Reopening of Tax Assessment Invalid Due to Change of Opinion

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Case Name:

Commissioner of Income Tax and Another vs. Hewlett-Packard Globalsoft Pvt. Ltd. (High Court of Karnataka

ITA Nos. 65 of 2014 C/w 66 of 2014

Date: 14th August 2015

Key Takeaways:

- The court emphasized that reopening a tax assessment under Section 147 (of Income Tax Act, 1961) requires new tangible material, not just a change of opinion.

- The original assessment had already considered the eligibility of income from technical services for deduction under Section 10A (of Income Tax Act, 1961).

- The decision reinforces the principle that tax authorities cannot reassess completed assessments without new evidence.

Issue

Was the reopening of the tax assessment valid, or was it merely a change of opinion by the Assessing Officer?

Facts

Hewlett-Packard Globalsoft Pvt. Ltd. filed a tax return for the assessment year 2003-04, claiming a deduction under Section 10A (of Income Tax Act, 1961) for income derived from technical services abroad. The original assessment was completed, but later, the Assessing Officer issued a notice to reopen the assessment, claiming the deduction was excessive. The company challenged this reopening, arguing it was based on a change of opinion, not new evidence.

Arguments

- For the Revenue: The reopening was justified as the original assessment did not properly examine the eligibility of the income for deduction under Section 10A (of Income Tax Act, 1961).

- For the Assessee: The original assessment thoroughly scrutinized the claim, and the reopening was merely a change of opinion without new material.

Key Legal Precedents

- CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561: The court held that reopening an assessment requires tangible material and cannot be based on a mere change of opinion.

- Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC): The court discussed the scope of "reason to believe" in reopening assessments.

Judgement

The court ruled in favor of Hewlett-Packard Globalsoft Pvt. Ltd., stating that the reopening of the assessment was invalid as it was based on a change of opinion. The original assessment had already considered the relevant issues, and no new material was presented to justify reopening.

FAQs

Q1: What does this decision mean for other companies?

A1: It reinforces that tax assessments cannot be reopened without new evidence, protecting companies from arbitrary reassessments.

Q2: Why was the reopening considered a change of opinion?

A2: Because the original assessment had already addressed the issues, and no new information was provided to justify a different conclusion.

Q3: What is Section 10A (of Income Tax Act, 1961)?

A3: It provides a deduction for profits derived from export of articles or things or computer software, subject to certain conditions.

1. Revenue has preferred these appeals calling in question the order passed by the Income Tax Appellate Tribunal, “C” Bench, Bangalore in ITA Nos.

283/BANG/2012 and 267/Bang/2012 dated 30.09.2013 where under the Tribunal, while examining the validity of re-opening of the assessment, has set aside the same on the ground that Assessing Officer, on mere change of his opinion

and without any tangible material, could not have reopened the concluded assessment and as such held that reopening is invalid.

2. We have heard the arguments of Sri K.V. Aravind, learned Advocate appearing for appellant-revenue and Sri. T. Suryanarayana, learned Advocate appearing on behalf of respondent-assessee.

3. The above appeals came to be admitted to

consider the following substantial questions of law:

“(1) Whether on the facts and in

the circumstances of the case, the

Tribunal was correct in holding that

the reopening of assessment is by

mere change of opinion, without

appreciating the fact that the

expenditure related to on-site

development of computer software

was not examined in the original

assessment and as such is not a

deemed opinion to hold change of

opinion?

(2) Whether on the facts and in the

circumstances of the case the

tribunal was correct in holding that

reopening of assessment is mere

change of opinion, when the

assessing officer has not considered

the eligibility of the income derived

from rendering technical services

abroad to be eligible for deduction

under Section 10-A (of Income Tax Act, 1961) or not?”

4. Briefly stated facts are:

Assessee is a company engaged in the business

of software development. For the assessment year

2003-04 return of income was filed whereunder the

assessee claimed deduction under Section 10A (of Income Tax Act, 1961) of the

Act. The assessee had excluded the expenses

incurred in foreign currency for providing technical

services. The return of income was processed and it

was selected for scrutiny. After issuing statutory

notice, assessment order under section 143(3) (of Income Tax Act, 1961) of the

Income Tax Act, 1961 (for short `Act’) came to be

passed on 27.03.2006. While claiming deduction

under Section 10A (of Income Tax Act, 1961), the assessee had

excluded the expenses incurred in foreign currency

for providing technical services and had included the

profits derived from technical services in the eligible

profits for deduction under section 10A (of Income Tax Act, 1961).

