M/S.cognizant Technology Solutions India P. Ltd.,6[Th] Floor, New v. The Assistant Commissioner Of Income Tax, Large Taxpayer Unit

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 18-08-2021 CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAMWP No.2024 of 2016AndWMP No.1765 of 2016 M/s.Cognizant Technology Solutions India P. Ltd.,6[th] Floor, New No.165/Old No.110,Menon Eternity Building,St. Mary's Road,Chennai-600 018Represented by its Director..Petitioner vs. 1. The Assistant Commissioner of Income Tax, Large Taxpayer Unit, 1775, Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai-600 101. 2. The Deputy Commissioner of Income Tax, Large Taxpayer Unit, 1775, Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai-600 101. 3. The Commissioner of Income Tax, Large Taxpayer Unit, 1775, Jawaharlal Nehru Inner Ring Road, Anna Nagar Western Extension, Chennai-600 101...Respondents Writ Petition is filed under Article 226 of theConstitution of India, praying for the issuance of a Writ ofCertiorari, calling for the records of the first respondentpertaining to the reopening notice dated 28.03.2015 for AY 2010-2011 and the consequential communication dated 02.11.2015(Prayer amended vide order of Court dated 29.04.2021 made in WMPNo.10978 of 2021 in WP No.2024 of 2016). For Petitioner : Mr.Srinath Sridevann For Respondents : Mr.A.P.Srinivas, Senior Standing Counsel for Income Tax. O R D E R The writ petition has been instituted to quash theinitiation of reopening proceedings under Section 148 of theIncome Tax Act, 1961 [hereinafter referred to as the 'Act', inshort] and the consequential order disposing of the objectionsfiled by the petitioner in proceedings dated 02.11.2015. 2. The petitioner is a Private Limited Company engagedin the business of development of computer software and relatedservices and its export. It provides various software solutionsto variety of industries. The petitioner carries out itsbusiness activities through various units set up in SoftwareTechnology Parks (STPs) and Special Economic Zones (SEZs) andclaims deduction under Sections 10A and 10AA of the Act. 3. The petitioner filed its return of income for theassessment year 2010-2011 on 13.10.2010. It was processed underSection 143(1) of the Act, on 27.02.2012. The petitioner filedrevised return of income on 31.03.2012 and the case was selectedfor scrutiny by the Deputy Commissioner of Income Tax/secondrespondent under Section 143(2) of the Act on 06.09.2011. Thedetails were called for by the first respondent and thepetitioner also furnished all details, informations, books ofaccounts etc. 4. The case of the petitioner was referred to theTransfer Pricing Officer for necessary verification underSection 92CA of the Act, as the petitioner has internationaltransactions with its group of Companies abroad. The TransferPricing Officer vide his order dated 22.01.2014, accepted thearm's length price of the transactions of the petitioner withthat of its group Companies abroad. Consequently, no transferpricing adjustments were made by the second respondent. 5. The second respondent passed the assessment orderunder Section 143(3) r/w Section 92CA of the Act for theassessment year 2010-2011 on 31.03.2014, certain dis-allowanceswere made in the assessment order. After making dis-allowancesand adjustments, the second respondent assessed the income ofthe petitioner at Rs.10,97,21,20,974/- under Section 115JB ofthe Act as against the returned income of Rs.10,95,97,24,038/-.Consequently, a demand of Rs.26,42,620/- was raised vide demandnotice dated 31.03.2014 under Section 156 of the Act. 6. The first respondent issued the impugned notice underSection 148 of the Act for reopening of assessment for theassessment year 2010-2011. The petitioner responded to thenotice and requested to furnish the reasons for reopening andthe reasons sought for were provided by the respondents. 6. The first respondent issued the impugned notice underSection 148 of the Act for reopening of assessment for theassessment year 2010-2011. The petitioner responded to thenotice and requested to furnish the reasons for reopening andthe reasons sought for were provided by the respondents. 7. The petitioner submitted its detailed objections,questioning the legal validity of the initiation of reopeningproceedings and the said objections were also disposed of by thefirst respondent in proceedings dated 02.11.2015. Thus, thepetitioner is constrained to move the present writ petition. 8. The learned counsel appearing on behalf of thepetitioner contended that the case on hand is a classic case ofchange of opinion and the reopening proceedings are initiatedwithin a period of four years. 9. In order to establish the ground regarding the changeof opinion, the petitioner has drawn the attention of this Courtwith reference to the issues adjudicated in the originalassessment proceedings as well as in the assessment order. Theaudit objections were also taken into consideration forreopening, which is perverse. The petitioner, in its return ofincome, has clearly mentioned about the tax relief sought forand the block entitled for depreciation at 60%. 10. Perusal of the return of income submitted by thepetitioner would reveal that the tax relief mentioned underSection 90 of the Act, is Rs.1,02,96,469/-. The block entitledfor depreciation at 60% is mentioned as Rs.1,27,48,46,244/-.Similarly, in the revised return filed by the petitioner, anyother benefit to employees in respect of which an expenditurehas been incurred at 15J is stated as Rs.6,73,37,94,692/- In thesame revised return, the petitioner has claimed the tax reliefat 10(a) under Section 90 of the Act, as Rs.2,39,15,527/-. 