TMI Blog2020 (9) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... Year under the head Expenditure in foreign currency . In the tax audit report, in clause 17 relating to expenditure of capital nature, it is mentioned as NIL . This means that even the auditors were of the opinion that no capital expenditure was incurred during the year under consideration, which is debited to the profit and loss account. Since this reimbursement of professional expenses tantamount to international transactions, the assessee has, in Form 3CEB, which relates to particulars relating to International Transactions required to be furnished u/s 92E of the Act, furnished complete details in relation to transactions with NIIT Technologies INC UK and US. In column 10 of Form No. 3CEB, it was stated that amount has been paid to the sister concerns in lieu of services rendered by them and further, such transactions have been entered into at Arm s Length price 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. Reasons for reopening the assessment do not specify any failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 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 ₹ 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 ₹ 1,71,75.835 are to be held as capital expenditure, the assessing officer be directed to allow depreciation u/s 32 of the Act. 4. The representatives of both the sides were heard at length, the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed/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 based on change of opinion which is not permissible in law as the Assessing Officer had n ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure of any material facts. Moreover, there is no reference to any new fact or any new material which came to light of the Assessing Officer after framing original assessment order. In fact, adverse inference has been drawn only from material which, were very much available during the assessment proceedings. These glaring facts make the decisions relied upon by the ld. DR distinguishable. 32. The decision of the Hon'ble Supreme Court in the case of New Delhi Television Ltd 116 Taxmann.com 152 is very relevant on the facts of the case in hand. The observations of the Hon'ble Supreme Court read as under: 22. 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 place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts. 27. The High Court held that there was no true and fair disclosure in view of the law laid down by this Court in Phool Chand s case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Limited vs. Deputy Commissioner IncomeTax and Another4. We have already 4 (2012) 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details. 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 08.04.2011 NNPLC had sent a communication to the Deputy Director of Income Tax (Investigation), wherein it had not only disclosed 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s omission to bring to the assessing authority s attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to omission to disclose fully and truly all material facts necessary for his assessment. Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, gives a quietus to all such contentions; and the position remains 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 require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 33. The Revenue has heavily relied upon Explanation 1 to section 147 of the Act. In our considered opinion, the onus is also on the Assessing Officer to show that primary disclosure was not sufficient for further investigation by the Assessing Officer. 34. The Hon'ble Delhi High Court in the case of Donaldson India Filters Systems (P.) Ltd. vs. DCIT 371 ITR 87 has very lucidly reconciled Explanation 1 and the first proviso to section 147 of the Act. The relevant findings read as under: 22. Reading of the proviso to Section 147 and the decisions of this Court discussed above makes it amply clear that after a period of 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that in the present case, the test is not met. It is well settled proposition under the Income Tax Act that merely a change of opinion would not give the AO the jurisdiction to reopen the assessment under Section 147/148, as the same would amount to reviewing the earlier decision. There has to be some relevant tangible material for the AO to come to the conclusion that there is escapement of income from assessment, and there must be a live link with such material for the formation of the belief. The reasons should also disclose due application of mind as reopening of the assessment proceeding is not an empty formality. On a perusal of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from EDC and, therefore, the apparent reason for reopening seems to be erroneous, irrational and fallacious. The subsequent observation in paragraph 2 as per the provisions of Section 40(a)(ia) of the Income Tax Act, any sum payable on which tax is deductable at source under Chapter XVII B but the same has not been deducted appears to be based on the understanding that the provisions of Section 194 are attracted to EDC and, therefore, it is subject to withholding tax and consequently the provisions of Section 40 (a) (ia) of the Act would be attracted. Even if one were to ignore the provision of law quoted and relied upon by the AO, and we 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Greater Noida are not local authorities for the purpose of the Act. Therefore, the aforesaid decision has no relevance to the facts of the present case. 28. We would also like to reflect on Section 194-I and its explanation which deals with rent and has been relied upon by the Revenue to contend that the definition of rent is broad and would also envisage the payment of EDC and is subject to withholding tax. In support of this provision, Revenue has relied upon the observations of the Supreme Court in M/s New Okhla Industrial Development Authority (supra), the relevant portion whereof is reproduced herein below:- The definition of rent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessing officer the power of review and Section 147 confers the power to reassess and not the power to review. 10. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. xxx xxx 12. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment proceedings, was held to be change in opinion, in the absence of any new facts/ or law with the assessing officer. 39. Similar view was taken by the Hon'ble Bombay High Court in the case of State Bank of India 411 ITR 664 wherein reassessment notice issued on claims accepted by the Assessing Officer at the time of original assessment proceedings was held to be change of opinion in the absence of any new facts or law with the Assessing Officer. 40. The Hon'ble Supreme Court in the case of Kelvinator of India Ltd 320 ITR 561 has clearly laid down the ratio that in the absence of fresh information /material coming to the possession of the Assessing Officer, reopening is not permissible. 41. Considering the totality of the facts in light of the judicial decisions discussed hereinabove, we do not find any reason to interfere with the findings of the ld. CIT(A). The reassessment is bad in law and, therefore, no interference is called for. 42. Since the very basis [assessment order] has been removed, we do not find it necessary to dwell in to the merits of the case. Therefore, the cross objections raised by the assessee have become otiose and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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