Reassessment Initiated at Direction of Higher Authorities is Bad in Law | HC

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Reassessment proceedings

Case Details: Principal Commissioner of Income-tax vs. Agfa India (P.) Ltd. - [2025] 173 taxmann.com 875 (Bombay)

Judiciary and Counsel Details

  • M.S. Sonak & Jitendra Jain, JJ.
  • Akhileshwar Sharma, for the Appellant.
  • P J. Pardiwalla, Sr. Adv., Harsh Kothari, Atul K. Jasani for the Respondent.

Facts of the Case

The assessee, engaged in the business of distributing photographic and electronic imaging systems, filed its return of income, declaring a total income of Rs. 11,42,17,803/-. The return was revised, declaring a total income of Rs. 12,30,39,783. The Assessing Officer (AO) issued a notice for reassessment based on the information received from the Transfer Pricing Officer (TPO). The AO initiated the reassessment proceedings based on the TPO’s determination for the subsequent assessment year.

Assessee contended that the entire process of initiating reassessment proceedings commenced with the letter from the Additional CIT, Transfer Pricing, to the Joint CIT. The Joint CIT and the CIT, acting upon the letter from the Additional CIT, Transfer pricing, virtually directed the AO to initiate proceedings for reassessment. Nothing on record indicated any independent application of mind by the AO. There was nothing to suggest that the AO who issued the notice under Section 147-148 had, himself, any reason to believe.

The matter reached the Bombay High Court.

High Court Held

The High Court held that it was apparent that the AO regarded himself as bound by the TPO’s determination for the subsequent assessment year and felt that he had no option but to issue the notice to reopen the assessment.

The directions of the Joint Commissioner of Income Tax or the Commissioner of Income Tax left the AO in no doubt about the bindingness of the TPO’s determination and the Commissioner’s directions. All this was sufficient to vitiate the initiation of reassessment proceedings. This was a classic case of the AO acting under dictation or on borrowed satisfaction. Thus, the initiation of reassessment proceedings was liable to be set aside.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied