Bombay High Court Judgments — 2022

The High Court allowed the petition, holding that advance tax paid by the assessee is adjustable against the total tax, surcharge, and penalty payable under the Income Declaration Scheme, 2016. The Court reasoned that both TDS and advance tax are methods of collecting tax in advance, as evidenced by Sections 190(1), 199, and 219 of the Income Tax Act, 1961. The Court found no sustainable ground to distinguish between TDS and advance tax for the purpose of credit. The Court noted that the Supreme Court's dismissal of the Revenue's Special Leave Petition against the Delhi High Court's decision in Kumudam Publications, which allowed adjustment of advance tax, supported this view. The Court also noted that the Umesh D. Ganore judgment did not consider the Supreme Court's observations on advance tax being adjustable. The Court directed the Principal Commissioner to issue the certificate in Form 4, giving credit for the advance tax already paid by the petitioner.

The High Court held that the writ petition had to be allowed, quashing and setting aside the notice dated March 28, 2019, and the order dated November 13, 2019. The Court found that the notice was issued after the expiry of 4 years from the end of the relevant assessment year, and the proviso to Section 147 of the Act applied. The Revenue failed to discharge its onus to show that the petitioner had failed to disclose truly and fully all material facts. Specifically, items (2) and (4) were based on a clear change of opinion by the JAO, which is not permissible for reopening an assessment. Item (1) was based on audit objections, and the JAO did not independently satisfy himself that income had escaped assessment based on law. Item (3) was also based on audit objections and involved the JAO considering the same material on record to take a different view, which is impermissible. The Court noted that the entire basis for reopening was a change of opinion. However, regarding item (4), the assessee's counsel conceded that there was an oversight in the original assessment and offered to pay the tax on the amount of Rs. 64,48,000/-. Consequently, the Court directed the petitioner to pay Rs. 30,54,398/- as mentioned in the revenue audit objections, with the demand to be raised by the respondents and paid by the petitioner within the prescribed time. The Court clarified that this payment was made without prejudice to the assessee's position, not an admission of liability, and no penalty proceedings could be initiated for this amount.

The High Court allowed the petition and quashed the notice dated March 30, 2021, issued under Section 148 of the Income Tax Act, 1961, and the order dated June 22, 2021, rejecting the petitioner's objections. The Court held that the conditions precedent for reassessment under Section 147 were not met. Firstly, the information relied upon by the Assessing Officer (AO) was received on January 20, 2019, which was prior to the original assessment order dated December 21, 2019. This indicated that the AO proceeded on incorrect facts. Secondly, the AO had issued specific queries regarding loans and advances during the original assessment, and the petitioner had provided detailed responses. The assessment order referenced these notices and the petitioner's filings. Therefore, the issue of loans advanced to group companies at low or nil interest was already considered during the original assessment. The Court reiterated that a 'change of opinion' does not constitute justification for reopening an assessment, citing Reserve Bank Officers Co-operative Credit Society Ltd. vs. The Income Tax Officer and CIT v. Kelvinator of India Ltd. The Court also emphasized that income which could have been earned but was not actually received or accrued cannot be taxed, referencing India Finance & Construction Co. (P.) Ltd. vs. B.N. Panda and Shivnandan Buildcon (P.) Ltd. vs. Commissioner of Income-tax, which held that there is no provision to tax 'notional' interest in the absence of accrual or receipt. The primary facts were fully disclosed, and the AO was not entitled to reopen based on a change of opinion on the same material.

The High Court held that the impugned notice dated March 27, 2019, issued under Section 148 of the Act, and the order dated November 13, 2019, rejecting the petitioner's objections, were set aside. The Court reasoned that the Assessing Officer had all the primary facts before him during the original assessment proceedings. The petitioner had disclosed all material facts necessary for the assessment, including financial statements, computation of income, and details of borrowings and interest expenses. The Assessing Officer had the opportunity to make necessary inquiries and draw proper inferences. Therefore, the reopening was based on a mere change of opinion, which is not a valid ground for reassessment, especially after the lapse of four years. The Court found that the conditions precedent for exercising the power to reopen assessment after four years were not fulfilled, referencing the principles laid down in *Bhavesh Developers*.

The High Court held that the impugned order dated September 28, 2021, passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for the assessment year 2011-12, was passed without jurisdiction. The court found merit in the petitioner's submission that the order was issued against Agarsen Mercantile Pvt. Ltd., which was a non-existent entity due to its amalgamation with Tin Time Consultancy Pvt. Ltd. as approved by the National Company Law Tribunal on March 28, 2018. Citing its own decision in Teleperformance Global Services (P) Ltd. vs. Assistant Commissioner of Income Tax and other judicial pronouncements, the court concluded that an order passed against a non-existent entity is void ab initio. Consequently, the petition was allowed, and the impugned order was quashed and set aside. All rights and contentions of the parties were kept open.

The High Court held that the impugned notice for reopening the assessment for AY 2014-15 was legally unsustainable and based on a mere change of opinion. The Court reasoned that the petitioner had disclosed all primary facts and provided explanations regarding employee cost reimbursements during the original assessment. The fact that the AO had considered the query and the petitioner had furnished a reply implied that the issue was subject to consideration. The Court distinguished the present case from situations involving non-disclosure of primary facts, citing the Supreme Court's decision in Calcutta Discount Co. Ltd. The Court also rejected the revenue's argument that the disallowance in AY 2015-16 constituted tangible material for reopening AY 2014-15, stating that the AO in the earlier year was satisfied with the explanation provided. The Court concluded that a different opinion formed in a succeeding assessment year, by itself, is not a ground to reopen an earlier year's assessment where a view was conclusively recorded. Consequently, the petition was allowed, quashing the notice and the order disposing of objections.

The High Court held that the entire basis on which jurisdiction was assumed under Section 147 of the Act failed because the Assessing Officer accepted that the initial reasons for reopening were based on incorrect facts. While Explanation 3 to Section 147 allows for reassessment of issues that come to notice subsequently, it presupposes that the initial notice was valid and the proceedings were validly initiated. The Court, referencing Commissioner of Income Tax vs. Jet Airways (I) Ltd., emphasized that if the Assessing Officer accepts the assessee's objections and does not assess or reassess the income that formed the basis of the initial belief, it is not open for him to independently assess other income that comes to notice subsequently. A fresh notice under Section 148 would be necessary for such independent assessment. Therefore, the notice and the order disposing of objections were quashed and set aside.

The High Court allowed the petition, quashing the notice dated August 2, 2019, and the order on objections dated December 5, 2019. The Court held that the reassessment proceedings were initiated based on a mere change of opinion by the Assessing Officer. It was observed that the reasons for reopening were based on documents and submissions already available before the original assessment was completed. The Court emphasized that the Assessing Officer cannot reopen an assessment based on the very same material to take a different view, especially when the original assessment was completed after careful scrutiny of disclosed facts. The judgment cited the Apex Court's ruling in Commissioner of Income Tax Vs. Kelvinator of India Ltd. that reopening on a mere change of opinion is arbitrary and not a valid reason. The Court was satisfied that the petitioner had truly and fully disclosed all material facts necessary for the assessment, and there was no indication of any non-disclosure. The principle from Sesa Goa Limited Vs. Joint Commissioner of Income Tax & Ors. and 3i Infotech Limited V/s. Assistant Commissioner of Income Tax was applied, stating that reopening beyond four years requires tangible material and failure to disclose, not just a different opinion on existing material.