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TMI Blog2016 (3) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee (through BBC World Division) operated the 'BBC World International News and Information Channel' (hereafter 'the BBC World Channel'). The Assessee earned revenues, inter alia, from the selling of airtime to Indian advertisers and from subscriptions for the BBC World Channel - which was otherwise a free to air channel (i.e., provided free of cost) - from various hotels. 3. The Assessee had entered into a marketing agreement with its stepdown subsidiary in India - BBC Worldwide India Private Limited (hereafter 'BIPL'). In terms of the said agreement, BIPL had agreed to provide services of marketing and selling airtime to advertisers in consideration of 15% of the net proceeds from sale of air time. 4. The Assessee filed its return of income for the AY 2002-03 on 31st December, 2002 declaring an income of Rs. 1,70,69,450/-. The said income comprised of Rs. 1,30,00,000/- received as a lump-sum consideration from Prasar Bharti (Door Darshan) for a feasibility study to analyse the introduction of Digital Terrestrial Transmission in India; Rs. 10,66,481/- received as royalty from Penguin Books India Private Limited on sale of books; and Rs. 30,02,969 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO rejected by an order dated 1st December, 2010. And, this led the Assessee to file the present writ petition. 11. Mr M.S. Syali, learned Senior Advocate appearing for the Assessee referred to the assessment order and contended that the same disclosed that the AO had examined all relevant material and, thereafter, accepted that the Assessee had incurred a loss; a part of which was attributable to India. He contended that the AO had reopened the assessment on the basis of assessment for other AYs, including assessment for subsequent AYs made in respect of the entities, which had succeeded to the Assessee's business in question. He contended that the AO was seeking to review the assessment made on the said basis, which is impermissible as being a mere change of opinion. 12. Mr Syali further referred to the submissions filed by the Assessee during the assessment proceedings in compliance with the information sought by the AO. In particular, Mr Syali drew the attention of the court to a statement of computation of the loss of BBC World Channel attributable to Indian activities. The said statement - which was filed with the AO on 30th October, 2004 - included the revenues from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He argued that the assessment order was passed on the statement produced by the Assessee which indicated that the Assessee had incurred a loss in relation to its channel activities. Since the AO was now questioning the veracity of the said statement furnished by the Assessee, the principle of change of opinion would not be applicable. 15. Mr Singh then referred to the decision of this Court in Dalmia Pvt. Ltd. v. Commissioner of Income Tax and Anr: (2012) 348 ITR 469 (Del.) and on the strength of this decision submitted that in cases where the AO had not applied its mind to the material produced, there would be no question of a change of opinion. 16. Insofar as the decision of this Court in BBC World News Limited (supra) is concerned, he submitted that the said decision would not be applicable; first of all for the reason that the said decision did not pertain to the Assessee. Secondly, he submitted that in any event, the said decision could not be relied upon as it had proceeded on the basis of discussion and finding recorded in assessment order which was now being reopened and, therefore, the observations made by this Court in respect of that assessment order (assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved by the aforesaid order dated 21st January, 2006, the Assessee filed a further appeal before the Income Tax Appellate Tribunal ("ITAT"). 22. The ITAT accepted the Assessee's contention that in view of the decisions of the Supreme Court in DIT v. Morgan Stanley and Company Inc: 292 ITR 416 (SC) and the Bombay High Court in SET Satellite (Singapore) Private Limited v. DDIT: 307 ITR 205 (Bom), the Assessee's revenues from sale of airtime could not be taxed. This was so because BIPL was assessed in respect of revenues from Indian activities which were determined on Arm's Length basis; thus the entire income attributable to India activities was captured in the net of tax, albeit in the hands of BIPL. Accordingly, the ITAT allowed the Assessee's appeal by its order dated 15th January, 2010. 23. For the AY 2001-02, the AO by its order dated 26th March, 2004 rejected the Assessee's contention that it did not have a PE in India and estimated the Assessee's income on the same basis as in AY 2000-01. However, the Assessee deducted the marketing commission payable to BIPL from the revenues and estimated the taxable profit as 10% of the net revenue. 24. For the AY 2003-04, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that the AO had, essentially, decided to reopen the assessment on account of the following reasons: (A) The AO had noticed that in AY 2003-04, the Assessee had shown global profits and since, its Indian revenues constituted 4.76% of the global revenue from sales, the profit relating to Indian sales were determined as Rs. 26,55,183/- and 20% of that profit was attributed to Indian activities. This, According to the AO indicated that the Assessee was earning profits from activities relating to telecast of the channel and since, the business had remained the same in the previous year, the AO reasoned that the Assessee had earned income in AY 2002-03 also, which income had escaped assessment. (B) The Assessee had not furnished the documentary evidence in support of its claim for loss but had merely furnished summary figures. (C) BBC World Ltd., the successor of the Assessee in respect of the business in question, was assessed for AYs 2004-05 to 2006-07 and in those assessments, it had been held that the global loss was not on account of activities in India and could not be attributed to the PE in India. (D) That the Assessee's taxable income was liable to be computed at 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion (the Assessee's division that operated the BBC World Channel). The Assessee also provided a statement indicating that BBC World Division had incurred a loss of UK Pounds 1,34,27,000 out of which losses that could be attributed to the Indian operations, were estimated at UK Pounds 4,335,000 (i.e, Rs. 29,77,31,000/-). The Assessee emphasized that for the purposes of the aforesaid calculation, it had allocated revenues of Rs. 6,84,52,000/- (UK Pounds 990,000) to Indian operations even though the said revenues were not generated from India or from Indian activities of the Assessee. The Assessee explained that the same was done for the purposes of matching allocation of revenues with allocation of expenses which in turn was done by allocating revenues over the number of households in India and other countries to which the BBC Channel was beamed. The Assessee also furnished a report of KPMG London in support of its computation. 