2016 (5) TMI 362 - AT - Income Tax

Reopening of assessment - exemption u/s 10BA - Held that - No doubt, Hon ble Apex Court in judgment cited as Liberty India (2009 (8) TMI 63 - SUPREME COURT) held that incentive profits are not profits derived from eligible business u/s 80IA/80IB, they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentive, such as, DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression profits derived from industrial undertaking under section 80IB. However, judgment (supra) is not applicable to the facts and circumstances of the case because when reopening u/s 147/148 under the given circumstances is itself not permissible, the AO is not empowered to review the applicability of section 10BA. So, in the given circumstances, we are of the considered view that reassessment in this case is not permissible under any circumstances. - Decided in favour of assessee.

Issues:
1. Validity of notice u/s 148 and reassessment order
2. Allegation of change of opinion in issuing notice u/s 148
3. Disallowance of deduction u/s 10BA
4. Applicability of Supreme Court decision on provision of 10BA
5. Charging of interest u/s 234B
6. Consideration of material for addition made

Issue 1: Validity of notice u/s 148 and reassessment order
The appellant challenged the legality of the notice u/s 148 and the reassessment order, claiming it was illegal, without jurisdiction, and time-barred. The CIT(A) upheld the notice and order. The AO reopened the assessment due to an alleged escapement of income, disallowing a deduction earlier allowed. The Tribunal found the AO's jurisdiction to reopen the assessment was flawed as there was no tenable material for reassessment, citing relevant case law.

Issue 2: Allegation of change of opinion in issuing notice u/s 148
The appellant argued that the AO's decision to invoke provisions u/s 148 was based on a change of opinion, which is impermissible under the law. The Tribunal referred to relevant case law, including CIT Vs Atul Kumar Swami, to support the contention that a valid reopening of assessment must be based on tangible material justifying income escapement.

Issue 3: Disallowance of deduction u/s 10BA
The CIT(A) upheld the disallowance of deduction u/s 10BA, leading to an increase in the assessed total income. The Tribunal found that the AO lacked a valid reason to review the applicability of section 10BA, as the appellant had claimed exemption based on duty drawback, which was earlier allowed after due scrutiny.

Issue 4: Applicability of Supreme Court decision on provision of 10BA
The Tribunal discussed the Supreme Court's decision in Liberty India vs. CIT, which held that incentive profits do not fall under the category of profits derived from an industrial undertaking. However, the Tribunal determined that this judgment was not applicable to the present case, as the reassessment itself was deemed impermissible, making a review of section 10BA inadmissible.

Issue 5: Charging of interest u/s 234B
The appellant contested the charging of interest u/s 234B, claiming it was wrongly and illegally imposed. The Tribunal did not provide specific details on this issue in the judgment summary.

Issue 6: Consideration of material for addition made
The appellant argued that the addition made was based on surmises and conjectures without proper consideration of available material. The Tribunal found that the reassessment was not permissible under any circumstances, leading to the allowance of the appeal.

In conclusion, the Tribunal allowed the appeal, emphasizing the lack of valid grounds for reassessment and the impermissibility of reviewing the applicability of section 10BA. The judgment highlighted the importance of tangible material for reopening assessments and the inadmissibility of a change of opinion as a basis for such actions.

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