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TMI Blog2013 (9) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... also explained that assessee company had claimed deduction under section 10A of the Income Tax Act and complied with provision of Law. The assessee further filed reply before Ld. CIT on dt. 12/03/2012 in which the assessee explained that complete books of accounts and all the material were furnished before AO at the assessment stage to claim deduction under section 10A of the Income Tax Act. Similar facts were explained that assessee claimed deduction under section 10A being the assessee company 100% EOU for Computer Software and is duly registered with Software Technology Park in India. Form No. 56 F was also filed before AO and the AO after examining the complete details and reply allowed the genuine claim of assessee of deduction under section 10A of the Income Tax Act. It was also explained that the AO examined the complete books of accounts and was satisfied with the explanations of assessee and profit earned out of said business. The AO was satisfied with reasonableness of the profit earned by the assessee - Therefore assessee was rightly granted deduction under section 10A of the Income-tax Act – Decided in favor of Assessee. Assessee duly complied with the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax gravelly erred in holding that the appellant is not entitled to deduction under section 10 A. 4. That in the facts and circumstances of the case the Ld. Commissioner of Income Tax gravelly erred in holding that the Assessing Officer erred in not examining the applicability of provisions of Section 80IA(8) and 80IA(10). 5. That the profit shown by assessee was duly verified by the Ld. Assessing Officer on the basis of audited books of accounts and after due application of mind, he had accepted the book results shown by the assessee, therefore, the assessment framed by the Ld. Assessing Officer is neither err oneous nor prejudicial to the interest of the revenue. 6. Any other ground that may be taken at later stage with the permission of the Hon'ble Bench. 2. Briefly the facts of the case are that the assessee filed its return declaring 'NIL' income for the assessment year 2007-08. Later the case was selected in scrutiny. Assessment was framed u/s 143(3) of the Income Tax Act by Assessing Officer vide order dt. 30/12/2009 at 'NIL' income as returned by the assessee. 3. The Ld. CIT on perusal of the assessment record, seen that the assessee company had clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished during the assessment proceedings, claimed exemption u/s 10B. The AO accepted the assessee's claim without reference to the eligibility of the assessee and quantum of eligible exemption. For accepting the claim of he assessee to be proper, the requisite report had to be submitted in Form No. 56 G. In the various replies submitted, the assessee maintained that the company was entitled to exemption u/s 10 A and that the Report was to be submitted in Form No. 56F. In this background, the reply filed [in parts] by the assessee are briefly discussed as under: i) Regarding eligibility for exemption u/s 10B [As per computation of Income submitted during assessment proceedings] , the counsel of the assessee submitted that the AO had allowed the genuine claim of exemption u/s 10 A [ as per reply dated 12/03/2012 after due application of mind and, as such, the assessment was neither erroneous nor prejudicial to the interest or revenue. ii) Regarding ser4vices provided by the assessee company to M/s. Axind LLC based in USA, the company had shown high net profit of 84 % which was verified by the AO on the basis of the audited accounts, sales and expenses. After due application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility. However, during entire assessment proceedings, there was no question asked by the AO either about high profitability shown or about the applicability of provisions of Section 80IA(8) and 80IA(10). The assessee's contention that the AO had made necessary verification in this regard are not acceptable. iv) The counsel of the assessee has himself submitted vide reply dated 12/03/2012 regarding the high profit shown by the assessee by stating "... to rebut it [high profit shown by the assessee] no comparable case has been brought out by the revenue...". This itself shows that the aspect of High profits shown by the assessee has not been examined vis- - vis provisions of Section 80IA(8) and 80IA(10). v) The judgments cited by the assessee in support of its contention and facts in the present case are distinguishable. 8. After careful consideration of the facts of the case, submissions of the counsel for the assessee and relevant provisions of the Income-tax Act, 1961 [as discussed in detail in the preceding paragraphs] it is clear that the AO has not examined the various issues regarding assessee's claim for exemption u/s 10B [ or 10A as per assessee's reply in proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Chartered Accountant and after making complete enquiry into the matter accepted the return of income therefore the reasonableness of the profit under section 80IA(8) (10) of the Income Tax Act were also examined by the AO, and in the opinion of the AO the profit was reasonable. Looking to the facts and circumstances of the case the AO has not pointed out any discrepancy in the explanation and evidences produced before him. He has submitted that even in the re-assessment proceedings under section 143(3) read with section 263 of the Income Tax Act, the assessee made a similar claim of deduction under section 10A of the Income Tax Act but the AO did not examining the claim of assessee and summarily rejected the claim vide order dt. 08/03/2013 (Paper Book 67). Learned Counsel for the assessee submitted that the provisions of section 10 A (2) of the Income Tax Act applies in the case of the assessee because the assessee has begun or begins to manufacture or to produce article or things or Computer Software during the assessment year under appeal and assessee was entitled for exemption under the said provision by filing Form no. 56 F which was filed before the AO. He has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as on erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law ". He has also submitted that even if the order passed by the AO is cryptic and no elaborate discussion is made but when he has applied mind to the facts and evidence before him, the jurisdiction exercised by the CIT under section 263 is not valid and assessment order cannot be said to be "erroneous". In next year claim of assessee u/s 10A is accepted u/s 143(1). He has relied upon decision of the Punjab Haryana High Court in the case of Hari Iron Trading Co. Vs. Commissioner of Income -Tax [2003]263 ITR 437 and decision of Bombay High Court in the case of Commissioner of Income Tax Vs. Gabriel India Ltd. [1993]203 ITR 108. In the case of Gabriel India Ltd. (Supra), it was also held that "Moreover, in instant case, Commissioner himself, even after initiating proceedings for revision and hearing the assessee could not say that the allowances of claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section applies to any undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year: (a) commencing on or after the 1 s t day of April, 1981, in any free trade zone; or (b) commencing on or after the 1 s t day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park; (c) commencing