The assessee submitted the details for claiming deduction under section 10AA, and the AO passed the assessment order under section 143(3), recording the plant’s existence and considering the assessee company’s turnover along with the net profit ratio. Subsequently, notice under section 148 was issued beyond four years. The reasons restricted the deduction under 10AA in the proportion of material purchased from outside parties other than inter-unit transfer.

The Tribunal, while quashing the reopening, noted that the reopening is based on the information submitted during assessment proceedings. It was not the case that the inter-unit transfer of the goods and services did not correspond to the market rate. The AO must show failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. During the assessment proceedings, the AO obtained complete details and recorded the turnover and the net profit ratio in the assessment order. There was no failure to disclose fully and truly all material facts by the assessee, and the AO has no tangible material. Hence, the reassessment proceedings are invalid.  (AY. 2010-11)