Case: INCOME TAX OFFICER WARD NO.16(2) Vs. M/S TECHSPAN INDIA PRIVATE LTD.(FORMERLY KNOWN AS M/S. TECHSPAN INDIA LTD.) THROUGH ITS MANAGING DIR

(a) M/s TechSpan India PrivateRespondent is a private limited company incorporated under the Companies Act, 1956 and is engaged in the business of development and export of computer softwares and human resource services. It is also relevant to mention here that theis also eligible for deduction under Section 10A of the IT Act.(b) On 25.10.2001, the Respondent filed its return of income for the Assessment Year (AY)declaring a loss of RsThe Respondent, while filing the return for the aforementioned period, has declared its income from two sources, namely, software development and human resource development but claimed expenses commonly for both. It also claimed deduction under Section 10 A of the IT Act for the income from the software development. The said return was accepted and accordingly intimated to the Respondent.(c) The return was selected for regular assessment under Section 143(3) of the IT Act and a show cause noticewas issued to the Respondent to show cause as to why the expenses claimed with regard to the allocation of common expenses between the two heads, viz., software development and human resource development do not reveal any basis for such allocation. The issue was duly contested and decided vide order dated 29.11.2004 and the proceedings ended with a rectification of the Assessment Order under Section 154 of the IT Act while arriving at an income of Rs. 31,63,570/which was fullyagainst the loss brought forward and the income was assessed as ‘Nil? for the AY) Further, on 10.02.2005, a Notice was served upon the Respondent by the Revenue forthe assessment under Section 148 on the ground that the deduction under Section 10A of the IT Act has been allowed in excess and the income escaped assessment works out to Rs. 57,36,811/in the original assessment. The Respondent filed a detailed reply objecting to theHowever, by order dated 17.08.2005, the objections were rejected and reassessment was approved by the Revenue.(e) Being aggrieved, the Respondent challenged the above said show cause notice dated 10.02.2005 as well as the order dated 17.08.2005 before the High Court by filing a Writ Petition (C) No. 14376 of 2005. Vide judgment and order dated 24.02.2006, the High Court set aside the show cause notice dated 10.02.2005 as well as theorder dated 17.08.2005.(f) Being aggrieved, the Revenue has filed this appeal before this Court.

Court's reasoning:
Before interfering with the proposedof the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order iscryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposedproceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in theThe fact in controversy in this case is with regard to the deduction under Section 10A of the IT Act which was allegedly allowed in excess. The show cause notice dated 10.02.2005 reflects the ground forin the present case, that is, the deduction allowed in excess under Section 10A and, therefore, the income has escaped assessment to the tune of Rs. 57,36,811. In the order in question dated 17.08.2005, the reason purportedly given for rejecting the objections was that the assessee was not maintaining any separate books of accounts for the two categories, i.e., software development and human resource development, on which it has declared income separately. However, a bare perusal of notice dated 09.03.2004 which was issued in the original assessment proceedings under Section 143 makes it clear that the point on which theproceedings were initiated, was well considered in the original proceedings. In fact, the very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details filed do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocation should be done. All these things leads to an unavoidable conclusion that the question as to how and to what extent deduction should be allowed under Section 10A of the IT Act was well considered in the original assessment proceedings itself. Hence, initiation of theproceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessmentIn light of the forgoing discussion, we are of the view that impugned judgment and order of the High Court dated 24.02.2006 does not call for any