2017 (7) TMI 499 - HC - Income Tax

Reopening of assessment - the audit party had raised an objection of the freight and insurance charges being included in the export turnover for computation of benefit under Section 10A - Held that - Notice for reopening came to be issued which was passed solely on the ground of the assessee s claim of deduction under Section 10A of the Act and reduction of the freight and insurance charges from the export turnover. Thus, clearly the notice for reopening was issued under the directives and compulsion of the audit party, a mode which is not permissible as held by the decision of this Court in the case of Adani Exports vs. Deputy Commissioner of Income Tax (Assessments) 1998 (12) TMI 51 - GUJARAT High Court . - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for the assessment year 2009-10 based on incorrect computation of deduction under Section 10A of the Income Tax Act.

Analysis:
1. The petitioner, a pharmaceutical company, filed its return for the assessment year 2009-10 declaring total income under the normal provisions of the Income Tax Act. The Assessing Officer accepted the claim of deduction under Section 10A but later issued a notice for reopening the assessment due to an alleged incorrect computation of the deduction.

2. The Assessing Officer's reasons for reopening the assessment included an allegation that the export turnover was overstated due to including freight and insurance charges, leading to excess allowance of deduction and short levy of tax. The petitioner objected to the notice, arguing that the claim under Section 10A was already scrutinized during the original assessment, and any re-examination would amount to a change of opinion.

3. The petitioner further contended that the issue was subject to appeals before higher authorities, and hence, reassessment should not be permissible based on the principle of merger. The Assessing Officer rejected these objections, leading to the petitioner filing a petition challenging the notice for reopening.

4. During the hearing, the petitioner argued that the inclusion of freight and insurance charges in the export turnover was not examined during the original assessment, hence not forming part of the Assessing Officer's opinion. The petitioner also raised concerns about the notice being issued at the behest of the revenue audit party.

5. The High Court observed that the audit objection regarding the freight and insurance charges was not accepted by the Assessing Officer in the past, who detailed reasons why the objection was incorrect. Despite internal correspondences rejecting the audit objection, the notice for reopening was issued solely based on the deduction claim under Section 10A and the freight and insurance charges issue.

6. The Court held that issuing a notice for reopening solely based on the directive of the audit party was impermissible, citing a previous decision. Consequently, the High Court set aside the impugned notice dated 27.01.2014, allowing the petition and disposing of the matter in favor of the petitioner.