Genuine export receipts and change of opinion barred reassessment; deduction under section 10B was upheld.
Genuine software export receipts supported by STPI certification, invoices and banking remittances were treated as eligible for deduction under section 10B, and could not be taxed as unexplained income under section 68 absent contrary evidence. The Tribunal also held that reassessment under section 147 cannot be founded on a mere change of opinion or suspicion; it requires fresh tangible material and a bona fide reason to believe that income has escaped assessment. On the facts described, the recorded reasons lacked such material, so the reopening was invalid and the consequential assessment was quashed.
Issues: (i) Whether the assessee was entitled to deduction under section 10B and whether the foreign remittances and export receipts could be treated as unexplained income under section 68; (ii) Whether the reassessment proceedings under section 147 were validly initiated on the basis of the recorded reasons.
Issue (i): Whether the assessee was entitled to deduction under section 10B and whether the foreign remittances and export receipts could be treated as unexplained income under section 68.
Analysis: The assessment and reassessment were founded on survey material and the view that the software exports were not genuine. The record showed, however, that the exports were supported by STPI certification, invoices, banking channel remittances, and the material already considered in the earlier year. The Tribunal treated the factual matrix as substantially the same as in the earlier decided year, where genuineness of export had been accepted. In the absence of material showing that the receipts were not export proceeds, the presumption against genuineness could not be sustained. Once the export activity was accepted as genuine, the receipts could not be assessed as unexplained credits merely because the Revenue doubted the business model or profit level.
Conclusion: The assessee was held entitled to deduction under section 10B, and the addition under section 68 was deleted.
Issue (ii): Whether the reassessment proceedings under section 147 were validly initiated on the basis of the recorded reasons.
Analysis: The original assessment had already considered the claim under section 10B, and the reopening was triggered substantially by the same survey material and the same line of suspicion. The reasons did not disclose fresh tangible material showing escapement of income; instead, they reflected a mere change of opinion on the existing facts. The governing principle is that reassessment cannot be used as a review power, and the formation of belief must have a live link with material indicating escapement of income. On that standard, the recorded reasons were not bona fide and the initiation of reassessment was invalid.
Conclusion: The reassessment proceedings under section 147 were held invalid and the consequential assessment was quashed.
Final Conclusion: The assessee succeeded on the substantive deduction issue and also on the jurisdictional challenge to reassessment, resulting in relief in the appeal for the later year and partial relief in the connected years.
Ratio Decidendi: Reassessment cannot be sustained on a mere change of opinion or suspicion; it must rest on tangible material forming a bona fide reason to believe that income has escaped assessment, and genuine export receipts supported by contemporaneous verification cannot be rejected and taxed as unexplained credits without contrary evidence.
TaxTMI 
AI Drafter ✕
TaxTMI 
