2013 (7) TMI 1146 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reopening assessment u/s 148 of the Income-tax Act, 1961.
2. Diversion of profits by transfer of technology.
3. Allocation of Research & Development (R&D) expenses.

Summary:

1. Validity of Reopening Assessment u/s 148:
The petition challenges the notice dated 30th March 2012 issued u/s 148 of the Income-tax Act, 1961, for reopening the assessment for the Assessment Year 2006-07. The petitioner argued that the reopening is contrary to law and without jurisdiction. The court examined whether the conditions for reopening, especially beyond the period of four years, were met. It concluded that the Assessing Officer had a reason to believe that income had escaped assessment due to the failure of the petitioner to disclose fully and truly all material facts necessary for the assessment.

2. Diversion of Profits by Transfer of Technology:
The notice for reopening was issued on two counts. The first count was the diversion of profits by transferring technology from Sun BVI to Caraco, USA. The court noted that the technologies were developed by the petitioner but were shown as acquired by Sun BVI from Unimed Technologies Limited and M.J Pharmaceuticals Limited. The court found that the material collected during the survey, including statements from senior officers, indicated that the petitioner did not disclose the true nature of these transactions. The court upheld the reopening on this ground, stating that the Assessing Officer had sufficient reason to believe that income had escaped assessment.

3. Allocation of Research & Development (R&D) Expenses:
The second count for reopening was the allocation of R&D expenses. The Assessing Officer believed that the R&D expenses incurred by the petitioner were not properly allocated among its various units, thereby reducing the petitioner's taxable income. The court noted that this issue had already been scrutinized and decided in the original assessment and by the Commissioner of Income-tax (Appeals). The court held that reopening on this ground was an attempt to review the already settled issue, which is not permissible. Therefore, the notice for reopening on this count was quashed.

Conclusion:
The court partly allowed the petition. The notice of reopening on the ground of diversion of profits by transfer of technology was upheld, while the notice on the ground of allocation of R&D expenses was quashed. The Assessing Officer was permitted to proceed with the reassessment on the first ground without being influenced by the court's observations.