Bombay High Court
Tata Communications Limited vs Deputy Commissioner Of Income Tax-1(3) ... on 7 March, 2025
Author: M.S. Sonak
Bench: M.S. Sonak
Digitally signed
2025:BHC-OS:3771-DB
PRACHI
by PRACHI
PRANESH
1 1.WP.2486.22(J).docx
PRANESH NANDIWADEKAR
NANDIWADEKAR
Date: 2025.03.07
15:27:41 +0530
Revati
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2486 OF 2022
Tata Communications Limited )
having its address Videsh Sanchar Bhavan, )
M.G. Road, Fort, )
Mumbai - 400 001. ) .. Petitioner
Versus
1. Deputy Commissioner of Income Tax-1(3)(1))
Aayakar Bhavan, M.K. Road, )
Mumbai - 400 020. )
2. Principal Commissioner of Income Tax-1, )
Aayakar Bhavan, M.K. Road, )
Mumbai - 400 020. )
3. National Faceless Assessment Centre, Delhi,)
National Faceless Assessment Centre, )
New Delhi - 110 003. )
4. Union of India )
Through the Secretary, Ministry of Finance,)
Government of India, North Block, )
New Delhi - 110 001. ) .. Respondents
______________________________________________________
Mr. J. D. Mistri, Senior Advocate a/w Mr. Harsh M. Kapadia
for the petitioner.
Mr. Suresh Kumar for the respondents.
______________________________________________________
CORAM
M.S. Sonak &
Jitendra Jain, JJ.
RESERVED ON: 3 March 2025
PRONOUNCED ON: 7 March 2025
JUDGMENT (Per Jitendra Jain, J):
-
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1. Rule. The Rule is made returnable immediately at
the request of and with the consent of the learned counsel for
the parties.
2. This Petition challenges re-assessment notice under
Section 148 of the Income-tax Act, 1961 (the Act) dated 30
March 2021 for the assessment year (AY) 2014-2015 and the
re-assessment order passed pursuant thereto dated 28 March
2022.
Brief Facts :
3. The petitioner filed its return of income u/s 139(1)
of the Act on 24 November 2014 which was subsequently
revised on two occasions namely on 17 March 2016 and 25
March 2016 which was further modified on 29 November
2016. In the original return of income, the petitioner offered
guarantee fees charged to its Associate Enterprise (AE)
amounting to Rs.152.66 crore by taking 1.5% of the guarantee
amount as the basis. This figure of Rs.152.66 crore was
credited to the profit and loss account. However, in March
2016, the petitioner realized that they have offered guarantee
fee more than what was required and therefore revised the
return of income by offering Rs.34.07 crore. This was done by
reducing Rs.118.59 crore in revised return of income. The net
effect was that the petitioner offered Rs.34.07 crore of income
as guarantee fees. However, since the accounts for the
financial year 2013-14 relevant to AY 14-15 were closed, the
petitioner in the account of financial year 2015-16 reversed
the guarantee fee amounting to Rs.118.59 crore.
3 1.WP.2486.22(J).docx
4. In the revised return of of income for AY 2014-15,
the petitioner under the heading 'allowable deductions' in
(xiii) reduced the guarantee fee receivable pertaining to
financial year 2013-14 but booked in financial year 2015-16
amounting to Rs.118.59 crore. In the note annexed to the said
revised return of income, being note No.16 read as under ;
'The company has revised the guarantee fees charged to its
subsidiaries for FY 2013-14, post finalization of the books of
accounts for the year. Accordingly, the guarantee fee reported
above excludes an amount of Rs.118,58,58,621 which has been
accounted as reversal of guarantee income int he books of FY
2015-16. For tax purpose, the reversal has been given effect to in
FY 2013-14 itself.'
5. The above revised return of income was selected for
scrutiny assessment and after obtaining the Transfer Pricing
Officer's (the TPO) report, a draft assessment order was
passed on 28 December 2017. In the draft assessment
order, the TPO made a transfer pricing adjustment of
Rs.187,556,48,429/- which included adjustment on account of
"corporate guarantee fees" issued on behalf of AE's amounting
to Rs.120,80,22,974/-. The reason for making the said
addition, on account of corporate guarantee fees, was the TPO
rejected the contention of the petitioner that only 0.33%
should be estimated towards guarantee fees which the transfer
pricing officer estimated at 1.5% of the guarantee amount.
