AI Drafter 
TaxTMI 
TaxTMI 
2019 (10) TMI 74
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....y ground(s) of appeal at any time before or during the hearing of this appeal." (2) The Original Assessment order was passed U/s 143(3) of the Income Tax Act, 1961 ("I.T. Act", for short) on 29.12.2006 wherein income was assessed at Rs. 87,27,232/-. Subsequently, the Assessment was reopened u/s 147 read with section 148 of I.T. Act by issuing notice dated 22.03.2011, U/s 148 of I.T. Act. The following reasons were recorded by the Assessing Officer ("AO", for short) for reopening of Assessment: "In this case it has been noticed that the assessee has claimed and was allowed franchise fee of Rs. 2,40,00,000/-. The franchise fee being of capital nature was not allowable and should have been disallowed and added back to the income of the assessee after allowing depreciation at the rate of 25% amounting to Rs. 60,00,000/- and balance amount of Rs. 1,80,00,000/- should have been added back to the income of the assessee." (2.1) Fresh Assessment Order U/s 147 / 143(3) of I.T. Act was passed on 19.12.2011 wherein the income of the assessee was assessed at Rs. 2,54,32,275/- as under: Income assessed U/s 143(3) 87,27,232 Less relief allowed by CIT(A) vide order 12,94....
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....o which the earlier Assessing Officer who framed the original assessment has already applied his mind and come to a conclusion that payments are revenue in nature. Moreover this very issue of franchise payment has been accepted by the Department in the Asst. Year 2003-04 to 2009-10 which is as under:- S.No. A.Y. Franchisee Fee Claimed Franchisee Fee Allowed Assessed Assessing Authority 1. 2003-04 1925606 1925606 u/s 143(1) ITO, W-9(4) 2. 2004-05 24000000 24000000 u/s 143(3) ITO, W-9(4) 3. 2005-06 24000000 24000000 u/s 143(1) DCIT, Cir. 9(1) 4. 2006-07 24000000 24000000 u/s 143(3) Addl. CIT, R-9 5. 2007-08 24000000 24000000 u/s 143(1) DCIT, Cir.9(1) 6. 2008-09 11844819 11844819 u/s 143(3) DCIT, Cir.9(1) 7. 2009-10 9550033 9550033 u/s 143(1) DCIT, Cir.9(1) The assessee case supported by the following judgment is as under:- " M/s Kelvinator of India (Supreme court) [2010] 320ITR 0561 " Satnam (c)verseas Limited and Aur. Vs ACIT (Delhi High Court) 329 ITR 237 " M/s Bhavesh Developers Vs Assessing Officer, CIT....
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....s under :- "5. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct^ Tax Laws (Amendment) bet, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in section 147 of the Act (with effect from 1.4.89), they are given to go-by and only on condition has remained viz. That where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1.4.89, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are ~afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of "mere change of opinion ", which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditio....
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....ax (Appeals)-XII, New Delhi on 15th June, 2012. 5. Copy of return of income along with copy of Audited Statement of Accounts of M/s Superior Films Private Limited for assessment year 2003-04. 6. Copy of Franchise Agreement dated 20th Dec., 2002 executed between M/s Satyam Cineplexed limited and M/s Superior Films Private Limited fuly signed by both and parties. 7. Computation of Franchise Fee paid for assessment year 2003-04. 8. Copy of return of income of M/s Superior Films Pvt. Ltd. for Assessment Year 2004-05 along with copy of Audited Statement of Accounts for Financial Year ended on 31.03.2004. 9. Computation of Franchise fee paid for assessment year 2004-05. 10. Copy of notice issued u/sec. 142(1) dated 19.12.2005 along with a questionnaire dated 19.12.2005 by the learned Income Tax Officer, Ward 9(4), New Delhi for assessment year 2004-05. 11. Copy of reply of assessee giving justification of payment of Franchise fee paid during financial year 2003-04 to M/s Satyam Cineplexes Ltd. along with submissions of copy of Agreement dated 20th Dec., 2002. 12. Copy of Assessment order of M/s Superior Films Pvt. Lt....