11. Citing these particulars provided by the petitionerboth in the original return of income as well as the revisedreturn of income filed after correction, contended that thepetitioner has not suppressed any facts, but provided thosefacts in detail for the purpose of assessment and the saidparticulars were scrutinised at length and an assessment orderwas passed. In proceedings dated 15.01.2014, issued underSection 142 (2) of the Act for scrutiny assessment, the saidissues were elaborately considered. 12. In respect of stock compensation expenses, thepetitioner relied on the query raised by the Assessing Officerat paragraph-7 in the proceedings dated 15.01.2014 and regardingforward contracts paragraph-1(g) is relied on, as far asdepreciation of software is concerned, paragraph-8 of the saidproceedings are relied upon and regarding excess double taxrecovery under Section 90, paragraph-9 of the proceedings dated15.01.2014 is relied upon. 13. Regarding the reasons furnished for reopening ofassessment, it is clarified that the very same materials wereinitially sought for by the original Assessment Officer, thepetitioner in turn submitted the informations and the materials,which were considered by the Assessing officer and a finalassessment order was passed on 31.03.2014 for the assessmentyear 2010-2011. 14. When the very same materials which were furnished,scrutinised, considered and a decision is taken, there is noreason for initiation of reopening proceedings and therefore,the respondents have miserably failed to establish that there isa tangible material for invoking Section 147 of the Act. Thus,the very initiation is in violation of the essential ingredientscontemplated under Section 147 of the Act. Regarding the othergrounds raised for reopening, depreciation claimed for the unitat Kolkatta Bantala (SEZ), the petitioner has stated that thesaid issue was also elaborately considered. 14. When the very same materials which were furnished,scrutinised, considered and a decision is taken, there is noreason for initiation of reopening proceedings and therefore,the respondents have miserably failed to establish that there isa tangible material for invoking Section 147 of the Act. Thus,the very initiation is in violation of the essential ingredientscontemplated under Section 147 of the Act. Regarding the othergrounds raised for reopening, depreciation claimed for the unitat Kolkatta Bantala (SEZ), the petitioner has stated that thesaid issue was also elaborately considered. 15. Relying on the assessment order, more specificallyin tax computation form, the learned counsel for the petitionerhas stated that the relief under Section 189(1)/under Section90, under Section 91 of the Act, has been stated asRs.2,39,15,527/-, which is tallying with the revised return ofincome filed by the petitioner. 16. It is contended that an audit objection, per se,cannot be a source for initiation of reopening proceedings. 17. In the present case, audit objection is relied uponwithout considering the fact that the subjects discussed in theaudit objection were elaborately considered by the AssessingOfficer and findings are provided in the assessment order. Thus,the entire exercise made for invoking Section 147 of the Act isbased on the change of opinion and not on the basis of anytangible material as required under Section 147 of the Act. 18. The learned counsel for the petitioner relied on thereasons furnished by the first respondent in proceeding dated28.08.2015 for reopening of assessment and compared the saidreasons with reference to the detailed objections filed by thepetitioner vide letter dated 25.09.2015. 19. The petitioner submitted its objections for all thereasons stated by the first respondent for reopening ofassessment and furnished reply with reference to the assessmentorder passed by the Assessing Officer. The details of theobjections read as under:- 20. The petitioner has further submitted the rulings toestablish its contentions and the grievances of the petitionerare that none of the objections raised are dealt with and, in anappropriate manner as per the directives of the Hon'ble SupremeCourt in the case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and Others [(2003) 1 SCC 72]. In other words, thelearned counsel for the petitioner reiterated that the ApexCourt of India ruled that Competent Authority should pass aspeaking order. The speaking order must be with reference to theobjections raised. Thus, non-consideration of the objections ina subjective manner is improper and not in consonance with thedirectives issued for the disposal of the objections. 21. The learned counsel for the petitioner solicited theattention of this Court regarding the order impugned dated02.11.2015, wherein the objections submitted by the petitionerwere rejected. It is contended that the reasons furnished forreopening of assessment is verbatim reproduced and no findingsare made available with reference to the objections raised bythe petitioner. Thus, the said order impugned cannot beconstrued as a speaking order for the purpose of complying withthe directives issued by the Apex Court of India. 