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TMI Blog2014 (4) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO – Section 10A of the Income Tax Act, 1961 provides deduction of such profits & gains as are derived from the eligible activities performed by an undertaking - the deduction allowed u/s 10A, does not form part of the total income, the loss in respect of Section 10A undertaking should also be ignored while computing total income – section 10A income is exempt from tax, the loss should also have been ignored, which has not been done - this has resulted in underassessment of income – thus, there is reason to believe that income to the extent of Rs,5,62,75,564/- has escaped assessment and it is a fit case for reopening u/s 147 of the Act – the materials, prima-facie, are sufficient to acquire jurisdiction u/s 147, because they give rise to “reason to believe” that the prima-facie assessee’s claim for exemption has not been examined properly in the course of the assessment proceedings – Decided against Assessee. Disallowance of claim of deduction u/s 10A of the Act – Registration not taken for new industrial undertaking – Held that:- Both the parties had admitted that the matter has to be remitted back to the AO for fresh adjudication – decided in favour of Assessee. - ITA no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 139(1) on 30th October 2002, at an income of Rs.2,30,23,149. The return of income was duly accompanied by the audited annual report under section 44AB and also audit report in Form no.56F for the purpose of claiming exemption / deduction under section 10A. The said return of income was the subject matter of scrutiny and the assessment was completed under section 143(3), vide order dated 25th March 2005 after allowing deduction of Rs.3.0,36,36,412 under section 10A. Thereafter, the case was re-opened under section 148 and the assessment was completed under section 143(3) r/w section 147 on 8th November 2006, which was later on revised vide order under section 154, dated 3rd December 2008. In these orders also, the assessee s claim of deduction which was allowed was not disturbed. Therefore, the expiry of four years from the end of the relevant assessment year, the assessee s case was re-opened vide notice dated 25th March 2009, under section 148, on the following reasons recorded :- The assessee filed its return of income on 30.10.2002, declaring total income at Rs.2,30,23,149. The return was processed u/s 143(3) of the Act. Thereafter, the case was select ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,412 has escaped assessment and hence, in my opinion nit is a fit case for reopening u/s 147 of the Income Tax Act, 1961. Accordingly, proceedings u/s 147 of the Income Tax Act, 1961 are hereby initiated and a notice u/s 148 of the Income Tax Act, 1961, is issued to the assessee company, requiring it to furnish a return in response. 4. After receiving the aforesaid reasons , the assessee raised objection before the Assessing Officer not only on the validity of notice under section 148 but also on the merits of re-opening the case under section 147 before the Assessing Officer. However, the Assessing Officer rejected the assessee s objection and disallowed the claim of deduction under section 10A on merits after holding that two units of the assessee i.e., Unit-II and Unit-III are not separate undertakings for the purpose of claiming deduction under section 10A. Such a finding was based on the material found and relied upon by the Assessing Officer in the course of assessment proceedings for the assessment year 2005-06. 5. Before the learned Commissioner (Appeals), it was submitted that the assessee s claim under section 10A, has been allowed by the Assessing Officer up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Multiscreen Media P Ltd. v/s Union of India, [2010] 324 ITR 48 (Bom.); iii) Bhor Industries Ltd. v/s ACIT, [2004] 267 ITR 161 (Bom.); and iv) Cadila Healthcare Ltd. v/s DCIT, [2011] 334 ITR 420 (Guj.). 7. The learned Departmental Representative, on the other hand, submitted that the Assessing Officer, in the reasons recorded , has categorically stated about the additional information which was received by the Assessing Officer during the course of the assessment proceedings for the assessment year 2005-06. In that year, enquiry was done by the Assessing Officer with STPI authorities who have written to the Assessing Officer vide letter dated 10th December 2008, that the assessee had only one STPI registration in the year 1992 and there is no new registration for setting up the new units in the year 2000. The new units which were set up were only expansion of the old unit registered in the year 1992 and, therefore, the Assessing Officer had reason to believe that the deduction under section 10A claimed by the assessee is without any basis and without registration and, hence, cannot be allowed. Besides this, the Assessing Officer has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry of more than four years from the end of the relevant assessment year, second notice under section 148 has been issued on 25th March 2009 on the reasons which has been incorporated in the forgoing paragraph. On a careful perusal of the reasons recorded, it is seen that the Assessing Officer has relied upon the material which were gathered during the course of the assessment proceedings for the assessment year 2005-06, inasmuch as that two units of the assessee are not separate undertakings but have been set-up on the expansion of the old unit for which registration certificate was granted by the STPI in the year 1992 and there is no registration for its new industrial undertaking. Nowhere in the reasons the Assessing Officer has ascribed any failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment. It is now a trite law that the conditions laid down under section 147 must be satisfied before issuing notice under section 148, as these conditions are jurisdictional facts, which needs to be examined for re-opening a completed