Case: Capgemini India Private Limited Vs. Assistant Commissioner of Income Tax Circle 14(1)(2) &amp; Others

2. On the earlier occasion we had extensively heard both sides. We have also heard both sides today. In the light of the agreement and consent of both sides, we dispose of this Writ Petition finally.3. Rule. Respondents waive service.4. On 21st April, 2015, we had passed an order inviting the attention of the Respondents to the averments in the Writ Petition and particularly in para 12. Thereafter, we indicated to the Respondents that in view of authoritative pronouncements by this Court as also by the Honble Supreme Court in the case of Asian Paints vs. Deputy Commissioner of Income Tax and Anr. reported in (2008) 296 ITR 90     and in the case of GKN Driveshofts (India) Ltd. vs. Income Tax Officer reported in (2003) 259 ITR 19  , the order passed on 12th February, 2015 rejecting the objections should have been communicated and the Respondents thereafter ought not to have proceeded with for a period of four weeks and in pursuance of the impugned notice. Since the order of assessment dated 27th February, 2015 is assailed on the ground that this direction of the Division Bench of this Court and the Honble Supreme Court has not been followed, we had called upon the Respondents Counsel then appearing to take appropriate instructions and inform the Court as to whether that assessment order should be set aside by consent or appropriate corrective steps would be adopted.5. The matter was placed today for passing orders, because we were not happy with the stand taken by the Respondents in the affidavit in reply. We had also noticed that in several matters the Respondents have been adopting similar course. There could be difficulties in meeting certain deadlines and particularly of 31st March, but that does not justify that in every case the Respondents defy the directions in the Judgments of the Honble Supreme Court and of the Division Bench of this Court. We could have appreciated a case of genuine difficulty and brought forward fairly and completely, but what we find in this case is that the notice under section 148 of the IT Act is dated 27th March, 2014. That was served on the Petitioner, but the reasons which are said to be recorded, annexed to this notice, came to be furnished to the Petitioner on 29th October, 2014. Thereafter, the Petitioner raised the objections on 12th December, 2014. The order passed by the Respondents, rejecting these objections, is dated 12th February, 2015. The Respondents were obliged to abide by the above directions and not passed an order of assessment for a period of 4 weeks from the date of service of this order rejecting the objections. In the instant case, if that order itself was served on 10th March, 2015, then, this haste in passing an assessment order within four weeks cannot be justified. If the notice is dated 27th March, 2014, then, the period till 27th March, 2015 was enough to conclude the steps and in accordance with law. The Respondents having delayed the proceedings and at their own end, it would not be open for them to justify their conduct and complete disregard to the orders and directions which are binding on them. In such circumstances, we are not in agreement with the contention that the assessment order having now been passed, the Writ Petition should not be entertained and the Petitioner must be relegated to the statutory remedies. We are of the firm opinion that having regard to the factual statements in para 12 of the Writ Petition and there being absolutely no reply thereto in the affidavit in reply, this contention of the Respondents cannot be accepted.6. On the earlier occasion, the learned Additional Solicitor General had also assured us that corrective steps would be taken and hereafter none of the Assessees would be visited with the consequences that are faced by the present Petitioner. We are informed today that appropriate corrective steps have been taken and the Principal Commissioner has issued clear directives to all Assessing Officers to abide by the law laid down by the Honble Supreme Court in the case of GKN Driveshofts (India) Ltd. (supra) and equally by this Court in the case of Asian paints Ltd. (supra) and AroniCommercials Ltd. vs. Deputy Commissioner of Income Tax reported in (2014) 44 Taxman 304. It is in these circumstances that we have proceeded to ignore the assessment order and on perusal of the notice under section 148 of the IT Act as well we are satisfied that this is a fit case for interference in our Writ Jurisdiction.7. Turning to the legality and validity of the notice under section 148 of the IT Act and the proceedings in pursuance thereof, we find that the notice is issued to reopen the assessment for the assessment yearThe reasons for the same are recorded at page 198 of the paper book. We have proceeded on the footing that these reasons have been recorded