INCOME TAX ACT, 1961

Section 147

Re-assessment - Basis of re-opening - Assessee disclosed all relevant materials - Whether re-opening of assessment valid

For the assessment year 2008-09, assessment under section 143(3) read with section 144C(13) was completed by determining the total income of Rs. 5,04,65,625, after making transfer pricing adjustment. Subsequently, notice under section 148 was issued on the basis of decision rendered by the ITAT in assessee's case for assessment years 2005-06 and 2006-07 and draft assessment order was passed by AO making transfer pricing adjustment of Rs. 6,62,47,745 relating to reimbursement of expenses paid by the assessee to its AE. On appeal, DRP (Dispute Resolution Panel) rejected the objections raised by the assessee. Accordingly, the final assessment order was passed. Held: On perusal of records, it transpired that for the relevant assessment year, viz., 2008-09, notice under section 148 was served on the assessee on 30-3-2015 for initiating reassessment in respect of reimbursement of expenses paid by the assessee to its AE which is clearly beyond four years from the end of the concerned assessment year. Proviso to section 147, at the material time, provides that when an assessment has been completed under section 143(3) and the AO seeks to reopen the assessment after a period of four years from the end of the relevant assessment year, it is incumbent upon the AO to first show that the income chargeable to tax had escaped assessment by reason of failure on the part of the assessee, inter alia, to disclose fully and truly all material facts, necessary for assessment. In the instant case, regular assessment was completed under section 143(3) read with section 144C during which the assessee was directed to furnish the details with regards to the payments towards reimbursement of expenses amounting to Rs. 6,62,47,745. In reply thereto, the assessee had disclosed all the relevant materials. The AO/TPO had accepted the arm's length price on reimbursement of expenses amounting to Rs. 6,62,47,745 without making any TP adjustment towards the same. Thus, it is clear that the assessee had disclosed all the material facts during the regular assessment proceedings. The reopening of assessment proceedings has been initiated on the basis of ITAT's order pertaining to assessee's own case for assessment years 2005-06 and 2006-07. Therefore, it cannot be alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In view of this, it was held that the initiation of re-assessment proceedings by the AO was bad in law and hence quashed.

Followed:New Delhi Television Ltd. Vs. Dy. CIT (2020) 116 taxmann.com 151 (SC) : 2020 TaxPub(DT) 1703 (SC) Pr. CIT-2 Vs. L&T Ltd. [Special Leave To Appeal (C) No. 17479 Of 2019, dt. 22-11-2019] CIT, Delhi Vs. M/s. Kelvinator of India Limited (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC) CIT and Asstt. CIT, Mangalore Vs. Karnataka Bank Ltd. (2014) 52 Tamann.com 526 (Karn) : 2015 TaxPub(DT) 3567 (Karn-HC) M/s. Sri Sakthi Textiles Limited Vs. The Jt. CIT (2010) 193 Taxman 216 (Mad) : 2010 TaxPub(DT) 2170 (Mad-HC) Sesa Goa Limited Vs. Jt. CIT & Ors. (2008) 294 ITR 101 (Bom) : 2007 TaxPub(DT) 0021 (Bom-HC) M/s. Nike India Private Limited Vs. Dy. CIT 2020 TaxPub(DT) 4456 (Bang-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2008-09

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