TaxTMI 
TaxTMI 
2021 (4) TMI 541
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..... 2.1 Subsequently, proceedings u/s 147 of the Act were initiated by issuance of notice u/s 148 of the Act after recording of reasons. The first re-opening was initiated on 10.04.2008 which reached finality at the ITAT on 14.07.2017 whereas the second reopening was initiated on 24.02.2011. The case was reopened for the second time in view of the findings of the Hon'ble Delhi High Cour in the case of CIT vs. Idea Cellular Ltd. as reported in (2010) 325 ITR 148 (Delhi) that free time allowed to the distributors and roaming services provided to the customers fell within the ambit of section 194H and 194J of the Act and as such were liable for deduction of tax at source. Since, no tax had been deducted at source, disallowance in terms of section 40(a)(ia) of the Act were warranted. The assessee raised objections against the reopening of the case which were dismissed by the Assessing Officer. The re-assessment was completed after making a disallowance of Rs. 69,04,34,000/- which included disallowance of Rs. 51,82,86,000/- on account of discount in the shape of free air time and disallowance of Rs. 17,21,48,000/- on account of roaming and interconnection charges. 2.2 Aggrieved, the....
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....estricted only to transactions where no tax has been deducted at source at all. 4.4 Further, without prejudice, that the AO failed to appreciate that disallowance under section 40(a)(ia) of the Act was, in any case, not warranted, since non deduction of tax at source was on account of bona fide view taken by the appellant. 4.5 Further, without prejudice, that the AO failed to appreciate that disallowance under section 40(a)(ia) of the Act should have, if at all, been restricted to the amount remaining as payable as on the last date of the relevant previous year. 4.6 Further without prejudice, the learned CIT (A) has erred both on facts and in law in confirming the action of AO in applying the provisions of Section 40(a)(ia) of the Act ignoring the fact that the distributor has declared income in respect of the transactions of prepaid products and thus such income would have been subject to payment of income tax and the assessee would not be deemed to be an assessee in default under the proviso to sub-section (1) of Section 201. 5. That the learned C1T (A) has erred both on facts and in law in confirming the action of the AO in disallowing roaming....
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....y, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal." 3.0 The Ld. Authorized Representative (AR) submitted that this was the second time that the assessee's case had been reopened u/s 148 of the Act for the year under consideration. It was submitted that the original assessment u/s 143(3) of the Act was completed on 29.12.2006 which was rectified u/s 154 of the Act on 27.07.2007. The order of the Ld. CIT(A) against the assessment was passed on 10.12.2009 and subsequently, the appeal before the ITAT was disposed off vide order dated 24.01.2013. It was further submitted that in the meanwhile notice u/s 148 of the Act was issued for the first time on 10.04.2008 and the order u/s 147 read with section 143(3) of the Act was passed on 30.10.2009 and the assessee's appeal was decided in its favour by the Ld. CIT(A) vide order dated 02.09.2013. It was further submitted that the Department's appeal against order of the Ld. CIT(A) was decided in favour of the assessee by the ITAT vide order dated 14.07.2017. It was submitted that in these proceedings u/s 148 of the Act, the issue was disallowance of software expenses. The Ld. AR further submitted that ....
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....numerous judicial precedents in support of his contention that if there is no failure on the part of the assessee as contemplated by the first proviso to Section 147 of the Act and where there has been no suppression of primary facts, initiation of reassessment proceedings would be bad in law. The Ld. AR reiterated that merely having a reason to believe that income had escaped assessment is not sufficient to reopen the assessment beyond a period for four years if there has been no failure on the part of the assessee to disclose material facts fully and truly. 3.2 The Ld. AR also pointed out that while invoking the provisions of Section 147, the Assessing Officer had placed reliance on the judgment of the Hon'ble Delhi High Court in the case of CIT Vs. Idea Cellular Ltd. as reported in (2010) 325 ITR 148 (Delhi) as was apparent from the assessment order itself, but reopening on the basis of such judgment cannot be treated as information for the purposes of reopening. It was submitted that as per provisions of Section 147, the Assessing Officer has to have 'reasons to believe' which should have a live link to the new information or knowledge which comes in the possession of the As....
