SILVER OAK LABORATORIES P.LTD. V. DEPUTY COMMISSIONER OF INCOME

W.P.(C)/17719/2006

AI Insights

The case involves Silver Oak Laboratories Private Limited, which challenged the initiation of re-assessment proceedings for the assessment year 1999-2000 under Section 147 of the Income-tax Act, 1961. The petitioner had initially declared a loss in their return, which was accepted. However, subsequent re-assessment notices were issued based on alleged suppression of sales, which had been adjusted in other years. The petitioner contested the re-assessment, arguing that the basis for it was no longer valid as the tribunal had removed the earlier additions. The High Court agreed with the petitioner, leading to the quashing of the re-assessment proceedings.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 726472 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 18-12-2008
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANJEEV SABHARWAL
• Assessee Lawyers: C S AGGARWAL; PRAKASH KUMAR
• Keywords: Income escape; Notice under section 148; Objections to reassessment; Re-assessment; Suppression of sales
• Section: 147; 148; 143(1); 151

Judgement Text

"WP(C) 17719-20/06 Page No. 1 of 5 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 18.12.2008 + WP(C) 17719-20/2006 SILVER OAK LABORATORIES PRIVATE LIMITED AND ANOTHER ... Petitioner - Versus - DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 8(1), NEW DELHI ... Respondents Advocates who appeared in this case :- For the Petitioner : Mr C.S. Aggarwal, Sr Advocate with Mr Prakash Kumar For the Respondent : Mr Sanjeev Sabharwal CORAM:- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MR JUSTICE RAJIV SHAKDHER 1. Whether Reporters of local papers may be allowed to see the judgment ? 2. To be referred to the Reporter or not ? 3. Whether the judgment should be reported in Digest ? BADAR DURREZ AHMED, J (ORAL) 1. The petitioner is aggrieved by the initiation of re-assessment proceedings under Section 147 of the Income-tax Act, 1961. The petitioner had filed the return of income on 30.12.1999 declaring a total loss of Rs 5,55,80,254/- which was processed under Section 143 (1) on 29.09.2000. Subsequently, by a notice dated 01.03.2006 issued under Section 148 of the said Act, the assessment in respect of the assessment year 1999-2000 was proposed to be re-opened. The reasons recorded for the re- WP(C) 17719-20/06 Page No. 2 of 5 opening of the assessment were recorded on 21.02.2006 and were supplied to the petitioner on 08.11.2006. The said reasons are as under:- “M/s Silver Oak Laboratories Ltd. A.Y. 1999-2000 Sub: Proposal for issue of notice u/s 148 of the Income Tax Act M/s Silver Oak Lab. Ltd. for the A.Y. 1999-2000. Return of income in this case was filed on 30.12.1999 declaring total loss of Rs. 5,55,80,254/- . The same was processed U/s 143(1) accepting the returned loss of Rs.5,55,80,254/- on 29.09.2000. While completing the asstt, in this case for asstt. year 1998-99 and 2001-02, it was noticed that the sale price was not driven by market forces. The sales during these assessment years were recomputed by taking net profit of 8% and additions were made on account of suppression of sales. These additions were also confirmed by CIT(A) and assessee’s appeals are pending before the Ld. ITAT. In asstt year 98-99 and 2001-02 the sales were recomputed after marking up of 8% net profit. I have therefore, reason to believe that income has escaped assessment due to suppression of sales by 1.41 crores within the meaning of section 147 of the Income Tax Act. In view of the above, as per the provision of section 151, it is requested to kindly accord approval for issuance of notice u/s 148 for asstt. year 1999-2000. Assessment record is enclosed alongwith this letter. Sd/- DTC circle 8(1), New Delhi” 2. The petitioner filed its objections on 10.11.2006. From the reasons recorded, it is apparent that nothing specific was alleged with regard to any escapement of assessment pertaining to the WP(C) 17719-20/06 Page No. 3 of 5 assessment year 1999-2000. Apparently, the reasons for re- opening the assessment were that in respect of the assessment years 1998-99 and 2001-02, additions had been made by the Assessing Officer in the course of the assessments on account of the allegations of suppression of sales. The allegation was that the sale price of the petitioner’s products were not driven by market forces. Consequently, in respect of those years, i.e., assessment years 1998-99 and 2001-02, the sales figures were recomputed by taking net profit of 8% and additions were made on that account at the time of issuance of the notice under Section 148 as well as the recording of the reasons. The additions made by the Assessing Officer had been confirmed by the Commissioner of Income-tax (Appeals) in respect of the said assessment years, i.e., 1998-99 and 2001-02. However, by the time the petitioner filed its objections, the tribunal had deleted the said additions in appeals before it. This fact was brought to the notice of the Assessing Officer by the petitioner in the objections itself. It is also relevant to note that the revenue has not preferred any appeal against the order passed by the Income-tax Appellate Tribunal deleting the additions on merits in respect of the assessment years 1998-99 and 2001-02. But, the Assessing Officer passed the order dated 17.11.2006 rejecting the objections preferred by the petitioner. WP(C) 17719-20/06 Page No. 4 of 5 The order dated 17.11.2006 is impugned before us and it reads as under:- “Sub: Notice u/s 148 for reassessment – filing of objections – reg. Asstt yr. – 1999 – 00 Please refer to your letter dated 10th November, 2006 on the above subject. 2. Proceedings u/s 147 in this case were initiated after recording reasons on 21-2-2006. At the time of recording of the reasons, the additions made on account of suppression of sales in the assessment year earlier to assessment year 1999-2000 and in subsequent assessment years have been confirmed by the superior authorities. And thus, the undersigned had reason to believe that the income has escaped assessment in the A.Y. 1999-2000 too. 3. Secondly, the subsequent order of the Hon’ble ITAT deleting the additions on merits does not vitiate the reassessment proceedings and has no bearing on the reasons to believe recorded on 21-2- 2006 for initiating the re-assessment proceedings. 4. You are once again requested to kindly furnish the details already asked for to enable the undersigned to complete the assessment proceedings. 5. Hoping for full cooperation. 6. Your case stands fixed for hearing on 28-11- 2006 at 11.30 a.m.” 3. We have heard the counsel for the parties. It is apparent that the reasons recorded do not contain any specific allegation with regard to the year in question, i.e., the assessment year 1999-2000. The sole and entire basis of re-opening the assessment is the additions made in respect of the assessment years 1998-99 and 2001-02. There is no other reason given by the Assessing Officer WP(C) 17719-20/06 Page No. 5 of 5 for re-opening the assessment. Since the tribunal has 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 does not survive any more. We have also indicated above that there is no specific allegation with regard to the assessment year 1999-2000 regarding suppression of sale figures. 4. In these circumstances, we set aside the order dated 17.11.2006, whereby the petitioner’s objections were rejected and quash further proceedings in respect of the notice dated 01.03.2006. The writ petition stands disposed of. The parties shall bear their own costs. BADAR DURREZ AHMED, J RAJIV SHAKDHER, J December 18, 2008 dutt "