Kerala H.C : Where assessee did not realize sale proceeds of exported goods within stipulated period, reopening of assessment on issue of section 10B deduction was valid

High Court Of Kerala

Suntec Business Solutions (P.) Ltd. vs. Union Of India

Assessment Year : 2005-06

Section : 10B, 147

P.R. Ramachandra Menon, J.

W.P.(C) No. 7863 Of 2013 (G)

April 12, 2013


P. R. Ramachandra Menon, J. – Exhibit P-12 speaking order passed by the third respondent in a proceeding under section 147 of the Income-tax Act, 1961, is under challenge in this writ petition.

2. The sequence of events shows that the assessment in respect of the year 2005-06 was finalized by the third respondent as per exhibit P-1 order dated December 24, 2007, under section 143(3) of the Income-tax Act. Subsequently, exhibit P-2 order was passed under section 154 of the Act, rectifying the errors. The petitioner filed exhibit P-3 appeal against exhibit P-1 assessment order and the same is pending consideration before the appellate authority. Challenging exhibit P-2 order under section 154 of the Act, the petitioner filed an appeal before the appellate authority who considered and dismissed the same as per exhibit P-4 order dated November 11, 2009. This in turn was sought to be challenged before the Income-tax Appellate Tribunal, Kochi. After considering the same, the matter was remanded to be heard and disposed of, along with exhibit P-3 appeal, vide exhibit P-5 order dated June 30, 2010. Both the appeals are stated as pending, as on date.

3. While so, the petitioner was served with exhibit P-6 notice dated March 29, 2012, issued by the third respondent under section 148 of the Income-tax Act, proposing to effect the reassessment under section 147. On receipt of exhibit P-6, the petitioner sought for reasons to be furnished in writing for invoking section 147 in tune with the decision rendered by the Apex Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963. On filing exhibit P-7 representation in this regard, the petitioner was furnished with reply, vide exhibit P-8, in response to which, exhibit P-9 objection was filed. After considering the same, the third respondent passed exhibit P-12, holding that the objection preferred by the assessee was not sustainable and that it was a fit case where the power and procedure under section 147 was to be invoked asking the assessee to furnish the particulars so as to proceed with the matter on the merits, which in turn is under challenge in this writ petition.

4. The learned counsel for the petitioner submits that there is absolutely no rhyme or reason for reopening the assessment under section 147 and that the specific requirements of the provisions are not satisfied. It is stated that the reassessment is proposed to be made after a lapse of four years and that there is absolutely no lapse, fault or failure on the part of the assessee in the matter of disclosure of the relevant facts and figures and it was accordingly, that the assessment was finalized earlier under section 143(3). It is further pointed out by the learned counsel that the proposed exercise sought to be pursued by the third respondent is only by way of review/ change in opinion, which is not permissible, in view of the law declared by this Court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312. The very purpose of furnishing detailed reasons for invoking the power and procedure under section 147 is to enable the party to contest the matter then and there, without having the necessity to undergo any detailed assessment and further proceedings, if the same is otherwise not sustainable in law as discernible from the decision rendered by the Apex Court in GKN Driveshafts (India) Ltd.’s case (supra). It is in the said circumstance that the petitioner is constrained to approach this Court by filing the writ petition, submits the learned counsel.

5. Mr. Jose Joseph, learned standing counsel appearing for the respondents submits that, there is no merit or bona fides in the writ petition and that there is no infringement of any statutory prescription or any law declared by the Apex Court or by this Court in any manner. It was in full compliance with the directions given by the Apex Court in GKN Driveshafts (India) Ltd.’s case (supra) that the reason for reopening the assessment was furnished by way of exhibits P-8 and P-9. The objection preferred by the petitioner was considered on the merits and a detailed order had been passed as borne by exhibit P-12, which, according to the respondents, is perfectly within the four walls of law and not assailable under any circumstances. The learned counsel adds that there is patent non-disclosure of actual facts from the part of the assessee, leading to escapement of income, and as such, it is a case which falls within the parameters of section 147 of the Act.

6. After hearing both the sides and after going through the materials on record, it cannot be said that there is any procedural lapse on the part of the respondents. The request made by the assessee, vide exhibit P-7 to furnish reasons was favourably considered and exhibit P-8 reply was sent furnishing the reasons in the following terms :

“The assessee, M/s. Suntech Business Solutions (P.) Ltd., has claimed deduction under section 10B amounting to US$ 123691 (Rs. 49,08,058.85) for the assessment year 2005-06. However, the assessee itself has confirmed in Form 56G submitted for the assessment year 2008-09 that the company has not realized the same amount in convertible foreign exchange till date. Subsequently, the assessee has written-off this amount and claimed deduction for the same. Hence, the assessee has violated the provisions of section 10B(3) of the Income-tax Act and, therefore, income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act.”

7. It was in response to the above reason that the petitioner furnished exhibit P-9 statement of objection, which led to exhibit P-12 order. This Court finds that the respondents have complied with the direction given by the Apex Court in GKN Driveshafts (India) Ltd.’s case (supra), and no challenge can survive under this head.

8. Coming to the question whether the proceedings can be justified beyond a period of four years (with reference to any act or omission on the part of the assessee in effecting the true and full disclosure), the case of the assessee is that, though the third respondent had proposed to disallow a portion of the claim for deduction under section 10B of the Act in the computation portion of exhibit P-1, the same was not given effect to and the third respondent passed exhibit P-2 order under section 154 of the Income-tax Act, rectifying exhibit P-1 order disallowing an amount of Rs. 1,53,95,507 (rupees one crore fifty-three lakhs ninety-five thousand five hundred and seven) out of the export turnover for the purpose of reducing the quantum of deduction claimed under section 10B of the Act. This aspect, along with such other points raised in exhibit P-9 statement of objections were meticulously analysed by the third respondent while passing exhibit P-12 order. The assessee contended that there was no violation under section 10B(3) of the Act and in the revised statement of total income, the said amount was excluded and that appeal is pending.

9. The third respondent observed with reference to the records that no revised return of income was filed by the assessee, revising the total income and, hence, the contention, of the assessee was not prima faice acceptable. The third respondent also observed that the particulars of the income for the assessment years 2005-06 filed by the assessee was inaccurate and that the same was detected only subsequently in the course of the assessment proceedings for the assessment year 2008-09. The pendency of the appeal was not a bar as escapement of income quantified in the reassessment was never to be part of the subject matter of the pending appeal. After referring to the factual particulars as above, the third respondent placed reliance on the Explanation to section 147 and also on the law declared by this Court in CIT v. Popular Vehicles & Services Ltd. [2010] 191 Taxman 333. It was, accordingly, that exhibit P-12 order was passed, deciding to proceed with the matter on the merits.

10. After hearing both the sides, this court finds that the course and proceedings pursued by the third respondent are in conformity with the statutory prescription and there is no violation of any legal provisions or binding judicial precedents. It is also relevant to note that no opinion was expressed by the third respondent while passing exhibits P-1/P-2 assessment orders and as such, it cannot be said that section 147 proceedings have been initiated by change of opinion/by way of review. In any view of the matter, it is more a question of fact and the true state of affairs can be brought to light only on furnishing the export turnover details sought for from the part of the third respondent and the actual fact has to be established by the assessee.

11. In the above circumstance, this Court finds that the writ petition does not have any merits or bona fides. None of the grounds raised in support of the same is held as tenable. Interference is declined and the same is dismissed accordingly.

[Citation 354 ITR 657]

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