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TMI Blog2014 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e full and true disclosure of the material facts is not satisfied and the re-opening cannot be permitted - The notice dated 30.03.2009 and all proceedings pursuant thereto including the impugned order dated 23.11.2009 are set aside - validity of assumption of jurisdiction u/s 147/148 and have not examined the merits of the matter as to whether the royalty payments were of a revenue or capital nature – Decided in favour of assessee. - W. P. (C) 13896/2009 and CM No. 15790/2009 - - - Dated:- 25-9-2014 - Badar Durrez Ahmed And Siddharth Mridul,JJ. For the Petitioner : Mr M.S. Syali, Senior Advocate with Mr Mayank Nagi, Mr Harkunal Singh, Mr Tarandeep Singh and Mr Tarun Singh For the Respondents : Ms Prem Lata Bansal, Senior Advocate with Mr Naman Nayak. JUDGMENT Badar Durrez Ahmed, J (Oral) 1. The notice dated 30.03.2009 under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as the said Act ) and the order dated 23.11.2009 rejecting the objections filed by the assessee are the subject matter of challenge in this writ petition which pertains to the assessment year 2002-03. 2. The assessment under Section 143(3) was completed and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary for the assessment, for that assessment year. Mr Syali, the learned senior counsel, appearing on behalf of the petitioner / assessee submits that in the present case, this pre-condition has not been met, inasmuch as, there has been no failure on the part of the petitioner / assessee to make a full and true disclosure of the material facts necessary for the assessment. He further points out that even in the reasons which have been supplied, it has not been indicated as to which material fact was not fully and truly disclosed by the assessee. He placed reliance on the decision in Haryana Acrylic Manufacturing Company v. Commissioner of Income Tax Anr : 308 ITR 38(Del) as well as on Microsoft Corporation (I) Pvt. Ltd v. Deputy Commissioner of Income Tax Anr: 357 ITR 50 (Del) and Bombay Stock Exchange v. Deputy Director of Income Tax: 2014 TIOL 961 - High Court Bombay, W.P.(C) No. 2468/2011. Mr Syali also place reliance on a recent decision of this court in the case of M/s Swarovski India Pvt. Ltd v. Deputy Commissioner of Income Tax, W.P.(C) 1909/2013 decided on 08.08.2014. 4. Mrs Prem Lata Bansal, Senior Advocate, who appears on behalf of the Revenue, contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 52,95,19,480/- approx. In view of the facts narrated above, there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and I have reason to believe that the income of the assessee to the extent of ₹ 52,95,19,480/- approx. has escaped assessment for which action u/s 147 of the I. Tax Act is to be initiated in the year under consideration i.e. A.Y. 2002-03. Since the assessment in this case was completed u/s 143(3) of I. Tax Act, and four years have also been elapsed from the end of the relevant assessment year, therefore, kind approval of the Commissioner, Delhi-V, New Delhi is solicited as per the provisions of Section 151(2) of I. Tax Act. to issue notice u/s 148 read with section 147 of the I. Tax Act. Submitted please. (R.K. Sharma) DCIT, Circle -13(1), New Delhi Add. CIT, Range-13,New Delhi. In view of the mistakes as indicated above, there is reason to believe that income has escaped assessment to the extent of ₹ 52.95 crores. As such kind approval for issue of notice u/s 148 of the Act may kindly be accorded. 6. In respect of the above reasons, Mr Syali submitted that first of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount which is reflected in the reasons referred to above. 7. According to Mr Syali, there is no non-disclosure of the fact that royalty to the extent of ₹ 70,60,25,973/- had been paid by the petitioner / assessee to its parent company in USA. The petitioner had claimed the entire amount as a revenue expenditure in the original assessment proceedings. He further submitted that this fact was very much under consideration of the Assessing Officer himself who had issued a questionnaire dated 31.08.2004. Point No. 8 of the questionnaire specifically dealt with royalty in the following manner:- 8. Furnish the details of royalty paid during the year and justify the same. In response to this question, details were submitted by the petitioner / assessee and the entire aspect of royalty has been discussed in the original assessment order dated 04.03.2005 in the following manner:- Royalty Payment: During the year assessee has claimed to have paid a sum of ₹ 70,60,25,973/- on account of royalty to M/s Oracle Corporation USA for duplicating sub-licensing of software to its customers. The assessee vide questionnaire dated 31.08.2004 was asked to justify the roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l decisions relied up on by the assessee. The objections raised by the assessee are discussed as under- (a) The objection raised that the reopening of the assessment proceedings is merely on the basis of change of opinion and the AO had enquired into the matter and was conscious about the fact that the royalty payment were revenue in nature, is not correct. The issue addressed by the AO was that whether the quantum of expenditure of royalty claimed by the assessee was fully allowable under Section 37 of IT Act, the same was claimed in excess. The AO had not addressed the issue of royalty being a capital expenditure as per provisions of section 32 of the IT Act and only depreciation is allowable to the assessee. (b) The submission of the assessee is not tenable. In form 3CEB, the column 9 reads as particulars in respect of transactions in intangible property which does not mean that the transaction required in this column are, not regarding to acquisition of intangible assets. (c) The submission of the assessee that the assessee had disclosed all the material facts and at the time of the recording reason for reopening the assessment there was no fresh material with the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated March 29, 2004, under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated March 2, 2005, are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. (underlining added) In Microsoft Corporation (I) Pvt. Ltd (supra) also this court observed as under:- From the above, it is evident that merely having a reason to believe that income had escaped assessment is not sufficient for reopening the assessment beyond the four year period referred to above. It is essential that the escapement of income from assessment must be occasioned by the failure on the part of the assessee to, inter alia, disclose material facts, fully and truly. If this condition is not satisfied, there would be a bar to taking any action under Section 147 of the said Act. (underlining added) Both these decisions were taken note of in M/s Swarovski India Pvt. Ltd (supra) wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rights in respect thereof and there was no acquisition of those rights other than the right to use the intangible assets in the knowhow. It was also the case of the petitioner / assessee that the entire payment by way of royalty was in the nature of revenue expenditure and this aspect had been examined and accepted by the Assessing Officer in the original assessment. Therefore, we find it difficult to agree with Mrs Bansal that the issue as to whether this payment was or was not in the nature of revenue expenditure had not been considered by the Assessing Officer during the course of the original assessment. In any case, we are not examining this case from the stand point of change of opinion but from the stand point of whether the assessee had made a full and true disclosure of material facts. There is no material which has been pointed out on behalf of the revenue which subsequently came to the knowledge of the revenue which was not already there in the original assessment proceedings. No new fact has emerged as a result of further or deeper examination of the existing documents or any other fresh material. Insofar as the assessee is concerned, it had disclosed all the material ..... X X X X Extracts X X X X X X X X Extracts X X X X
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