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AC. Cir.6(1),R.No. 506, 5th Floor, Aayakar Bhavan, M.K. Road, Mumbai 400 020 Vs. M/s. Blue Star Infotech Pvt. Ltd.,4th Floor, Band Box House, Dr. A.B. Road, Worli, Mumbai - 18.
October, 04th 2012
                   MUMBAI BENCHES "B" MUMBAI

                              [^ .., .


                                    ^ ], ..

                    . /              ITA No. 7117/Mum/2011
                       [ [ /Assessment Year 2004-05

              AC. Cir.6(1),                   M/s. Blue Star Infotech
              R.No. 506,                      Pvt. Ltd.,
              5th Floor,                      4th Floor,
              Aayakar Bhavan,         Vs.     Band Box House,
              M.K. Road,                      Dr. A.B. Road,
              Mumbai ­ 400 020                Worli,
                                              Mumbai - 18.

                                              PAN: AAACB 6385 J
             ( /Appellant)                     ( / Respondent)

             Revenue by                      :       Shri Surinder Jit Singh
             Assessee by                     :       Shri Niraj Sheth

             / Date of Hearing                       :       25 -09-2012
          / Date of Pronouncement                    :       03 -10-2012

                                      / O R D E R


        Following Grounds of Appeal were filed by the Assessing Officer (AO)
against the Order dated 14-07-2011 of the CIT(A)-14,Mumbai :

      1."On the facts and in the circumstances of the case and in law, the Ld. CIT (A)'s
      decision in annulling the order u/s. 143 r.w.s. 147 of the Act is erroneous and
      contrary to the decision of the Hon'ble High Court Delhi in the case of Consolidated
      Photo & Finvest Ltd. ACIT (2006) 281 ITR 394 (Del.)
                                           2                            ITA No. 7117/Mum/2011
                                                                 M/s. Blue Star Infotech Pvt. Ltd.,

       2. The appellant prays that the order of CIT (A) on the above grounds be set aside
       and that of the Assessing Officer be restored.

       3."The appellant craves leave to amend or alter any ground or add a new ground
       which may be necessary."

2.     Assessee-company, engaged in the business of software development,
consultancy support and maintenance service, filed its return of income on 30-10-
2004 declaring total income of Rs. 1,92,55,173/-. Assessment was finalized on 20-
12-2006 u/s. 143 (3) of the Income Tax Act, 1961 (Act) assessing total income at Rs.
4,89,16,110/- by the AO. Later on AO initiated proceedings u/s. 147 of the Act by
issuing notice u/s. 148(dt.26-03-2010)in respect of income alleged to have been
escaped assessment. Re-assessment order was passed on 29-12-2010 determining total
income of the assessee at Rs. 27.72 Crores.

2.1.    Assessee preferred an appeal before the First Appellate Authority (FAA).
Assessee-company challenged the validity of re-opening before the FAA. Ground
Nos. 1,2,3 and 5 of the appeal filed by the assessee-company were related to the
validity of the re-assessment proceedings initiated u/s. 148 after 4 years from the end
of the relevant Assessment Year (AY) in the light of first proviso to Sec.147 of the
Act. After considering the submissions of the assessee, re-assessment order, reasons
recorded by the AO and the objections of the assessee, FAA held that the issue on the
basis of which, the AO had re-opened the assessment had been considered by him/his
predecessor in original assessment proceedings, that the AO had no where
demonstrated that income had escaped by reason of failure on the part of the assessee-
company to disclose fully and truly all material facts necessary for assessment, re-
opening was based on mere change of opinion, that there was no failure on the part of
the assessee to disclose fully and truly all material facts, all material facts were
already available at the time of original assessment proceedings, that AO had not only
considered the claim of deduction u/s. 10A of the Act-but after due consideration, the
claim was allowed at a reduced figure of Rs. 15.26 Crores (as against the appellant
claim of Rs. 18.23 Crores), that case laws relied upon by the AO were not applicable
to the facts of the case under consideration. He further held that fresh material was
not available to the AO while re-opening assessment of the appellant, that it was a
case of change in opinion. Relying on the cases of Kelvinator of India
Ltd.(320ITR561), Rallis India (323ITR54), Tanna Builders (P) Ltd (198CTR541) and
Hindustan Lever (now Unilever) Ltd. (268ITR332) he allowed the appeal filed by the

