TMI Blog2013 (2) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... None of the three clauses of the Explanation applies to case. Clause (a) speaks of no return having been filed; that is not the case here. Clause (b) speaks of a return having been filed without an assessment being made and the assessee had understated the income or has claimed excessive loss, deduction, allowance or relief in the return. This also is not the case here. Clause (c) has several sub-clauses and none of the situations applies to the petitioner's case. It cannot be so construed as to rope in cases where credit for TDS, which is a credit given against the tax payable and is not any allowance or deduction or loss or relief against the income chargeable to tax was erroneously given. There is, therefore, no merit in the reasons recorded by the revenue for reopening the assessment - Notice quashed – In favour of assessee - W.P.(C) NO. 8852 OF 2011 - - - Dated:- 23-8-2012 - S. RAVINDRA BHAT AND R.V. EASWAR, JJ. S. Ganesh, Ms. Anuradha Dutt and Anish Kapur for the Appellant. Abhishek Maratha and Ms. Anshul Sharma for the Respondent. JUDGMENT R.V. Easwar, J. - This writ petition has been filed by Asia Satellite Telecommunication Company Limited (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyalty" as defined in Section 9(1)(vi) of the Act. 3. The assessee preferred an appeal against the assessment order to the CIT (Appeals). The CIT (Appeals) passed a consolidated appellate order on 29.02.2008 for the assessment years 1998-99 to 2005-06 holding, inter alia, that the income of the petitioner earned from its customers for providing satellite services was chargeable to tax in India as "royalty" as per the provisions of clause (iii) read with clause (vi) of Explanation 2 to Section 9(1)(vi) of the Act. The petitioner preferred further appeal against the order passed by the CIT (Appeals) to the Tribunal. While the appeal before the Tribunal was pending, the Assessing Officer on 17.07.2008 passed an order to give effect to the order passed by the CIT (Appeals) on 29.02.2008 and recomputed the taxable income of the petitioner at Rs. 61,19,71,423/- and raised a demand of tax and interest aggregating to Rs. 8,73,14,913/-. In arriving at the final tax liability as per the order passed on 17.07.2008, the Assessing officer allowed credit for tax deducted at source amounting to Rs. 2,11,16,426/-. The credit was given on the basis of the TDS certificates filed by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3), royalty income from Indian concerns was determined and TDS of Rs. 2,11,16,426/- was allowed by the assessing officer. However, as the above income was not disclosed in the income tax return, TDS credit against this income should not have been allowed. Section 155(14) of the Income Tax Act, 1961, provides that Wherein the assessment for any previous year or in any intimation or deemed intimation under sub-section (1) of section 143 for any previous year, credit for tax deducted (..) in accordance with the provisions of section 199 ( .) has not been given on the ground that the certificate furnished under section 203 ( ) was not filed with the return and subsequently such certificate is produced before the assessing officer within two years from the end of the assessment year in which such income is assessable, the assessing officer shall amend the order of assessment or any intimation or deemed intimation under sub-section (1) of section 143, as the case may be .. Provided that nothing contained in this sub-section shall apply unless the income from which the tax has been deducted ( ..) has been disclosed in the return of income filed by the assessee for the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Act. Sd/- GOPAL KAMAL (DIT-I, INTL. TAX, DELHI)" 7. On receipt of the reasons for reopening the assessment, the petitioner submitted its objections to the same as envisaged by the Supreme Court in G. K. N. Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19. The respondent passed an order on the objections on 02.12.2011, which is the impugned order which was modified later by issuance of a corrigendum on 12.12.2011 which is also impugned in the present writ petition. Briefly speaking, the respondent took the following position vis- -vis the objections filed by the petitioner: - (a) Even when the petitioner filed its return of income on 30.10.2003, declaring "nil" income, the Tribunal had already pronounced its order on 01.11.2002 for the assessment year 1997-98 holding that the receipts earned from satellite transmission services fall within the ambit of royalty. This order should have been followed and the return of income should have been filed by the petitioner on that basis. (b) Mere filing of an appeal against the order of the Tribunal to the High Court on 28.07.2010, which was a much later event, does not operate as the stay of the Tribunal's order. (c) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the original assessment proceedings on the issue of TDS credit allowable, and it was for the first time an opinion was formed as to the allowability of the TDS credit on 26.06.2006 when the rectification order was passed. Thus the substance of the corrigendum was that there was no change of opinion on the part of the assessing officer resulting in the issue of notice under