In their order passed recently, Justices MS Sanlecha and SF Vajifdar upheld an order of Income Tax Tribunal which, on Mar 19, 2010, held that the assessment officer was not justified in starting proceedings under section 147 of IT Act against Bachchan.
The judges further ruled that Commissioner of Income Tax (Appeal) and Income Tax Tribunal had correctly come to a conclusion that there was no tangible material before the assessment officer to reach a reasonable belief that the income liable to tax had escaped assessment.
On 13 Oct 2002, Bachchan had filed returns stating his income at Rs 14.99 crore for Assessment Year 2002-03. Thereafter, on Mar 31, 2002, he filed revised returns declaring his total income for the assessment year 2002-03 wherein he claimed expenses at 30 per cent adhoc amounting to Rs 6.31 crore and determining his income at Rs 8.11 crore.
However, before the assessment for the Year 2002-03 could be completed, the actor, by a letter dated Mar 13, 2004, withdrew the revised returns along with his claim of deduction of 30 per cent adhoc expenses from his total income.
On Mar 29, 2005, the Assessing Officer completed the assessment for the Assessment Year 2002-03 determining the actor's income at Rs 56.41 crore.
On Apr 5, 2006, a notice under Section 148 of the IT Act was issued to Bachchan seeking to reopen the assessment proceedings for the Year 2002-03.
Among the reasons given for reopening assessment were that books of accounts kept by Bachchan were not examined and that although he had seven bank accounts the actor had given details of only six of them. Besides, he had withdrawn revised returns wherein he showed 30 percent expenses for professional causes.
Consequent to the reopening assessment notice, by an order dated Dec 31, 2007, Bachchan was assessed to a total income of Rs 20.05 crore. This was arrived at after adding an amount of Rs 6.31 crore as unexplained expenses under Section 69C of the said Act.
Being aggrieved, the actor filed an appeal before the Commissioner of Income Tax (Appeals) challenging proceedings under section 147 of the Act and consequent completion of assessment by an order dated Dec 31, 2007.
By an order dated Mar 4, 2009, the Commissioner of Income Tax (Appeal) set aside the reassessment order dated Dec 31, 2007, holding that the assessing officer had wrongly assumed jurisdiction under Section 147 of the IT Act.
Being aggrieved, the Income Tax Commissioner (Revenue) filed an appeal before the Income Tax Tribunal which held that the reasons recorded for initiating reassessment proceedings under Section 147 of the Act clearly indicates that there was no new material which had come to the notice of the assessing officer so as to lead to a reasonable belief that income assessable to tax has escaped assessment.
The adhoc expenses of 30 per cent from the receipts was the subject matter of consideration of the assessing officer when he passed the assessment order on Mar 29, 2005, under Section 143(3) of the Act. Consequently, there was no fresh tangible material for the assessing officer to initiate reassessment proceeding under Section 147.
The High Court judges observed that the Commissioner of Income Tax (Appeal) as well as Income Tax Tribunal have correctly come to a conclusion that there was no "fresh tangible material" before the assessment officer to reach a reasonable belief that income liable to tax had escaped assessment.
"In the circumstances there could be no basis for the Assessing Officer to form a belief that income has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. We uphold the Tribunal's order of Mar 19, 2010," the bench ruled.