on 27th March, 2014 and they reflect the satisfaction of the Assessing Officer.8. In the present case, the Assessing Officer has issued notice under section 148 of the IT Act to reopen the assessment for the assessment yearGoing by this admitted factual position, it is evident that the Assessing Officer could have reopened the assessment only on recording his satisfaction that the income chargeable to tax has escaped assessment for the relevant assessment year by reason of the failure of the Assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. The reasons recorded and copy of which is at Annexure 198 of the paper book read as under:ANEXUREM/s. Capegemini India Pvt. Ltd.Reason for issue of notice u/s 148 of the Income Tax Act, 1961 A. Y.this case, the assessee company filed its return of income for A. Y.on 02.11.2007 declaring income of Rs.2,76,74,434/under normal provision of the Act. Then the case was selected for scrutiny and the assessment was completed u/s 143(3) r.w.s. 144C(13) of the Act on 14.10.2011 assessing the total income at Rs.The assessee company is engaged in business of development and export of software. During the year under consideration, it is seen that the assessee company had claimed deduction u/s 10A of the Act for its Unit II & III without setting off losses of Unit IV from the profits derived by the eligible units. As per the provisions of section 10A of the Act, deduction u/s 10A of the Act is allowable on the net profit derived by the assessee company from eligible units after setting off of losses from other eligible units.I have therefore, reasons to believe that the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, within the meaning of the provisions of section 147 of theAct, 1961, income of Rs.5,14,12,534/chargeable to tax has escaped assessment. This is, therefore, a fit case for issue of notice u/s 148 of the I. T. Act, 1961.9. The Petitioner raised a specific objection by a letter dated 12th December, 2014. The Petitioner pointed out that it had filed a return of income for assessment yearon 2nd November, 2007. The admitted factual position was that it declared an income of Rs.2,76,74,434/under normal provision of the IT Act. The case was selected for scrutiny and the assessment was completed under section 143(3) read with section 144C(13) of the IT Act on 14th October, 2011 assessing the total income at Rs.The Petitioner company is engaged in the business of development and export of software. The Petitioner pointed out that the return of income, which was furnished for the assessment reflected the deduction under section 10A of the IT Act. There is a Pune Unit of the Petitioner and there is a Hyderabad Unit. The Petitioner pointed out that the deduction under section 10A of the IT Act was elaborated in Schedule 10A. The deduction in respect of Units located in Software Technology Park, namely Undertaking No. 1 and Undertaking No. 2 have been disclosed with figures. In the Schedule BP, Income from Business or Profession, the deduction under section 10A of the IT Act was disclosed and it was pointed out that during the course of assessment proceedings, there was a questionnaire and which was forwarded to the Petitioner Assessee. This was attached to a notice under section 142(1) of the IT Act dated 14th July, 2010. That raised a specific query in relation to the deduction claimed under section 10A of the IT Act. The query is also reproduced in the Petitioners letter dated 12th December, 2014. The response to this query is contained in the Petitioners letter dated 22nd November, 2010. The Petitioner stated that it filed three audit reports in Form 56F in respect of the three software units, which were eligible for deduction under section 10A. The said audit reports are enclosed to this letter as Annexures 1 to 3. Thereafter, the relevant particulars in the audit reports were highlighted. Thus, the Pune II Unit is known as Unit II and the claim is raised for the 6th year, where as Hyderabad Unit is known as Unit III and the claim is raised for the 4th year. Chennai Unit is known as Unit IV and the claim raised is in the 7th year in relation thereto. The Petitioner company set off the losses of Unit IV (Chennai) against the profits of Unit I, namely, the Unit of Pune. The Petitioner also pointed out that there was a draft assessment order under section 143(3) r.w.s. 144C(1) dated 31st December, 2010. The paragraphs of the draft assessment order were reproduced. Thus, the complete claim of deduction was reflected in all the documents. The loss of the Chennai Unit has not been set off against the profits of Units II and III and therefore, impliedly the loss of Unit IV has been set off against the profits of Unit I, because that Unit has completed its 10 years of deduction under section 10A of the IT Act and therefore, not eligible for the said deduction. The assertion of the Petitioner was that complete