Facts of the Case

  • The petitioner company was originally incorporated as Swaropearl India Pvt. Ltd. and later renamed as Swarovski India Pvt. Ltd.
  • Upon name change, a new PAN was issued, replacing the old PAN.
  • The Income Tax Department initiated reassessment proceedings using the old (non-existent) PAN, issuing notices under Section 148.
  • The petitioner claimed it had no knowledge of such proceedings, as notices were never properly served.
  • Assessment orders and penalties were passed, raising a demand exceeding ₹304 crores across three assessment years.
  • The petitioner challenged these proceedings before the Delhi High Court.

Issues Involved

  1. Whether reassessment proceedings initiated under Section 148 using an obsolete PAN are valid.
  2. Whether lack of proper service of notice vitiates reassessment proceedings.
  3. Whether assessment orders and penalties passed without participation of the assessee are sustainable.
  4. Whether procedural safeguards laid down in GKN Driveshafts case were followed.
  5. Whether reassessment proceedings were time-barred.

Petitioner’s Arguments

  • Notices were issued under an old PAN which no longer existed, hence invalid.
  • No proper service of notice → violation of principles of natural justice.
  • All transactions were duly recorded under the new PAN and disclosed in returns.
  • Reassessment proceedings are time-barred.
  • The reassessment was fundamentally flawed and lacked jurisdiction.

 Respondent’s Arguments (Revenue)

  • The Assessing Officer alleged income escaping assessment, particularly in import-export transactions.
  • The petitioner failed to participate in proceedings, leading to ex-parte assessments.
  • Discrepancies in financial data justified reassessment action.
  • It was contended that exports were allegedly carried out under the old PAN.

 Court’s Findings / Judgment

  • The Assessing Officer failed to clearly determine escaped income.
  • There were serious procedural lapses, including improper notice.
  • The Court emphasized compliance with the Supreme Court ruling in:
    GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC)

 Final Order:

  • Assessment orders and penalty orders were set aside.
  • Petitioner allowed to file objections to Section 148 notices.
  • Assessing Officer directed to:
    • Provide relevant material
    • Grant personal hearing
    • Pass a reasoned (speaking) order
  • Fresh proceedings to be completed within prescribed timelines.
  • Liberty granted to petitioner to pursue further remedies if aggrieved.

Important Clarifications by Court

  • Reassessment must strictly follow due process and natural justice.
  • Use of incorrect PAN undermines validity of proceedings.
  • The GKN Driveshafts procedure is mandatory, not optional.
  • Revenue must provide complete material before seeking objections.
  • Taxpayer cannot later challenge applicability of old regime once accepted.

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), 271(1)(c), 271F – Penalties
  • 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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