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2015 (1) TMI 64 - AT - Income TaxValidity of notice for reopening of assessment u/s 147/148 - Jurisdiction to issue notice - Held that - The assessee is a 100% EOU. The assessee also sold goods to another EOU to the extent of ₹ 10,12,61,099/- and deduction u/s. 10B of the Act to the extent of ₹ 4,26,30,184/- was claimed - on perusal of the original assessment order passed u/s. 143 it is seen that the Assessing Officer discussed issue of deduction - it cannot be said that the AO has not made an enquiry or applied his mind to the issue which was the subject matter of the reassessment proceedings and issuance of the notice u/s. 148 - assessee had made a disclosure in the notes forming part of the accounts of the nature of payments required to be made to the foreign principal on account of CDC - a reference was made to the fact that as a result of a circular issued by the RBI, the assessee was not permitted to remit a certain proportion equivalent to US 1.5 for each container - The statutory auditors had also included a note in the report - during the course of assessment proceedings, the assessee addressed a comprehensive letter dt. 18th Nov., 2009 making a full disclosure of facts the AO specifically discussed in the course of the assessment order the matters in respect of which he has made a disallowance either fully or in part. Since the AO did not find any justification to reject the claim of the assessee in respect of the issue of CDC, there was no specific discussion in the course of order - the AO has considered the claim of the assessee by applying his mind - there was a decision on this issue in favour of the assessee when the assessment was completed u/s. 143(3) - merely because subsequently another decision of the Co-ordinate Bench of the ITAT is noticed by the AO, that will not vests the jurisdiction in the AO to exercise his powers u/s 147 the AO was not justified at all to initiate the proceedings u/s. 147 and issued the notice u/s. 148 thus, the proceedings initiated u/s 147 is set aside Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment under Section 147 of the Income Tax Act. 2. Eligibility of deduction under Section 10B for exports made to another Export Oriented Undertaking (EOU). Issue-wise Detailed Analysis: 1. Validity of Reassessment under Section 147: The primary issue contested by the assessee was the validity of the reassessment initiated under Section 147 of the Income Tax Act. The assessee argued that the reassessment was based on a mere change of opinion, which is not permissible under the law. The original assessment under Section 143(3) had already considered and allowed the deduction under Section 10B. The reassessment was initiated after the Assessing Officer (AO) became aware of a contrary decision by the ITAT Bangalore in the case of Tata Elxsi Ltd. vs. ACIT, which was not considered during the original assessment. The CIT(A) upheld the reassessment, stating that the AO had "reason to believe" that income had escaped assessment based on new tangible material, which in this case was the ITAT Bangalore decision. The CIT(A) referenced several judicial precedents, including the Supreme Court's decision in CIT vs. Kelvinator of India Ltd. (320 ITR 561), which emphasized that the AO must have tangible material to justify reopening an assessment. The CIT(A) concluded that the reassessment was valid as it was initiated within four years and was based on new information that came to light post the original assessment. The Tribunal, however, disagreed with the CIT(A). It highlighted that the original assessment had already considered the relevant facts and the ITAT Ahmedabad decision in favor of the assessee. The Tribunal noted that the mere existence of a contrary decision by another ITAT Bench (Bangalore) does not constitute sufficient grounds for reassessment. The Tribunal emphasized that reassessment based on a mere change of opinion is not permissible, aligning with the principles laid down in Kelvinator of India Ltd. and subsequent cases like NYK Line (India) Ltd. vs. DCIT (346 ITR 361) and Parveen P. Bharucha vs. DCIT (348 ITR 325). Consequently, the Tribunal quashed the reassessment proceedings initiated under Section 147. 2. Eligibility of Deduction under Section 10B: The second issue pertained to the eligibility of the assessee to claim a deduction under Section 10B for exports made to another EOU. The AO initially allowed the deduction based on the assessee's claim that sales to another EOU are deemed exports under Chapter 8 of the Foreign Trade Policy. However, during reassessment, the AO withdrew the deduction citing the ITAT Bangalore decision, which held that sales within India between STPs (Software Technology Parks) do not qualify as deemed exports for the purpose of Section 10A, which is analogous to Section 10B. The CIT(A) supported the AO's decision to disallow the deduction under Section 10B, referencing the ITAT Bangalore decision. The CIT(A) argued that the reassessment was justified as the AO had "reason to believe" that income had escaped assessment due to the incorrect allowance of the deduction. The Tribunal, having quashed the reassessment proceedings on the first issue, did not delve into the merits of the deduction under Section 10B. The Tribunal's decision to annul the reassessment effectively rendered the second issue moot, as the original assessment allowing the deduction stood reinstated. Conclusion: The Tribunal allowed the assessee's appeal, quashing the reassessment proceedings initiated under Section 147. The Tribunal held that the reassessment was invalid as it was based on a mere change of opinion, which is not permissible under the law. Consequently, the Tribunal did not address the merits of the deduction under Section 10B, as the original assessment allowing the deduction was restored.
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