SELLA SYNERGY INDIA PVT LTD Vs. INCOME TAX OFFICER, COMPANY CIRCLE VI (2); ADDITIONAL COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Heard Mr.M.V.Swaroop, learned counsel appearing for the petitioner and Mr.J.Narayanaswamy, learned Standing counsel appearing for the respondent.

(2.) The petitioner is a 100% Export Oriented Unit registered under STPI for the assessment year 2005-06. The petitioner is stated to be a wholly owned subsidiary of Sella Holding Banca S.P.A., Italy engaged in the business of development and sale of computer software. In this Writ Petition, the petitioner seeks for issuance of a Writ of Certiorari, to quash the notice issued by the first respondent dated 28.05.2007, wherein the first respondent stated that he has reason to believe that the petitioner's income in respect of which they are assessable and chargeable to tax for the assessment year 2005-06 has escaped assessment within the meaning of Section 147 of the Income Act, 1961, (hereinafter referred to as 'Act'). Therefore, the first respondent proposed to assess/reassess the income/recompute loss/depreciation allowance for the said assessment year and called upon the petitioner to file a return in the prescribed form.

(3.) The petitioner filed their return of income for the assessment year 2005-06 on 28.10.2005, claiming exemption under Section 10A/10B of the Act, by virtue of which 90% of the profits earned from the export business is fully exempted. It is not in dispute that the first respondent did not initiate any proceedings under Section 143 of the Act, but has now resorted to issue the impugned notice under Section 148 of the Act. Parallely, the first respondent issued notice by initiating penalty proceedings under Section 271BA of the Act vide notice dated 19.07.2002, with respect to non-filing of the audit report along with return of income for the assessment year 2005-06, to substantiate the claim of exemption under Section 10A/10B of the Act and proceeded to levy penalty vide order dated 25.06.2007. It is the contention of the petitioner that they have furnished all the material particulars and facts well in time before the first respondent and there being no default on the part of the petitioner, there is no legal basis for the first respondent to initiate re-assessment proceedings. On receipt of the impugned notice, the petitioner by reply dated 29.06.2007, requested the first respondent to furnish the reasons for issuing the notice under Section 148 of the Act. In response to such request, the first respondent by communication dated 03.10.2007, furnished the reasons for reopening stating that the petitioner had declared business loss of Rs.36,03,553/- and income under other sources of Rs.3032/- and while computing the business income, the assessee has claimed loss on sale of asset of Rs.69,243/-, which is a capital gain and the petitioner is not entitled to this amount and hence, it has to be disallowed while computing the business income and therefore, income chargeable to tax to the tune of Rs.69,243/- has escaped assessment.