No Change In Opening And Closing Stock Of NCDs; Bombay High Court Quashes Reassessment Notice

The Bombay High Court has quashed the reassessment notices as there was no change in the opening and closing stock of the non-convertible debts (NCDs).

The Bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the reopening of assessment by the notice was merely on the basis of a change of opinion of the AO. The change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.

The petitioner/assessee is a company incorporated under the laws of Cyprus. The petitioner is a tax resident of Cyprus and is an investment holding company. The petitioner company was also registered as a foreign portfolio investor (FPI) with the Securities and Exchange Board of India (SEBI). The Jurisdictional Assessing Officer (JAO) and Commissioner of Income Tax (International Taxation), who are required to grant approval.

The Assessment of Petitioner for AY 2015-2016 was completed on October 30, 2017 under Section 143(3), accepting the return of income as 'Nil'. Later on, Petitioner received a notice under Section 148 alleging that there were reasons to believe that Petitioner's income chargeable to tax for AY 2015–2016 has escaped assessment within the meaning of Section 147 of the Act. The petitioner was provided with reasons to believe why the tax had escaped assessment.

The petitioner submitted that under Article 11 of the DTAA, interest income can be taxed only when it is received by the payee, and since the petitioner had not received any interest income on the non-convertible debt (NCD) during the AY 2015–2016, no tax was payable.

The department contended that the queries raised during the assessment proceedings were not exactly on the issue of non-disclosure of interest on the NCDs, and therefore there was no change of opinion.

The court held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration for the AO while completing the assessment. It is also not necessary that an assessment order contain references and/or discussions to disclose its satisfaction with respect to the query raised. Therefore, the reopening of the assessment is merely on the basis of a change of opinion of the AO from that held earlier during the course of assessment proceedings, and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.

Counsel For Appellant: Madhur Agrawal

Counsel For Respondent: Ahileshwar Sharma

Case Title: Upesi Ventures Ltd. Versus The Assistant Commissioner of Income Tax

Case No.: Writ Petition No. 2234 Of 2022

Click Here To Read The Order