Hence, notice under section 148 (of Income Tax Act, 1961) came to be issued

for reopening the concluded assessment on the

ground that claim made by the assessee under

Section 10A (of Income Tax Act, 1961) by including the profits derived

from technical services in the eligible profits was

excess claim. Thereafter re-assessment came to be

completed on 31.12.2007 by excluding the profits

derived from technical services from the eligible

profits and consequently, the deduction under

Section 10A (of Income Tax Act, 1961) came to be re-concluded. The said re-

assessment order was challenged by the assessee

before the CIT (A) questioning the validity of the re-

opening on the ground that it would amount to

change of opinion. Though appellate Commissioner

confirmed the validity of re-opening of assessment

under Section 148 (of Income Tax Act, 1961), partial relief was

granted to the assessee on merits by order dated

28.11.2011. Hence, assessee as well as revenue filed

separate appeals before the Tribunal against the

order of CIT(A). The assessee challenged the

confirmation of validity of re-opening of assessment.

The revenue challenged the partial relief granted by

the appellate Commissioner to the assessee. The

Tribunal annulled the re-assessment proceedings and

held it is not valid in law. In view of the same, the

Tribunal did not examine other issues raised by the

assessee and consequently, the appeal filed by the

revenue also came to be dismissed. Hence, the

revenue has filed these two appeals.

5. It is the contention of Sri K.V.Aravind,

learned Advocate for the revenue that Tribunal erred

in holding that assessing Officer sought to initiate the

re-assessment proceedings by mere change of

opinion, without considering the fact that the

expenditure related to onsite development of

computer software and same had not been examined

in the original assessment and as such, it is not a

deemed opinion. He would submit that when the

assessing Officer has not examined the eligibility of

the income derived from rendering technical services

abroad to be eligible for deduction under Section 10A (of Income Tax Act, 1961)

or not, question of change of opinion did not arise.

He would submit that eligibility of income derived

from technical services was not to be included in the

eligible profits under Section 10A (of Income Tax Act, 1961) and the

assessing Officer, while framing the assessment

proceedings, had not examined inclusion of income

from technical services into the eligible profits for

computing deduction under Section 10A (of Income Tax Act, 1961). He would

submit that assessee had claimed deduction under

Section 10A (of Income Tax Act, 1961) by including the profits from

rendering technical services in the eligible profits and

as such deduction claimed under Section 10A (of Income Tax Act, 1961) of the

Act by the assessee was excessive and Explanation to

Section 147 (of Income Tax Act, 1961) was attracted and it would

amount to deemed escapement of income to tax.

Hence, he contends that the re-opening of the

concluded assessment is valid.

6. He would further submit that the

assessing Officer had not expressed any opinion on

the controversy regarding inclusion of profits derived

from rendering technical services into the eligible

profits and as such, no opinion had been expressed

during assessment proceedings and thereby change

of opinion would not arise. On these grounds, he

would seek for substantial questions of law being

answered in favour of the revenue and prays for

allowing the appeal. In support of his submissions,

he has relied upon the following judgments:

(i) (2010) 320 ITR 561

Commissioner of Income Tax vs.

Kelvinator of India Ltd.

(ii) (2007) 291 ITR 500 (SC)

Assistant Commissioner of Income

Tax vs. Rajesh Jhaveri Stock

Brokers (P) Ltd.

(iii) (2012) 348 ITR 485 (Delhi)

Commissioner of Income Tax-VI vs.

Usha International Limited.

(iv) (2011) 242 CTR 425

Commissioner of Income Tax &

Another vs. Rinku Chakraborthy

(v) (2013)350 ITR 651

Export Credit Guarantee

Corporation of India Ltd. vs.

Additional Commissioner of Income

Tax

(vi) (2014) 265 CTR 540

Commissioner of Income Tax &

Another vs. Sasken Communication

Technologies Ltd.

7. Per contra, Sri Suryanarayana, learned

Advocate would support the order passed by the

Tribunal and contends that the assessing Officer at

the first instance had examined the issue of

excluding certain sum from the export turnover on

the ground it was expenditure incurred in foreign

exchange for providing technical services outside

India and in the reasons recorded for re-opening the

assessment, he has taken the view that aforesaid

amount cannot be considered as income derived from

export of articles or things or computer software at

all. He would submit that by issuing the notice for re-

assessment, the assessing Officer intends to re-

examine the deduction claimed by the assessee under

Section 10A (of Income Tax Act, 1961) which itself amounts to change of

opinion and even if there was a failure on the part of

the assessing Officer with regard to computation of

export turnover, the only course of action left to the

revenue was to take recourse under Section 263 (of Income Tax Act, 1961) of

the Act. Hence, he prays for dismissal of the appeals.

