In a setback for former Tata Sons Chairman Cyrus Mistry and a major relief for Sir Dorabji Tata Trust, JRD Tata Trust and Sir Ratan Tata Trust, the Mumbai-bench of Income Tax Appellate Tribunal (ITAT) has quashed revised assessment orders issued by the IT department based on Mistry's allegations.
Through the order, the appellate tribunal has upheld the tax exemptions given as per Section 11 of the Income Tax Act to the three trusts.
The case pertains to allegation levelled by Mistry over prohibited mode of investment by these Trusts in shares that resulted in revised assessment order by the Income Tax department.
The Commissioner of Income Tax, last year had observed that the trusts may have violated the provisions of section 13(1)(d) of the Income Tax Act during the assessment year 2014-15 and the assessing officer did not probe the breach adequately.
ITAT noted that the Commissioner had acknowledged that Cyrus Mistry had flagged some of these issues after he was ousted as the Chairman of Tata Sons.
"It is well-known that Cyrus Mistry, a former Chairman of the Tata Group, was removed from his position in the Tata Group on 24th October 2016, and within eight weeks of his removal, he sends this material, against the trusts in the Tata group, including the assessee before us, to the Assessing Officer," said the order.
The objectivity of the claims made by Cyrus Mistry, in such a situation and to say the least, seems to be extremely "doubtful", the order said.
It said: "Just as he is expelled from the office of the Chairman of Tata Sons, he gathers copies of the documents accessed by him in a fiduciary capacity and hands these documents over to the income tax department. This kind of conduct is unheard of in the civilised corporate world."
The order noted that the inputs from those engaged in a rivalry with an assessee should be taken with a reasonable degree of circumspection and should not be placed on such a high pedestal so as to relegate all other material facts and accepted past assessment history of the case into insignificance.
The appellate tribunal came up with three separate but identical orders regarding the three trusts.
"ITAT also stated that there was a clear and glaring non-application of mind to even undisputed material facts of the case by the commissioner," said Rajat Mohan, Senior Partner, AMRG & Associates.
The orders said: "We hold that the impugned revision order is devoid of any legally sustainable merits. Accordingly, we hereby quash the impugned revision order."