Case Note & Summary
The petitioner, M/s. Rabo India Finance Limited, challenged the reopening of its income tax assessment for Assessment Year 2006-07 under Section 148 of the Income Tax Act, 1961. The reopening was based on reasons recorded by the Assessing Officer, who noted that during the assessment for AY 2007-08, it was found that no substantial or specific services were rendered by the holding company, and therefore business support charges and guarantee fees paid were not for business expediency. The petitioner argued that the same issue had been examined during the original assessment proceedings for AY 2006-07, including by the Transfer Pricing Officer and the Assessing Officer, and thus the reopening was based on a mere change of opinion. The court agreed, noting that the reopening was within four years and required fresh material to justify it. Since the reasons did not disclose any new information not already considered, the notice was quashed. The court also noted that similar notices for earlier years had been quashed by a Division Bench on the ground of change of opinion. The petition was allowed.
Headnote
A) Income Tax - Reopening of Assessment - Section 147, 148 Income Tax Act, 1961 - Change of Opinion - The Assessing Officer reopened assessment based on information from a subsequent year's assessment that no substantial services were rendered by the holding company - The court held that since the same issue was considered during the original assessment, reopening was based on a mere change of opinion and was impermissible - The notice under Section 148 was quashed (Paras 1-5).
Issue of Consideration
Whether the reopening of assessment under Section 148 of the Income Tax Act, 1961 for Assessment Year 2006-07 was valid or based on a mere change of opinion.
Final Decision
The petition is allowed. The notice dated 28 March 2011 under Section 148 of the Income Tax Act, 1961 for Assessment Year 2006-07 is quashed and set aside.
Law Points
- Reopening of assessment within four years requires fresh material
- not mere change of opinion
- Section 147
- Section 148
- Income Tax Act
- 1961
Case Details
2013 LawText (BOM) (05) 18
Writ Petition (Lodg.) No.592 of 2013
Dr. D.Y. Chandrachud, A.A. Sayed
Mr. Jehangir D. Mistri, Senior Advocate with Mr. Atul K. Jasani for the Petitioner; Mr. P.C. Chhotaray for the Respondents
M/s. Rabo India Finance Limited
Deputy Commissioner of Income Tax and others
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Nature of Litigation
Writ petition under Article 226 of the Constitution challenging reopening of income tax assessment.
Remedy Sought
Quashing of notice dated 28 March 2011 under Section 148 of the Income Tax Act, 1961 for Assessment Year 2006-07.
Filing Reason
The petitioner contended that the reopening was based on a mere change of opinion and was impermissible.
Previous Decisions
A Division Bench of the Bombay High Court had quashed similar reopening notices for Assessment Years 2004-05 and 2005-06 on the ground of change of opinion.
Issues
Whether the reopening of assessment under Section 148 for AY 2006-07 was based on a mere change of opinion and thus invalid.
Submissions/Arguments
Petitioner: The issue of business support charges and guarantee fees was examined during original assessment by TPO and AO; reopening is based on change of opinion.
Respondent: Reopening is based on information from AY 2007-08 assessment that no substantial services were rendered; it is not a change of opinion.
Ratio Decidendi
Reopening of assessment within four years requires fresh material; if the same issue was considered during original assessment, reopening based on the same material is a mere change of opinion and impermissible.
Judgment Excerpts
The reopening in the present case is admittedly within a period of four years of the end of the relevant Assessment Year.
The reasons on the basis of which the assessment is sought to be reopened are as follows : ...
Before the order of assessment was passed in the present case, requisitions were issued by the Transfer Pricing Officer and thereafter even by the Assessing Officer during the course of which explanatory statements were furnished by the assessee...
Procedural History
The petitioner filed a writ petition under Article 226 challenging the notice under Section 148 for AY 2006-07. The court heard arguments and delivered judgment on 3 May 2013.
Acts & Sections
- Income Tax Act, 1961: Section 147, Section 148, Section 195(2)