In support of his submissions, he has relied

upon the following judgments:

(i) (2002) 256 ITR 1

Commissioner of Income Tax vs.

Kelvinator of India Ltd.

(ii) (2001)116 Taxman 274 (Kar)

Commissioner of Income – Tax vs.

Hardware Trading Co.

(iii) Replika Press Private Limited &

Another vs. Deputy Commissioner of

Income Tax Circle

(W.P.(C) 7452/2010 dated 5th August,

2013)

(iv) (2014) 363 ITR 603 (Bom)

NDT Systems and another vs. Income-Tax

Officer and others

(v) (2014) 366 ITR 134 (Guj)

Deepakbhai Ramjibhai Patel vs. Income-

Tax Officer

8. Assessee is in the business of software

development. For the assessment year 2003-04

return of income was filed on 31.10.2003 declaring

income of ` 15,00,92,060/- after claiming deduction

of ` 99,67,71,161/- under Section 10A (of Income Tax Act, 1961).

Assessment order came to be framed under Section

143(3) of the Act on 27.03.2006. The Assessing

Officer reduced the claim of deduction from

` 99,67,71,161/- to ` 89,08,86,778/-. Notice under

Section 148 (of Income Tax Act, 1961) was issued on the ground that

excess deduction under Section 10A (of Income Tax Act, 1961) has been

claimed and hence the deduction has to be

recomputed. After considering the reply given by the

assessee, order of reassessment was passed under

Section 143(3) (of Income Tax Act, 1961) read with Section 147 (of Income Tax Act, 1961) on 31.12.2007.

This was carried in appeal by the assessee and was

successful partially. The assessee being aggrieved by

the finding recorded by the Appellate Commissioner

that reopening being proper, filed further appeal

before the Tribunal and the revenue being aggrieved

by the grant of partial relief to the assessee by the

Appellate Commissioner, filed an appeal before the

Tribunal. Thus, both the appeals came to be taken

up together by the Tribunal and by the impugned

order set aside the reopening of the assessment on

the ground that it is change of opinion and

consequently allowed the appeal filed by the assessee

and dismissed the appeal filed by the revenue.

Hence, revenue has preferred these two appeals.

RE: SUBSTANTIAL QUESTIONS OF LAW Nos.1 & 2:

9. The validity of initiation of reassessment

proceedings under Section 147 (of Income Tax Act, 1961) by the

Assessing Officer was challenged by the assessee

before the Assessing Officer, Appellate Commissioner

as well as Tribunal. Perusal of the original records

would indicate that Assessing Officer for the reasons

recorded in the order sheet dated 05.09.2006 to

reopen the concluded assessment for the year 2003-

04. It reads as under:

“The expenses incurred in foreign

currency in respect of technical service

rendered outside India at

Rs.34,5145,781 has been reduced from

the export turnover as per clause (iv) of

the Expl. 2 to Section 10A (of Income Tax Act, 1961). Actually

profits from providing technical

services abroad should be excluded

while computing deduction u/s 10A (of Income Tax Act, 1961).

In the instant case the

expenditure for providing technical

services at 11.71% of the total

expenditure and the profits from

providing technical services is to be

estimated at 11.71% of the total

profits, which is eligible for deduction

u/s 10A (of Income Tax Act, 1961).

Consequent short levy of tax and

surcharge works out to

Rs.1,76,39,326/-. Therefore, I have

reasons to believe that income

chargeable to tax has escaped

assessment for the Ay 2003-04”.

As per Section 147 (of Income Tax Act, 1961), if the Assessing Officer

has reason to believe that any income chargeable to

tax has escaped assessment for any assessment year

he may, subject to provisions of Section 148 (of Income Tax Act, 1961) to 153,

assess or reassess such income.

