9911796707
TMI Blog2020 (9) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the Ld. C1T(A) is justified quashing the proceedings u/s 147 of the Act without considering that one of the purpose of section 147 is to ensure that an assessee cannot get away by making an incorrect claim of deductions? 4. That the order of the CIT(A) is erroneous and is not tenable on facts and in law." 3. The assessee has raised the following grounds in its cross objections: "1. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer of initiating reassessment proceedings u/s 147 of the Income Tax Act, 1961 (The Act') on the basis of audit objections, without any independent satisfaction regarding escapement of income. Without prejudice: 2. That the C1T(A) erred on facts in not deciding the appeal on merits thereby upholding the action of the assessing officer in disallowing business development and marketing expenses amounting to Rs. 1.71,75,835/- holding the same to be capital expenditure, as against revenue expenditure claimed by the assessee. 2.1 Further without prejudice, if the business development and marketing expenses aggregating to Rs. 1,71,75.835 are to be held as capital expenditure, the assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 315 ITR 84 wherein the Hon'ble High Court has held that the points which have not been discussed/decided by the Assessing Officer do not tantamount to change of opinion. 13. Referring to Explanation (1) to section 147 of the Act, the ld. DR stated that mere production of books of account before the Assessing Officer will not amount to disclosure within first Proviso of section 147 of the Act. 14. The ld. DR continued by saying that the audit party of the department raised objections in respect of the impugned expenditure and, therefore, reopening on the basis of objections of the audit party is valid. 15. In support of this contention, the ld. DR placed reliance on the decision of the Hon'ble Delhi High Court in 256 ITR 391 wherein the Hon'ble High Court has held that "Where the audit objections relate to factual error pointed out by the audit party, reopening is valid." 16. Similar view was taken by the Hon'ble Apex Court in 237 ITR 13. 17. The ld. counsel for the assessee, on the other hand, vehemently stated that the reassessment proceedings are barred by limitation of four years as prescribed in proviso to section 147 and captioned reassessment is merely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs.) Reference JUNE- 2004 1. Professional Business Development & Marketing Services NUT Technologies, USA 26,29,323.86 Annx-22C @Pg.61 of PB 2. Professional Business Development & Marketing Services NUT Technologies, UK 35,92,341.13 Annx-22C @Pg.61 of PB SEP-2004 1. Professional Business Development & Marketing Services NUT Technologies, USA 13,48,037.02 Annx-22F @Pg.64 of PB 2. Professional Business Development & Marketing Services NUT Technologies, UK 96,05,533.61 Annx-22F @Pg.64 of PB Total 1,71,75,235.62 25. A perusal of the record shows that similar payments have been made by the assessee for the months of December 2004 and March 2005, which details are available at pages 67 and 70 of the paper book. 26. Surprisingly, no adverse inference has been drawn in so far as the payments made in the months of December and March are concerned and adverse inference has only been drawn in the months of June 2004 and September 2004, as exhibited elsewhere. 27. Before issuing the notice u/s 148 of the Act, the Assessing Officer sought clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A perusal of the aforesaid judgments clearly shows that subsequent facts which come to the knowledge of the assessing officer can be taken into account to decide whether the assessment proceedings should be reopened or not. Information which comes to the notice of the assessing officer during proceedings for subsequent assessment years can definitely form tangible material to invoke powers vested with the assessing officer under Section 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. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 340 ITR 53 (Delhi) 19 20 referred to the judgment in Phool Chand's case (supra), wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all "true" and "full". Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed the names of all the bond holders but also their addresses; number of bonds along with the total consideration received. This chart forms part of the assessment orders dated 03.08.2012 in the case of M/s.NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two assessment orders were passed by the same officer who had passed the assessment order in the case of the assessee on the same date itself. Therefore, 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. Income tax Officer, Companies District I, Calcutta and Another5 , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that so far as primary facts are concerned, it is the assessee's duty to disclose all of them - including particular entries in account books, particular portions of documents and documents, and other evidence, which could have been discovered by the assessing authority, from the documents and other evidence disclosed. (10) Does the duty however extend beyond the full and truthful disclosure of all 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 coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years from the end of the Assessment Year, for the AO to assume jurisdiction, it becomes necessary that income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the Assessee to make a return, or to disclose all material facts necessary for that assessment year. 23. We find force in the submissions advanced by Mr. Kaushik that in the present case, the test for reopening the assessment as per proviso to Section 147 has not been met. The questionnaire raised by the AO during the course of assessment proceedings categorically adverted to the question of withholding tax. The details of the TDS paid and EDC charges were available with the AO. Revenue has sought to contend that even if the AO could have, with due diligence, discovered material from the tax audit report, it does not necessarily mean that the petitioner had made a full and true disclosure of material facts. The mere production of evidence before AO is not enough and there may be a failure to make full and true disclosure, if some material for the assessment lies embedded in that evidence which the AO could uncover, but did not do so. The aforesaid submissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recorded reasons, we are not able to discern as to how the AO has come to a conclusion that there is a failure on the part of the Assessee in fully and truly disclosing all material facts for the purpose of the assessment. Though, the recorded reasons allude to an ostensible failure on the part of the Assessee to disclose fully and truly all material facts, however, the recorded reasons except for using the expression "failure on the part of the Assessee to disclose fully and truly all material facts", do not specify as to what is the nature of default or failure on the part of the Assessee. The reasons also do not explain or specify as to what is the rationale connection between the reasons to believe and the material on record. The Supreme Court in Income Tax Officer v. Techspan Pvt. Ltd And Ors. (2018) 6 SCC 685 has held that "The use of the words "reason to believe" in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of some facts and circumstances which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were to agree with the contention of Revenue that while exercising the power, the source may not be specifically referred to or if wrongly mentioned to, it would not render the exercise of such power to be invalid, yet, we are unable to fathom as to how the AO has arrived at the conclusion that EDC payment was subject to tax deduction at source. Revenue in its counter affidavit has sought to elaborate on the aforesaid reasons by contending that the EDC payment is akin to rent. However, we are not impressed with this submission. Firstly, such an understanding is not borne out from the recorded reasons and, secondly, the department cannot by way of a counter affidavit supplement the recorded reasons by introducing such legal submissions. The source of the power in this case, as sought to be argued, is not discernible. 27. If the AO harboured a reason to believe that the payment of EDC requires TDS under the provisions of the Income Tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that "Since, EDC has Income Character, therefore i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contained in the Explanation is a very wide definition. Explanation states that "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land. The High Court has read the relevant clauses of the lease deed and has rightly come to the conclusion that payment which is to be made as annual rent is rent within the meaning of Section 194-I, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that TDS shall be deducted on the payment of the lease rent to the Greater Noida Authority as per Section 194-I. Reliance on the Circular dated 301-1995 has been placed by the Noida/Greater Noida Authority. A perusal of the Circular dated 30-1-1995 indicate that the query which has been answered in the above circular is "Whether requirement of deduction of income tax at source under Section 194-I applies in case of payment by way of rent to Government, statutory authorities referred to in Section 10(20-A) and local authorities whose income under the head "Income from house property" or "Income from other sources" is exempt from income tax." 35. In ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re-assessment proceedings. 13. The fact in controversy in this case is with regard to the deduction under Section 10A of the IT Act which was allegedly allowed in excess. The show cause notice dated 10.02.2005 reflects the ground for re-assessment in the present case, that is, the deduction allowed in excess under Section 10A and, therefore, the income has escaped assessment to the tune of Rs. 57,36,811. In the order in question dated 17.08.2005, the reason purportedly given for rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
