2022 (2) TMI 922 - HC - Income Tax

Disallowance of exemption u/s 10B - assessee has flouted the prerequisite condition laid down for claiming due exemption u/s. 10B of the Act regarding authority granting approval as a 100% Export Oriented Undertaking (EOU) - Tribunal deleted the disallowance - HELD THAT - So far as the question as regards the claim under Section 10B of the Act is concerned the findings recorded by the Tribunal cannot be faulted. So far as the other questions as proposed by the Revenue are concerned those are kept open for being considered in some appropriate matter. With the aforesaid this appeal fails and is hereby dismissed.

Issues Involved:
1. Validity of deletion of addition made by Assessing Officer on account of disallowance of exemption u/s. 10B of the Income Tax Act.
2. Justification of not upholding the addition made by Assessing Officer due to failure to obtain necessary approvals for claiming exemption u/s. 10B of the Act.
3. Validity of claim of deduction not made in the return of income filed u/s 139 of the Income Tax Act.
4. Validity of reopening the case based on factual errors pointed out by the Audit party.
5. Validity of allowing grounds challenging the validity of assessment completed u/s. 143(3) r.w.s. 147 of the Act without obtaining approval of the Competent Authority as mandated under Section 10B of the Act.

Analysis:

1. The Tax Appeal under Section 260A of the Income Tax Act, 1961 was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal, where the appeal by the Revenue was dismissed. The main issue raised by the Revenue was the deletion of the addition of a specific amount made by the Assessing Officer on account of disallowance of exemption u/s. 10B of the Act. The Tribunal's decision was based on a previous order in a similar case where the claim under Section 10B was granted in previous years without questioning the certification by the relevant authority. The Tribunal upheld its decision, emphasizing the consistency in treatment over consecutive years.

2. The Revenue questioned the justification of not upholding the addition made by the Assessing Officer due to the failure of the assessee to obtain necessary approvals for claiming exemption u/s. 10B of the Act. The Tribunal's decision was supported by the fact that the relevant authority had certified the claim in the initial year and subsequent years without objection from the Revenue. The Tribunal highlighted the provisions of Section 10B regarding the deduction of profits for a period of ten consecutive years, which further strengthened the assessee's position.

3. The issue regarding the validity of a claim of deduction not made in the return of income filed under Section 139 of the Income Tax Act was also raised. The Tribunal's decision was based on the argument that the claim was consistently accepted in previous years, and the Revenue's selective challenge without explanation for a specific year was not justified. The Tribunal referred to relevant case laws to support its decision.

4. The validity of reopening the case based on factual errors pointed out by the Audit party was another issue raised. The Tribunal held that the reopening was not valid, citing precedents that allow reopening on factual errors but emphasizing the need for justification and adherence to legal principles. The Revenue's argument was countered by the Tribunal's interpretation of relevant legal provisions and case laws.

5. Finally, the validity of allowing grounds challenging the validity of assessment completed without obtaining approval of the Competent Authority as mandated under Section 10B of the Act was discussed. The Tribunal's decision to dismiss the appeal was based on the consistency in treatment over the years and the lack of objection from the Revenue in previous assessments. The Tribunal clarified its decision based on the principle of consistency and highlighted the importance of adherence to legal provisions and past practices in tax assessments.

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