Facts of the Case

The petitioner, Swarovski India Private Limited (formerly Swaropearl India Pvt. Ltd.), challenged reassessment proceedings initiated by the Income Tax Department for Assessment Years 2015–16, 2016–17, and 2017–18.

  • The company originally operated under an old PAN and later obtained a new PAN after a name change.
  • The Revenue initiated reassessment proceedings under Section 148 of the Income Tax Act, 1961 (old regime) using the old PAN, which was no longer in existence.
  • As a result, the petitioner claimed it had no knowledge of the reassessment proceedings.
  • A massive demand of approximately ₹304.62 crores was raised along with penalty orders under various provisions.

The dispute also involved alleged discrepancies in import-export transactions forming the basis of escaped income.

Issues Involved

  1. Whether reassessment proceedings initiated under Section 148 using an invalid/old PAN are legally sustainable.
  2. Whether non-service of notice invalidates reassessment proceedings.
  3. Whether assessment and penalty orders can survive without proper opportunity of hearing.
  4. Whether reassessment proceedings were time-barred.
  5. Applicability of principles laid down in GKN Driveshafts (India) Ltd. v. ITO (2003).

Petitioner’s Arguments

  • Notices were issued on an old PAN, which had ceased to exist, hence no valid service of notice occurred.
  • The petitioner had duly reported all transactions under the new PAN in its financial statements and returns.
  • Reassessment proceedings were void due to lack of proper service and violation of natural justice.
  • The proceedings were also time-barred.
  • The alleged discrepancies were factually incorrect and based on incomplete understanding of records.

Respondent’s Arguments

  • The Assessing Officer claimed that income had escaped assessment due to discrepancies in import-export transactions.
  • It was argued that the petitioner did not participate in assessment proceedings, leading to inability to reconcile discrepancies.
  • The Revenue contended that export transactions continued under the old PAN.

Court Findings / Order

  • The Assessing Officer failed to crystallize the exact escaped income, showing lack of clarity in reassessment.
  • The case required adherence to the Supreme Court ruling in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC).
  • The petitioner must be given an opportunity to file objections against Section 148 notices.

Final Directions:

  1. Assessment orders and penalty orders were set aside.
  2. Petitioner allowed to file objections within 6 weeks.
  3. Assessing Officer directed to:
    • Provide all material relied upon
    • Grant personal hearing
    • Pass a speaking order
  4. Liberty granted to the petitioner to pursue remedies as per law.

Important Clarification by Court

  • The Court emphasized strict compliance with procedural safeguards under reassessment law.
  • It reaffirmed that service of notice is foundational to reassessment validity.
  • The petitioner agreed that old reassessment regime would apply, not the new regime.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 144 – Best judgment assessment
  • Section 156 – Notice of demand
  • Section 271(1)(b) – Penalty for non-compliance
  • Section 271(1)(c) – Penalty for concealment
  • Section 271F – Penalty for failure to furnish return
  • Section 272A(1)(d) – Penalty for non-compliance

 

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS31012023CW8822023_185552.pdf

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