2021 (6) TMI 771 - HC - Income Tax

Reopening of assessment u/s 147 - Exemption granted u/s 10B - whether approval granted by the STPI under the delegated powers of the Directors of STPI by IMSC is a valid approval for the purpose of claiming exemption under Section 10B? - HELD THAT - The dispute arises in view of the fact that the assessee is of an opinion that the approval granted by the STPI under the delegated powers of the Directors of STPI by IMSC is a valid approval for the purpose of claiming exemption under Section 10B of the Act. Therefore, the presumption cannot be construed as suppression on the part of the assessee. It is not a mere presumption in the present case by the assessee. The presumption has got a valid reason because the assessee is holding a valid approval obtained from the STPI and the power to grant approval was delegated to the Directors of STPI by IMSC. It is not as if the assessee claimed exemption under Section 10B without any such approval. It is a case where the order of approval, which was validly granted, was produced before the Assessing Officer at the time of scrutiny and the Assessing Officer also accepted the approval order and granted exemption. Thus, the reason stated in the impugned proceedings that the assessee committed a mistake cannot be accepted. Assessee was possessing a valid approval which was produced before the Assessing Officer and if a ratification is to be obtained, then the AO at the time of scrutiny, ought to have directed the assessee to get any such ratification certificate for the purpose of grant of exemption under Section 10B which the Department had not done. Thus, it was a mistake or omission committed by the AO at the time of passing of the original assessment order. Even in such cases, if the reopening of assessment is made within a period of four years, then there is a ground for the Department to reopen the same. In the present case, the reopening of assessment is made beyond the period of four years and therefore, the statutory requirement contemplated under Section 147 is to be complied with scrupulously. Thus, the ground taken for reopening of assessment that the assessee has not disclosed fully and truly all material facts is not established in the present case and the assessee, in fact, submitted all the particulars regarding the approval granted by the authority and further ratification, if required, must be instructed by the Department which was not done and therefore, there was no suppression or nondisclosure of material facts by the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of reasons for reopening assessment under Section 147 of the Income Tax Act, 1961.
2. Exemption under Section 10B of the Income Tax Act.
3. Compliance with statutory requirements for reopening assessment beyond four years.

Analysis:
1. The petitioner challenged the respondent's order rejecting the reasons for reopening assessment. The petitioner, engaged in the business of lifts, escalators, and software export, had received approval under the Software Technology Park Scheme. The respondent did not dispute the business nature or approval order.

2. The main issue was the exemption under Section 10B of the Income Tax Act. The petitioner claimed the benefit based on STPI approval, which the Assessing Officer accepted during the original assessment under Section 143(3).

3. The petitioner argued that the reopening beyond four years was not valid as there was no suppression or omission. The respondent contended that the petitioner failed to disclose the need for CBDT ratification for claiming exemption under Section 10B.

4. The Court analyzed Section 147's Proviso, emphasizing the requirement to disclose all material facts for assessment. The respondent claimed the petitioner did not provide sufficient materials during the original assessment.

5. The Court interpreted the Proviso constructively, requiring an intention to suppress facts for reopening beyond four years. Mere nondisclosure was insufficient; the motive for non-disclosure mattered.

6. The Court found that the petitioner's possession of valid STPI approval, produced during scrutiny, did not constitute suppression. The Assessing Officer's failure to request CBDT ratification during scrutiny was an error, not the petitioner's omission.

7. As the reopening was beyond four years and the petitioner had disclosed all relevant details, the Court held the initiation of proceedings under Section 147 was not sustainable. Consequently, the impugned order was quashed, and the writ petition was allowed.

8. In conclusion, the Court ruled in favor of the petitioner, highlighting the importance of complying with statutory requirements for reopening assessments and the necessity of disclosing all material facts during the original assessment process.