TMI Blog2020 (4) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... for subsequent assessment years can definitely form tangible material to invoke powers vested with the assessing officer under Section 147 of the Act. The material disclosed in the assessment proceedings for the subsequent years as well as the material placed on record by the minority shareholders form the basis for taking action under Section 147 of the Act. At the stage of issuance of notice, the assessing officer is to only form a prima facie view. In our opinion the material disclosed in assessment proceedings for subsequent years was sufficient to form such a view. We accordingly hold that there were reasons to believe that income had escaped assessment in this case. Question No.1 is answered accordingly. Whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts? - Extension of limitation period - HELD THAT:- Assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the second proviso. The assessee must be put to notice of all the provisions on which the revenue relies upon. If the revenue is to rely upon the second proviso and wanted to urge that the limitation of 16 years would apply, then in our opinion in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice that the revenue relies upon the second proviso. The assessee could not be taken by surprise at the stage of rejection of its objections or at the stage of proceedings before the High Court that the notice is to be treated as a notice invoking provisions of the second proviso of Section 147 of the Act. Accordingly, we answer the third question by holding that the notice issued to the assessee and the supporting reasons did not invoke provisions of the second proviso of Section 147 of the Act and therefore at this stage the revenue cannot be permitted to take benefit of the second proviso. Thus notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment but since the revenue has failed to show non-disclosure of facts the notice having been issued after a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had never actually issued such guarantee, the assessing officer was of the view that the subsidiary of the assessee could not have raised such a huge amount without having this assurance from the assessee. The transaction was of such a nature that the assessee should be required to maintain an arm s length from its subsidiary, meaning that it should be treated like a guarantee issued by any corporate guarantor in favour of some other corporate entity. The assessing officer did not doubt the validity of the transaction but imposed guarantee fee @ rate of 4.68% by treating it as a business transaction and added ₹ 18.72 crores to the income of the assessee, vide order dated 03.08.2012. 5. On 31.03.2015, the revenue sent a notice to the assessee wherein it was stated that the authority has reason to believe that net income chargeable to tax for the assessment year 200809 had escaped assessment within the meaning of Section 148 of the Act. This notice did not give any reasons. The assessee then asked for reasons and thereafter on 04.08.2015 reasons were supplied. The main reason given was that in the following assessment year i.e. assessment year 200910, the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and considering the findings of the DRP holding the funds received by NNPLC as the funds of the assessee New Delhi Television Limited under sham transactions, there is a reason to believe that the funds amounting to ₹ 405.09 crores introduced into the books of NNPLC during the FY 200708 in the form of Step Up Coupon Bonds pertain to the assessee New Delhi Television Limited only. I have therefore reason to believe that the income of the assessee New Delhi Television Limited for AY 2008-09 amounting to at least ₹ 405.09 crores has escaped assessment. It is also recorded that the escapement is due to failure on the part of the assessee to disclose fully and truly all facts material for assessment. 7. The assessee filed reply to the notice and reasons given, and claimed that there had been no failure on the part of the assessee to disclose fully and truly all material facts necessary to make an assessment. Assessee also claimed that the proceedings had been initiated on a mere change of opinion and there was no reason to believe. The assessee also claimed that the transaction of step-up bonds was a legal and valid transaction. In addition, it was cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the second proviso to Section 147 of the Act? 12. At the outset we may note that it has been strenuously urged on behalf of the assessee that its assessment was done under scrutiny procedure and a very detailed procedure was followed during the original assessment proceedings and all aspects of the case were noted by the assessing officer. That may be true, but merely the fact that the original assessment is a detailed one, cannot take away the powers of the assessing officer to issue notice under Section 147 of the Act. Question No.1 13. We would like to make it clear that we are not going into the merits of the allegations made against the assessee. At this stage we are only required to decide whether the revenue has sufficient reasons to believe that undisclosed income of the asseessee has escaped assessment and therefore there are grounds to issue notice. Obviously, during the assessment proceedings the assessee will have the right to place material on record to show that the transaction in question was a genuine transaction. 14. It is trite law that an assessing officer can only reopen an assessment if he has reason to believe that undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable 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; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) 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 (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. (ca) where a return of income has not been furnished by the assessee or a return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al subsequent to the assessment order of 03.08.2012, it cannot be said that the assessing officer did not have reasons to believe that income had escaped assessment. 