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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश / O R D E R PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-3, Chennai, dated 30.06.2016 and pertains to assessment year 2009-10.
2. The assessee has raised the following grounds of appeal:
For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case and is opposed to the principles of equity, natural justice and fair play.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction.
3. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the reopening is bad in law.
For that the Assessing Officer did not comply with the statutory requirements before issue of notice u/s.148.
5. For that change of opinion cannot be a reason for reopening.
6. For that there is no new tangible material before the Assessing Officer to initiate the reassessment proceedings.
7. For that the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs.2,1 5,00,780/-.
For that the Commissioner of Income Tax (Appeals) failed to appreciate the reason for downward revision of sales.
For that the Commissioner of Income Tax (Appeals) erred in upholding denial of deduction in respect of income from export business.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant satisfied all the conditions and is eligible to claim deduction in respect of income from export business.
PRAYER
For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Hon'bie Tribunal may be pleased to a. Direct the Assessing Officer to accept the revised return filed (and/or) b. Allow the claim of deduction in respect of income from export business (and/or) c. Pass such other orders as this Hon'bie Tribunal may deem fit.
The assessee has raised the following additional grounds of appeal:
The Appellant craves the leave of the Hon'ble Appellate Authority to file the following additional grounds of appeal for the first time. These grounds are pure legal issues. The appellant submits that the failure to raise these grounds were due to inadvertence. The appellant further submits that this omission is not intentional and craves the leave of the Hon'ble Appellate Authority to admit these additional grounds.
ADDITIONAL GROUNDS OF APPEAL
Ground No.3
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the reopening is bad in law.
Ground No.4
For that the Assessing Officer did not comply with the statutory requirements before issue of notice u/s.148. Ground No.5 For that change of opinion cannot be a reason for reopening. Ground No.6 For that there is no new tangible material before the Assessing Officer to initiate the reassessment proceedings. Ground No.7 For that where the reason fails, the reopening fails (The existing ground nos.7 to 10 may be renumbered as 8 to 11) 4. The brief facts of the case are that the assessee company is engaged in the business of export of Software filed its return of income for the AY 2009-10 on 30.09.2010 declaring ‘nil’ total income after claiming deduction u/s.10AA of the Act. The assessment has been completed u/s.143(3) of the Act, on 29.09.2011 and determined total income of Rs.‘NIL’. The assessment has been subsequently re-opened u/s.147 of the Act, and notice u/s.148 of the Act, dated 21.03.2013 was issued. In response to the notice, the assessee has filed a return on 20.03.2014 declaring a net loss of Rs.2,55,53,954/-. During the course of assessment proceedings, the AO noticed that in the revised return of income filed in response to notice u/s.148 of the Act, the assessee has declared sales turnover of Rs.4,48,84,200/- as against sales turnover declared in original return of income of Rs.8,87,94,833/-. The AO further noted that the assessee is not eligible for deduction u/s.10AA of the Act, because, it is not operating in SEZ. Therefore, called upon the assessee to file necessary justification for claiming deduction u/s.10AA of the Act, also reduction in sales turnover.
In response, the assessee submitted that in the original return of income, by inadvertent error, proforma invoice issued to customer has been accounted as sales, but in the revised return of income, the same has been rectified which resulted in reduction in turnover and also net loss for the year and therefore, the assessee has not claimed deduction u/s.10A / 10AA of the Act. The AO, however, was not convinced with the explanation of the assessee and according to the AO, the assessee could not explain downward revision of sales with necessary evidences and also eligibility to claim exemption u/s.10AA of the Act, and thus, rejected the arguments of the assessee and denied exemption claimed u/s.10AA of the Act. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeeded. The Ld.CIT(A) for the reasons stated in their appellate order dated 30.06.2016, dismissed the appeal filed by the assessee. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.
The first issue that came up for our consideration from the assessee’s appeal is validity of re-opening of assessment. The Ld.Counsel for the assessee referring to reasons recorded for re-opening of assessment submitted that the assessment has been re-opened merely on ‘change of opinion’ without there being any fresh tangible material which suggest escapement of income, which is not permissible under the law. In this regard, he relied upon certain judicial precedents, including the decision of the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India reported in [2010] 320 ITR 0561 (SC) and also the decision of the Hon’ble Madras High Court in the case of M/s.Mobis India Ltd. v. DCIT reported in [2020] 421 ITR 0463 (Mad.).
5.1 The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A), submitted that the AO has formed reasonable belief of escapement of income on the basis of fresh material which suggest escapement of income and thus, there is no merit in the arguments of the assessee that the assessment has been re-opened on ‘change of opinion’.
5.2 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. Although, the original assessment has been completed u/s.143(3) of the Act, on 29.09.2011, but the AO has not considered the issue of exemption claimed u/s.10AA of the Act, in right perspective of law and thus, we are of the considered view that, when the AO has not expressed any opinion, the question of concept of ‘change of opinion’ does not arise. We further noted that the AO has formed reasonable belief of escapement of income on the basis of fresh materials subsequent to completion of original assessment order and said materials may come from the assessment records also.
Therefore, we are of the considered view that there is no merit in the arguments of the assessee that there is no fresh tangible material in the possession of the AO to form reasonable belief of escapement of income and thus, we reject the arguments of the assessee and uphold the re- opening of assessment.
The next issue that came up for our consideration from the assessee’s appeal is deduction u/s.10A / 10AA of the Act. The assessee is a 100% export oriented unit under the Software Technology Parks of India, an Autonomous Society under Government of India, and the Units of the assessee has been approved by the Director, STPI, Ministry of Communications & Information Technology, Department of Information Technology. In the original return of income filed u/s.139(1) of the Act, the assessee has claimed exemption u/s.10AA of the Act. However, in the revised return, in response to notice u/s.148 of the Act, the assessee did not claim deduction u/s.10AA of the Act, because, financial results of the assessment year shown net loss for the year. The assessee claims that which is eligible for claiming deduction u/s.10AA of the Act, and it has satisfied all conditions. However, because of loss, it does not claim deduction for the year under consideration. The assessee further explained that it has declared loss in the return due to rectification of duplicate entries in sales turnover on account of wrong posting of proforma invoice to export turn over and the same has been rectified while filing revised return of income. The AO has not accepted the claim of the assessee on the ground that no proper evidence has been filed to substantiate the claim. We find that if assessee is able to explain reduction in export turnover with necessary evidences, then the AO is bound to consider the turnover declared in revised return of income for the purpose of assessing income and also for claiming deduction u/s.10A / 10AA of the Act. As regards the second observation of the AO with regard to non-eligibility of the assessee for claiming such deduction, the assessee has filed necessary copies of approval from STPI under the provisions of Sec.10A / 10AA of the Act.
From the above, it appears that the assessee is eligible for claiming deduction u/s.10A / 10AA of the Act. Since, the assessee has declared net loss for the year, the question of claiming deduction u/s.10A / 10AA of the Act, does not arise. Therefore, for that reason, deduction u/s.10A / 10AA of the Act, cannot be rejected, in case, the assessee is entitled for claiming such deduction. Therefore, we are of the considered view that the issue needs to go back to the file of the AO for fresh consideration and thus, we set aside the issue and direct the AO to re-consider the claim of the assessee in light of various averments including justification for reduction in export turn over and consider the issue of computation u/s.10A / 10AA of the Act, in accordance with law after providing reasonable opportunity of hearing to the assessee.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on the 23rd day of November, 2022, in Chennai.