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Supreme Court Ruling on Reopening Assessments

The Supreme Court of India rules that the Revenue authorities can reopen certain past cases relating to section 14A of the Income-tax Act, 1961 ('Act'), despite the relief sought to be provided to taxpayers by the proviso to the said section. Taxand India looks into a recent case that sets the precedent.

The Supreme Court of India has recently held that the Revenue authorities were justified in initiating reopening proceedings against Honda Siel Power Products Ltd ('Honda Siel'), on the grounds that income had escaped assessment because of the applicability of section 14A of the Act to Honda Siel's case. This is despite the fact that the proceedings relate to a tax year (ie Assessment Year 2000-01), which is barred from reopening proceedings by virtue of the tax amnesty sought to be provided by the proviso to section 14A of the Act.

The ruling issued by the Supreme Court is extremely brief, and does not shed any light on the reasoning behind the ruling. To understand the issue, one would need to examine the earlier ruling issued by the Delhi High Court on this matter in Honda Siel's case.

For full details of the case and to read more from Taxand India, click here


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Taxand's Take


The ruling brings out an important principle that a tax payer has two opportunities of disclosing all material facts to the Revenue authorities: first at the time of filing of the return of income and second, at the time of assessment proceedings. This ruling highlights the importance of disclosing all possible documents and information at the time of filing the return of income as well as during the course of assessment proceedings, so as to reduce the chances of reopening of assessment to the extent possible.

Taxpayers against whom the Revenue authorities have initiated reassessment proceedings under the Act and which hold similarities to those of Honda Siel's, could be impacted by the above Supreme Court ruling.

Taxand's Take Author