2013 (5) TMI 524 - AT - Income Tax

Re opening of assessments - proceedings initiated after the expiry of four years from the end of the assessment year - disallowance of deduction u/s 80IB - CIT(A) quashed reopening - Held that - Deduction u/s 80IB was allowed to the assessee in assessment made u/s 143(3) on 21.03.2006 after scrutiny of the claim of the assessee. The reopening thereafter was made on the very same set of facts. Therefore the decision of the Khaitan B. Mehta vs ACIT (2012 (10) TMI 742 - Gujarat High Court) wherein held that reassessment after four years to disallow deduction on the ground that interest was not paid for earning dividend but for acquiring controlling interest in company cannot be said that there was failure on the part of the assessee to disclose material facts. In favour of assessee. Deduction u/s 10A - CIT(A) allowed the claim - Held that - As from the assessment orders that deduction u/s 10A has been allowed to the assessee by the AO in the A.Yr. 2004-05 and 2006-07 in an assessment made u/s 143(3), DR could not point out whether the department has taken any remedial measures for allowing deduction u/s 10A to the assessee in these years. In the above facts and circumstances of the case order of the CIT(A) is supported by the order of the Tribunal in the case of ITO vs Ektara Exports Pvt. Ltd. (2005 (7) TMI 607 - ITAT KOLKATA) and that the AO himself has allowed deduction u/s 10A to the assessee in therefore find no infirmity to interfere with the order of the CIT(A) which is confirmed and the ground of appeal is dismissed. In favour of assessee.

Summary

Issues involved:
1. Validity of reassessment proceedings initiated after the expiry of four years from the end of the assessment year.
2. Eligibility of deduction under section 10A of the IT Act for specific expenses incurred in manufacturing processes.

Issue 1: Validity of reassessment proceedings:
In the case for the assessment year 2003-04, the primary issue was the validity of the reassessment proceedings initiated by the Revenue after the expiry of four years from the end of the assessment year. The Appellate Tribunal noted that the original assessment was completed under section 143(3) of the Act, allowing the deduction claimed by the assessee under section 80IB. The notice for reopening the assessment was issued beyond the four-year period, based on the disallowance of the deduction due to non-compliance with certain audit requirements. The Tribunal held that the reassessment was invalid as there was no failure on the part of the assessee to disclose material facts necessary for assessment. Citing a precedent, the Tribunal emphasized that the reassessment cannot be based on grounds that do not indicate a failure to disclose material facts. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the decision of the CIT(A) regarding the invalidity of the reassessment proceedings.

Issue 2: Eligibility of deduction under section 10A:
In the case for the assessment year 2005-06, the issue revolved around the eligibility of the assessee for deduction under section 10A of the IT Act. The assessee, engaged in trading and manufacturing of garments, claimed the deduction, which was initially disallowed by the Assessing Officer (AO) due to lack of evidence for certain manufacturing processes. However, the CIT(A) allowed the deduction by relying on a precedent set by the Kolkata Bench of the Tribunal. The Tribunal considered the nature of the assessee's activities, noting that certain processes like affixing labels and ironing constituted manufacturing based on the precedent. The Tribunal further highlighted that the AO had allowed the deduction in the preceding and succeeding assessment years, indicating consistency in the treatment of the deduction. Consequently, the Tribunal upheld the decision of the CIT(A) to allow the deduction under section 10A, dismissing the Revenue's appeal in this regard.

In conclusion, the Appellate Tribunal ITAT KOLKATA, in the cited judgment, addressed issues concerning the validity of reassessment proceedings and the eligibility of deduction under section 10A of the IT Act. The Tribunal emphasized the importance of disclosing material facts for assessment validity and considered precedents in determining the eligibility for deductions. The Tribunal's detailed analysis and reliance on legal principles led to the dismissal of the Revenue's appeals in both instances.