Jetair Pvt. Ltd Vs DCIT (Bombay High Court)
Bombay High Court held that initiation of reassessment proceedings invalid as there was no failure on the part of the assesse to disclose any material facts.
Facts- The petitioner (Jet Airways India Limited) received a notice u/s 143(2) of the Act for scrutiny assessment. During the course of assessment proceedings, on 21st April 2015 detailed questionnaires were issued by the AO. Those were responded through various letters starting from 29th April 2015 to 28th December 2015. After due consideration the AO passed order dated 28th January 2016 u/s 143(3) of the Act and computed the total income at ₹ 7,25,65,530/-. The AO made a disallowance with respect to interest expense on the ground that the petitioner had given interest free loan and advances to subsidiaries and other companies. Aggrieved by the order, an appeal was filed before CIT(A) which deleted the disallowance whilst allowing the appeal by its order dated 12th September 2016.
On 11th March 2021 the respondent no. 1 issued the impugned notice u/s 148 of the Act on the ground that he had reason to believe that income chargeable to tax for AY 2013-14 had escaped assessment. The notice stated that it had been issued after obtaining necessary satisfaction of respondent no.2. Thereafter the petitioner on 28th May 2021 filed the return in response to the impugned notice.
On 4th January 2022 the petitioner filed its objections challenging the validity of the reassessment proceedings. Thereafter on 25th January 2022 the respondent no. 1 rejected the objections. Aggrieved, the petitioner filed the present petition.
Conclusion- In our view, the pre-requisite conditions of assuming jurisdiction u/s 148 of the Act are not satisfied in as much as the AO has failed to specify the material facts that were not truly and fully disclosed by the petitioner that was necessary for the assessment. Upon perusal of all the documents attached with the petition, it is clear that all documentary evidence including books of account as well as statements were submitted by the petitioner and therefore it is nothing but change of opinion which is not permissible under the Act.
On the perusal of the papers and the reasons mentioned in the notice for reopening we find that AO has not mentioned what was the new tangible material to justify the reopening and what was the material fact which was not truly and fully disclosed.
In our view, the respondent no.1 wrongly rejected the aforestated objection of the petitioner by the impugned order dated 25th January 2022 The statement of an employee, during the course of survey of Jet Airways cannot in our view form the basis of assessment. It would clearly amount to a change of opinion. There is no failure on the part of the petitioner to disclose any material facts and consequently the reopening is invalid in view of the proviso of Section 147 of the IT Act.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The present petition challenges, the notice dated 11th March 2021 issued under Section 148 of the Income Tax Act, 1961 (the Act) by respondent no.1 seeking to reopen the assessment for the Assessment Year (A.Y.) 2013-14 on the basis that he has ‘reasons to believe’ that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act; and the order dated 25th January 2022 passed by the respondent no.1 rejecting the objections inter alia on the grounds that they are ex facie illegal and contrary to the provisions of the Act.
2. Whilst the present petition pertains to Assessment Year (AY) 2013-14, writ petitions (W.P) No 1996 of 2022 pertain to AY 2014-15, W.P No. 1901 of 2022 pertains to AY 2015-16, W.P No. 2828 of 2022 pertains to AY 2016-17 and W.P No. 2393 of 2022 pertains to AY 2017-18. Since the issue in these writ petitions as also the facts are identical save and except the year of assessment, we are disposing them by a common order. For brevity we advert to the facts in the W.P 1996 of 2022.
FACTS:
3. The petitioner was the sole General Sales Agent (GSA) for Jet Airways India Limited (Jet Airways) as also sales agent for various other airline companies for which the petitioner receives commission on domestic and international ticket sales for passengers and cargo transport.
4. The petitioner filed its return of income for AY 2013-14 on 28th September 2013, declaring total income at ₹ 6,29,93,470/-. The commission charged by the petitioner from Jet Airways was duly reported as a related party transaction in its audited statement. The commission earned from Jet Airways was ₹ 14,42,13,012/- being 76.85% of the total commission earned in respect of passenger turnover. On 1st September 2014, the petitioner received a notice u/s 143(2) of the Act for scrutiny assessment. During the course of assessment proceedings, on 21st April 2015 detailed questionnaires were issued by the AO. Those were responded through various letters starting from 29th April 2015 to 28th December 2015. After due consideration the AO passed order dated 28th January 2016 u/s 143 (3) of the Act and computed the total income at ₹ 7,25,65,530/-. The AO made a disallowance with respect to interest expense on the ground that the petitioner had given interest free loan and advances to subsidiaries and other companies.
5. Aggrieved by the order dated 28th January 2016, an appeal was filed before the Commissioner of Income-tax (Appeals) (CIT(A)) which deleted the disallowance whilst allowing the appeal by its order dated 12th September 2016.
6. On 11th March 2021 the respondent no. 1 issued the impugned notice u/s 148 of the Act on the ground that he had reason to believe that income chargeable to tax for AY 2013-14 had escaped assessment. The notice stated that it had been issued after obtaining necessary satisfaction of respondent no.2. Thereafter the petitioner on 28th May 2021 filed the return in response to the impugned notice. On 16th December 2021 the respondent no.1 issued the following reasons:
“2. Brief details of information, Analysis of information collected/ received, Enquiries made, findings of AO, Basis of forming reason to believe and details of escapement of income:-
2 (i) A survey u/s. 133A was conducted in the case of M/s. Jet Airways (India) Pvt. Ltd. on 19.09.2018, by the investigation Wing Mumbai and following issues were found.
2 (ii) CASE OF JETAIR AS A SOLE GSA FOR JET AIRWAYS.
Jetair private Limited is private ltd co. Incorporated on 19 July 1974. The company has been in business from 1974 as General Sales Agent for International Airlines and domestic Airlines. As a General sales agent, company represents foreign/domestic Airlines to agent community, works with agent to increase Airline sale and provides city ticketing offices wherever required. It also carries out function of sales accounting and collection follow up.
Jetair is the sole GSA for domestic ticket sales passenger and Cargo for Jet Airways India Limited. Thus, Jetair Pvt. Limited works as a GSA and earns commission which ranges from 0.60% to 5% on passenger and 2.5% on cargo sales.
The GSA receives a commission on all tickets and airways bill flown from the region that it represents. All cost related to GSA’s business are the responsibility of GSA including rent, staff cost, office expenses etc. Airline also use GSA since GSA has historical ties with travel and cargo agents which will be time consuming for the Airline to build.
The company Jetair Pvt. Limited has agreement with various other airlines companies other than Jet Airways India Limited. The list of all the companies with whom ORC (Online Registration Commission) agreement is executed along with the commission rate is given as follows AY 2012-13 to 2017-18.
2 (iii) JETAIR AND ITS ONLINE RESERVATION COMMISSION (ORC)
The rates at which ORC was received by Jetair from several airlines for FY 2012-13 has been tabulated as under:
