2015 (10) TMI 824 - HC - Income Tax

Validity of reopening of assessment - taxation of advertisement and distribution revenue was to be governed by MAP resolution and the competent authorities of USA and India had agreed to an attribution of 10% of the total revenue generated from the said distribution and advertisement sales agreement to be treated as business income - Held that - A detailed questionnaire had been issued to the petitioner, which was duly replied to. As many as 38 queries had been raised and a detailed reply alongwith all annexures and supporting documents were furnished by the petitioner in response to the queries raised. The copies of the relevant agreements, the generation of income and the tax treatment given by the petitioner to the said income was duly disclosed to the assessing officer. The material based on which the reopening has been sought to be done by the department was available before the assessing officer at the time of the framing of the assessment under Section 143. Not only was the same before the Assessing Officer, the Assessing Officer has referred to the same in the Assessment Year and taken note of the same. Thus on perusal of the reasons we find that no fresh information or material has been referred to in the reasons recorded for seeking to reopen the assessment. The material that is referred to is the very same material that was already before the Assessing Officer at the time of framing of the assessment under Section 143 (3) of the Act and even the reasons record that from the perusal of the assessment record, it is observed that . This clearly shows that the assessing officer has sought to re-appreciate the material that was already there at the time when the assessment was framed under Section 143 (3). Thus, as seen from above, it is clearly a case of change of opinion, which is clearly not permissible. AO has merely intended to revisit the concluded assessments - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening assessments under Sections 147/148 of the Income Tax Act.
2. Application of the MAP resolution for determining taxable income.

Issue-Wise Detailed Analysis:

1. Validity of Reopening Assessments under Sections 147/148 of the Income Tax Act:

The court examined the legality of reopening the assessments for the assessment years 2007-08 and 2008-09. The petitioner challenged the notices issued under Sections 147/148, arguing that the reopening was based on a mere change of opinion, which is not permissible under the law.

The court noted that the Assessing Officer had issued detailed questionnaires during the original assessments, to which the petitioner had duly responded, providing all relevant documents and agreements. The material based on which the reopening was sought was already available with the Assessing Officer during the original assessment under Section 143(3).

The court referenced the Full Bench decision in *Commissioner of Income Tax Versus Usha International Ltd.*, which laid down that reassessment proceedings are invalid if the issue was raised and decided in favor of the assessee in the original assessment. The court also cited *Jindal Photo Films Ltd. Versus Deputy Commissioner of Income-tax*, emphasizing that reassessment cannot be initiated merely because the Assessing Officer forms a different opinion based on the same set of facts.

The court concluded that the reopening of assessments was based on reappreciation of the same material that was considered during the original assessment, amounting to a change of opinion, which is impermissible. Therefore, the notices and orders for reopening the assessments were quashed.

2. Application of the MAP Resolution for Determining Taxable Income:

The petitioner, Turner Broadcasting Systems Asia Pacific Inc., derived income from granting exclusive rights to Turner International India Private Limited (TIIPL) to sell advertising and distribute products in India. The original assessments for the years in question were concluded based on the Mutual Agreement Procedure (MAP) resolution under Article 27 of the India-USA Double Taxation Avoidance Agreement (DTAA).

The MAP resolution, agreed upon by the competent authorities of India and the USA, determined that 10% of the total advertisement and distribution revenue earned in India was taxable as business income. The Assessing Officer, during the original assessments, adhered to this MAP resolution.

The court observed that the reasons recorded for reopening the assessments did not introduce any new material or information. Instead, they were based on the same facts and agreements that were already considered during the original assessments. The court emphasized that the MAP resolution was applicable for the relevant assessment years, and the Assessing Officer had correctly applied it during the original assessments.

The court held that the reopening of assessments on the grounds that the MAP resolution was only applicable for earlier years was unfounded. The Assessing Officer had already formed an opinion based on the MAP resolution, and seeking to reopen the assessments amounted to a change of opinion, which is not permissible.

Conclusion:

The court set aside the impugned orders and notices for reopening the assessments for the assessment years 2007-08 and 2008-09, declaring them invalid due to the impermissible change of opinion. The writ petitions were allowed, and the proceedings initiated pursuant to the impugned orders and notices were quashed. The parties were directed to bear their own costs.

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