"Condition Of Income Having Escaped Assesment Not Satisfied"- Bombay High Court Quashes IT Notice Against Tata Son Ltd For 2003-04

A division bench Justices KR Shriram and NJ Jamadar observed that the notice did not justify the reasons to show that income had escaped assessment on account of failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment, and, that reasons cited by the Assessing Officer merely showed "change of opinion" on the very same material.

Tata sons had filed its Income Tax returns for the relevant period on November 8, 2003, showing an income of Rs 10,53,46,561, which was selected for scrutiny by the Assessing Officer (AO). Multiple notices and questionnaires were served on Tata Sons on a variety of issues which were responded to by the company along with in supporting documents. On March 21, 2006, an assessment order was passed under section 143(3) determining a total income of Rs.858,87,52,290.

The company challenged this before the Commissioner of Income Tax (Appeals)-XXXIII, Mumbai ('CIT-[A]'). On March 16, 2007, the CIT-[A] passed an order granting the company some relief, based on which the AO passed a fresh order and determined the revised total income of the company as Rs 98,55,51,776.

Another notice was issued on July 23, 2008 under section 154 seeking to rectify the last assessment order of April 2007.

On April 5, 2010, the company was served with a notice under section 148 of the Act issued by Deputy Commissioner of Income Tax, Range 2(3), Mumbai (DCIT), dated March 31, 2010, saying that the AO had reasons to believe that income chargeable to tax for assessment year 2003-04 had escaped assessment within the meaning of section 147 of the Act, 1961, and, thus, it was proposed to reopen the assessment. The company requested for reasons recorded for reopening the assessment, which were provided, followed by the company's objections to the reopening of assessment.

Senior Advocate PJ Pardiwalla, appearing for the petitioner-company, argued that the assessment was proposed to be reopened beyond the period of six years from the end of assessment year 2003-04; that there was no tangible material which would justify reopening of the assessment; and there was no allegation much less cogent material to demonstrate that income had escaped assessment on account of suppression of material facts on the part of the petitioner. It was also argued that the reasons recorded by the AO, ex-facie, indicated that the entire exercise was influenced by a mere change of opinion on the same material and that all the issues had already been considered threadbare not once but twice.

Advocate Arvind Pinto for the authorities justified the reopening specifically denying that the notice was issued after six years and that the reasons recorded by the AO justified the invocation of powers under section 147 of the Act, 1961.

The bench observed that the legal position on the issue of exercise of power of reassessment under section 147 of the Act, 1961 was crystallised.

"In case the assessment is proposed to be reopened beyond the period of four years, where the assessment was completed under section 143(3) of the Act, an additional condition is required to be satisfied, namely, recording a satisfaction that the income has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Whether these jurisdictional conditions are satisfied, has to be ascertained from the reasons recorded by the Assessing Officer," the bench observed. It added that the existence of reasons should be based on tangible material and a bald assertion by the AO un-substantiated by tangible material was of no avail.

"The reason is not far to seek. The power is of reassessment and not review. It is thus postulated that where the primary facts necessary for assessment are fully and truly disclosed and the Assessing Officer took a conclusive view thereon, it is impermissible to reopen the assessment based on the very same material on the premise that the said material sustains a different opinion," the be concluded, observing that a bare perusal of the reasons indicates that the exercise was influenced by a mere change of opinion.