The draft order was a subject matter of objections filed before
DRP u/s 144C of the Act and finally on 25 October 2018, an
order under Section 143(3) read with Section 144-C(13) of
the Act was passed wherein pursuant to the directions of the
DRP, the corporate guarantee fees proposed by the TPO at
Rs.120,80,22,974/- was confirmed. The said final assessment
4 1.WP.2486.22(J).docx
order dated 25 October 2018 is challenged by the petitioner
by filing an appeal to the Tribunal on 14 December 2018. In
the writ petition, the petitioner has specifically averred that
this issue of adjustment on account of "corporate guarantee
fee income" is pending before the Tribunal. The appeal filed
before the Tribunal is still pending as of today.
6. Meanwhile, pending the appeal before the Tribunal,
a notice under Section 148 of the Act came to be issued on 30
March 2021 for the assessment year 2014-15, calling upon the
petitioner to deliver a return of income within 30 days from
the service of the notice. The petitioner, vide letter dated 29
April 2021, requested the assessing officer to treat the original
revised return filed in March 2016 as a return pursuant to the
notice under Section 148 of the Act and further requested the
reasons for reopening the assessment.
7. On 12 November 2021, a notice under Section 142(1)
was issued without providing the reasons, calling upon the
petitioner to file its return of income. The said notice was
replied by the petitioner vide letter dated 18 November 2021
wherein the petitioner once again requested the revised return
filed in March 2016 to be taken as return pursuant to Section
148 notice. The petitioner also enclosed a copy of the said
return.
8. On 24 March 2022, the assessing officer issued a
show cause cum draft assessment order and called upon the
petitioner to reply to the same within one day, i.e. by 25
March 2022. In the draft order, for the first time, the reasons
recorded were reproduced and furnished to the petitioner.
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9. The reasons, as produced in the draft order, read as
under:
As per reason recorded for the re-opening of the case, the
relevant part is reproduced here -
"The deduction claimed by the assessee in computation of income
is not admissible due to following reasons:
1. Reversal of income accounted under guarantee fee in FY 2013-
14 is reportedly done in the books for FY 2015-16. Hence if at all
deduction is allowable based on audited books for the FY 2015-
16, it is allowable only in AY 2016-17 relevant to FY 2015-16
that too subject to confirmation that it is written off in the books.
2. (ii) If the deduction is allowed in AY 2014-15, this tantamount
to allowing bad debts of AY 2016-17 in AY 2014-15 as the
income is offered in AY 2014-15. As per the provisions of section
36(2), bad debts is allowable only in the year income is written
off. Hence no deduction can be allowed in AY 2014-15.
3. Department does not have any mechanism to watch whether
assessee has offered the amount in the computation of income
relevant to AY 2016-17 if the same is claimed in the AY 2014-15.
4. DRP-2, in its order dated 27th September 2018 at para 46
confirmed the addition made by TPO on account of guarantee
fee. As per DRP, guarantee commission should have been charged
at the rate of 1.5% of the borrowing guaranteed instead of 0.33%
charged by the assessee from its overseas Associated Enterprises.
Accordingly differential amount of Rs. 120,80,22,974/- was
added back in the computation."
Considering the above facts and non-compliance of the assessee
company, the entire amount claimed as grantee fees reversal of
Rs.1,18,58,58,621/- is hereby disallowed and added back to the
total income of the assessee company. Penalty proceedings u/s
271(1)(C) of the IT Act, 1961 for furnishing inaccurate
particulars of income.
10. On 25 March 2022, the petitioner filed its
submissions challenging the reopening based on the reasons
reproduced in the draft assessment order. The petitioner had
various objections to the reopening.
11. On 28 March 2022, the Faceless Assessment Unit
passed a final reassessment order in which Rs.118.59 crore
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was added to the "guarantee fees" and a demand of Rs.542
crore was raised. The petitioner filed a rectification
application for not crediting the prepaid taxes before arriving
at the respondents' demand of Rs.542 crore. The said
rectification application is also pending as of today.
12. Meanwhile, to obviate limitation period for filing an
appeal, the petitioner after filing the present petition has
challenged the reassessment order by filing an appeal to the
Commissioner of Income Tax (Appeals).
13. It is on the above backdrop that the petitioner is
before this Court challenging the reassessment proceedings as
per the pre-amended law.
Submissions of the Petitioner :
14. Mr. Mistri, learned Senior Counsel for the petitioner
submits that the impugned notice is issued after a period of 4
years from the end of the relevant assessment year and in the
absence of any failure on the part of the petitioner to disclose
fully and truly all material facts necessary for the assessment,
the reassessment notice and the proceedings are bad in law.
