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TMI Blog2023 (10) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings 2015-16. Petitioner was specifically asked to produce Form No. 56F with respect to STP and SEZ units during proceedings for AY 2011-12 and the deduction under 10A of the Act was allowed after the scrutiny of the said forms. Petitioner furnished the same and other relevant documents as required by the AO from time to time, including financial statements for AY 2012-13 and AY 2013-14, wherein again details of SEZ were mentioned. Further financial statements of AY 2014-15 also mention details of the SEZ unit and Form No. 56F and relevant extract of ITR form for AY 2012-13 to AY 2014-15 as furnished also disclose details of the claim of deduction under section 10AA of the Act. Hence there is no neglect or failure on the part of petitioner to render full and true disclosure at the time of assessment. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on an assessee. Does the duty however extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGMENT:- (PER NEELA GOKHALE, J.) 1. Rule. Rule made returnable forthwith. With consent of the parties, the Petition is taken up for final hearing. 2. Petitioner assails notice dated 27th March 2021 issued by Respondent No. 1 under Section 148 of the Income-tax Act, 1961 ( the Act ) re-opening the assessment for the Assessment Year ( AY ) 2015-16 and order dated 22nd March 2022 rejecting the objections of Petitioner for re-opening of the assessment under Section 147 of the Act for the year under consideration. Notice dated 19th July 2021 issued under Section 143(2) of the Act and the further notices dated 10th January 2022 and 7th February 2022 issued under Section 142(1) of the Act are also assailed. 3. Petitioner is in the business of providing healthcare technology services. It commenced its business activities by establishing a unit in Software Technology Park ( STP ) Andheri, Mumbai. Production was commenced in the previous year relevant to AY 2006-07. Petitioner claimed 100% deduction under Section 10(A) of the Act on the profits earned from STP Unit from AY 2006-07 to AY 2011-12, which was allowed by the Assessing Officer ( AO ). Even in subsequent assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 and conveyed that in case its objections were eventually rejected, Petitioner would require time to challenge the decision of initiation of re-assessment by rejection of the objections raised by Petitioner. 7. Despite reminders from Petitioner, Respondent No. 3 passed the impugned order dated 22nd March 2022 disposing the objections merely eight days before the time limit to complete the assessment. Petitioner thus filed the present Petition seeking quashing of the notice under Section 148 of the Act and the order disposing of the objections, amongst other relief. 8. Mr. Mistri, learned Senior Advocate appearing for Petitioner contested the notices and the order impugned on the grounds that firstly, Petitioner had made full disclosure regarding the deduction claimed under Section 10AA of the Act in the return of income, financial statements and statutory audit report in Form No. 56F during the original assessment in respect of the profits earned from SEZ unit and hence, there was no failure to disclose fully and truly material facts as required under the Act; secondly, there was nothing to indicate that the deduction claimed on the profits earned from the SEZ unit was a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, the Mark to Market (MTM) losses claimed by petitioner as was allowed, should have also been routed through the profit and loss account and brought to taxation. This resulted in under-assessment of income and hence he justified re-opening on the ground of income escaping assessment. 11. Mr. Suresh Kumar also pointed to new and tangible information made available to the AO pursuant to an audit objection raised by the Revenue, although this does not find place in the reasons recorded for re-opening conveyed through the notice dated 19th July 2021 under Section 143(2) read with Section 147 of the Act. 12. We have heard the learned Counsels appearing for the parties and with their assistance have gone through the record of the proceedings. In our opinion, the following issues arise for consideration in this case: - (i) Whether in the facts and circumstances of the case, it can be adduced that the petitioner failed to disclose fully and truly all material facts during the course of original assessment which led to the finalization of the assessment order and income escaping assessment? (ii) Whether reasons to believe conveyed vide the notice dated 19th July 2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties SEZ, Airoli and could have claimed deduction u/s. 10A/10B as applicable. Therefore, the assessee is not eligible for any deduction as provided in Sub-section 4 of section 10AA. This has resulted into under assessment of income to the tune of Rs. 104,14,77,844/-. 3. Further from P L account, it was seen that the assessee has claimed finance cost of Rs. 1,61,93,313/- as Premium on Put options. Further, as per note 27, it was stated that the company enters into forward foreign exchange contracts and vanilla put options. The company purchases forward contracts and option to mitigate the risks of change in foreign exchange rate on receivables denominated in foreign currency. The Mark to Market (MTM) is considered on portfolio approach wherein the hedging instrument and the hedging items are evaluated together. Further, from note-15 other assets, it was also seen that Premium on Put Options of Rs. 2,27,38,682/- was not routed through P L account. As the assessee claimed MTM losses and was allowed, this amount should have also been routed through P L Account and brought to taxation. This has resulted into underassessment of income to the tune of Rs. 2.27,38,682/-. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner is conducting its operations from STP unit and SEZ unit is also evident in the notes to accounts forming part of the financial statements furnished by Petitioner during assessment proceedings 2015-16. Petitioner was specifically asked to produce Form No. 56F with respect to STP and SEZ units during proceedings for AY 2011-12 and the deduction under 10A of the Act was allowed after the scrutiny of the said forms. Petitioner furnished the same and other relevant documents as required by the AO from time to time, including financial statements for AY 2012-13 and AY 2013-14, wherein again details of SEZ were mentioned. Further financial statements of AY 2014-15 also mention details of the SEZ unit and Form No. 56F and relevant extract of ITR form for AY 2012-13 to AY 2014-15 as furnished also disclose details of the claim of deduction under section 10AA of the Act. Hence there is no neglect or failure on the part of petitioner to render full and true disclosure at the time of assessment. 15. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on an assessee. Does the duty however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have been routed through profit and loss account and brought to taxation. Further the language of Paragraph 4 of the same notice states that the expenditure as claimed by Petitioner in its profit and loss account towards Employees Benefit Expense including Employee Stock Appreciation Rights was allowed by the AO and now it is held that the expenditure being not for current year should have been disallowed and added to the total income resulting in underassessment of income. This clearly shows that the AO during the original assessment was of the view that the expenditure as claimed should be allowed and the reopening of assessment is based on a change of opinion . 18. The impugned order dated 22nd March 2022 rejecting the objections of Petitioner to the reason to believe notice merely justifies the reopening on the ground that Explanation I to Section 147 of the Act provides that production before the assessing officer of books of accounts or other evidence from which material evidence could, with due diligence, have been discovered by the assessing officer will not necessarily amount to disclosure within the meaning of the foregoing proviso . This is the only basis on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening of assessment is merely based on a change of opinion on the same set of facts and material before the AO which was available to him at the time of original assessment. We thus, answer issue No. 2 accordingly. 21. In view of the foregoing, we allow the Petition and hold that the Revenue has failed to show non-disclosure of facts by Petitioner and the reason to believe there was escapement of income is purely based on a change of opinion. The Petition is allowed. Rule is thus made absolute in terms of prayer clause (a) which reads as thus: - (a) That this Hon ble Court be pleased to issue a writ of Certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under Article 226 and/or Article 227 of the Constitution of India calling for the records of the Petitioner s case and after examining the legality and validity thereof quash and set aside the impugned notice dated 27th March 2021 (Exhibit I ) the impugned order dated 22nd March 2022 (Exhibit W ) and consequential notice dated 19th July 2021 under section 143(2) of the Act (Exhibit L ) and notices dated 10th January 2022 (Exhibit Q ) and 7th February 2022 (Exhibit T ..... 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