• Feb
  • 24
  • 2013

Reopening for lack of price transparency & requirement of price adjustment in ALP valid

HIGH COURT OF KARNATAKA

Sysarris Software (P.) Ltd.

versus

Deputy Commissioner of Income-tax

WRIT APPEAL NO. 3039 OF 2012 (T-IT)

Date of pronouncement – 07.01.2013

JUDGMENT

1. This writ appeal by an assessee under the provisions of the Income Tax Act, 1961 [for short, the Act], which is a private limited company, is aggrieved by the reopening of the concluded assessment for the assessment year 2006-07 by issue of notice under Section 148 of the Act.

2. The assessee questioned this reopening before a learned Single Judge of this court by filing a writ petition on the premise that there was no tangible or credible information with the assessing officer before issuing the notice under Section 148 of the Act.

3. Notice had been issued to the revenue-respondents. Revenue has produced records. Learned Single Judge examined the record, particularly the reasons recorded by the assessing officer prior to issue of notice as contained in the record. Learned Single Judge rejected the contention on behalf of the assessee that it was a case of reopening without basis or material and on the other hand took the view that there was reasons recorded before reopening, but the adequacy of it or otherwise cannot be gone into and therefore dismissed the writ petition. It is aggrieved by this order, the present appeal.

4. Sri Chaithanya, KK, learned counsel for the appellant, has very vehemently contended that it was not the case of adequacy of reasoning as recorded in the records before reopening, but relevancy of the reason with which the assessing officer could have formed the basis of the nature of the transaction and the manner of assessment for the assessment year 2005-06 i.e. earlier year for reopening the concluded assessment for the subsequent year; that the transfer pricing officer’s opinion for the early hearing cannot constitute information for the subsequent year etc.

5. It is submitted that the assessing officer has entered into a roving enquiry for eliciting information by rendering the case for the opinion of the transfer pricing officer in respect of the transaction for the assessment year in question much later to the issue of notice proposing to reopen the concluded assessment.

6.On the other hand, Sri K V Aravind, learned standing counsel for respondents-revenue, with reference to para-3 of the reasoning, submits that while the information that had been received by the assessing officer for the earlier assessment year with regard to the valuation of international transactions was one basis, the assessing officer having noticed that the assessee having carried identical business activity with the very business associates and being of the opinion that the pricing was not transparent, but because of mutual relationship and therefore formed the opinion that there is an escapement of the income for the assessment year 2006-07 also and proceeded to issue notice under Section 148 of the Act.

7. While Sri Chaithanya, learned counsel for the appellant submits that the transaction and the report of the transfer pricing officer for the other assessment year cannot be a basis for reopening of any concluded assessments of other years, this contention was subsequently rejected by the learned Single Judge on the premise that while the assessing officer had considered the manner of transaction for the earlier year, he has independently formed his opinion that there is an escapement of income for the assessment year 2006-07 also and therefore without going into the adequacy of the reasoning, dismissed the writ petition.

8. We are unable to accept the contentions on behalf of the appellant-assessee for two reasons. Firstly, the reasoning recorded by the assessing officer cannot be said to be totally irrelevant, as the relevancy is in the context of escapement of income for the assessment year and the information may be from any source outside and an information with reference to any earlier year is outside the purview of the record of the current assessment year. Secondly, we find that reference to the nature of the transactions of the very assessee even for the year and this forming basis for the opinion for the present year, because of the like manner of transactions by the assessee is the opinion of the assessing officer and this exercise had been undertaken before a further report was called for from the transfer pricing officer for the assessment year in question as per the reference made on 16-12-2010 by the assessing officer. Notice should have been issued earlier if the assessing officer gathers supporting material for the earlier due, that cannot be said to be gathering of information subsequent to the issue of notice. The basis was already known and it is always the duty of the assessing officer to procure relevant material which, if at all, to be put to the assessee before concluding the assessment, but that does not vitiate the reopening.

9. Though learned counsel for the appellant has placed reliance on the judgment of the Supreme Court in the case of Asstt. CIT v. Dhariya Construction Co. [2010] 328 ITR 515, we find, that was a case where the Supreme Court took the view that opinion of the DVO cannot itself be substituted that the opinion of the assessing officer, who has passed the order on escapement of income and in the present case, we find the opinion is formed by the assessing officer and the reference if at all to the transfer pricing officer is later for confirming etc.

10. It is, therefore, we are not impressed to interfere with the order passed by the learned Single Judge in the writ petition. Writ appeal dismissed.

Sandeep Kanoi

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