TaxTMI 
TaxTMI 
2012 (12) TMI 456
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....t 66 Noida Special Economic Zone (NSEZ) yielded profit of Rs.10,65,03,063/- in respect of which deduction under Section 10A was claimed. For the second unit (another EOU) at A-164, Sector 80, Noida, the profit of Rs.2,24,72,84,842/- was declared and a deduction under Section 10 B was claimed for this entire amount. In respect of the third unit i.e. 100% EOU at 66 Udyog Vihar, Greater Noida, the assessee declared loss of Rs.50,53,96,992/- and did not claim any deduction. In the concerned form i.e. 56G, as against the column seeking particulars regarding eligibility for deduction under Section 10A, the assessee declared "Nil". The assessee later filed a revised return of income and declared Rs.86,29,74,037/- under normal provisions of the Act and stated that it had inadvertently omitted to claim deduction on previously incurred expenses. In the revised return it made the following claims for deductions under Sections 10A and 10B respectively: Particulars of the Unit Profit/(Loss) (In Rs.) Remarks 66, NSEZ, Noida 10,65, 03,063 Deduction u/s 10A claimed A-164, Sector-80, Noida 2,21,68, 52,725 Deduction u/s 10B claimed 66, Udyog Vihar, Greater Noida (50,....
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....,57,37,009/- u/s 10A & 10B in respect of two units. However, the loss of Rs.50,75,39,374/- of third unit was not reduced from the profit of other two units. Thus the assessee has claimed excess exemption u/s 10B of Rs.50,72,19,040/-. This has resulted in over assessment of loss of Rs.50,72,19,040/- involving potential tax effect of Rs.18,19,65,133/-. Further the assessee has paid tax u/s 115JB and excess allowance of exemption u/s 10B has resulted in underassessment of book profit of Rs.50, 72, 19, 040/- involving tax effect of Rs. 5,18,92,728/-." 6. The petitioner objected to re-opening of the assessment contending that no grounds were validly made out; the first respondent rejected the objections on 15.07.2011. That action was impugned in a writ petition (i.e. WP(C) No.5183/2011). By an order dated 02.08.2011 this Court set aside the rejection of the petitioner's objection (by the first respondent's order 15.07.2011) and directed the latter to hear the objections afresh and pass fresh order dealing with them. The petitioner again approached the first respondent through letter dated 24.08.2011 objecting to assumption of jurisdiction contending inter alia that as regards the ....
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....ction under Sections-10A/10B of the Act. 9. I have carefully considered these submissions made on behalf of the assessee company. The issue under consideration is the computation of deduction allowable under section 10B of the IT Act, 1961. For this purpose, a reference to sub-section 4 to 8 of section 10B of the IT Act, considered necessary. The provisions of clause (ii) of sub-section 6 of section 10B provide for carry forward and set off of losses pertaining to the 100 % export oriented units eligible for deduction under the said section. When the facts of the present cases are analyzed in the light of the provision of sub-sections (3) to (8) of sub-section 10B, more particularly clause (ii) of sub-section 6, the losses of eligible units are to be set off against the profits of such eligible unit. Reliance is placed on the ratio laid down by the Hon'ble Karnataka High Court in the case of CIT vs. Himatasingike Seide Ltd. 286 ITR 0255 and of Hon'ble ITAT Chennai in the case of Sword Global (I) P Ltd Vs. ITO 306 ITR (AT) 286. Therefore, the assessee was not correct in not setting off of losses of one eligible unit against the profits of another eligible unit, which is against t....
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....s enclosed." 9. It is also urged that in response to a query raised by Respondent No.1, the Petitioner by letter dated 21.02.2005 furnished information regarding the units eligible for deduction u/s 10A/10B. In the reply the Petitioner listed all 3 units as units eligible for claiming deduction. The issue of deduction u/s 10A/10B was specifically examined by the Assessing Officer during the original assessment. Many queries regarding deduction u/s 10A/10B were raised by the Respondent No.1 and the same were replied to by the Petitioner. The Assessing Officer after having gone through the return of income filed, replies to the queries and the notes annexed to the return of income reached the conclusion that the Petitioner was entitled to deduction u/s 10A/10B as claimed subject to certain modifications. As a result, the reassessment proceedings are bad in law and impermissible as being barred by limitation. In this regard, it is contended that Section 147empowers the assessing officer to reassess the income chargeable to tax if he has reason to believe that the income for such assessment year has escaped assessment. However the proviso to Section 147 restricts....
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.... disclosed at Point 1(c) that, the claim for benefit under Sections 10A/10B of the Act, in respect of 66, Udyog Vihar, Greater Noida- (registered as a 100% Export Oriented Unit on November 28, 2001) was eligible for claiming tax-holiday benefits u/s 10B of the Act. No deduction under Section 10B of the Act was claimed in view of a loss situation. The Report in Form 56G for the said unit was enclosed. Further on 27.12.2006 the Petitioner filed approval letter from the competent authority regarding eligibility of the units for deduction u/s 10A/10B; approval letters regarding all three units were submitted. 11. It was emphasized that the Assessing Officer after examining the return of income, documents accompanying the return of income, Form 56F/56G, notes and various other documents submitted in the course of the original assessment accepted the deduction claimed u/s 10A/10B after some modification. The Assessing Officer applied his mind and after taking into consideration all documents on record passed an assessment order dated 29.12.2006 wherein he specifically altered the deduction claimed u/s 10A/10B. At the time of the original assessment, the Assessing Officer was aw....
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....losure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account book or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment." 13. It is lastly urged that the Supreme Court while upholding the view of the Full Bench of this Court, in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited (2010) 2 SCC 723 observed that, "6. Ongoing through the changes, quoted above, made to Section 147 of the Act, we fin....
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....A number of representations were received against the omission of the words 'reason to believe' from Section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." 14. In the present case the Assessing Officer passed the assessment order knowing that there were three units eligible for deduction u/s 10A/10B and that only 2 of the 3 units had claimed deduction; the third unit claimed NIL deduction. The Assessing Officer passed the assessment order and specifically altered the deduction claimed u/s 10A/10B. At the time of the original assessment the Assessing Officer did not think of setting o....
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....f the Act. Now, Kelvinator of India (supra) is authority that the Assessing Officer can re-open assessment under Section 147 of the Act, only if there is 'tangible material' to show that income has escaped assessment. The Assessing Officer is not allowed to arbitrarily reopen assessment. This aspect had been emphasized much earlier, in Lakhmani Mewal Das that "The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section." 17. In the present case, the original return of the assessee was subjected to scrutiny assessment, under Section 143 (3). The assessee was apparently closely questioned on various aspects, including its claim for treatment of the three units, under Sections 10-A/10B of the Act. In response to a query raised by Respondent No.1, the Petitioner by letter dated 21.02.2005 furnished in....