2023 (3) TMI 484 - HC - Income Tax

Reopening of assessment u/s 148 - ‘review’ and ‘change of opinion’ - disallowance with respect to interest expense on the ground that the petitioner had given interest free loan and advances to subsidiaries and other companies - HELD THAT:- The pre-requisite conditions of assuming jurisdiction u/s 148 are not satisfied in as much as the AO has failed to specify the material facts that were not truly and fully disclosed by the petitioner that was necessary for the assessment. Upon perusal of all the documents attached with the petition, it is clear that all documentary evidence including books of account as well as statements were submitted by the petitioner and therefore it is nothing but change of opinion which is not permissible under the Act.

In regard to what is “true and full disclosure by the assessee” the following passage from the decision in the case of Income-tax Officer vs. Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME COURT] - there was no failure to disclose any material fact necessary for the assessment by the petitioners.

Based upon the reasons recorded, one needs to scrutinize whether there was any tangible material with the AO justifying reopening of the assessment or can it be said to be a case of ‘review’ and ‘change of opinion’ by the said officer. On the perusal of the papers and the reasons mentioned in the notice for reopening we find that AO has not mentioned what was the new tangible material to justify the reopening and what was the material fact which was not truly and fully disclosed.

The respondent has failed to show why the presumption should not be applied in the present case. It can also be seen from the reasons recorded that there was no new material which had come to the notice of the AO and the entire reference in the reasons recorded is only to the material on record.

The respondent no.1 wrongly rejected the aforestated objection of the petitioner by the impugned order dated 25th January 2022. The statement of an employee, during the course of survey of Jet Airways cannot in our view form the basis of assessment. It would clearly amount to a change of opinion. There is no failure on the part of the petitioner to disclose any material facts and consequently the reopening is invalid in view of the proviso of Section 147 of the IT Act.

The petitioner was right in charging lower commission rates to its sister concern / related party jet airways India Limited on account of it being a sole selling agent as well as client giving more than 98% of its total turnover.

It is business call / decision for a party and is certainly not colourable device / mechanism as contended by the respondents. In fact, if the sister concern / related party namely Jet Airways India Limited which is loss making company were to pay the same rates as paid by other clients of the assessee then such transaction in normal business parlance would have been colourable device or mechanism to increase the expenses of the sister concern, the fact that Jet India Private Limited is a loss making company is not a valid criteria to determine escapement of income.

Since this transaction is neither an international transaction nor a specified domestic transaction, the transfer provisions do not apply. We have no hesitation in holding that the reassessment proceedings were nothing but a case of ‘change of opinion’, which does not comply with the jurisdictional foundation u/s. 147 of the Act.