2021 (6) TMI 111 - HC - Income Tax

Reopening of assessment u/s 147 - excess claim of Deduction u/s 10B - HELD THAT - The case of the respondent (Revenue) is that the petitioner was in the habit of making an excess claim under Section 10B of the IT Act, 1961 and this fact came to be knowledge of the Department only when a survey was conducted during March 2010. It is submitted that, this information was not available earlier when the assessment orders were passed both under Section 143(1). No merits in the present writ petition. If the accounts were castled to distort the income to show higher profit from EOU operation to claim deduction under Section 10B of the IT Act, 1961, the Income Tax Department would be justified in reopening the assessment under Section 148 of the IT Act, 1961, for the purpose of the proviso to Section 147 of the IT Act, 1961. Facts also indicate that an order was passed for the assessment year 2005-2006 as is evident from the preamble to be final order dated 30.08.2013 of the Tribunal as noted that the submission of the Respondent that this was not the first time the petitioner had claimed deduction under Section 10B of the IT Act, 1961. It appears that for the aforesaid year, CIT(Appeals)-IV vide order dated 21.09.2010, had observed that, Since transfer cost of materials between the EOU and all EOU units has been wrongly recorded the deduction u/s 10B should be restricted to the profits of the EOU units after recording the transfer of the material at the correct cost. . The issue on merits is apparently covered in favour of the petitioner in the case of Scientific Atlanta India Technology Private Ltd 2010 (2) TMI 658 - ITAT, CHENNAI and similar views in Changpond Technologies (P) Ltd vs ACIT 2008 (2) TMI 486 - ITAT MADRAS-A and Enercon Wind Farm (Krishna) Ltd. 2007 (12) TMI 306 - ITAT MUMBAI It is therefore for the petitioner to substantiate its case before the respondent by citing the above decisions and get the issue decided on merits in its favour. Writ petition is dismissed. The Respondent is therefore directed to pass appropriate orders in accordance with law on merits.

Summary

Issues:
Challenge to impugned communication overruling objection against re-opening of assessment under Section 143(3) of the Income Tax Act, 1961.
Validity of denial of deduction under Section 80HHC and exemption under Section 10B of the IT Act.
Justifiability of the reasons for re-opening the assessment under Section 148 of the IT Act.
Applicability of change of opinion in disallowing deductions.
Interpretation of relevant case laws in the context of the present case.

Analysis:
The petitioner challenged a communication dated 01.12.2010, objecting to the re-opening of assessment under Section 143(3) of the Income Tax Act, 1961. The petitioner had initially filed returns claiming deductions under Section 80HHC and exemption under Section 10B, which were subsequently rectified under Section 154 of the IT Act, leading to a revised total income assessment.

The Tribunal, in a separate appeal, held that the issues raised by the Assessing Officer were debatable and could not be rectified under Section 154. The Tribunal allowed the petitioner's appeal, emphasizing that deductions under Section 80HHC and 10B could not be determined under Section 154 for calculating book-profit under Section 115J of the IT Act.

Subsequently, a Scrutiny Assessment Order disallowed the deductions claimed by the petitioner, leading to a notice under Section 148 for re-opening the assessment. The reasons cited for re-opening included discrepancies in claiming deductions under Section 80HHC and 10B, as well as alleged distortion of profits to claim benefits under the IT Act.

The petitioner argued that the re-opening was unwarranted, citing past Tribunal decisions in their favor. The respondent defended the re-opening, citing new information uncovered during a survey in 2010 and the alleged misrepresentation of profits for tax benefits.

The Court found merit in the re-opening, considering the alleged discrepancies in profit reporting and the justification under Section 147 of the IT Act. The Court directed the respondent to proceed with the assessment in accordance with the law, allowing the petitioner to present their case based on relevant case laws and prior Tribunal decisions.

In conclusion, the Court dismissed the writ petition and directed the respondent to issue appropriate orders within sixty days, emphasizing adherence to Tribunal decisions unless contradicted by other rulings. No costs were awarded in the matter.