10. In the instant case, the Tribunal, while

accepting the plea of the assessee that merely on

change of opinion, the concluded assessment was

being reopened, noticed that the Assessing Officer

had already gone into specific issues arising under

Section 10A (of Income Tax Act, 1961). It can be noticed that from

the reasons recorded for issue of notice under Section

148 of the Act, the assessing Officer wanted to hold

that the entire sum towards employee’s salary,

overseas travel, in all totaling ` 154,05,83,125/-

towards expenditure incurred in foreign currency for

rendering technical services outside India ought to

have been considered as not profits derived by an

undertaking from export of articles or things or

computer software under Section 10A(1) (of Income Tax Act, 1961)

and that the same should be totally excluded from

the computation of deduction under Section 10A (of Income Tax Act, 1961) of

the Act and as such, considering ` 38,51,45,781/-

as part of the export turnover, while computing

deduction under Section 10A (of Income Tax Act, 1961) was

incorrect. Hence, the assessing Officer had proposed

to re-assess. The assessee had contended that there

was application of mind by the assessing Officer on

all issues including the question as to whether the

sum of ` 38,51,45,781/- is not profit derived by the

assessee from the export of articles or things or

computer software. The assessing Officer while

completing the assessment under Section 143(3) (of Income Tax Act, 1961) of

the Act, has gone into the question of excluding the

sum of ` 38,51,45,781/- from the export turnover on

the ground that it was expenditure incurred in

foreign exchange for providing technical services

outside India. However, the reasons recorded for re-

opening the said assessment is that the aforesaid

sum cannot be considered as income derived from

export of articles or things or computer software at

all. Thus, it has to be seen whether it would be a

different dimension or the income had escaped

assessment or whether the assessing Officer had

adopted one of the views possible and as such, he

could not have taken recourse to re-assessment of

the proceedings.

11. Jurisdiction under Section 147 (of Income Tax Act, 1961)

can be invoked by the assessing Officer where he has

reason to believe that income chargeable to tax has

escaped assessment. However, such ‘reason to

believe’ cannot be based on a mere change of opinion.

It is not in dispute that the assessing Officer does not

have jurisdiction to review his own order. The power

of rectification of mistakes conferred on the assessing

Officer is circumscribed by the provisions of Section

154 of the Act.

12. From the perusal of the provisions

contained in Section 147 (of Income Tax Act, 1961), as it stood up to

31.03.1999, it is evident that to confer jurisdiction

under Section 147(a) (of Income Tax Act, 1961), twin conditions were

required to be satisfied namely, (1) the assessing

officer must have reason to believe that income

chargeable to tax has escaped assessment; and (2) he

must also have a reason to believe that such

escapement occurred by reason of either – (a)

omission or failure on the part of the assessee to

make a return of his income under Section 139 (of Income Tax Act, 1961) or (b)

omission or failure on the part of the assessee to

disclose fully and truly all material facts necessary

for his assessment for that year. Both conditions are

cumulative and in the given circumstances of the

case, if these two conditions are not fulfilled, then

necessarily notice issued by the assessing Officer

would be wholly without jurisdiction.

13. The effect of amendment to Section 147 (of Income Tax Act, 1961)

came to be examined by the Hon’ble Apex Court in

CIT vs KELVINATOR OF INDIA LIMITED reported

in (2010) 320 ITR 561 and observed as under:

“4. On going through the

changes, quoted above, made to Section

147 of the Act, we find that, prior to

Direct Tax Laws (Amendment) Act,

1987, reopening could be done under

above two conditions and fulfillment of

the said conditions alone conferred

jurisdiction on the Assessing Officer to

make a back assessment, but in

Section 147 (of Income Tax Act, 1961) [with effect from

1st April, 1989], they are given a go by

and only one condition has remained,

viz., that where the Assessing Officer

has reason to believe that income has

escaped assessment, confers

jurisdiction to reopen the assessment.

Therefore, post 1st April, 1989, power

to reopen is much wider. However, one

needs to give a schematic interpretation

to the words "reason to believe" failing

which, we are afraid, Section 147 (of Income Tax Act, 1961) 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; he has the power to reassess.

But reassessment has to be based on

fulfillment of certain pre-condition 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, 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 Income Tax Act, 1961)

of the Act, as quoted hereinabove.

Under the Direct Tax Laws

(Amendment) Act, 1987, Parliament not

only deleted the words "reason to

believe" but also inserted the word

"opinion" in Section 147 (of Income Tax Act, 1961).

However, on receipt of representations

from the Companies against omission

of the words "reason to believe",

Parliament re-introduced the said

expression and deleted the word

"opinion" on the ground that it would

vest arbitrary powers in the Assessing

Officer. We quote hereinbelow the

relevant portion of Circular No.549,

dated 31st Oct., 1989 [(1990) 82 CTR

(St) 1], which reads as follows xxx

remain the same.”

