2018 (3) TMI 803 - HC - Income Tax

Reopening of assessment u/s 147 - notice is admittedly beyond the period of 4 years from the end of the relevant Assessment Year - Petitioner failed to bring to the notice of the Assessing Officer the application of Section 79 - Held that - The Petitioner had by letter dated 22.11.2012 given details as called for in the format specified along with annual return filed with the Registrar of Companies. Thus the change in the shareholding pattern in two Assessment Years in the required format was forwarded to the AO. Prima facie there was complete disclosure of all facts by the Petitioner in respect of the change in shareholding pattern during the assessment proceedings. The grievance of the Revenue that the Petitioner failed to bring to the notice of the AO the application of Section 79 is a question of application of law and has nothing to do with the obligation as the Assessee makes full and true disclosure of all facts during the regular assessment proceedings. If all facts are truly and fully disclosed then reopening notice beyond the period of four years is barred by virtue of proviso to Section 147. Thus prima facie the first ground is not sustainable. Payment made in foreign exchange to players for performance in India during the previous year without having deducted tax at source - Held that - So far as the second ground we note that it proceeds on the fundamental erroneous basis that the relevant previous year subject to the Assessment Year 2010-2011 Indian Premier League was performed in India when in fact it has admittedly played in South Africa and not in India. During the assessment proceedings the Assessee was called upon by letter dated 6.11.2012 to give details of all expenses along with TDS if applicable. The Petitioner in response on 22.11.2012 had given complete details of expenses during the relevant previous year to the subject assessment year 2010-11. Further by the letter dated 6.12.2012 the Petitioner gave complete list of players to whom payment was made in the subject Assessment Year and also extracts of the ledger account along with the agreements entered into with the players. AO did not at that point of time disallow any expenditure on account of non-deduction of TDS to foreign players for services rendered in South Africa. This acceptance by AO at that time seems to be supported by Section 115BBA of the Act. Full and true disclosure of all facts relating to the payments made to foreign players who performed in South Africa. Thus on this ground also the impugned notice is not prima facie sustainable. Thus the impugned notice is without jurisdiction. Accordingly there shall be interim stay in terms of prayer clause (c)

Summary

Issues:
1. Challenge to notice issued under Section 148 of the Income-Tax Act, 1961 for reopening assessment for the Assessment Year 2010-2011.
2. Alleged failure to disclose all material facts necessary for assessment.
3. Grounds for reopening assessment: (A) Change in shareholding pattern, (B) Payment made in foreign exchange to players without deduction of tax at source.

Analysis:
1. The petition challenged a notice issued under Article 226 of the Constitution of India, seeking to reopen the assessment for the Assessment Year 2010-2011 beyond the 4-year period. The notice was based on the alleged failure to disclose all material facts necessary for assessment, specifically related to the change in shareholding pattern and payment made in foreign exchange to players.

2. Regarding the change in shareholding pattern, it was found that the petitioner had provided details as requested by the Assessing Officer during the assessment proceedings. The petitioner had submitted the required information in the specified format, including details of shareholders for the relevant years. The court noted that if all facts were truly and fully disclosed during the regular assessment proceedings, the reopening notice beyond the four-year period would be barred by law. The court emphasized that the duty of the assessee is to make full disclosure of all primary facts, not to provide legal inferences.

3. Concerning the payment made in foreign exchange to players, it was observed that the assessment proceedings had already included complete details of expenses and payments made to foreign players. The petitioner had provided a list of players, ledger accounts, and agreements related to the payments. The Assessing Officer had not disallowed any expenditure at that time, indicating prima facie full and true disclosure of all relevant facts. The court found that the notice was not sustainable on this ground as well.

4. In conclusion, the court held that the impugned notice was without jurisdiction, leading to an interim stay in favor of the petitioner. The court's analysis focused on the requirement of full and true disclosure of primary facts by the assessee during assessment proceedings to prevent reopening notices beyond the statutory period.