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....Hon'ble Rajsthan High Court have held that such discounts were not liable to deduction of tax at source. The Ld. AR also referred to an order of the Delhi Bench in the case of Bharat Sanchar Nigam Ltd. in ITA No.920/Del/2017 wherein it was held by the Tribunal that in case of discount offered to prepaid distributors, the provision of Section 194H did not apply and, therefore, there can be no disallowance u/s 40a(ia) of the Act. Reference was also made to the judgment of Hon'ble Delhi High Court in the case of JDS Apparents as reported in 53 taxmann.com 139, wherein it had been held that section 40a(ia) itself is a penal consequence and the principles of doubtful penalization, which requires strict interpretation, will have to be applied to determine whether indeed a disallowance can be made u/s 40a(ia) of the Act. 3.5 It was also submitted that the assessee was under bonafide belief that tax was not to be deducted at source while making the impugned payments and, therefore, such an act under a bonafide belief would not warrant disallowance u/s 40a(ia) of the Act. It was submitted that on this count also, no fault can be attributed to the assessee for not having deducted tax at s....
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....f the case, the Ld. CIT-DR placed reliance on the orders of the lower authorities. 5.0 We have heard the rival submissions and have also perused the material on record. Before we proceed with the adjudication of the issue as to whether the jurisdiction u/s 147 of the Act was rightly invoked by the Assessing Officer or not, it would be worthwhile to reproduce the reasons recorded. They are reproduced as under: "Return of income in this case for A.Y. 2004-05 was filed on 01/11/2004 declaring Nil income. The same was assessed u/s 143(3)/154 of the I.T. Act at Nil income on 27/07/2007. Further, assessment u/s 143(3)/147 of the I.T. Act was also made in this case on 30/10/2009 at Nil income after setting off brought forward losses to the tune of Rs. 2,92,59,37,829. An information in this case was received from DCIT(TDS), Circle-57, Kolkata vide his letter no. DCIT(TDS)/Circle-57/194H/10-l 1/1139 dated 16/12/2010 that the assessee company has paid Rs. 32,60,471 in the form of discount to it's franchises/distributors without effecting TDS u/s 194H of the I.T. Act. Hon'ble ITAT, B-Bench Kolkata in it's order in ITA Nos. 1678 & 1679 (Kol) of 2005 (unreported) has held t....
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....aped assessment within the meaning of section 147 of the I.T. Act and it is a fit case for the issue of notice u/s 148 of the I.T. Act. Notice u/s 148 of the I.T. Act will be issued after taking approval of the Commissioner of Income Tax, Delhi u/s 151(1) of the I.T. Act." 5.1 It is undisputed that the in the present case, the impugned notice was issued after four years from the end of the relevant assessment year. A perusal of the reasons, as reproduced above, would also show that the case was reopened in view of the judgment of the Hon'ble Delhi High Court in the case of Idea Cellular Ltd. (supra) that free time allowed to the distributors and roaming service provided to the customers come within the ambit of section 194H and 194J respectively and as such are liable for deduction of tax at source. Reference has also been made by the Assessing Officer to an information having been received from the DCIT (TDS) Circle-57, Kolkata regarding payment by the assessee company in form of discount to its distributors without deduction of tax at source u/s 194H of the Act. Reference has also been made in the reasons to an order of the Kolkata Bench of ITAT wherein it had been he....
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....ssessment order under Section 143(3) of the Income Tax Act, 1961 it was settled legal position by various judicial precedents that the provisions for deduction of tax at source were not applicable in respect of discounts and roaming charges. 5.3 It is trite that in order to reopen an assessment made under Section 143 (3) of the Act after the expiry of four years from the end of the relevant assessment year, the reasons recorded must allege that there was failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment. Such allegation is necessary since it is a condition precedent to the assumption of jurisdiction. In the absence of such allegation, the reassessment proceedings have to be held as without jurisdiction. 5.4 We note that at the time when the assessee's assessment was completed, the law as it stood was that there was no liability to deduct tax at source in respect to discount and roaming charges. Therefore, in our considered opinion, there cannot even be an allegation of failure to disclose fully and truly any material fact necessary for assessment. Reliance by the Revenue on the judgment of the Hon'ble Supreme Court ....
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.... fully and truly any material fact, has even been alleged. Learned counsel for the respondents relied on the law as decided by the apex court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 for showing that this court, at this stage of issuance of notice, is not to assess the correctness or sufficiency of materials. But this contention cannot be accepted as at this stage not the correctness or sufficiency of the materials but the very existence of the allegation is being considered and that is within the power of the court when the notice is challenged." "But in the present case the respondents have failed to show that the second condition was satisfied at all. Therefore, in such circumstances, I am of the opinion that in the absence of satisfaction of one of the statutory requirements as contained in Section 147, the notices impugned under Section 148 cannot be held to be valid as they were issued after the expiry of four years from the last date of the concerned assessment year and there was an assessment under Section 143(3) in respect of the assessee." 5.6 Similarly, the Bombay High Court in the case of Titanor Components Ltd. vs. ACIT, as reporte....