2012 (11) TMI 470 - AT - Income Tax

Reopening of assessment - claimed exemption u/s 10B for the assessment year 2004-05 which is the 11th year - Held that - In the present case, it is not the case of the Revenue that the assessee had not furnished the relevant documents or the information at the time of the assessment. The original assessment order was passed on 29.9.2006. Thereafter, the order was revised by the AO on 23.3.2007. Subsequently, after the elapse of four years notice u/s 148 was issued. The reason for reopening does not fall within the ambit of the provisions leading to escapement of assessment as the assessee had started claiming deduction u/s 10B from the assessment year 1995-96 and not from the assessment year 1994-95. Therefore, 10th and the last year for claiming deduction under the provisions of section 10B is assessment year 2004-05 and not assessment year 2003-04 as has been wrongly held by the AO as well as the first appellate authority - in favour of assessee. Disallowance of deduction u/s 10B - Held that - As decided in CIT Vs. DSL Software Ltd. 2011 (10) TMI 423 - KARNATAKA HIGH COURT The said denial of the benefit runs counter to the spirit of section 10B and it would negate the object with which the amended provision was brought in. The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production. The order has been passed by the CIT(A) in a non-judicious and arbitrary manner. The order is not only against the law laid down by the Hon ble High Court but smacks malafide on the part of the CIT(A). As CIT(A) has committed intellectual dishonesty extending it to the limit of perversity. The impugned order has burdened the assessee with the avoidable cost of litigation before the Tribunal and harassment. The appeal of the assessee is allowed with costs of Rs.25,000/- - appeal in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under section 148 beyond four years.
2. Disallowing deduction under section 10B of the Act.
3. Charging of interest under section 234B and 234C.

Detailed Analysis:

Reopening of Assessment under Section 148 Beyond Four Years:
The first issue concerns the reopening of the assessment under section 148 beyond the period of four years. The assessee argued that the reopening was based on a change of opinion by the Assessing Officer (AO) and not on any failure to disclose material facts. The assessee relied on the judgments of the Supreme Court in CIT Vs. Kelvinator of India Ltd. and the Madras High Court in Sri Sakthi Textiles Ltd. The Tribunal found that the AO had indeed reopened the assessment based on a mere change of opinion and not due to any failure on the part of the assessee to disclose fully and truly all material facts. Thus, the reopening was deemed invalid, and this issue was decided in favor of the assessee.

Disallowing Deduction Under Section 10B:
The second issue was the disallowance of the deduction under section 10B. The assessee contended that the deduction was claimed correctly for the 10th year (Assessment Year 2004-05) and not the 11th year as alleged by the AO. The Tribunal noted that the CIT(A) had previously confirmed the eligibility of the assessee for the deduction under section 10B up to the assessment year 2004-05. This finding was not challenged by the Revenue and had attained finality. The Tribunal also criticized the CIT(A) for misinterpreting the judgment of the Karnataka High Court in the case of CIT Vs. DSL Software Ltd., which actually supported the assessee's claim. The Tribunal concluded that the assessee was entitled to the deduction under section 10B for the assessment year 2004-05 and allowed this ground of appeal.

Charging of Interest Under Section 234B and 234C:
The final issue was the charging of interest under sections 234B and 234C. Given the Tribunal's decision to allow the deduction under section 10B, the assessee was not liable for any additional tax, and consequently, no interest under sections 234B and 234C was chargeable. This ground of appeal was also allowed in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee on all grounds. The reopening of the assessment under section 148 was deemed invalid as it was based on a change of opinion. The disallowance of the deduction under section 10B was overturned, and the assessee was found eligible for the deduction for the assessment year 2004-05. Consequently, the charging of interest under sections 234B and 234C was also invalidated. The Tribunal awarded costs of Rs. 25,000 to the assessee for the unnecessary litigation and harassment caused by the Revenue.