3.     Before us, Departmental Representative (DR) submitted that re-assessment
proceedings were initiated as per the provisions of Section 147/148 of the Act that
there was failure on the part of the assessee-company to disclose fully and truly the
material facts. He relied upon the case of Consolidated photo and Finvest Ltd., (281
ITR 394). Authorised Representative (AR) submitted that assessee-company had
furnished all the necessary details during the original assessment proceedings, that
reasons recorded by the AO do not reveal failure on the part of the assessee, re-
assessment proceedings were initiated as a result change in opinion of the AO, that
                                            3                            ITA No. 7117/Mum/2011
                                                                  M/s. Blue Star Infotech Pvt. Ltd.,

proviso with Section 147 clearly was in favour of the assessee-company. We have
heard the rival submissions and perused the material put before us Before deciding the
issue, we will like to mention the basic facts of the case:

       i) Original Assessment was finalised on 20-12-2006 determining the total
       income of the assessee at Rs. 4.89 Crores as against the declared income of
       Rs. 1.92 Crores.

       ii) At the time of original assessment claim made by the assessee u/s. 10A of
       the Act was considered by the AO. He reduced the claim by Rs. 2.96 Crores
       (appellant's claim was for Rs. 18.23 Crores, whereas AO allowed Rs. 15.26
       Crores only).

       iii) Provisions of section 148 were invoked with reference to Section 10A of
       the Act.

4.     While recording the reasons AO mentioned that the assessee had reduced the
expenses incurred in foreign exchange in providing technical service outside India
from the export turn-over as well as total turn-over of the undertaking, that the above
expenditure could be deducted from export turn-over only, that deduction of the
above expenditure from total turn-over was incorrect, that while computing the
deduction u/s. 10A assessee had not reduced other income.

5.       In the case under consideration notice u/s. 148 was issued after 4 years from
the end of the relevant Assessment Year. If we consider the above factual position, it
is clear that the re-opening was result of change of opinion and not result of failure on
the part of the assessee to disclose truly and fully material facts. As per the AO,
assessee should have reduced other income while computing the profit of the business
for claiming deduction u/s.10A of the Act. Other reason of re-opening, recorded by
the AO, was about reduction of the expenses incurred in foreign exchange for
providing technical services outside India from the export turn-over as well as the
total turn-over. We find that during the original assessment proceedings, details about
export turn-over were examined by the then AO From the records available, it is clear
that deduction claimed by the appellant u/s. 10A had been examined and fully verified
during the regular assessment proceedings.AO had granted deduction to the assessee-
company after careful scrutiny of the claim after going through Form No. 56(F).Thus,
it is clear that appellant had fully and truly disclosed all the material facts to the AO.
For the purpose of evaluating the claim made u/s. 10A,AO had applied his mind.
From the reasons recorded by the AO, it is evident that there had been no new/fresh
material available with him for formation of a belief relating to escapement of income
for assessment. In absence of any new material, AO's action in initiating
reassessment proceeding, is held to be entirely based on mere change of opinion and
hence invalid. As per the settled principle of jurisprudence, proceedings u/s. 147
cannot be initiated by the AO to review the earlier orders. In the case under
consideration, AO has actually done the review of the original Assessment Order and
that is not permitted as per the provisions of the Act. Case laws relied upon by the
FAA support his view. Respectfully following the decisions of Kelvinator of India
Ltd. and IPCA Labs Ltd., (supra) we hold that re-assessment proceedings initiated by
                                          4                           ITA No. 7117/Mum/2011
                                                               M/s. Blue Star Infotech Pvt. Ltd.,

the AO for the AY under consideration was not based on any sound footings ­ it was
result of change of opinion.

Upholding the order of the FAA, we decide Ground Nos. 1-3 against the AO.

As a result, appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 3rd October, 2012.

           Sd/-                                               Sd/-
 (..          / B.R. MITTAL )                        (] / RAJENDRA)
 /JUDICIAL MEMBER                             /ACCOUNTANT MEMBER

 Date: 3rd October, 2012


    /Copy of                   the Order forwarded to :

       1. Appellant
       2. Respondent
       3. The concerned CIT (A)
       4. The concerned CIT
       5. DR "B" Bench, ITAT, Mumbai
       6. Guard File
           //True Copy//

                                                             / BY ORDER,

                                              /  Dy./Asstt.             Registrar
                                                ,                 /   ITAT, Mumbai
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