2017 (6) TMI 640 - AT - Income Tax

Validity of re-assessment u/s.147 - eligibility of entitlement of claim u/s.10A - Held that - In the instant case the assessment was reopened within four years from the end of the relevant AY and there was a prima facie case of wrong deduction claimed by the assessee. This fact was not brought to the notice of the AO by the assessee at the time of original assessment proceedings u/s.143(3) and the AO also has not examined the eligibility of entitlement of deduct on u/s.10A. Therefore, we hold that the notice issued u/s.148 is valid and the order of the CIT(A) is upheld. The assessee s appeal on this ground is dismissed Disallowance of claim made by the assessee u/s.10A - year of commencement reckoned - Held that - From the plain reading amended section of Sec.10A, it is clear that the assessee is eligible for deduction u/s.10A for the period of 10 years from the date of commencement of production/ manufacture of articles/things for 10 consecutive AYs. It was also made it clear in section that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years. The assessee is in existence from 1997-98 which had commenced production/manufacture of articles/things during the FY 1997-98 and exemption period of 10 years was ended with the AY 2007-08 and therefore for the AY under consideration, the assessee is not eligible for deduction u/s.10A as held by the Ld.CIT(A) in his order. - Decided against assessee.

Summary

Issues involved:
1. Validity of re-assessment under Section 147 of the Income Tax Act.
2. Disallowance of the claim made by the assessee under Section 10A of the Income Tax Act.

Issue-wise detailed analysis:

1. Validity of re-assessment under Section 147 of the Income Tax Act:

The assessee filed a return of income for AY 2009-10 on 11.08.2009, admitting a total income of Rs. NIL. The case was selected for scrutiny, and the assessment was completed under Section 143(3) on 04.10.2011, accepting the returned income. Later, the Assessing Officer (AO) noticed a wrong claim under Section 10A and reopened the assessment under Section 147, issuing a notice under Section 148 on 18.03.2014. The re-assessment was completed on 23.03.2015, withdrawing the deduction claimed under Section 10A.

The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the notice issued under Section 148. The assessee then appealed to the Tribunal, arguing that the original assessment under Section 143(3) had already examined and allowed the deduction under Section 10A, and reopening the assessment amounted to a change of opinion, which is not permissible. The assessee relied on several judicial precedents, including Capgemini India Pvt. Ltd. v. ACIT, CIT v. Aravind Remedies Ltd., and CIT v. Maruti Suzuki India Ltd.

The Department argued that the re-assessment was initiated within four years from the end of the relevant assessment year. The AO had relied on the assessee's audit report, which incorrectly stated the year of the claim as the 10th year, whereas it was actually the 11th year, making the assessee ineligible for the deduction under Section 10A.

Upon hearing both parties, the Tribunal noted that the audit report provided misleading information, and the AO had not examined the eligibility of the deduction during the original assessment. The Tribunal distinguished the cited cases, noting that the assessee had furnished wrong and misleading information. Therefore, the Tribunal upheld the validity of the notice issued under Section 148 and dismissed the assessee's appeal on this ground.

2. Disallowance of the claim made by the assessee under Section 10A of the Income Tax Act:

The AO disallowed the assessee's claim under Section 10A, stating that the 10-year period from the commencement of manufacturing/production ended with AY 2007-08, making the assessee ineligible for the deduction for AY 2009-10. The CIT(A) confirmed the AO's order, holding that the 10-year period should be reckoned from AY 1998-99, the year following the commencement of production on 06.10.1997.

The assessee argued that the period for exemption should be reckoned from AY 2000-01, the year of STPI registration, making AY 2009-10 the 10th year of deduction. The Department maintained that the commencement date was 03.10.1997, and the assessee was entitled to the deduction only up to AY 2007-08.

The Tribunal reviewed the audit report and other materials, confirming that the assessee commenced production on 06.10.1997. The Tribunal noted that the relevant provisions of Section 10A, as amended by the Finance Act, 2000, allowed a deduction for a period of 10 consecutive assessment years from the commencement of production. Since the assessee's production commenced in FY 1997-98, the 10-year period ended with AY 2007-08. Therefore, the Tribunal upheld the CIT(A)'s order, disallowing the deduction for AY 2009-10.

In conclusion, the Tribunal dismissed the assessee's appeal, upholding the validity of the re-assessment and the disallowance of the deduction under Section 10A.