2012 (11) TMI 1210 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction and validity of notice issued u/s 148.
2. Reason to believe that income had escaped assessment.
3. Allegation of notice issued for roving and fishing enquiries.
4. Validity of notice issued u/s 148 with proper sanction.
5. Admission of affidavit.
6. Confirmation of addition u/s 68.
7. Allowability of deduction u/s 10B.
8. Allowance of expenses incurred.
9. Consideration of ITAT order for assessment year 2004-2005.
10. Reliance on letter dated 04/08/2003 by CIT(A).
11. Opportunity to explain the document relied upon by CIT(A).
12. Certificate issued by STPI authorities.

Summary:

1. Jurisdiction and Validity of Notice Issued u/s 148:
The assessee argued that the notice issued u/s 148 was without jurisdiction and thus the proceedings were illegal and invalid. However, the Tribunal found that the reopening of assessments was based on findings from a survey conducted by the Investigation Wing, and thus the notice was valid.

2. Reason to Believe that Income Had Escaped Assessment:
The CIT(A) held that there was reason to believe that income had escaped assessment based on the survey findings which revealed discrepancies in the assessee's software export claims. The Tribunal upheld this view, noting the substantial evidence presented by the survey team.

3. Allegation of Notice Issued for Roving and Fishing Enquiries:
The Tribunal found that the notice u/s 148 was not issued for roving and fishing enquiries but was based on specific findings from the survey, which indicated potential income escapement.

4. Validity of Notice Issued u/s 148 with Proper Sanction:
The Tribunal confirmed that the notice issued u/s 148 was valid and had proper sanction, dismissing the assessee's contention to the contrary.

5. Admission of Affidavit:
The CIT(A) did not admit the affidavit of Mr. Rakesh P. Sindher, which the Tribunal found justified as the affidavit did not provide any new or compelling evidence to alter the findings of the survey.

6. Confirmation of Addition u/s 68:
The CIT(A) confirmed the addition of Rs. 6,69,35,376 u/s 68 of the I.T. Act, which was upheld by the Tribunal. The Tribunal noted that the assessee failed to prove the genuineness of the transactions and the export claims.

7. Allowability of Deduction u/s 10B:
The primary issue in all grounds was the allowability of deduction u/s 10B. The Tribunal found that the assessee did not comply with the guidelines issued by the STPI and failed to provide substantial evidence of genuine software exports. Consequently, the deduction u/s 10B was disallowed.

8. Allowance of Expenses Incurred:
The Tribunal noted that no software expenses were debited by the assessee despite claiming substantial software exports. Thus, the expenses claimed were disallowed.

9. Consideration of ITAT Order for Assessment Year 2004-2005:
The assessee argued that the ITAT order for the assessment year 2004-2005, which allowed the deduction u/s 10B, should be followed. However, the Tribunal found that the factual parameters for the years under consideration were different from those in 2004-2005.

10. Reliance on Letter Dated 04/08/2003 by CIT(A):
The CIT(A) relied on a letter dated 04/08/2003 written by the Director and Chief Executive of STPI to the Jt. Commissioner of Customs and Excise, which the assessee claimed was never furnished by them. The Tribunal found that this letter was part of the remand report and not independently submitted by the assessee.

11. Opportunity to Explain the Document Relied Upon by CIT(A):
The Tribunal found that the CIT(A) relied on the letter without giving the assessee proper opportunity to explain the document, which was a procedural lapse.

12. Certificate Issued by STPI Authorities:
The CIT(A) held that the certificate issued by STPI authorities in Softex Form was based on the appellant's own verification without specific verification. The Tribunal upheld this finding, noting that the assessee failed to provide substantial evidence to prove the genuineness of the software exports.

Conclusion:
The Tribunal dismissed the appeals for the assessment years 2001-2002 and 2002-2003, confirming the disallowance of deduction u/s 10B and the additions made u/s 68. However, for the assessment year 2003-2004, the Tribunal found the reassessment proceedings invalid due to lack of bonafide reasons and quashed the assessment order.