2016 (8) TMI 414 - HC - Income Tax

Reopening of assessment - while computing deduction u/s.10A for the purpose of computing export turnover, telecommunication charges for export of computer software have not been considered as the same are fixed in nature and not incurred specifically for export of software - Held that - The impugned notices have been issued beyond the period of 4 years from the end of relevant assessment year. In the present cases the question of telecommunication expenses and freight and insurance charges was minutely scrutinized by the Assessing Officer during the original assessment. - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment beyond the statutory period.
2. Validity of reasons recorded by the Assessing Officer.
3. Failure to disclose material facts by the assessee.
4. Exclusion of telecommunication charges from export turnover.
5. Impact of excess deduction on reopening assessment.
6. Legal provisions under Section 147 of the Income-Tax Act, 1961.

Analysis:

1. The primary issue in this case is the reopening of the assessment beyond the statutory period of four years. The Assessing Officer issued notices based on reasons recorded for the Assessment Years 2006-07 and 2008-09, respectively, beyond the prescribed time limit.

2. The validity of the reasons recorded by the Assessing Officer was challenged by the assessee. The reasons included the exclusion of telecommunication charges from export turnover and excess deduction granted during the original assessment. The Assessing Officer contended that the assessee did not disclose all material facts, warranting reassessment.

3. The controversy revolved around the failure of the assessee to disclose material facts fully and truly. The assessee argued that all necessary details were provided, including specific explanations regarding telecommunication charges, freight, and insurance expenses, both in the return filed and during the original assessment.

4. The exclusion of telecommunication charges from export turnover was a crucial point of contention. The assessee had disclosed in the return that such charges were not considered as expenses directly related to software export. The computation of exemption under Section 10-A of the Act was detailed, indicating that the assessee had made full disclosures.

5. The impact of excess deduction on the reopening of the assessment was examined. The court emphasized that errors made by the Assessing Officer in granting larger reliefs did not constitute a ground for reassessment beyond the statutory period of four years, unless there was a failure on the part of the assessee to disclose material facts.

6. The legal provisions under Section 147 of the Income-Tax Act, 1961 were crucial in determining the validity of the reassessment. The court reiterated that the Assessing Officer's power to reopen assessments beyond four years is contingent upon the assessee's failure to disclose all material facts necessary for assessment, a prerequisite not met in this case.

In conclusion, the High Court quashed the impugned notices, upholding the assessee's contention that all material facts were adequately disclosed, and the reassessment was invalid due to the absence of grounds for reopening beyond the statutory period.