2019 (4) TMI 1477 - AT - Income Tax

Reopening of assessment u/s 148 - exemption u/s 10AA claimed - assessment reopened after expiry of 4 years - HELD THAT - Revenue could not place any material to establish that there is a failure on the part of the assessee to disclose all material facts required for assessment. Therefore, we hold that the AO has wrongly invoked the jurisdiction. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. Disallowance u/s 10AA without examining the books of accounts - In the original assessment it appears that the assessee had produced the books of accounts and the AO made certain disallowances. No finding was given by the AO in original assessment with regard to non maintenance of separate books of accounts for 10AA unit. In the instant case, the assessee has filed separate trading account for both SEZ and manufacturing unit, P L account and balance sheet separately. The assessee has stated that it has maintained separate books of account and worked out the Net profit of ₹ 2,93,93,500/-, before reducing the interest earned on bank FDs of ₹ 20,20,444/-,thus, the profit from SEZ unit worked out to ₹ 2,73,73,054/- which was claimed as exemption. The assessee is trading in bauxite which is relating to domestic sales and the SEZ is dealing in Chrome Concentrate, both are different products. From the information filed in the paper book, these are taken separately by the assessee. AO after verifying the books of accounts, instead of working out the actual profit of the SEZ unit, resorted for proportionate disallowance of exemption claimed by the assessee which is highly arbitrary. When the material is placed before the AO, it is for the AO to examine the books and work out the correct amount of profit related to the exempted unit unless there is any defect in the books of account. As per the Trading Profit Loss account, the profit derived by the assessee in respect of VSEZ unit which is eligible for deduction u/s 10AA. Therefore, we hold that on merits also, the assessee is entitled for deduction u/s 10AA as allowed originally. - Decided in favour of assessee.

Summary

Issues:
- Deduction u/s 10AA
- Reopening of assessment u/s 147

Deduction u/s 10AA:
The case involved the deduction u/s 10AA and reopening of assessment u/s 147 of the Income Tax Act. The assessee, engaged in the manufacture and export of chrome concentrate, initially filed its return of income for A.Y. 2009-10, revising it later. The AO reopened the assessment due to a claimed exemption u/s 10AA. The AO computed the deduction proportionately to the export turnover, restricting it to &8377; 2,07,74,719. The CIT(A) held that the notice u/s 148 was invalid as the assessee had furnished all details during the original assessment. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to establish any failure on the part of the assessee to disclose material facts.

Reopening of Assessment u/s 147:
The AO reopened the assessment u/s 147 beyond four years, alleging the assessee did not maintain separate books of accounts for the SEZ unit as required u/s 10AA. However, the assessee had provided all relevant details during the original assessment. The Tribunal found that the AO wrongly invoked jurisdiction as there was no failure to disclose material facts. On merits, the AO made disallowances without examining the books of accounts. The Tribunal held that the assessee maintained separate accounts and was entitled to the deduction u/s 10AA. The appeal of the revenue was dismissed, and the cross objections of the assessee were deemed infructuous.

In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and confirming the assessee's entitlement to the deduction u/s 10AA. The Tribunal found that the AO incorrectly reopened the assessment and made arbitrary disallowances without proper examination of the books of accounts. The assessee's compliance with disclosure requirements and maintenance of separate accounts were crucial factors in the judgment.