The main legal point established in the judgment is that reassessment proceedings can be validly initiated within the period of limitation and based on relevant and material reasons. The court emphasized the importance of a rational and intelligible nexus between the reasons and the belief entertained by the Assessing Officer for re-opening the assessment.

Challenging the Notice issued under Section 148 of the Income Tax, 1961 (in short, ‘the Act’) issued by the second respondent, dated 26.03.2014 proposing to re-assess the income for the assessment year 2007-08 having reason to believe that the income chargeable to tax has escaped assessment; as well as the consequential order, dated 7.11.2014 passed by the third respondent, rejecting the objections filed by the petitioner for re-opening of the assessment, the petitioner has come forward with the present writ petition.

2. The Petitioner is a Private limited company incorporated under the Companies Act, 1956 in India on 23 March 1999 and is engaged in the business of development and export of software. The Petitioner is a 100% Export Oriented Undertaking (‘EOU’) as per the letter of approval from the Ministry of Industry, Department of Industrial Policy and Promotion (DIPP) dated 17 May 1999 and Green Card No. DOE/STPI-C/99/1242 dated 06 July 1999 and registered with Software Technology Park of India (‘STPI’). Subsequently, the Petitioner renewed its registration as a 100% EOU for a further period of five years from 06 July 2004 to 05 July 2009 vide letter dated 20 July 2004 from the Director, STPI. The Petitioner has accepted the terms and conditions of the renewal vide letter dated 22.07.2004.

3. The brief case of the petitioner is that they filed its return of income for the Assessment Year (‘AY’) 2007-08 on 19 October 2007 declaring a total income of Rs.29,242/-after claiming an amount of Rs.4,02,37,947 as deduction under Section 10B of Act and it was selected for scrutiny and a notice dated 22 July 2008 under Section 143(2) of the Act was issued. During the course of scrutiny proceedings, the 1st Respondent called for various details from time to time. The 1st Respondent vide notice dated 27 April 2009 had specifically called for the following details:

a. Annual accounts including directors and auditors report; and

b. Form 56G for claim of deduction under section 10B.

3.1. In response to the above notice, filed letter dated 06 May 2009 with the Balance Sheet and auditors report, the computation for deduction under Section 10B of the Act and Certificate from the Chartered Accountant in Form 56G in support of deduction under section 10B. The 1st Respondent vide notice dated 23 June 2009 requested for numerous details in an annexure. The Petitioner vide its reply dated 3 August 2009 furnished details as required under notice dated 23 June 2009 and has specifically disclosed the details of the directors requested in serial no. 3 of the said annexure. The 1st Respondent after discussion and verification of the details furnished by the Petitioner in response to the notice dated 23 June 2009 completed the assessment under section 143(3) read with section 92CA(4) of the Act by accepting the income returned by the Petitioner.

3.2. While so, the 2nd Respondent without obtaining approval from the Chief Commissioner or Commissioner as required under section 151 of the Act, initiated reassessment proceedings under section 147 of the Act by issuing a notice dated 26 March 2014 under Section 148 of the Act (Impugned Notice). The said notice does not state whether the necessary sanction of the Chief Commissioner or Commissioner was obtained and also does not state the reasons for reopening. The Petitioner, vide letter dated 8 May 2014 sought a copy of the reasons recorded on the basis of which the impugned notice has been issued. The 2nd Respondent vide his letter dated 16 June 2014 furnished four reasons for reopening the assessment. In response to the reasons furnished by the 2nd Respondent for reopening the assessment under Section 147 of the Act, the Petitioner filed its objections as regards the jurisdiction to the reopen the assessment and to the reasons for reopening the assessment vide letter dated 27 August 2014. However, the 3rd Respondent vide order dated 07 November 2014 rejected the objections raised by the Petitioner fo