2013 (2) TMI 318 - HC - Income Tax

Validity of notice u/s 148 Escaped assessment - Excessive relief - Re-opening of assessment Reason to believe - Reason of reopening the assessment that credit for TDS was wrongly allowed in the original assessment - Assessee had claimed credit for tax deducted at source on estimated basis as TDS certificates of this amount were not available with the assessee at the time of filing return - During assessment u/s 143(3), royalty income from Indian concerns was determined and TDS was allowed by the A.O. However, as the above income was not disclosed in the income tax return, TDS credit against this income should not have been allowed Held that - It is intended for the benefit of the assessee who had omitted to file the TDS certificate along with the return of income but subsequently produces the same before the A.O. within two years from the end of the assessment year in which the income relevant to the TDS is assessable, in which case the A.O. can amend the assessment order and grant the relief, invoking the powers u/s 154 None of the three clauses of the Explanation applies to case. Clause (a) speaks of no return having been filed; that is not the case here. Clause (b) speaks of a return having been filed without an assessment being made and the assessee had understated the income or has claimed excessive loss, deduction, allowance or relief in the return. This also is not the case here. Clause (c) has several sub-clauses and none of the situations applies to the petitioner s case. It cannot be so construed as to rope in cases where credit for TDS, which is a credit given against the tax payable and is not any allowance or deduction or loss or relief against the income chargeable to tax was erroneously given. There is, therefore, no merit in the reasons recorded by the revenue for reopening the assessment - Notice quashed In favour of assessee

Issues Involved:
1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961.
2. Whether the income earned by the petitioner from satellite services is taxable in India as "royalty" under Section 9(1)(vi) of the Act.
3. Whether the credit for TDS was correctly allowed in the original assessment.

Detailed Analysis:

1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961:
The petitioner, a non-resident company based in Hong Kong, filed a return of income declaring "nil" income for the assessment year 2003-04. The assessment was completed under Section 143(3) of the Act, and the taxable income was determined at Rs. 64,99,26,627/-. The Assessing Officer issued a notice under Section 148 on 31.03.2010, alleging that income chargeable to tax had escaped assessment. The petitioner objected, arguing that the notice was issued after four years from the end of the assessment year and that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The court found that the reasons recorded for reopening the assessment did not demonstrate any failure on the part of the petitioner to disclose material facts and that the reasons could not be improved upon subsequently. The court held that the reopening of the assessment was invalid.

2. Whether the income earned by the petitioner from satellite services is taxable in India as "royalty" under Section 9(1)(vi) of the Act:
The petitioner provides satellite transponder capacity to its customers, and the income from these services was assessed as "royalty" by the Assessing Officer. The Tribunal had earlier held that the petitioner's receipts were in the nature of "royalty" as defined in Section 9(1)(vi) of the Act. The petitioner contended that their income was not in the nature of "royalty" and had filed an appeal before the High Court. The court noted that the petitioner had disclosed the fact that there was an adverse order of the Tribunal for an earlier assessment year and that they had not accepted the order and had filed an appeal. The court found that the petitioner had fully and truly disclosed all material facts necessary for the assessment and that the reopening of the assessment on this ground was not justified.

3. Whether the credit for TDS was correctly allowed in the original assessment:
The Assessing Officer had allowed credit for TDS of Rs. 2,11,16,426/- in the assessment order passed on 27.03.2006. The petitioner had filed the TDS certificates during the assessment proceedings, and the credit was given in an order passed under Section 154 of the Act on 26.06.2006. The court found that the petitioner had not claimed the TDS credit in the return of income but had filed an application for rectification after the assessment order was passed. The court held that the credit for TDS was correctly allowed under Section 155(14) read with Section 154 of the Act and that the reopening of the assessment on this ground was not valid.

Conclusion:
The court quashed the impugned notice issued under Section 148 of the Act and all proceedings consequent thereto. The writ petition was allowed with no order as to costs. The court held that the reopening of the assessment was invalid as the petitioner had fully and truly disclosed all material facts necessary for the assessment and the credit for TDS was correctly allowed.

← Previous Next →