-“Appropriate application of the law and correct advise to the concerned officer can save a lot of litigation and burden on the court as well as agony to the citizens.”
The Bombay High quashed assessment order passed on change of opinion thereby granting relief to Lehman Brothers Investments PteLtd, the petitioner.
The petition challenged the legality and validity of the impugned notice dated 31st March 2021 issued under Section 148 of the Income Tax Act, 1961, whereby the Assessment Officer (AO) sought reopening of the assessment since he had ‘reason to believe’ that the income chargeable to tax for A.Y. 2015-16 had escaped assessment within the meaning of section 147 of the Income Tax Act.
The petitioner is an investment holding company incorporated in Singapore. The ultimate holding company of the petitioner, Lehman Brothers Holdings Inc. (“LBHI”) filed a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York.
The petitioner did not conduct any business activity and laid off the entire staff. Hence, the petitioner had no business transaction during the A.Y. 2015-16. An Assessment Order under Section 143(3) of the Income Tax Act whereby it noted that the petitioner has no business operations/permanent establishment in India. It also noted that there was a capital reduction and the capital gain/loss had been computed as per the provisions of the Act.
JD Mistri, the Senior Counsel for the petitioners submitted that the respondent had not complied with the jurisdictional condition which is a condition precedent for conducting the reassessment inasmuch as the respondent must show a failure on the part of the petitioner to disclose truly and fully all material facts necessary for the completion of his assessments, since their reassessment was conducted beyond a period of four years.
According to the Counsel, all the facts on the capital reduction and the computation of capital gain /loss under Section 45 r.w.s. 48 of the Act were disclosed and there was no failure to make a full and true disclosure.
The counsel for the respondents submitted that no return was filed in response to the notice within one month of its issuance and that submitting the earlier return does not fulfil the procedural requirements as the notice under Section 143(2) cannot be generated on the return filed earlier.
Quashing the assessment order a Bench comprising of Justices Kamal Khata and Dhiraj Singh Thakur observed that “The reopening of the assessment based on a different method of computation or application of the section is nothing else but a change of opinion, which is impermissible in law.”
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