Section 148 of the Act. 9. The contention of the petitioner is that this Court has pronounced orders in ITA Nos.131/2003 and 134/2003 pertaining to the assessment year 1997-98 on 31.01.2011 holding that the income of the petitioner is not taxable in India under the provisions of Section 9(1)(vi) of the Act. It was also pointed out that relying on this order, this Court has also taken a similar view in the petitioner's appeals for the assessment year 1998-99 to 2005-06 and held that the petitioner is not assessable in respect of the receipts from its customers in India on the footing that they represented "royalty" income within the meaning of Explanation 2 to Section 9(1)(vi) of the Act. It was also urged that the notice under Section 148 of the Act has been issued after a period of four years from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessable to tax in India. In the notes to the statement of total income it was pointed out that the satellites of the petitioner are located in the orbit at a height of 36000 km above Moscow to Auckland and from Cyprus to Tokio. This is in Note No.4 to the statement of total income. On this basis it was claimed that the petitioner was not liable to tax in India as per the provisions of the Act and, therefore, the return was being filed showing "nil" income. Note No.6 to the statement of total income is important since in the order rejecting the objections the respondent has taken the plea that the petitioner, by filing a nil return of income despite the order of the Tribunal in its own case by the assessment year 1997-98 holding that the assessee was liable to tax in India, failed to furnish full and true material facts and, therefore, the notice under Section 148 of the Act was valid. 11. Two aspects fall for consideration on this issue: firstly, whether it is legally permissible for the AO to improve upon the reasons recorded for reopening the assessment in his order rejecting the petitioner's objections and secondly, whether the allegation is factually correct. Taking the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to the issue of notice under Section 148 cannot be improved upon and the gaps cannot be supplied later. The validity of the reasons has to be judged only on the basis of what was originally recorded under Section 148(2): In Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51 a Division Bench of this Court, speaking through Sanjiv Khanna, J. observed as follows: - "The reasons which are recorded by the Assessing Officer for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. The requirement of recording reasons is a check against arbitrary exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well settled that the question as to whether there was reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had understated the income or has claimed excessive loss, deduction, allowance or relief in the return. This also is not the case here. Clause (c) has several sub-clauses and none of the situations applies to the petitioner's case. Reference is then made to Section 155(14) of the Act in the reasons recorded. A careful reading thereof shows that it is intended for the benefit of the assessee who had omitted to file the TDS certificate along with the return of income but subsequently produces the same before the Assessing Officer within two years from the end of the assessment year in which the income relevant to the TDS is assessable, in which case the Assessing Officer can amend the assessment order and grant the relief, invoking the powers under Section 154 of the Act. The proviso to Section 155(14), however, places a condition, namely that the credit for TDS can be given by the Assessing only if the corresponding income is disclosed by the assessee in the return of income. What perhaps the respondent in the present case had in mind - we are only surmising - is that the assessee has not disclosed the income corresponding to the TDS of Rs. 2,11,16,426/-; and when credit was giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income; nor can it be said that by allowing credit for the TDS the Assessing Officer has given excessive relief. The other assumption which we have to make is that the relief was allowed to the petitioner in the original assessment order, which would be an erroneous assumption since no credit for TDS was allowed in the original assessment order dated 27.03.2006. The credit given for TDS in an order passed under Section 155(14) read with Section 154 cannot be construed as a relief given in the original assessment order. Section 155 of the Act provides for various situations under which an order can be amended because of developments taking place subsequent to the date on which the order was originally passed. It was this power of amendment which was invoked by the petitioner; thereby the petitioner was not claiming any relief in the return. Lastly, if we were to uphold the reasoning of the respondent we have to make a further assumption that claiming credit for TDS amounts to claiming excessive loss, deduction, allowance or relief. The respondent has not demonstrated in the reasons recorded as to how such an assumption can be validly made. Explanation 2 to Section 147 of the Act can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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