Back
2023 Supreme(Ker) 742
IN THE HIGH COURT OF KERALA AT ERNAKULAM
ANU SIVARAMAN, J.
M/s. Digital Mesh Softech India (P) Ltd. & Ors. - Petitioners
Versus
The Union of India, Represented by the Secretary, Ministry of Finance (Department of Revenue) & Ors. - Respondents
W.P.(C) Nos. 4689 of 2015, 4709 of 2015 & 7849 of 2014
Decided On : 12-10-2023
For the Petitioner: Sri. M. Gopikrishnan Nambiar, Sri. P. Benny Thomas, Sri. P. Gopinath, Sri. K. John Mathai, Sri. Joson Manavalan, Sri. Kuryan Thomas, Sri. Raja Kannan.
For the Respondent: Sri. Jose Joseph, SC, For Income Tax, Christopher Abraham.
Point of Law : Responsibility of assessee is only to place materials before assessing officer and assessee would not be responsible for inferences made by assessing authority.
Headnote:
Income Tax Act, 1961 - Section 147, 148, 143 - Industries Development and Regulation Act, 1951 - Assessment year - Re-opening an assessment - Issue raised in these writ petitions is with regard to validity of an order re-opening an assessment under Section 147 of Income Tax Act, 1961 after period of four years from end of assessment year - Re-opening of assessment in all these 3 cases are therefore found to be incompetent - Para 22.
Finding of the Court :
Change in opinion or a later decision on legal aspects cannot be a reason for re-opening an assessment which has been concluded on basis of material which is made available in cases where re-opening is attempted after 4 years, unless assessee failed to disclose relevant information - There is no failure on part of assessee to disclose materials and failure was on part of assessing authority in drawing inferences on basis of materials placed re-opening of assessment after 4 years would be incompetent - Re-opening of assessment in all these 3 cases are therefore found to be incompetent - Notices and assessment orders are resultantly set aside - Assessments made under Section 143 for relevant assessment years shall stand confirmed.
Result : Writ petitions are ordered accordingly.
JUDGMENT :
1. The issue raised in these writ petitions is with regard to the validity of an order re-opening an assessment under Section 147 of the Income Tax Act, 1961 after the period of four years from the end of the assessment year.
2. W.P.(C).Nos.4689 of 2015 and 4709 of 2015 are filed by the very same assessee and the assessment years in question are 2007-2008 and 2008-2009 respectively, while W.P.(C).No.7849 of 2014 is in respect of assessment year 2006-2007. The assessees had availed exemption under Section 10B of the Income Tax Act as 100% Export Oriented Undertakings (EOU for short) for a block of ten years. Their assessments had been completed accepting their claim for exemption by Exhibit P1 orders. In W.P.(C).No.4689/2015 Exhibit P1 is dated 10.12.2009 and exemption under Section 10B for income under the head “business derived from export of software” was allowed to the petitioner. However, it was found that the assessee had not excluded the interest income and had claimed exemption under Section 10B in respect of interest income also. The interest income received from Bank deposit and short term deposits was therefore assessed as income from other sources and the exemption under Section 10B was limited to profits from the export of software and tax was demanded for interest income. It is submitted that the demand was met by the petitioner.
3. In W.P.(C).No.4709/2015 also, the assessment was finalised by Exhibit P1 for the assessment year 2008-2009 on 13.12.2010.
4. In W.P.(C).No.7849/2014 an assessment order was passed, as evidenced by Exhibit P1 for the assessment year 2006-2007, which was a non-speaking order assessing a total income of 30,42,228/-. The 2nd respondent had thereafter initiated proceedings under Section 263 of the Act and set aside Exhibit P1 order for the reason that the exemption claimed by the petitioner under Section 10B of the Act was granted without following the due procedure and for other reasons. The assessment order was set aside and the assessment was remanded to the assessing officer to go into all the materials and to revise the assessment accordingly. Thereafter Exhibit P3 assessment order was passed assessing the total income as Rs.30,42,228/- and disallowing the excess deduction claimed under Section 10B for an amount of Rs.40,62,940/-. The revised total income of Rs.71,05,170/- was arrived at and tax was computed accordingly. The said demand was met by the petitioner. It is specifically stated in Exhibit P3 revised assessment order that the assessee has filed the relevant report under Section 10B of the Act in Form No.56G and that since the procedure for allowance of deduction is fulfilled, no further interference is required.
5. However, in all the three cases, after a period of four years from the last day of the asessment year, notices were issued for re-opening the assessment under Section 148 of the Income Tax Act, 1961 by Exhibit P2 in the first two writ petitions and Exhibit P4 in W.P.(C).No. 7849/2014. The notices are seen dated 26.3.2014 in all the three cases. The petitioner submitted requests seeking reasons recorded for re-opening of the assessment. The reply given by the assessing authority is Exhibit P4 in the first two cases is as follows:-
“The assessee's claim for exemption u/s.10B of the Act was based on the approval as 100 percent EOU granted under STPI scheme. In the case CIT Vs. Regency Creations Ltd, the Honourable High Court of Delhi made it clear that approval granted to a 100 percent EOU set up under STPI scheme cannot be claimed to be an approval under Section 10B of the Act. Hence, I have reason to believe that assessee's income has escaped assessment within the meaning of section 147 of IT Act, 1961.”
6. In W.P.(C).No.7849 of 2014, Exhibit P6 is the reply. In Exhibit P6, apart from relying on the decision in M/s.Regency Creations case for invoking re-assessment under Section 147 of the Act, it was stated that since there is failure on the part of the assessee
