Cairn India Ltd. Vs Deputy Director of Income Tax-I (Madras High Court)
The Madras High Court considered a writ petition challenging the notice issued under Section 148 of the Income-tax Act dated 29.03.2012 and the consequential order dated 05.03.2013 rejecting the assessee’s objections to the reopening of assessment for AY 2007-08. The petitioner, engaged in the exploration and production of oil and gas in India, had filed its return claiming deductions, and the assessment had originally been completed under Section 143(3) after scrutiny, including transfer pricing proceedings. The assessment was subsequently reopened under Section 147 within four years on the ground that income chargeable to tax had escaped assessment.
The petitioner contended that all material facts, audited financial statements, tax audit reports, transfer pricing documentation, and responses to queries raised during the original scrutiny assessment had been fully disclosed. It argued that the reopening was based solely on a change of opinion without any fresh tangible material, despite the Assessing Officer having examined the relevant issues during the original assessment proceedings. The petitioner relied upon several judicial precedents concerning the requirement of “reason to believe,” judicial review of reopening proceedings, and the principle that reassessment cannot be based merely on a change of opinion. It also submitted that the issue relating to loan guarantee fee had been specifically examined during the original assessment through notices under Section 142(1), detailed replies, guarantee agreements, transfer pricing findings, and explanations regarding deductibility under Section 37(1) and tax deduction at source. The petitioner further argued that guarantee fees were not taxable as fees for technical services under the India–UK DTAA because of the “make available” requirement under Article 13.