facts were before the Assessing Officer during the course of the original assessment. They have been referred in the course of passing of the assessment order. If there were no particulars nor was the disclosure complete, truly and fully pertaining to material facts, it would not have been possible for the Assessing Officer to make an assessment and pass an assessment order. The Petitioner pointed out that though it has been called upon to comply with the notice under section 148(1) of the IT Act, it is incumbent upon the Respondents to deal with the objections and pass a speaking order thereon. The request to pass such an order was made on 23rd January, 2015. It was also brought to the notice of the Assessing Officer that the steps in furtherance of the impugned notice should not be taken so long as the objections are pending and not dealt with by the speaking order. The course of events are set out at page 215 of the paper book, which is a copy of the letter dated 9th February, 2015. Thereafter, the Petitioner pointed out on 2nd March, 2015 that it is not possible for them to waive their right to seek redressal against the order, which is stipulated by law, namely of dealing with their objections. They, therefore, informed the Assessing Officer that if he proceeds and passed an order of reassessment in furtherance of the impugned notice, that course is impermissible. He should first deal with the objections and in the event he is inclined to reject them, he shall not proceed further for a period of 4 weeks. That is equally the communication at page 226 of the paper book.

Reasoning:
15. Upon hearing both sides and perusing the Writ Petition and all Annexures thereto so also the affidavit in reply, we fail to understand as to how the Respondents justify the issuance of the notice under section 148 of the IT Act and by referring to such details including of the claim of deduction under section 10A of the IT Act. If these details and pertaining to deduction in question were not furnished and were not available with the Assessing Officer, then, one fails to understand as to from where the data and the computation has been taken and for reference by the Respondents themselves. In the reasons recorded, it is clear that the Assessing Officer is aware that the Petitioner Assessee is engaged in the business of development and export of software. The Assessing Officer was aware of the Units set up by the Assessee/Petitioner before us. He has derived the figures of profits and losses from the relevant records and the information, some of which was supplied and furnished by the Petitioner itself. In these circumstances and when material facts relevant to the assessment year were disclosed and were on record, then, one fails to understand as to why this notice has been issued. From the reasons itself, it is apparent that it is issued to revisit this claim of deduction under section 10A of the IT Act and as put forward by the Petitioner/Assessee. If the deduction under section 10A of the IT Act is allowable on the net profit derived by the Assessee company from eligible units, after setting off lossess from other eligible units, then, it is apparent that all the particulars and profits were before the Assessing Officer at the time of the original assessment. The Petitioner has, while disputing the reasons recorded and raising objections thereto, pointed out in details as to how the relevant facts were before the Assessing Officer. We do not find any material to the contrary and which falsifies the Petitioners assertions in the letter dated 12th December, 2014 raising specific objections to the reasons recorded for reopening the assessment under section 147 of the IT Act. The affidavit in reply is completely silent with regard to furnishing of these details and by the Petitioner. From the affidavit in reply, we have taken specific paragraphs, where the Petitioners version before the Assessing Officer in the original assessment though accepted by the Assessing Officer, he is faulted for not having taken into consideration certain aspects of this deduction. If the Petitioner allegedly did not give information regarding the losses of the Unit IV and did not adjust the losses of Unit IV with the profits of other units and therefore the order in that behalf is termed as erroneous, then, this is a clear case of revisiting this claim. Now, a different opinion is held by the Respondents and for which they want to reopen the assessment. Such a course is clearly impermissible.16. Having referred to the undisputed factual materials on record and finding that there is no justification for reopening the assessment that we have no alternative but to allow this Writ Petition. Once we find that the mandatory precondition and as set out in the statute has not been abided by, then, the notice under section 148 of the IT Act and all steps in furtherance thereof cannot be sustained.