TMI Blog2024 (4) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... rutiny of the petitioner s book while considering disallowing these amounts under Section 40(a)(ia) of the IT Act. In the light of the above, this Court must opine that there was no failure on the petitioner s part to disclose primary facts and the reasons for re-assessment are recorded arbitrarily without considering all the circumstances. Hence, the second question framed is answered in favour of the petitioner holding that the re-assessment that is initiated after four years on the ground that there is failure to disclose primary facts is barred in law. Decided in favour of assessee. - HON BLE MR. JUSTICE B. M. SHYAM PRASAD For the Petitioner (By Sri. S. Naganand, Senior Counsel For Smt. Sumana Naganand, Advocate) For the Respondents (By Sri Raviraj Y.V., Advocate) ORDER The petitioner is a recognized Turf Authority and is engaged in the business of organising thorough bred horse racing. The petitioner has impugned the following. [i] The Notice dated 29.03.2019 [Annexure-G] in No. ITBA/A/COM/F/17/2018-19/101553669 7(1) issued under Section 148 of the Income Tax Act, 1961 [for short, the IT Act ]. [ii] The Notice dated 31.05.2019 [Annexure-J] in ITBA/AST/S/143(2) 3/2019-20/1016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t enter into any agreement with the trainers or horse owners [except for licensing them] and it only facilitates the transactions for the owner of the horses. 4. The petitioner, for the Assessment Year 2012-13, has filed its return of income [ROI] on 28.09.2012. The petitioner has filed its revised Returns on 20.12.2012 4 . The petitioner s ROI is selected for scrutiny through Computer Assisted Scrutiny Selection [CASS], and the petitioner is issued with notice dated 24.09.2013 under Section 143(2) followed by the Questionnaire dated 09.10.2014 under Section 142(1) of the IT Act. The petitioner has responded to the queries through its letters dated 17.10.2014 and 22.12.2014. 5. The Assessing Officer [AO], after hearing the petitioner, has concluded the assessment proceedings by the Order dated 27.03.2015. The AO has concluded that the petitioner, in violation of the provisions of Section 194 BB of the IT Act, has disbursed Rs. 34,15,30,436/- to the horse owners without deducting tax at source claiming such amount as expenditure in the Profit and Loss Account. The AO has disallowed the amount of Rs. 34,15,30,436/- under Section 40 (a)(ia) of the IT Act. The Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-opening of assessment: During scrutiny proceedings for A.Y 2016-17 it was observed that assessee was making payment of crores of rupees to horse Trainers, jockeys. etc. During A.Y 2016-17 Rs. 17.09 Cr was paid to trainers jockeys for horse maintenance and as mount fee. It is almost 7.04% of net revenue declared in Profit loss account. These payments were not brought through profit Loss account. Further, payments made to trainers jockey required TDS. Same was not deducted which calls for disallowance u/s 40a(ia) of IT act. As mentioned above, payments made to trainers, jockeys were not passed through profit loss account. Further, it was also confirmed during scrutiny proceedings of A.Y 2016-17 that these services were professional services attract TDS. But assessee has failed to deduct TDS on these payments. As discussed above, it is confirmed that assessee had not declared gross revenue in profit Loss account but only 12.5% of gross collection as its revenue. The payments made to trainers jockeys etc were directly setoff with owners accounts without passing through Profit loss account. Assessee had failed to compliance to TDS provision. It is confirmed that assessee has not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re true facts in Profit and loss account. Hence, there is escapement of income to the tune of Rs. 14.85 Crore. Reassessment cannot be made merely on the basis of assessment order passed for subsequent year: The issue of escapement has come into light during the scrutiny proceeding for the assessment year 2016-17. Assessee is maintaining two sets of books of account-Primary and secondary. The information available with this office that assessee is making payments to the horse trainers Jockey on behalf of owners. Even though, assessee is making the payments. Hence, necessary TDS compliance is to be undertaken by assesse but failed to do so. Hence, based on this new information case has been re-opened. Assessee has not disclosed these payments in its Profit and Loss Account. Change of Opinion: Assessee raised objection that reasons stated were mere change of opinion. It is not accepted because, the payments made to horse trainers Jockeys were not even disclosed by assessee in earlier year. Hence, then assessing officer has not examined this issue. As. assessee has not disclosed these transactions in the P L account even though payments were made by assessee. All the entries were direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed all material facts when it filed its ROI and Revised ROI for the Assessment year 2012-13 and offered explanations in the proceedings under Section 143 of the IT Act for this Assessment year. 12. Sri. S.S. Naganand, the learned Senior Counsel for the petitioner, submits that the notice is issued on 29.03.2019 without assigning any reason just before the expiry of the outer limit of 6 years on 31.03.2019 and reasons are offered for the first time in the Communication dated 06.06.2019 [after 31.03.2019], and therefore, the notice dated 29.03.2019 is not issued within the time limit prescribed under Section 149(1)(b) of the IT Act. The learned Senior Counsel, in support of the proposition that the notice and reasons should go in hand in hand and must be communicated to the assessee before the limitation prescribed, relies upon the following exposition by the Division Bench of the Delhi Court in Haryana Acrylic Manufacturing Co. v. Commissioner of Income 2008 SCCOnLine Del 1500 : 24 The notice under Section 148 was issued on 29.03.2004. The petitioner filed the return and sought reasons by its letter dated 11.05.2004. If the date of filing of the counter-affidavit in this writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards the analysis of the information, the following is observed. the payments made to the horse trainers and jockeys is not brought into the Profit and Loss account, the petitioner has not deducted TDS for the services offered by these horse trainers and jockeys would be professional services, the petitioner maintains primary and secondary accounts with only 12.5% of the gross collection taken as net revenue in the secondary accounts. On receipt of this Communication, both the Additional Commissioner of Income Tax and the Principal Commissioner of Income Tax, Bengaluru 1, on 29.03.2019, have recorded satisfaction for re-assessment of the proceedings. 