TaxTMI 
TaxTMI 
2023 (10) TMI 137
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....assessment can be reopened on change of opinion. 5. Petitioner, for the year under consideration, i.e., Assessment Year ("A.Y.") 2016-2017, carried on the business of operating and running a team in India Premium League, i.e., Kolkata Knight Riders. Petitioner filed return of income on 13th October 2016 declaring total income of Rs. 11,17,62,590/-. During the years Petitioner paid a sum of Rs. 3,04,85,970/- as management fees towards consultancy and team management fees. A sum of Rs. 1.90 crores was paid as consultancy fees to one Insignia Sports International Ltd. ("Insignia"). 6. During the course of assessment proceedings, Petitioner received various notices under Section 142(1) of the Act. In the notice dated 17th January 2018 under Section 142(1) of the Act petitioner was called upon to furnish in writing and verify in the prescribed manner information to justify the outward remittances to any non-resident (not being a company) or to a foreign company and in that regard also submit relevant 15CA and 15CB certificate. Petitioner replied through its Chartered Accountant's letter dated 29th January 2018 in which Petitioner provided details of the expenses that were incurred....
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....ade available and relevant portion reads as under: "Audit scrutiny of the assessment records including the Financial Statements for the relevant Previous Year (PY) showed that the assessee had claimed a total amount of 31480970/- as consultancy and team management fees. Out of this, an amount of 1,90,00,000/- pertained to payment to a foreign entity, namely, Insignia Sport International Ltd., an entity based in United Kingdom. As per the submission of the assessee, no tax was deducted on this payment as per the provisions of the Act sated above. This non deduction of tax made this amount ineligible for deduction as per section 40(a)(i) of the Act quoted above. The tax effect on 1,90,00,000/- worked out to 65,75,520/- @30 percent tax, 12 percent surcharge and 3 percent cess." 11. Petitioner replied vide letter dated 25th March 2023. Petitioner's objections were rejected and an order dated 30th March 2023 under Section 148A(d) of the Act came to be passed followed by the impugned reassessment notice also dated 30th March 2023 u/s 148 of the Act. 12. Mr. Mistri submitted that the subject matter of the information, i.e., payment to Insignia and non deduction of TDS was a....
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.... crores paid to Insignia ineligible for deduction and the tax effect on that would work out to approximately Rs. 66 lakhs. Mr. Bajpayee further submitted that this issue was not discussed in the assessment proceedings. 16. In our view Mr. Mistri's submission have to be accepted. This is because the law as held in Siemens Financial Services (supra) is clear that reopening of assessment is not permissible based on change of opinions as the AO does not have any power to review his own assessment when during the original assessment Petitioner has provided all the relevant information which was considered by the AO before passing the assessment order under Section 143(3) of the Act. This would be their position even if there is an audit objection. Paragraphs Nos. 34 to 39 of Siemens Financial Services Pvt. Ltd. (supra) reads as under: "34 On the facts of this case, as regards change of opinion, the information made available is the same reason to believe. If one considers it clearly, it indicates change of opinion. Paragraphs 2 to 6 of the information read as under: "2. Brief details of information collected/ received by AO: On perusal of the records it I noticed th....
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....s of escapement of income: In view of the finding of AO (as mentioned in para 5 above), I have a reason to believe that the Income chargeable to tax of Rs. 2,56,75,172/-, has escaped assessment under the meaning of section 147 of the Income tax Act, 1961. The AO has carefully applied his mind to the facts and circumstances of the case. The information in possession of the AO gives a substantial basis for the formation of a reason to believe to initiate re-assessment u/s. 147 of the Income Tax Act, 1961." 3.5 During the course of assessment proceedings, notice had been issued to petitioner. In reply to the notice under Section 143(2), petitioner had by its letter dated 6th December 2018 recorded, "......... based upon our discussion during the course of the hearing ..................". The transaction wise summary of the software consumable was made available. This was considered during the assessment proceedings and the assessment order accepting revised return came to be passed. 36. We would agree with the submissions of Mr. Pardiwalla that if change of opinion concept is given a go by, that would result in giving arbitrary powers to the Assessing Officer to reop....
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.... record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment." 37. The Assessing Officer does not have any power to review his own assessment when during the original ....
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...."change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4- 1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer............." 39. The Delhi High Court in Seema Gupta v. ITO 18 held that the order under section 148A(d) and notice under section 148 of the Act should be set aside when the reassessment was initiated on a change of opinion where the same was discussed and verified by the Assessing Officer at the time of original assessment procee....