9911796707
TMI Blog2012 (11) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee are laid down as under: 1. The learned CIT(A) erred in not holding that the notice issued u/s 148 is without jurisdiction and therefore proceedings for assessment are illegal and invalid and consequently the order of assessment is void, ab initio. 2. The learned CIT(A) erred in holding that there was reason to believe that income had escaped assessment. 3. The learned CIT(A) erred in not holding that notice u/s 148 was issued only for purpose roving and fishing enquiries. 4. The learned CIT(A) erred in holding that notice issued u/s 148 2was valid with proper sanction. 5. The learned CIT(A) erred in not admitting the affidavit of Mr. Rakesh P. Sindher. 6. The learned CIT(A) erred confirming the addition of ₹ 66935376/-. 7. The learned CIT(A) erred in not allowing the deduction u/s 10B. 8. The learned CIT(A) erred in not allowing any expenses incurred. 9. The learned CIT(A) erred in not following the order of the I.T.A.T. for assessment year 2004-2005. On the ground that the factual parameters for this year are different from 2004- 2005. 10. The learned CIT(A) erred in stating that letter dated 04/08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil income. The assessee is running a computer software business in the name of M/s Jai Hari Softech, Nagpur. During the year under consideration, the assessee has shown total receipt of ₹ 96.4%. The entire profit has been shown as exempt under section 10B of the Income-tax Act, 1961. A survey conducted under the business premises of the above referred assessee was conducted on 07-03-2007 by the Investigation wing of the department. During the course of survey it was revealed that during the period from 1999-2000 to 2003-04 the assessee has shown to have received a total consideration of 55,94,054 US Dollars (approx ₹ 26.66 crores) against the export to M/s Alpha Impex Hongkong. The assessee has also claimed exemption under section 10B of the Income-tax Act, 1961 as an 100% export oriented unit. The assessee has stated that it was exporting computer software to the above referred firm during the above years. The exemption claimed under section 10B has been allowed except for the assessment year 2004-05 wherein it was disallowed as the assessment was passed as an ex-parte under section 144 of the Act. The disallowance made for the assessment year 2004-05 has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to issue notice under section 148 of the Income-tax Act, 1961 in the case of assessee for the assessment year 2001- 02. 3.1 Similar type of reasons were recorded for reopening the assessment in the assessment year 2002-2003 and 2003-2004. In the assessment proceedings initiated u/s 147, the Assessing Officer sought to disallow deduction u/s 10B of the Act as according to him the assessee was approved by Inter Ministerial Standing Committee appointed by the notification of the Government of India in the Ministry of Industries vide gazette Notification No.S.O.117(E) dated 22/02/1993 while as per section the undertaking must have been approved by the Board appointed in this behalf by the Central Government and, accordingly the Assessing Officer took the view that the exemption u/s 10B is not available. The Assessing Officer also took note of the finding of the survey team and observed that the assessee has diverted its sales to its in-laws and sister concern in the form of interest free loans, the profit earned are unrealistic almost 90% while leading software companies are showing profit @25%. The assessee has shown to have developed a project known 19-Scribe Alias X 2 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-2005 wherein it has been held that there was no ground for allowing expenditure on the one hand and doubting exports on the other is, therefore, distinguishable. 8.4 The appellant has made a submission that the amounts of Foreign Inward Remittance cannot be brought to tax u/s 68. This has no merit. The appellant has not established that the transaction purported to be export is genuine. There is no transparency in the nature of transaction as discussed in the foregoing paragraphs. Since the amounts have been credited to the books of the assessee, provisions of section 68 have been rightly invoked by the Assessing Officer. As regards the alternate contention of the appellant that expenses may be allowed against income brought to tax u/s 68. There is no case made out that the expenses have genuinely been incurred as these claims have been made against purported exports, which have been held to be non genuine. Therefore, the findings in the assessment order are upheld. 4. The learned A.R. before us vehemently contended that deduction u/s 10B has mainly been denied by the Assessing Officer on the basis of the report of the survey team. The assessee has duly replied each a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted by the Inter-Ministerial Standing Committee in accordance with the Scheme, the demand so arising should be kept in abeyance until further orders Instruction : No. 1/2006, dated 31-3-2006. 4.1 It was pointed out that the Misc. Application filed by the Department was also dismissed by the Tribunal vide order dated 25/07/2011. The learned A.R. drawn our attention to page No. 63 to 65 of the paper book pointing out that the assessee has submitted point-wise reply to the Assessing Officer mentioning therein the details of approved plant machinery. The Softex Form has been certified by the assessee as per the advice of the RBI. No person except the RBI has any power to make any change in the contents and/or Form of Softex at any point of time. The assessee does not have any record showing for rejected Softex Forms are concerned except the correspondence and letters exchanged between the assessee and the importer. The copy thereof was duly filed by the Assessing Officer. The letter dated 30/01/2007 was issued by Assessment. Director, STPI, Maharashtra just to expedite the proceedings initiated by the ACIT, Nagpur. It was not an independent letter seeking any information by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2002-2003 @90.2% and in assessment year 2003-2004 @90.2%. The Revenue did not have any evidence which may prove that the exports were bogus. Referring to page No. 71 of the paper book, which contained a letter in reply to RTI application dated 15/05/2012, it was pointed out that this letter clearly states that the CIT(A) under para 5.6 of its order has wrongly mentioned that the assessee has filed a letter dated 04/08/2003 addressed to the Jt. Commissioner (Customs Excise) while this letter was never filed by the assessee but was the part of the remand report of the Assessing Officer dated 02/11/2009. The Tribunal has given clear cut finding in the assessment year 2004-2005 that the sales are genuine. Thus there remains no scope to take a view from the different one which has been taken by the Tribunal. The facts remain the same in all the assessment years. Apparent is real, onus is on the person who alleges the apparent is not real. For this proposition of law, reliance was placed on the decision of Hon'ble Supreme Court in the case of Durga Das Rawat Mal 87 ITR 369. 