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TMI Blog2015 (4) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profit and loss account and not disallowed it. The facts and which are taken from the director's report itself would indicate that the Assessee had disclosed what was relevant and necessary for the purpose of making assessment. The Assessee did not hold back any document nor failed to supply any information in addition to the explanation given by it in writing concerning the said management fees expenses. In the circumstances, this is a clear case of change of opinion and based on which, the reassessment is proposed. That being impermissible in law, the Writ Petition must succeed - Decided in favour of assessee. - Writ Petition No. 2959 of 2015 - - - Dated:- 26-3-2015 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Appellant : Mr Mihir C Naniwadekar For the Respondents : Mr Tejveer Singh Mr A R Malhotra JUDGMENT (Per S. C. Dharmadhikari, J.) Rule. Respondents waive service. 2. Since Mr. Tejveer Singh appearing for the Respondents, upon service of notice, informed the Court that the Respondents do not wish to file any affidavit and admit the factual statements and assertions in the Writ Petition that by consent Rule is made returnable forth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;E' and 'F'. 8. Thereafter, a notice was issued under section 154 of the IT Act (Annexure 'G') dated 19th June, 2012. The details of the alleged mistake proposed to be rectified were made available to the Assessee by letter dated 6th July, 2010. The alleged mistake was stated to be that of the management fees and taken to be allegedly capital in nature. A detailed reply was filed to this notice by the Petitioner on 10th July, 2012 (Annexure 'I'). The Petitioner hoped that with this reply/clarification, the matter must have been closed by the Revenue. However, impugned notice was issued dated 30th March, 2014 (Annexure 'J'). That notice was received only on 2nd April, 2014. The reasons recorded for reopening were supplied on demand by letter dated 9th February, 2015 (Annexure 'K'). 9. It is the Petitioner's case that neither the notice nor the reasons record that the necessary sanction has been accorded for the reopening by the superior authorities, as mandated by law. Hence, there is a clear defect going to the root of the matter and the notice is without jurisdiction. Then, on the reasons supplied, the Petitioner raised objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te details which were provided under the heading US contact center acquisition. How the payments were accounted for has been truly and fully disclosed. Beyond this, there is no requirement in law and the Assessee cannot be expected also to indicate as to how this matter has to be appreciated and considered. This is a clear case where the Revenue is having another opinion and therefore reopening is not permissible on such ground. Mr. Naniwadekar also invites our attention to the order rejecting the objections and particularly para 4 thereof, wherein, the finding is that the Assessee failed to make full and true disclosure of facts in the sense it has distorted facts as per its convenience. Such a finding does not suffice in law and in that regard, our attention is also invited to a para of the director's report at page 31. Mr. Naniwadekar submits that Respondent No. 2 copies the features of the acquisition of U. S. centers and as contained in this director's report. Based on all this, no reopening is permissible is the submission of Mr. Naniwadekar. He relied upon the two Judgments delivered by this Court, one in the case of Bombay Stock Exchange Ltd. vs. Deputy Director of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 142 of the paper book. We have noted, on several occasions, that notices of this nature are issued in a standard format and often the officers merely fill in the blanks or tick mark whatever is applicable. We would highly appreciate if the department draws a notice not in this format, but something by which it would be clear in indicating to the Assessee as to why section 147 of the IT Act has been resorted to. The notice at page 142 reads as under: NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 No. PN/DCIT Circle 1(2)/148/201314/ Office of the Dy. Commissioner of IncomeTax, Circle1(2), PMT Building, 2nd floor, Room No. 204, Swargate, Pune-411037 Date: 30.03.2014 To, The Principal Officer, Tata Business Support Services Limited, Survey No. 15, Marisoft III, Kalyani Nagar, Marigold, Pune - 411 014. PAN: AABCT9406B Sir/Madam, Where as I have reason to believe that income chargeable to tax for the assessment year 200708 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. I, therefore, propose to assess/reassess the income for the said A. Y. 200708 recompute/ loss of the I. T. Act, 1961 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence could be discovered with due diligence is not what is sufficient. The Assessee must disclose fully and truly all material facts necessary for his assessment. In the present case, it is alleged that the Assessee has failed to disclose fully and truly all material necessary for the assessment, for that assessment year. However, the reasons for reopening the assessment at page 144 of the paper book read as under:- REASONS FOR REOPENING OF ASSESSMENT IN THE CASE OF Tata Business Support Services Pvt. Ltd. A. Y. 2007-08 PANAABCT9406B The return of income for A. Y. 2007-08 on 31/10/2007 declaring loss of ₹ 13,13,16,597/-. The scrutiny assessment has been completed on 14.12.2009 accepting the loss. On going through the profit and loss account it is noticed that the assessee has debited ₹ 984.80 lakhs as management fees. Further, it was noticed from the notes of accounts that the assessee has paid the management fees under the shared service agreement for acquisition of two US contact center from TRX Inc., USA. The Assessee has taken over the business along with the employees and the two centers became branch operation from April 1, 2006. The amount has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatures of this agreement and as contained in further documents, namely, director's report, balance sheet and notes to the balance sheet have been produced. What the Revenue then expects the Petitioner/Assessee to produce has not been clarified or explained to us at all. If these are not facts and material for the purpose of assessing as to whether the loss indicated and under this head has been so suffered, then, what more is required to be produced and with the aid of which document or material should have been indicated with sufficient clarity. In the present case, unless this material so produced was expressly referred and considered, it was not possible to reason out as above. Now what emerges from paras 2 and 3 of the reasons is that this expenditure ought to have been treated as capital, but has not been so treated. Then, there is a mechanical reason as to how the Assessee did not disclose all material facts. The law postulates reassessment for failure to disclose fully and truly all material facts. We do not see how the first sentence that the Assessee did not disclose all material facts at the time of assessment would suffice in the given circumstances. Then, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. The first proviso to this section refers to non disclosure of material facts truly and fully. As to what facts are material and disclosure of which is not true and full depends upon circumstances in each case. No general rule can be laid down. However, the crucial words are failed to disclose fully and truly all material facts . The satisfaction about this is mandated and non disclosure thereof permits resorting to the power under section 147. Thus, the principle requisite is that any income chargeable to tax has escaped assessment and for the relevant assessment year and reopening of which is a discretion vested in the Assessing Officer. That can be exercised even after expiry of four years, but then, the requirement of the first proviso has to be satisfied. From the first proviso, it is evident that the Assessee cannot urge that he had produced before the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect and inaccurate. There is no denial of the fact that when the case was selected for scrutiny, not only did the Petitioner give a detailed note on the nature of business, but with regard to every single heading in its balance sheet and profit and loss account. It produced the necessary enclosures. On 11th October, 2010, a departmental audit party raised objection and the audit query was brought to the notice of the Petitioner. The Petitioner responded to the same as well. Then, notice under section 154 of the IT Act has also been issued. It is thus apparent that when the assessment order was passed and which clearly refers to all the material supplied, then, this observation and conclusion is erroneous to say the least. At page 19 of the Petition paper book, there is a letter dated 16th July, 2009 addressed by the Assessing Officer to the Petitioner's principal officer and which calls upon the Petitioner to file a detailed note on the nature of business. It also calls upon the Petitioner to furnish certain information and balance sheet and profit and loss account along with all annexures. The corresponding figures for financial year 200506 under each heading are also called ..... X X X X Extracts X X X X X X X X Extracts X X X X
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