TaxTMI 
TaxTMI 
2018 (6) TMI 1447
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....both on the legal ground of the validity of the assessment framed under section 147 of the Act as well as on the merits of the case. The Ld. CIT(A) upheld the validity of the order passed but at the same time decided the issue in favour of the assessee on merits following the decision of the ITAT Chandigarh in the case of the assessee for AY 2009-10 and 2010-11. 3. Aggrieved by the same the Revenue has come in appeal before us challenging the deletion of the addition made on merits while the assessee has filed a Cross Objection challenging the action of the CIT(A) in upholding the validity of the order passed under section 147 of the Act. The grounds raised by the Revenue are as under: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee without appreciating the facts of the case. 2. Whether the Ld. CIT(A) is right in deleting the addition on account of royalty expenses by relying of the decision of Hon'ble ITAT in the case of the assessee for A.Y. 2009-10 & A.Y. 2010-11 in which it was held that expenditure made on account of royalty is a license fee, when the agreement clearly stipulates tha....
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....o 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure80 on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:" Ld. Counsel for the assessee stated that where assessment had been earlier framed u/s 143(3) of the Act, reopening beyond four y....
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....ieve that the income to the tune of Rs. 4,15,10,000/- for the A. Y. 2008-09 has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. Therefore, the proceedings in the case of the assessee for A. Y. 2008-09 are being initiated u/s 147 of the Income Tax Act." 8. Ld. Counsel for the assessee pointed out therefrom that the reopening had been resorted to on account of the claim of the assessee of royalty expenses as revenue in nature, which the AO noted in the reasons, as having been held to be capital in nature in the assessment framed for the subsequent years. It was on account of this fact that the AO allegedly formed the belief that income to the tune of royalty expenses claimed amounting to Rs. 4.15 crores had escaped assessment within the meaning of section 147 of the Act. Ld. Counsel for the assessee thereafter pointed out that the issue of royalty had been discussed during assessment proceedings wherein all primary and material facts relating to royalty had been submitted. In this regard, Ld. Counsel for the assessee pointed out that the transfer pricing officer had discussed the issue of royalty in his order dt. 28/10/2011 placed in the PB at pag....
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....he assessee, the Royalty is to be paid in instalments. The 1st installment of Rs. 41.51 million was paid by the assessee during the F.Y. 2007-08 relevant to A.Y. 2008-09. The Assessing Officer made an addition on this ground in A.Y. 20091-0. The assessee's claim of Revenue expenditure on this account was rejected by the DRP during these years. However, the assessee succeeded on this ground in ITAT, Chandigarh, for A.Y. 2009-10 in ITA NO. !55/Chd/2014 dated 16.3.2015. The department is in process of filing appeal on this issue in the Hon'ble High Court of Punjab & Haryana. Since, the expenditure made under the head Royalty' shall give enduring benefits to the assessee company in the ensuing years, therefore, the claim of the assessee of expenditure with reference to Royalty amounting to Rs. 41.51 Million has to be re examined in the A.Y. 2008-09 as well. Therefore, proceedings were initiated u/s 147 of the Act and notice was issue to the assessee u/s 148 of the Act on 30.3.2015 after obtaining due approval from the competent authority." 10. Ld. DR, on the other hand ,supported the order of the CIT(A) and stated that merely because the assessee had disclosed the transactio....
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.... (Delhi)[ (2011] 1907 Taxman 415 (Delhi) [2012] 340 ITR 53 (Delhi) [2012] 247 CTR 322 (Delhi) 3) New Delhi Television Ltd.. Vs. [2017] 84 Taxmann.com 136 (Delhi) 4) CIT Vs. P.V.S. Beedies (P) Ltd. [1999] 103 Taxman 294 (SC) [1999] 237 ITR 13 (SC) [1999] 155 CTR 538 (SC) 5) CIT Vs. Kiranbhai Jamnadas Sheth (HUF). [2013] 39 Taxmann.com 116 (Gujarat) [2014] 221 Taxman 19 (Gujarat) (MAG. 6) Dishman Pharmaceuticals & Chemicals Ltd. Vs. CIT [2012] 346 ITR 228 (Guj) 12. We have heard the contentions of the both the parties,gone through the orders of the authorities below and also the documents referred to before us. We find merit in the contentions of Ld. Counsel for the assessee. Undisputedly notice u/s 148 of the Act was issued after the expiry of 4 years from the end of the assessment year and, we agree with the Ld.Counsel for the assessee, that the same did not satisfy the requirement provided u/s 147 regarding the failure of the assessee to disclose fully and truly all material facts. 13. Admittedly, it was the assessees claim of royalty expenses as revenue, as against capital held by the AO in subsequent year i.e A.Y 2009-10 & 2010-11, which....