5. The learned D.R., on the other hand, vehemently contended that the facts involved in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment and export after 31/03/2004. The finding given by the survey team has duly been considered by this Tribunal while deciding the appeal of the assessee for the assessment year 2004-2005 and ultimately the Tribunal in I.T.A. No.159/NAG/08 vide its order dated 06/03/2009 took the view after looking into the totality of the facts that the assessee has duly established the genuineness of export of software by it during the year under consideration by holding as under: We have carefully considered the arguments of both the sides and perused the material placed before us. The CIT(Appeals) has sustained the disallowance of exemption u/s 10B mainly on the basis of finding in the survey report and has extensively quoted the same from page 3 to 5 of his order. The learned counsel for the assessee explained each and every finding in the survey report. The learned D.R has not controverted the explanation of the learned counsel for the assessee with reference to the issues raised in the survey report. The learned CIT(Appeals) has also mentioned the AO s report that on visit of assessee s premises only one lady was found sitting at the reception. It was explained by the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,199,772.75 The genuineness of the above expenditure has not been doubted by the AO or the CIT(Appeals). The above expenditure has been duly allowed. When the huge expenditure on salary, internet expenses, annual maintenance charge for computers and the service charges to STPI is allowed, it cannot be said that there was no business of software development by the assessee during the relevant accounting year. The assessee is registered as Importer Exporter with STPI. The certificate of the same is placed at page 21 of the assessee s paper book. The export of software is duly evidenced by the invoice raised on Alfa Impex. The sale consideration of export of software was received in convertible variation exchange through banking channel. The assessee submitted required form to STPI. The assessee had purchased the software which was further developed and exported to Alpha Inpex. The purchase of software were at ₹ 15,01,699/- is allowed by the AO. In view of the totality of the facts, we are satisfied that the assessee has duly established the genuineness of the export of the software by it during the year under consideration. The AO disallowed the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the STPI and has also to submit firms before the RBI under the FEMA along with the certificate issued by the STPI certifying the value declared by the exporter to be in order and accepted by the STPI. This form has been filed along with each and every invoice under the FEMA. It is not a case where the STPI has not to issue any certificate before the export about the declaration of the export consideration by the assessee. We do not find even a single instance, which may prove that the assessee had not complied with the guidelines in this regard. The Assessing Officer has mainly relied on a letter dated 03/01/2007 issued by STPI to the assessee asking the assessee to furnish certain information. This letter is issued after the expiry when actually export had already taken place and also at the instance of the Assessing Officer as is apparent from para 6 of the letter dated 22/07/2009 written by the Assessment. Director, STPI, Maharashtra to ACIT, Circie-Nagpur. This para reads as under: 6.As regards contents of para No.6 of your aforesaid letter, all the then dealing Officials in our Office have changed. You will appreciate that the sole reason behind sending our letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2001-02 on 29-11-2003 declaring income of ₹ 52,93,205/-. The assessee is running a computer software business in the name of M/s Jai Hari Softech, Nagpur. During the year under consideration, the assessee has shown total receipt of ₹ 5,69,32,783/- and net profit has been shown at ₹ 4,90,13,560/- giving profit rate of 90.2%. The entire profit has been shown as exempt under section 10B of the Income-tax Act, 1961. A survey conducted under the business premises of the above referred assessee was conducted on 07-03-2007 by the Investigation wing of the department. During the course of survey it was revealed that during the period from 1999-2000 to 2003-04 the assessee has shown to have received a total consideration of 55,94,054 US Dollars (approx ₹ 26.66 crores) against the export to M/s Alpha Impex Hongkong. The assessee has also claimed exemption under section 10B of the Income-tax Act, 1961 as an 100% export oriented unit. The assessee has stated that it was exporting computer software to the above referred firm during the above years. The exemption claimed under section 10B has been allowed except for the assessment year 2004-05 wherein it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer that the appeal for the assessment year 2004-2005 against the disallowance of exemption u/s 10B is pending before the Tribunal. The assessee, vide letter dated 23/12/2008, requested for the copy of the reasons as well as the copy of the requisite mandatory sanction as provided u/s 151(2). The Assessing Officer did not supply the copy of the reasons. The reasons were supplied to the assessee vide letter dated 29/12/2008, which were received by the assessee on 30/12/2008. The assessee furnished various comments vide letter dated 25/12/2008 to substantiate the bonafide of the export and the claim of the exemption u/s 10B of the I.T. Act. The assessee sought one week time to file the objection on 31/12/2008 but as the assessment was going to be time barred on 31/12/2008, the Assessing Officer completed the assessment vide order dated 31/12/2008. The assessee went in appeal before the CIT(A) and the CIT(A) confirmed the order of the Assessing Officer both on legality as well as on merit. 8. Before us, the learned A. R., vehemently contended that the reasons recorded are not bonafide. The predecessor Assessing Officer allowed the exemption u/s 10B to the assessee @90% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic interpretation to the words reason to believe failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review and power to reassess. But reassessment has to be based on fulfilment of certain pre-conditions and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct tax Laws (Amendment) Act, 1987, Parliament not only de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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