Arm's length principle barred further profit attribution, making the reassessment reopening unsustainable under section 148.

Reassessment under section 148 was held unsustainable where the alleged basis was the existence of a permanent establishment in India and escapement of income, but the Supreme Court in the assessee's own case had already ruled that, once the arm's length price mechanism had been applied, no further profit attribution could be made merely on that basis. In view of that binding position, the reopening could not be supported, and the reassessment proceedings and consequential orders failed with the invalid notice.

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Issues: Whether the reassessment notice under section 148 of the Income-tax Act was sustainable in view of the Supreme Court's ruling in the assessee's own case on the effect of the arm's length principle and the alleged permanent establishment.

Analysis: The reassessment proceedings were founded on the allegation that the assessee had a permanent establishment in India and that income chargeable to tax had escaped assessment. The record noted that the Supreme Court, in the assessee's own case for the relevant years, held that once the arm's length price procedure had been followed, no further profit attribution could survive merely on the basis of an alleged permanent establishment. On that basis, the notice issued under section 148 could not be sustained, and the reassessment proceedings and consequent orders fell with it.

Conclusion: The reassessment notice was invalid and the challenge to reopening succeeded in favour of the assessee.

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