22. In support of the grounds raised, the petitionerrelied on the judgment in the case of Commissioner of Income Txvs. Pentasoft Technologies Ltd [(2013) 33 Taxmann.com 570(Madras)], wherein the Hon'ble Division Bench of this Courtconsidered the question whether due to diminish in rupee value,the respondnet-Assessee gained a higher sum in rupee value whileearning foreign exchange and the said difference in rupee valuewas allowable as a deduction under Section 10A of the Income TaxAct, 1961. 22. In support of the grounds raised, the petitionerrelied on the judgment in the case of Commissioner of Income Txvs. Pentasoft Technologies Ltd [(2013) 33 Taxmann.com 570(Madras)], wherein the Hon'ble Division Bench of this Courtconsidered the question whether due to diminish in rupee value,the respondnet-Assessee gained a higher sum in rupee value whileearning foreign exchange and the said difference in rupee valuewas allowable as a deduction under Section 10A of the Income TaxAct, 1961. 23. In the present case also, regarding the foreigntrade transactions, the petitioner was not subjected themselvesto value fluctuations and as per the agreement, they areprotected from such fluctuations. Therefore, the presumptioncreated by the first respondent in this regard is far beyond thetruth and hence the initiation is based on change of opinion andnot based on any materials on record. Paragraph-5 of theabovesaid judgment, reads as under:- “5. Viewed in that respect, the conclusionof the Tribunal, as held above, cannot be heldto be illegal. We, therefore, do not find anyquestion of law, much less substantial questionof law, to be considered in this appeal. Theappeal, therefore, fails and the same isrejected. Consequently, connected M.P.No.1 of2010 is also dismissed. 24.Another case with regard to the same issue offoreign transactions in the case of Commissioner of Income Tax-16, Mumbai vs. D.Chetan and Co. [(2016) 75 Taxmann.com 300(Bombay)], the Bombay High Court considered the speculativetransactions (forward contracts) and made the followingobservations in paragraph-7 of its judgment, which reads as “7. The impugned order of the Tribunal has,while upholding the finding of the CIT(Appeals), independently come to theconclusion that the transaction entered intoby the Respondent assessee is not in thenature of speculative activities. Further thehedging transactions were entered into so asto cover variation in foreign exchange ratewhich would impact its business of import andexport of diamonds. These concurrent findingof facts are not shown to be perverse in anymanner. In fact, the Assessing Officer alsoin the Assessment Order does not find thatthe transaction entered into by theRespondent assessee was speculative innature. It further holds that at no point oftime did Revenue challenge the assertion ofthe Respondent assessee that the activity ofentering into forward contract was in theregular course of its business only tosafeguard against the loss on account offoreign exchange variation. Even before theTribunal, we find that there was nosubmission recorded on behalf of the Revenuethat the Respondent assessee should be calledupon to explain the nature of itstransactions. Thus, the submission now beingmade is without any foundation as the standof the assessee on facts was never disputed.So far as the reliance on AccountingStandard-11 is concerned, it would not byitself determine whether the activity was apart of the Respondent-assessee's regularbusiness transaction or it was a speculativetransaction. On present facts, it was neverthe Revenue's contention that the transactionwas speculative but only disallowed on theground that it was notional. Lastly, thereliance placed on the decision in S.Vinodkumar (supra) in the Revenue's favourwould not by itself govern the issues arisingherein. This is so as every decision isrendered in the context of the facts whicharise before the authority for adjudication.Mere conclusion in favour of the Revenue inanother case by itself would not entitle aparty to have an identical relief in thiscase. In fact, if the Revenue was of the viewthat the facts in S. Vinodkumar (supra) are identical/similar to the present facts, thenreliance would have been placed by theRevenue upon it at the hearing before theTribunal. The impugned order does notindicate any such reliance. It appears thatin S. Vinodkumar (supra), the Tribunal heldthe forward contract on facts before it to bespeculative in nature in view of Section 43(5) of the Act. However, it appears that thedecision of this court in CIT v. BadridasGauridas (P) Ltd. [(2003) 261 ITR 256]was notbrought to the notice of the Tribunal when itrendereditsdecisionin S.Vinodkumar (supra). In the above case, thiscourt has held that forward contract inforeign exchange when incidental to carryingon business of cotton exporter and done tocover up losses on account of differences inforeign exchange valuations, would not bespeculativeactivitybutabusinessactivity.” 