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TMI Blog2021 (4) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... it stood was that there was no liability to deduct tax at source in respect to discount and roaming charges. Therefore there cannot even be an allegation of failure to disclose fully and truly any material fact necessary for assessment. Reliance by the Revenue on the judgment of the Hon ble Supreme Court in the case of A.L.A. Firm vs. CIT [ 1991 (2) TMI 1 - SUPREME COURT ] is misplaced in as much as this judgment of the Hon ble Apex Court relates to reopening of assessment within a period of four years on the basis of information, being a judgment which came to the notice of the Assessing Officer subsequent to the assessment. In our considered opinion, this principle will not apply where the assessment is sought to be reopened after the expiry of four years from the end of the relevant assessment year on the basis of a subsequent judgment of the Hon ble Delhi High Court which is being interpreted as reversing the legal position and in such case the Assessing Officer will have to establish failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, we hold that the impugned notice u/s 148 of the Income Tax Act and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of roaming and interconnection charges. 2.2 Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority, who dismissed the assessee's appeal both on the ground of the issue of assumption of jurisdiction as well as on the merits of the case. 2.3 Aggrieved, the assessee has now approached this Tribunal challenging the dismissal of its appeal by the Ld. CIT(A) and has raised the following grounds of appeal: "1. That the learned Commissioner of Income Tax (Appeals) ["CIT (A)"] has erred both on fact and in law in confirming the action of the Assessing Officer [AO] in assuming jurisdiction under section 147 of the Income-tax Act, 1961 ("the Act"), disregarding the facts that the ingredients for applying the provisions of Section 147 were missing and thus the assumption of jurisdiction u/s 147 was incorrect in law. 2. That the AO erred both on facts and in law in completing the impugned assessment vide order dated 09.11.2011 under section 147 /143(3) of the Act at an income of ₹ 69,04,34,000 as against NIL income declared by the appellant. 3. That in framing the assessment the learned AO has erred in making the following additions and disallowances: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 17,21,48,000 paid to other telecom operators under section 40(a)(ia) of the Act. 5.1 That the learned CIT (A) has erred both on facts and in law in confirming the action of the AO in holding that roaming charges paid by the appellant were on account of technical services provided by other telecom operators on which tax was required to be deducted at source under section 194J of the Act. 5.2 Without prejudice, that the AO failed to appreciate that services, if any, were being rendered by other telecom operators directly to the subscribers of the appellant and the appellant's role was only restricted to collecting such roaming charges from its subscribers and making payment to the telecom operators on their behalf, which, in any case, did not involve rendering of any technical services. 5.3 Without prejudice, that the AO failed to appreciate that the telecom operators were only sharing their revenue in relation to use of their gateway/networks, which did not constitute 'technical service' within the meaning of section 194J of the Act. 5.4 Without prejudice, that the AO further failed to appreciate that disallowance under section 40(a)(ia) of the Act was, in any case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the notice u/s 148 of the Act was issued. The Ld. AR submitted that this re-assessment proceeding was after a period of four years from the end of the relevant assessment year. The Ld. AR further submitted that in these re-assessment proceedings the issue is disallowance u/s 40a(ia) of the Act with respect to non-deduction of tax u/s 194H of the Act on the discount enjoyed by the distributors on sale of prepaid cards amounting to ₹ 51,82,86,000/- and u/s 194J of the Act pertaining to payment of roaming charges to Telecom Service providers amounting to ₹ 17,21,48,000/-. 3.1 The Ld. AR drew our attention to the 'reasons recorded' in this case and submitted that in terms of first proviso to section 147 of the Act wherein an assessment has been made u/s 143(3) of the Act, no action can be taken by the Assessing Officer after four years from the end of the assessment year unless there has been a failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment for that relevant assessment year. Drawing our attention to the reasons recorded, it was submitted that a perusal of the reasons would show that there is effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court cannot be termed as information but rather interpretation of law by the Hon'ble Delhi High Court. It was submitted that there was no change in the facts of the case, they remained the same and, therefore, the subsequent judgment by the Hon'ble Delhi High Court would not be considered an information to justify reopening after four years. 