The Income Tax Appellate Tribunal (ITAT) Bangalore has quashed re-assessment proceedings against Nike India Pvt. Ltd, which was reopened more than 4 years after the initial assessment.
Facts of the case:-
The assessee is engaged in the distribution of Nike products like footwear, apparel sports equipment, and accessories in India through its distribution network and franchise partners. For the assessment year 2008-2009, the return of income was filed declaring a loss of Rs.16,02,53,855.
Interpretation of law:-
Assessment under section 143(3) and 144C(13) was completed by determining the total income of Rs.5,04,65,625, after making transfer pricing adjustment pertaining to the share of BCCI costs paid to Nike International Limited.
Subsequently, a draft assessment order dated 16.12.2016 was passed making a transfer pricing adjustment of Rs.6,62,47,745 relating to reimbursement of expenses paid by the assessee to its Associated Enterprise (AE), namely, Nike Inc. USA. From the reasons recorded for reopening the assessment for the relevant assessment year, it is clear that the reopening of the assessment has been initiated only on the basis of the earlier Tribunal order in the assessee’s own case for assessment years 2005-2006 and 2006-2007. Therefore, the revenue could not establish that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for their assessment.
Hence, Judicial Member George George K and accountant member Chandra Poojari relied on the Karnataka High Court in the case of CIT v. Karnataka Bank [(2014) 52 and ruled, “In the light of the aforesaid reasoning and judicial pronouncements cited supra, we hold that the reassessment proceedings are bad in law and we quash the same. It is ordered accordingly.”