assessment. Once the vital conditions of the section 147 stands fulfilled, then the first proviso c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d v/s Union of India (2010) 324 ITR 48 (Bom) In the above case, the Bombay High Court has held that, the notice issued by the Assessing Officer under section 148 does not state that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment for assessment year 2002-03. The assessment was sought to be reopened after the expiry of a period of four years from the end of the relevant assessment year. In such a case the jurisdictional condition precedent stipulated by the proviso to Section 147 is a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year consequent upon which income chargeable to tax has escaped assessment. That has not been fulfilled. The notice does not even purport to state so. iii) Bhor Industries Ltd. vs. ACIT (2004) 267 ITR 161 (Bom) In the above case, the Bombay High Court has held that, in the entire reasons submitted in support of the notice under section 148, there was no allegation of income having escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in ground no.2 on merits, the same has become academic in view of the fact that the assessment itself has been quashed by us. 13. In the assessment year 2003-04 also the assessee has challenged the re-opening for the assessment under section 147 on similar ground. The facts and circumstances in this year are exactly same and the findings given in the assessment year 2002-03 will also apply mutatis mutandis in this year also. For the sake of ready reference, following events, which are relevant, are as under:- i) The return of income was filed u/s 139(1) on 27th Nov. 2003 ii) The assessment u/s 143(3) was completed on 24th March 2005, after accepting the assessee s claim for exemption under section 10A on the basis of material placed on record iii) Notice under section 148 has been issued on 20th March 2009 which is much beyond the period of four years from the end of the relevant assessment year. 14. Even the reasons recorded in this year also are similar to that of the assessment year 2002-03, which for the sake of ready reference, is reproduced herein below:- The assessee company is engaged in the business of providing IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and further erred in holding that the re-opening of the assessment by issue of notice u/s 148 of the Act was validly done by the Assessing Officer. 2. The learned CIT(A) erred in upholding the disallowance of the appellant s claim of deduction u/s 10A amounting to Rs.66,63,24,606. 17. Insofar as ground no.1 is concerned, it has been admitted by both the parties that in this year re-opening has been done before the expiry of four years from the end of the relevant assessment year and, therefore, the proviso to section 147 will not apply. The assessee s main contention in this regard is on account of change of opinion . On merits, it has been admitted by both the parties that similar issue had come up for consideration before the Tribunal in assessee s own case for the assessment year 2005-06, wherein the Tribunal has restored this issue to the file of the Assessing Officer. The learned counsel for the assessee submitted that in pursuance of the Tribunal order dated 31st January 2012, for the assessment year 2005-06, the Assessing Officer has passed the assessment order, without carrying out the directions given by the Tribunal In the first appeal, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai vide order uls.92CA(3) dated 27.10.2006 has made total adjustment of Rs.2,84,70,000/- to the transaction values. Subsequently, the order uls.143(3) of the Act was passed on 29.12.2006, assessing the total income of the assessee at Rs.11,70,12,950/- and raising a demand of Rs.3,70,85,599/-. Subsequently, the assessment has been rectified uls.154 of the Income Tax Act, 1961 on 21.02.2007, revising the total income to Rs.10,37,83,450/- and raising a demand of Rs.3,07,73,309/-. The assessee company is engaged in the business of providing IT IT enabled services. In the course of assessment proceedings for A.Y. 2005-06, the assessee company claimed deduction u/s 10A for the units II IV situated at HTMT House, Vijpayee Nagar, Bommanahalli, Hosur Road, Bangalore 560 068 and the assessee company has obtained Registration Certificate vide Reg. No. 15(63) 192SDA dated 22/0711992. On enquiry with STPI Authorities, it is revealed that there was no new registration certificate has been obtained at the time of setting up of the above two new units in the year 2000. STPT Authorities further clarified that the so called new units set up in 2000 are the expansion of the old units set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings uls.147 of the Income Tax Act, 1961 are hereby initiated. 21. In this case, the return of income was filed on 30th November 2004 and the assessment was completed under section 143(3) on 29th December 2006, after allowing the claim of deduction under section 10A. On a perusal of the original assessment order, it is seen that the Assessing Officer has not specifically dealt upon the issue of claim of exemption under section 10A, however, has allowed on the basis of the material available with him. In this case, the Assessing Officer has clearly brought out new material fact in the reasons which was made available to him during the course of the assessment proceedings for the assessment year 2005-06. These materials, prima-facie, are sufficient to acquire jurisdiction under section 147, because they give rise to reason to believe that the prima-facie assessee s claim for exemption has not been examined properly in the course of the assessment proceedings. If some new material facts comes in light, which has a direct nexus and live link with the claim allowed earlier, then such a material do give rise to reasons to believe . Hence, it cannot be held that such rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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