2018 (7) TMI 941 - AT - Income Tax

Fringe benefits escaping assessment - Fringe benefit tax FBT liability - assessee provided free / concessional tickets to its employees / their family member - re-assessment of Fringe Benefit FB u/s 115WE (3) read with Section 115WG - Held that - Since the assessee has originally been assessed, its case is covered by Clause (c) of the explanation, since the information as received by Ld. AO, suggested possible escapement of fringe benefit. At this stage, only a prima facie opinion suggesting underassessment was required to be formed by Ld. AO, which has apparently been formed. It is settled law that deeming fiction has to be construed strictly. The Ld. AO, subsequent to completion of assessment, came across certain information which suggested possible under-assessment of fringe benefit in the hands of the assessee. This being the case, we are of the opinion that the Ld. AO was clinched with valid jurisdiction to reassess the fringe benefit of the assessee. This ground of assessee s appeal stand dismissed. Coming to the merits of the case, we find that Ld. CIT(A) has granted partial relief to the assessee by relying upon the decision of this Tribunal rendered in Jet Airways (India) Ltd. Vs. DCIT 2013 (1) TMI 722 - ITAT MUMBAI as directed to value the tickets at par with the provisions made by the assessee with respect to frequent flier programme which would be further reduced by the amount recovered by the assessee from its employees in this regard - we confirm the stand of Ld. CIT(A) in this regard particularly when the revenue is unable to place on record any contrary judgment of any judicial authority. Accordingly, this ground as raised by revenue in the appeal and as raised in cross-objections, stands dismissed. Time limit for completion of assessments and reassessments - time barred assessment - Held that - since the notice was issued on 06/11/2012, the re-assessment u/s 115WG was to be completed within 9 months from the end of the financial year i.e. by 31/12/2013. As against this, the assessment has been completed on 20/02/2014, which is clearly time barred as per statutory provisions of Section 153 (1B). This being the case, the assessment could not be said to have been framed within the ambit of statutory framework and therefore, the same being time barred, could not be sustained in the eyes of law. Resultantly, we quash the same. Accordingly, the additional ground raised by assessee stands allowed.

Summary

Issues Involved:
1. Reopening of Fringe Benefit Tax (FBT) assessment.
2. Valuation of fringe benefits in respect of free/concessional tickets to employees.
3. Time limit for completion of reassessment.

Issue-wise Detailed Analysis:

1. Reopening of Fringe Benefit Tax (FBT) Assessment:
The assessee contested the reopening of the FBT assessment for AY 2006-07, arguing that the Deputy Commissioner of Income Tax (DCIT) erred in reopening the assessment without recording satisfaction that fringe benefits chargeable to tax had escaped assessment. The original assessment was completed u/s 115WE(3) on 30/12/2008, and reassessment proceedings were initiated on 06/11/2012. The reasons for reopening were based on information received from DCIT-5(2), Mumbai, indicating that the cost of free and concessional tickets provided by the airline company to its employees and their family members was not offered to tax as fringe benefits. The tribunal found that the Assessing Officer (AO) had valid jurisdiction to reassess the fringe benefits, as there was a prima facie opinion suggesting underassessment, and the reassessment provisions of Section 115WG were applicable.

2. Valuation of Fringe Benefits in Respect of Free/Concessional Tickets to Employees:
During reassessment, it was noted that the assessee provided free/concessional tickets to its employees and their family members, which the AO subjected to FBT. The assessee argued that no expenditure was incurred as the tickets were for unsold seats that would remain vacant otherwise. The AO, however, valued the fringe benefits based on the average revenue per passenger, resulting in additional fringe benefits of ?62.38 crores. The CIT(A) provided partial relief by directing the AO to value the tickets at par with the provisions made for the frequent flier program, following the tribunal's decision in Jet Airways (India) Limited Vs. DCIT [153 TTJ 624]. The tribunal upheld the CIT(A)'s decision, confirming the valuation approach used for the frequent flier program and dismissing the revenue's appeal.

3. Time Limit for Completion of Reassessment:
For AY 2007-08, the reassessment notice u/s 115WH was issued on 06/11/2012, and the reassessment was completed on 20/02/2014. The assessee raised an additional ground, arguing that the reassessment was time-barred as per Section 153(1B), which stipulates a nine-month period from the end of the financial year in which the notice was served. The tribunal found that the reassessment should have been completed by 31/12/2013, and since it was completed on 20/02/2014, it was time-barred. Consequently, the reassessment order was quashed.

Conclusion:
The cross appeals for AY 2006-07 were dismissed. For AY 2007-08, the revenue's appeal was dismissed, and the assessee's appeal was partly allowed due to the reassessment being time-barred. The order was pronounced on 11th July 2018.