He further submits that the issue of "guarantee fees" is
pending before the Tribunal and therefore even on this
account the impugned proceedings are barred by the 3rd
proviso to Section 147 of the Act. He further submitted that in
the assessment order addition of Rs.120.8 crore on account of
"guarantee fee income" has been made and therefore there
cannot be any case for the very same amount having escaped
the assessment so as to confer jurisdiction on the respondents
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for reopening the case. He also submitted that there is no
fresh tangible material and the present proceedings are
nothing but would amount to change of opinion on the issue
which was examined during the course of the regular
assessment proceedings.
15. Mr. Mistri, learned Senior Counsel for the petitioner
also has raised various other grounds which we do not
propose to reproduce and adjudicate in this petition but leave
it open to be decided in appropriate case. Mr. Mistri, learned
Senior Counsel, therefore, prayed for quashing of the notice
u/s 148 of the Act and consequent assessment order passed
pursuant thereto.
Submissions of the Respondents :
16. Mr. Suresh Kumar, learned counsel for the
respondent submitted that the petitioner did not file its return
of income pursuant to notice u/s 148 of the Act and therefore
was not entitled to the reasons recorded. He submits that this
is in accordance with the procedure laid down by the Supreme
court in the case of GN Driveshafts (India) Ltd vs Income Tax
Officer And Ors1 wherein it was obligatory on the petitioner to
file its return of income before asking for the reasons for
reopening. He further submitted that the reversal of the
"guarantee fees" was not the issue during the course of
original assessing proceedings. Therefore the submissions
made by the petitioner is required to be rejected. He, however,
does not dispute that the issue of "guarantee fees" is pending
before the Tribunal. He relied upon the affidavit-in-reply in
1 (2003) 259 ITR 19
8 1.WP.2486.22(J).docx
support of these submissions and prayed for dismissal of the
appeal.
17. In the reply filed by the respondents, reasons
disclosed for reopening the assessment reads as under:
REASONS FOR REOPENING OF ASSESSMENT
1. The assessee company filed its return of income for A.Y.2014-15
on 25.11.2014 declaring total income at Rs.999.60 Crore. The
return was revised on 25-3-2016 declaring revised Income of
Rs.892.37 Crore. The return was again revised on 29-11-2016
offering Income of Rs.922.69 Crore. Assessment u/s 143(3) r.w.s.
144C was completed on 25.10.2018 assessing total Income at
Rs.1237.63 Crore. While completing scrutiny assessment, return
filed by assessee on 29-11-2016 was considered.
2. It is seen from the return and computation filled by the assessee
on 29-11-2016 and also on 25-3-2016 that assessee had claimed a
deduction of Rs.118,58,58,621 under the head Guarantee fee
reversal pertaining to FY 2013-14 but booked in FY 2015-16. No
such deduction was claimed in the original return filed on 25-11-
2014. At note No.16 attached to the computation of Income it is
stated that the company had revised the guarantee fee charged to
its subsidiaries for AY 2013-14, post finalisation of the books of
accounts for the year. Accordingly, it was stated that the guarantee
fee offered to tax excludes an amount of Rs.118,58,58,621 which
has been accounted as reversal of guarantee income in the books
of FY 2015-16. It is stated for tax purpose, the reversal has been
given effect to in FY 2013-14 itself.
The deduction claimed by the assessee in computation of income is
not admissible due to following reasons;
1. Reversal of income accounted under guarantee fee in FY
2013-14 is reportedly done in the books for FY 2015-16.
Hence if at all deduction is allowable based on audited
books for the FY 2015-16, it is allowable only in AY 2016-17
relevant to FY 2015-16 that too subject to confirmation that
it is written off in the books.
2. (ii) If the deduction is allowed in AY 2014-15, this
tantamount to allowing bad debts of AY 2016-17 in AY
2014-15 as the income is offered in AY 2014-15. As per the
provisions of section 36(2), bad debts is allowable only in
the year income is written off. Hence no deduction can be
allowed in AY 2014-15.
3. Department does not have any mechanism to watch
9 1.WP.2486.22(J).docx
whether assessee has offered the amount in the computation
of income relevant to AY 2016-17 if the same is claimed in
the AY 2014-15.
4. DRP-2, in its order dated 27th September 2018 at para 46
confirmed the addition made by TPO on account of
guarantee fee. As per DRP, guarantee commission should
have been charged at the rate of 1.5% of the borrowing
guaranteed instead of 0.33% charged by the assessee from
its overseas Associated Enterprises. Accordingly differential
amount of Rs.120,80,22,974 was added back in the
computation. If the assessee claims any further deduction
from the income already offered, the differencial amount to
be added would further increase to that extent.
