Bombay HC quashes reassessment proceedings on account of mere change of opinion


Bombay HC quashes reassessment proceedings on account of mere change of opinion


Jetair Pvt Ltd vs. Deputy Commissioner of Income Tax & Ors. (WP No. 3446 of 2022, 1901 of 2022 and 1996 of 2002)


  1. The petitioner, Jetair, was the sole General Sales Agent (GSA) for Jet Airways and also a sales agent for various other airline companies for which it receives commission on domestic and international ticket sales.
  1. The DCIT sought to reopen the assessment for the relevant Assessment Year on the basis that he had ‘reasons to believe’ that income chargeable to tax had escaped assessment.
  1. The DCIT contended that , Jetair, who is a sales agent of Jet Airways, charged commission at a rate lower than what is charged by it from other unrelated airlines on the domestic and international ticket sales, was a colourable device, with an aim to evade tax.
  1. Since Jet Airways is a loss-making enterprise, the revenue department pleaded that payment of commission at a lower rate lowered the tax liability of the group as a whole, benefitting the whole group.
  1. Jetair filed a writ petition before the Bombay High Court challenging the notice issued under Section 148 of the Income Tax Act by the Deputy Commissioner of Income Tax (DCIT).

Hon Bombay HC held as below:

  1. The fact that Jet India Pvt Ltd is a loss-making company is not a valid criteria to determine escapement of income. The company can take its own business decision regarding charging lower commission and the same cannot be called a colourable device/ mechanism.
  1. No new material has come to the notice of the AO and this was a mere change in opinion, thus rendering the reopening of assessment bad in law.
  1. So the reassessment proceedings against the petitioner are hereby stayed.