TaxTMI 
TaxTMI 
2019 (10) TMI 74
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....aring 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 12,94,957 74,32,275 Add: Franchisee fee treated as capital 1,80,00,....
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....ments 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 (Bombay High Court) [2010] 329 ITR 0249 " Aventis Pharma Ltd Vs ACIT (Bombay High Court) [2010J323 ITR 0570 " H K Buidcon Ltd Vs Income Tax Officer (Ahmedabad High Court) [2010J-TIOL- 254-HC-AHM-IT In the recent ....
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....nferred 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 precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department-then, in the grab of reopening the assessment, review would take place. 7. One must treat the concept of "change of opinion " as an in-build text to check abuse of power by the....
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....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. Ltd. for assessment year 2004-05 completed u/sec. 143(3) of the Act dated 29.12.2006. 13. Copy of Assessment Order of M/s Satyam Cineplexes Ltd., for assessment year 2003-04 dated 18.01.2006 completed u/sec. 143(3) of the Act along with copies of Audited Statement of Accounts for financial year ended on 31.03.2003. 14. Copy of return of income of M/s Satyam Cineplexes Ltd. for assessment yea....
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.... 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 172(Delhi) 34. Priya Desh Gupta vs. DCIT 385 ITR 452 (Delhi) 35. Ranglal Bagaria (HUF) vs. ACIT 384 ITR 477 (Cal.) 36. Director of Income Tax International Taxation-II vs. Rolls Royce Industrial Power India Limited in ITA No. 1058 /Del/2011 (Delhi) (2.4) The relevant portions of written submissions filed from assessee's side as well as from the side of Revenue are reproduced as under: Written submissions from the assessee's side: "The appellant company M/s Superior Films Private Limited (in short "SFPL") had filed the aforesaid appeal against the impugned assessment order pa....
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....issioner 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 directed the appellant company to file the return of their income for the year under reference. On receipt of the said notice, the assessee's counsel vide his letter dated 6th April, 2011 had submitted that the appellant company had already filed their return of income for the year under reference on 1.11.2004 which was also assessed u/sec. 143(3) of the Act on 29th Dec., 2006. Copy thereof is enclosed herewith from page No. 78 of the paper book. The assessee also submitted that the original return of income so filed by the appellant company may kindly be treated as return being filed in compliance to notice u/sec. 148 of the Act. Madam, in this le....
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....d 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 for the assumption of jurisdiction in passing the reassessment order u/sec. 147/143(3) of the Act, therefore, the same had been taken in the Grounds of Appeal (Ground No. 1) filed by the company for your honour's kind consideration, the same may please be considered. A separate application under Rule 46A of the Income Tax Rules, 1962 is also been filed herewith separately for its admission and consideration. This ground has been taken for the first time before your honour and the same had not been adjudicated by the learned Assessing Officer in the reassessment order. The same may please be admitted and considered. In this connection, reliance is placed by us on the decision of the Hon'ble Supreme ....
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....r 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 2003-04. It was assessed as revenue receipt in their assessment completed u/sec. 143(3) of the Act on 18.01.2006. Copy enclosed herewith for your ready reference on page No. 47 to 61 of the paper book. Madam, the payment of Franchise Fee, as explained above, was allowed as Revenue Expenditure during assessment year 2003-04 and in the original assessment of the appellant company for assessment year 2004-05, therefore, in the absence of any material change on the similar facts as were available during the course of assessment for assessment year 2003-04 and at the time of original assessment for assessment year 2004-05, there was no justification for the learned Assessing Officer to take a different view in the matter for the reopening....
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....pon 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 the issue which have been examined and considered at the time of original assessment. The Hon'ble Supreme Court on these issues in the case of CIT vs. Kalvinator of India Ltd.[2010 302 ITR-561 (SC) has held that:- "Therefore, post April, 1, 1989, 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 given 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. We mush 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 fulfil....
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....nt 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 from page No.323 to 326 of the paper book. Madam, in support of the above, we are also pleased to furnish you a statement where the assessment status of the appellant company and the assessment status of SCL are given on page Nos. 89 and 198 of the paper book which are fully supported by the documentary evidences thereof which are also appearing on page No. 90 to 197 and 199 to 299 of the paper book. On perusal of the said statements, your honour will kindly appreciate that in the assessment of the appellant company as well as of SCL for succeeding assessment years, the said payment of Franchise Fee have been assessed as Revenue Expenditure and revenue receipt respectively where the assessments was completed u/sec. 143(3) of the Act. Since the appellant company had fully disclosed all the details in respect of ....
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....ve 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 Satyam Cineplexes Ltd. By M/s Superior Films Pvt. Ltd. Since SFPL did not acquire any asset of capital nature during the lease period, therefore, the franchise fee paid by the appellant company was of the nature of revenue expenditure. Reliance is placed on the following decisions:- i) Banashankar Medical & Oncology Research Centre vs. JCIT (2009) 316 ITR-407 (Kar.). ii) CIT vs. Essel Propeck Ltd. (2011) 237 CTR (Bom)-395. Copies of both judgements are enclosed herewith from page No.316 to 322 of the paper book." Written submissions from Revenue's side: "Sub: Written Submission in the above cse- reg. In the above case, it is humbly submitted that the following decisions may kindly be considered 1. Yuvrai v. Union of India [315 ITR 841 ISC) where Hon'ble Supreme Court held that points not decided while passing assessment order under section 143(3)....
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....sions, 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 part of the assessee either to make a return U/s 139 or to disclose fully and truly all material facts necessary for assessment. (4) We have heard both sides. We have perused the materials available on record, carefully. We have also considered the judicial precedents brought to our attention, at the time of hearing or referred to in the materials on record. We find that notice U/s 148 of I.T. Act was issued, thereby reopening the assessment, on 22.03.2011 which is more than 4 years after 31.03.2005 (i.e. more than 4 years from end of the Assessment Year 2004-05 with which we are concerned in this appeal). Therefore, the case of the assessee is covered by proviso to section 147 of I.T. Act. For ease of reference, the provisions of section 147 of I.T. Act are reproduced as under: [Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sectio....
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....s noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; [(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] [(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under subsection (2) of section 133C it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] [(d) where a person is....
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.... it can be said that there was failure on the part of the assessee to disclose all material facts fully and truly. Infact we are unable to even find any allegation by the AO to the effect that there was failure on the part of the assessee to disclose all material facts fully and truly. Even at the time of hearing before us, it was not the case of the Ld. DR that the assessee has failed to disclose the material facts fully and truly. In these facts and circumstances, we hold that Revenue has failed to show that there was failure on the part of the assessee to disclose all material facts fully and truly. (4.2) When the assessee has filed a return u/s 139 of the Act or in response to sections 142(1) or 148 of the I.T.Act and when an assessment order u/s 143(3) or u/s 147 of the Act has already been passed then the assessee enjoys statutory protection under proviso to section 147 of the Act from any action u/s 147 of the Act after the expiry of four years from the end of the relevant assessment years; unless income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for th....