3. In view of above, deduction claimed by the assessee to the
extent of Rs.118,58.58,621 is not allowable in the AY 2014-15.
This had resulted in under assessment of income to the extent of
Rs. 118,58,58,621.
4. Hence, It is clear that there is failure on the part of assessee to
disclose fully and truly all material facts necessary for the
assessment for the year in question within the meaning of First
provision to section 147(1) of the Act.
5. In view of the above, I have reason to believe that income
chargeable to tax to the tune of Rs. 118,58,58,621/-has escaped
the assessment within the meaning of section 147 of the Act for
the A.Y.2014-15. It is therefore proposed to issue notice u/s 148 of
the Income-tax Act, 1961 for A.Y.2014-15 to reassess such income
and also any other income chargeable to tax which has escaped
the assessment and which may come to notice subsequently in the
course of proceedings under this section.
6. In this regard, as mandated by Section 151 of the IT Act, 1961,
the satisfaction of the Pr. Commissioner of Income Tax-1, Mumbai,
regarding fitness of the case for issuing for issuing notice u/s 148
of the IT Act, 1961 is hereby requested on the above mentioned
reasons.
Analysis and Conclusion :
18. We have heard learned senior counsel for the
petitioner and learned counsel for the respondent.
19. Relevant provisions of Section 147 as it existed at the
relevant point are reproduced herein:
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147. Income escaping assessment - If the Assessing Officer has
reason to believe" that any income chargeable to tax has escaped
assessment" for any assessment year, he may", subject to the
provisions of sections 148 to 153, assess or reassess" such income
"and also any other income chargeable to tax which has escaped
assessment and which comes to his notice subsequently in the
course of the proceedings" under this section, or recompute the
loss or the depreciation allowance or any other allowance, as the
case may be, for the assessment year concerned (hereafter in this
section and in sections 148 to 153 referred to as the relevant
assessment year):
Provided that where an assessment under sub-section (3) of
section 143 or this section has been made for the relevant
assessment year, no action shall be taken under this section after
the expiry of four years from the end of the relevant assessment
year, unless any income chargeable to tax has escaped assessment
for such assessment year by reason of the failure on the part of
the assessee to make a return under section 139 or in response to
a notice issued under sub-section (1) of section 142 or section
148 or to disclose fully and truly all material facts necessary for
his assessment, for that assessment year:
Provided further that nothing contained in the first proviso shall
apply in a case where any income in relation to any asset
(including financial interest in any entity) located outside India,
chargeable to tax, has escaped assessment for any assessment
year.
Provided also that the Assessing Officer "may assess or reassess
such income, other than the income involving matters which are
the subject matters of any appeal, reference or revision, which is
chargeable to tax and has escaped assessment.
Explanation 1.-Production before the Assessing Officer of account
books or other evidence from which material evidence could with
due diligence have been discovered by the Assessing Officer will
not necessarily amount to disclosure within the meaning of the
foregoing proviso.
20. There is no dispute that, in this case, the original
assessment order u/s 143(3) of the Act was passed on 25
October 2018, and the impugned notice under Section 148 of
the Act has been issued after the expiry of 4 years from the
end of the relevant assessment order. As per the first proviso
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to Section 147 of the Act, reassessment proceedings cannot be
initiated unless there is a failure to disclose fully and truly all
material facts necessary for the original assessment. In the
instant case, reasons reproduced in the draft assessment order,
which were the reason furnished to the petitioner at the first
instance, does not allege any failure on the part of the
petitioner to disclose fully and truly all material facts
anywhere in the assessment. There is no an allegation that
any income has escaped assessment. Therefore, on this ground
itself the proceedings must be quashed. It is a settled position
that the reasons furnished at the first instance to an assessee
have to be looked into, and the same cannot be improvised
subsequently. This position is laid down by the decision of the
Co-ordinate bench of this Court in the case of Indivest Pte Ltd.
Vs Adit & Ors2.
21. In any case, in the documents annexed to the
affidavit in reply, the respondents have annexed reasons for
reopening, which differ from those reproduced in the draft
order. On a comparison of the reasons filed along with the
reply and the reasons as reproduced in the draft assessment
order, in the reasons annexed to the reply, there are 5 crucial
paragraphs which are absent in the reasons reproduced in the
draft order, namely paras 1, 2, 3, 4 and 5. It is a settled
position that the reasons furnished to the assessee have only
to be seen, and the officer cannot supply different reasons in
the affidavit of reply.
