2012 (12) TMI 895
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....etitioner was called upon, by order dated 14.11.2008 to explain the claim of deduction of royalty paid as revenue expenditure. The Petitioner explained its claim justifying deduction of expenditure on account of royalty as revenue expenditure along with copy of the licence agreements, through replies dated 1.12.2008 and 11.12.2008. The AO, in the original assessment, made an addition of Rs. 99.30 crores out of the royalty payment of Rs. 198.58 crores in view of the findings of the Transfer Pricing Officer that the royalty payment was not at arm's length. This addition was not put into effect since this Court had made an order dated 19.09.2008, in W.P. (C) No. 6876/2008 (filed by the Petitioner), directing the Transfer Pricing Officer to determine the arm's length within 3 months. Aggrieved by that order, the Petitioner filed a Special Leave to Appeal being SLP (C) No. 8457/2010. The Supreme Court directed the Transfer Pricing Officer to proceed in the matter uninfluenced by the Order of the High Court. 3. Pursuant to the order of the Supreme Court, the first respondent revised the assessment order and recomputed the income amounting to Rs. 16,34,18,35,039 after making an addition ....
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....of the language of the Supreme Court in GKN Drvishafts, the AO should have rejected the objections, if he thought it appropriate to do so before passing the final order and not simultaneously This position was reiterated by this Court in Sita World Travels (India)Ltd. v. CIT and Anr. (2005)193 CTR (Del) 84: (2005) 274 ITR 186 (Del)" The judgment of the Bombay High Court, to the same effect in Allana Cold Storage Ltd. v. ITP 287 ITR 1 was relied on, especially the following extract: "We have noted the submissions of both counsel. The lae as laid down by the apex court is binding on this court as well as on the authorities functioning under the statute. This being the position, we fail to understand as to why the first Respondent did not decide the objections separately which he is duty bound to decide. The whole idea in laying down the law in the above-referred judgment of the apex court is to give an opportunity to the assessee to know as to what is the decision on his objections, which decision has to be arrived at after giving an opportunity to the assessee. In the present case, the assessee has been denied this opportunity. Not only that but in the first three writ petitions w....
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....the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]" 7. The Petitioner contended that there is no mention, leave aside any allegation, of the failure on its part to disclose income during the relevant Assessment year, in the reasons recorded for reassessment. Reference is made in this regard to the decision of the Gujarat High Court in the case of Kaira District Cooperative Milk Producers Union Ltd. v. ACIT (1995): 216 ITR 317, where it was held that where the Assessing officer had failed to record his belief that the income chargeable to tax had escaped assessment on account of the ass....
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....ly all material facts, he shall have no jurisdiction to conduct reassessment after the expiry of 4 years from the end of the relevant assessment year. The decision in Wel Intertrade (P) Ltd. v. ITO 308 ITR 22, of this Court, was relied on. 9. It was contended that the duty of the assessee is only to disclose the primary facts and nothing beyond that. It is the duty of the Assessing Officer to determine the facts provided by the assessee and reach a conclusion. This position has been time and again reiterated by the Supreme Court in catena of judgments including Calcutta Discount Co. Ltd. v. ITO and Anr (1961) 41 ITR 191(SC), ITO v. Lakhmani Mewal Das 1976 CTR (SC) 220, GIT v. Bhanji Lavji (1971) 79 ITR 582(SC), Parashmam Pottery Works Ltd v. CIT 1977 CTR (SC) 32. It has been stated that once the assessee has disclosed all the primary facts that is the end of his duty. It is then for the assessing authority to draw the proper conclusions from these facts. If the conclusions drawn by the AO from the primary facts disclosed, by the assessee are erroneous, the assessing authority cannot reopen the assessment merely on the basis of the change of opinion. 10. The assessee's next conten....
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....tioner about the reopening of assessment for the relevant year, to which, as per process of law, the Petitioner has filed objections. Furthermore, the Respondents have passed the reassessment order after due consideration of the objections filed by the Petitioner. 13. The revenue contends that G.K.N. Driveshafts nowhere states that the objections cannot be disposed simultaneously with the passing of the reassessment order. In the instant case, the Assessing officer, by way of speaking order duly considered the objections filed by the Assessee and has disposed of the same at the time of framing the reassessment order. The Revenue argued that the present petition is not justified. A writ Petition can only be entertained, when there is no alternative remedy available. Reliance has been placed on the judgment of Jagdish Preshad Gupta v. Jt. CIT (2006) 283 ITR 583 (Delhi) where this Court has where an assessment order has been processed after considering the objections, it was held that a writ proceeding would not lie, since the assessee has alternative remedy of pursuing appeal before the Commissioner of Income Tax (Appeals). 14. The revenue further argues that the Assessing Officer ....
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..... Maruti Suzuki India Ltd. for the assessment year 2005-06 was completed under Section 143(3) of the Income Tax Act, in December 2008 determining Rs.154852.08 lacs as taxable income. But from the verification of the case records, it was found that the assessee claimed running royalty of Rs.198.60 crores, which was paid to Suzuki Motor Corporation (SMC) on various vehicle models. In the assessment order of A.Y. 2006-07, the claim of entire royalty expense was disallowed after examining the issue from various factual as well as legal prospective. In this year, this claim of royalty expenses of Rs.198,58,54,557/- has been claimed by the assessee as under: XXXXXX XXXXXX XXXXXX Apart from the same, the assessee had also incurred expenditure of Rs.745.83 lacs towards cess on running royalty. Though in the transfer pricing order, the TPO has advised to make an upward adjustment of Rs.99.30 crores (being half of the Rs.198.585 crores) and the matter is sub-judice (i.e. before High Court and Hon'ble Supreme Court and as per their directions before, TPO for fresh adjudication). However, in A.Y. 2006-07, the claim of entire royalty expense was disallowed after examining the issue from vario....
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.... of the subsequent year which made disallowance for royalty. The notice does not anywhere indicate what was the new material which came to light, that threw into focus the fact that the assesse's behavior in not disclosing material particulars, attracted the provision under Section 148. The order of the AO contains an insight into the fact that there was an inquiry into the royalty claim; in fact the assessee has placed on record a letter written to the AO, containing replies to the queries in respect of the royalty deduction claim, dated 1-12-2008. It was after considering these materials, that the AO granted the allowance in the first instance. 18. Long ago, in Indian and Eastern Newspaper Society v. Commissioner of Income Tax, New Delhi reported in (1979) 119 ITR 996 the Supreme Court considered the if a Section 148 notice could be based on an audit report. The Court rejected the revenue's contention that the audit report could constitute material or information as to income escaping assessment, and held that: "In every case, the Income Tax officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of....