2015 (5) TMI 262 - HC - Income Tax

Reopening of assessment - high level of operating profits and the consequent alleged excessive deduction taken by the petitioner-assessee under section 10A - Held that - As decided in assessee's own case 2014 (9) TMI 128 - ITAT DELHI as facts of that case were somewhat similar to the present case the very basis for forming the purported reason to believe that the income had escaped assessment in respect of the assessment year in question does not survive any further. It can be seen from the facts of the instant case that the Assessing Officer has simply treated high profit earned by the assessee as a rea son to summon sub-section (10), without even remotely demonstrating the existence of any 'arrangement' between the assessee and its AEs aimed at producing extraordinary profits in the hands of the assessee. The conclusion drawn by the authorities below in such circumstances cannot be ex consequent sustained. Since the Tribunal, in that case had already deleted the additions in respect of the assessment years 1998-99 and 2001- 02, the very basis for continuing any further with the reassessment proceedings in respect of the relevant assessment year (1999-2000) did not survive any further. It was specifically noted in the said decision in Silver Oak Laboratories (2008 (12) TMI 40 - HIGH COURT DELHI ) that there was no specific allegation with regard to the assessment year 1999-2000 regarding the suppression of the sale figures and that the reassessment proceedings depended entirely on the additions made in respect of the assessment years 1998-99 and 2001-02, which, as pointed out above, had been deleted by the Tribunal. It was also noted in the said decision that the Revenue had not filed any appeal against the decision of the Tribunal deleting the said additions. Thus we direct that the reassessment proceedings stand closed and the present writ petition is disposed of with liberty to both sides to seek revival in case the need arises - Decided in favour of assessee.

Summary

Issues:
1. Challenge against notice under section 148 of the Income-tax Act, 1961 for the assessment year 2008-09 based on excessive deduction under section 10A.
2. Rejection of objections by the Assessing Officer and subsequent legal proceedings.
3. Impact of the Tribunal's decision on the basis for reopening the assessment.
4. Comparison with a similar case regarding the validity of reopening assessment.
5. Decision on quashing the proceedings and setting aside the order rejecting objections.
6. Consideration of time for filing an appeal by the Revenue and its impact on the proceedings.
7. Court's direction regarding the closure of reassessment proceedings and liberty to seek revival if needed.

Analysis:
The judgment involves a challenge against a notice issued under section 148 of the Income-tax Act, 1961 for the assessment year 2008-09, concerning an alleged excessive deduction under section 10A. The Assessing Officer rejected the objections raised by the petitioner, citing new tangible material from assessment proceedings of the subsequent year as the basis for reopening. The Tribunal's decision in a related case emphasized the necessity of demonstrating arrangements leading to extraordinary profits for such reassessment to be valid.

The Tribunal's decision in the related case impacted the basis for reopening the assessment, leading the petitioner to seek the quashing of proceedings and setting aside the order rejecting objections. Drawing parallels with a similar case, the court highlighted the importance of specific allegations for reopening assessments and the need for a valid basis beyond mere observations from other years' proceedings.

Considering the time for the Revenue to file an appeal against the Tribunal's decision, the court directed the closure of reassessment proceedings for the present but allowed for revival if circumstances change. This approach aimed to protect both parties' interests and maintain the possibility of revisiting the matter based on future developments, as seen in a previous case involving the National Agricultural Co-operative Marketing Federation of India Ltd.

In conclusion, the court disposed of the writ petition with the provision for revival if necessary, emphasizing the need to protect the Revenue's rights while acknowledging the evolving nature of the legal proceedings based on potential appeal outcomes. The judgment did not express a definitive opinion on the validity of the notice under section 148 at the time of issuance, leaving room for further legal considerations based on future events.