PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the Revenue against the impugned order dated 11.11.2014, passed by Ld. CIT (Appeals)-X, Delhi for the quantum assessment passed u/s.147/143(3) for the Assessment Year 2005-06. In the grounds of appeal, the Revenue has raised the following grounds of appeal.

1. The ld. CIT(A) has erred in law and on facts in holding that the Assessing Officer has wrongly assumed jurisdiction u/s.147 of the Income Tax Act.

2. The ld. CIT (A) has erred in law and on merits in deleting the I.T.A. No.386/DEL/2015 2 disallowance of deduction u/s.10A amounting to Rs.2,09,37,331.

3. The appellant craves to amend, modify, alter, or add any grounds of appeal at any time before or during the hearing of this appeal.

2. The facts in brief qua the validity of reopening u/s.147 is that, assessee has filed its original return of income u/s.139(1) on 31.10.2005, declaring loss of Rs.6,35,44,316/- after claiming deduction u/s.10A of Rs.2,09,37,331/-. The said return of income was duly processed u/s.143(1); and thereafter, the case was selected for scrutiny by issuance of notice u/s.143(2) dated 14.07.2006 which ensued passing of assessment order u/s.143(3), vide order dated 29.12.2008, at a huge income of Rs.177,28,37,646/- as against the return loss of Rs. 6.35 crores. But the Assessing Officer had allowed the claim of deduction u/s.10A at Rs.2,09,37,331/- in the computation given in the assessment order. Post passing of such an order, assessee had filed application u/s.154 and on such an application, order was passed u/s.154/143 (3) on

24.07.2009 and revised income was assessed at Rs.163.25 crores. The said assessment was also challenged before the ld. CIT (A), who decided the appeal vide order 19.01.2009 and AO had also passed the order giving effect, wherein the revised income stood assessed at Rs.171.40 crore. After completion of the assessment in the aforesaid manner, the assessees case has sought to be reopened u/s.147 by issuance of notice dated 15.02.2012 u/s.148 on the following reasons recorded:- I.T.A. No.386/DEL/2015 3

The original assessment u/s.154/143 (3) was completed in December 17.12.2007, at an income of Rs.175,12,66,760/-, which was later on rectified u/s.154 at an income of Rs.163,24,87,260/- after allowing deduction of Rs.2,09,37,331/- u/s. 10A. Perusal of records revealed that freight and insurance on exports amounting to Rs.2,51,07,605/- was not deducted from export turnover of Rs.14,13,67,629/-. This has resulted in business loss of Rs.4170274/-, hence the deduction u/s.10A should have been disallowed. The mistake has resulted in incorrect allowance of deduction u/s.10A to the tune of Rs.2,09,37,331/- & therefore, escapement of income of Rs.20937331/-. I have therefore reason to believe that an amount of Rs.20937331/- has escaped assessment within the meaning of section 147(c) of the IT Act, 1961. The escapement of the income has been by the reason of failure on the part of the assessee to disclose fully and truly, all material fact necessary for assessment. Since the assessment has been completed u/s. 143(3) of the IT Act, 1961 and four year have since elapsed. The assessment records is being submitted for kind perusal and approval u/s. 151(1) of the IT Act, 1961 for issuance of notice u/s.148 of the IT Act, 1961.

3. The assessee after receiving the notice u/s.148, filed its return of income and detail objections vide letter dated 15.01.2013, objecting to the reopening of assessment u/s.147 on the ground that it is barred by limitation and based on change of opinion which is not permissible in law. The learned Assessing Officer rejected the assessees objections on the ground that due law has been followed for reopening the case after getting approval of the competent authority and the time limit prescribed u/s.149(2) is six I.T.A. No.386/DEL/2015 4 years. After referring to the various judgments which has been discussed in the impugned assessment order from pages three onwards, AO held as under:

Thus, the law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts are those facts, which if taken into account, would have an adverse effect on assessee by the higher assessment of income than the one actually made. They should be proximate and not have any remote bearing on the assessment. Omission to disclose may be deliberate or inadvertent. This is not relevant, provided there is omission or failure on the part of assessee. The latter confers jurisdiction to reopen assessment. In view of the above, I hold that the re-opening of assessment was well within the rights of Assessing Officer to invoke the proviso to section 147 of the.

