TMI Blog2019 (6) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... here has been no independent application of mind in the least to the issued raised. It was incumbent upon the AO to have had independent reasons to believe that there is escapement of tax, even if the initial nudge did emanate from the audit department. The recording of reasons is mechanical and robotic and the mandate u/s 147 has not been complied with. TDS u/s 195 - TDS on foreign remittances relating to production related fees - HELD THAT:- Tax was deducted in respect of the payments effected by the petitioner to Nagie James Associates Ltd (UK), Mark Monitor INC (USA), Cososys SRL (USA) and Buena Vista International (USA). The sole remittance upon which tax was not deducted was in respect of the payment to Asianet Global FZ LLC, UAE, as the payment was in connection with production related fees and the Agreement for Avoidance for avoidance of Double Taxation between India and the UAE does not contain an Article providing for the taxation of Fees for Technical Services. In any event, the details of the remittances as well as the certification in Form 15B to this effect were duly furnished to the assessing authority even during the original proceedings and are, admittedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner : Mr.Porus Kaka, S.C. For Mr.Srinath Sridevan For the Respondent : Mr.J.Narayanasamy, Sr.Standing Counsel COMMON ORDER These three Writ Petitions challenge orders rejecting objections filed by the assessee in regard to assumption of jurisdiction by the Assessing Officer for re-assessment under section 147 of the Income Tax Act, 1961 (in short Act ). 2. The Petitioner is a company engaged in the business of production, procurement and broadcasting of movies and programmes over satellite channels. Asianet Communication Limited (petitioner in W.P.No. 25336 of 2018 ) merged with Vijay Television Private Limited (petitioner in W.P.Nos.25328 25331 of 2018) vide order of the Mumbai Bench, National Company Law Tribunal dated 30.07.2018 in CP(CCA) 9/230-232/NCLT/MB/MAH/2018, approved by the Ministry of Information and Broadcasting on 17.12.2018. Thereafter, the name, Vijay Television Private Limited, stood changed to Asianet Star Communications Private Limited w.e.f. 7.1.2018. The petitioners sought amendment of cause title and the miscellaneous petitions were ordered on 20.03.2019. Common submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the sale (iv) The financials also included Form 3CD duly certified by the Chartered Accountant confirming that there had been no change in the method of accounting employed in the present assessment year as compared with the immediate preceding years. (v) The method of valuation of closing stock was detailed in point 12 of the Form No.3CD (Statement of particulars required to be furnished under section 44 AB of the Income tax Act, 1961), as under: 12(a) Method of valuation of closing stock employed in the previous year 1) Program/Film rights are stated at lower of unamortised cost or net realizable value. i) Cost of programs are amortised based on the expected pattern of realisation of economic benefits. ii) Film rights are amortised on the straight-line basis over the license period of sixty months from the commencement of rights whichever is shorter. Film rights with limitation on the number of telecast during the license period are amortised on a straight-line basis over the license period or on telecast basis whichever is earlier. 2) Programs pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised representative. He also confirms that the assessee had produced all the details called for and the same were verified. The valuation and the cost of amortisation in respect of television programmes, movie telecast rights, events and serials was found to be in order and the claim of the petitioner accepted. 5. While this is so, a notice under section 148 of the Act was issued on 27.03.2018 after the elapse of six(6) years from the end of the assessment year in question wherein the Assessing Authority states that he had reasons to believe that income chargeable to tax had escaped assessment and that he proposed to re-assess the same, and calling for a return of income to be filed by the assessee. 6. The Supreme Court in the case of GKN Drive Shafts Private Limited V. Income Tax Officer (259 ITR 19) has set out the procedure to be adopted in the matter of re-assessments as follows: We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to re-assess, only requires a prima facie belief of the Assessing Officer that income has escaped assessment. In a nut shell, the proposed re-assessment and the assumption of jurisdiction by the officer are justified on the following basis as extracted from the impugned order: . . . . The Assessing Officer had a reason to believe that there was escapement of income based on the information available. There was material tangible before the Assessing Officer to form a belief. There was no change of opinion as this issue was not dealt with in the original assessment completed. Before issue of notice u/s 148, the Assessing Officer satisfied himself by recording the reasons, he relied on for having believed that there is escapement of income. . . . . 10. He concludes by stating that no details in regard to the issue in question have been called for by the officer, none furnished by the assesssee and consequently no discussion whatsoever in the order of assessment in regard to whether the expenses incurred and claimed would be revenue or capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re stated at lower of unamortised cost or net realizable value. (i) Cost of televised events including programs are fully expenses on telecast, which is based on the expected pattern of realization of economic benefits. (ii) In case of films whose right commence after April 1, 2008 are amortised equally over 5 years or license period, whichever is less, which is based on the expected pattern of reliazation of economic benefits. Films whose rights have commenced prior to April 1, 2008 and which has value in inventory are written off based on the number of telecasts. Management regularly reviews and revises, wherever necessary, its estimates of total revenues by film rights, which may result in the change in the rate of amortisation. 