The Hon'ble High Court of Delhi in Principal Commissioner of Income-tax v. Samsung India Electronics (P.) Ltd. [ IT APPEAL NO. 1445 OF 2018 dated May 30 , 2024 ] held that initiation of reassessment proceedings after a lapse of four years, in the absence of any new tangible material, is not permissible under the settled position of law.
Facts of the Case:
The Respondent, Samsung India Electronics (P.) Ltd., filed its income tax return for the assessment year 2002-03, declaring a loss of Rs.4,63,27,044/- and book profit of Rs.80,47,676/- as per Section 115JB of the Income Tax Act, 1961 ("the Act"). The return was processed under Section 143(1) of the Act and selected for scrutiny assessment. Subsequently, an assessment order was passed by the Assessing Officer ("AO") under Section 143(3) of the Act on March 21, 2005, making various additions and assessing the business income at Rs.67,97,24,064/-.
On March 25, 2009, the AO issued a notice under Section 148 of the Act for reopening the assessment under Section 147 of the Act. The reasons recorded for reassessment were supplied to the Respondent on August 10, 2009, to which the Respondent replied on December 16, 2009, contending that there was no fresh material to reopen the assessment. However, on the same day, the AO passed an assessment order under Section 147/143(3) of the Act, making certain additions and computing the total taxable income at Rs.73,71,78,670/-.
Aggrieved by the order, the Respondent preferred an appeal before the Commissioner of Income Tax (Appeals) ["CIT(A)"], who, vide order dated June 27, 2011, held that the reassessment proceedings were validly initiated by the Revenue but deleted the additions made by the AO on merits. The Revenue then filed an appeal before the Income Tax Appellate Tribunal ("ITAT") against the CIT(A)'s order deleting the additions, while the Respondent filed a cross-objection challenging the validity of the reassessment proceedings. The ITAT, vide order dated February 23, 2018, decided the cross-objection in favor of the Respondent and dismissed the Revenue's appeal.
Issue:
Whether the initiation of reassessment proceedings after a lapse of four years, in the absence of any new tangible material, is permissible under the law?
Held by the Court:
The Hon'ble High Court of Delhi held that the initiation of reassessment proceedings after a lapse of four years, in the absence of any new tangible material, is not permissible under the settled position of law.
The Court observed that the reasons recorded by the AO while issuing the notice under Section 148 of the Act did not disclose any specific reference to the circumstances that triggered the Revenue to take a fresh view.
It was noted that the Revenue's contention of relying on the revenue audit report as fresh tangible material was mentioned for the first time in the CIT(A)'s order, which indicated no live link between the reasons recorded and the formation of belief to take action under Section 147 of the Act.
The Court held that the alleged non-disclosure of giving away 75 vehicles to dealers as commission could not have formed a part of the satisfaction recorded to issue notice under Section 148 of the Act, as the proceedings under Section 201/201(1A) of the Act, which brought this fact to light, were initiated much later on February 9, 2011.
The High Court upheld the ITAT's decision, stating that no new tangible material was discovered by the Revenue to warrant reopening the assessment for the assessment year in question after a lapse of four years.
Relevant Sections:
- "Section 147" and "Section 148" of the Income Tax Act, 1961
Income Tax Department cannot reopen tax assessments aft
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