Facts of the Case

The petitioner, Swarovski India Private Limited (formerly Swaropearl India Pvt. Ltd.), filed writ petitions challenging reassessment proceedings initiated for AY 2015–16, 2016–17, and 2017–18.

  • The company originally operated under a different name and PAN, which was later changed after renaming in 2000.
  • The Income Tax Department issued reassessment notices under Section 148 using the old (non-existent) PAN.
  • Due to this, the petitioner claimed it had no knowledge of the proceedings.
  • Assessment orders under Sections 147/144, along with penalty orders under Sections 271(1)(b), 271(1)(c), 271F, and 272A(1)(d) were passed.
  • A total demand of approximately ₹304.62 crores was raised.

The dispute arose due to alleged income escaping assessment, particularly relating to import-export transactions.

Issues Involved

  1. Whether reassessment proceedings under Section 148 are valid when notices are issued on a non-existent PAN.
  2. Whether reassessment orders passed without proper service of notice violate principles of natural justice.
  3. Whether assessment and penalty orders can sustain when the assessee was not given an opportunity to participate.
  4. Applicability of the Supreme Court ruling in GKN Driveshafts (India) Ltd. v. ITO (2003).

Petitioner’s Arguments

  • Notices were issued on an old PAN which was no longer in existence, hence proceedings are void.
  • No proper service of notice under Section 148 was effected.
  • Export transactions were duly recorded under the new PAN and reflected in financial statements.
  • Proceedings are time-barred.
  • The reassessment is fundamentally flawed due to lack of participation caused by improper notice.

Respondent’s Arguments

  • The Assessing Officer contended that income had escaped assessment based on discrepancies in import-export data.
  • It was argued that the petitioner did not participate in reassessment proceedings.
  • The department alleged that exports may have been carried out under the old PAN.

Court Findings / Order

  • The Assessing Officer failed to conclusively determine escaped income.
  • The proper course is to follow the procedure laid down in GKN Driveshafts case.
  • The Court set aside:
    • Assessment Orders
    • Penalty Orders
  • Directions issued:
    1. Petitioner to file objections to Section 148 notices within 6 weeks.
    2. Assessing Officer to provide:
      • All material relied upon
      • Opportunity of personal hearing
    3. AO to pass a reasoned (speaking) order.
  • Liberty granted to petitioner to pursue remedies thereafter.

Important Clarifications

  • Reassessment proceedings must comply with natural justice principles.
  • Issuance of notice on a non-existent PAN is a serious procedural defect.
  • AO must clearly establish escaped income before proceeding.
  • The Court emphasized adherence to GKN Driveshafts procedure:
    • Supply reasons
    • Allow objections
    • Pass speaking order

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 file return
  • Section 272A(1)(d) – Penalty for failure to comply with notice

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.