2) Inventories of raw material (Tapes) are valued at cost is taken on FIFO basis. . . . . (iv) The Form 3CD duly certified by the Chartered Accountant confirmed that there had been no change in the method of accounting employed in the present assessment year as compared with immediate preceding years. (v) A notice for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is verified from Annexure that foreign expenditure debited to the P L Account for the period April 2012 to March 2013 was GBP2,875 (₹ 88 Approx.), USD 1,01,812 (₹ 59 Approx.) and AED 26,34,985 (₹ 55 Approx.) for which no tax was withheld. However, tax is required to be deducted u/s 195. According to Section 40(a)(i) of the Income Tax Act, the entire expenses amounting to ₹ 15,11,84,260/- is required to be disallowed. Further, it was noticed that programme/film rights amounting to ₹ 175,41,00,000/- for A.Y.2013-14 were claimed by the assessee under Note 19 Operating and Other Expenses . The same is required to be capitalized and depreciation at the rate of 25% only to be allowed as the asset is in the nature of intangible asset . 17. The petitioner has filed its objections on 06.07.2018 to the proceedings for re-assessment, interalia, objecting on the grounds that: (i) there was no new or tangible material or information on record; (ii) the proceedings were a mere review of the earlier scrutiny assessment; (iv) the reassessment proposed constituted a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regard to amortisation of expenditure on programmes/film rights and foreign remittances and tax deducted thereupon where applicable. These documents have been taken into account by the Assessing Officer at the time of scrutiny and there is no new material that has come to the notice of the Assessing Authority, despite which he comes to the conclusion that there is escapement of income. The methodology of valuation of the assets and details of claim of the expenditure was reflected in the financial statements filed along with the return of income as well as discussed in detail in the course of scrutiny assessment. The impugned proceedings for re-assessment are thus, nothing but a review of the original order of assessment apart from not being based on any new or tangible material. 22. That apart, the petitioner has placed on record two notes signed by the Sr.Receipt Audit Officer/ITRA Review dated 15/11/2017 pointing out modifications required to be made the assessment dated 30.03.2016 in regard to disallowance under section 40(a)(i) for alleged non-deduction of tax at source and disallowance of operating and other expenses and suggesting capitalisation of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly in the course of the original assessment proceedings, notwithstanding that the same have been filed along with the return of income. I am thus of the view that the statutory condition imposed for availment of the extended period of limitation has not been satisfied in the present case and as such, the proceedings for re-assessment for AY 2011-12 are barred by limitation. 26. In similar circumstances, the Supreme Court, in the case of ACIT V. ICICI Securities Primary Dealership Ltd. ([2012] 348 ITR 299) has held as follows: The assessee had disclosed full details in the Return of Income in the matter of its dealing in stocks and shares. According to the assessee, the loss incurred was a business loss, whereas, according to the Revenue, the loss incurred was a speculative loss. Rejection of the objections of the assessee to the re-opening of the assessment by the Assessing Officer vide his Order dated 23rd June, 2006, is clearly a change of opinion. In the circumstances, we are of the view that the order re-opening the assessment was not maintainable. 27. The Supreme Court, in Commissioner of Income Tax Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of all relevant facts along with the return of income, the impugned proceedings are barred by limitation and also constitute a review of the original order of assessment, impermissible in law. In fact, the Assessing Officer is seen to have applied his mind to the issue in question and the original order of assessment confirms the position that various materials have been called for, such as accounts, financials, tax audit report, etc. and the assessee has also engaged in discussions with the Assessing Officer in regard to the issues that arise therefrom. The full and true disclosure of the assessee is thus not in doubt. 30. I also draw support in this regard from the decisions in the cases of the Bombay High Court in 3I Infotech Ltd. and Assistant Commissioner of Income-Tax and others [(2010) 329 ITR 257] and Madras High Court in Cholamandalam Investment Finance Co. Ltd. Vs. Assistant Commissioner of Income Tax, Corporate Circle-1(2), Chennai [(2018) 89 Taxmann.com 337] and Mobis India Ltd. Vs. Deputy Commissioner of Income Tax, LTU-II, Chennai [(2018) 90 Taxmann.com 389]. 