2018 (3) TMI 1664 - HC - Income Tax

Court quashes notice reopening assessment for AY 2011-2012, emphasizing full disclosure in assessments

QX KPO SERVICES PVT LTD Versus DEPUTY COMMISSIONER OF INCOME TAX

The Court quashed the notice seeking to reopen the assessment for the Assessment Year 2011-2012 under Section 148 of the Income-tax Act, 1961. The Court ... Reopening of assessment - claim of deduction u/s 10B - Held that:- Furnishing the explanation in support of the claim of deduction under Section 10B of the Act, it cannot be stated that there was any failure on the part of the petitioner in disclosing truly and fully all material facts necessary for its assessment for the year under consideration. The then Assessing Officer, at the time of original assessment as such had scrutinized the claim of deduction under Section 10B and did not chose to make any disallowance against the claim of deduction u/s 10B. It is the settled legal position that when a particular claim has been scrutinized by the Assessing Officer at the time of original assessment, as such, the Assessing Officer cannot reopen such assessed case in order to examine another facet of the same claim. In light of the facts that the very basis for reopening no longer survives, the assumption of jurisdiction under Section 147 of the Act by the Assessing Officer of issuing notice under Section 148 of the Act is without the authority of law and cannot be sustained. - Decided in favour of assessee. Issues involved:Challenging a notice seeking to reopen assessment for the Assessment Year 2011-2012 under Section 148 of the Income-tax Act, 1961 based on the claim of deduction under Section 10B of the Act.Detailed Analysis:1. Reopening of Assessment:The petitioner, a company providing accountancy and IT services, filed its return for the Assessment Year 2011-2012 claiming a deduction under Section 10B of the Act. The Assessing Officer, after scrutiny, accepted the return without making any disallowance regarding the deduction claimed. However, after four years, the Assessing Officer issued a notice seeking to reopen the assessment, citing reasons related to the late filing of the return and lack of proof regarding the approval of the 100% Export Oriented Undertaking (EOU) for the claimed deduction under Section 10B. The petitioner objected to the reopening, arguing that the issue was already decided in their favor during the original assessment.2. Petitioner's Arguments:The petitioner contended that the notice of reopening was issued beyond the statutory period of four years and that there was no failure on their part to disclose all relevant facts during the original assessment. They also highlighted previous instances where the deduction under Section 10B was granted and upheld by the court. The petitioner argued that since the Assessing Officer had already examined and accepted the deduction claim during the original assessment, there was no basis for reopening the assessment.3. Revenue's Arguments:The Revenue opposed the petitioner's arguments, stating that the petitioner did not fulfill the conditions for claiming the deduction under Section 10B and failed to disclose crucial information during the original assessment. They argued that the Assessing Officer had the authority to reopen the assessment even beyond the statutory period if there was a failure to disclose material facts. The Revenue emphasized that the Assessing Officer formed a bona fide belief that income had escaped assessment due to the petitioner's lack of full disclosure.4. Court's Decision:The Court examined the facts and previous legal precedents related to the deduction claim under Section 10B. It noted that the petitioner had provided all necessary details during the original assessment, and the Assessing Officer had accepted the deduction claim without any disallowance. The Court held that since the basis for reopening the assessment no longer existed, the notice issued by the Assessing Officer was without legal authority. Consequently, the Court quashed and set aside the impugned notice dated 10th January 2017, thereby disposing of the petition in favor of the petitioner.In conclusion, the Court's decision emphasized the importance of full disclosure of material facts during assessments and highlighted that once a claim has been scrutinized and accepted during the original assessment, there should be no basis for reopening the assessment on the same grounds.