14. The phrase ‘reason to believe’ found in

Section 147 (of Income Tax Act, 1961) came up for scrutiny before

the Hon’ble Apex Court in the matter of ASSISTANT

COMMISSIONER OF INCOME TAX vs RAJESH

JHAVERI reported in (2007) 291 ITR 500 (SC) and

held that the said expression cannot be read to mean

that the assessing Officer should have finally

ascertain the fact by legal evidence or conclusion of

the fact of escapement of income from tax. It came to

be held as under:

“16. Section 147 (of Income Tax Act, 1961) authorises

and permits the Assessing Officer to

assess or reassess income chargeable

to tax if he has reason to believe that

income for any assessment year has

escaped assessment. The word

“reason” in the phrase “reason to

believe” would mean cause or

justification. If the Assessing Officer

has cause or justification to know or

suppose that income had escaped

assessment, it can be said to have

reason to believe that an income had

escaped assessment. The expression

cannot be read to mean that the

Assessing Officer should have finally

ascertained the fact by legal evidence

or conclusion. The function of the

Assessing Officer is to administer the

statute with solicitude for the public

exchequer with an inbuilt idea of

fairness to taxpayers. As observed by

the Delhi High Court in Central

Provinces Manganese Ore Co. Ltd. v.

ITO (1991) 98 CTR (SC) 161: (1991)

191 ITR 662 (SC), for initiation of

action under Section 147(a) (of Income Tax Act, 1961) (as the

provision stood at the relevant time)

fulfillment of the two requisite

conditions in that regard is essential.

At that stage, the final outcome of the

proceeding is not relevant. In other

words, at the initiation stage, what is

required is “reason to believe”, but not

the established fact of escapement of

income. At the stage of issue of notice,

the only question is whether there was

relevant material on which a

reasonable person could have formed a

requisite belief. Whether the materials

would conclusively prove the

escapement is not the concern at that

stage. This is so because the formation

of belief by the Assessing Officer is

within the realm of subjective

satisfaction (see ITO v. Selected

Dalurband Coal Co. Pvt. Ltd. [(1996)

132 CTR (SC) 162: (1996) 217 ITR 597

(SC)]; Raymond Woollen Mills Ltd. v.

ITO [(1999) 152 CTR (SC) 418: (1999)

236 ITR 34 (SC)].

17. The scope and effect of

section 147 (of Income Tax Act, 1961) as substituted with effect

from 1st April, 1989, as also Sections

148 to 152 are substantially different

from the provisions as they stood prior

to such substitution. Under the old

provisions of Section 147 (of Income Tax Act, 1961), separate

clauses (a) and (b) laid down the

circumstances under which income

escaping assessment for the past

assessment years could be assessed or

reassessed. To confer jurisdiction

under Section 147(a) (of Income Tax Act, 1961) two conditions

were required to be satisfied firstly the

Assessing Officer must have reason to

believe that income profits or gains

chargeable to income- tax have

escaped assessment, and secondly he

must also have reason to believe that

such escapement has occurred by

reason of either (i) omission or failure

on the part of the assessee to disclose

fully or truly all material facts

necessary for his assessment of that

year. Both these conditions were

conditions precedent to be satisfied

before the Assessing Officer could have

jurisdiction to issue notice under

Section 148 (of Income Tax Act, 1961) read with Section 147(a) (of Income Tax Act, 1961).

But under the substituted Section 147 (of Income Tax Act, 1961)

existence of only the first condition

suffices. In other words if the

Assessing Officer for whatever reason

has reason to believe that income has

escaped assessment it confers

jurisdiction to reopen the assessment.

It is however to be noted that both the

conditions must be fulfilled if the case

falls within the ambit of the proviso to

section 147 (of Income Tax Act, 1961). The case at hand is

covered by the main provision and not

the proviso.”

15. Thus, it boils down to the fact that

“escapement of income” from tax for whatever reason

would suffice for the assessing Officer to initiate re-

assessment proceedings by issuance of notice under

Section 147 (of Income Tax Act, 1961).

