AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 194
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....ant's part to disclose fully and truly all material facts necessary for assessment. 1.2 That there is no fresh or tangible material comes into existence after completion original assessment. 1.3 That the reassessment proceedings were initiated merely on the basis of change ofopinion on the same set of facts which existed and considered at the timeof original assessment concluded under section 143(3) of the Act. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance made by the Ld. AO amounting to Rs. 2,203,234 in respect of "Provision for Demo Inventory" charged to Profit & Loss account on conjectures and incorrect facts. The above grounds of appeal are without prejudice to each other. That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal." 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in ....
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.... that as per schedule - 15 under the head selling and administration forming part of the P&L account and an amount of Rs. 22,03,234/- has been debited to P&L account. 8. As mentioned above, the Assessing Officer had no new tangible material and the only material referred by the Assessing Officer is the assessment records of the assessee. We failed to persuade ourselves to believe that while framing the original assessment order, the Assessing Officer did not look into the Profit and Loss account of the assessee and the relevant schedule. Since the P&L account along with its schedules was very much available during the course of the original assessment proceedings. It cannot be said that there was a failure on the part of the assessee to disclose all material facts. 9. In our considered opinion, first proviso to Section 147 of the Act squarely applies on the facts of the case in hand as discussed hereinabove and the same reads as under: "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 rele....
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....ord by the minority shareholders form the basis for taking action under Section 147 of the Act. At the stage of issuance of notice, the assessing officer is to only form a prima facie view. In our opinion the material disclosed in assessment proceedings for subsequent years was sufficient to form such a view. We accordingly hold that there were reasons to believe that income had escaped assessment in this case. Question No.1 is answered accordingly. 24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed. 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its untaxed income in India to entities abroad and then bring it back to India thereby avoiding t....
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....given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any,arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 03.08.2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee. 29. The fact that stepup coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which s....
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....s have been cited as to what is meant by true and full disclosure. It is not necessary to multiply decisions, as law in this regard has been succinctly laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. vs. Income tax Officer, Companies District I, Calcutta and Another, wherein it was held as follows :"( 8)...The words used are "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise - the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts i....
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....tive. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences - whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. (11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn?" A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclos....
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....e assessment as per proviso to Section 147 has not been met. The questionnaire raised by the AO during the course of assessment proceedings categorically adverted to the question of withholding tax. The details of the TDS paid and EDC charges were available with the AO. Revenue has sought to contend that even if the AO could have, with due diligence, discovered material from the tax audit report, it does not necessarily mean that the petitioner had made a full and true disclosure of material facts. The mere production of evidence before AO is not enough and there may be a failure to make full and true disclosure, if some material for the assessment lies embedded in that evidence which the AO could uncover, but did not do so. The aforesaid submissions may be correct proposition in law; however, each case has to turn on its own facts. In the present case, the details of the TDS and EDC charges paid to HUDA were brought to the notice of the AO. On this question, it would be sufficient to refer to the decision of this Court in Donaldson India Filters Systems Pvt. Ltd. vs. DCIT, (2015) 371 ITR 87 (Del. In the said case, the Court held that the explanation clarifies the....
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....t for using the expression "failure on the part of the Assessee to disclose fully and truly all material facts", do not specify as to what is the nature of default or failure on the part of the Assessee. The reasons also do not explain or specify as to what is the rationale connection between the reasons to believe and the material on record. The Supreme Court in Income Tax Officer v. Techspan Pvt. Ltd And Ors. (2018) 6 SCC 685 has held that "The use of the words "reason to believe" in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of some facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature." The said judgment further held that "Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that we....
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....in its counter affidavit has sought to elaborate on the aforesaid reasons by contending that the EDC payment is akin to rent. However, we are not impressed with this submission. Firstly, such an understanding is not borne out from the recorded reasons and, secondly, the department cannot by way of a counter affidavit supplement the recorded reasons by introducing such legal submissions. The source of the power in this case, as sought to be argued, is not discernible. 27. If the AO harboured a reason to believe that the payment of EDC requires TDS under the provisions of the Income Tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that "Since, EDC has Income Character, therefore it should have been subjected to TDS by Assessee." The AO has further proceeded to observe since the Assessee is a development authority of State of Government of Haryana and is a taxable entity, TDS provisions could be applicable on EDC payable by the Assessee through HUDA. Apart from making aforenoted observations and referring to Sectio....
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....sion that payment which is to be made as annual rent is rent within the meaning of Section 194-I, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that TDS shall be deducted on the payment of the lease rent to the Greater Noida Authority as per Section 194-I. Reliance on the Circular dated 301-1995 has been placed by the Noida/Greater Noida Authority. A perusal of the Circular dated 30-1-1995 indicate that the query which has been answered in the above circular is "Whether requirement of deduction of income tax at source under Section 194-I applies in case of payment by way of rent to Government, statutory authorities referred to in Section 10(20-A) and local authorities whose income under the head "Income from house property" or "Income from other sources" is exempt from income tax." 16. In light of the judicial decisions discussed hereinabove, the assessment order could be quashed." 17. We further find that in the reasons supplied, the Assessing Officer alleges that the appellant had failed to disclose fully and truly all material facts necessary for assessment. However, we find that no details have been disclosed a....
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....lant assessee. The requirement is that the assessee should have failed or omitted to make full and true disclosure of material facts. The assessee is not required to disclose, state or explain the law. It cannot be said that the appellant-assessee had failed to make full and true disclosure of material facts. Full and true facts were stated by the assessee." 19. The DR vehemently stated that the Assessing Officer did not examine the impugned issue during the course of the original assessment proceedings nor any specific query was raised. The Assessing Officer, therefore, was within his rights in reopening the assessment. However, we find that the Hon'ble High Court of Delhi in the case of IHHR Hospitality (P.) Ltd. 415 ITR 459 had the occasion to consider a similar contention raised by the Counsel for the Revenue and the Hon'ble High Court observed as under: "6. It is far too well settled that any notice under Section 147/148 is to be premised on fresh or tangible material - made available with the Revenue within the time granted or within the extended time under Section 147. The only other circumstance when it can seek recourse to the reassessment power is if material ....
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..... Reasons must have a link with the formation of the belief." 21. While framing the reopening and the assessment, CIT(A) has drawn support from the decision of the Hon'ble High Court of Delhi in the case of Consolidated photo and Finvest Limited 151 Taxman 41. We find that this decision is no longer good law at the time of initiation of proceedings. In view of the subsequent decision of the Hon'ble Delhi High Court in the case of Rolls Royce Industrial Power India Ltd. 394 ITR 547. The relevant findings of the Hon'ble Delhi High Court read as under: "...16. The fact of the matter is that later Benches of this Court, including two Full Benches in CIT v. Kelvinator of India Ltd.(supra) and CIT v. Usha International Ltd., (2012) 348 ITR 485 have disagreed with the view expressed by the DB in Consolidated Photo and Finvest Ltd. v. Assistant Commissioner of Income-Tax(supra). In fact, the decision of the FB in CIT v. Kelvinator of India Ltd.(supra) was affirmed by the Supreme Court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312. 17. The Full Bench of this Court in CIT v. Usha International Ltd.(supra), specifically overruled the decisi....