4. As regards the assessees objection that all the material facts and information were duly submitted at the time of regular assessment and no new information has come to the knowledge of the Assessing Officer, he held that there is no merit in such a contention, because certain factual error has been noticed by the Revenue Audit party and these objection itself contains fresh information and again after referring to certain decisions he justified the reopening of the assessment. So far as on merits of the assessees objection that the deduction of 10A was taken for the profit of the undertaking which was purely into exports of software and as per the audit report filed in Form 56F which provides the details of working of freight & insurance of Rs.2,51,07,605/- I.T.A. No.386/DEL/2015 5 and has been clearly specified that it pertains to the entire business and not to the undertaking (eligible for 10A) and the true and full disclosure of profit of the undertaking has been disclosed separately in the Form 56F duly certified by the auditors. Without prejudice it was submitted that, even if freight and insurance is treated as forming part of the export turnover, then the same would also have been excluded from computation of the total turnover which ultimately will not have impact on profits and this proposition settled by the decision of Honble Bombay High Court in the case of CIT vs. Gems Plus Jewellery India Ltd, in ITA No.2426 of 2009. However, the learned Assessing Officer rejected the assessee submissions after observing and holding as under:

the contention/submission of the assessee is duly considered, but not found acceptable. On perusal of records it is found that freight and insurance on export was not deducted from export turn over and this has resulted business loss to the assessee. Therefore, deduction u/s 10A is not allowable to the assessee. Section 10A of the Income Tax Act provides that a deduction of such profit and gains where the gross total income of the assessee includes profit and gains derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment year beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such article or things or computer software shall be allowed from the total income. Explanation 2:- "export turnover" means the consideration in respect of export by the undertaking of article or things or computer software received in or brought into India by the assessee in convertible foreign exchange in accordance with sub section (3), but does not include freight, I.T.A. No.386/DEL/2015 6 telecommunication charges or insurance attributable to the delivery of the articles or thing or computer software outside India or expense, if any, incurred in foreign exchange in providing the technical service outside India. Therefore, in view of the above the amount of Rs. 2,09,37,331/- claimed and allowed to the assessee during the course of original assessment u/s 143(3) is being disallowed and added back to the total taxable income of the assessee.

5. Before the ld. CIT (A), detailed submissions have been made not only on the validity of reopening of assessment u/s.147, but also on merits which has been dealt and discussed by the ld. CIT (A) in detail in his order. Ld. CIT (A), after considering the entire facts and material on record, assessees submission and judicial precedents, not only quashed the reopening u/s.147, but also deleted the addition on merits. On the validity of the reopening, his observations and finding can be summarised in the following manner:- Firstly, learned Assessing Officer has not given the reasons as to what was the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment and no new facts have been gathered or brought on record by the Assessing Officer; Secondly, re-assessment has been initiated on the basis of information given in the return of income filed and the details submitted during the course of assessment proceedings; Thirdly, very importantly, Ld. CIT(A) has noted that I.T.A. No.386/DEL/2015 7 during the original assessment proceedings the assessee had explained the deduction claimed u/s.10A vide letter dated 10.09.2008, in response to specific show-cause notice by the AO, wherein assessee had clearly explained about the deduction of excise duty from the figure of total turnover and pointed out that Form 56G clearly indicates that assessee had reduced the freight and insurance on export and excise duty from the total turnover. Lastly, at the time of original assessment proceedings these details were available which shows that Assessing Officer had examined and investigated this issue. Based on these reasons, Ld. CIT (A) held that Assessing Officer has wrongly reopened the assessment u/s.147.

