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2007 (2) TMI 193 - BOMBAY HIGH COURTReopening of assessment u/s 147 - Income escaping assessment - Validity Of notice issued u/s 148 - assessment for the assessment year 2001-02 is sought to be reopened - HELD THAT:- It is evident that the reasons to believe that the income has escaped assessment are based on the findings recorded in the assessment order for the assessment year 2002-03. In the assessment order for the assessment year 2002-03, the research and development expenses incurred by the petitioner in the assessment year 2002-03 have been disallowed partially on the basis of the findings recorded by the Transfer Pricing Officer to the. effect that the transactions were not at arm's length as contemplated under the Transfer Pricing Regulations. As rightly contended by Mr. Pardiwala, the Transfer Pricing Regulations came into force with effect from April 1, 2002, and, thus, the said Regulations were not applicable to the assessment year 2001-02. Therefore, reopening of the assessment for the assessment year 2001-02 based on the provisions which were not applicable for the assessment year 2001-02 cannot be sustained. The contention of the Revenue that the Assessing Officer has only relied upon the material available from the assessment order for the assessment year 2002-03 cannot be accepted, because what is held in the assessment order for the assessment year 2002-03 is that the transactions were not at arm's length as per the provisions which are applicable to the assessment year 2002-03. It is not the case of the Assessing Officer that the deduction allowed in the assessment order passed u/s 143(3) of the Act is contrary to any provisions applicable to the assessment year 2001-02. Thus, in the facts of the present case, apart from the assessment order for the assessment year 2002-03, there are no other reasons for reopening the assessment. Admittedly, the expenses in question have been incurred after obtaining FIPB approval and approval from the R.B.I. Therefore, reopening of the assessment for the assessment year 2001-02 on the ground that the transactions are not at arm's length is without any merit. The law in the subsequent year being different, reopening of the assessment based on the subsequent assessment order cannot be sustained. Thus, the reopening of the assessment for the assessment year 2001-02 on the ground that the transactions were not at arm's length as held in the assessment order for the assessment year 2002-03 cannot be sustained. Accordingly, the petition succeeds. The impugned notice is quashed and set aside.
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