31. As regards AY 2013-14, (W.P.Nos. 25331 and 25336 of 2018), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited V. CIT Commissioner of Income Tax Vs. Kelvinator of India Ltd. (256 ITR 1) (affirmed in 320 ITR 651) where the Division Bench of the Delhi High Court held as under: The question posed for consideration of this Larger Bench is, as to whether even for a mere change of opinion by the Income-tax Officer (in short 'ITO') action under Section 147 of the Income-tax Act, 1961 can be brought into operation . . . . We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under Section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of Sub-section (1) of Section 143 or Sub-section (3) of Section 143. When a regular order of assessment is passed in terms of the said Sub-section (3) of Section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced all documentation in support thereof transparently and conclusively, right from the start. 38. In this regard, I draw useful reference, and quote from the judgement of the Supreme Court in the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) that has become locus classicus as an exposition of the position in law in regard to re-assessments. The words used are 'omission or failure to disclose fully and truly all material facts necessary for his assessment for that year'. It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only primary facts and not inferences. If some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts--the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is attracted. The principles have been well settled and reiterated in numerous decisions of the apex court in Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638 (SC); ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and Indo-Aden Salt Mfg. and Trading Co. P. Ltd. v. CIT [1986] 159 ITR 624.. 40. Finally, and in addition to my reasoning as aforesaid for assessment year 2011-12, the placement of the Explanation, after the Proviso to Section 147 is also, in my view, relevant. This indicates the scheme of the section and the interplay of the components thereof. To my mind, the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments are thus distinguishable on facts, the admitted position in these cases being that no new material has come to light after the completion of the original assessment proceedings. The reasons for reopening in the present case have not been challenged on the ground of sufficiency or adequacy, but on various other grounds that I have dealt with in extenso above. In the light of the detailed discussion as above, the aforesaid decisions relied on by Mr.Narayanasamy do not advance his case. 44. Moreover, the impugned proceedings for re-assessment have been initiated on the basis of an objection raised by an audit party. The proposals for re-assessment are, couched along identical lines as suggested by the audit officer. The audit objections are extracted below alongside the reasons for re-assessment for A Y 2011-12 and 2013-14 to enable effective comparison between the two documents: Audit Objection (AY 2013-14) IT Entt. Sector Review As.No.18 Dt.15.11.2017 Name of the Asessee M/s.Vijay Television Pvt.Ltd.,Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AAACA246OP Status COMPANY Assessment Year 2013-14 Date of Filing Return of Income 31/03/2015 Date of Assessment 30/03/2016(revised) Section and sub Section 143(3) Total Income ₹ 227.63/- IAP seen No The assessee filed the revised return on 31/03/15 admitting a total income of ₹ 227,62,85,940/- and the scrutiny assessment was completed n 30/03/2016 accepting the ROI. During audit, it was observed from Annexure that foreign expenditure debited to the P L accounts for the period April 2012 to March 2013 was GBP 2,875 (₹ 88 approx.), USD 1,01,815 (₹ 59 approx.) and AED 26,34,985 (₹ 55 approx.) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening of the assessment in your case for the AY 2013-14 are hereby communicated as under: It is verified from Annexure that foreign expenditure debited to the P L Account for the period April 2012 to March 2013 was GBP2,875 (₹ 88 Approx.), USD 1,01,812 (₹ 59 Approx.) and AED 26,34,985 (₹ 55 Approx.) for which no tax was withheld. However, tax is required to be deducted u/s 195. According to Section 40(a)(i) of the Income Tax Act, the entire expenses amounting to ₹ 15,11,84,260/- is required to be disallowed. Further, it was noticed that programme/film rights amounting to ₹ 175,41,00,000/- for A.Y.2013-14 were claimed by the assessee under Note 19 Operating and Other Expenses . The same is required to be capitalized and depreciation at the rate of 25% only to be allowed as the asset is in the nature of intangible asset . 45. A comparison of the audit objections with the reasons for re-assessment in the respective years reveal that the assessing officer has done nothing more than simply extract/adopt the audit objection itself as the basis for re-assessment. The inescapable conclusion is that the proceedings ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for Avoidance for avoidance of Double Taxation between India and the UAE does not contain an Article providing for the taxation of Fees for Technical Services. In any event, the details of the remittances as well as the certification in Form 15B to this effect were duly furnished to the assessing authority even during the original proceedings and are, admittedly, on record. 50. Coming to the issue of amortisation of cost of programmes/films, the annexures to the returns of income reflect the expenditures incurred and claimed on programmes/film rights. In fact, the petitioner has been following a consistent method of claiming expenditures in a particular fashion and the Department has accepted the methodology of valuation and claim for all years except the assessment years in question, being AY 2011-12 and 2013-14. In fact, even after the initiation of the present proceedings for re-assessment, orders under scrutiny have been passed in respect of AY 2015-16 accepting the petitioners claim. 51. The view proposed to be adopted in the impugned re-assessments is thus a deviation, an aberration so to say, from the regular and consistent view taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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