2023 (8) TMI 1345 - HC - Income Tax

Reopening of assessment u/s 147 - SEZ unit - exemption u/s 10AA - Source of profit derived - foreign exchange fluctuation gain - recorded reasons indicating that profits not derived from any export from its unit of Special Economic Zone - HELD THAT - As respective parties what is noticeable is that in coming to the conclusion that the petitioner was not entitled or not eligible for exemption u/s 10AA and that the assessee had wrongly claimed the exemption, what is evident from reading the reasons and the order disposing the objections is that the author of these communications is the very same Officer who in response to a notice u/s 142 having been satisfied with the explanation given by the petitioner vide its communication passed an assessment order, accepting the explanation tendered by the petitioner in the communication. This case can be no better example of a case where an Officer at the drop of the hat has sought to change his opinion which is contrary to the decision of the Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT Petition is allowed.

Summary

Issues involved:
The challenge to the notice proposing to reopen the completed assessment for Assessment Year 2017-18 and the order disposing of objections.

Summary:

Notice to Reopen Assessment:
The petitioner, a company, filed its return of income for the Assessment Year 2017-18, declaring a total income. The petitioner availed a loan in foreign exchange and treated the foreign exchange fluctuation gain as capital gain, not offered for taxation. The loan was utilized for an undertaking in a Special Economic Zone, claiming exemption under Section 10AA of the Income Tax Act. An assessment order was passed based on the explanation provided by the petitioner. However, a notice dated 20.03.2021 proposed to reopen the assessment, stating that the petitioner was not eligible for the exemption under Section 10AA, leading to an alleged escapement of income.

Change of Opinion:
The petitioner argued that the notice was based on a change of opinion by the assessing officer, who had previously accepted and passed an assessment order in favor of the petitioner regarding the exemption under Section 10AA. The respondent contended that the revision of the return was due to a retrospective amendment to the Finance Act, not a mere change of opinion. The court noted that the same officer who accepted the petitioner's explanation earlier was now challenging the eligibility for exemption, indicating a sudden change of opinion, contrary to the decision in CIT Vs. Kelvinator of India Ltd.

Judgment:
The court allowed the petition, quashing the impugned notice and the order disposing of objections, dated 20.03.2021 and 11.11.2021 respectively. The court found the officer's change of opinion without valid grounds as unjustified, leading to the decision in favor of the petitioner.