14. The Division Bench of the Andhra Pradesh, in GVK Gautami Power Ltd. v. Asst. CIT (OSD) supra disagreeing with the aforesaid decision of the Delhi High Court, has observed thus: We respectfully disagree with the opinion expressed by the Delhi High Court in Haryana Acrylic. Section 148(2) of the Act merely requires the assessing officer, before issuing notice under Section 148(1), to record his reasons for doing so. If reasons are recorded, the requirement of Section 148(2) must be held to have been complied with. Further the time l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice and the reasons for the notice must also be issued within the stipulated period. The issuance of the notice under Section 148 of the Act could lead to the request for reasons and the adjudication on the objections, if any, to the reasons for re-assessment. 17. If it is to be canvassed that the reasons for the re-assessment must be furnished within the stipulated time, despite the provisions of the IT Act and decision in GKN Driveshafts (India) Ltd. v. ITO [supra] being silent about the same, it could also be canvassed that the adjudication on the objection to the reasons must also be within this time line. If the conditions for exercise of the jurisdiction to initiate re-assessment are added to be complied within the time limit for issuance of notice, the power vested to exercise such jurisdiction will be shackled. 18. This Court, therefore, is of the considered view that it cannot be reasonably opined that the reasons for the re-assessment had to be furnished within the period of six [6] years, and in any event, as seen from the original file, the reasons are recorded for re-assessment before issuance of notice. As such, the submissions by Sri Y V Raviraj on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an assessee is not bound to disclose any information other than that what is required to be mentioned in by him in various columns of a prescribed form or return or which he is bound under the provisions of the Act to furnish even though that fact may otherwise be relevant for the purposes of his assessment. Merely because such information has not been furnished in the return it would not mean that the assessee had failed or omitted to disclose fully and truly all material facts necessary for his assessment. As stated, the obligation for supplying such other information could arise only if the Income-tax Officer had required the assessee to furnish information in connection with the amount of depreciation on the written-down value of his machinery and plant. 21. This Court must refer to the following from the decision of the Division Bench of the Bombay High Court in SBI v. Vineet Agrawal, Asst. CIT 2020 SCC OnLine Bom 943. The expressions reason to believe and failure on the part of the assessee to disclose fully and truly all material facts have been subjected to numerous judicial pronouncements, and it is not necessary to burden this judgment by making reference to the long li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls are prepared as per the primary books command and that insofar as the revenue, he has explained that stake money and cups amounting to Rs. 34,15,30,436/- is paid to the horse owners. It is undisputed that this amount of Rs. 34,15,30,436/- includes the amount debited by the petitioner on the horse owner s instructions to the Horse Trainers and Jockeys. 24. The AO, considering these explanations and after examining the Books of Accounts, by the Order dated 27.03.2015 has disallowed the said amount under Section 40(a)(ia) of the IT Act. However, the petitioners appeal with the ITAT as against the AO s Order and the Commissioner s order in first appeal, is allowed with the ITAT opining that the stake money paid by the petitioner to the horse owners is not liable to TDS under Section 194 B or Section 194 BB of the IT Act and consequentially, the disallowance made is set-aside. It follows from these circumstances that the petitioner has disclosed the primary facts i.e., the receipt on behalf of the horse -owners and the debits affected on their instructions disclosing that the financials are prepared from the primary accounts and without claiming any expenditure in the regard. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f training of horses. 3. A jockey is also licensed by the Turf Authority. 4. The petitioner has declared a total income of Rs. 3,32,97,476/- and tax liability of Rs. 1,18,43,656/-. 5. This appeal is taken up for consideration by the ITAT along with the petitioner s appeal against the similar orders for the Assessment years 2014-15. 6. The provisions of Section 149 (1) of the IT Act material for the present case, as it stood prior to the Finance Act, 2021. 149 . (1) No notice under section 148 shall be issued for the relevant assessment year, (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c)]; (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year]. 7. The provisions of Section 147 of the IT Act, as it read before the Finance Act, 2021: Income escaping assessment. Section 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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