ad hoc basis only. 7.4 In the light of above discussion, it is held that the appellant made a bona fide claim for deduction u/s 80HHE and the job work charges paid during the relevant years were genuine. The Assessing Officer is directed to allo .....

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cer and to establish the felicity of order of CIT(A) also relied upon certain case laws in this regard. On the other hand, ld. Authorized Representative supported the order of CIT(A) with various reasonings coupled with case laws on the points invoked in this case. 5. After going through rival submissions and material on record, we find that a search and seizure action u/s.132(1) of the Act was conducted in assessee s premises on 23.03.2005. Pursuant to notice u/s.153A of the Act, assessee filed .....

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Lee & Nee Software (Export) Ltd. as they were in the same filed. Shri S. M. Gupta proposed for the business of developing software for M/s. Lee & Nee Software (Export) Ltd., which was accepted by assessee firm in consultation with technical Director, Mr. C. L. Deshpande and the first contract was entered into on 28.12.1999 as a test case and was completed successfully. 5.1 On successful completion of the same, one large contract was received by the appellant firm. The details of the con .....

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d with LNSEL. Copy of all the above contracts has been enclosed in Paper book (Refer page 103 to 114) before us, which is not in dispute. 5.2 On gaining even more confidence, the appellant decided to apply for 100% Export Oriented Unit (EOU) under Software Technology Park of India, Bhubaneswar Centre for the development of computer software which was done vide application dated 16.12,2000. The STPI granted permission on 01.1.2001. For the purpose, the premises were also taken on lease. The contr .....

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EL, which in turn, after making the value addition in the software developed by the appellant firm as well as in the software, development of which was outsourced to other parties, the said LNSEL exported the same to M/s. Aapkidukan.com Corporation, which was a US based company. Though, the appellant firm did not directly export the said softwares, being a supporting manufacturer, on receipt of disclaimer certificate from LNSEL, it was eligible to claim deduction u/s.80 HHE on profits earned fro .....

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the paperbook page no 239 to 286 filed by assessee before us. LNSEL has been approved as Software Technology Park by Department of Electronics vide letter of permission dated 30.04.1992. Since then, LNSEL is eligible for exemption u/s.10B of the Act. LNSEL, on 27.01.2000, undertook a major project being an order received from Aapkidukaan.com Corporation, which is a US based company, for developing a portal of Aapkidukaan.com. The main object of the said portal was to grab US market for Indian g .....

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ous modules and templates for the said software. For said purpose, orders were placed wih various other software developers apart from the appellant firm. Once the work outsourced was completed and received by LNSEL through email, the various parts outsourced to different developers were assembled and linked with the main portal. To this extent, there was a value addition by LNSEL. On the said value addition, exemption u/s. 10B was claimed by LNSEL and same was accepted by the department in ITAT .....

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1. Shri R. R. Chaturvedi was not having any knowledge about the development of software and the appellant firm had no previous expertise in development and export of softwares. The said business proposition had come to Shri R. R. Chaturvedi, through luck and not through efforts or knowledge. 2. Shri, R R Chaturvedi voluntarily declared ₹ 7 Crores in his statement dated 24.03.05, which was subsequently retracted vide his affidavit dated 30.08.05. According to Assessing Officer, it was an a .....

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has been granted permission by STPI vide letter dated 30.04.92, what is the fate of certificate of recognition of Software Export House w.e.f. 1-4-02 vide letter dt. 3-4-03 issued by Jt. Director General of Foreign Trade, Kolkata. 5. The source code of the softwares developed could not be provided by the appellant firm as well as by Director of M/s. LNSEL, Shri S.M. Gupta. 6. The enquiry made by Foreign Tax Division with respect to the transmission of software developed to Aapkidukan.com Corpora .....

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ejudice to all the above allegations which prove that export of software were not genuine, the learned Assessing Officer has calculated excess deduction u/s 80 HHE claimed by the appellant and correlating the same with the disclosure made by the appellant. 5.8 All of the allegations of Assessing Officer are being dealt with hereunder: 5.8.1 First objection of Assessing Officer is that Shri R. R. Chaturvedi was not having any knowledge about the development of software and the appellant firm had .....

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uired by LNSEL. Unfortunately, at the time of search, Shri C. L. Deshpande was no more alive. The main reason for arriving at this conclusion by Assessing Officer was that the technical questions raised by the search party could not be answered by Shri R. R. Chaturvedi. So far as agreements and finance was concerned, Shri R. R. Chaturvedi was very much aware of the same, as decision making and control of the business was entirely in his hands. There is no necessity to have technical expertise to .....

