Bombay High Court Quashed Notice to Reopen Tata Sons Assessment for 2003-04
The Bombay High Court earlier this month quashed an Income Tax notice filed by the Income Tax authorities against Tata Sons Ltd – the holding company of Tata Group’s Companies – for the financial year 2003-2004.
A division bench of Justices KR Shriram and NJ Jamadar observed that the notice did not justify the reasons cited by the Assessing Officer to show that income had escaped assessment due to the petitioner’s failure to disclose fully and truthfully all material facts necessary for the assessment, and that the reasons cited by the Assessing Officer merely demonstrated “change of opinion” on the same material.
On November 8, 2003, Tata Sons filed its Income Tax returns for the relevant period, showing an income of Rs 10,53,46,561, which was selected for review by the Assessing Officer (AO). Multiple notices and inquiries were served on Tata Sons on a number of problems, to which the corporation responded in writing as well as in supporting documentation. On March 21, 2006, a section 143(3) assessment order was issued, indicating a total income of Rs.858,87,52,290.
The corporation filed an appeal with the Commissioner of Income Tax (Appeals)-XXXIII in Mumbai (‘CIT-[A]’). On March 16, 2007, the CIT-[A] issued an order providing the company some relief, upon which the AO issued a new order determining the company’s revised total income to be Rs 98,55,51,776.
On July 23, 2008, another notice was issued under Section 154, attempting to correct the April 2007 assessment ruling.
On April 5, 2010, the company was served with a notice under section 148 of the Act issued by the Deputy Commissioner of Income Tax, Range 2(3), Mumbai (DCIT), dated March 31, 2010, stating that the AO had reasons to believe that income chargeable to tax for the assessment year 2003-04 had escaped assessment within the meaning of section 147 of the Act, 1961, and that the assessment would be reopened. The company asked for grounds for revisiting the assessment to be documented, which were provided, followed by the company’s objections to the reopening of the evaluation.
Senior Advocate PJ Pardiwalla, appearing for the petitioner-company, argued that the assessment was proposed to be reopened beyond the six-year period beginning with the end of assessment year 2003-04; that there was no tangible material justifying reopening of the assessment; and that there was no allegation, let alone cogent material, demonstrating that income had escaped assessment due to the petitioner’s suppression of material facts. It was further contended that the AO’s reasons ex-facie suggested that the entire process was influenced by a simple change of view on the same material and that all problems had already been considered threadbare not once, but twice.
The authorities’ advocate, Arvind Pinto, defended the reopening by specifically rejecting that the notice was sent beyond six years and that the reasons recorded by the AO warranted the use of powers under Section 147 of the Act of 1961.
The bench noted that the legal position on the subject of using the power of reassessment under Section 147 of the Act of 1961 had been crystallised.
“If the assessment is proposed to be reopened after four years, where the assessment was completed under section 143(3) of the Act, an additional condition must be satisfied, namely, recording satisfaction that the income has escaped assessment due to the assessee’s failure to disclose fully and truthfully all material facts necessary for assessment. The Assessing Officer’s reasoning must be used to determine whether these jurisdictional elements are met “ The bench took notice. It went on to say that the existence of reasons should be supported by actual evidence, and that the AO’s unsubstantiated argument was futile.
“The reason is not difficult to find. The power is one of reassessment rather than review. It is thus posited that where the primary facts required for assessment are fully and truthfully disclosed and the Assessing Officer reached a conclusive conclusion, it is unlawful to reopen the assessment based on the same material on the grounds that the said material supports a different opinion “ The exercise should be concluded by observing that a cursory examination of the reasons indicates that it was influenced by a simple shift in opinion.
To Read Judgment Download PDF Given Below :