33. The Assessee, without prejudice to its other contentions, further contended that even if BIPL was held to be the Assessee's PE in India or a business connection under Section 9 of the Act, the commission paid to BIPL constituted adequate compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is amount of revenue is net of commission paid to BWIPL for their services availed." 36. The AO verified the aforesaid statement. The assessment order indicates that the details of expenses alongwith relevant vouchers were produced for examination and the AO had noted that "the nature of the expenses alongwith the furnished vouchers were examined in detail and the same was found satisfactory". Accordingly, the AO accepted the loss attributable to the Indian operations of the BBC World Channel at Rs. 7,29,39,000/-. He further attributed 20% of that loss to the activities in India; thus, restricting the loss attributable to the Assessee's Indian PE (i.e, BIPL) at Rs. 1,45,87,800/-. 37. The above narration clearly indicates that the AO had conducted a detailed examination and thereafter, assessed the income of the Assessee. The fact that while assessing income in respect of the business in question (whether in the hands of the Assessee or the entities to whom the Assessee's business was transferred) for other AYs, the AO had not relied on the accounts produced by the Assessee and had proceeded to estimate the Assessee's income on a presumptive basis, would provide the AO no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the category of a change of opinion and not where the AO had not formed an opinion. 41. In the aforesaid context, it may be mentioned that the Supreme Court in Indian and Eastern Newspaper Society v. CIT: (1979) 119 ITR 996 (SC) had diluted its earlier view expressed in Kalyani Mavji and Co vs Commission of Income Tax: (1976) 102 ITR 287 (SC) that an assessment could be reopened in cases whether an AO had made a mistake and held as under: "Now, in the case before us, the Income Tax Officer had, when he made the original assessment, considered the provisions of Sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered] by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under Section 147(b). Reliance is placed on Kalyanji Mavji and Co. v. Commissioner of Income Tax : [1976] 102 ITR 287 (SC), where a Bench of two learned Judges of this Court observed that a case where income had escaped assessment due to the "oversight, inadvertence or mistake" of the Income Tax Officer must fall within Section 34(1)(b) of the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the said proviso to Section 147 of the Act, if an assessment under sub-section (3) of Section 143 of the Act has been made for the relevant AY, no action under Section 147 of the Act can be taken after expiry of four years from the end of the relevant AY unless any income chargeable to tax has escaped assessment for such AY by reason of failure on the part of the assessee: (i) 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 (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. [See: Haryana Acrylic Manufacturing Company v CIT: (2009) 308 ITR 38 (Delhi)] 45. In the present case, although the AO has recorded that the Assessee "has not produce any documentary evidence in support of its claim of losses. Assessee merely furnished summary figures", the same is clearly erroneous as the assessment order indicates that the Assessee had produced vouchers which were examined in detail and found satisfactory. 46. We are also unable to accept the contention that the Assessee had not maintained books of accounts as required under Section 44AB of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the AO to now allege that there was omission or failure on the part of the Assessee to fully and truly disclose all material facts for his assessment. 50. Whether there has been a failure or omission on the part of an Assessee to fully and truly disclose all material facts for the purposes of assessment has to be viewed in the context of the relevant facts of each case. The Assessee must truly disclose all facts as available with him which are relevant for the purpose of his assessment. Thus, even in cases, where an assessee has not maintained the necessary records or accounts as required in law, he is bound to disclose all facts in his knowledge which are relevant for the purposes of his assessment including making a candid disclosure that the requisite records have not been maintained by him. The Assessee must not conceal any material fact that he knows, or should have reasonably known, would have a bearing on his assessment. Once the Assessee has discharged this burden, it is up to the AO to draw the necessary inferences for assessing the income of an assessee and assessee cannot be faulted for the same (See: CIT v. Burlop Dealers Ltd.: AIR 1971 SC 1635, ITO v. Madnani En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the AY 2003-04, the issue concerning taxability of income from sale of airtime of BBC World Channel was common to both BBC World News Ltd and the Assessee. Whilst, the AO sought to reopen the assessment of BBC Worldwide News Ltd. for AY 2003-04, we are informed by Mr Syali that no such proceedings were initiated in the case of the Assessee for AY 2003-04. 53. It is relevant to notice the reasons recorded for reopening the assessment of BBC Worldwide News for AY 2003-04, which reads as under:- "The assessee is a company incorporated under the applicable laws of United Kingdom (U.K.) and is engaged in running and operating the BBC World Channel. With effect from 1st December 2002, the airtime sales/marketing agreements between BBC Worldwide (India) Private Limited (BWIPL) and BBC Worldwide Limited were novated by assignment to the assessee. Accordingly, BBC Worldwide (India) Private Limited (BWIPL) acts as an agent in India for the assessee for soliciting advertisement for the sale of airtime on the channel and for providing marketing support to the channel in India. The assessee has claimed in the notes to the return of income that it does not have any business connection or pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iii) Such income has been made the subject to excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed". 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.f. 147 of the I.T. Act, 1961 satisfies the time limit for issue of notice as provided in Section 149 of the Act. As required by section 151 of the Income-Tax Act 1961, the reasons are hereby put up for the kind perusal & recording of satisfaction." 54. It is apparent from the above, the reasons recorded by the AO for reopening the assessment of the Assessee in AY 2002-03, in substance, bear similarity to the reasons recorded by the AO for reopening of the Assessment of BBC World News Ltd. for AY 2003-04. In the aforesaid context, this Court had quashed the reassessment proceedings, inter alia, for the reasons that the AO had examined the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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