Bombay High Court: In a case wherein, the petitioner challenged the impugned notice dated 25-03-2021 under Section 148 of the Income Tax Act, 1961 (‘the 1961 Act’) and the impugned order dated 31-01-2022, whereby the petitioner’s objection to reopening of the assessment made by Respondent 1 for the assessment year 2014-2015, was rejected, the Division Bench of M.S. Sonak* and Jitendra Jain, JJ., merely because there was some change in the tax rate for the future assessment years of the petitioner, that is, its status changed to “non-resident” from “resident”, making it subject to 40% tax rate, instead of 30%, the provisions of Section 148 of the 1961 Act could not be invoked without the jurisdictional parameters of the said sections being fulfilled. The Court quashed and set aside the impugned notice dated 25-03-2021, and the consequent order dated 31-01-2022.
Background
The petitioner stated that the impugned notice dated 25-03-2021 was issued more than four years after the end of the relevant assessment year and thus, in terms of the proviso to Section 147 of the 1961 Act, the Assessing Officer could reopen the assessment only upon recording satisfaction that the petitioner failed to fully and truly disclose all material facts necessary for the assessment. Upon receipt of the impugned notice dated 25-03-2021, the petitioner sought and was thus furnished the reasons for reopening via communication dated 11-01-2022.
Counsel for the respondents submitted that for the assessment year 2016-2017, the petitioner was assessed as “non-resident” and for the assessment year 2014-2015, the petitioner was assessed as “resident”, as the petitioner agreed to be assessed as a “resident” from assessment year 1995-1996 onwards, via communication dated 19-07-2006. It was also submitted that if the petitioner had to be taxed as non-resident, then the tax rate was 40%, instead of tax rate of 30%, to which the petitioner was assessed based upon resident status. Thus, it was reasonable to reopen the assessment for the assessment year 2014-2015.
Analysis, Law, and Decision
The Court, after referring to the reasons that were furnished, opined that it did not find any allegation regarding any failure on the petitioner’s part to fully and truly disclose any material facts necessary for the assessment. The Court also opined that without an allegation, let alone some material to support such allegation, one of the jurisdictional parameters for reopening of the assessment beyond four years could not be said to have been fulfilled.
The Court stated that only because the respondents insisted that the petitioner should be taxed as resident, the petitioner through communication dated 19-07-2006 agreed with the department’s position to avoid litigation.
The Court noted that along with the return of income filed by the petitioner for the assessment year 2014-2015, the petitioner had once again submitted a letter dated 16-07-2015 regarding its status as a “resident” company and the records also showed that from 1995-1996 onwards, the petitioner had been assessed as a “resident” company. The Court opined that the department could not reasonably allege any failure on the petitioner’s part to disclose the material facts regarding the petitioner’s status and therefore, the reasons did not even contain any allegation of failure to disclose material facts.
The Court opined that the jurisdictional parameter about failure to disclose fully and truly all material facts necessary for assessment were missing in the present case and without compliance with the jurisdictional parameters, the respondents had no jurisdiction to issue impugned notice and proceed with the reopening of the assessment. The Court opined that merely because there was some change in the tax rate for the future assessment years, the provisions of Section 148 of the 1961 Act could not be invoked without the jurisdictional parameters of the said sections being fulfilled.
The Court relied on DIL Ltd. v. Asst. CIT, 2012 SCC OnLine Bom 92 : (2012) 343 ITR 296, wherein it was held that “given Parliament’s retrospective amendment of law, the Assessing Officer may have reason to believe that income has escaped assessment but that in itself is insufficient for reopening an assessment beyond the period of 4 years. When an assessment is sought to be reopened beyond the period of four years, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The retrospective amendment of law by Parliament would negate the inference that is sought to be drawn from the failure to disclose material facts.”.
The Court opined that in the present case, although the reasons did not allege a failure to disclose material facts, the material on record showed that there was no failure to disclose material facts. The Court thus quashed and set aside the impugned notice dated 25-03-2021, and the consequent order dated 31-01-2022.
[Oxford University Press v. CIT, Writ Petition No. 1894 of 2022, decided on 11-02-2025]
*Judgment authored by: Justice M.S. Sonak
Advocates who appeared in this case:
For the Petitioner: J. D. Mistri, Senior Advocate a/w Madhur Agrawal, Arnab Roy, Ankit Triwedi and Fenil Bhatt i/by Vaish Associate for the petitioner;
For the Respondents: Akhileshwar Sharma for the respondents.
