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2018 Supreme(Mad) 1976
IN THE HIGH COURT OF JUDICATURE AT MADRAS
K. RAVICHANDRABAABU, J.
M/s. MBI Kits International, Rep. by its Partner, D. Chandrasekar - Petitioner
Versus
The Income-tax Officer, Non-Corporate Ward-1(3), Chennai - Respondent
W.P.No. 7416 of 2017 & WMP No. 8070 of 2017
Decided On : 04-10-2018
For the Petitioner:M.P. Senthilkumar, Advocate.
For the Respondent: Hema Muralikrishnan, Senior Standing Counsel (I.T).
The main legal point established in the judgment is that the reopening of the assessment under Section 148 of the Income Tax Act must be based on tangible material and not on a mere change of opinion, especially when the original assessment was made based on the materials filed by the assessee.
Headnote:
Income Tax Act - Reopening of Assessment - Section 148 - [MANUFACTURING ACTIVITIES] - [Section 147, Section 148, Section 149] - The court considered the reopening of the assessment under Section 148 of the Income Tax Act for the Assessment Year 2010-11. The petitioner, engaged in manufacturing of test chemicals, claimed deduction under Section 10B of the Act. The Assessing Officer had allowed the deduction based on the materials filed, including Form 56G, which mentioned the date of commencement of manufacture as 28.03.2000 and the number of consecutive years for which the deduction was claimed as the tenth year. The court held that the reopening was beyond the period of limitation and based on a mere change of opinion, as the petitioner had not deceived or suppressed any material fact before the Assessing Officer to claim the deduction under Section 10B. The court set aside the impugned proceedings of the respondent in reopening the assessment for the assessment year 2010-11.
Fact of the Case:
The petitioner, engaged in manufacturing of test chemicals, claimed deduction under Section 10B of the Income Tax Act for the Assessment Year 2010-11. The Assessing Officer had allowed the deduction based on the materials filed, including Form 56G, which mentioned the date of commencement of manufacture as 28.03.2000 and the number of consecutive years for which the deduction was claimed as the tenth year.
Finding of the Court:
The court found that the reopening of the assessment was beyond the period of limitation and based on a mere change of opinion, as the petitioner had not deceived or suppressed any material fact before the Assessing Officer to claim the deduction under Section 10B.
Issues: The issues revolved around the reopening of the assessment under Section 148 of the Income Tax Act for the Assessment Year 2010-11, based on the petitioner's claim for deduction under Section 10B.
Ratio Decidendi: The court held that the reopening was beyond the period of limitation and based on a mere change of opinion, as the petitioner had not deceived or suppressed any material fact before the Assessing Officer to claim the deduction under Section 10B.
Final Decision: The court set aside the impugned proceedings of the respondent in reopening the assessment for the assessment year 2010-11.
The petitioner is aggrieved against the proceedings of the respondent dated 13.02.2017 in rejecting the objections filed by the petitioner against the reopening of the assessment under Section 148 of the Income Tax Act, in respect of the Assessment Year 2010-11.
2. The case of the petitioner is as follows:
The petitioner is an assessee under the respondent. The petitioner firm was formed under Partnership Deed dated 20.03.2000 with an object to carry on the business of manufacturing and testing chemicals. The Madras Export Processing Zone issued a letter of permission dated 28.03.2000. The Government of India, Ministry of Commerce by letter dated 29.03.2000, granted permission to the petitioner to carry on its business of manufacturing of test kits used for checking iodized salt. The petitioner was granted permanent Registration Certificate by the Director of Industries and Commerce dated 31.05.2000. The petitioner commenced its business of production on 25.05.2000. The petitioner filed its return of income for the Assessment Year 2010-11 on 24.09.2010, claiming deduction under Section 10B of the said Act to the tune of Rs.97,34,667/-. After scrutiny, an order of assessment under Section 143(3) was passed on 28.01.2013, accepting the claim of deduction under Section 10B, however by making minor additions. The petitioner filed an appeal as against the additions and the Appellate Authority, through his order dated 30.06.2016, deleted the additions and allowed the appeal. Thereafter, a notice under Section 148 dated 03.01.2017 was served on the petitioner for reopening of the assessment, on the reason that the income of the petitioner chargeable to tax for the assessment year 2010-11 has escaped assessment. The petitioner filed its return on 19.01.2017, declaring its taxable income at nil, as was declared in original return. The petitioner through the letter dated 19.01.2017, also sought reasons for reopening the assessment. The respondent, through the communication dated 25.01.2017, informed the reasons for reopening of the assessment. It was stated that the petitioner has extended its 10B holiday period to the eleventh year and hence, become ineligible for deduction under Section 10B. The petitioner, through the letter dated 02.02.2017, objected to the reopening on the ground that the same was beyond four years of the end of the relevant assessment year and that the petitioner firm commenced its business of manufacturing activity only after 01st April 2000 and consequently, the initial year, when the undertaking commenced manufacturing activity being the assessment year 2001-02, the claim of deduction under Section 10B was well on the tenth year itself. The petitioner also contended that the reopening was made merely based on change of opinion without there being new tangible material to deny the claim under Section 10B. However, the respondent, through the impugned communication, rejected the objection filed by the petitioner. Hence the present writ petition.
3. The respondent filed a counter affidavit, wherein it is stated as follows:
The petitioner was an assessee under the respondent. The petitioner was formed under Partnership Deed dated 20.03.2000. The petitioner had executed a legal agreement with MEPZ dated 28.03.2000, pursuant to the letter of permission granted by the said Authority on 28.03.2000. The petitioner was granted permission to carry on business by the Ministry of Commerce, Government of India, on 29.03.2000. The petitioner was granted permanent Registration Certificate by the Directorate of Industries and Commerce dated 31.05.2000. The petitioner commenced its business of production on 28.03.2000 and not on 25.05.2000, as claimed by the petitioner. The same is evidenced by the relevant entry in column No.7 of Annexure A to Form No.56G in support of claim of deduction under Section 10B for the assessment year 2010-11. The petitioner filed its return for the assessment year 2010-11 on 24.09.2010, claimi
