Jurisdictional Error — Absence of Fresh Tangible Material — Change of Opinion — Issue Pending Before Tribunal — Reassessment Proceedings Held Without Jurisdiction

Reassessment proceedings cannot be initiated merely based on a change of opinion. The absence of failure to disclose material facts and the lack of fresh tangible material render such proceedings without jurisdiction. Further, reassessment on issues already under appeal is statutorily barred. (Paras 20, 21, 24, 25, 27, 31)

The Bombay High Court quashed the reassessment notice and the final reassessment order, holding that:

• The reassessment proceedings were initiated without the jurisdictional requirement of failure to disclose material facts fully and truly.

• The issue of corporate guarantee fees was already pending before the Tribunal, barring reassessment under the third proviso to Section 147.

• No fresh tangible material justified reopening the case after four years.

Acts and Sections Discussed:

1. Income-tax Act, 1961 — Section 139(1) — Filing of Return of Income

2. Income-tax Act, 1961 — Section 143(3) — Scrutiny Assessment

3. Income-tax Act, 1961 — Section 144C(13) — Directions of Dispute Resolution Panel (DRP)

4. Income-tax Act, 1961 — Section 147 — Reassessment for Income Escaping Assessment

5. Income-tax Act, 1961 — Section 148 — Issuance of Notice for Reassessment Proceedings

6. Income-tax Act, 1961 — Section 151 — Approval for Issuance of Notice

7. Income-tax Act, 1961 — Section 271(1)(C) — Penalty Proceedings for Furnishing Inaccurate Particulars of Income

Subjects: Reassessment Proceedings — Jurisdictional Error — Full and True Disclosure — Change of Opinion — Fresh Tangible Material — Corporate Guarantee Fees — Income Escaping Assessment — Pending Tribunal Proceedings

Nature of the Litigation: Writ Petition filed by Tata Communications Limited challenging the reassessment notice and consequent order passed under the Income-tax Act, 1961.

Relief Sought: Quashing of reassessment notice dated 30 March 2021 and the final reassessment order dated 28 March 2022.

Reason for Filing the Case: The reassessment proceedings were alleged to be without jurisdiction due to absence of failure to disclose material facts and the issue of corporate guarantee fees already being subject to pending appeal before the Income Tax Appellate Tribunal (ITAT).

Previous Decisions: The Dispute Resolution Panel (DRP) confirmed the addition of corporate guarantee fees proposed by the Transfer Pricing Officer (TPO) in the assessment order dated 25 October 2018. The said addition was challenged before the Tribunal, and the appeal remains pending.

Issues:

1. Whether the reassessment proceedings initiated after four years were valid despite the absence of any failure on the part of the assessee to disclose material facts fully and truly?

2. Whether the reassessment proceedings could be initiated on an issue already subject to appeal before the Tribunal?

3. Whether the absence of fresh tangible material justified reopening the assessment?

Submissions/Arguments: a. By the Petitioner:

• The reassessment notice was issued beyond the period of four years without the assessee’s failure to disclose material facts fully and truly.

• The issue of corporate guarantee fees was already subject to pending appeal before the ITAT.

• There was no fresh tangible material to justify the reopening of the assessment.

• Reassessment proceedings amounted to a mere change of opinion, impermissible under the law.

b. By the Respondents:

• The petitioner did not file a fresh return of income in response to the Section 148 notice.

• The reversal of the guarantee fee was not an issue during the original assessment proceedings.