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....enever passed by Assessing Officer. 26. Copy of preliminary objection filed by M/s Superior Films Pvt. Ltd. On 28.12.2011 for the issuance of notice u/sec. 148 of the Act for assessment year 2004-05. This was acknowledged by the learned Income Tax Officer, Ward 9(4), New Delhi on 30.12.2011. 27. Copy of Appellate Order in the case of M/s Superior films Pvt. Ltd. for assessment year 2004-05 dated 30.01.2009 in Appeal No. 156/2006-07. 28. Referred Judgments:- (i) Jute Corpn. Of India Ltd. vs. CIT 187 ITR- 688 (SC) (ii) N.T.P.C. vs. CIT 229 ITR 383(SC) (iii) Banashankari Medical & Onclogy vs. JCIT 316 ITR 407 (Karnataka) (iv) Essel Propack Ltd. vs. CIT 237 CTR 395 (Bom) (v) R.R.B. Consultants & Engg. Vs. DCIT 342 ITR 127 (Delhi) (vi) Vodaphone Essar Gujarat Ltd. vs. CIT 342 ITR 135 (Guj.) 29. Bharti Infratel Limited 411 ITR 403 (Delhi) 30. Hitech Outsourcing Services vs. Pr. CIT 408 ITR 129(Guj.) 31. Munjal Showla Ltd. vs. DcIT 382 ITR 555 (Delhi) 32. CIT vs. Reliance Industries Ltd. 382 ITR 574(Bom.) 33. CIT vs. Central Warehousing Corpn. Ltd. 382 ITR....
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....come was processed u/sec. 143(1) of the Income Tax Act, 1961 (hereinafter referred as "ACT") at declared income, however, it was finally assessed u/sec. 143(3) of the Act on 29.12.2006 at an income of Rs. 10,46,279/-. The assessee company being aggrieved by such order of the learned Assessing Officer had filed an appeal before the Hon'ble Commissioner of Income Tax (Appeals)-XII, New Delhi. The Hon'ble Commissioner of Income Tax (Appeals) vide his order dated 30.01.2009 in Appeal No. 156/2006-07 had granted relief of Rs. 12,94,957/- to the assessee company. After providing the appeal effect to the orders of the Hon'ble Commissioner of Income Tax (Appeals), the assessed income became "NIL and there was "Nil" tax liability payable by the appellant company. Copy of assessment order and the co of Appellate order are enclosed herewith from page No. 303 to 306 of the paper book. Subsequently, a notice u/sec. 148 of the Act dated 22nd March, 2011 was served on the appellant. Copy thereof is enclosed herewith on page No. 77 of the paper booj whereby the learned Income Tax Officer intend to reassess the income of the company for the year under reference and dir....
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.....2011. Copy enclosed herewith from page No. 83 to 86 of the paper book. On the facts and in the circumstances of the case as explained hereinabove, the appellant's counsel during the course of hearing did not raise any objection for the issuance of notice u/sec. 148 of the Act for mere change of opinion but on 19th Dec., 2011 (the only date of hearing provided to the appellant), he conveyed the learned Assessing Officer that the company is shortly filing objection challenging the validity of issuance of notice. It was prepared on 28th Dec., 2011 and the same was submitted before the learned Assessing Officer but the learned Assessing Officer had denied to accept it by stating that he had already passed the assessment order. The appellant company had left no alternative but as a matter of precaution, the appellant filed the said objection on a dak counter of the ward on 30th Dec., 2011. Copy enclosed herewith on page No. 300 to 303 of the paper book. Madam, the appellant as stated above had filed the objection for the reopening of the assessment u/sec. 148 of the Act, 1961 but since such objection is a legal objection on the facts and circumstances of the case ....
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....o. (ii) of the said Agreement, the appellant company paid Rs. 19.25 lacs as Franchise Fee to SCL for the period from 20th Dec., 2002 to 31st March, 2003. This amount of Franchise Fee was claimed as "Revenue Expenditure" by the appellant company in their books of account and had accordingly been debited to Profit & Loss Account for the year ended 31st March, 2003 which were duly audited. These audited statements of accounts for the year ended on 31st March, 2003 were submitted along with the return of income filed by the appellant for the assessment year 2003-04 on 12.12.2003. Copy enclosed herewith from page No. 1 to 11 of the enclosed paper book. This return of income was processed u/sec. 143(1) of the Act but not selected for scrutiny and no notice u/sec. 143(2) of the Act was issued. Thus prime facie the return of income was accepted as declared and accordingly the franchise fee of Rs. 19.25 lacs was assessed as Revenue expenditure. On the other hand, M/s Satyam Cineplexes Limited who had received the said franchise fee of Rs. 19.25 lacs had declared it as their revenue receipt in their books of accounts and in their return of income filed by them for assessment year 20....
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....n in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or precedential value of the earlier pronouncement. Where the facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench, which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior jurisdiction. This decision is also considered and relied upon by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Limited & Another vs. Union of India and Others [2006] 282 ITR-2783 (SC). Madam, in view of the above statement of facts and the principle of consistency, the issuance of notice u/sec. 148 of the Act is totally invalid in law. Madam, it is now well settled that the Assessing Officer cannot reopen the assessment on t....
