· Assessee company was engaged in the business of manufacturing pharmaceuticals and formulations, and was claiming deduction u/s 10A of the Act. Assessment of assessee company was completed by the AO u/s 143(3) of the Act, wherein certain additions were made, but the claim of deduction u/s 10A was allowed.
· Within a period of four years, notice for reopening the assessment was issued by AO alleging that excess deduction was allowed to the assessee u/s 10A of the Act. Assessee raised objections against the said notice, however, AO disposed off the objections raised by assessee vide its order dated 12.12.2014. Therefore, assessee filed petition before High Court.
· After perusal of the file, High Court observed that the audit party had raised an objection regarding the freight and insurance charges being included in the export turnover for computation of deduction u/s 10A of the Act. High Court further observed that in response to the above audit objections, the then AO conveyed to the concerned CIT as well as to the Deputy Accountant General of Audit that the said objections were not acceptable, giving detailed reasons thereof.
· High Court further took note of the fact that the notice for reopening was issued solely on the ground of reduction of assessee’s claim of deduction u/s 10A of the Act by reducing the freight and insurance charges from the export turnover.
· Therefore, in view of the above facts, High Court concluded that the notice for reopening was issued under the directives and compulsion of the audit party. Thus, considering its earlier decision in the case of Adani Exports v. DCIT [1999] 240 ITR 224, the Court held the reopening to be not permissible as per law.
For further reading, refer the attachment.
Further Reading