3.3 It was further submitted that the reopening based on the judgment of Hon'ble Delhi High Court in the case of Idea Cellular Ltd. (supra) is a debatable interpretation and is on applicability of section 201 of the Act and, therefore, it does not automatically lead to disallowance u/s 40a(ia) of the Act. The Ld. AR also submitted that subsequent to the judgment of the Hon'ble Delhi High Court in the case of Idea Cellular Ltd. (supra) other High Courts and Coordinate Benches of the ITAT have held that the provisions of section 194H are not attracted on the discount enjoyed by the distributors of prepaid cards. Our attention was drawn to the judgment of the Hon'ble Karnataka High Court in the case of Bharti Airtel Ltd. as reported in [2015] 372 ITR 33 (Kar.) and on another judgment of Hon'ble Kerala High Court in the case Vodafone ESSAR Cell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the Revenue as well as the assessee were proceeding on the premise that provisions of Section 194H of the Act were not applicable. It was further submitted that a similar plea had been made in the case of Bharti Airtel Ltd. before the Tribunal in Assessment Year 2007-08 and 2008-09 in MA Nos.27/Del/2017 and M.A No.28/Del/2017 relating to the ITA No.5363/Del/2011 and 5816/Del/2012 and it had been held by the Tribunal that in view of the divergent view of the Hon'ble High Court and Co-ordinate Benches, no fault can be found with the assessee in not deducting the tax at source. It was submitted that the Co-ordinate Benches of the Tribunal had followed the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Kotak Securities Ltd. as reported in 340 ITR 333 while coming to this conclusion. 3.6 It was further submitted that similarly the disallowance of ₹ 17,21,48,000/- with respect to failure to deduct tax u/s 194H was confirmed by the Ld. CIT(A) by following his decision on an identical issue relating to Hexacom Ltd., which was deleted by ITAT Delhi Bench vide order dated 21.04.2016. 4.0 In response, the Ld. CIT-DR submitted that as far as the issue of reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the payment of ₹ 32,60,471/- are to be disallowed u/s 40(a)(ia) of the I.T._Act. This issue has also been adjudicated by Hon'ble Delhi High Court (Jurisdictional High Court) in the favour of revenue in the judgment of CIT vs. Idea Cellular Ltd. (2010) TIOL 139, wherein the relationship between the assessee, who was also telecom service provider like the assessee in the present case, and the distributors was held to be one of principal to agent and the claimed discounts were held as commission liable to TDS u/s 194H of the I.T. Act. Hence, the sum of ₹ 32,60,471/- has escaped escapement within the meaning of clause c(i) of Explanation 2 below 2nd Proviso appended to Section 147 of the I.T. Act. Besides, the above, the sum of ₹ 32,60,471/- is related to Kolkata Circle only. Actually the discount to distributors/franchises is huge on all India basis in the form of free airtime/discount which has been paid without effecting TDS u/s 194H of the I.T. Act. Assessee has also paid roaming/inter-connection charges without effecting TDS u/s 194J of the I.T. Act, which is clearly and unambiguously in the nature of fees for technical services. The same also needs e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Hon'ble Delhi High Court in the case of Idea Cellular Ltd. (supra) has taken a view that discount paid to distributors was liable for deduction of tax at source. It is also undisputed that the judgment of the Hon'ble Delhi High Court in the case of Idea Cellular Ltd. (supra) was rendered subsequent to the original assessment order passed u/s 143(3) of the Act which was dated 29.12.2006 and also subsequent to the order passed u/s 147/143(3) of the Act which was passed on 30.10.2009. It is the assessee's contention that the assessee had made complete disclosure of all the material facts necessary for the purpose of assessment and that there was not failure on the part of the assessee to have disclosed fully and truly all the material facts. It has also been argued that there has been no mention in the recorded reasons with regard to any failure on the part of the assessee to disclose fully and truly all material facts required for the purpose of assessment. The Ld. AR has also drawn our attention to the Notes to the audited annual account wherein the relevant information regarding discount as well as roaming charges has been disclosed. On the other hand, it is the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Apex Court relates to reopening of assessment within a period of four years on the basis of information, being a judgment which came to the notice of the Assessing Officer subsequent to the assessment. In our considered opinion, this principle will not apply where the assessment is sought to be reopened after the expiry of four years from the end of the relevant assessment year on the basis of a subsequent judgment of the Hon'ble Delhi High Court which is being interpreted as reversing the legal position and in such case the Assessing Officer will have to establish failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Hon'ble Apex Court in the case DCIT vs. Simplex Concrete Piles (India) Ltd. as reported in [2013] 358 ITR 129 (SC) held as under: "We see no error in the observation made by the Division Bench of the High Court in the impugned period of four years provided under Section 147/149 (lA) of the Income Tax Act, 1961, (for short, "the Act") expires then the question of reopening by the Department does not arise. In any event, at the relevant time, when the assessment order got comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Having regard to the purpose of the section, we are of the view that the power conferred by Section 147 does not provide a fresh opportunity to the Assessing Officer to correct an incorrect assessment made earlier unless the mistake in the assessment so made is the result of a failure of the assessee to fully and truly disclose all material facts necessary for assessment. Indeed, where the assessee has fully disclosed all material facts, it is open for the Assessing Officer to reopen the assessment on the ground that there is a mistake in assessment. Moreover, it is necessary for the Assessing Officer to first observe whether there is a failure to disclose fully and truly all material facts necessary for assessment and having observed that there is such a failure to proceed under Section 147. It must follow that where the Assessing Officer does not record such a failure he would not be entitled to proceed under Section 147. As observed earlier, the Assessing Officer has not recorded the failure on the part of the petitioner to fully and truly disclose all ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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