2017 (12) TMI 250 - HC - Income Tax

Reopening of assessment - petitioner company is incorporated in the United Kingdom which is engaged in the business of providing services and facilities in connection with exploration and extraction and production of mineral oils - reason to believe - Held that - In the present case, the Assessment Officer while assessing the income of petitioner company, has ignored the transactions made by it with its Associate Enterprises. He has also overlooked whether Section 3CEB was to be referred to the TPO. It is thus, not the change of opinion but the reassessment has been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment. The objections raised by the petitioner company have been specifically dealt with by the respondent no.1. Impugned order dated 12.12.2011 passed by the respondent no.1 is detailed and reasoned. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice and order dated 28.3.2011 and 12.12.2011 under Income Tax Act for reassessment of income. Reopening of assessment for the assessment year 2004-05 based on transactions with Associate Enterprises and non-referral of Section 3CEB to TPO.

Analysis:
The petitioner, a UK-based company engaged in oil exploration, filed a return of income for 2004-05 under section 44BB(3) of the Income Tax Act. The return was scrutinized, resulting in an income assessment. Subsequently, a notice was issued under section 148 to reassess the income, focusing on transactions with Associate Enterprises and non-referral of Section 3CEB to the TPO. The petitioner objected to the reopening, but the objections were rejected by the Income Tax authorities.

The judgment referred to the Supreme Court's decision in 'Commissioner of Income Tax Delhi v. Kelvinator of India Ltd.' emphasizing that reassessment can only be based on tangible material indicating income escapement. The court highlighted the distinction between review and reassessment, emphasizing that reassessment must have a live link with tangible reasons. The judgment also cited a Delhi High Court case, 'Consolidated Photo & Finvest Ltd. V. Asst. CIT (Delhi),' clarifying that mere change of opinion is not a valid reason for reassessment.

In this case, the reassessment was not due to a change of opinion but was based on tangible material related to transactions with Associate Enterprises and non-referral of Section 3CEB to the TPO. The court found the reassessment order detailed, reasoned, and in line with legal precedents. Consequently, the petition challenging the reassessment was dismissed, upholding the legality of the reassessment process.

This detailed analysis of the judgment highlights the legal principles governing reassessment under the Income Tax Act, emphasizing the importance of tangible material and reasons for income escapement. The court's reliance on established legal precedents reinforces the validity of the reassessment in this case, ultimately leading to the dismissal of the petition challenging the reassessment order.