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....rned Assessing Officer made an error of judgement and do not form a proper legal opinion. A wrong legal inference was drawn from the facts as stated by the Appellant which are already on records. Once the primarily facts have been disclosed then, it is for the Assessing Officer to drop proper legal conclusion and apply the provision for the statute in judicial manner. In the present case, it is not alleged by the learned Assessing Officer that any facts or factual details was embedded in the evidences/books of accounts which the learned Assessing Officer could have uncovered but failed to do so. Under these circumstances, it is very much clear that the precondition required for the reopen of the assessment order u/sec. 148 of the Act are not been satisfied in the present case and therefore, the reopening of assessment is totally invalid in law and not sustainable in law. Reliance is placed on the aforesaid decision of the Hon'ble Supreme Court in the case of CIT vs. Kalvinator of India Ltd.[2010 302 ITR-561 (SC), R. R. B. Consultants & Engg. Pvt. Ltd. Vs. DCIT (2012) [2012] 342 ITR-127 (Delhi) and Doshion Ltd. Vs. ITO [2012] 342 ITR-6 (Guj). Copy thereof are enclosed herewith f....
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....on on leased assets used by SFPL had been allowed to SCL. The Revenue Department has also not initiated any action u/sec. 263 of the Act in these years, therefore, the reopening of completed assessment in the hands of the appellant company for the year under appeal u/sec. 148 is totally invalid in law and consequently the reassessment completed u/sec. 147/143(3) is also invalid in law which may please be quashed / annulled. Madam, on merits of the case also, it is kindly submitted that the payment of franchise fee is a sort of lease rentals for the user of the assets leased out for a particular and defined period. On expiry of the leased period, the assets are reverted back to the lessor. The lessee (SFPL) does not acquire any asset of capital nature by obtaining a non exclusive licence for fixed period user right. The lessee (SFPL) since have no right over the ownership of the assets used by them, therefore, it has also no right to claim depreciation. In the instant appeal, the term of agreement with SCL is for 7 (Seven) years which ended on 19th Dec., 2009 however for 1st April, 2009, SFPL had terminated the lease and leased assets were returned back to M/s Saty....
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....n the case law reported at Yuvraj v. Union of India [315 ITR 84](SC). He contended that the AO had not expressed any opinion in the original Assessment Order dated 29.12.2006, in respect of assessee's claim on account of payment of franchisee fee. Therefore, the Ld. DR contended, the addition made in the fresh Assessment Order dated 19.12.2011 cannot be treated as change of opinion. He also placed reliance on the following case laws in support of his aforesaid contention: i) A.L.A. Firm vs. CIT (Mad) 102 ITR 622 ii) Ess Kay Engineering Co. (P) Ltd. vs. CIT (SC) 247 ITR 818 iii) Revathy C.P. Equipments Ltd. Vs. DCIT & Ors. (Mad) 241 ITR 856 iv) EMA India Ltd. vs. ACIT (ALL) 30 DTR 82 (3.1) The Ld. Authorized Representative ("AR", for short) for the assessee placed reliance on the aforesaid Paper Book and the case laws compilation filed from assessee's side during appellate proceedings in ITAT. He also placed reliance on the aforesaid written submissions, already reproduced earlier in this order in the foregoing paragraph (2.4). He also drew our attention to proviso to section 147 of I.T. Act and contended that there was no failure on the ....
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....sessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped 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, allowanc....
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....essary for his assessment, for that assessment year. In the case before us, the undisputed facts are, that the assessee did file return u/s 139 of the Act; the AO did pass assessment order u/s 143(3) of the Act on 19.12.2011; and re-assessment proceedings u/s 147 of the Act have been initiated on 22.03.2011 much after the expiry of more than four years from the end of the relevant assessment year (AY 2004-05). Under these facts, no action u/s 147 of the Act can be taken unless income has escaped assessment by reason of failure on the part of the assessee to disclose all material facts fully and truly. In the instant case, the Revenue has failed to show which material facts were not disclosed by the assessee. We have perused the assessment order dated 19.12.2011 passed by AO u/s 143(3)/147 of the Act and we have also perused the aforesaid impugned appellate order of Ld. CIT(A) dated 18.06.2012. We have further perused the reasons recorded by the AO for initiation of proceedings u/s 147 of the Act and for issue of notice u/s 148 of the Act. Moreover, we have perused our records carefully. There is nothing on the basis of which it can be said that there was failure on the part of the ....