The Bombay High Court has quashed the income tax reassessment against Tata Communications in the absence of any fresh tangible material, the proceedings were merely a department’s change of opinion.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that the issue of the “guarantee fee” has been added to the assessment order passed under section 143(3) read with 144C(13) of the Income Tax Act.
The petitioner filed its return of income under section 139(1) of the Income Tax Act 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.
The figure of Rs.152.66 crore was credited to the profit and loss account. However, in March 2016, the petitioner realized that they had offered a 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.
In the revised return 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.
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 to by the petitioner vide letter dated 18 November 2021 in which the petitioner once again requested the revised return filed in March 2016 to be taken as return pursuant to Section 148 notice.
The petitioner contended that 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.
The court held that 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 Income Tax Act and consequent reassessment order to survive.
The court quashed the reassessment notice under section 148 of the Income Tax Act.
Case Details
Case Title: Tata Communications Limited Versus DCIT
Case No.: Writ Petition No.2486 Of 2022
Date: 7/03/2025
Counsel For Petitioner: Senior Advocate J. D. Mistri
Counsel For Respondent: Suresh Kumar
