TMI Blog2007 (2) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rule. Rule, returnable forthwith. By consent of the parties, the writ petition is taken up for final hearing. 2. In this petition, the petitioner has challenged the notice dated May 25, 2005 issued under section 148 of the Income-tax Act, 1961 ( the Act for short) whereby the assessment for the assessment year 2001-02 is sought to be reopened. The petitioner has also challenged the order dated November 21, 2006, passed by the Assessing Officer rejecting the objections filed by the petitioner for reopening the assessment. 3. The petitioner carries on business of providing verification, inspection and certification of services in India. On October 30, 2001, the petitioner filed its return of income for the assessment year 2001-02 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT, TP-2, has held that R D expenditure amounting to Rs. 2.87 crores was paid to SGS Switzerland towards common research and development. The benefit of which were stated to be shared by all the associated concerns global. However, the Addl. CIT, TP-2, Mumbai, after detailed investigation held that the transactions entered into by the assessee-company with its associate in Switzerland was not at arm' s length and was disallowed. Considering the fact that the similar payment was made under the head ' Research and Development' amounting to Rs. 1.47 crores in the relevant assessment year that is 2001-02, by virtue of the finding of the Addl. CIT, TP-2, Mumbai, this payment to SGS Switzerland, would have to be disallowed. There fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the material relating to research and development fees and after a detailed enquiry, the Assessing Officer had allowed the said expenses. Therefore, in the absence of any reason to believe that the income has escaped assessment, the impugned notice issued under section 148 of the Act for reopening the assessment for the assessment year 2001-02 cannot be sustained. 9. Mr. Pardiwala further submitted that from the reasons recorded by the Assessing Officer, it is seen that the assessment is sought to be reopened solely based on the assessment order passed for the assessment year 2002-03 wherein the research and development expenses incurred have been disallowed on the ground that the same were not at arm' s length as contemplated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Ess Ess Kay Engineering Co. P. Ltd. v. CIT reported in [2001] 247 ITR 818 and a decision of the apex court in the case of CIT v. P. V. S. Beedies P. Ltd. reported in [1999] 237 ITR 13, Mr.Kotangale submitted that the action under section 147 is permissible even if the Assessing Officer gathered his reasons to believe from the very same record as had been the subject matter of completed assessment proceedings. 13. We have carefully considered the rival submissions. In the present case from the reasons recorded for reopening the assessment, 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 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly, 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 decisions relied upon by counsel for the Revenue are distinguishable on facts, because, in all those cases there was no change in law in the subsequent assessment years and, therefore, reason to believe that income has escaped assessment could be gathered from the subsequent assessment orders. In the present case, the law in the subsequent year being different, reopening of the assessment based on the subsequent assessment order cannot be sustained. 15. In this view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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