Case Note & Summary
The petitioner, Tata Communications Limited, filed its return of income for Assessment Year 2014-15 on 24 November 2014, which was revised twice in March 2016. In the revised return, the petitioner reduced the guarantee fee receivable from its Associate Enterprise by Rs.118.59 crore, as it had initially offered more guarantee fee than required. The revised return was selected for scrutiny assessment, and the Transfer Pricing Officer made an addition of Rs.120.80 crore on account of corporate guarantee fees, which was confirmed by the Dispute Resolution Panel and the final assessment order dated 25 October 2018. The petitioner appealed this order to the Income Tax Appellate Tribunal, where the appeal was pending. While the appeal was pending, the Assessing Officer issued a notice under Section 148 of the Income-tax Act, 1961 on 30 March 2021, seeking to reopen the assessment for AY 2014-15. The reasons recorded for reopening were that the deduction claimed by the assessee for reversal of guarantee fee was not admissible in AY 2014-15 and should have been claimed in AY 2016-17, and that the DRP had confirmed the addition on account of guarantee fee. The petitioner objected to the reopening, but the Assessing Officer passed a final reassessment order on 28 March 2022, adding Rs.118.59 crore and raising a demand of Rs.542 crore. The petitioner challenged the reassessment notice and order by way of a writ petition before the Bombay High Court. The court considered the submissions of the petitioner that the reassessment was beyond four years, there was no failure to disclose material facts, the issue was already examined in the original assessment and was pending before the Tribunal, and the reassessment amounted to a change of opinion. The court held that the reassessment notice and order were invalid and quashed them, allowing the petition.
Headnote
A) Income Tax - Reassessment - Section 147, 148 Income-tax Act, 1961 - Reassessment beyond four years - The petitioner challenged reassessment notice and order for AY 2014-15 issued after four years from the end of the assessment year. The court held that in the absence of any failure on the part of the assessee to disclose fully and truly all material facts, the reassessment is bad in law. (Paras 14-15)
B) Income Tax - Reassessment - Change of Opinion - Section 147, 148 Income-tax Act, 1961 - The issue of guarantee fee reversal was already examined during the original assessment proceedings and the TPO had made an addition on account of corporate guarantee fees. The court held that the reassessment based on the same issue amounts to a change of opinion and is not permissible. (Paras 14-15)
C) Income Tax - Reassessment - Third Proviso to Section 147 - Bar on reassessment - The issue of guarantee fee income was pending before the Tribunal in appeal against the original assessment order. The court held that the reassessment proceedings are barred by the third proviso to Section 147 of the Act. (Para 14)
D) Income Tax - Reassessment - Reasons recorded - Lack of tangible material - The reasons recorded for reopening were based on the same facts already considered in the original assessment. The court held that there was no fresh tangible material to justify reopening. (Paras 14-15)
Issue of Consideration
Whether the reassessment notice under Section 148 of the Income-tax Act, 1961 and the consequent reassessment order are valid when the issue of guarantee fee reversal was already examined in the original assessment and is pending before the Tribunal, and whether the reassessment is barred by the third proviso to Section 147 and constitutes a change of opinion.
Final Decision
The court allowed the writ petition and quashed the reassessment notice dated 30 March 2021 and the reassessment order dated 28 March 2022.
Law Points
- Reassessment beyond four years requires failure to disclose material facts fully and truly
- Reassessment cannot be based on change of opinion
- Third proviso to Section 147 bars reassessment on issues pending before appellate authority
- Reasons recorded must be based on tangible material
Case Details
2025 LawText (BOM) (3) 77
Writ Petition No.2486 of 2022
M.S. Sonak, Jitendra Jain
J. D. Mistri (Senior Advocate), Harsh M. Kapadia for petitioner; Suresh Kumar for respondents
Tata Communications Limited
Deputy Commissioner of Income Tax-1(3)(1), Principal Commissioner of Income Tax-1, National Faceless Assessment Centre, Delhi, Union of India
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Nature of Litigation
Writ petition challenging reassessment notice under Section 148 and reassessment order under the Income-tax Act, 1961.
