2017 (9) TMI 487 - HC - Income Tax

Reassessment u/s 147 - Business of export of Back Office and computer software - claimed deduction u/s 10B - AO disallowing 100% dedcution u/s 10B stating that assessee had not fulfilled the requirement of being a 100% export oriented undertaking - Held That - the assessee s claim of deduction under section 10B of the Act was examined minutely by the Assessing Officer. The assessee pointed out that it enjoyed certification under STPI. If the Assessing Officer was of the opinion that such certification was inadequate and did not substitute for the requirement of approval by the Board appointed by the Government of India, under the Industries (Development and Regulation) Act, 1961, it was always open for the Assessing Officer to examine this issue further or to reject the assessee s claim in its entirety. He however, accepted the claim accepting the assessee s certification as sufficient compliance with the statutory requirements. There was no failure on part of the assessee to disclose necessary facts. Reassessment order set aside - Decided in favor of assessee.

Issues Involved:
1. Validity of the reopening of the assessment beyond four years.
2. Eligibility for deduction under section 10B of the Income Tax Act.
3. Compliance with the requirement of being a 100% export-oriented undertaking.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment Beyond Four Years:
The petitioner challenged the reopening of the assessment, arguing that it was issued beyond the statutory period of four years from the end of the relevant assessment year. The petitioner contended that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The court noted that the original assessment proceedings had thoroughly examined the petitioner’s claim for deduction under section 10B, and the Assessing Officer had accepted the claim after scrutiny. The court concluded that the reopening of the assessment based on a mere change of opinion was not permissible, as there was no new material or failure by the petitioner to disclose facts. Therefore, the reopening notice was invalid.

2. Eligibility for Deduction Under Section 10B of the Income Tax Act:
The petitioner had claimed a deduction under section 10B for their export-oriented business. The Assessing Officer initially allowed the deduction with a minor disallowance for late foreign exchange remittances. However, during the reassessment, the deduction was disallowed on the grounds that the petitioner did not have the required approval from the Board appointed by the Central Government under the Industries (Development and Regulation) Act, 1951. The court found that the petitioner had provided certification under the Software Technology Parks Scheme (STPI) and other supporting documents during the original assessment. The court held that the Assessing Officer had accepted this certification as sufficient compliance with section 10B requirements, and there was no failure by the petitioner to disclose necessary facts.

3. Compliance with the Requirement of Being a 100% Export-Oriented Undertaking:
The reassessment disallowed the deduction under section 10B on the basis that the petitioner’s undertaking was not approved as a 100% export-oriented unit by the Board appointed by the Central Government. The court observed that the original assessment had accepted the petitioner’s certification under STPI as sufficient. The court emphasized that the Assessing Officer had the opportunity to examine or reject the certification during the original assessment but chose to accept it. Hence, reopening the assessment on this ground was not justified.

Conclusion:
The court set aside the impugned order dated 9.3.2017 by the Commissioner and the reassessment order dated 25.3.2015. Consequently, the notice for reopening the assessment was invalidated. The petition was allowed and disposed of, affirming that the reopening of the assessment was not permissible due to the lack of new material and the initial thorough scrutiny of the petitioner’s claim.

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