18. The main issue is whether there was sufficient material before the assessing officer to take a prima facie view that income of the assessee had escaped assessment. The original order of assessment was passed on 03.08.2012. It was thereafter on 31.12.2013 that the DRP in the case of AY 200910 raised doubts with regard to the corporate structure of the assessee and its subsidiaries. It was noted in the order of the DRP that certain shares of NNPLC had been acquired by Universal Studios International B.V., Netherlands, indirectly by subscribing to the shares of NNIH. As already noted above it was recorded in the reasons communicated on 04.08.2015 that NNPLC was not having any business activity in London. It had no fixed assets and was not even paying rent. Other than the fact that NNPLC was incorporated in the U.K., it had no other commercial business there. NNPLC had declared a loss of ₹ 8.34 crores for the relevant year. It was also noticed from the order of the assessing officer that the assessee is the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court has observed, that this information could have been acquired by the Income Tax Officer if he had exercised due diligence at the time of the original assessment itself. It does not appear, however, that the attention of the Income Tax Officer was directed by anything before him to the fact that the overhead expenses related to the entire business. The information derived by the Income Tax Officer evidently came into his possession when taking assessment proceedings for the subsequent year. In the circumstances, it cannot be doubted that the case falls within the terms of clause (b) of Section 147 of the Act, and that, therefore, the High Court is right in holding against the assessee. In M/s Phool Chand Bajrang Lal and Another vs. Income Tax Officer and Another (1993) 4 SCC 77, this Court held as follows: 19 Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing a fresh inference from the same facts and material which was available with the ITO at the time of original a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 147 of the Act. 23. The material disclosed in the assessment proceedings for the subsequent years as well as the material placed on record by the minority shareholders form the basis for taking action under Section 147 of the Act. At the stage of issuance of notice, the assessing officer is to only form a prima facie view. In our opinion the material disclosed in assessment proceedings for subsequent years was sufficient to form such a view. We accordingly hold that there were reasons to believe that income had escaped assessment in this case. Question No.1 is answered accordingly. Question No.2 24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round-tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent does not mean that there is true and full disclosure of facts. 28. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 03.08.2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee. 29. The fact that st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the entire material was available with the revenue. 32. A number of decisions have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. vs. Incometax Officer, Companies District I, Calcutta and Another AIR 1961 SC 372 , wherein it was held as follows : (8) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences - whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. (11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of times in the counter affidavit. Therefore, in our opinion the revenue cannot now turn around and urge that the assessee is guilty of nondisclosure of facts. We are also of the view that the revenue could not be permitted to blow hot and cold at the same time. 35. We are clearly of the view that the revenue in view of its counteraffidavit before the High Court that it was not relying upon the nondisclosure of facts by the assessee could not have been permitted to orally urge the same. Even otherwise we find that the assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of 6 years. We answer Question No.2 accordingly. Question No.3 36. It is urged before this Court by the revenue that in terms of second proviso to Section 147 of the Act read with Section 149(1) (c) of the Act, the limitation period would be 16 years since the assessee has derived income from a foreign entity. We may make specific reference to the second proviso and explanation 2(d) which reads as follows: Provided further that nothing contained in the first proviso shall ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been wrongly mentioned, but all relevant facts were mentioned, then the notice can be said to be a notice under the provision which empowers the revenue to issue such notice. There can be no quarrel with this proposition of law. However, the noticee or the assesee should not be prejudiced or be taken by surprise. The uncontroverted fact is that in the notice dated 31.03.2015 there is no mention of any foreign entity. There is only mention of the Section 148. Even after the assessee specifically asked for reasons, the revenue only relied upon facts to show that there was reason to believe that income has escaped assessment and this escapement was due to the nondisclosure of material facts. There is nothing in the reasons to indicate that the revenue was intending to apply the extended period of 16 years. It is only after the assessee filed its reply to the reasons given, that in the order of rejection for the first time reference was made to the second proviso by the revenue. 41. In our view this is not a fair or proper procedure. If not in the first notice, at least at the time of furnishing the reasons the assessee should have been informed that the revenue relied upon the se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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