2013 (7) TMI 381 - AT - Income Tax

Reopening of assessment - disallowance of deduction u/s 10B and addition towards difference in valuation of closing stock made - CIT(A) quashed reassessment orders - Held that - As seen from the reasons given by AO except alleging that the assessee violated the provisions of section 80I(2) and the assessee has not received export proceeds within the time limit prescribed and it has suppressed the value of closing stock as on 31.3.2004, nothing has been mentioned on the failure of the assessee in disclosing fully and truly all material facts necessary for completion of assessment. AO did not point what details or material facts necessary for completion of assessment, the assessee had failed to disclose in the course of original assessment proceedings. Thus AO has merely reopened the assessment based on the materials which are already available on record and it is mere change of opinion and in case of change of opinion based on the facts already available on record, reassessment is not permissible under section 147 as decided in CIT Vs. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA)& E.I. Dupont India Pvt. Ltd., & Another Vs. DCIT., (2013 (2) TMI 406 - DELHI HIGH COURT). Thus agreeing with the CIT(Appeals) that there was no failure on the part of the assessee in disclosing fully and truly all material facts necessary for completion of assessment - In favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147.
2. Entitlement of the assessee to deduction under Section 10B.
3. Alleged under-valuation of closing stock.
4. Timely remittance of foreign exchange proceeds.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:

The primary issue in this case is whether the reopening of assessment under Section 147 was valid. The Commissioner of Income Tax (Appeals) held that the reassessment completed on 20.08.2011 was beyond four years from the end of the relevant assessment year (2004-05). As per the proviso to Section 147, no action can be taken after the expiry of four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Commissioner found no such failure by the assessee and concluded that the reassessment was bad in law. The Tribunal upheld this view, noting that the Assessing Officer had reopened the assessment based on existing records, which amounted to a change of opinion, not permissible under the law.

2. Entitlement of the Assessee to Deduction under Section 10B:

The Departmental Representative argued that the assessee was not entitled to deduction under Section 10B because the plant and machinery used in the 100% Export Oriented Unit (EOU) were worth only Rs. 79,545/-, which was insufficient to achieve the reported turnover. It was alleged that the assessee must have used facilities from its Domestic Tariff Area (DTA) units and outsourced production. However, the Commissioner of Income Tax (Appeals) found that the assessee had disclosed all necessary details and that the issue had been examined in prior years. The Tribunal agreed, stating that the reopening of the assessment on this ground was merely a change of opinion.

3. Alleged Under-Valuation of Closing Stock:

The Assessing Officer had disallowed the deduction claimed under Section 10B and made additions towards the difference in the valuation of closing stock. The Commissioner of Income Tax (Appeals) noted that the details were already available in the Form 3CD report and that there was no failure on the part of the assessee in disclosing these details. The Tribunal upheld this view, emphasizing that the reassessment was based on existing records and constituted a change of opinion, which is not valid for reopening under Section 147.

4. Timely Remittance of Foreign Exchange Proceeds:

The Departmental Representative contended that the assessee did not bring the entire foreign exchange into India within the specified time, pointing out that Rs. 1,38,13,188/- was received in the following assessment year (2005-06). The Commissioner of Income Tax (Appeals) found that all sale proceeds were repatriated within the specified time. The Tribunal confirmed this finding, noting that the Assessing Officer had not demonstrated any failure by the assessee to disclose material facts.

Conclusion:

The Tribunal concluded that the reopening of the assessment under Section 147 was invalid as it was based on a mere change of opinion and not on any new material evidence. The appeal by the Revenue was dismissed, affirming the order of the Commissioner of Income Tax (Appeals). The decision emphasized that for reassessment beyond four years, there must be a failure by the assessee to disclose fully and truly all material facts, which was not the case here.