25. Regarding the grounds raised for 60% dis-allowanceinstead of 40% as claimed by the petitioner-Assessee, thejudgment in the case of Deputy Commissioner of Income Tax vs.Cognizant Technology Solutions India Pvt Ltd (petitioner's case)[pronounced on 10.02.2012 in ITA No.1921/Mds/2010], the IncomeTax Appellate Tribunal, Chennai Bench, in paragraph-5, held infavour of the petitioner as under:- “5. We have considered the rivalsubmissions. It is noticed that the issue ofre-opening has been decided by the learned CIT(A) by following the decision of the Hon'bleFull Bench of the Delhi High Court in the caseof Kelvinator of India Ltd. reported in 256ITR 1 which has been approved by the Hon'bleSupreme Court in 320 ITR 561. It is alsonoticed that the learned CIT(A) following thedecision of the Hon'ble Supreme Court in thecase of GKN Driveshafts, reported in 259 ITR19 (S.C) has held that as the AssessingOfficer has not passed a speaking order inregard to the objections raised by theassessee, the assessment is quashed. Thisfinding of the learned CIT(A) is notacceptable insofar as per the decision of theHon'ble Supreme Court in the case ofGKN I.T.A. No.1921/Mds/2010 Driveshafts, theAssessing Officer is duty bound to give thereasons recorded for the purpose of re-opening to the assessee as also pass a speaking orderdealing with the assessee's objections, ifany. Just because the Assessing Officer hasnot passed a speaking order in regard to theobjections raised by the assessee, it wouldnot mean that the re-opening would be invalid.However, in the present case as the facts areclearly available and as it is noticed thatall the facts necessary for adjudicating theissue were available before the AssessingOfficer when the original assessment orderitself was passed u/s 143(3) on 17-03-2005, inview of the decision of the Hon'ble SupremeCourt in the case of Kelvinator of India Ltd.,referred to supra, the re-opening is liable tobe held to be invalid as the same is beyondthe period of 4 years and the re-opening isonly on the basis of change of opinion. In thecircumstances,there-openingoftheassessment stands quashed by following theprinciples laid down by the Hon'ble SupremeCourt in the case of Kelvinator of India Ltd.,referred to supra. In the circumstances, theappeal of the Revenue is dismissed.” 26. In the case of Commissioner of Income Tax-8 vs. I-Flex Solutions Ltd [(2014) 46 Taxmann.com 88 (Bombay)], the HighCourt of Bombay held that “Income Tax Rules computed softwarewas clubbed with computers as the depreciable asset enjoyingrate of depreciation at 60%”. The High Court of Bombay, inparagraph-5 of its judgment, observed as under:- 26. In the case of Commissioner of Income Tax-8 vs. I-Flex Solutions Ltd [(2014) 46 Taxmann.com 88 (Bombay)], the HighCourt of Bombay held that “Income Tax Rules computed softwarewas clubbed with computers as the depreciable asset enjoyingrate of depreciation at 60%”. The High Court of Bombay, inparagraph-5 of its judgment, observed as under:- “5. The question is therefore for a prioryear was the position as understood otherwise.In the facts and circumstances of theAssessee's case, both the Commissioner ofIncome Tax (Appeals) and the Tribunal foundthat the software cannot be seen in isolationand delinked from the computer. The reasonsthat are assigned is that what has been alwaysunderstood as obvious is now apparent by theamendment. The Commissioner of Income Tax(Appeals) found that in the case of thepresent Assessee, the software cannot beworked in isolation. It has to be loaded onthe computer. Therefore, in the present case,it is an integral part of the computer. Inthese circumstances, the finding of fact doesnot require any interference in our appellatejurisdiction as the same does not raise any substantial question of law.”27. In the case of Commissioner of Income Tax vs.Computer Age Management Services (P) Ltd [(2019) 109 Taxmann.com134 (Madras)], wherein this Court considered the depreciationallowance/rate of (software) and in paragraphs-3, 7, 8 and 10,made the following observations:- “3. The Revenue has filed these appeals byraising the following substantial questions oflaw : “Common Question in all the TCAs: Whether, on the facts and in thecircumstances of the case, theTribunal was right in holding that thesoftware license acquired by theassessee are in the nature of softwareapplication and hence, the assesseewas eligible to claim depreciation at60% ? Additional Question in TCA.No.412 of2019 (AY 2014-15) : Whether, on the facts and in thecircumstances of the case, theTribunal was right in holding that thenon compete fee was a revenueexpenditure and had to be allowed inone go irrespective of the method ofaccounting adopted by the assessee?” 7. As noticed above, the assessee is inthe business of registrar and transfer agentas licensed by the SEBI handling large volumeof market sensitive data and information,which is available only through generalcustomized application software. The assesseeacquired software licenses capitalized duringthe relevant years in the books of accountsand claimed depreciation at 60%. In paragraph20 of the order passed by the Tribunal, thenature of items, on which, the assesseeclaimed depreciation at 60%, has been listedout and they are 17 in number, from which, wefind that substantial amount of serverlicences, which have been obtained by theassessee are customized and some of which aresingle user licenses. 8. The question would be as to whether thesoftware application, which was acquired by the assessee would fall under Entry 5 of PartA of New Appendix I, which states thatcomputers including computer software areentitled to depreciation at 60%. Note 7 of theAppendix defines the expression 'computersoftware' to mean any programs recorded on CDor disc, tape, perforated media or otherinformation storage devices. 