TMI Blog2017 (7) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Rules itself. The mere fact that the working sheet may not have been enclosed does not amount to a failure by the Assessee to make a full and true disclosure of all material facts. Consequently, the Court is satisfied that the second reason for re-opening is also unsustainable in law. Deduction under Section 35D - reason given by the AO is that the Assessee did not make a similar deduction for the earlier two AYs i.e., 2001-02 and 2002-03 - Held that:- The mere fact that the Assessee may not have claimed such deduction for two of the five years it was entitled to, cannot deprive it of its legitimate claim for such deduction in the AY in question. In an answer to a query raised by the AO in this behalf, the Assessee has explained how in the revised return it included a claim for the said deduction which was inadvertently left out while filing the original return. This was permissible for the Assessee to do. Consequently, even this reason appears to be untenable in law. Payment made by the Assessee for software licence - Held that:- AO formed the opinion contrary to what was formed when the original assessment was framed that the deduction claimed was capital expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, Senior Standing Counsel ORDER Dr. S. Muralidhar, J. 1. This writ petition by HCL Technologies Limited ( the Assessee ) challenges a notice dated 30th March, 2010 issued by the Assistant Commissioner of Income Tax, Central Circle-2/Assessing Officer ( AO ) under Section 148 of the Income Tax Act, 1961 ( Act ) seeking to re-open the assessment for the Assessment Year ( AY ) 2003-04 as well as the order dated 19th November, 2010 passed by the AO dismissing the objections filed by the Petitioner thereto. The cause title and the writ petition wrongly describe the Respondent. 2. The background facts are that the Petitioner, a public limited company, is engaged in the business of development and export of computer software and rendering ITES services. The Petitioner filed its return of income for AY 2003-04 on 28th November, 2003 declaring an income of ₹ 47,43,47,000. In the original return, the Petitioner claimed deduction of ₹ 2,35,63,91,105 under Section 10A of the Act. This claim was supported by a certificate issued by a Chartered Accountant ( CA ) in Form 56F. It is stated that on 31st March, 2005, the Assessee filed a revised return declaring an inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 143(3) of the Act after the AO sent a questionnaire which was duly answered by the Assessee and those answers were considered by the AO. The reasons given by the AO for forming the belief that income had escaped assessment were based on a mere change of opinion and not on any fresh tangible material. All the relevant records including the balance sheet, books of accounts, certificates of the CA in Form 56F etc. were available with the AO during the assessment proceedings. Re-opening of an assessment on the mere change of opinion and that too on the same material was clearly impermissible in law. 9. Mr. Vohra referred to the decision in Commissioner of Income Tax-II v. Maruti Suzuki India Ltd. (2013) 31 taxmann.com 184 (Delhi). He further pointed out that in the order rejecting the objections, the AO placed reliance on the decision of this Court in Consolidated Photo Finvest Ltd. v. ACIT (2006) 281 ITR 394, which has been expressly overruled by this Court subsequently in KLM Royal Dutch Airlines v. ACIT (2007) 292 ITR 49 (Del) which fact was noted by the Full Bench of this Court in Commissioner of Income Tax v. Usha International Ltd. (2012) 348 ITR 485 (Del). 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d freight. iii. The Petitioner has claimed deduction under section 35D of the Act amounting to ₹ 4,97,58,627. The Petitioner did not claim such deduction during the assessment years 2001-02 and 2002-03. Apparently, the claim under section 35D is incorrectly claimed. iv. The entire payment of software license made by the Petitioner during the relevant year was not allowable as revenue expenditure and is apparently capital expenditure. The Petitioner has wrongly claimed the same as revenue expenditure. v. Depreciation on certain items of computer peripheral was wrongly claimed @ 60% instead of 25% since the same was wrongly treated as a part of computer system instead of Plant and Machinery. vi. The Petitioner did not furnish details of payment exceeding ₹ 1 lakh as required by the Respondent No.1 in the course of assessment proceedings. The Petitioner has simply stated that such details were voluminous in nature. The Petitioner has failed to disclose the nature of expenses claimed by not furnishing details of expenses claimed exceeding ₹ 1,00,000. 13. There are two jurisdictional requirements as far as the first proviso to Section 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining the return and the documents submitted along with it (including the balance sheet, books of accounts, certificates of the auditors and statutory forms, etc.), did not simply accept the version of the Assessee but issued a detailed questionnaire asking for specific inputs and information in relation to some of the claims, it can no longer be said that such a disclosure would still be considered to be a disclosure which is not true or full only on the basis of the same material more than four years later. That, again, would be a mere change of opinion and nothing more. It would, therefore, not satisfy the jurisdictional requirement of Section 147 of the Act. 16. The AO has not made the effort of disclosing, in the reasons, what according to him constituted the failure by the Assessee to make a full and true disclosure. A mere reproduction of the language of the provision will not suffice. Also, although making such an averment either in the order rejecting the objections of the Assessee or subsequently in the counter-affidavit in the answer to a writ petition will not satisfy the requirement of the law. The reasons will have to speak for themselves. For complying with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lecommunication costs debited to the P L account were. The assessment order passed by the AO in the first instance shows that there was a detailed discussion leading to the allowing of the deduction under Section 10A of the Act. 20. The AO s reason for re-opening is that along with the certificate in Form 56F, which was the certificate of the CA, the working sheet of deduction was not enclosed. That was not a requirement of law. What Form 56F has to be accompanied with is specified under the Income Tax Rules itself. The mere fact that the working sheet may not have been enclosed does not amount to a failure by the Assessee to make a full and true disclosure of all material facts. Consequently, the Court is satisfied that the second reason for re-opening is also unsustainable in law. 21. The third reason concerns a deduction under Section 35D of the Act. The only reason given by the AO is that the Assessee did not make a similar deduction for the earlier two AYs i.e., 2001-02 and 2002-03. As explained by Mr. Vohra, it is not the case of the Revenue that the Assessee was not eligible to claim the deduction under Section 35D of the Act. The mere fact that the Assessee may not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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