ChipTest Engineering Ltd., CHENNAI V. ITO Corporate Circle 1(2), CHENNAI

ITA 2431/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6434 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 24-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANAT KUMAR RAHA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Reopening of assessment; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 10B; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , ! ' # , $ #% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2431/CHNY/2018 & '& /ASSESSMENT YEAR: 2010-11 M/S. CHIP TEST ENGINEERING LTD., NO.18, ZAKARIA COLONY, 1 ST STREET, CHOOLAIMEDU, CHENNAI 600 094. VS. DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI. [PAN: AAFCS 1531A ] ( () /APPELLANT) ( *+() /RESPONDENT) () , - / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE *+() , - /RESPONDENT BY : SHRI SANAT KUMAR RAHA, JCIT . , /$ /DATE OF HEARING : 16.01.2019 01' , /$ / DATE OF PRONOUNCEMENT : 18.02.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 27.06.2018 F OR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.2431/CHNY/2018 (AY: 2010-11) :- 2 -: 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT ADJUDICATING/CONFIRMING THE VALIDITY OF THE REOPENI NG OF THE ASSESSMENT U/S. 147 TO DISALLOW THE DEDUCTION CLAIMED BY THE APPELLANT U/S IOB. 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT AS THE APPELLANT HAD FU RNISHED ALL THE MATERIALS, DOCUMENTS AND PARTICULARS FULLY AND TRULY WHILE COM PLETING THE ASSESSMENT U/S 143(3). HE OUGHT TO HAVE APPRECIATED THAT AS PER PR OVISO (1) OF SECTION 147, WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTIO N 143(3) OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 2.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE MADE IN THE REASSESSMENT HAS ARISE N ONLY DUE TO CHANGE OF OPINION OR IS A CASE OF REVIEW ON THE SAME SET OF F ACTS AND NOT ON ACCOUNT OF CONCEALMENT OF ANY PARTICULARS BY THE APPELLANT; HE NCE THE ORDER IS TO BE QUASHED AS BEING WITHOUT JURISDICTION. 2.3 THE APPELLANT RELIES ON THE DECISION OF THE SUP REME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LIMITED, REPORTED IN 320 ITR 561 (SC). 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT U/S LOB OF THE ACT ON THE GROUND THAT THE RATIFICATION BY THE BOARD UNDER SEC TION 14 OF INDUSTRIAL DEVELOPMENT & REGULATION ACT WAS MADE ONLY ON 25TH MARCH 2011 AND THEREFORE THE DEDUCTION WAS NOT AVAILABLE FOR THE A SSESSMENT YEAR UNDER APPEAL. 3.1 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE ASSESSING OFFICER SHOULD HAVE ALLOWED THE DEDUCTION CLAIMED BY THE APPELLANT U/S.IOB AS ALL THE CONDITIONS HAD BEEN FULFILLED BY THE APPELLANT. SINCE, THIS WAS THE FIFTH YEAR OF CLAIM MADE BY THE ASSESSEE. 3.2 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE FOUND THAT IT WAS AN ADMITTED POSITION THAT THERE WAS ALREADY A PERMI SSION/APPROVAL GRANTED BY THE ASSISTANT DEVELOPMENT COMMISSIONER DECLARING/AP PROVING THE ASSESSEE AS 100 PER CENT. EXPORT ORIENTED UNIT ( DATE OF REGIST RATION 27.08.2005) WHICH WAS SUBSEQUENTLY RATIFIED BY THE BOARD UNDER SECTION 14 OF INDUSTRIAL DEVELOPMENT & REGULATION ACT, AND THEREFORE THE DEDUCTION COULD N OT BE WITHDRAWN. 3.3 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE FOUND THAT THE MOMENT THE DECISION/APPROVAL OF THE DEVELOPMENT COM MISSIONER IS RATIFIED BY THE BOARD OF APPROVAL IT WILL RELATE BACK TO THE DA TE ON WHICH THE APPROVAL WAS GRANTED BY THE DEVELOPMENT COMMISSIONER AND THE ASS ESSEE WAS ENTITLED TO THE DEDUCTION UNDER SECTION 1 OB OF THE ACT. 3.4 THE APPELLANT RELIES ON THE DECISION OF THE HON BLE HIGH COURT OF GUJARAT IN THE CASE OF PCIT VS. ECI TECHNOLOGIES PVT. LTD. 375 ITR 595 (GUJ.) 3.5 THE APPELLANT SUBMITS THAT THE DEDUCTION UNDER SECTION LOB CANNOT BE DENIED ON ACCOUNT OF DELAY OF