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2016 (12) TMI 1245 - AT - Income TaxReopning of assessment - deduction u/s 10A calculation - Held that - The issue of interest on FDR forming part of the net profit and calculation for the purpose of section 10A of the Act was very much before the AO which was furnished vide written submission dated 24.10.2008 in reply to the questionnaire dated 19.8.2008 which is placed at page 37 of the paper book and the AO after considering all these information and documents filed before him during the assessment proceedings reduced the amount of deduction u/s 10A to ₹ 8,50,06,151/- as against ₹ 11,57,73,763/- claimed by the assessee. In our opinion, reopening of the assessment on the basis of interest on FDR stating that the same to have escaped the assessment u/s 147 r.w.s 148 of the Act is not correct as the material was already before the AO at the time of framing the original assessment and therefore, we are in agreement with the argument of the ld. AR that the reopening of assessment on the basis of material which was already before the AO is nothing but a mere change of opinion which is not permissible under the Income Tax Act. - Decided in favour of assessee
Issues Involved:
1. Validity of reopening of assessment under sections 147 and 148 of the Income Tax Act. 2. Treatment of interest income for the purpose of computing deduction under section 10A of the Income Tax Act. 3. Deduction of out-of-pocket expenses from export turnover under section 10A. 4. Cross-objection regarding the treatment of out-of-pocket expenses in total turnover. Issue-wise Detailed Analysis: 1. Validity of Reopening of Assessment under Sections 147 and 148: The primary issue raised by the assessee was the jurisdictional challenge to the reopening of the assessment by the Assessing Officer (AO) under sections 147 and 148. The assessee argued that the AO did not have "reason to believe" that income chargeable to tax had escaped assessment and that the reopening was based on a mere change of opinion without any fresh tangible material. The Tribunal noted that the AO had originally scrutinized the assessee's claim for deduction under section 10A, including the interest on fixed deposits (FDRs), during the initial assessment proceedings. The Tribunal concurred with the assessee that reopening the assessment based on the same material already considered constituted a change of opinion, which is not permissible under the law. Therefore, the Tribunal quashed the reopening of the assessment, rendering the proceedings invalid. 2. Treatment of Interest Income for Deduction under Section 10A: The second issue pertained to whether the interest income of ?20,89,000 from FDRs should be included in the profits of the undertaking for computing the deduction under section 10A. The assessee contended that the interest income was part of the business profits and had been duly considered during the original assessment. The Tribunal observed that the AO had already examined the interest income during the initial assessment and concluded that reopening the assessment on this ground was unjustified. Consequently, the Tribunal held that the interest income should be considered part of the profits for the purpose of section 10A deduction, and the reopening based on this issue was invalid. 3. Deduction of Out-of-Pocket Expenses from Export Turnover: The revenue's appeal challenged the CIT(A)'s direction to reduce out-of-pocket expenses from the export turnover of the 10A unit. Since the Tribunal had already quashed the reopening of the assessment, the revenue's appeal on this issue was rendered infructuous and dismissed. 4. Cross-Objection Regarding Out-of-Pocket Expenses: The assessee's cross-objection argued that if out-of-pocket expenses were to be reduced from the export turnover, they should also be reduced from the total turnover of the eligible unit. Given that the revenue's appeal was dismissed and the reopening quashed, the cross-objection was deemed infructuous and dismissed. Conclusion: The Tribunal allowed the assessee's appeal, quashed the reopening of the assessment under sections 147 and 148, and dismissed both the revenue's appeal and the assessee's cross-objection as infructuous. The Tribunal emphasized that reopening an assessment based on a change of opinion without fresh tangible material is not permissible under the Income Tax Act.
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