22. Even otherwise, in the reasons annexed to the reply,
the reasons itself state, 'it is seen from the return and
2 (2013) 350 ITR 120
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computation of income....'. It further states that 'at note No.16
attached to the computation of income.....revised the
guarantee fee...'. This indicates that the reasons are based on
the documents forming part of the original assessment
proceedings. There is no fresh tangible material that has been
referred to in the reasons annexed to the reply, which would
empower the assessing officer to reopen the case, more so
after a period of 4 years.
23. The reasons appearing in the draft assessment order
and to the reply filed by the respondent do not disclose what
are the facts which the Petitioner has not disclosed and which
were necessary for the assessment. In the absence of this
statement in the reasons recorded the impugned proceedings
are required to be quashed and set aside, as being without
jurisdiction.
24. Admittedly, there is also no dispute that the issue of
"guarantee fee" is pending before the Tribunal since an
addition was made on this count in the original assessment
proceedings. As per third proviso to section 147 of the Act, if
the subject matter is pending before the Appellate Authority,
then the assessing officer is debarred from initiating the
reassessment proceedings on that very issue. In the instant
case, even on account of third proviso to section 147, the
impugned proceedings are without jurisdiction.
25. It is also important to note that the fact that the issue
of guarantee fee is pending before the Tribunal in the
petitioner's appeal clearly shows that this issue was examined
in the course of the original assessment proceedings.
13 1.WP.2486.22(J).docx
Therefore, in the absence of any fresh tangible material, the
impugned proceedings would amount to a change of opinion
for reviewing the earlier order, which is not permissible under
the Act.
26. The jurisdictional requirement is that the
reassessment proceedings can be initiated if any income has
escaped the assessment. In the instant case, the issue of the
"guarantee fee" has been added to the assessment order
passed under section 143(3) r/w. 144C(13) of the Act. If that
be so, we fail to understand as to how the said issue would
amount to having escaped the assessment. Therefore, even on
this count, the impugned proceedings and the approval
granted to such proceedings are wholly without jurisdiction.
27. Therefore, to summarise, because there was
disclosure, there was enquiry and because there was enquiry
there was addition and because there was addition, issue is
pending before the Tribunal in appeal and therefore none of
the jurisdictional condition can be said to have been satisfied
for exercising powers under Section 147 of the Act and
consequent reassessment order to survive.
28. The respondent justifies its delay in giving reasons
for reopening by pointing out that the petitioner did not file
its return of income pursuant to Section 148 notice. Assuming
we accept such contention, however, since the reasons have
been given in the draft assessment order, this Court is
certainly entitled to examine the reasons for deciding the
satisfaction of the jurisdictional condition for reopening the
case.
14 1.WP.2486.22(J).docx
29. Even otherwise, the petitioner vide letters dated 29
March 2021 and 18 November 2021 requested the respondent
to treat the revised return filed in March 2016 as return filed
pursuant to the notice under Section 148 of the Act and
further a copy of the said return was also filed. In our view,
this would amount of substantial compliance of the
requirement of filing of return of income pursuant to the
notice under Section 148 of the Act. The petitioner is justified
in relying upon the decisions of Delhi High Court in the case
of Principal Commissioner of Income-tax v. S.G. Portfolio (P.)
Ltd.3 and Madras High Court in the case of Swapna Manuel v.
Assistant Commissioner of Income-tax4, in support of the
contention that a letter filed by an assessee to treat the
original return as return pursuant to 148 notice would amount
to compliance of notice under Section 148 of the Act.
30. We note that the petitioner has filed an appeal after
filing the present petition to obviate the limitation period and
since, as held by us above, the reassessment proceedings are
wholly without jurisdiction, we exercise our discretion to
entertain the present petition and quash the reassessment
notice under section 148 of the Act dated 30 March 2021 and
consequently the assessment order passed on 20 March 2022.
Mr. Mistri, learned Senior Counsel states that the petitioner
would withdraw the appeal filed before the Commissioner of
Income-tax (Appeal) within two weeks from the date of
uploading the present order, and such appeal would be
deemed to have been withdrawn.
3 (2023) 151 taxmann.com 307 (Delhi)
4 (2024) 160 taxmann.com 166 (Madras)
15 1.WP.2486.22(J).docx
31. For all the above reasons, the rule is made absolute
in above terms and the notice under section 148 dated 30
March 2021 and the reassessment order dated 28 March 2022
is quashed and set aside.
32. The rule is made absolute without costs.
(Jitendra Jain, J) (M.S. Sonak, J)