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t this proposal. The possibility of luck in getting business proposals could not be ruled out. Thus both the allegations of Assessing Officer that no business could be carried on without having any previous knowledge for the same as well as the business proposition should come only through efforts or knowledge are baseless. The Assessing Officer has not brought on record any material fact to disbelieve the fact that technical aspect of the deal were being looked after by late Shri Deshpande. As .....

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hought. In this regard, we find that Statement recorded u/s.132(4) of the Act is forming part of paper book on page nos.199-231. From the contents of same, we find that the said disclosure was made without prejudice to his contention that accounting method adopted by the firm is correct. A perusal of the answers to question Nos.11 to 57 would indicate that the said disclosure was prompted by an alleged mistaken claim u/s. 80HHE of the Act without analyzing merit of claim. It is for that reason t .....

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ion could be made on the basis of such statement unless and until it is corroborated with the evidence. In other words, the retraction can be made on the basis of validity of claim. 5.8.3 Regarding M/s. LNSEL is only engaged in trading of software and they are not manufacturing any software. Further, there was no mention in the return of income of LNSEL that it had given disclaimer certificate to the appellant firm and thus it has violated the provisions of Income Tax Act. LNSEL claimed exemptio .....

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submitted to the designated official of department of electronics of Government of India at the STPI and the said export is done under the supervision of competent authority i.e. Director of STPI. Apart from the above, it was certified by the said officer that the software described in the SOFTEX form was actually transmitted and the export value by the exporter has been found in order and accepted by the said authority. Further the export through STPI is allowed only when certificate of STPI is .....

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to appellant company's share in software export. The copy of Form 10CCAG is forming part of paperbook page nos. 44-60. In this regard, during the appellate proceedings, CIT(A) had corresponded with the Assessing Officer of LNSEL, Kolkata wherein he was intimated vide letter dated 10.12.2008 that there was no dispute pending with regard to the claim of deduction u/s.10B of the Act and no recourse was taken to the provision of section 147 for AYs 2000-01 to 2002-03. The CIT(A) has recorded th .....

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ed by the department in the assessment made and there was no dispute in this regard excepting in AY 2000-01 in case of one of the erstwhile amalgamating company M/s L. T Estate Pvt Ltd in which disallowance of deduction u/s 10B was on account of non-receipt of foreign exchange was allowed by the Hon'ble ITAT Kolkata Bench in its order dated 12.5.2004. It may also be stated here that on correspondence made by undersigned with the assessing officer concerned of LNSEL, Kolkata, it has been inti .....

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that claim of assessee u/s.80HHE of the Act is in order. 5.8.4 Next issue is that the source code of the softwares developed could not be provided by the assessee firm as well as by Director of M/s. LNSEL, Shri S.M. Gupta. The said statement made by Assessing Officer on page no. 14 para 10 of the assessment order. In this regard, it was submitted that the source code as requested Assessing Officer was very much provided to the search team during the course of investigation on 14.06.05, at Mumbai .....

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lant firm was handicapped on account of the seizure from producing the relevant source code. CIT(A) in para 7.7 page 30 of his order has accepted the assessee's justification of non-furnishing of source code. Nothing prevented the Assessing Officer from verifying the contentions of the assessee as the relevant material was in the possession of the Department from the date of the search Operations itself. This fact has been completely overlooked by the Assessing Officer, which is not justifie .....

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hrough which the software has been exported by LNSEL, was certified by competent authority i.e. Director of STPI, which is a Government authority. Thus, the stand of the Assessing Officer is a mere surmise and in contradiction to the Competent Authority which is the Director STPI. Assessee firm was also required to explain why M/s. Apakidukaan.com Corporation had two bane accounts but the owners of Aapkidukaan.com were not the owners of these accounts. In response to this, it was reiterated by a .....

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ukaan.com Corporation and hence to providing such information was beyond the scope of assessee firm. CIT(A) rightly held that the report of FTD does not falsify the claim of export made by LNSEL and it concerns itself more about the business activities of Aapkidukan and its existence as an entity. On both these counts the report of the FTD confirms the existence and business activities. Accordingly, it was rightly held that the point raised by Assessing Officer does not carry significance vis-&a .....