on or after the 1 s t day of April, 2001 in any special economic zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence; Provided that this condition shall not apply in respect of any undertaking which is formed as a result of there establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period of specified in that section; (iii) It is not for med by the transfer to a new business of machinery or plant previously used for any purpose. Explanation: The provisions of Explanation 1 and Explanation 2 to sub-section (2) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply for the purposes of clause (iii) of this sub- section as they apply for the purposes of clause (ii) of that sub- section. Sub section (5) of Section 10 B of the Income Tax Act similarly provides that deduction under this section shall not be admissible for any assessment year beginning on or after the 01/04/2001, unless the assessee furnishing in the prescribed form 56 G alongwith the return of income as prepared by the Chartered Accountant certifying that the deduction has been correctly claimed in accordance with the provisions of this section. Explanation 2(i) to Section 10 B provides the definition of "Computer Software" which reads as under: "(i) "Computer Software" means- (a) any computer programmed recorded on any disc, tape, perforated media or other information storage device; or (b) any customized electronic data or any product or service of similar nature as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means; Sub Clause (iv) to Explanation 2 to Section 10B provides 100% export oriented undertaking means an undertaking which has been approved as a 100% export oriented undertaking by the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionnaire dated 22/12/2009 issued by the AO at the assessment stage raising as many as 27 questions regarding history of assessee and nature of business activities carried on and complete details related to the business activities. The assessee filed reply before AO (Paper Book 27) in which complete details of nature of business and history of the assessee were explained. The assessee explained before AO at the assessment stage that assessee company is doing business of developing and exporting of computer software and online maintenance of such softwares. The assessee company is 100% EOU for computer software and has been duly registered with the Software Technology Park of India, copy of which is filed at page 31 of the Paper Book. The assessee, however, in the reply claimed that deduction has claimed under section 10 B of the Income Tax Act. The certificate of Software Technology Park of India as noted above filed at page 31 of the Paper Book certified that assessee is engaged in 100% EOU for manufacturing Computer Software. 8.5. The assessing officer in the assessment order dt. 30/12/2009 has specifically mentioned that the assessee company attended the assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial to interest of revenue. 8.7. Hon'ble Allahabad High Court in the case of Commissioner of Income Tax Vs. Goyal Private Family Specific Trust [1988] 171 ITR698 held as under : The orders of the Income-Tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interest of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement, cannot be said to be erroneous and prejudicial to the interest of the Revenue. It was for the Commissioner to point out as to what error was committed by the Income-tax Officer in having reached the conclusion that the income of the trust was exempt in its hands and was assessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the Commissioner that the Income-tax Officer would have reached a different con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and all the material were furnished before AO at the assessment stage to claim deduction under section 10A of the Income Tax Act. Similar facts were explained that assessee claimed deduction under section 10A being the assessee company 100% EOU for Computer Software and is duly registered with Software Technology Park in India. Form No. 56 F was also filed before AO and the AO after examining the complete details and reply allowed the genuine claim of assessee of deduction under section 10A of the Income Tax Act. It was also explained that the AO examined the complete books of accounts and was satisfied with the explanations of assessee and profit earned out of said business. The AO was satisfied with reasonableness of the profit earned by the assessee. Therefore assessee was rightly granted deduction under section 10A of the Income-tax Act. When the matter was taken up by the AO in re- assessment proceeding under section 143(3)/263 dt. 08/3/2013 the assessee made similar claim of deduction under section 10A but it was not allowed being no revised return have been filed. It would therefore show that the assessee since beginning before AO as well as before Ld. CIT claimed that de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioner from any liability on account of the house property in question holding it to belong to the petitioner. The findings recorded by the criminal court in this regard could not be brushed asidc. Hence, any de novo proceedings at this stage would be futile. The order of revision had to be quashed. The assessment of the petitioner for the assessment year 1992-93 made by order dated May 16, 1994, had to be considered complete and final." 23 8.11. Hon'ble Delhi High Court in the case of Commissioner of Income Tax Vs. Vikas Polymers [2012] 341 ITR 537 held as under: "That the Commissioner had mentioned that the Income-tax Officer had not examined the cash credits of the partners or deposits of chit fund. Assuming this to be so, this might make the order erroneous, but how it was prejudicial to the interests of the Revenue had not been stated by the Commissioner as he did not deal with the explanation given by the assessee in the course of the section 263 proceedings. The Commissioner observed in his order that the assessee had not filed certain documents on the record at the time of assessment. Assuming this was so it did not justify the conclusion arrived at by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 11, 1998, had merged in the order dated January 7, 2000. In such circumstances, without interfering with the order dated January 7, 2000, the order dated March 11, 1998, could not have been reached by the revisional authority and set aside. The notice dated January 24,2000 and the order dated March 28,2000, passed by the Commissioner, under section 263, were absolutely without jurisdiction and not tenable in law. The notice and order were liable to be quashed." 8.13. Considering the above discussion in the light of the above case laws, we are of the view that when all the evidence and material on record clearly support the case / explanation of the assessee that assessee is entitled for deduction under section 10A of the Income-tax Act, the Ld. CIT should have examined the explanation of the assessee and passed the order of revision in accordance with law. Merely because AO passed a cryptic order or might have made inadequate enquiry would not be a ground to set as ide the assessment order. Ld. Counsel for assessee also contended that in next year similar claim of assessee has been accepted u/s 143(1) by Revenue Dept. has not been disputed before us. 8.14. The order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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