TaxTMI 
TaxTMI 
2020 (9) TMI 278
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....47 of the Act? 3. Whether on the facts and circumstances of the case and in law, the Ld. C1T(A) is justified quashing the proceedings u/s 147 of the Act without considering that one of the purpose of section 147 is to ensure that an assessee cannot get away by making an incorrect claim of deductions? 4. That the order of the CIT(A) is erroneous and is not tenable on facts and in law." 3. The assessee has raised the following grounds in its cross objections: "1. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer of initiating reassessment proceedings u/s 147 of the Income Tax Act, 1961 (The Act') on the basis of audit objections, without any independent satisfaction regarding escapement of income. Without prejudice: 2. That the C1T(A) erred on facts in not deciding the appeal on merits thereby upholding the action of the assessing officer in disallowing business development and marketing expenses amounting to Rs. 1.71,75,835/- holding the same to be capital expenditure, as against revenue expenditure claimed by the assessee. 2.1 Further without prejudice, if the business development ....
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.... marketing development services. 12. Strong reliance was placed on the decision of the Hon'ble Bombay High Court in 315 ITR 84 wherein the Hon'ble High Court has held that the points which have not been discussed/decided by the Assessing Officer do not tantamount to change of opinion. 13. Referring to Explanation (1) to section 147 of the Act, the ld. DR stated that mere production of books of account before the Assessing Officer will not amount to disclosure within first Proviso of section 147 of the Act. 14. The ld. DR continued by saying that the audit party of the department raised objections in respect of the impugned expenditure and, therefore, reopening on the basis of objections of the audit party is valid. 15. In support of this contention, the ld. DR placed reliance on the decision of the Hon'ble Delhi High Court in 256 ITR 391 wherein the Hon'ble High Court has held that "Where the audit objections relate to factual error pointed out by the audit party, reopening is valid." 16. Similar view was taken by the Hon'ble Apex Court in 237 ITR 13. 17. The ld. counsel for the assessee, on the other hand, vehemently stated that the reassessme....
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....ve been entered into at Arm's Length price 24. The details of such expenses are as under: S. No. Particulars Nature of exp. Name of Party Amount (Rs.) Reference JUNE- 2004 1. Professional Business Development & Marketing Services NUT Technologies, USA 26,29,323.86 Annx-22C @Pg.61 of PB 2. Professional Business Development & Marketing Services NUT Technologies, UK 35,92,341.13 Annx-22C @Pg.61 of PB SEP-2004 1. Professional Business Development & Marketing Services NUT Technologies, USA 13,48,037.02 Annx-22F @Pg.64 of PB 2. Professional Business Development & Marketing Services NUT Technologies, UK 96,05,533.61 Annx-22F @Pg.64 of PB Total 1,71,75,235.62 25. A perusal of the record shows that similar payments have been made by the assessee for the months of December 2004 and March 2005, which details are available at pages 67 and 70 of the paper book. 26. Surprisingly, no adverse inference has been drawn in so far as the payments made in ....
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.... the ld. DR distinguishable. 32. The decision of the Hon'ble Supreme Court in the case of New Delhi Television Ltd 116 Taxmann.com 152 is very relevant on the facts of the case in hand. The observations of the Hon'ble Supreme Court read as under: "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 disclosed in the assessment proceedings for the subsequent years as well as the material placed on record 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 w....
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....cts. 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 IncomeTax and Another4. We have already 4 (2012) 340 ITR 53 (Delhi) 19 20 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 disclosure of facts. 28. We are unable to agree with this reasoning 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 subs....
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....e 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. A number of decisions 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 Another5 , wherein it was held as follows :"( 8)...The words used are "omission o....
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....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 in the negative. 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 ....
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.... 34. The Hon'ble Delhi High Court in the case of Donaldson India Filters Systems (P.) Ltd. vs. DCIT 371 ITR 87 has very lucidly reconciled Explanation 1 and the first proviso to section 147 of the Act. The relevant findings read as under: "22. Reading of the proviso to Section 147 and the decisions of this Court discussed above makes it amply clear that after a period of four years from the end of the Assessment Year, for the AO to assume jurisdiction, it becomes necessary that income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the Assessee to make a return, or to disclose all material facts necessary for that assessment year. 23. We find force in the submissions advanced by Mr. Kaushik that in the present case, the test for reopening the 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 mate....
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....uld amount to reviewing the earlier decision. There has to be some relevant tangible material for the AO to come to the conclusion that there is escapement of income from assessment, and there must be a live link with such material for the formation of the belief. The reasons should also disclose due application of mind as reopening of the assessment proceeding is not an empty formality. On a perusal of the recorded reasons, we are not able to discern as to how the AO has come to a conclusion that there is a failure on the part of the Assessee in fully and truly disclosing all material facts for the purpose of the assessment. Though, the recorded reasons allude to an ostensible failure on the part of the Assessee to disclose fully and truly all material facts, however, the recorded reasons except 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. Techsp....
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....payable on which tax is deductable at source under Chapter XVII B but the same has not been deducted" appears to be based on the understanding that the provisions of Section 194 are attracted to EDC and, therefore, it is subject to withholding tax and consequently the provisions of Section 40 (a) (ia) of the Act would be attracted. Even if one were to ignore the provision of law quoted and relied upon by the AO, and we were to agree with the contention of Revenue that while exercising the power, the source may not be specifically referred to or if wrongly mentioned to, it would not render the exercise of such power to be invalid, yet, we are unable to fathom as to how the AO has arrived at the conclusion that EDC payment was subject to tax deduction at source. Revenue 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....
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....d its explanation which deals with rent and has been relied upon by the Revenue to contend that the definition of 'rent' is broad and would also envisage the payment of EDC and is subject to withholding tax. In support of this provision, Revenue has relied upon the observations of the Supreme Court in M/s New Okhla Industrial Development Authority (supra), the relevant portion whereof is reproduced herein below:- "The definition of rent as contained in the Explanation is a very wide definition. Explanation states that "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land. The High Court has read the relevant clauses of the lease deed and has rightly come to the conclusion 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 ....
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....one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. xxx xxx 12. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be exam....
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....9;ble Bombay High Court in the case of State Bank of India 411 ITR 664 wherein reassessment notice issued on claims accepted by the Assessing Officer at the time of original assessment proceedings was held to be change of opinion in the absence of any new facts or law with the Assessing Officer. 40. The Hon'ble Supreme Court in the case of Kelvinator of India Ltd 320 ITR 561 has clearly laid down the ratio that in the absence of fresh information /material coming to the possession of the Assessing Officer, reopening is not permissible. 41. Considering the totality of the facts in light of the judicial decisions discussed hereinabove, we do not find any reason to interfere with the findings of the ld. CIT(A). The reassessment is bad in law and, therefore, no interference is called for. 42. Since the very basis [assessment order] has been removed, we do not find it necessary to dwell in to the merits of the case. Therefore, the cross objections raised by the assessee have become otiose and accordingly, dismissed. 43. In the result, the appeal of the revenue in ITA No. 5173/DEL/2015 as well as the Cross Objections in CO No. 217/DEL/2018 are dismissed. The order is p....