Brief about the case
The Assessing Officer had issued notice u/s 148 of IT act to reopen the assessment of the AY 2007-08 giving reasons to believe that there was non-disclosure of all facts with respect to deduction u/s 10A by the assessee and the assessee had taken the deduction without setting off the loss of one unit.
The assessee, on the other hand, asserted that complete facts were before the Assessing Officer during the course of original assessment and it has been referred in the course of passing of the assessment order. Thus the High court held that reopening assessment would be a clear case of revisiting claim which was clearly impermissible.
Facts of the case:
- The assessee company is engaged in business of development and export of software. The assessee had filed a return of income for AY 2007-08 declaring an income of 2,76,74,434/- and the deduction u/s 10A was elaborated in Schedule 10A.
- The case was selected for scrutiny and the assessment was completed under section 143(3) read with section 144C (13) of the IT Act, assessing the total income at `115, 90, 05,170/-.
- During the course of assessment proceedings, a questionnaire was forwarded to the assessee raising a specific query in relation to the deduction claimed u/s 10A which was replied and corroborated by relevant documentation to the satisfaction of Assessing Officer. The Assessing officer passed the order allowing the said deduction.
- The Assessing officer issued reassessment notice u/s 148 of IT act giving reasons to believe that there was non-disclosure of true facts with respect to deduction u/s 10A by the assessee thereby leading to wrong allowing of deduction by the Assessing Officer.
- The assessee objected to the reassessment order by stating that complete facts were before the Assessing Officer during the course of the original assessment. The assessee contemplated that the reasons for reassessment was merely the change of opinion.
- On writ appeal, it was held by the Mumbai High Court that the issue of notice u/s 148 for reassessment was not justifiable and to revisit the deduction based on a different opinion is clearly impermissible by law.
Contention of the Revenue
- The contention of the revenue was that the assessee company had claimed deduction u/s 10A of the Act for its Unit II & III without setting off losses of unit IV from the profits derived by the eligible units which resulted in excessive deduction allowed.
- As per the provisions of section 10A of the Act, deduction is allowable on the net profit derived by the assessee company from eligible units after setting off of losses from other eligible units.
- Thereby, having reasons to believe that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, within the meaning of the provisions of section 147 of the I.T Act, 1961, income chargeable to tax has escaped assessment. Therefore, the issue of notice u/s 148 of the IT Act for reassessment is sustainable.
Contention of the Assessee
- The Assessee’s contention is that the notice under section 148 is totally vitiated as the Assessing Officer has failed to record the reasons mandated by the proviso to section 147. It was asserted by the assessee that complete facts were presented before the Assessing Officer during the course of original assessment.
- Further, a specific query raised by the Assessing Officer with regard to the deduction claimed u/s 10A was also responded with supporting documentation to the satisfaction of the Assessing officer.
- The Assessing Officer proposed to reopen the assessment so as to deal with the return of income furnished and for the assessment year 2007-08 afresh insofar as the deduction under section 10A of the IT Act is concerned which is not permissible by law.
- The assessee further stated that once the deduction is allowed and which was otherwise also permissible in law, then, the impugned notice cannot be sustained. It must be quashed and set aside for the failure to comply with the mandatory precondition.
Held by High Court
- It is not comprehensible as to how the Respondents justify the issuance of the notice u/s 148 of the IT act. If the facts and figures were not furnished to the Assessing Officer then from where the data and the computation have been taken for reference by the Respondents themselves.
- From the reasons itself, it is apparent that it is issued to revisit this claim of deduction under section 10A of the IT Act and as put forward by the Petitioner/Assessee. The Petitioner has, while disputing the reasons recorded and raising objections thereto, pointed out in details as to how the relevant facts were before the Assessing Officer.
- No material to the contrary which negates the Petitioner’s assertions is found. If the Petitioner allegedly did not give information regarding the losses of the Unit IV and did not adjust the losses of Unit IV with the profits of other units and therefore the order in that behalf is termed as erroneous, then, this is a clear case of revisiting this claim. Now, a different opinion is held by the Respondents and for which they want to reopen the assessment.
- Such a course is clearly impermissible. The mandatory precondition and as set out in the statute has not been abided by and therefore the notice under section 148 of the IT Act and all steps in furtherance thereof cannot be sustained.