Reassessment Proceedings Can't Be In The Nature Of Review: Karnataka High Court

The Karnataka High Court has held that reassessment proceedings cannot be in the nature of review.

The bench of Justice S. Sunil Dutt Yadav has observed that the material that has come to light in the assessment proceedings for the assessment year 2008–2009 cannot be sufficient grounds to resort to reassessment proceedings.

The petitioner/assessee has challenged the notice issued under Section 148 of the Income Tax Act, seeking to reassess the income that has escaped assessment in terms of Section 147 with respect to the assessment year 2005–2006. The assessee was called upon to deliver a return within 30 days. Subsequently, the reasons for initiating proceedings under Section 147 for reopening the assessment were communicated.

The reasons for re-opening would indicate the position of the department that the delegation of technical manpower relating to software development activity conducted abroad had no link with the STP units in India. The activity was known as body shopping and eligible for deduction under Section 80HHE, but it was not an activity that was eligible for deduction as regards expenses under Section 10A.

The assessee contended that in the assessment order passed, while computing deductions under Section 10A, there was an exclusion of expenditures relating to the visits of the company's employees as well as expenses incurred relating to software development services for the clients. The very aspect of profits from rendering technical services in the context of the export of computer software that has been examined and a decision based on legal appreciation that has been arrived at cannot be reconsidered subsequently in reassessment proceedings. It is impermissible to reopen the assessment on the basis of a “mere change of opinion.”.

The court held that a mere change of opinion cannot be grounds for reopening concluded assessments.

Counsel For Petitioner: Percy Pardiwalla

Counsel For Respondent: E.I. Sanmathi

Case Title: EIT Services India Pvt. Ltd. Versus Deputy Commissioner Of Income Tax

Case No.: Writ Petition No.15061/2013 (T-IT)

Citation No: 2023 LiveLaw (Kar) 498

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