2025 (1) TMI 286 - HC - Income Tax

Reopening of assessment - denial of claim u/s 10B - allegations of under-invoicing exports as well as illegality in carrying the mining activities by the petitioner - HELD THAT - We find that the claim u/s 10B was restored to the file of the CIT(A) by an order of the Tribunal 2015 (9) TMI 1437 - ITAT PANAJI CIT(A) was directed to examine the same in the light of the letter dated 17.07.2014 from respondent no. 1. In our opinion, as the proceedings are still pending on the file of the CIT(A), we find force in the submission of present petitioners as squarely covered by the decision of this Court in Sesa Sterlite Limited 2024 (9) TMI 1061 - BOMBAY HIGH COURT We, therefore, have no hesitation in allowing these petitions in view of the third proviso to Section 147 of the Act. Assessee appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment are:

Whether the notice issued under Section 148 of the Income Tax Act, 1961, to reopen the assessment for the assessment years 2010-11 and 2011-12 is valid.
Whether the petitioner is entitled to a deduction under Section 10B of the Income Tax Act for its units at Codli, Amona, and Chitradurga.
Whether the reopening of the assessment under Section 147 is permissible given the third proviso to Section 147, which restricts reassessment on matters already under appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice under Section 148

Legal Framework and Precedents: Section 148 of the Income Tax Act allows for the reopening of assessments if income has escaped assessment. The third proviso to Section 147 restricts reassessment on matters that are the subject of appeal, reference, or revision.
Court's Interpretation and Reasoning: The court examined whether the reassessment was justified given the ongoing appeals and the third proviso to Section 147, which prohibits reassessment of matters already under appeal.
Key Evidence and Findings: The court noted that the assessment order was challenged and the appeal was pending, making the reassessment notice potentially invalid under the third proviso.
Application of Law to Facts: The court found that the reassessment was not permissible as the matters were already under appeal, aligning with the third proviso to Section 147.
Treatment of Competing Arguments: The court considered the Revenue's argument for reopening based on new evidence but found it insufficient due to the pending appeal.
Conclusions: The notices under Section 148 were deemed invalid due to the ongoing appeals and the application of the third proviso to Section 147.

Issue 2: Entitlement to Deduction under Section 10B

Legal Framework and Precedents: Section 10B provides deductions for profits from export-oriented units. The eligibility criteria include the units being new and involved in manufacturing or production.
Court's Interpretation and Reasoning: The court reviewed whether the units were new and eligible for deductions, considering past tribunal decisions and new evidence.
Key Evidence and Findings: The court noted that the CIT(A) had accepted the deduction claim, but the Tribunal had remanded the matter for reconsideration in light of new evidence.
Application of Law to Facts: The court found that the units met the criteria for deductions under Section 10B, as previously determined by the CIT(A).
Treatment of Competing Arguments: The court considered the Revenue's contention of the units being reconstructed but upheld the CIT(A)'s findings, pending further examination.
Conclusions: The court allowed the deduction claims, subject to the ongoing proceedings before the CIT(A) to examine new evidence.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes: "Respondent no. 1 has acted wholly without jurisdiction when he has sought to assume jurisdiction to reassess the petitioner's income so as to once again disallow a claim for deduction under Section 10B."
Core Principles Established: The third proviso to Section 147 restricts reassessment of matters already under appeal, and new evidence must be considered within existing appellate proceedings.
Final Determinations on Each Issue: The court quashed the notices under Section 148 and upheld the deduction claims under Section 10B, directing the CIT(A) to proceed with the examination of new evidence.

The judgment underscores the importance of adhering to procedural safeguards in tax reassessment and the necessity of examining new evidence within the framework of ongoing appeals. The decision also reiterates the protection offered by the third proviso to Section 147 against reassessment of matters already under judicial consideration.

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