10. We find that Part B of New Appendix Iis a general entry whereas Entry 5 of Part Aof New Appendix I is a specific entry readwith Note 7. In the instant case, theTribunal, in our considered view, rightly heldthat the assessee is eligible to claimdepreciation at 60%.” 28. The grounds raised regarding the depreciation, thecase of Assistant Commissioner of Income Tax vs. Ashima SyntexLtd [2000 SCC OnLine Guj. 470], wherein the Gujarat High Court,in paragraph-16 of its judgment, observed as under:- 10. We find that Part B of New Appendix Iis a general entry whereas Entry 5 of Part Aof New Appendix I is a specific entry readwith Note 7. In the instant case, theTribunal, in our considered view, rightly heldthat the assessee is eligible to claimdepreciation at 60%.” 28. The grounds raised regarding the depreciation, thecase of Assistant Commissioner of Income Tax vs. Ashima SyntexLtd [2000 SCC OnLine Guj. 470], wherein the Gujarat High Court,in paragraph-16 of its judgment, observed as under:- “16. Learned counsel for the Revenueplaced strong reliance on the decision in thecase of Additional CIT v. Speciality PaperLtd., [1982] 133 ITR 879 (Guj) (Appex.) whichis an appendix to the decision in the caseof Hotel Alankar v. CIT, [1982] 133 ITR 866(Guj). In the case of Speciality Papers Ltd.,[1982] 133 ITR 879 (Guj), the questionreferred for opinion of the court was under(page 879): “Whether, on the finding of theTribunal that the assessee had beenequipped with all the plant andmachinery including wet press foundnecessary to produce the requisitequality of paper and substantialquantity of raw materials necessaryfor the manufacture of products bythe end of June, 1966, the assesseemust be held to have set up itsbusiness ai that point of time,although only trial productionfollowed thereafter and regularcommercial production commenced sometime later?” 29. Relying on the abovesaid judgments, the learnedcounsel for the petitioner reiterated that based on certainincorrect informations, the respondents have initiated reopeningproceedings and not actually based on any tangible materials. All such forward contracts details regarding foreigntransactions, depreciation and 60% dis-allowance, every aspectof the matter was adjudicated by the Assessing Officer and allsuch clarifications were sought for during the scrutinyproceedings, and the petitioner furnished the required details.While-so, the respondents by drawing certain incorrectinferences initiated reopening proceedings, which is untenable.The reopening shall be made only if tangible materials areavailable on record. In the absence of any such materials, mereinterpretation of the issues already adjudicated by the originalAssessing Officer, reopening of assessment cannot be done andtherefore, it is to be construed as change of opinion for allpurposes and accordingly, the impugned orders are liable to beset aside. 30. As far as the abovesaid judgments, relied on onbehalf of the writ petitioner, are concerned, the High Court ofBombay, in D.Chetan and Co. case (cited supra), considered theimpugned order passed by the Tribunal while upholding thefindings of the Commissioner (Appeals). In paragraph-7, theBombay High Court held based on the case of S.VinodkumarDiamonds (P) Ltd., that forward contract in foreign exchangewhen incidental to carrying on business of cotton exporter anddone to cover up losses on account of differences in foreignexchange valuations, would not be speculative activity but abusiness activity. The Bombay High Court considered variousfacts in that particular case in view of the reason that theorder of the Tribunal was under challenge and the Tribunalupheld the findings of the Commissioner (Appeals). Thus, thesaid judgment cannot be relied upon as the present writ petitionis challenging the reopening proceedings. Therefore,adjudication of those facts in the case before the Bombay HighCourt is not applicable to the facts of the present case. 31. So also in the case of Pentasoft Technologies Ltd(cited supra), the Hon'ble Division of this Court considered theorder passed by the Income Tax Appellate Tribunal (ITAT),wherein the question was raised whether on the facts andcircumstances of the case, the ITAT was right in law in holdingthat gains on account of foreign exchange fluctuation held tohave direct nexus with the export sales of the Assessee. In thepresent case also no doubt, the petitioner has stated that itsforeign exchange transactions are protected by virtue of anagreement. However, those facts are to be adjudicatedelaborately by the Assessing Officer in the present case. In thecase of Pentasoft Technologies Ltd (cited supra), also was thetax case appeal, which was decided by the Division Bench andtherefore, the said case cannot be applied without completeadjudication of facts and circumstances in the present case onhand. 