6. On merits, the ld. CIT(A) held that the certificate of the Chartered Accountant issued in Form No.56F/56G clearly shows that the freight and insurance and excise duty were relatable to the export of computer software and computation of net profit from the newly established undertaking indicates that after adjustment the gross income from the said undertaking has come to Rs.20,93,771/- and against that how freight and insurance amount of Rs.2,51,07,605/- was incurred by the company has not been explained by the Assessing Officer. Without verifying the nature of freight and insurance, Assessing Officer has presumed that it relates to the export of computer software when export turnover itself was Rs.14.13 crores. Accordingly, on merits also he allowed I.T.A. No.386/DEL/2015 8 the issue in favour of the assessee.

7. Before us, the ld. CIT-DR after explaining the entire facts relied upon the following judgments:-

1. Honda Siel Power Products Ltd. v. Dy. CIT [2012] 340 ITR 64 (SC) Where Honble Supreme Court held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s 14A there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified.

2. Honda Siel Power Products Ltd. v. Dy. CIT [2011] 10 taxmann.com 2 (Delhi)/[2011] 197 Taxman 415 (Delhi) /[2012] 340 ITR 53 (Delhi) /[2012] 247 CTR 322 (Delhi) Where Honble Delhi High Court held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s 14A there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified.

3. New Delhi Television Ltd. Vs DCIT [2017] 84 taxmann.com 136 (Delhi) Where Honble Delhi High Court held that proceedings under section 147, beyond a period of 4 years can only be initiated if the Assessing Officer has reason to believe that there has been escapement of income and this escapement is owing to the lack of true and fair disclosure by the assessee. In this regard, it is essential to understand the meaning of the phrase true and fair disclosure. The Court has considered the meaning of this phrase in Honda Siel Power Products Ltd. v. Dy. CIT [2012] 340 ITR 53 /[2011] 197 Taxman 415 /10 taxmann.com 2 (Delhi) where the Court held that that the term failure 1 on the part of the assessee is not restricted to the return and the columns of the return or the tax audit report. There can be omission and failure on the part of the assessee to disclose material facts fairly and truly during the course of the assessment proceedings. [Para 42]

4. CIT vs. P.V.S. beedies (P) ltd. (1993) 103 Taxman 294 (SC)/(1999) 237 ITR 13 (SC) /(1999) 155 CTR 538 (SC) I.T.A. No.386/DEL/2015 9 Where Honble Supreme Court held that Audit party had merely pointed out a fact which had been overlooked by Assessing Officer and this was not a case of information on a question of law. Reopening of case under section 147(b) on basis of factual information given by internal audit party was valid in law.

5. CIT Vs Kiranbhai Jamnadas Sheth (HUF) T20131 39 taxmann.com 116 (Gujarat)/(2014) 221 Taxman 19 (Gujarat)(MAG.) Where Honble Gujarat High Court held that Assessment without scrutiny would mandate reassessment beyond 4 years even if assessee made true disclosure.

6. Dishman Pharmaceuticals & Chemicals Ltd. Vs CIT [2012] 346 ITR 228 (Guj) The assessee had shown an amount as loan from company. The assessee had not disclosed that it had substantial interest in the company. Reassessment proceedings after four years to assess amount as deemed dividend was held to be valid

7. R.K. Malhotra ITO Vs Kasturbhai Lalbhai [1977] 109 ITR 537 (SC) Where Honble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute "information" within the meaning of section 147.

8. Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] Where Honble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage

9. Yuvraj v. Union of India (315 ITR 84] (SC) Where Honble Supreme Court held that points not decided while passing assessment order under section 143(3) was not a case of change of opinion. It was held that assessment was reopened validly.

I.T.A. No.386/DEL/2015 10

8. On the other hand, learned counsel for the assessee strongly relied upon the order of the ld. CIT (A) and also upon the following judgments.

1.

