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TMI Blog2019 (10) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... as escaped assessment by reason of failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year. Onus is on Revenue to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year and in the instant case, Revenue has failed to discharge this onus. When it is not the case of the Revenue that there was failure on the part of the assessee to disclose all material facts fully and truly, Revenue cannot violate the statutory protection enjoyed by the assessee under proviso to section 147 of the Act. Statutory protection enjoyed by the assessee under proviso to section 147 of the Act was wrongly violated by Revenue. Therefore, we dismiss all the grounds of appeal in this appeal filed by the Revenue, and hold that the assumption of jurisdiction u/s 147 and initiation of proceedings u/s 147 r.w.s. 148 of the Act was erroneous in law For Coming to this conclusion, we take support from the order of the Hon ble jurisdictional High Court in the case of Bharti Infratel Limited vs. DCIT [ 2019 (1) TMI 1072 - DELHI HIGH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2.1) Fresh Assessment Order U/s 147 / 143(3) of I.T. Act was passed on 19.12.2011 wherein the income of the assessee was assessed at ₹ 2,54,32,275/- as under: Income assessed U/s 143(3) 87,27,232 Less relief allowed by CIT(A) vide order 12,94,957 74,32,275 Add: Franchisee fee treated as capital 1,80,00,000 (As discussed above) 2,54,32,275 (2.2) Aggrieved, the assessee filed an appeal before Commissioner of Income Tax (Appeals)-XII, New Delhi. Vide order dated 18.06.2012, the Ld. CIT(A) quashed the reassessment proceedings U/s 147/148 of I.T. Act. Relevant portion of the order of Ld. CIT(A) is reproduced as under: . . A notice under section 148 was served upon the assessee on March 22, 2011. The Assessing Officer has recorded the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessed Assessing Authority 1. 2003-04 1925606 1925606 u/s 143(1) ITO, W-9(4) 2. 2004-05 24000000 24000000 u/s 143(3) ITO, W-9(4) 3. 2005-06 24000000 24000000 u/s 143(1) DCIT, Cir. 9(1) 4. 2006-07 24000000 24000000 u/s 143(3) Addl. CIT, R-9 5. 2007-08 24000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 9.1.09. The Revenue s appeal being ITA No.56/2009 has been dismissed by a detailed order of a Division bench, after examining the relevant clauses of the then agreement It has been held that the royalty- paid was, in fact, revenue and not capital expenditure. It has been stated that this decision has been accepted by the Revenue. We fail to understand why, despite this matter being settled in the previous assessment yers, the Revenue feels compelled to stil up the same dispute in subsequent assessment years. 15. In view of the aforesaid discussion, we are clearly of the view that the present case falls in the category of change of opinion as at the time of original proceedings the Assessing Officer examined and gone into the question of royalty. Even if there was any legal error or illegality the same cannot be rectified and be made the subject matter of reassessment proceedings u/s. 147/148 of the Act. The Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. (2010) 2 SCC 723 has observed as under :- 5. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct^ Tax Laws (Amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. No costs. In view of the above facts and case laws cited above ground No. 1 to 4 regarding the re-assessment proceedings u/s 147/148 are hereby quashed. (2.3) The present appeal before Income Tax Appellate Tribunal, ( ITAT , for short) has been filed by Revenue against the aforesaid impugned order dated 18.06.2012 of Ld. CIT(A). In the course of appellate proceedings in ITAT, a Paper Book and a case laws compilation was filed from assessee s side, containing following particulars; 1. Written submissions filed before the Hon ble Commissioner of Income Tax (Appeals)-XII, New Delhi for Assessment Year 2004-05 on 08.05.2012. 2. Copy of letter dated 8th May, 2012 for admission of additional Ground under Rule 46A of the Income Tax Rules, 1961 for assessment year 2004-05. 3. Copy of Remand Report dated 05.06.2012 sent by the Income Tax Officer, Ward 9(4), New Delhi to the Hon ble Commissioner of Income Tax (Appeals)-XII, New Delhi. 4. Copy of Reply of Remand Report dated 05.06.2012 filed before the Hon ble Commissioner of Income Tax (Appeals)-XII, New Delhi on 15th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Copy of Notice issued u/sec. 142(1) dated 13.12.2011 along with notice u/sec. 143(2) dated 13.12.2011 for assessment year 2004-05 fixing the date for 19.12.2011. 20. Reply of M/s Superior Films Pvt. Ltd. dated 19.12.2011 against notices received u/sec. 142(1) 143(2) of the Act. 21. Copy of Assessment Order M/s Superior Films Pvt. Ltd. for assessment year 2004-05 u/sec. 147143(3) of the Act dated 19.12.2011. 