Scrutiny assessment cannot be reopened for non ratification of STPI approval by CBDT

M/s. Kone Elevators (India) Pvt. Limited Vs ACIT (Madras High Court)

Undoubtedly, the assessee had not submitted the ratification certificate to be obtained from the CBDT for claiming exemption under Section 10B of the Act. However, there are certain confusions even within the Department Officials regarding production of such ratification certificate from the CBDT. The dispute arises in view of the fact that the assessee is of an opinion that the approval granted by the STPI under the delegated powers of the Directors of STPI by IMSC is a valid approval for the purpose of claiming exemption under Section 10B of the Act. Therefore, the presumption cannot be construed as suppression on the part of the assessee. It is not a mere presumption in the present case by the assessee. The presumption has got a valid reason because the assessee is holding a valid approval obtained from the STPI and the power to grant approval was delegated to the Directors of STPI by IMSC. It is not as if the assessee claimed exemption under Section 10B without any such approval. It is a case where the order of approval, which was validly granted, was produced before the Assessing Officer at the time of scrutiny and the Assessing Officer also accepted the approval order and granted exemption. Thus, the reason stated in the impugned proceedings that the assessee committed a mistake cannot be accepted. The assessee was possessing a valid approval which was produced before the Assessing Officer and if a ratification is to be obtained, then the Assessing Officer, at the time of scrutiny, ought to have directed the assessee to get any such ratification certificate for the purpose of grant of exemption under Section 10B which the Department had not done. Thus, it was a mistake or omission committed by the Assessing Officer at the time of passing of the original assessment order. Even in such cases, if the reopening of assessment is made within a period of four years, then there is a ground for the Department to reopen the same. However, in the present case, the reopening of assessment is made beyond the period of four years and therefore, the statutory requirement contemplated under Section 147 is to be complied with scrupulously. Thus, the ground taken for reopening of assessment that the assessee has not disclosed fully and truly all material facts is not established in the present case and the assessee, in fact, submitted all the particulars regarding the approval granted by the authority and further ratification, if required, must be instructed by the Department which was not done and therefore, there was no suppression or non­disclosure of material facts by the assessee. Thus, the initiation of proceedings under Section 147 of the Act, beyond the period of four years, is not sustainable and consequently, the impugned proceedings are not in consonance with the conditions stipulated in the Proviso to Section 147 of the Act.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The order passed by the respondent, rejecting the reasons furnished for reopening of assessment in proceedings dated 15.11.2016, is under challenge in the present writ petition.

2. The petitioner is an assessee engaged in the business of design, manufacture, supply, erection and installation of lifts and supply, erection and installation of escalators. It is engaged in manufacture and export of computer software which is a 100% export oriented unit duly approved vide proceedings dated 28.02.2002 under the Software Technology Park Scheme of the Government of India which was issued under the delegated power of the Directors of Software Technology Parks of India (STPI) by Inter Ministerial Standing Committee (IMSC) vide letter dated 24.06.1993.

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