INCOME TAX ACT, 1961

--Reassessment--Change of opinionAbsence of tangible material--For assessment years 2002-03 and 2003-04, assessee claimed deduction udner section 10A. AO disallowed the deduction under section 10A on ground that domain name registration and sebhosting services were not covered under the head of web-site services. For assessment years 2002-03 ad 2003-04 the orders passed by the CIT(A) granting to the assessee the benefit of the deduction under section 10A attained finality. Following this position, the assessee was allowed a dedcution under section 10A for assessment eyars 2004-05, 2005-06, 2006-07 and 2007-08. During the course of the assessment year 2008-09 the Assessee did not as a matter of fact claim a deduction under section 10A having returned a business loss. Nonetheless, the assessing officer purported to comment on whether the assessee would have been entitled to a deduction under section 10A had such a claim been made. The assessing officer held that if the assessee were to make a claim under section 10A, such a claim would not be sustainable and would had been rejected. assessing officer reopened te assessment for assessment year 2006-07 and 2007-08 on ground that domain registration services did not fall under the category of web-site services and in te case of the assessee, during the course of assessment year 2008-09 a deduction under section 10A had been disallwoed. Assessee argued that reassessment were based on a mere change of opinion ad there were no any further or new facts or fresh materials. Further, agued that section 10A contemplates a continuos deduction for a period of 10 years were to be reopened or reversed, there would be no justification for reopening assessment for subsequent years. AO argued that decision taken in a particular year could not bind the AO for subseqent years. Held: Section 10A contemplates a deduction in respect of 10 succeeding assessment years not to independent assessment year. Therefore, AO was not justified in reopening the assessment on mere change of opinion without the existence of any tangible material.

There is justification in the grievance of the assessee that by relying on the assessment order for assessment year 2008-09 the Revenue has put into place a contrived attempt to reopen the assessment for assessment year 2008-09. The issue as to whether the assessee was entitled to a deduction under section 10A did not fall for determination at all the assessee not having made a claim for deduction under section 10A in the first place during assessment year 2008-09. The AO, proceeded to hold that if the assessee were to claim a deduction during that year, then such a deduction would have been unsustainable. These observations in the order for assessment year 2008-09 have now been pressed into service to sustain the reopening of assessment for assessment years 2006-07 and 2007-08. That clearly is impermissible in the facts of this case which are clearly indicative of a mere change of opinion without the existence of any tangible material to reopen the assessment. (Para 19)

Income Tax Act, 1961 Section 147

Section 10A

IN THE BOMBAY HIGH COURT

D.Y. CHANDRACHUD & A.A.SAYED, JJ.