2019 (7) TMI 415 - HC - Income Tax

Court upholds Single Bench decision on assessment reopening, emphasizes accurate details submission and substance over form

The High Court dismissed the appeal, affirming the Single Bench's decision in favor of the assessee regarding the reopening of assessment for the year ... Reopening of assessment - Deduction u/s 10B - substance over form - failure to provide conclusive picture regarding commencement of manufacturing activity - Single member bench of the HC has observed that, Every non disclosure of material facts will not or cannot be a justifiable reason for reopening sustainable under judicial scrutiny. - HELD THAT:- There has been a discrepancy in the dates mentioned in Form 56G filed by the assessee. There can be no escape from this fact and the assessee should accept this mistake. In fact this Form is required to be submitted through the Chartered Accountant as a report under Section 10B - Utmost care should have been taken before the details are submitted. It may be true that the assessee can now take a stand that substance over form is to be considered but what is important is that the assessee at the first instance had a duty to give proper and correct details. We may say that the assessee failed in doing so. Be that as it may, what is required on the part of the Assessing Officer is not to go mechanically by the details disclosed by the assessee in the statutory form and or for that matter signed and certified by the Chartered Accountant. AO being cast with a statutory duty an enquiry is required to test the correctness of the disclosure made in such statutory forms. This is why the concept of substance over form was always preferred by Courts while dealing with such matters. The second mistake which the assessee committed, which had invited the problem, was not mentioning the correct date of commencement of commercial production in its reply dated 02.02.2007 and this again was submitted through the very same Chartered Accountant. In the reply, there is a vague statement with regard to the commencement of manufacturing activity and what has been stated is that the assessee commenced manufacturing activity only after 01.04.2000. Thus assessee appears to have not been very seriously contesting the matter at the relevant point of time. Wisdom dawned upon the assessee only after the appellant passed the order dated 13.02.2017. It is thereafter the assessee through their Chartered Accountant gave the exact date of production/manufacture as 25.05.2000. Keeping aside all these issues, we have examined the correctness of the order passed by the learned Single Bench and we note with approval the findings of the learned Single Bench in paragraphs 16 and 17 of the impugned order. The above finding rendered by the learned Single Bench is just and proper. Issues:1. Reopening of assessment for the year 2010-2011 based on deduction claim under Section 10B of the Income Tax Act.2. Discrepancy in the Form 56G filed by the assessee regarding the date of commencement of manufacturing activity.3. Assessing Officer's rejection of the objections raised by the assessee and subsequent legal proceedings.Analysis:1. The appeal was against the order rejecting objections to the reopening of assessment for the year 2010-2011 based on a deduction claim under Section 10B of the Income Tax Act. The appellant argued that the assessee extended the 10B holiday period to the 11th year, making them ineligible for the deduction. The assessee provided documents to support their claim that manufacturing activity commenced after 01.04.2000, not in the 11th year as contended by the Assessing Officer.2. The Assessing Officer rejected the assessee's contentions, emphasizing the requirement of Form 56G for claiming exemption under Section 10B. The officer stated that the report certified by the Chartered Accountant should provide a conclusive picture of the commencement of manufacturing activity. However, the Chartered Accountant's subsequent communication indicating a different commencement date was not considered, leading to the assessee filing a writ petition challenging the order.3. The High Court noted discrepancies in the Form 56G filed by the assessee and highlighted the importance of accurate details submission. The court emphasized that the Assessing Officer should not rely solely on the details provided by the assessee but conduct a thorough inquiry to ensure correctness. The court also criticized the assessee for not providing the correct commencement date earlier and only clarifying it after the Assessing Officer's order. Ultimately, the court upheld the Single Bench's decision, emphasizing the principle of substance over form and the need for a comprehensive examination of facts and legal positions before reopening an assessment. The court dismissed the writ appeal, affirming the Single Bench's order.In conclusion, the High Court dismissed the appeal, upholding the Single Bench's decision in favor of the assessee, emphasizing the importance of substance over form in tax assessments and the need for thorough examination of facts before reopening assessments.