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....as resorted to on the basis of disallowance of claim of depreciation made in succeeding year, the Hon'ble High Court has categorically held that where the reasons do not show any failure on the part of the assessee to disclose fully and truly all material facts, the reopening was not valid. The relevant findings of the Hon'ble High Court at para 10-15 is as under: "10. Without going into the merits of the issue as to whether the ATM is a computer or ought to be treated as normal plant and machinery, attracting different rates of depreciation, we are of the opinion that the present writ petitions are liable to be allowed on the ground that admittedly, the notice issued on 27.03.2012 did not fulfil the mandatory requirement of recording that the assessee did not disclose fully and truly all the material facts which was the necessary requirement in CWP Nos.6765 and 17892 of 2013. The reasons which have prevailed with the AO to issue notice reads as under: "Reasons u/s 147 r.w.s. 148 of the Income Tax Act, 1961 reopening the assessment. During the course of assessment proceedings for the assessment year 2008-09, it has been noticed that the assessee bank has ....
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....notice after 4 years from the end of the assessment year in question, could not be initiated in the absence of any allegation that there was failure on the part of the assessee to disclose fully and truly all material facts. In the absence of any such reasons, the assumption of jurisdiction under Section 147 was not justified. Relevant portion of the reasoning given reads as under: "13. The entire thrust of the findings recorded by the Assessing Officer in his order dated 13-3-2003 is to justify his satisfaction about escapement of income. According to him, it was a clear case of escapement of income as defined in Explanation-2 to Section 147 as the assessee had been allowed excessive relief under Section 80-O of the Act. However, it is not necessary for us to go into the merits of this finding as the second requirement of the proviso has not been satisfied obviously. The reasons recorded by the Assessing Officer for initiation of proceedings under Section 147 of the Act have already been reproduced above. A bare perusal of the same shows that the satisfaction recorded therein is merely about escapement of income. There is not even a whisper of an allegation that such esca....
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....ion of four years provided in the proviso to Section 147 has been made applicable only to cases where assessments have already been completed under Sub-section (3) of Section 143 or under Section 147. There is a specific purpose behind it. Where the return is processed under Section 143(1)(a), the Assessing Officer has no jurisdiction to examine the genuineness of the claims made in the return of income. He has only limited power of making adjustments on the basis of information available in the return. However, when an assessment is made under Section 143 (3) of the Act, the Assessing Officer has very wide power to examine the genuineness of the claims made in the return and require the assessee to furnish whatever information the Assessing Officer deems necessary. In the present case, the assessment had been made under Section 143(3) of the Act and if the Assessing Officer was of the view that he required profit and loss account and depreciation charts of the assessment years 1995-96 and 1996-97 for examining the correctness of the claim under Section 80IA of the Act, he could have required the assessee to produce the same. Failure of the Assessing Officer to do so, cannot be tre....
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....of the present case and in fact helps the present case of the assessee .As pointed out above the assessee in the present case had not only disclosed the royalty expenses in its return of income and books of account but had disclosed the nature of the said expenses also by way of filing details and agreement pertaining to the same during assessment proceedings. Therefore all material facts stood disclosed by the assessee. Facts cannot include in its meaning the inferences to be drawn from the facts. 18. In the case of NDTV Ltd.(supra) relied upon by the Revenue, the Hon'ble High Court had held the mere disclosure of a transaction at the time of original assessment proceeding to be not true and fair disclosure for the purposes of section 147 since the AO had information indicating the transaction to be sham or bogus. In these factual circumstances the Hon'ble High Court held the mere disclosure of the transaction to be not true and fair. In the case of Dishman Pharmaceuticals(supra) the assessee had not disclosed the substantial interest it had in the company from which it had taken loan and which was therefore treated as deemed dividend in its hand. In the case of Kiran Bhai Jamn....