2013 (9) TMI 78 - AT - Income Tax

High Court sets aside Tribunal decision on reassessment notices, remands for further consideration.

Abad Fisheries Versus Income-tax Officer and Assistant Commissioner of Income-tax Versus Abad Fisheries

Abad Fisheries Versus Income-tax Officer and Assistant Commissioner of Income-tax Versus Abad Fisheries - [2012] 19 ITR 753 Issues Involved:1. Validity of reassessment notices under section 147.2. Justification for reopening assessments for the years 1999-2000 and 2000-01.3. Claim of deduction under section 10B for 100% export-oriented unit.4. Treatment of service charges related to exports.5. Validity of charging interest under section 234D.6. Chargeability of interest under section 234B.Detailed Analysis:1. Validity of Reassessment Notices under Section 147:The assessments for the years 1999-2000, 2000-01, and 2002-03 were completed under section 147 read with section 143(3) of the Income-tax Act. The assessee challenged the reopening of assessments, arguing that it was invalid in the absence of a regular assessment under section 143(3). The Tribunal initially accepted the assessee's plea, but the High Court of Kerala set aside the Tribunal's orders due to a factual error and remanded the case back to the Tribunal to consider the reasons recorded for reopening the assessments.2. Justification for Reopening Assessments for 1999-2000 and 2000-01:The Tribunal examined the reasons recorded by the Assessing Officer (AO) for reopening the assessments. For the year 1999-2000, the reasons included issues like exemption under section 10B, computation of deduction under section 80HHC, and treatment of interest on LERMS account. For the year 2000-01, the reasons included interest on fixed deposits, exclusion of interest on LERMS deposits from export turnover, and gain on exchange fluctuation rate. The Tribunal found that the AO had sufficient reasons to believe that there was an escapement of income, justifying the reopening of assessments for both years.3. Claim of Deduction under Section 10B for 100% Export-Oriented Unit:The assessee claimed exemption under section 10B for profits from its 100% export-oriented unit. The AO denied the exemption on the grounds that exports were made through export houses, not directly. The Tribunal, referencing a decision by the Kerala High Court in the assessee's own case, noted that if the sale proceeds were received in foreign exchange and drawback incentives were granted, the assessee should be treated as an exporter. However, since relevant details were not available on record, the Tribunal remanded the issue back to the AO for verification.4. Treatment of Service Charges Related to Exports:The assessee claimed deduction under section 80HHC for service charges related to exports. The AO treated some of these charges as 'other income' and excluded 90% of them while computing 'profits of business.' The Tribunal noted that the assessee did not furnish disclaimer certificates for the years under consideration, unlike in a previous year where the Tribunal had allowed the claim. Therefore, the Tribunal upheld the AO's treatment of these charges as 'income from other sources.'5. Validity of Charging Interest under Section 234D:The Tribunal referred to a decision by the Kerala High Court in the case of CIT v. Kerala Chemicals and Proteins Ltd., which settled the issue of charging interest under section 234D. The Tribunal set aside the orders of the Commissioner of Income-tax (Appeals) on this issue and directed the AO to examine it in accordance with the High Court's decision.6. Chargeability of Interest under Section 234B:The Tribunal noted that the issue of charging interest under section 234B is consequential in nature and remanded it back to the AO for examination.Conclusion:The appeal of the Revenue for the assessment year 2002-03 was treated as allowed, and the appeals filed by the assessee for the years 1999-2000 and 2000-01 were treated as partly allowed for statistical purposes. The Tribunal directed the AO to re-examine certain issues based on the High Court's guidance and the provided factual details.