22. Statement showing income tax Assessment status of M/s superior Films Pvt. Ltd. from assessment years 2003-04 to 2009-10 (section wise and year-wise) 23. Copies of Returns of Income, copies of Audited Statement of Accounts vis- -vis Balance Sheets and Profit Loss Account of M/s Superior Films Pvt. Ltd. for assessment year 2005-06 to 2009-10 and assessment order u/sec. 143(3) of the Act whenever passed. 24. Statement showing Income Tax Assessment Status of M/s Satyam Cineplexes Ltd. from Assessment year 2003-04 to 2009-10 (section-wise and year-wise) 25. Copies of Returns of Income, copies of Audited Statement of Accounts vis-as-vis Balance Sheet, Profit L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 2.40 crores paid by the appellant company to M/s Satyam Cineplex Limited (in short hereafter be referred as SCL ) as Capital Expenditure as against the claim of the appellant company as Revenue Expenditure . The payment of franchise fee so paid by the appellant company to SCL was for the use of superstructure of Multiplex Cinema Building constructed by SCL on the land owned by the appellant company (SFPL) and for the use of installed plant and machineries for exhibition of films, installed furniture and fixture including sitting chairs, installed A.C. Plant and interior designing etc for a period of 7 years commencing from 20th Dec., 2002 on payment of business consideration of the Franchise Fee in terms of Clause No. (ii) of the Agreement dated 20.12.2002 - Copy of Agreement attached herewith from page No. 12 to 15 of the paper book. By treating the said payment as capital expenditure, he allowed depreciation thereon of ₹ 60.00 lacs as depreciation and made a net addition of ₹ 1.80 crores. In connection to the above, we wish to place on record the past brief history of the appellant company for your honour's kind consideration:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to provide them the copy of reasons recorded by him for the reopening of assessment. On 29th June, 2011, the appellant company was provided the copy of reasons so recorded by the learned Assessing Officer for initiation of proceedings u/sec. 147 of the Act. Copy thereof is enclosed herewith on page No. 79 to 80 of the paper book. However, the for sake of brevity, the same are being reproduced hereinunder:- In this case it has been noticed that the assessee has claimed and was allowed franchise fee of ₹ 2,40,00,000/-. The franchise fee being of capital nature was not allowable and should have been disallowed and added back to the income of the assessee after allowing depreciation at the rate of 25% amounting to ₹ 60,00,000/- and balance amount of ₹ 1,80,00,000/- should have been added back to the income of the assessee Madam, on perusal of the reasons so recorded by the learned Assessing Officer, it was observed that the learned Assessing Officer intend to treat the Franchise Fee of ₹ 2.40 crores paid by the appellant company for the year under reference to SCL as capital exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, reliance is placed by us on the decision of the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. Vs. CIT (1991) 187 ITR-688 and N.T.P.C. vs. Cit (1998) 229 ITR-383 (SC). Copies of both the judgments are enclosed herewith from page No.308 to 315 of the paper book. Madam, during the reassessment proceedings, keeping in view the reasons recorded for the reopening of the assessment, the company submitted the copy of Franchise Agreement dated 20th Dec., 2002 entered into by the appellant company with SCL in support of the Franchise Fee of ₹ 2.40 crores paid by it to SCL . Copy thereof is attached herewith from page No. 12 to 15 of the paper book. Copy of the said Agreement was attached with a detailed note on justification for allowability of payment of Franchise Fee as Revenue expenditure was also submitted before the Assessing Officer on 19th Dec., 2011. Copy enclosed herewith on page No. 83 to 86 of the paper book. These two documents were also filed during the course of original assessment proceedings before the then learned Assessing Officer on 29.08.2006. Copy enclosed herewith from page No. 42 to 43 of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of original assessment for assessment year 2004-05, there was no justification for the learned Assessing Officer to take a different view in the matter for the reopening of assessment u/sec. 148 of the Act, which in the instant appeal had erroneously been taken by the learned Assessing Officer by issuance of notice u/sec. 148 of the Act which is not sustainable in law. In this connection the appellant rely on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT 193 ITR-321( SC) where it was held that: Strictly speaking res judicata does not apply to income tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply i8n the following year, where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be change in the subsequent year. On consistency issue, reliance is also placed on the decision of the Hon'ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We mush also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after April, 1, 1989, the Assessing Officer has power to reopen, provided there is tangible 