Bombay HC quashes reassessment notice due to lack of proper approval, reiterates no review under reassessment.

Key Takeaways:

1. Reassessment notices require proper approval from the specified authority as per Section 151 (of Income Tax Act, 1961).

2. The concept of 'change of opinion' acts as a check against abuse of reassessment powers by the Assessing Officer.

3. Reassessment cannot be initiated to review an assessment where all relevant information was provided and considered during the original assessment.

Issue:

Whether the reassessment notice issued to Siemens Financial Services Pvt Ltd for the assessment year 2016-17 was valid, considering the approval was granted by the wrong authority and the reassessment appeared to be a review of the earlier assessment.

Facts:

For the assessment year 2016-17, the Assessing Officer issued a notice under Section 148A(b) (of Income Tax Act, 1961) on June 25, 2021, proposing to reassess Siemens Financial Services Pvt Ltd's income. The assessee raised objections, which were rejected by the Revenue. Subsequently, an order under Section 148A(d) (of Income Tax Act, 1961) was passed, and a notice under Section 148 (of Income Tax Act, 1961) was issued on July 31, 2022.

The assessee challenged the order and notice by filing a writ petition, arguing that the approval for reassessment was granted by the wrong authority and that the reassessment amounted to a review of the earlier assessment, which is not permitted.

Arguments:

1. Assessee's Arguments: The assessee contended that the approval for reassessment should have been obtained from the Chief Commissioner or Director General as per Section 151(ii) (of Income Tax Act, 1961), since more than three years had elapsed from the end of the relevant assessment year. However, the approval was granted by the Principal Commissioner of Income Tax-8, who was not the specified authority.

2. Revenue's Arguments: The Revenue argued that the concept of 'change of opinion' should not be a barrier to reassessment and that the Assessing Officer should have the power to review an assessment if new information comes to light.

Key Legal Precedents:

1. Aroni Commercials Ltd. v. Dy.CIT (2014) 44 taxmann.com 304 / 224 Taxman 13 (Bombay) (Mag.) / 362 ITR 403 / 267 CTR 228 (Bom)(HC)

2. CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC)

3. Dr. Mathew Cherian v. ACIT (2023) 151 taxmann.com 154 / 450 ITR 568 (Mad)(HC)

4. Tata Communications Transformation Services Ltd. v. ACIT (2022) 443 ITR 49 (Bom)(HC)

5. J.M. Financial & Investment Consultancy Services Pvt Ltd. v. ACIT (2022) 215 DTR 98 / 327 CTR 458 / (2023) 451 ITR 205 (Bom)(HC)

6. Sidhmicro Equities (P) Ltd. v. Dy.CIT (2023) 150 taxmann.com 460 (Bom)(HC (SLP dismissed Dy.CIT v. Sidhmicro Equities (P) Ltd (2023) 150 taxmann.com 461 / 453 ITR 35 (SC))

