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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