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ed from STPI Bhubaneswar also states that no activity had been carried out. Assessing Officer observed that the assessee could not establish its job work done. Shri R. R. Chaturvedi was also confronted with the statements of 5 persons, who had totally denied having developed any software for assessee firm. However, Shri Chaturvedi reiterated that the responsibility of getting developed the software was of Shri C. L. Deshpande, who was no more alive at relevant point of time. These statements w-e .....

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ppellant firm. Issue of non grant of cross examination of these parties was raised in the Statement of Facts filed before the CIT(A). All these four statements remained untested by cross examination. Without prejudice to above, we find that the four statements deal with an amount of approximately ₹ 2 lakhs out of a total amount of job work claimed in the four years of ₹ 71,42,585/- and therefore forms an insignificant 2.5% of the total amount. The extrapolation cannot be made of this .....

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investigation wing and no independent finding has been forthcoming from him. The payments made were duly recorded in the books of accounts and relevant vouchers found during the search only corroborate the genuineness of such payments. The assessing officer has also overlooked the fact that TDS was duly deducted and paid to the government account. Nothing has been brought on record to suggest that all such facts borne from the books of account were bogus or incorrect as the books of account have .....

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om the communication of Additional Director, STPI addressed to assessee. Assessing Officer observed that commercial production has not started and quantity of production was also disputed. In this regard, stand of assessee has been that assessee submitted clarification vide letter dated 15.07.2003 inter alia submitted that they had already started commercial production from A.Y. 2002-03 in Bhubaneswar. Copy of same has been placed on page nos. 165-166 of the paperbook filed by assessee and reque .....

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cer placed reliance on certain replies, which were not acceptable as the full content of the same were never confronted to assessee in any manner. Proceedings made by the enforcement directorate against the assessee on similar grounds as contended by Assessing Officer has already been dropped, which is evident from page no.306 of paper book. This takes care the issue of disallowance of software development charges of ₹ 1,73,985/-. Similar disallowance on account of software development cha .....

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f in both the years on the same reasoning. Facts being similar, so following same reasoning, we are not inclined to interfere with the order of CIT(A) who has allowed the deduction u/s.80HHE of the Act as claimed. Same are upheld. 7. In the result, appeal filed by Revenue in ITA No.1481/Mum/2009 for A.Y. 2000-01 is dismissed. ITA No.889/Mum/2009 for A.Y. 2000-01 (Assessee s appeal) 8. The only issue in assessee s appeal in A.Y. 2000-01 is with regard to depreciation on car. Assessing Officer dis .....

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acts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 7,67,33,946/- on account of disallowance of the claim u/s.80HHE of the I.T. Act, 1961, made by the Assessing Officer. 2) On the facts and circumstances of the case, the ld. CIT(A) erred in deleting the addition of ₹ 23,08,200/- on account of disallowance of the Software Development charges, made by the Assessing Officer. 11. First issue is with regard to addition of ₹ 7,67,33,946/- on account .....

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on account of disallowance of software development charges made by Assessing Officer. This issue has been discussed and decided in A.Y. 2000-01 vide para no.5.8.7 of this order, wherein addition on account of disallowance of software development charges of ₹ 1,73,985/- has been upheld by us. Facts being similar, so, following same reasoning, we are not inclined to interfere in the finding of CIT(A). Same is upheld. 13. In the result, Revenue s appeal for A.Y. 2001-02 is dismissed. 14. In I .....

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in law, the learned CIT(A), Central VII, Mumbai, grossly erred in enhancing the income of the appellant by making a disallowance of ₹ 40,000 u/s 40A(3) on account of cash payment made exceeding ₹ 20,000 towards job work charges. The appellant prays that the disallowance of ₹ 40,000/- may please be deleted. 15. At the outset of hearing, ld. Authorized Representative did not press ground no.2. Same is dismissed as not pressed. 16. Next issue is with regards to addition of ₹ .....

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d to discharge its onus and has neither established the identity and creditworthiness of alleged lender nor proved the genuineness of credit. Even though, the said persons were stated to have expired long time back, assistance of the legal representatives/relatives of the said person could have been availed for the said purposes. Assessee has merely stressed upon the fact that the transaction was entered through banking channels which meets the test of Section 68 of the Act. But this contention .....

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prove the same with cogent evidence, so, CIT(A) was justified in confirming the same. Same is upheld. 17. In the result, appeal of assessee for A.Y. 2001-02 is dismissed. 18. In ITA No.1528/Mum/2009 for A.Y.2002-03, Revenue has filed the appeal on the following grounds: 1) On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 10,33,88,045/- on account of disallowance of the claim u/s.80HHE of the I.T. Act, 1961, made by the Assessing Officer. 2) On .....

