2012 (2) TMI 281 - HC - Income Tax

Validity of reopening of assessment previously framed after scrutiny beyond 4 years from the end of relevant A.Y A.Y. 04-05 sought to be reopened on the basis of an order of assessement for A.Y. 06-07 A.O. did not specifically deal with the eligibility to claim a deduction u/s 10A Held that -The order for A.Y. 2006-07 is based on disclosures made by the assessee during the course of assessment proceedings for that year and it is not the submission of the assessee before this Court that the same disclosures were also made during the course of A.Y. 2004-05. In the circumstances, we are of the view that though the reopening of the assessment in the present case has taken place beyond a period of four years, the jurisdictional condition for reopening the assessment u/s 147 has been fulfilled Decided against the assessee.

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Rejection of objections against the reopening of assessment.
3. Disallowance of exemption under Section 10A for Assessment Year 2004-05.

Detailed Analysis:

1. Reopening of Assessment under Section 148:
The primary issue is the validity of the notice issued by the Assessing Officer (AO) on 9 August 2010 under Section 148 to reopen the assessment for Assessment Year (AY) 2004-05. The AO sought to reopen the assessment based on findings from AY 2006-07, which indicated that the petitioner was not entitled to a deduction under Section 10A for several reasons including lack of independent units, overlapping work, and incorrect audit reports.

The petitioner argued that the reopening was beyond the four-year limitation period and contended that there was no failure to disclose material facts fully and truly. The petitioner further argued that the assessment could not be reopened based on subsequent year's findings.

Conversely, the Revenue argued that reopening was permissible based on new material found during the assessment of a subsequent year. The Revenue cited precedents where reopening was allowed under similar circumstances, emphasizing that the AO had tangible material to justify reopening.

The court held that reopening beyond four years is permissible if there is a failure to disclose material facts fully and truly. The court found that the AO had tangible material from AY 2006-07 to justify reopening the assessment for AY 2004-05.

2. Rejection of Objections Against Reopening:
The second issue concerns the order dated 14 November 2011, which rejected the petitioner's objections to the reopening of the assessment. The petitioner claimed that the AO had already inquired about the eligibility for Section 10A deduction during the original assessment, and thus reopening was not justified.

The court noted that during the original assessment, the AO did not specifically address the eligibility for the Section 10A deduction. The material facts that emerged during the assessment for AY 2006-07 were not disclosed during the original assessment for AY 2004-05. Therefore, the court concluded that the rejection of objections was justified.

3. Disallowance of Exemption under Section 10A:
The third issue pertains to the reassessment order dated 21 November 2011, which disallowed the Section 10A exemption for AY 2004-05. The AO concluded that the units were not independent, accounts were not maintained separately, and there was an overlap of work and resources.

The court upheld the AO's decision, noting that the petitioner had not fully and truly disclosed all material facts necessary for the assessment during the original proceedings. The findings from AY 2006-07 provided sufficient grounds for disallowing the exemption.

Conclusion:
The court dismissed the petition, holding that the reopening of the assessment was justified based on new material from AY 2006-07, and the petitioner had failed to disclose material facts fully and truly. The rejection of objections and the disallowance of the Section 10A exemption were upheld. The court allowed the petitioner to pursue remedies against the reassessment order and extended the stay for four weeks to enable the filing of an appeal. No order as to costs was made.

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