In a recent case on Oxford University Press, the Bombay High Court has ruled that unless the “jurisdictional parameters” of Section 148 of the Income Tax Act, 1961 are met, the mere fact that the tax rate that applies to an assessee increases in subsequent assessment years (AYs) does not serve as justification for initiating a reassessment action against it for prior AYs.
“Merely because there is some change in the tax rate for the future assessment years, the provisions of Section 148 cannot be invoked without the jurisdictional parameters of these Sections being fulfilled.” , a division bench of Justices MS Sonak and Jitendra Jain viewed.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The petitioner challenged the impugned notice dated 25 March 2021 under Section 148 of the Income Tax Act, 1961 and the impugned order dated 31 January 2022, rejecting the petitioner’s objection to reopening of the assessment made by the first respondent for the assessment year 2014-15. The reassessment action was initiated in March 2021, more than four years after the end of the relevant assessment year. Therefore, the petitioner contended that in terms of the proviso to Section 147, the Assessing Officer could have reopened the assessment only upon recording satisfaction that the petitioner failed to fully and truly disclose all material facts necessary for the assessment.
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The Department, on the other hand submitted that the petitioner was assessed as a “resident” for the relevant AY, relying almost entirely on the petitioner’s communication agreeing to be assessed as a “resident” from assessment year 1995-96 onwards. It pointed out that if the petitioner was to be taxed as a nonresident, then the tax rate was 40%.
THe High Court noted that Petitioner had agreed to be taxed as a resident only because the respondents had insisted. Further noted that changes in applicable tax rate do not answer non-compliance with the jurisdictional parameter that the assessee should have failed to fully and truly disclose the material facts necessary for assessment since the reassessment was proposed beyond four years.
Relying in DIL Ltd. v. Assistant Commissioner of Income-tax, Circle 6(2) the High Court held that the Assessing Officer may have reason to believe that income has escaped assessment but that in itself is insufficient for reopening an assessment beyond the period of 4 years. When an assessment is sought to be reopened beyond the period of four years, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The court while allowing the appeal quashed the reassessment order passed against Oxford University Press, merely because its tax status was changed from ‘resident’ to ‘non-resident’, making it subject to a 40% tax rate instead of 30%.
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