'material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Director Tax Laws (Amendment), Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements, your honour will kindly appreciate that in the assessment of the appellant company as well as of SCL for succeeding assessment years, the said payment of Franchise Fee have been assessed as Revenue Expenditure and revenue receipt respectively where the assessments was completed u/sec. 143(3) of the Act. Since the appellant company had fully disclosed all the details in respect of payment of Franchise Fee during assessment year 2003-04 and 2004-05 i.e. the original assessment and also in the subsequent assessment year where assessments were completed u/sec. 143(3) of the Act, the claim of expenditure has been allowed as Revenue Expenditure , therefore, there is no need for disturbing the admitted position of law. Under these circumstances and in view of the principle of consistency as explained hereinabove, the appellant respectfully pray to your honour that reassessment order passed by the learned Assessing Officer u/sec. 147 / 143(3) of the Act may kindly be quashed and annulled. Madam, in the instant appeal, the appellant company, as explained hereinabove, had fully complied with the requirement of law by giving complete details and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) CIT vs. Essel Propeck Ltd. (2011) 237 CTR (Bom)-395. Copies of both judgements are enclosed herewith from page No.316 to 322 of the paper book. Written submissions from Revenue s side: Sub: Written Submission in the above cse- reg. In the above case, it is humbly submitted that the following decisions may kindly be considered 1. Yuvrai v. Union of India [315 ITR 841 ISC) where Hon ble Supreme Court held that points not decided while passing assessment order under section 143(3) was not a case of change of opinion. It was held that assessment was reopened validly. 2. It was held in the following judgements also that when there is no discussion on the issue in the assessment order and no details were called for by the Assessing Officer or filed by the assessee on the issue, no finding either positive or negative was arrived at during the course of the original assessment proceedings there is no question of change of opinion:- i) A.L.A. Firm Vs CIT (Mad) 102 ITR 622 ii) Ess Kay Engineering Co. (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) We have heard both sides. We have perused the materials available on record, carefully. We have also considered the judicial precedents brought to our attention, at the time of hearing or referred to in the materials on record. We find that notice U/s 148 of I.T. Act was issued, thereby reopening the assessment, on 22.03.2011 which is more than 4 years after 31.03.2005 (i.e. more than 4 years from end of the Assessment Year 2004-05 with which we are concerned in this appeal). Therefore, the case of the assessee is covered by proviso to section 147 of I.T. Act. For ease of reference, the provisions of section 147 of I.T. Act are reproduced as under: [ Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153,, assess or reassess such 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 ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or relief in the return ; [( ba ) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] ( c ) where an assessment has been made, but- ( i ) income chargeable to tax has been underassessed ; or ( ii ) such income has been assessed at too low a rate ; or ( iii ) such income has been made the subject of excessive relief under this Act ; or ( iv ) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] [( ca ) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under subsection (2) of section 133C it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] [( d ) where a pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords carefully. There is nothing on the basis of which it can be said that there was failure on the part of the assessee to disclose all material facts fully and truly. Infact we are unable to even find any allegation by the AO to the effect that there was failure on the part of the assessee to disclose all material facts fully and truly. Even at the time of hearing before us, it was not the case of the Ld. DR that the assessee has failed to disclose the material facts fully and truly. In these facts and circumstances, we hold that Revenue has failed to show that there was failure on the part of the assessee to disclose all material facts fully and truly. (4.2) When the assessee has filed a return u/s 139 of the Act or in response to sections 142(1) or 148 of the I.T.Act and when an assessment order u/s 143(3) or u/s 147 of the Act has already been passed then the assessee enjoys statutory protection under proviso to section 147 of the Act from any action u/s 147 of the Act after the expiry of four years from the end of the relevant assessment years; unless income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to fully an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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