2014 (9) TMI 726 - HC - Income Tax

Reopening of assessment u/s 148 - high level of operating profits - excessive deduction taken u/s 10A Held that - Appeal of the assessee has been allowed by the ITAT - As the position stands today, the reasons do not survive - subsequently the position may be altered in case the Revenue files and appeal and succeeds therein - Therefore, the Revenue also has to be protected - the re-assessment proceedings is directed to stand closed and the writ petition is disposed of with liberty to both sides to seek revival in case the need arises - if the case is ultimately decided in favour of the Revenue in respect of the assessment year 2009-10, then the Revenue shall be entitled to revive its proceedings pursuant to the impugned notice u/s 148 of the Act and the assessee shall not take up the plea of limitation - As of now, the re-assessment proceedings initiated by virtue of the notice u/s 148 does not survive Decided in favour of assessee.

Summary

Issues:
- Challenge against notice under Section 148 of the Income-tax Act, 1961 for the assessment year 2006-07 based on excessive deduction under Section 10A.
- Rejection of objections by Assessing Officer and subsequent appeal.
- Tribunal's decision on the appeal for the assessment year 2009-10.
- Comparison with a similar case regarding re-opening of assessment.
- Quashing of re-assessment proceedings and objections rejection order.
- Consideration of pending appeal by the Revenue and protection of interests.
- Disposal of the writ petition with liberty to seek revival if needed.

Analysis:
1. The writ petition challenges a notice under Section 148 of the Income-tax Act, 1961 for the assessment year 2006-07, citing excessive deduction under Section 10A. The Assessing Officer rejected objections, noting similarities with the assessment year 2009-10 proceedings where excessive deduction was claimed. The basis for re-opening was the alleged escape of income due to excessive deduction.

2. The appeal for the assessment year 2009-10 was allowed by the Income Tax Appellate Tribunal, New Delhi. The Tribunal criticized the Assessing Officer for treating high profits as a reason without demonstrating any arrangement for extraordinary profits. This decision undermined the basis for the notice under Section 148 for the assessment year in question.

3. Drawing parallels with a similar case, the petitioner sought to quash the re-assessment proceedings and objections rejection order. In the referenced case, the Tribunal's deletion of additions in other assessment years led to the quashing of re-assessment proceedings for the relevant year.

4. Despite similarities with the referenced case, a key difference was the pending appeal by the Revenue against the Tribunal's order for the assessment year 2009-10. This led the court to adopt a different approach to protect the interests of both parties.

5. The court decided to close the re-assessment proceedings, granting liberty to both sides to seek revival if necessary. The order emphasized that if the Revenue succeeds in the appeal for the assessment year 2009-10, they can revive the proceedings under the impugned notice without the plea of limitation.

6. The judgment concluded by disposing of the writ petition with the mentioned observations, ensuring clarity on the status of the re-assessment proceedings and leaving room for potential revival based on the outcome of the pending appeal.