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TMI Blog2012 (11) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, have been allowed reasonable opportunity of being heard before concluding so and before passing the order on the miscellaneous petition - order passed on the miscellaneous petition by the CIT(A) is bad in law and liable to be quashed - IT APPEAL NO. 322 (BANG.) OF 2012 & S.P. NO. 56 (BANG.) OF 2012 - - - Dated:- 4-4-2012 - GEORGE GEORGE K., AND JASON P. BOAZ, JJ. Padam Chand Khincha for the Appellant. B. Saravanan for the Respondent. ORDER Jason P. Boaz, Accountant Member - The appeal in ITA No. 322/Bang/2012 is directed against the order of the Commissioner of Income Tax (Appeals)-I, Bangalore dated 31.01.2012 captioned 'ORDER ON MISCELLANEOUS PETITION'. In the said order, the learned CIT(A) entirely disallowed the assessee's claim for deduction u/s. 10A of the Income Tax Act, 1961 (herein after referred as 'the Act') and directed the Assessing Officer to assess amount of deduction claimed u/s. 10A as income of the assessee. The assessee has also filed a petition seeking stay on collection of demand in S.P. No. 56/Bang/12. 2. The facts of the case, in brief, are as under : 2.1 The assessee was incorporated under the Companies Act, 1956 on 2.7.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finished product" and in view of this fine and distinct difference, we reiterate our submission that such datacom expenses though incurred in foreign exchange, should not be deducted from the export turnover to arrive at quantum of deduction under section 10A sub-section 4 and explanation 2(iv) to section 10A which speaks of telecom cost incurred in foreign exchange " attributable to delivery of computer software service is not applicable in our case since this expense incurred in forex is towards obtaining audit files which are akin to our input raw material. Since we had not detailed and elaborated our explanation, but subsequent to our personal hearing we wish to highlight this clear and distinct difference for your perusal and consideration appropriately." In the light of the above submission, the assessee submitted that internet charges amounting to Rs. 38,00,830 should not be reduced from the export turnover while computing its eligible deduction u/s. 10A. The Assessing Officer after examining and considering the assessee's submissions proceeded to complete the assessment by an order u/s. 143(3) of the Act on 19.11.2010, wherein he rejected the assessee's claim and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the registration certificate from Deputy Registrar of Companies, Karnataka Bangalore on 4.9.2006 under - CIN U 72200 KA 1999 PTCO 39933. However, the name of 'Focus Infosys (India) Pvt. Ltd.,' was changed to 'Focus MT India Private Limited' on 19.6.2008 by certificate issued by Assistant Registrar of Companies Karnataka to that effect." The learned CIT(A) went on conclude that -- " .This demonstrates that the appellant was not in existence in this relevant A.Y. 2007-08 but still a return was filed and assessment was also completed thereon without appreciation of actual fact. I therefore hold that the assessee has filed inaccurate particulars of income in A.Y. 2007-08 by showing its existence when it was not even in embory, return being filed on 29.10.2007 i.e. before 9.6.2008. Therefore a notice under section 271(1)( c ) of the Act is issued along with this order, I being satisfied that inaccurate particulars of income has been filed. The appeal is dismissed being infructuous because the assessment is itself held bad in law. However the Assessing Officer is directed to take appropriate steps as per law to bring the income chargeable to tax in appropriate hands. However a not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A deduction of Rs.16,77,821 was disallowed. Against this disallowance the assessee preferred appeal before the Hon'ble CIT(A) and the same has been disposed by CIT(A) vide order in ITA No. 70/DC 11(3)/A-1/10-11 dated 10.8.2011. It is submitted that in the above order the CIT(A) has held that the assessment completed is bad in law since the name of the assessee company is changed from M/s. Focus Infosys (India) Pvt Ltd to M/s. Focus MT India Pvt Ltd, that since the appellant was not in existence in the relevant A.Y. 2007-08 the assessee has filed inaccurate particulars of income in the A.Y. 2007-08 by showing its existence and on this ground the CIT(A) has set aside the assessment to recompute the income and tax on the basis of CIT(A) order in appropriate hands. On facts and circumstances of the case, it is submitted that it is not correct to hold that assessee company was not in existence during Assessment Year 2007-08 and has come into existence only on 19.6.2008. In fact the company was very much in existence and only the name of the company was changed to M/s. Focus MT India Pvt Ltd under the same PAN. This fact is evident from the notice generated by computer system on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned CIT(A) on 3.1.2012. The grounds of appeal raised by the assessee are as under : "1. The order passed by the learned CIT(A) is bad in law and on facts. 2. The learned CIT(A) erred in admitting and adjudicating on the miscellaneous petition of the Assessing Officer, without providing any opportunity to the appellant to be heard on the issue. 3. The learned CIT(A) erred in passing an order on the miscellaneous petition, which had the effect of substantially enhancing the income returned without providing any opportunity to the appellant of showing cause against such enhancement. 