Re-opening beyond the period of 4 years, where originally no assessment was made under section 143(3) of the Act, reasons recorded for the reopening should clearly bring out as to what is the material which has not been disclosed: - IPCA Laboratories Ltd v CIT: [2001 ] 251 ITR 416 (Del) - CIT v ELGI Ultra Industries Ltd:[2008] 296 ITR 573(Mad) - CIT v Pradeshoya Industrial & Investment Corp of UP Ltd: [2010] 186 Taxman 131 (All) - Haryana Acrylic Manufacturing Company v CIT:[2009] 308 ITR 38(Del) - CIT v TVS Motor Company Ltd: [2009] 319 ITR l92(Mad) - Patidar Oil Cake Industries v DCIT:[2004] 270 ITR 347(Guj) - Sudhir Gensets Ltd v ITO- WP No.7789/2010(Del) - Bank International Indonesia v DDIT: 2012(ITA No. 1083/Mum/2006

2. Reopening on mere change of opinion in not permissible in law - CIT v Kelvinator of India Ltd: [2010] 320 ITR 561 (SC) - CIT v Kelvinator of India Ltd: [2002] 123 taxman 433(Del) (FB) - ICICI Prudential Life Insurance v ACIT:[2010] 325 ITR 471 (Bom) - Direct Information(P) Ltd v ITO:2011] 203 TAXMAN 70(Bom) - German Remedies Ltd v DCIT:2006] 285 ITR 26 - Sita World Travel(India) Ltd v CIT:2004] 140 TAXMAN 3 81 (Del) - Siemens Information System Ltd v ACIT:[2007] 295 ITR 333(Bom) - Jindal Photo Films Ltd v DCIT: [ 1998] 234 ITR 170(Del) - Sirpur Paper Mills Ltd v ITO: [1978] 114 ITR 404(AP) - MJ Pharmaceuticals Ltd v CIT: [2008] 297 ITR 119(Bom) - Universal Subscription Agency (P) Ltd v Jt CIT:[2007] 293 ITR 244(A11) - 3i infotech v ACIT : [2010] 192 taxman 137 (Bom) .