RATIFICATION BY THE B OARD. 3.6 THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE FOUND THAT BENEFICIAL, PROMOTIONAL AND INCENTIVE PROVISIONS LI KE THE PROVISIONS OF SECTION 10B OF ACT, WHICH WAS AIMED AT PROMOTING SOFTWARE I NDUSTRY IN INDIA, SHOULD BE LIBERALLY CONSTRUED AND SHOULD NOT BE DEFEATED ON T ECHNICAL GROUNDS. ITA NO.2431/CHNY/2018 (AY: 2010-11) :- 3 -: 3.7 THE APPELLANT SUBMITS THAT IT IS A SETTLED PROP OSITION OFTEN REITERATED BY THE HONBLE APEX COURT THAT IN CASES WHERE TWO VIEWS AR E POSSIBLE, THE ONE FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED. CIT V S. PODAR CEMENTS LTD. 226 ITR 625 (SC) AND MYSORE MINERALS LTD. VS. CIT 239 I TR 775 (SC). 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSI NESS OF IC APPLICATION SOFTWARE DEVELOPMENT, WAFER CHARACTERIZATION AND CO MPONENT CHARACTERIZATION SERVICES USING THE SOFTWARE SERVIC ES. THE RETURN OF INCOME FOR THE AY 2010-11 WAS FILED ON 18.08.2010 A DMITTING NIL INCOME. AGAINST THE SAID RETURN OF INCOME, THE ASSE SSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) ON 18.03.2013 AT TOTAL INCOME OF RS. 6,04,176/-. SUBSE QUENTLY, AO ISSUED A NOTICE U/S. 148 OF THE ACT ON 29.03.2014 PROPOSING TO REASSESS THE TOTAL INCOME ON THE GROUND THAT THE DEDUCTION U/S. 10-B O F THE ACT WAS ALLOWED, THOUGH THE NECESSARY APPROVAL FOR 100% EOU WAS NOT OBTAINED BY THE APPELLANT FROM THE PRESCRIBED BOARD AND THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 64,96,992/- DENY ING THE CLAIM OF EXEMPTION U/S. 10-B OF THE ACT FOR S. 70,96,197/-. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), CONTENDING THE INTER ALIA THAT THE VERY REOPENING OF ASSESSMENT WAS BAD IN LAW, INASMUCH AS, THERE IS NO FAILURE ON THE PAR T OF THE ASSESSEE COMPANY TO DISCLOSE THE MATERIAL FACTS, WHICH ARE N ECESSARY FOR COMPLETION OF THE ASSESSMENT AND ALSO CONTENDING TH AT IN LIGHT OF THE ITA NO.2431/CHNY/2018 (AY: 2010-11) :- 4 -: CBDT CIRCULAR NO.02/2009 DATED 09.03.2009, THE APPE LLANT IS ENTITLED FOR DEDUCTION U/S. 10-B OF THE ACT. THE LD. CIT(A) CON SIDERING THE SUBMISSIONS OF THE APPELLANT HAD DISMISSED THE APPE AL. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 5. IT IS CONTESTED THAT IN THE REASONS RECORDED THE RE IS NO ALLEGATION THAT THERE IS A FAILURE ON THE PART OF THE ASSESSEE COMPANY TO DISCLOSE PRIMARY MATERIAL FACTS, WHICH ARE NECESSARY FOR THE PURPOSE OF ASSESSMENT OF THE TOTAL INCOME. IN THE ABSENCE OF THIS AVERMENT, THE REOPENING THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR IS BAD IN LAW AND THEREFORE, REASSE SSMENT ORDER MADE PURSUANT TO SEEK ILLEGAL NOTICE SHOULD QUASHED. ON THE OTHER HAND, THE LD. CIT(A) PLACED RELIANCE ON THE LOWER AUTHORITIES . 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. IT IS SINEQUANON THAT IN ORDER TO REOPEN THE ASSESSMENT AFTER EXPIRY OF THE PERIOD OF FOUR YEARS FOR THE RELEVANT ASSESSMENT YEAR, THE REASONS RECORDED SHOULD CONTAIN AN AVERMENT THAT TH E INCOME ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS WHICH ARE NECESSARY FOR MAKING THE ASSESSMENT . INDISPUTEDLY, IN THE PRESENT CASE, NO SUCH AVERMENT WAS MADE BY THE AO. THUS, THE REQUIREMENTS OF PROVISO TO S. 148 OF THE ACT WERE N OT MET BY AO, THEREFORE, THE AO HAD NO JURISDICTION TO RE-OPEN TH E ASSESSMENT ITA NO.2431/CHNY/2018 (AY: 2010-11) :- 5 -: PROCEEDINGS, WHICH WERE CONSIDERED U/S. 143(3) OF T HE ACT. THEREFORE, WE HAVE NO HESITATION TO HOLD THAT THE REOPENING IS BAD IN LAW. ACCORDINGLY, WE QUASH THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 18 TH DAY OF FEBRUARY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' # ) (INTURI RAMA RAO) $ /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 18 TH FEBRUARY, 2019. EDN, SR. P.S , */34 54'/ /COPY TO: 1. () /APPELLANT 4. . 6/ /CIT 2. *+() /RESPONDENT 5. 47 */ /DR 3. . 6/ ( )/CIT(A) 6. 8& 9 /GF