4. The learned CIT(A) erred on facts by not appreciating the nature of the business carried on by the appellant and concluding that the appellant was not eligible for deduction under section 10A of the Act. 5. The learned CIT(A) erred in disallowing the claim of the appellant under section 10A of the Act. On the facts and in the circumstances of the case, the appellant is entitled to the deduction under section 10A of the Act. 6. The learned CIT(A) has erred in initiating penal proceedings under section 271(1)(c) of the Act." 3.1 In the grounds of appeal at S. No. 1 to 3, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative that the reference on page 1 of the order on the Miscellaneous Petition that the ld. DCIT appeared before the learned CIT(A) on 31.10.2011 in connection with rectification proceedings is incorrect, because the rectification application of the DCIT itself though dated 30.11.2011 was filed before the learned CIT(A) on 2.12.2011 only. (iv) It is submitted that the references made in para 3 of the said order by the learned CIT(A) that the Assessing Officer and the learned Authorised Representative of the assessee appeared and explained the matter before him is factually incorrect since no opportunity of hearing was provided to the assessee. (v) It is further submitted by the learned Authorised Representative that in para 4 of the said order the learned CIT(A) states that the learned Authorised Representative provided a brief note on the nature of exports made and which is enclosed as Annexure 2 thereof is also incorrect as no opportunity was afforded to the assessee. He pointed out that the note at Annexure 2 had in fact been submitted to the learned CIT(A) during the hearing of the first appeal and the contents of this note have been reproduced in page 3 and 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords, the learned CIT(A) in the guise of adjudication thereon, has reviewed his order and denied the entire deduction claimed under section 10A. It was pleaded by the learned Authorised Representative that the action of the CIT(A) in reviewing his order already passed on 10.8.2011 and denying the deduction claimed under section 10A is bad in law and liable to be quashed. 3.4 We have also heard the learned Departmental Representative in the matter and he was unable to controvert the aforesaid submissions and arguments of the learned Authorised Representative. He also conceded that, as per the order passed by the learned CIT(A), the assessee has not been provided any opportunity of being heard in passing the order on the Miscellaneous Petition. 4. We have carefully considered the submissions and arguments of the assessee through the learned Authorised Representative and that of the learned Departmental Representative. It is seen that, in the instant case, the learned CIT(A) passed an order on Miscellaneous Petition on 3.1.2012 denying the deduction claimed under section 10A after passing the appellate order on 10.8.2011. Before going into the issues of enhancement of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an appeal. As discussed in para 4.1 above, the appeal is said to have been disposed when an order is passed by the CIT(A) in writing. When section 250 and 251 are read together, it would be evident that the powers of enhancement could be exercised by the CIT(A) before passing an order disposing of the appeal and not afterwards. 4.3 There is an exception to the above proposition. Under section 154(2) of the Act, the CIT(A) may correct the mistake apparent from records either on his own motion or when such mistake is brought to his notice either by the assessee or by the Assessing Officer. The correction of the mistake apparent from the records may have the effect of either enhancing the assessment or reducing a refund already made. As per section 154(3), the enhancement of assessment or reducing of refund cannot be made unless the assessee is allowed a reasonable opportunity of being heard. However, to enhance the assessment under section 154, the primary requirement of the mistake being apparent from the record should be satisfied. 4.4 In view of the above proposition, the question for consideration in the instant case is whether the action of the learned CIT(A) in denying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires a long drawn out process of reasoning or examining arguments on points where there may conceivably be two opinions or views. The said mistake, if at all there is one, is not glaring, obvious or self-evident. Rather, one has to travel outside the record and examine the relevant facts and law to determine whether the assessee is involved in exports and is eligible for deduction u/s. 10A of the Act. We are of the opinion that the issue as to whether the assessee is involved in exports and is eligible for deduction u/s. 10A of the Act cannot be considered as 'mistake apparent from records' within the meaning of section 154. As a result, the ld. CIT(A) was not correct in unilaterally denying the assessee deduction u/s. 10A in the 'Order on miscellaneous petition' and pursuant to the rectification application filed by the Assessing Officer u/s. 154 of the Act. Even otherwise, the assessee should, in the interest of natural justice, have been allowed reasonable opportunity of being heard before concluding so and before passing the order on the miscellaneous petition. 4.7 Section u/s. 154(3) of the Act, provides that an amendment that has the effect of enhancing the income or incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) on 3.1.2012 is bad in law and liable to be quashed. Grounds of appeal raised at S. Nos. 1, 2 and 3 are accordingly allowed. 5. In the grounds of appeal at S. Nos. 4 5, the assessee has pleaded that the conclusion of the ld. CIT(A) that the assessee is not entitled to claim deduction u/s. 10A is incorrect and bad in law in the facts and circumstances of the case and law applicable. Since we have held that the order on miscellaneous petition dt. 3.1.2012 passed by the CIT(A) is bad in law and liable to be quashed, we are not adjudicating these grounds on merits. 6. In the ground of appeal raised at S. No. 6, the assessee has challenged the intimation of penalty proceedings u/s. 271(1)(c) of the Act by the learned CIT(A), after denying the deduction claimed by the assessee u/s. 10A, in the order on Miscellaneous Petition dt. 3.1.2012. Since we have quashed the order on the miscellaneous petition, this ground does not now survive for consideration and therefore no penalty u/s. 271(1)(c) can be levied on the same issue. This ground No. 6 is accordingly allowed. 7. In the result, the appeal of the assessee in ITA No. 322/Bang/2012 is allowed. 8. Consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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