24. MBI Kits International vs. ITO;
[2018] 98 taxmann.com 473 (Mad):
Date of order: 4th October,
2018 A. Y. 2010-11
Section 10B – Export oriented undertaking
(Date of commencement of production) – Deduction u/s. 10B – Where in order to
determine admissibility of assessee’s claim u/s. 10B, date of commencement of
manufacture or production could be ascertained from relevant documents such as
certificate of registration by competent authority, mere wrong mentioning of
said date in Form No. 56G filed in support of claim of deduction, could not be
a ground to reopen assessment
The assessee firm was
formed 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 assessee filed
its return of income for A. Y. 2010-11, claiming deduction u/s. 10B of the Act.
An order of assessment u/s. 143(3) was passed on accepting the claim of
deduction u/s. 10B. Subsequently, the Assessing Officer noticed that in Column
No. 7 to Form No. 56G, filed in support of claim of deduction u/s. 10B, date of
Commencement of manufacture or products was mentioned as 28/03/2000. According
to the Assessing Officer if the date of commencement of manufacture or
production referred to in the Column No. 7 in Form No. 56G as 28/03/2000 was
taken as true, the deduction claimed was at the eleventh year and not at the
tenth year which was not permissible. Thus, Assessing Officer took a view that
on account of assessee’s failure to disclose all material facts truly and fully
at time of assessment, deduction u/s. 10B was wrongly allowed. He thus relying
upon proviso to section 147, initiated reassessment proceedings.
The assessee raised an
objection to initiation of reassessment proceedings by contending that actual
date of commencement of manufacturing was only on 25-5-2000 and, thus,
deduction was claimed in tenth year itself. The Assessing Officer rejected the
assessee’s objection.
On a writ petition
challenging the validity of the notice the Madras High Court allowed the writ
petition and held as under:
“i) The assessee is engaged in manufacturing of test chemicals. They
got approval from the Development Commissioner, Export Processing Zone on
29/03/2000. It is claimed by the assessee that they commenced the manufacturing
activities only on 25/05/2000 and not on 28/03/2000, as has been wrongly stated
in Form 56G, an Auditor’s Report filed for claiming deduction u/s. 10B of the
Act.
ii) Admittedly, the assessee has furnished the details in Columns 7
and 8 of Form 56G. According to the revenue, if the date of commencement of manufacture
or production referred to in the Column No.7 in Form No.56G as 28/03/2000 is
taken as true, the deduction claimed was at the eleventh year and not at the
tenth year. The assessee seeks to explain that the entry made in Column No.7 of
Form 56G was by mistake and on the other hand, the actual date of commencement
of manufacture was only on 25/05/2000. At the same time, Column No.8, which
deals with number of consecutive year for which the deduction claimed, relevant
year was rightly stated as tenth year. Therefore, the question that arises for
consideration, under the above stated circumstances, is as to whether these
contradictory statement made by the assessee can be brought under the purview
of non-disclosure of fully and truly all material facts necessary for his
assessment, to attract the extended period of limitation.
iii) No doubt, Column Nos.7 and 8 contradict each
other with regard to the commencement of manufacture. However, when one of such
column has specifically referred the number of consecutive year as the tenth
year to claim section 10B deduction and when the Assessing Officer has also
considered and allowed such deduction, it has to be construed that such
deduction was granted by the Assessing Officer by forming his opinion based on the
conjoined consideration of materials already placed. In other words, it cannot
be stated that the assessee has availed the benefit u/s. 10B by giving false
details. If the date of manufacture as referred to in Form 56G is taken as the
right date, the Assessing Officer ought not to have allowed the deduction.
Likewise, if the number of consecutive year referred to in Form 56G as tenth
year is taken as the true statement, the Assessing Officer was right in
allowing the deduction. Therefore, it is evident that by furnishing the wrong
date of manufacture as 28/03/2000, the assessee has not either deceived or
suppressed any material fact before the Assessing Officer to claim deduction
u/s. 10B. If the exact date of manufacturing/production could be ascertained or
gathered from the conjoined consideration of other material documents, such as
relevant certificates of registration by the competent authority, mere wrong
mentioning of the date in Column 7 could not be construed as non-disclosure of
true and material facts, especially when column 8 of statement supported the
claim. One can understand and appreciate the stand of the revenue for reopening
the assessment, if the assessee, by giving a false information regarding the
date of commencement of manufacture as 28/03/2000 alone, had obtained deduction
u/s. 10B. Thus, it is seen that the Assessing Officer, who has originally
chosen to allow the deduction based on the materials filed already, has now
changed his opinion and has chosen to reopen the assessment, which cannot be
done after a period of four years.
iv) Accordingly, the writ petition is allowed and the impugned
proceedings of the respondent in reopening the assessment for the A. Y. 2010-11
are set aside.”