16. Keeping the above dicta in mind, when the

facts on hand are re-examined, it would indicate that

while completing the assessment under Section

143(3) of the Act, the assessing Officer has gone into

the question of excluding the sum of

` 38,51,45,781/- from the export turnover on the

ground that it was expenditure incurred in foreign

exchange for providing technical services outside

India. However, for re-opening the assessment the

assessing Officer has intended to take a view that

aforesaid sum cannot be considered as income

derived from export of articles or things or computer

software at all. It would not be out of place to

mention that while concluding the assessment

proceedings under Section 143(3) (of Income Tax Act, 1961) and during the

course of assessment proceedings, the assessing

Officer had called for clarifications from the assessee

and in reply to the notice issued under Section

143(2)(ii) of the Act, the assessee on 06.03.2006 has

categorically stated as under:

“Based on the above definition, it

may be appreciated that only such

expenses by way of freight,

telecommunication charges or insurance

attributable to the delivery of computer

software outside India, needs to be

excluded from the export turnover in

case of a company engaged in software

development activities and expenses, if

any, incurred in foreign exchange would

need to be reduced only in the case of a

company engaged in rendering technical

services outside India.

In this context, we wish to submit

that the Company is primarily engaged

in software development activities and is

not involved in rendering any technical

services outside India.”

17. Considering the above explanation given

by the assessee, the assessing Officer in the original

assessment proceedings which resulted in order

passed under Section 143(3) (of Income Tax Act, 1961) on 27.03.2006

has held to the following effect:

“2.6. It is clear from the assessee’s

above submissions that the assessee is

engaged in providing support services,

which are nothing but technical services.

The expenditure in foreign exchange is

incurred for both development of

software and providing technical

services. However, the assessee has not

been able to furnish a break-up of the

expenditure incurred for development of

software and providing technical

services. It has taken a stand that no

technical services are provided and the

entire expenditure is for development of

software. Taking the functional analysis

reproduced above into account, and in

the absence of any break-up of the

expenditure, 25% of the expenditure

incurred under the following heads in

foreign exchange is deemed to be the

expenditure incurred in foreign exchange

for providing technical services outside

India.

Employees’ salary - Rs.126,75,49,201

Overseas travel - Rs. 25,30,33,924

Total - Rs.154,05,83,125

2.7. Hence, the expenditure

incurred in foreign currency for

providing technical services is adopted at

Rs.38,51,45,781/- and is allocated

between the five STP Units in the ratio of

the export sales. Similarly, from out of

the communication expenses incurred in

foreign currency of Rs.3,21,66,847/- an

amount of Rs.7,03,50,677/- (as

quantified by the assessee) is taken as

attributable to the delivery of computer

software and is allocated between the

five STP Units in the same ratio of the

Export Sales. Both these amounts are

reduced from the export turnover in

accordance with the definition of ‘ETO’

given in sec.10A (of Income Tax Act, 1961).”

18. Thus, it can be seen from the original

assessment records that the claim of the assessee

under Section 10A (of Income Tax Act, 1961) was thoroughly

scrutinized, the assessing Officer had examined the

claim of expenditure incurred in foreign currency for

providing technical services by allocating the sum of

` 38,51,45,781/- between the five STP units in the

ratio of the export sales. In fact, the assessing Officer

had raised certain queries during assessment

proceedings and detailed reply given by the assessee,

which is extracted herein above, would leave no

doubt in our mind that the said issue was thoroughly

addressed to by the assessing Officer, considered and

the plea of the assessee came to be accepted. In that

view of the matter, it cannot be construed that there

was either non disclosure by the assessee or the

assessing Officer had obtained material subsequent

to the framing of the assessment order on 27.03.2006

so as to arrive at a conclusion that there was

escapement of income from tax.

19. For the reasons aforestated, we are of the

considered view that the Tribunal was fully justified

in arriving at a conclusion that the re-opening of

assessment was by change of opinion and the issue

regarding eligibility of the income derived from

rendering technical services abroad to be eligible for

deduction under Section 10A (of Income Tax Act, 1961) or not had already been

considered by the assessing Officer in the assessment

concluded under Section 143(3) (of Income Tax Act, 1961) on

27.03.2006.

20. For the reasons aforestated, we proceed to

pass the following:

ORDER

(1) Appeals are hereby dismissed by

answering the substantial questions

of law in favour of the assessee and

against the revenue.

(2) Order of the Income Tax Appellate

Tribunal, “C” Bench, Bangalore in

ITA Nos. 283/Bang/2012 and

267/Bang/2012 dated 30.09.2013

are hereby affirmed.

(3) No order as to costs.

Sd/-

JUDGE

Sd/-

JUDGE