TMI Blog2018 (3) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the original assessment proceedings had raised the query on deduction u/s.10A to which assessee had duly responded and explained the entire computation and this goes to show that the assessee has disclosed full and true disclosure of all the material facts relevant for the claim of deduction u/s.10A. If AO on perusal of the entire material fact disclosed and after raising a specific query has accepted the computation of the claim, then there cannot be any failure ascribed to the assessee so as to warrant acquiring of jurisdiction for reopening the assessment beyond the period of four years in terms of proviso to Section 147. Here in the “reasons recorded” the Assessing Officer has simply tried to use the phraseology appearing in the proviso to Section 147, without even actual examination as to what is the actual failure on the part of the assessee. Thus we hold that there is no failure on the part of the assessee in terms of proviso to Section 147, and therefore, the ld. CIT (A) has rightly held that reopening of assessment u/s.147 in terms of aforesaid “reasons recorded” is unjustified in law. - Decided in favour of assessee. - I.T.A. No.386/DEL/2015 - - - Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.154/143 (3) was completed in December 17.12.2007, at an income of ₹ 175,12,66,760/-, which was later on rectified u/s.154 at an income of ₹ 163,24,87,260/- after allowing deduction of ₹ 2,09,37,331/- u/s. 10A. Perusal of records revealed that freight and insurance on exports amounting to ₹ 2,51,07,605/- was not deducted from export turnover of ₹ 14,13,67,629/-. This has resulted in business loss of ₹ 4170274/-, hence the deduction u/s.10A should have been disallowed. The mistake has resulted in incorrect allowance of deduction u/s.10A to the tune of ₹ 2,09,37,331/- therefore, escapement of income of ₹ 20937331/-. I have therefore reason to believe that an amount of ₹ 20937331/- has escaped assessment within the meaning of section 147(c) of the IT Act, 1961. The escapement of the income has been by the reason of failure on the part of the assessee to disclose fully and truly, all material fact necessary for assessment. Since the assessment has been completed u/s. 143(3) of the IT Act, 1961 and four year have since elapsed. The assessment records is being submitted for kind perusal and approval u/s. 151(1) of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A) and the true and full disclosure of profit of the undertaking has been disclosed separately in the Form 56F duly certified by the auditors. Without prejudice it was submitted that, even if freight and insurance is treated as forming part of the export turnover, then the same would also have been excluded from computation of the total turnover which ultimately will not have impact on profits and this proposition settled by the decision of Hon'ble Bombay High Court in the case of CIT vs. Gems Plus Jewellery India Ltd, in ITA No.2426 of 2009. However, the learned Assessing Officer rejected the assessee submissions after observing and holding as under: the contention/submission of the assessee is duly considered, but not found acceptable. On perusal of records it is found that freight and insurance on export was not deducted from export turn over and this has resulted business loss to the assessee. Therefore, deduction u/s 10A is not allowable to the assessee. Section 10A of the Income Tax Act provides that a deduction of such profit and gains where the gross total income of the assessee includes profit and gains derived by an undertaking from the export of articles or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form 56G clearly indicates that assessee had reduced the freight and insurance on export and excise duty from the total turnover. * Lastly, at the time of original assessment proceedings these details were available which shows that Assessing Officer had examined and investigated this issue. Based on these reasons, Ld. CIT (A) held that Assessing Officer has wrongly reopened the assessment u/s.147. 6. On merits, the ld. CIT(A) held that the certificate of the Chartered Accountant issued in Form No.56F/56G clearly shows that the freight and insurance and excise duty were relatable to the export of computer software and computation of net profit from the newly established undertaking indicates that after adjustment the gross income from the said undertaking has come to ₹ 20,93,771/- and against that how freight and insurance amount of ₹ 2,51,07,605/- was incurred by the company has not been explained by the Assessing Officer. Without verifying the nature of freight and insurance, Assessing Officer has presumed that it relates to the export of computer software when export turnover itself was ₹ 14.13 crores. Accordingly, on merits also he allowed the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Vs Kiranbhai Jamnadas Sheth (HUF) T20131 39 taxmann.com 116 (Gujarat)/(2014) 221 Taxman 19 (Gujarat)(MAG.) Where Hon ble Gujarat High Court held that Assessment without scrutiny would mandate reassessment beyond 4 years even if assessee made true disclosure. 6. Dishman Pharmaceuticals Chemicals Ltd. Vs CIT [2012] 346 ITR 228 (Guj) The assessee had shown an amount as loan from company. The assessee had not disclosed that it had substantial interest in the company. Reassessment proceedings after four years to assess amount as deemed dividend was held to be valid 7. R.K. Malhotra ITO Vs Kasturbhai Lalbhai [1977] 109 ITR 537 (SC) Where Hon ble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute information within the meaning of section 147. 8. Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] Where Hon ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Chartered Accountant in Form No.56F and had computed the profit at ₹ 2,09,37,331/- of the undertaking which was engaged in the export of computer software. The working of the computation was given along with the detailed working in the said form. Again in the same form no.56F, the working of freight and insurance of ₹ 2,51,07,605/- was also submitted which was clarified that it pertains to entire business and not to the undertaking. Thus, the entire disclosure of the taxable profit of the undertaking, export turnover and the total business was given by the assessee along with the return of income. Further from the perusal of the order of the ld. CIT (A), it appears that during the course of original assessment proceedings, the assessee was specifically required to justify the claim of deduction u/s.10A which was duly responded by the assessee vide letter dated 10.09.2008, wherein the assessee had duly explained the facts about the deduction of excise duty from the total turnover and the deduction on freight and insurance on exports and excise duty from the total turnover. All these material facts clearly indicate that not only in the return of income but als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our years. It appears that Assessing Officer has blindly gone by the objections raised by the Revenue s Audit party without his own independent application of mind or the actual verification of the assessment records. We find that the Assessing Officer in the course of the original assessment proceedings had raised the query on deduction u/s.10A to which assessee had duly responded and explained the entire computation and this goes to show that the assessee has disclosed full and true disclosure of all the material facts relevant for the claim of deduction u/s.10A. The deduction of Section 10A has been claimed in respect of an undertaking which is completely into computer software export and whether the freight and insurance at all pertains to such an export turnover or to total turnover of the business has neither been examined by the Assessing Officer nor has he applied his mind at the time of assuming the jurisdiction u/s.147. Freight and insurance if at all will come into the picture, once there is a physical movement in the form of hard-discs/CDs etc. The entire turnover of the software sale pertaining to the STPI unit has been stated to be made through online transmission onl ..... 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