32. In the case of Computer Age Management Services(P) Ltd (cited supra), the Hon'ble Division Bench of this Courtconsidered the findings of the Income Tax Appellate Tribunalthat the nature of items, on which, the Assessee claimeddepreciation at 60%, has been listed out and they are 17 innumber, from which, we find that substantial amount of serverlicenses, which have been obtained by the Assessee arecustomised and some of which are single user licenses. On thebasis of the above facts, the Hon'ble Division Bench of thisCourt held that the Tribunal was right in holding that theAssessee is eligible to claim depreciation at 60%. However, inthe present case, what was disposed by the Assessing Officer isthe objections filed on the reasons to believe and there was nocomplete adjudication. The facts and circumstances in depth areto be adjudicated during the course of reopening proceedings. Inthe absence of any such elaborate adjudication, one cannot forman opinion that whether the petitioner is entitled for therelief or not. Therefore, the disposal of objections in thepresent case, cannot be compared with the case where the Courtshave examined the validity of the order passed by theCommissioner (Appeals) and the Income Tax Appellate Tribunal.Therefore, the petitioner has to place all these judgments andfacts before the Assessing Authority, who in turn shall considerthe same and pass an assessment order. Only with the saidassessment order, the Assessee will come to know the reason fordropping of further actions or its acceptance or otherwise. 33. In petitioner's own case before the Income TaxAppellate Tribunal also, the Tribunal formed an opinion that itwas change of opinion. This Court is of the considered opinionthat whether the reasons furnished for reopening of assessmentis change of opinion or the Assessment Officer has reason tobelieve is to be decided independently and as the facts andcircumstances of each case differs from one and the other. Thusthe said judgments are of no avail to the case of thepetitioner. All the cases cited by the petitioner and itsprinciples may be placed before the Authorities Competent duringthe course of reassessment proceedings. However, this Court, atthis juncture, cannot appreciate the facts in detail for thepurpose of application of the judgments, unless those facts arecompletely adjudicated and findings are arrived. In the absenceof any factual findings, the principles in certain circumstancescannot be applied for the purpose of grant of exoneration fromthe reopening proceedings. As the writ petition is filedchallenging the very reopening of assessment, this Court is ofan opinion that the judgments, relied on by the petitioner, areof no avail to the petitioner. 34. The learned Senior Standing Counsel, appearing onbehalf of the respondents, disputed the grounds raised on behalf 34. The learned Senior Standing Counsel, appearing onbehalf of the respondents, disputed the grounds raised on behalf of the petitioner and contended that the reopening was not madebased on change of opinion. It is a case where the AssessingOfficer has reason to believe for reopening of assessment. Thereasons were furnished as per the directives of the Apex Courtin the case of GKN Driveshafts (India) Ltd vs. Income TaxOfficer and Others [(2003) 1 SCC 72] has been scrupulouslyfollowed. The objectives submitted by the petitioner were alsoconsidered by the Assessing Officer as required under law andtherefore, there is no infirmity as such and the reopeningproceedings initiated may be allowed to be concluded byfollowing the procedures as contemplated under the Act. 35.To substantiate the said contention, the learnedSenior Standing Counsel directly referred to the reasonsfurnished for reopening of assessment. The reasons furnishedwould establish that in computing the total income of theAssessee for the assessment year 2010-2011, part of the expensesamounting to Rs.2,43,69,22,379/- which related to the assessmentyear 2009-2010 were not excluded. This has resulted in undercomputation of income for the assessment year 2010-2011 byRs.2,43,69,22,379/-. 36.In paragraph-2 also the Assessing Officer hasstated that in the computation of income in respect of the STPand other units located in SEZs, the Assessee has claimed atotal deduction of Rs.12,17,34,81,284/- under Sections 10A and10AA of the Act. The above deduction included, deduction claimedon the amount of Rs.2,82,23,12,353/- claimed as gain fromoutstanding forward contracts. It is observed from the Notes onAccounts that the Company uses foreign exchange forwardcontracts to hedge its exposure to movements in foreign exchangerates. Forward contracts are fair valued at each reporting date.The resultant gain or loss from these transactions is recognisedin the profit and loss account. 37.The Assessing Officer has stated that the incomefrom forward contract is not derived from the business of theundertakings, proportionate dis-allowance of deduction underSection 10A/10AA of the Act, based on the method adopted by theAssessing Officer in dis-allowances made under Section 14A and40(a)(i), which worked out to Rs.2,24,81,46,496/- as detailedneeds to be made and the income brought to tax as per theregular provisions of the Act. 38. Citing other reasons as stated by the firstrespondent in proceedings dated 28.08.2015, the learned SeniorStanding Counsel reiterated that the reasons in entiretyfurnished to the Assessee would reveal that there is a case forreason to believe and accordingly, the Assessing Officerinitiated proceedings under Section 147/148 of the Act. In such circumstances, the disputed facts, if any, raised are to beadjudicated during the course of reopening proceedings and notat the stage of furnishing reasons and disposal of theobjections filed by the petitioner. 