Bombay High Court Sets Aside Order Rejecting Naresh Goyal's Objections In Income Tax Reassessment

The Bombay High Court has recently set aside an order rejecting former Jet Airways chairman Naresh Goyal's objections to the reopening of his income tax assessment for the Assessment Year 2014-15.

It directed the Assessing Officer to reconsider the objections after taking into account Goyal's March 8, 2022 letter and the annexures explaining the source of funds used to acquire Jet Airways (India) Ltd. shares.

A division bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla held that the Assessing Officer's earlier decision could not, at first glance, be faulted because no supporting documents had accompanied Goyal's objections.

However, the bench held that the material furnished on March 8, 2022, warranted fresh consideration in the interests of justice.

"Since this is the main grievance raised by the Petitioner, we are of the view that in the peculiar facts of the present case, though prima facie, on this issue, the reasoning of the Assessing Officer in the order disposing of the objections cannot be faulted, in view of the letter dated 8th March 2022 addressed by the Petitioner to the Assessing Officer, we are of the view that interest of justice would be served if the Assessing Officer also takes into account the said letter dated 8th March 2022 and thereafter pass an order disposing of the objections.", the court ruled.

The reassessment proceedings stemmed from information received by the Assessing Officer from the Deputy Commissioner of Income Tax (International Taxation). The information stated that Tail Winds Ltd., a company incorporated in the Isle of Man, had sold Jet Airways (India) Ltd. shares worth ₹3,563.49 crore during the relevant financial year.

According to the recorded reasons, Goyal had purchased Jet Airways (India) Ltd. shares from Tail Winds Ltd. in transactions amounting to ₹3,563.49 crore. The recorded reasons further stated that the nature and source of funds for those transactions were not reflected in his return of income. On that basis, the Assessing Officer formed the belief that income chargeable to tax had escaped assessment.

In his objections to the reopening, Goyal argued that the belief regarding escapement of income was based on borrowed satisfaction. He also explained that the acquisition of the shares had been financed through short-term loans from HSBC Geneva. Those loans, he contended, were repaid from dividends declared by Tail Winds Ltd. The remaining tranche was funded from his own resources.

The Assessing Officer rejected the objections on January 24, 2022. The officer held that Goyal's claims required verification during the reassessment proceedings and could not be accepted at that stage.

During the reassessment, Goyal submitted a detailed response to notices issued under Sections 143(2) and 142(1) of the Income Tax Act. He also furnished documents which, according to him, established the source of funds used to purchase the shares. Before the High Court, he sought a fresh consideration of his objections in light of those documents.

The revenue opposed the plea. It argued that no documentary evidence had accompanied the original objections. It also submitted that Goyal could establish his claims during the reassessment proceedings. On that basis, it contended that the writ petition did not warrant interference.

Accepting Goyal's limited request, the court quashed the January 24, 2022, order disposing of his objections. It directed the assessing officer to pass a fresh order after considering Goyal's March 8, 2022, letter and the annexures filed with it. The fresh order has to be passed within six weeks.

The court also directed the department to furnish the sanction obtained for reopening the assessment within two weeks. It clarified that it had not expressed any opinion on the merits of Goyal's objections or the reassessment proceedings.

All contentions of both sides were kept open. The court further directed that if the fresh order is adverse to Goyal, it shall not be acted upon for four weeks. During that period, Goyal would be free to approach the High Court again.

For Petitioner: P.J. Pardiwalla, Senior Advocate, a/w Mr. Madhur Agrawal, Mr. Punit Shah,  Mr. Atul K. Jasani

For Respondent: Suresh Kumar, for the Respondents.