AO Has No Jurisdiction To Reopen Assessment Once Tax Arrears Are Determined And Paid By Taxpayer Under KVSS: Bombay HC

Noticing that the assessee had already made a declaration under Kar Vivad Samadhan Scheme (KVSS), tax arrears were determined and paid and a certificate was also issued, the Bombay High Court ruled that there was no jurisdiction for the Assessing Officer to reopen the assessment of the assessee.

A Division Bench of Justice K.R Shriram and Justice M.M Sathaye further observed that since the issue of PMS was raised by Assessing Officer during assessment proceedings, a detailed reply was furnished and was dealt with in detail in the assessment order, therefore, the reopening of assessment was merely on basis of change of opinion, which is not permissible.

The Bench was dealing with an issue where a reopening notice was issued upon the assessee relating to the amount assessable in the hands of the assessee in respect of its Portfolio Management Scheme (PMS) including transactions in units and transactions with Public Sector undertakings.

Senior Advocate Percy Pardiwalla appeared for the Petitioner, whereas Advocate Suresh Kumar appeared for the Respondent.

In a nutshell, a revision order was passed in case of the assessee, Citibank making an addition of a certain amount and raising tax demand accordingly. While an appeal against the said order was pending, the assessee filed a declaration in prescribed Form 1A under KVSS 1998 introduced under Finance Act. The tax payable was determined and the assessee paid the full and final settlement of its tax arrears under section 90(2) read with section 91 of the Finance Act. Subsequently, a reopening notice was issued upon the assessee relating to the amount assessable in the hands of the assessee in respect of its Portfolio Management Scheme (PMS) including transactions in units and transactions with Public Sector undertakings.

After considering the submission, the Bench observed that the issue of PMS relating to Grasim Industries Ltd. has been raised by the Assessing Officer during the assessment proceedings, detailed reply has been furnished and has been dealt with in detail in the assessment order.

Therefore, the Bench elucidated that the reopening of the assessment is merely based on a change of opinion of the Assessing Officer and that does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.

The Bench highlighted that the notice of reopening has been issued after the expiry of four years from the end of the relevant assessment year.

“Under Section 148 of the Act, where the notice has been issued after the expiry of four years from the end of the relevant assessment year, the onus is on the Assessing Officer to show that income chargeable to tax has escaped assessment because of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year”, added the Bench.

Therefore, finding that there is not even a whisper in the reasons to believe that there was any such failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the High Court quashed the reassessment proceedings.

Cause Title: Citibank N.A. v. S.K. Ojha and Ors.

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