9911796707
TMI Blog2013 (2) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2003-04, it filed a return of income declaring "nil" income. An assessment was made under Section 143(3) of the Act by order dated 27.03.2006. In the assessment order the taxable income of the petitioner was determined at Rs. 64,99,26,627/- and a tax demand (including interest) of Rs. 33,98,99,070/- was raised. The petitioner owns and operates satellites and it provides satellite transponder capacity to its customers. The satellite is located in the geo-stationary orbit, 36000 km. above the equator. In making the assessment for the assessment year 2003-04 the Assessing Officer referred to an order of the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal') dated 01.11.2002 in the assessee's own case for the assessment year 1997-98. In this order certain directions had been given to the Assessing Officer as to how the income of the petitioner should be computed. It would appear that the Tribunal did not accept the contention of the petitioner that no part of its income can be brought to tax in India and therefore proceeded to give certain directions to the Assessing Officer to compute the income of the petitioner. The respondent while comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 9(1)(vi) of the Act. 5. When the appeals of the petitioner for the assessment years 1998-99 to 2005-06, which had been filed by the petitioner before the Tribunal, came up for hearing, the order of the Special Bench (supra) had already been passed and since the facts of the petitioner's case were identical, the Tribunal passed orders on 23.03.2010 in the petitioner's case holding that the receipts were taxable in India as "royalty" as held by the Special Bench. 6. On 31.03.2010 the respondent issued notice under Section 148 of the Act for the assessment year 2003-04 calling upon the petitioner to file the return of income on the ground that income chargeable to tax had escaped assessment. In response to the notice, the petitioner addressed a letter to the respondent on 05.05.2010 stating that the return earlier filed on 30.10.2003 may be treated as return filed in response to the notice of reopening. The petitioner also requested the respondent to supply the reasons recorded for reopening the assessment. The respondent supplied the reasons for reopening the assessment which are as follows: - "Reasons recorded for issue of notice u/s 148 of the Income tax Act, 1961 in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but income chargeable to tax has been underassessed or (ii) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or In view of the above, I have reason to believe that the income of the assessee for A.Y. 2003-04 chargeable to tax has escaped assessment. In this case, not more than six years have elapsed from the end of the relevant Asstt. Year (i.e. A.Y. 2003-04) and income of more than 1 lakh has escaped assessment, therefore, the notice u/s 148 r.w.s. 147 of the I.T. Act, 1961 satisfies the limit for issue of notice as provided in Section 149 of the Act. As required by section 151 of the Income Tax, 1961, the reasons are hereby put up for the kind perusal of recording of satisfaction. Sd/- (Alok Malviya) ADIT, Cir-1(1), Intl. Taxation New Delhi The Addl. DIT, R- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes are concerned, clause (c) to Explanation 2 to Section 147 of the Act covers a situation where the income of the assessee is assessed at too low a rate, without involving any change in the taxable income and even in such a case a notice to reopen the assessment on the ground of escapement of income can be issued. Therefore, the petitioner's contention that no income chargeable to tax had escaped assessment and that the mere giving credit for TDS certificates does not result in escapement of income is not correct. 8. The above is the gist of reasons given by the respondent for rejecting the objections raised by the petitioner. In the order dated 02.12.2011 rejecting the petitioner's objections, the respondent had erroneously mentioned the date of the assessment order as 27.03.2005. This error was corrected in the corrigendum issued on 12.12.2011, to 27.03.2006. It was admitted by the respondent in the corrigendum that the petitioner had filed the TDS certificates claiming credit for Rs. 2,11,16,426/- even during the assessment proceedings. He further adverted to the fact that since no credit was given in the assessment order, the petitioner filed an application under Section 154 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the petitioner, Section 147 of the Act comes into operation only where "income" chargeable to tax has escaped assessment and it cannot be invoked, in the absence of any specific provision authorising the same, on the ground that credit for TDS was erroneously given. 10. We think there is good deal of force in the contentions of the counsel for the petitioner. We are concerned with the assessment year 2003-04. The notice under Section 148 of the Act was issued on 31.03.2010, after a lapse of four years from the end of the assessment year. It is, therefore, a case where the first proviso to Section 147 of the Act applies. In a case to which the proviso applies and notice is issued after a period of four years from the end of the assessment year, it is for the Assessing Officer to allege and demonstrate that the assessee had either failed to file the return of income under Section 139 or Section 142(1) or Section 148 of the Act or "to disclose fully and truly all material facts necessary for his assessment, for that assessment year". Explanation 1 says that production before the Assessing Officer of account books or other evidence from which material evidence could with due dil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act and does not fall within the definition of "royalty" even after the insertion of clause (iva) therein because there is no user of the transponder by the customer. Without prejudice, it is further submitted that the provisions of section 9(1)(vi)(c) are not applicable to the assessee as the conditions in sub-clause (c) are not satisfied. The assessee has filed an appeal before the High Court on the issue as to whether the assessee's income is in the nature of "royalty" as defined in Explanation 2 to section 9(1)(vi) and whether the assessee's non-resident customers are carrying on business in India or have a source of income in India. As regards the applicability of clause (iva), the Tribunal has held that a transponder is not "equipment" and that the assessee's case is not covered under clause (iva). Against the finding of the Tribunal regarding clause (iva), the Income-tax Department has filed appeal before the High Court. Both appeals have been admitted." 12. It is thus seen that not only has the petitioner drawn the attention of the Assessing Officer to the fact that in the assessment year 1997-98 the Tribunal has held that its receipts were in the nature of "royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the notice: - (a) CIT v. Agarwalla Brothers [1991] 189 ITR 786 (Pat.) (b) East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326 (Cal.) (c) Equitable Investment Co. (P.) Ltd. v. ITO [1988] 174 ITR 714 (Cal.) (d) Jamna Lal Kabra v. ITO [1967] 69 ITR 461 (All.) (e) H.A. Nanji & Co. v. ITO [1979] 120 ITR 593 (Cal.) (f) C.M. Rajgharia v. ITO [1975] 98 ITR 486 (Pat.) (g) Saradbhai M. Lakhani v. ITO [1998] 231 ITR 779 (Guj.) 13. In the present case we have searched in vain the reasons recorded by the Assessing Officer for the allegation that the petitioner did not bring to the notice of the Assessing Officer the fact that for the assessment year 1997-98 there was an adverse order of the Tribunal. 14. Turning now to the validity of the reasons recorded, that credit for TDS of Rs. 2,11,16,426/- was wrongly allowed to the petitioner, counsel for the petitioner is right in his submission that Section 147 of the Act can be invoked only "if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year" and that there is no authority given by the section enabling the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,11,16,426/- was made by the petitioner "in the return" nor was any credit given in the demand notice for any TDS. This is clear from the income tax computation form dated 26.03.2006 placed at pages 68 - 69 of the writ petition. The petitioner had filed the TDS certificates with the respondent on 18.05.2005 which is obviously in the course of the original assessment proceedings. Despite this, and despite rejecting the assessee's claim that its income was not taxable in India and thereby bringing to tax the sum of Rs. 64,99,26,627/- in the assessment order passed on 27.03.2006, the respondent did not allow credit for the TDS of Rs. 2,11,16,426/-. It was because of this - not giving credit for TDS despite assessing the income - that the petitioner was compelled to move an application for rectification of the assessment under Section 154 of the Act on 12.05.2006. The claim was accepted by the Assessing Officer and an order under Section 154 of the Act was passed on 26.06.2006 wherein credit for the TDS was allowed (income tax computation form placed at pages 83-84 of Annexure-G to the writ petition). The petitioner thus claimed the relief for TDS not in the return of income bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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