Ahmedabad: Gujarat High Court has quashed income tax reassessment proceedings initiated against Adani Exports for the assessment year 2010-11, setting aside a notice issued under Section 148 of the Income Tax Act, 1961, and the consequential order rejecting the firm’s objections.Adani Exports, a partnership firm engaged in manufacturing and exporting gold jewellery from the Special Economic Zone at Sachin in Surat, had claimed a 100% deduction on profits from exports under Section 10AA of the Act.The firm filed its return in Sep 2010 along with audited accounts and tax audit reports. The case was selected for scrutiny, after which the assessing officer issued notices under Sections 143(2) and 142(1), along with questionnaires. After receiving replies and examining records, the assessment was completed under Section 143(3) in Dec 2011.In March 2015, the I-T department issued a notice under Section 148 seeking to reopen the assessment. The department cited two grounds: that the firm had not provided interest on partners’ capital, allegedly inflating profits and the deduction claimed under Section 10AA; and that gold purchases from sister concern Adani Enterprises Ltd were made at prices lower than market rates, allegedly resulting in excess profits requiring adjustment under Section 10AA (9) read with Section 80-IA (10).Adani Exports challenged the department’s reassessment bid, arguing that the reopening was based on a revenue audit objection and amounted to a change of opinion since the issues had already been examined during scrutiny. The firm also submitted that the department’s price comparisons were flawed due to differences in gold fineness and measurement units.The Income Tax Department argued that specific queries on inflated profits had not been raised earlier and that the non-payment of interest and related-party pricing justified reopening the case.A bench of Justice AS Supehia and Justice VD Nanavati held that the material was already available during the original scrutiny. The court also noted that the reopening proceeded based on an unamended partnership deed, despite the firm pointing out that an amended deed had eliminated the liability to pay interest.The bench said, “We are of the considered view that the impugned notice dated 27.03.2015 issued under Section 148 of the Act, along with the consequential order rejecting the petitioner’s objections and initiating the reopening proceedings, deserves to be quashed and set aside.”