39. The learned Senior Standing Counsel drew adistinction between an assessment order to be passed and theorder disposing of the objections filed by the petitioner oninitiation of reopening proceedings under Section 147/148 of theAct. It is not as if all the merits disputed facts raised by wayof an objection needs to be adjudicated in entirety. Whiledisposing of the objections, what is required under theprovisions of the Act is that the Assessing Officer must havereason to believe for reopening of assessment and therefore, thecontentions raised in this regard by the petitioner that theobjections were not considered in entirety is far beyond thetruth. 39. The learned Senior Standing Counsel drew adistinction between an assessment order to be passed and theorder disposing of the objections filed by the petitioner oninitiation of reopening proceedings under Section 147/148 of theAct. It is not as if all the merits disputed facts raised by wayof an objection needs to be adjudicated in entirety. Whiledisposing of the objections, what is required under theprovisions of the Act is that the Assessing Officer must havereason to believe for reopening of assessment and therefore, thecontentions raised in this regard by the petitioner that theobjections were not considered in entirety is far beyond thetruth. 40. The Assessing Officer, while disposing of theobjections filed by the petitioner, considered the same andpassed orders. However, adjudication of the disputed facts onmerits need not be done at the stage of disposing of theobjections filed with reference to the reasons furnished forreopening of assessment. The petitioner/Assessee would begetting further opportunity to furnish further documents andinformations for the purpose of completing the reassessmentproceedings. Therefore, what is required is to submit objectionson the reasons to believe and such objections are to be disposedof objectively. The disposal of the objections submitted by theAssessee on the reasons furnished cannot be compared with thefinal assessment/reassessment orders to be passed after completeadjudication of disputed facts and the materials available onrecord. 41.Drawing distinction in this regard, the learnedSenior Standing Counsel pointed out the manner in which theobjections filed by the petitioner was disposed of in theimpugned proceedings dated 02.11.2015. The learned SeniorStanding Counsel contended that broadly, two objections areraised by the petitioner. One relating to auditobjections/queries and the other is about the change of opinion. 42.To substantiate the said two objections, theAssessee has furnished certain details and relying on thematerials already adjudicated by the Assessing Officer. Nodoubt, the Assessee/petitioner had furnished the factualdetails, which were submitted and scrutinised by the AssessingOfficer while passing the original assessment order. However,the authority on reopening of assessment, found that theAssessee's objections are not acceptable in view of the fact that certain new materials emerged from and out of the samematerials, which were produced and such new informations ormaterials required reopening of assessment, as the CompetentAuthority has reason to believe that the income chargeable totax escaped assessment. When the Assessing Officer has reasonto believe with reference to certain materials or informationsnot adjudicated in a manner such materials are to beadjudicated, then the authority is empowered to initiate thereopening proceedings. that certain new materials emerged from and out of the samematerials, which were produced and such new informations ormaterials required reopening of assessment, as the CompetentAuthority has reason to believe that the income chargeable totax escaped assessment. When the Assessing Officer has reasonto believe with reference to certain materials or informationsnot adjudicated in a manner such materials are to beadjudicated, then the authority is empowered to initiate thereopening proceedings. 43.The case of the petitioner for reopening ofassessment is falling within a period of four years and thus theconditions stipulated under the proviso clause to Section 147 ofthe Act, would not be applicable. If the Assessing Officer hasreason to believe for reopening, then it is sufficient for suchreopening of assessment and further adjudication on merits areto be undertaken during the course of reassessment proceedings.The learned Senior Standing Counsel raised a question by statingthat if all such materials in entirety are adjudicated, whiledisposing of the objections submitted on the reasons furnished,then nothing would remain for further adjudication and thatexactly is not the objective of the opportunity to be providedto the Assessee. What is required is that whether the objectionsare considered in a genuine manner or not. Subjectivesatisfaction may not be required at the stage of disposal of theobjections filed on the reasons furnished. If the reasons tobelieve exist it is sufficient enough for reopening ofassessment, and the sufficiency of the reasons cannot be goneinto at that stage. In this context, the spirit of thedirectives issued in GKN Driveshafts case (cited supra) is to belooked into and applied. 44. Considering the arguments advanced in this regard,it is necessary to understand the spirit of the directivesissued by the Hon'ble Supreme Court of India in GKN Driveshaftscase (cited supra). As per the directives, the Assessing Officeris bound to furnish the reasons for reopening within areasonable time. On receipt of the reasons, the Noticee isentitled to file objections, if any, to the Assessing Officer,who is bound to dispose of the same by passing a speaking order. 