2022 (2) TMI 706 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued after the expiry of four years from the end of the assessment year - allowability of franchisee fee paid by petitioner to BCCI as revenue expenditure - HELD THAT - To a specific query raised by respondent no.1, petitioner by its said letter dated 17th November 2014 also submitted a statement received from the BCCI for sharing of the central rights income which was to be shared with petitioner, wherein BCCI adjusted the amount that was payable by petitioner to BCCI on account of IPL played during the year and thereafter, paid the balance amount to petitioner. Final appeal has been disposed by ITAT vide its order pronounced on 2020 (12) TMI 1058 - ITAT MUMBAI holding that the franchisee fee paid by petitioner to BCCI was revenue expenditure and directed the Assessing Officer to delete the addition. All figures were all available before the AO, who has considered the same and after applying his mind, passed the original assessment order dated 26th March 2015. Therefore, in our considered view, the reason to reopen on change of opinion, which as held by this Court, the Apex Court and many other Courts, is not permissible. We will have to hold that the AO had in his possession all primary facts and it was for him to make necessary enquiries and draw proper inference, which he did. AO had all materials facts before him when he made the original assessment. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. Even if the AO who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings. Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice dated 31st March 2019 under Section 148 of the Income Tax Act, 1961.
2. Legality of the order dated 22nd November 2019 for reassessment.
3. Application of proviso to Section 147 of the Income Tax Act.
4. Disclosure of material facts by the assessee.
5. Permissibility of reopening assessment based on change of opinion.
6. Consideration of primary facts by the Assessing Officer.
7. Competency of the Assessing Officer to reopen assessment proceedings.

Analysis:
1. The petitioner challenged a notice dated 31st March 2019 and an order dated 22nd November 2019 under the Income Tax Act, 1961. The notice was issued after the completion of assessment under Section 143(3) for the assessment year 2012-2013, invoking the proviso to Section 147, requiring the respondents to demonstrate failure by the assessee to disclose material facts.

2. The reasons for reopening indicated a change of opinion without specifying any undisclosed material facts by the petitioner. The Assessing Officer's basis for reopening was the alleged non-consideration of exchange rate in payments to BCCI, resulting in an alleged escapement of income. However, the petitioner had explained the nature of payments and provided relevant documents during scrutiny assessment.

3. Both the petitioner and BCCI were Indian entities, and payments were to be made in rupees, as confirmed by BCCI. The Assessing Officer's query during scrutiny assessment regarding the nature of franchisee fee and subsequent proceedings indicated that all relevant details were available and considered before the original assessment.

4. The High Court emphasized that reopening assessments based on a change of opinion, when all primary facts were disclosed during the original assessment, was impermissible. The Assessing Officer, having all necessary facts before him, was not entitled to reassess based on a different interpretation of the same material.

5. Consequently, the High Court quashed the notice dated 31st March 2019 and the order dated 22nd November 2019, as the Assessing Officer lacked the authority to reopen the assessment proceedings based on the same set of disclosed primary facts. The petition was disposed of in favor of the petitioner.