7. MA Multi-Infra Development Pvt Ltd v. ACIT (2023) 149 taxmann.com 491 / 451 ITR 181 (Bom)(HC)

8. DCW Limited v. ACIT (Bom)(HC) [WP No. (L) 6546 of 2022 dated 4-7-2022]

9. Soumya Girdhari Agarwal v. ITO (Bom)(HC) (WP No. 3354 of 2022 dated 25-7-2022)

10. Voltas Limited v. ACIT (2022) 141 taxmann.com 127 / 288 Taxman 506 (Bom)(HC)

11. Johnson and Johnson v. DCIT (Bom)(HC) [WP (L) No. 7733 of 2022 dated 4-5-2022]

12. Equitable Financial Consultancy Services Pvt Ltd v. ITO (WP No. 43 of 2022 dt. 27-4-2022

13. Asian Paints Ltd. v. ACIT (Bpm)(HC) (WP (L) No. 6385 of 2022 dated 26-4-2022])

14. Godrej Industries Limited v. DCIT. (2015) 377 ITR 1 (Bom)(HC)

15. KK Agarwal and Sons HUF v. ITO (Cal)(HC) (WPA No. 25770 of 2022 dt. 14-12-2022)

16. Seema Gupta v. ITO (2022) 288 Taxman 519 (Delhi)(HC)

17. Sudesh Taneja v. ITO (2022) 442 ITR 289 / 286 Taxman 284 (Raj)(HC) (AY. 2016-17) (WP No. 4882 of 2022 dt. 25-8-2023)

18. Banamali Das v. Dy. CIT (2023) 453 ITR 569 (Gauhati)(HC)

19. Ganesh Chandra Das v. Dy. CIT (2023) 453 ITR 569 (Gauhati)(HC)

20. Ganesh Chandra Das. v. Dy. CIT (2023) 453 ITR 565 (Gauhati)(HC)

21. Salien Das v. Dy. CIT (2023) 453 ITR 569 (Gauhati)(HC)

Judgement:

The Bombay High Court allowed the writ petition filed by Siemens Financial Services Pvt Ltd and quashed the reassessment order under Section 148A(d) (of Income Tax Act, 1961) and the notice issued under Section 148 (of Income Tax Act, 1961), dated July 31, 2022. The court held that the approval for reassessment was not obtained from the specified authority as required by Section 151 (of Income Tax Act, 1961). Since more than three years had elapsed from the end of the relevant assessment year (2016-17), the approval should have been obtained from the Chief Commissioner or Director General as per Section 151(ii) (of Income Tax Act, 1961). However, the approval was granted by the Principal Commissioner of Income Tax-8, who was not the specified authority. The court also held that the Revenue cannot rely on the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), as Section 151 (of Income Tax Act, 1961) was amended by the Finance Act 2021, and the amended provisions would have to be complied with by the Revenue. Furthermore, the court reiterated the principle that the Assessing Officer does not have the power to review an assessment where all relevant information was provided and considered during the original assessment proceedings. The court relied on various precedents, including Aroni Commercials Ltd. v. Dy.CIT, CIT v. Kelvinator of India Ltd., Dr. Mathew Cherian v. ACIT, and others, to emphasize that the concept of 'change of opinion' is an in-built test to check the abuse of power by the Assessing Officer.

FAQs:

Q1: What was the main reason for quashing the reassessment notice?

A1: The main reason for quashing the reassessment notice was that the approval for reassessment was not obtained from the specified authority as required by Section 151 (of Income Tax Act, 1961).

Q2: Can the Assessing Officer review an assessment during reassessment proceedings?

A2: No, the Assessing Officer cannot review an assessment during reassessment proceedings. Reassessment cannot be used as a tool to review an earlier assessment where all relevant information was provided and considered during the original assessment proceedings.

Q3: What is the significance of the 'change of opinion' concept in reassessment cases?

A3: The concept of 'change of opinion' acts as a check against the abuse of reassessment powers by the Assessing Officer. It ensures that reassessment proceedings are not initiated merely because the Assessing Officer has a different opinion on the same set of facts and information that were considered during the original assessment.

Q4: What legal precedents did the court rely on in this case?

A4: The court relied on various legal precedents, including Aroni Commercials Ltd. v. Dy.CIT, CIT v. Kelvinator of India Ltd., Dr. Mathew Cherian v. ACIT, Tata Communications Transformation Services Ltd. v. ACIT, J.M. Financial & Investment Consultancy Services Pvt Ltd. v. ACIT, Sidhmicro Equities (P) Ltd. v. Dy.CIT, MA Multi-Infra Development Pvt Ltd v. ACIT, DCW Limited v. ACIT, and others

Q5: What is the impact of this judgment on future reassessment cases?

A5: This judgment reinforces the principles that reassessment notices must be issued with proper approval from the specified authority and that reassessment cannot be used as a tool to review an earlier assessment where all relevant information was provided and considered during the original assessment proceedings. It serves as a reminder to the Revenue authorities to follow the due process and adhere to the legal principles established by various court precedents.