45. The Hon'ble Supreme Court of India formulatedprocedures for disposing of the objections in order to ensurethat the principles of natural justice has been complied with.Thus, the directives in GKN Driveshafts case (cited supra) mustbe understood in its context and certainly not beyond thecontext in which the directives are issued. Admittedly, theIncome Tax Act, 1961 itself contemplates an opportunity to beprovided to an Assessee. Such an opportunity provided iselaborated by the Apex Court to ensure the compliance of 45. The Hon'ble Supreme Court of India formulatedprocedures for disposing of the objections in order to ensurethat the principles of natural justice has been complied with.Thus, the directives in GKN Driveshafts case (cited supra) mustbe understood in its context and certainly not beyond thecontext in which the directives are issued. Admittedly, theIncome Tax Act, 1961 itself contemplates an opportunity to beprovided to an Assessee. Such an opportunity provided iselaborated by the Apex Court to ensure the compliance of principles of natural justice through GKN Driveshafts case(cited supra). Accordingly, the reasons must be provided,objections may be filed and it is to be disposed of by passing aspeaking order. However, the speaking order as contemplated,cannot be compared with the final assessment/reassessment orderto be passed after complete adjudication of disputed facts andother documents. Thus, 'speaking order' in GKN Driveshafts case(cited supra) means the speaking order to be passed in thecontext of reasons furnished, objections submitted by theAssessee and the decision taken while disposing of theobjections, but not beyond that. In other words, it is notnecessary that all the disputed facts raised in the objectionsneed to be answered in the order disposing the objectionssubmitted on the reasons furnished. It is sufficient if theAuthority Competent is satisfied that the objections filed arenot sufficient to disprove the reasons furnished for reopeningof assessment. The opportunity to file objections is provided todisprove the decision of the Assessing Officer that he hasreason to believe for reopening of assessment. If the objectionssubmitted by the Assessee are not sufficient enough to disprovethe initiation of reopening proceedings, then such disposal isto be considered as a speaking order as contemplated under thedirectives issued by the Apex Court in GKN Driveshafts case(cited supra). A distinction in this regard is imminent. Thus,'speaking order' as stated in GKN Driveshafts case (cited supra)is to be understood with reference to the initiation ofreopening proceedings, reasons furnished, objections submittedand to ascertain whether the Assessee could able to disprove thereopening proceedings on the basis that the Assessing Officerhas reason to believe. Rest of the adjudication on disputedfacts are to be done during the course of reassessmentproceedings and the Assessee would be getting furtheropportunity to defend his case in the manner known to law. 46. The order disposing of the objections must be donein an objective manner, so as to understand whether the reasonsto believe formed by the Assessing Officer is sufficient enoughfor reopening of assessment. Sufficiency of the reasons need notbe gone into in writ proceedings under Article 226 of theConstitution of India, as the writ proceedings are filedchallenging the very reopening itself. 47. As the case on hand is falling within the periodof four years, the other conditions contemplated under theproviso clause, is not required. What is required is reasons tobelieve. The reasons furnished by the respondents in the presentcase, are elaborate in nature and the relevant portions of suchreasons are extracted as under:- “It is observed from Schedule 13 to the Profit andLoss Account for the year ended March 31, 2010 that the Assessee https://hcservices.ecourts.gov.in/hcservices/ claimed a sum of Rs.6,73,37,94,692/- towards stock compensationexpenses, the year wise details of which with a difference ofRs.53 are as under:- It was observed that in computing the total income of theAssessee for the AY 2010-11, part of the expenses amounting toRs.2,43,69,22,379/- which related to AY 2009-10 were notexcluded. This has resulted in under computation of income forAY 2010-11 by Rs.2,43,69,22,379/-..................... “It is observed from Schedule 13 to the Profit andLoss Account for the year ended March 31, 2010 that the Assessee https://hcservices.ecourts.gov.in/hcservices/ claimed a sum of Rs.6,73,37,94,692/- towards stock compensationexpenses, the year wise details of which with a difference ofRs.53 are as under:- It was observed that in computing the total income of theAssessee for the AY 2010-11, part of the expenses amounting toRs.2,43,69,22,379/- which related to AY 2009-10 were notexcluded. This has resulted in under computation of income forAY 2010-11 by Rs.2,43,69,22,379/-..................... So, since the income from Forward Contract is notderived from the business of the undertakings, proportionatedis-allowance of deduction under Section 10A/10AA based on themethod adopted by the Assessing Officer in allowing the saiddeduction on the enhanced income arising on dis-allowances madeunder Section 14A and 40(a)(i), which worked out toRs.2,24,81,46,496/- as detailed below needs to be made and theincome brought to t