TMI Blog2023 (3) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... inion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds that they are ex facie illegal and contrary to the provisions of the Act. 2. Whilst the present petition pertains to Assessment Year (AY) 2013-14, writ petitions (W.P) No 1996 of 2022 pertain to AY 2014-15, W.P No. 1901 of 2022 pertains to AY 2015-16, W.P No. 2828 of 2022 pertains to AY 2016-17 and W.P No. 2393 of 2022 pertains to AY 2017-18. Since the issue in these writ petitions as also the facts are identical save and except the year of assessment, we are disposing them by a common order. For brevity we advert to the facts in the W.P 1996 of 2022. FACTS: 3. The petitioner was the sole General Sales Agent (GSA) for Jet Airways India Limited (Jet Airways) as also sales agent for various other airline companies for which the petitioner receives commission on domestic and international ticket sales for passengers and cargo transport. 4. The petitioner filed its return of income for AY 2013-14 on 28th September 2013, declaring total income at ₹ 6,29,93,470/-. The commission charged by the petitioner from Jet Airways was duly reported as a related party transaction in its audited statement. The commission earned from Jet Airways was ₹14,42,13,012/- b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, Jetair Pvt. Limited works as a GSA and earns commission which ranges from 0.60% to 5% on passenger and 2.5% on cargo sales. The GSA receives a commission on all tickets and airways bill flown from the region that it represents. All cost related to GSA s business are the responsibility of GSA including rent, staff cost, office expenses etc. Airline also use GSA since GSA has historical ties with travel and cargo agents which will be time consuming for the Airline to build. The company Jetair Pvt. Limited has agreement with various other airlines companies other than Jet Airways India Limited. The list of all the companies with whom ORC (Online Registration Commission) agreement is executed along with the commission rate is given as follows AY 2012-13 to 2017-18. 2(iii) JETAIR AND ITS ONLINE RESERVATION COMMISSION (ORC) The rates at which ORC was received by Jetair from several airlines for FY 2012-13 has been tabulated as under: Airline Pax/cgo F.Y. 12- 13 Jet Airways/Jetlite Cargo 2.37 Jet Airways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant portion of the same are reproduced as under: Q.15. From details furnished by you, it is seen that there is huge variation in commission fee received by M/s. JetairPvt. Ltd. from M/s. Jet Airways Ltd over various Fys. Please comment. Ans . Most of the commission earned by M/s. Jetair Pvt. Passenger ticket booking. Further, with most of the nonrelated airlines, commission at passenger ticket booking is charged either @ 3% of basic ticket fare or cost plus 15%. From jet Airways, commission at passenger ticket booking is charged @ up to 1% of basic ticket fare. Further, during FY 2011-12 and 2012-13. M/s. Jetair Pvt. Ltd. agreed to limit commission earning from Jet Airways to assist the Jet Airways (annexure-3 (page 1 to 3) letters). Therefore, there was further drop in commission earned from Jet Airways during FY 2011- 12 and 2012-13. Q.16. As per answer given by you above, M/s. Jetair Pvt. Ltd. commission from M/s. Jet Airways Ltd. at lower rate in comparison to rate at which it charges commission from non-related entities. This rate was further lowered during FY 2011-12 and 2012-13. This has reduced taxable profit of M/s. Jetair Ltd. Please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rways from is related entity Jetair. Due to this, Jet Airways regularly and consistently underpaid its sister concern Jet Air Pvt. Ltd. thereby resulting in its lesser revenues and consequently leading to its lower profits, finally resulting into lower tax liability. Having been done without any reasonable justification in violation of arms length principles, this appears to a device for evasion of taxes which would have been due from Jet Airways (India) Ltd. Sr. No. Particulars A.Y. 2013-14 (Rs.) 1. Total Turnover (Cargo+PAX) 78,22,86,48,896 2. Total Commission received by Jetair 30,40,38,007 3. Jet Airways PAX Turnover 78,29,29,33,117 4. % of Commission calculated by the 0.20% 5. Amount as calculated by the assessee 14,45,85,866 6. % of commission @ 2.50% of Jet Airways PAX Tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out in the instant case, however, the assessee has failed to disclose truly and fully all material facts necessary for its assessment, relating to the commission receipts transactions from Jet Airways (India) Ltd. In view of the above discussion and facts of the case, I have reason to believe that the income amounting to Rs. 1,66,27,37,461/- chargeable to tax has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. 2(xiii) Applicability of provisions of Section 147/151 to the facts of the case: In this case, the return of income was filed for the year under consideration and the scrutiny assessment u/s. 143(3) had also taken place but the assessee had failed to disclose truly and fully material facts necessary for its assessment. Explanation [1] to Section 147 of the Act provides that Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. 2(xiv) In view of the above, the provisions of clause (c) of Explanation [2] to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he related party and the unrelated party was discovered. He submitted that merely on the basis that the petitioner is charging less commission for rendering services as sales agent from Jet Airways (related party) than from others cannot be a basis for a belief that income chargeable to tax has escaped assessment. He submitted that the rates of commission cannot be compared without considering the surrounding circumstances under which the rate has been agreed between the parties. He submitted that the passenger turnover of Jet Airways was 61.74 times the combined passenger turnover of all other airlines with whom the petitioner had executed General Sales Agreement (GSA). He submitted that considering the turnover given by Jet Airways, the lower rate charged by the petitioner for providing service as the sole selling agent was justified and cannot be compared with the rate charged to the other airlines which gave a very small fractions to the work to the petitioner. 11. He submitted that only real income is chargeable to tax. The respondent had not alleged that the petitioner had disclosed lesser income than what was actually earned by the petitioner. The allegation is that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that Jet Airways (India) Limited and Jetair Private Limited are related party s under the Act. He submitted that considering the size and financial standing, Jet Airways has considerable weight for fixing ORC rate to its own benefit thereby lowering the tax liability and to the benefit of the whole group thereby lowering the tax liability of the entire group. The lower rates charged by the petitioner are indicative of a mechanism deliberately employed to lower the payment of commission to Jetair Private Limited coupled with the fact that Jet Airways is a loss-making enterprise and its liability to pay tax may not get affected as much as payment of ORC to Jetair at lower rate would affect the revenues, and consequently the tax liability of the petitioner which is a profit-making company. He submitted that the transaction in the nature of commission payment between the related entities appear to be an arranged one and to conclude that there has been deviation from the usual practice of commission payment, which reduces the overall tax liability of the petitioner which is a group entity of Jetair Private Limited. He submitted that this arrangement of charging lower rates has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus submitted that the petition be dismissed. CONCLUSION: 15. We find merit in the contentions of learned senior counsel Mr. Pardiwalla. 16. In our view, the pre-requisite conditions of assuming jurisdiction u/s 148 of the Act 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. 17. 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] 103 ITR 473 (SC) would be relevant: . The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. 20. The respondent has failed to show why the presumption should not be applied in the present case. Further, it can also be seen from the reasons recorded that there was no new material which had come to the notice of the Assessing Officer and the entire reference in the reasons recorded is only to the material on record. 21. In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax, the Court, in the background of section 147 of the Act, observed: .all that the Income-tax Officer has said is that he was not right in allowing deduction under Section 80I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase reason to believe in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Officer nothing new has happened. There is no change of law. No new material has come on record. No information has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly goes to show that the issue with regard to transactions with all parties including Jet Airways had been gone into by the said Assessing Officer. 23. In our view, 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. 23. We are of the view that 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. 24. In our view, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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