2022 (11) TMI 1256 - AT - Income Tax

Validity of re-opening of assessment - reasons to believe - change of opinion - fresh materials subsequent to completion of original assessment - Eligibility of exemption claimed u/s.10AA - HELD THAT - Although, the original assessment has been completed u/s.143(3) of the Act, on 29.09.2011, but the AO has not considered the issue of exemption claimed u/s.10AA of the Act, in right perspective of law and thus, we are of the considered view that, when the AO has not expressed any opinion, the question of concept of change of opinion does not arise. AO has formed reasonable belief of escapement of income on the basis of fresh materials subsequent to completion of original assessment order and said materials may come from the assessment records also. Therefore, we are of the considered view that there is no merit in the arguments of the assessee that there is no fresh tangible material in the possession of the AO to form reasonable belief of escapement of income and thus, we reject the arguments of the assessee and uphold the reopening of assessment. Computation of deduction u/s.10A / 10AA - AO has not accepted the claim of the assessee on the ground that no proper evidence has been filed to substantiate the claim - We find that if assessee is able to explain reduction in export turnover with necessary evidences, then the AO is bound to consider the turnover declared in revised return of income for the purpose of assessing income and also for claiming deduction u/s.10A / 10AA of the Act. As regards the second observation of the AO with regard to non-eligibility of the assessee for claiming such deduction, the assessee has filed necessary copies of approval from STPI under the provisions of Sec.10A / 10AA - From the above, it appears that the assessee is eligible for claiming deduction u/s.10A / 10AA of the Act. Since, the assessee has declared net loss for the year, the question of claiming deduction u/s.10A / 10AA of the Act, does not arise. Deduction u/s.10A / 10AA of the Act, cannot be rejected, in case, the assessee is entitled for claiming such deduction. Therefore, we are of the considered view that the issue needs to go back to the file of the AO for fresh consideration and thus, we set aside the issue and direct the AO to re-consider the claim of the assessee in light of various averments including justification for reduction in export turn over and consider the issue of computation u/s.10A / 10AA of the Act, in accordance with law after providing reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is partly allowed for statistical purposes.

Summary

Issues:
Validity of re-opening of assessment
Deduction u/s.10A / 10AA of the Act

Validity of re-opening of assessment:
The appeal challenged the re-opening of assessment for the assessment year 2009-10. The assessee contended that the re-opening was based on a mere 'change of opinion' without fresh tangible material, citing legal precedents. The Department argued that the re-opening was justified based on new material indicating income escapement. The Tribunal observed that since the original assessment did not address the exemption claimed u/s.10AA, the concept of 'change of opinion' did not apply. It was noted that the AO formed a reasonable belief of income escapement post the original assessment. The Tribunal upheld the re-opening, rejecting the assessee's argument of lack of fresh material.

Deduction u/s.10A / 10AA of the Act:
The assessee, a 100% export-oriented unit, initially claimed exemption u/s.10AA but later omitted the claim due to a net loss. The AO rejected the claim citing lack of evidence. The Tribunal found that if the assessee could justify the reduction in export turnover, the AO should consider the revised turnover for assessing income and granting deductions. The assessee provided STPI approvals supporting eligibility for the deduction. As the assessee declared a loss, the Tribunal directed the AO to re-consider the deduction claim, emphasizing the need for proper justification for the turnover reduction. The issue was remanded to the AO for fresh consideration.

The Tribunal partially allowed the appeal for statistical purposes, emphasizing a fresh review by the AO regarding the deduction claim. The order was pronounced in Chennai on November 23, 2022.