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A.T.KEARNEY INDIA LTD Vs. INCOME TAX OFFICER-WARD 1(1) , NEW DELHI
September, 24th 2014
        THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgment delivered on: 16.09.2014

+       W.P.(C) 5244/2012 and CM No. 10713/2012

A.T.KEARNEY INDIA LTD                                            ... Petitioner


                                        versus

INCOME TAX OFFICER-WARD 1(1) ,
NEW DELHI                                                        ... Respondent

Advocates who appeared in this case:
For the Petitioner      : Mr Mayank Nagi

For the Respondent      : Mr Sanjeev Sabharwal, Senior Advocate with Mr Ruchir
                          Bhatia and Ms Swati Thapa

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL

                                   JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1.               This writ petition is directed against the notice dated
        27.03.2012 issued under Section 148 of the Income-tax Act, 1961
        in respect of the assessment year 2008-09. The reasons given for
        the re-opening were inter alia based on the scrutiny proceedings of
        the very same petitioner for the assessment year 2009-10. The
        issue pertains to the high level of operating profits and the
        consequent alleged excessive deduction taken by the petitioner /
        assessee under Section 10A of the said Act.



W.P.(C) No. 5244/2012                                                   Page 1 of 7
2.               The petitioner had filed its objections and the Assessing
        Officer passed an order rejecting the objections. In that order the
        Assessing Officer specifically noted that the fact that the assessee
        was claiming excessive deduction, as above, under Section 10A
        surfaced for the first time during the assessment proceedings for
        assessment year 2009-10 in the case of the petitioner itself. It was
        also noted that while going through the income tax return details
        for the subject year it was observed that here also the petitioner /
        assessee had adopted the same mechanism and had thus claimed
        excessive deduction under Section 10A of the said Act. According
        to the Assessing Officer, these findings constituted the new
        tangible material on record which was the basis for the reason to
        believe that income by way of excessive deduction under Section
        10A had escaped assessment and that it was not a case of mere
        change of the opinion. It was also pointed out in the order rejecting
        the objections that the assessee had also not been able to
        distinguish as to how the facts of assessment year 2008-09 were
        different from those of assessment year 2009-10. It was concluded
        by the Assessing Officer that, where all other things remain the
        same, the inference drawn during the assessment proceedings for
        assessment year 2009-10 with respect to the excessive deduction
        claimed under Section 10A of the said Act was equally applicable
        in respect of the assessment year 2008-09.
3.               We are now informed by the learned counsel appearing on

        behalf of the petitioner that the appeal in respect of the assessment







W.P.(C) No. 5244/2012                                             Page 2 of 7
        year 2009-10 being ITA No. 348/Del/2013 has been allowed by the

        Income Tax Appellate Tribunal, New Delhi.             Apart from the

        observations on law, on facts it has been held by the Tribunal as

        under:-

                 "It can be seen from the facts of the instant case that
                 the AO has simply treated high profit earned by the
                 assessee as a reason to summon sub-section (10),
                 without even remotely demonstrating the existence of
                 any ,,arrangement between the assessee and its AEs
                 aimed at producing extra ordinary profits in the hands
                 of the assessee. The conclusion drawn by the
                 authorities below in such circumstances cannot be ex
                 consequenti sustained."

4.               The consequence of the above decision by the Tribunal is

        that the very basis for forming the purported reason to believe that

        income had escaped assessment in respect of the assessment year in

        question does not survive any further. The learned counsel for the

        petitioner, therefore, contended that the proceedings pursuant to the

        impugned notice under Section 148 ought to be quashed as also the

        order rejecting the objections needed to be set aside. He placed

        reliance on a decision of this court in Silver Oak Laboratories

        Private Limited and Another v. Deputy Commissioner of Income-

        Tax, Circle 8(1), New Delhi, in W.P. (C) 17719-20/2006 decided




W.P.(C) No. 5244/2012                                               Page 3 of 7
        on 18.12.2008. The facts of that case were somewhat similar to the

        present case. In that case also, during the assessment proceedings

        of other assessment years, certain facts were noticed and, based

        upon that, the notice under Section 148 for re-assessment had been

        issued in respect of the year in question. It was evident that the

        reasons recorded for the proposed re-assessment did not contain

        any specific allegation with regard to the year in question in that

        case, namely, the assessment year 1999-2000 and that the sole and

        entire basis of re-opening the assessment were the additions made

        in respect of the assessment years 1998-99 and 2001-02. No other

        reason had been given by the Assessing Officer for re-opening the

        assessment. 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 re-assessment

        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 (supra) that there was no

        specific allegation with regard to the assessment year 1999-2000

        regarding suppression of the sale figures and that the re-assessment




W.P.(C) No. 5244/2012                                             Page 4 of 7
        proceeding 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.

5.               In these circumstances this court, in Silver Oak Laboratories

        (supra), quashed further proceedings in respect of the notice under

        Section 148 and also set aside the order whereby the objections of

        the assessee had been rejected by the Assessing Officer. A similar

        order is sought by the learned counsel for the petitioner in the

        present case.

6.               We find that there is one factor which is different from that

        case and, that is, that while in the previous case no appeal had been

        filed against the Tribunals order, in the present case the Tribunals

        order had been passed only on 26.08.2014 and there is still time for

        filing of the appeal on the part of the Revenue.             In these

        circumstances, while the very basis for the issuance of the notice

        under Section 148 no longer survives, we are of the view that as







W.P.(C) No. 5244/2012                                               Page 5 of 7
        there is still time for the filing of an appeal by the Revenue before

        this court, a different order would be required to be passed.

7.               It is clear that as the position stands today, the reasons do not

        survive. However, subsequently the position may be altered in

        case the Revenue files and appeal and succeeds therein. Therefore,

        the Revenue also has to be protected.            Consequently, we are

        inclined to adopt the approach indicated in National Agricultural

        Co-operative Marketing Federation of India Ltd. v. Assistant

        Commissioner of Income Tax ­ Circle 32(1), W.P.(C) 5895/2010

        decided on 07.08.2014 wherein we passed the following order:-

                 "In these circumstances, we find that as of now, the
                 very basis of initiating the re-assessment proceedings
                 by virtue of the notice dated 02.02.2010 issued under
                 Section 148 of the Income Tax Act, 1961 does not
                 survive. Therefore, we are disposing of this writ
                 petition with liberty to both sides to seek revival in
                 case the need arises. We make it clear that in case it
                 is ultimately held in favour of the revenue, then the
                 revenue shall be entitled to revive its proceedings
                 pursuant to the notice under Section 148 of the said
                 Act and the assessee shall not take up the plea of
                 limitation.
                 The writ petition stands disposed of accordingly."




W.P.(C) No. 5244/2012                                                  Page 6 of 7
8.               Consequently, we direct that the re-assessment proccedings

        stand closed and the present writ petition is disposed of with liberty

        to both sides to seek revival in case the need arises. We make it

        clear that 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 under Section 148 of the said Act and the assessee shall not

        take up the plea of limitation.       As of now, the re-assessment

        proceedings initiated by virtue of the impugned notice under

        Section 148 does not survive. We are making it clear that we have

        not expressed any opinion with regard to the validity of the

        issuance of the notice under Section 148 on the date on which it

        was issued.

9.               With these observations, the writ petition stands disposed of.




                                           BADAR DURREZ AHMED, J




                                             SIDDHARTH MRIDUL, J
SEPTEMBER 16, 2014
SU


W.P.(C) No. 5244/2012                                                Page 7 of 7

 
 
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