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ts of the same are not repeated for the sake of convenience. Facts being similar, so following same reasoning, we are not inclined to interfere with the finding of CIT(A) who has deleted the addition of ₹ 10,33,88,045/- on account of disallowance u/s.80HHE of the Act. Same is upheld. 20. Next issue is with regard to addition of ₹ 23,50,400/- on account of disallowance of Software Development charges made by Assessing Officer. This issue has been discussed and decided in A.Y. 2000-01 .....

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f the case and in law, the learned CIT(A), Central VII, Mumbai, grossly erred in enhancing the income of the appellant by making a disallowance of ₹ 6,000 u/s 40A(3) on account of cash payment made exceeding ₹ 20,000 towards job work charges. The appellant prays that the disallowance of ₹ 6,000/- may please be deleted. Ground No.2: On the facts and in the circumstances of the case and in law, the learned CIT(A), Central VII, Mumbai, grossly erred in partly disallowing the job w .....

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he outset of hearing, ld. Authorized Representative did not press ground nos.1 & 2. So, same are dismissed as not pressed. 24. Regarding issue of depreciation on car to 50% of the amount claimed of ₹ 2,50,028/- by assessee. We find that Assessing Officer disallowed the depreciation of ₹ 2,50,028/-. Similar issue came before us in A.Y.2000-01. Fact being similar, so following same reasoning, we are not inclined to interfere with the finding of CIT(A) who had rightly restricted the .....

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case, the Ld. CIT(A) erred in deleting the addition of ₹ 15,00,000/- made by the Assessing Officer. 27. First issue is general in nature which needs no elaboration. 28. Second issue is with regard to addition of ₹ 15lacs made by Assessing Officer. Assessing Officer made estimated addition of ₹ 15lacs as undisclosed sales. According to the order, search and seizure action u/s.132(1) of the Act was undertaken on 23.3.2005. The firm is claimed to be conducting Computer Training co .....

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arties. Assessing Officer noted that although assessee did not carry on any business activity during the year, it had submitted a letter to STPI, Bhubaneshwar according to which it made export of ₹ 15 lakh. Thus, the Assessing Officer on the basis of such figures made an addition of ₹ 15 lakh and also disallowed the claim of deduction of job work charges amounting to ₹ 21,142/- on the basis of his findings in the assessment order for A.Ys. 2000-01 to 2002-03 regarding non-genui .....

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hort. Hence, the actual payment of short provision was made in A.Y. 2003-04 and the same was debited to Profit & Loss account. However, as the job work charges were disallowed by Assessing Officer even in earlier years and the amount claimed in the aforesaid assessment year was a short provision of the same job work charges, the Assessing Officer disallowed job work charges in aforesaid assessment year also, which was deleted by CIT(A) by observing as under: 5. I have carefully considered th .....

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original assessment orders. No business activity, not to speak of any export has been carried on during the relevant year. Moreover, there was no corroborative evidence to show that the appellant was engaged in any such business activity during the relevant year Thus, not much importance can be attributed to such a declaration which also appears to have been made on estimate and ad hoc basis only with a bona fide business expediency. Accordingly, the addition made is deleted. 28.2 Same has been .....

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ports were stated therein, as actual exports were done in the earlier years and the books of account did reflect the actual sales turnover which were also duly disclosed in the returns of income of the relevant assessment years and the said exports were duly accepted to be genuine in the original assessment orders. No business activity, not to speak of any export has been carried on during the relevant year. Moreover, there was no corroborative evidence to show that assessee was running any such .....

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the appeal on the following grounds: Ground No.1: On the facts and in the circumstances of the case and in law, the learned CIT(A), Central VII, Mumbai, grossly erred in enhancing the assessment by treating interest income of ₹ 5,89,717/- as income from other sources. The said interest income is emanating from business transactions and ought to have been treated as income from business. The appellant prays that the said income should be treated as business income. Ground No.2: Without pre .....

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hanced the assessed income by disallowing business expenses of ₹ 15,57,488/- on the ground that there is no business activity during the year. At the outset of hearing, ld. Authorized Representative submitted that the issue is covered with ITAT order in assessee s own case for AY 2004- 05, wherein ITAT, SMC, Bench, Mumbai has allowed the business loss of ₹ 36,41,385/- by observing as under: 6. I have carefully considered the arguments of both sides and perused the material placed bef .....

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