The Assessing Officer must independently believe that income has escaped assessment; acting under dictation from superiors invalidates reassessment proceedings.

JUDGMENT :

(Per M. S. Sonak, J.)

1. Heard learned counsel for the parties.

2. This Appeal is directed against the Income Tax Appellate Tribunal’s (ITAT) order dated 15 September 2017 allowing the Respondent-Assessee’s Appeal and setting aside the order dated 30 April 2015 made by the Commissioner of Income Tax (Appeals)-I, Thane, for the Assessment Year 2007-08.

3. The assessee, engaged in the business of distributing photographic and electronic imaging systems, filed its return of income on 31 October 2007, declaring a total income of Rs.11,42,17,803/-. This return was revised on 07 November 2007, declaring a total income of Rs.12,30,39,783/-.

4. The Respondent’s return was selected for scrutiny assessment, and the original assessment was completed under Section 143(3) of the Income Tax Act, 1961 (“IT Act”) on 22 December 2010 by accepting the returned income of Rs.12,30,39,783/-. This was in conformity with the price determination by the Transfer Price Officer (“TPO”), who suggested no adjustments to the value of the assessee's international transactions.

5. For the Assessment Year 2008-09, the TPO, while finalizing its order under Section 92CA (3), suggested an adjustment of Rs. 11,22,74,613/-. Based on this, the assessee’s case was reopened by invoking the provisions of Section 147 of the IT Act. A notice under Section 148 was issued on 19 January 2012, followed by notices under Section 143(2) and Section 143(1) issued on 30 July 2012 and 11 September 2012, respectively.

6. An order under Section 143 read with Section 147 was passed on 25 March 2013 without referring to the TPO. The Pr. CIT-1, Thane, vide order dated 05 February 2015, exercised revisional jurisdiction under Section 263 of the IT Act and set aside the AO’s order dated 25 March 2013, being erroneous and prejudicial to the interest of Revenue. The AO was directed to undertake de novo assessment after referring to the TPO. Accordingly, an order under Section 143(3) read with Section 144C(13) of the IT Act was passed on 24 October 2017 by assessing the income at Rs.23,53,14,390/- after making an addition of Rs.11,62,91,948/- to the total income of the assessee.

7. The assessee appealed the above orders, but the CIT(A)- 1, Thane, vide order dated 30 April 2015, dismissed the assessee’s appeal. The assessee assailed the order dated 30 April 2015 before the ITAT, which has allowed the assessee’s appeal vide the impugned order dated 15 September 2017. Hence, this Appeal by the Revenue under Section 260A of the IT Act.

8. Mr Sharma, learned counsel for the Appellant-Revenue, urges the formulation of the following substantial question of law, which, according to him, arises in this Appeal.

“ Whether, on the facts and in the circumstances of the case and in law, the tribunal was justified in quashing the re-assessment proceedings without appreciating the fact that the A. O. while recording the reasons for re-opening, recorded his own satisfaction after analysis of the information received?”

9. This Appeal was admitted on the above substantial question of law, and with the consent of the learned counsel for the parties, the Appeal was taken up for final disposal.

10. Mr Sharma, learned counsel for the Appellant, submitted that the Additional CIT, Transfer Pricing-1(1), Mumbai, vide a letter informed the Jt. CIT, Range-1, Thane, that income had escaped during the relevant assessment year. Accordingly, the Jt. CIT, Range-1, Thane, was duty-bound to pass on the information to the AO with a direction to take necessary action. He submitted that in such a matter, the determination of the TPO binds the AO, and there is no further option left with the AO than to initiate re-assessment proceedings. He submitted that nothing was illegal or improper in initiating re-assessment proceedings, and the ITAT seriously erred in interfering with such initiation.

11. Mr Sharma submitted that this was a case of reopening the assessment within four years. Still, he pointed out that the assessee had fail