TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 133
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....ssee. Thereafter, the case of the assessee was taken up for consideration and final assessment order was passed on 03.08.2012. 3. We are mainly concerned with that part of the assessment order which relates to the issue of stepup coupon bonds amounting to US$100 million. These bonds were issued in July, 2007 through the Bank of New York for a period of 5 years. The case of the assesee is that NNPLC issued stepup coupon bonds of US$ 100 million which were arranged by Jeffries International and the funds were received by NNPLC through Bank of New York. The assessee had agreed to furnish corporate guarantee for this transaction. These bonds were subscribed to by various entities to whom we shall refer to in detail at a later stage. These bonds were to be redeemed at a premium of 7.5% after the expiry of the period of 5 years. However, these bonds were redeemed in advance at a discounted price of US $74.2 million in November, 2009. 4. The assessing officer held that NNPLC had virtually no financial worth, it had no business of the name and therefore it could not be believed that it could have issued convertible bonds of US$ 100 million, unless the repayment along with interest was se....
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.... a huge investment of $100 million in a virtually non-functioning company and thereafter get back only 72% of their original investment. According to the assessing officer "The natural inference could be that it was NDTV's own funds introduced in NNPLC in the grab of the impugned bonds." The details of the investors are given in this communication giving reasons. Mention has also been made of complaints received from a minority shareholder in which it is alleged that the money introduced in NNPLC was shifted to another subsidiary of the assessee in Mauritius from where it was taken to a subsidiary of the assessee in Mumbai and finally to the assessee. NNPLC itself was placed under liquidation on 28.03.2011. Therefore, the assessing officer was of the opinion that there were reasons to believe that the funds received by NNPLC were the funds of the assessee under a sham transaction and that the amount of Rs. 405.09 crores introduced into the books of NNPLC during the financial year 2007-08 corresponding to the assessment year 2008-09 through the transaction involving the stepup coupon convertible bonds pertains to the assessee. The last portion of the communication dt. 04.08.2015 giv....
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....f the assessee and the income was being derived through this foreign entity. Hence, the case of the assessee would fall within the 2nd proviso of Section 147 of the Act and the extended period of 16 years would be applicable. The objections were accordingly rejected. 9. Aggrieved, the petitioner filed a writ petition in the High Court challenging the notice. The writ petition was dismissed on 10.08.2017. Against this the assessee has filed the present Appeal. 10. We have heard Shri Arvind P. Datar, learned senior counsel for the assessee, Shri Tushar Mehta, learned Solicitor General and Shri Zoheb Hossain, learned counsel appearing for the revenue. 11. In our opinion, the following issues arise for consideration in this case: (i) Whether in the facts and circumstances of the case, it can be said that the revenue had a valid reason to believe that undisclosed income had escaped assessment? (ii) Whether the assessee did not disclose fully and truly all material facts during the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection? (iii) Whether the notice dated 31.03.2015 along with reasons communicat....
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....ed assessment for such assessment year by reason of the failure 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: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter 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 cas....
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....uestioned. Therefore, according to the assessee there was no fresh material before the assessing officer to have reason to believe that the undisclosed income of the assessee had escaped assessment. 16. On behalf of the assessee it has been urged that once the transaction of stepup coupon bonds has been accepted to be correct, then the revenue cannot reopen the same and doubt the genuiness of the transaction. We are not in agreement with the first part of the submission but we make it clear that we are not commenting on the genuineness of the transaction, which will be considered by the concerned assessing officer. 17. On the other hand, on behalf of the revenue it is submitted that at the stage of issue of show cause notice the revenue only has to establish a tentative and prima facie view. At this stage, this Court is not expected to go into the merits of the case but can only ascertain whether the revenue has prima facie ground to show that it had reasons to believe that income has escaped assessment. It is further submitted that the scope of judicial review in such matters is very limited. It is also submitted that since the revenue discovered fresh tangible material subseque....
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....ax, Andhra Pradesh 1989 Supp(2) SCC 182, this Court held as follows: " 7. Two points have been urged before us by learned counsel for the assessee. It is contended that the Income Tax Officer has no jurisdiction to take proceedings under Sections 147 and 148 of the Income Tax Act because the conditions prerequisite for making the reassessments were not satisfied. The reassessments were made with reference to clause (b) of Section 147 of the Act, and apparently the Income Tax Officer proceeded on the basis that in consequence of information in his possession he had reason to believe that income chargeable to tax had escaped assessment for the two assessment years. From the material before us it appears that the Income Tax Officer came to realise that income had escaped assessment for the two assessment years when he was in the process of making assessment for a subsequent assessment year. While making that assessment he came to know from the documents pertaining to that assessment that the overhead expenses related to the entire business including the business as commission agents and were not confined to the business of purchase and sale. It is true, as the High Court has observe....
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....tsar (2001) 10 SCC 189, this Court held as follows: "This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income Tax Officer could proceed to reopen the case. It is not a case of mere change of opinion. We are not inclined to interfere with the decision of the High Court merely because the case of the assessee was accepted as correct in the original assessment for this assessment year. It does not preclude the Income Tax Officer from reopening the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in course of assessment of the next assessment year. The appeal is dismissed. No order as to costs." 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 ....
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....or initiating proceedings under the first proviso Section 147 of the Act. This can only be done if the revenue 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 Income Tax and Another (2012) 340 ITR 53 (Delhi). We have already 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 disclosu....
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....fore finalising the assessment of 03.08.2012 had never asked the assessee to furnish the 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....
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....r your purpose: My duty is done with disclosing these account books and the documents." His 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 ....
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.... to the conclusion that there is nondisclosure of true and material facts by the assessee. 34. It is interesting to note that whereas before this Court the revenue is strenuously urging that the assessee is guilty of nondisclosure of material facts, before the High Court the case of the revenue was just opposite. We may quote a portion of the counteraffidavit filed by the revenue in response to the writ petition filed by the assessee before the High Court which reads as follows: "... It is evident from these facts that second proviso to Section 147 is clearly attracted in this case and first proviso to Section 147 is not applicable to facts of this case, i.e. in this case, the only requirement to reopen assessment U/s 147 was that the AO has reason to believe that any income chargeable to tax has escaped assessment. The second condition that the income should have escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for making assessment is not relevant to decide issue before the Hon'ble Court" This submission has been repeated a number of times in the counter affidavit. Therefore, in our opinion the revenue can....
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....o the notice. It is only while rejecting the objections of the assessee that reference has been made to the second proviso in the order of disposal of objections dated 23.11.2015. 39. The High Court relied upon the judgment in Mohinder Singh Gill & Anr. vs. The Chief Election Commissioner, New Delhi & Ors. (1978) 2 SCR 272 and came to the conclusion that the revenue cannot rely upon the second proviso because the notice was silent in this regard. However, the High Court held that the assessee was guilty of nondisclosure of material facts. We have already held that in our view the assessee was not guilty of nondisclosure of material facts. The revenue has not challenged the judgment of the High Court in so far as this finding against it is concerned but the revenue is entitled to defend the petition even on a ground which may have been decided against it by the High Court. 40. On behalf of the revenue it is urged that mere nonnaming of the second proviso in the notice does not help the assessee. It has been urged that even if the source of power to issue notice has been wrongly mentioned, but all relevant facts were mentioned, then the notice can be said to be a notice under the p....