Remedy Sought
Petitioner sought quashing of the reassessment notice dated 30 March 2021 and the reassessment order dated 28 March 2022 for AY 2014-15.
Filing Reason
Petitioner challenged the reassessment proceedings on grounds that they were initiated beyond four years without failure to disclose material facts, the issue was already examined in original assessment and was pending before the Tribunal, and the reassessment amounted to a change of opinion.
Previous Decisions
Original assessment order dated 25 October 2018 under Section 143(3) read with Section 144C(13) was passed, which was appealed to the Tribunal. Reassessment notice was issued on 30 March 2021 and reassessment order on 28 March 2022.
Issues
Whether the reassessment notice under Section 148 and the reassessment order are valid when the issue of guarantee fee reversal was already examined in the original assessment and is pending before the Tribunal?
Whether the reassessment is barred by the third proviso to Section 147 of the Income-tax Act, 1961?
Whether the reassessment amounts to a change of opinion and is based on lack of fresh tangible material?
Submissions/Arguments
Petitioner submitted that the reassessment notice was issued after four years from the end of the assessment year and there was no failure on the part of the petitioner to disclose fully and truly all material facts, hence the reassessment is bad in law.
Petitioner submitted that the issue of guarantee fees is pending before the Tribunal and therefore the reassessment is barred by the third proviso to Section 147 of the Act.
Petitioner submitted that the addition on account of guarantee fee income was already made in the original assessment, so there cannot be any case for the same amount having escaped assessment.
Petitioner submitted that there is no fresh tangible material and the reassessment amounts to a change of opinion on an issue already examined during regular assessment.
Ratio Decidendi
Reassessment beyond four years requires the Assessing Officer to demonstrate that the assessee failed to disclose fully and truly all material facts necessary for assessment. In the absence of such failure, the reassessment is invalid. Further, reassessment on an issue already examined in the original assessment and pending before the appellate authority amounts to a change of opinion and is barred by the third proviso to Section 147 of the Income-tax Act, 1961.
Judgment Excerpts
The deduction claimed by the assessee in computation of income is not admissible due to following reasons: 1. Reversal of income accounted under guarantee fee in FY 2013-14 is reportedly done in the books for FY 2015-16. Hence if at all deduction is allowable based on audited books for the FY 2015-16, it is allowable only in AY 2016-17 relevant to FY 2015-16 that too subject to confirmation that it is written off in the books.
The issue of 'guarantee fees' is pending before the Tribunal and therefore even on this account the impugned proceedings are barred by the 3rd proviso to Section 147 of the Act.
There is no fresh tangible material and the present proceedings are nothing but would amount to change of opinion on the issue which was examined during the course of the regular assessment proceedings.
Procedural History
The petitioner filed its return of income on 24 November 2014, revised on 17 March 2016 and 25 March 2016, and further modified on 29 November 2016. The return was selected for scrutiny, and a draft assessment order was passed on 28 December 2017 after obtaining the TPO's report. The petitioner filed objections before the DRP, and a final assessment order under Section 143(3) read with Section 144C(13) was passed on 25 October 2018. The petitioner appealed this order to the Tribunal on 14 December 2018. While the appeal was pending, a notice under Section 148 was issued on 30 March 2021. The petitioner requested reasons for reopening, which were provided on 24 March 2022. The petitioner filed objections on 25 March 2022. The reassessment order was passed on 28 March 2022. The petitioner filed a rectification application and also filed an appeal before the Commissioner of Income Tax (Appeals) to avoid limitation. The present writ petition was filed challenging the reassessment notice and order.
Acts & Sections
- Income-tax Act, 1961: Section 139(1), Section 143(3), Section 144C, Section 144C(13), Section 147, Section 148, Section 36(2), Section 271(1)(C), Section 142(1)