I.T.A. No.386/DEL/2015 11

9. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as the material referred to before us. As stated above, here in this case, the assessee in its return of income filed u/s.139(1) had claimed deduction u/s.10A based on certificate given by the Chartered Accountant in Form No.56F and had computed the profit at Rs.2,09,37,331/- of the undertaking which was engaged in the export of computer software. The working of the computation was given along with the detailed working in the said form. Again in the same form no.56F, the working of freight and insurance of Rs.2,51,07,605/- was also submitted which was clarified that it pertains to entire business and not to the undertaking. Thus, the entire disclosure of the taxable profit of the undertaking, export turnover and the total business was given by the assessee along with the return of income. Further from the perusal of the order of the ld. CIT (A), it appears that during the course of original assessment proceedings, the assessee was specifically required to justify the claim of deduction u/s.10A which was duly responded by the assessee vide letter dated 10.09.2008, wherein the assessee had duly explained the facts about the deduction of excise duty from the total turnover and the deduction on freight and insurance on exports and excise duty from the total turnover. All these material facts clearly indicate that not only in the return of income but also during the course of the original assessment proceedings, the assessee had made full and true disclosure of all the material facts relating to computation of deduction u/s.10A; working of freight and insurance that it pertains to I.T.A. No.386/DEL/2015 12 the entire business and not to the undertaking; and also the calculation of the total turnover of the business along with calculation of deduction from the profit of the undertaking. Not only that, such a disclosure and material facts have been examined by the AO during the course of the assessment proceedings, and after such examination, assessees claim for deduction has been accepted. Now the assessees assessment has sought to be reopened on the ground that freight and insurance on exports has not been deducted from the export turnover and that is the reason why it has resulted into business loss and hence deduction u/s.10A should have been disallowed completely. From a bare perusal of the reasons recorded, first of all, it is noticed that Assessing Officer has referred to the records which were already available at the time of original assessment and secondly, he has held that deduction u/s.10A should have been disallowed by the Assessing Officer and such a mistake has resulted into incorrect allowance. After ascribing such a failure in the original assessment order, he mentions that escapement of income has been by the reasons of failure on the part of the assessee to disclose full and true all material facts. Nowhere has he brought out even remotely as to what was the failure on the part of the assessee in making the true and full disclosure. Mere stating these words will not suffice, because Assessing Officer while acquiring jurisdiction u/s 147 beyond the period of four years from the end of the relevant Assessment Year for reopening an assessment which has been completed u/s.143(3) in terms of proviso, can acquire jurisdiction only when the condition precedent given in the I.T.A. No.386/DEL/2015 13 proviso has been satisfied, that is, firstly, there is a failure on the part of the assessee to file return of income u/s.139 or in response to notice issued u/s.142(1) or Section 148; and or secondly, there has been failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year. If such conditions are not satisfied then assessment completed u/s. 143(3) cannot be reopened beyond the period of four years. It appears that Assessing Officer has blindly gone by the objections raised by the Revenues Audit party without his own independent application of mind or the actual verification of the assessment records. We find that the Assessing Officer in the course of the original assessment proceedings had raised the query on deduction u/s.10A to which assessee had duly responded and explained the entire computation and this goes to show that the assessee has disclosed full and true disclosure of all the material facts relevant for the claim of deduction u/s.10A. The deduction of Section 10A has been claimed in respect of an undertaking which is completely into computer software export and whether the freight and insurance at all pertains to such an export turnover or to total turnover of the business has neither been examined by the Assessing Officer nor has he applied his mind at the time of assuming the jurisdiction u/s.147. Freight and insurance if at all will come into the picture, once there is a physical movement in the form of hard-discs/CDs etc. The entire turnover of the software sale pertaining to the STPI unit has been stated to be made through online transmission only and no expenditure has been stated or found to be incurred by I.T.A. No.386/DEL/2015 14 the company towards freight and insurance. When all these facts are there on record, then where is the question of either failure on the part of the assessee to disclose fully and truly all material facts or any wrong or incorrect allowance of deduction given by the Assessing Officer at the time of original assessment proceedings. The duty cast upon the assessee is only to disclose truly and fully all material fact necessary for computation of its income and what legal inference which has to be drawn on such material fact is upon the Assessing Officer. If Assessing Officer on perusal of the entire material fact disclosed and after raising a specific query has accepted the computation of the claim, then there cannot be any failure ascribed to the assessee so as to warrant acquiring of jurisdiction for reopening the assessment beyond the period of four years in terms of proviso to Section 147. Here in the reasons recorded the Assessing Officer has simply tried to use the phraseology appearing in the proviso to Section 147, without even actual examination as to what is the actual failure on the part of the assessee. Though there are catena of decisions both on the issue of, what is the meaning of failure on the part of the assessee to disclose fully and truly all material facts; and also on the issue of change of opinion which has been elaborated and discussed in the impugned order and also referred and relied upon by the parties in the open court, therefore, we are not referring to these judgments as these proposition are quite settled. On the facts and the record itself, we hold that there is no failure on the part of the assessee in terms of proviso to Section 147, and therefore, the ld. CIT (A) has I.T.A. No.386/DEL/2015 15 rightly held that reopening of assessment u/s.147 in terms of aforesaid reasons recorded is unjustified in law.

10. As regards the judgments relied upon by the ld. CIT- DR, we find that in most of the judgments, it was found that there was a failure on the part of the assessee to disclose fully and truly all the material facts either at the time of filing of return of income or in the course of the assessment proceedings. All these judgments are clearly distinguishable on the facts as we have disclosed hereinabove, and therefore, the ratio decendi of these judgments would not be applicable on the facts of the present case. Thus, order of the ld. CIT (A) on the issue of validity of the reopening is upheld and the grounds raised by the Revenue is dismissed.

11. Since we have already uphold the order of the ld. CIT(A) on legal issue, therefore, we are not dealing with the merits of the addition.

12. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 15 th March, 2018. Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 th March, 2018 PKK: