Reopening for overlooking transactions with associated enterprises and not referring them to TPO not change of opinion–HC

Reopening for overlooking transactions with associated enterprises and not referring them to TPO for computation of at arms’ length income was not change of opinion – High Court

ABCAUS Case Law Citation:
ABCAUS 2130 (2017) (11) HC

The petitioner company was incorporated in the United Kingdom and was engaged in the business of providing services and facilities in connection with exploration and extraction and production of mineral oils. During the year under consideration, the assessee had filed the return of income u/s 44BB(3) of the Income Tax Act, 1961 ( ‘the Act’). The return was scrutinized u/s 143(3) of the Act and the order was passed.

Subsequently, the notice was issued to the petitioner company u/s 148 of the Act to reassess the income for the relevant assessment year.

The Petitioner company filed objections to the reasons for reopening of case which were rejected by the Revenue. The Petitioner company challenged the order of the Revenue by filing the writ petition which is the subject matter of the case.

The High Court observed that it had come on record that the petitioner company had transactions with few foreign companies which were the Associate Enterprises of the assessee. The case of the Revenue was that the transactions with the assessee were never referred to the TPO for computation of the income at arms’ length. It was specifically mentioned in the reasons assigned for reopening of the case that the proceedings for the relevant assessment year showed that the issue, whether the 3CEB was to be referred to the TPO, was never even taken up by the Assessing Officer (AO). Rather, the Assessing Officer did not consider it proper referring to 3CEB report for arm’s length computation. It was under these circumstances, the notice u/s 148 of the Act was issued to the petitioner company.

The High Court observed that in the instant case, the AO while assessing the income of petitioner company, had ignored the transactions made by it with its Associate Enterprises. He had also overlooked whether Section 3CEB was to be referred to the TPO. It was thus, not the change of opinion but the reassessment had been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment.

His Lordship dismissed petition as devoid of any merit.