Change In Tax Rate In Future AYs Not Ground For Reassessment Without Fulfilling Jurisdictional Parameters U/S 148 Income Tax Act: Bombay HC

A division bench of Justices MS Sonak and Jitendra Jain thus quashed the reassessment order passed against Oxford University Press, merely because its tax status was changed from 'resident' to 'non-resident', making it subject to a 40% tax rate instead of 30%.

It said, “Merely because there is some change in the tax rate for the future assessment years, the provisions of Section 148 cannot be invoked without the jurisdictional parameters of these Sections being fulfilled.”

The reassessment action was initiated in March 2021, more than four years after the end of the relevant assessment year. Therefore, the petitioner contended that in terms of the proviso to Section 147, the Assessing Officer could have reopened the assessment only upon recording satisfaction that the petitioner failed to fully and truly disclose all material facts necessary for the assessment.

The Department on the other hand submitted that Petitioner was assessed as a “resident” for the relevant AY, relying almost entirely on the petitioner's communication agreeing to be assessed as a “resident” from assessment year 1995-96 onwards. It pointed out that if the petitioner was to be taxed as a nonresident, then the tax rate was 40%.

At the outset, the High Court noted that Petitioner had agreed to be taxed as a resident only because the respondents had insisted.

Moreover, it noted that changes in applicable tax rate do not answer non-compliance with the jurisdictional parameter that the assessee should have failed to fully and truly disclose the material facts necessary for assessment since the reassessment was proposed beyond four years.

It cited DIL Ltd. v. Assistant Commissioner of Income-tax, Circle 6(2) where a Co-ordinate Division Bench of the High Court had held that 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.

As such, the petition was allowed and the reassessment order was quashed.

Appearance: Mr. J. D. Mistri, Senior Advocate a/w Mr. Madhur Agrawal, Mr. Arnab Roy, Mr. Ankit Triwedi and Mr. Fenil Bhatt i/by Mr. Vaish Associate for the petitioner. Mr. Akhileshwar Sharma for the respondents.

Case title: Oxford University Press v. DCIT, Int. Tax Circle 3 (2)(2) & Ors. (WRIT PETITION NO.1894 OF 2022)

Citation: 2025 LiveLaw (Bom) 73

Click here to read order