It is a settled position in law that for reassessment proceedings beyond the period of four years from the end of the relevant assessment year, it is an essential condition that the income chargeable to tax which has allegedly escaped assessment must be occasioned, inter alia, by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary 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.
Held by High Court
The fact of the matter is that the petitioner, during the original assessment proceedings, had clearly indicated the nature of the royalty payments. The Assessing Officer had specifically asked in his questionnaire as to the nature of the royalty payments and the assessee was asked to justify the same. Upon further information provided by the assessee, the Assessing Officer considered the aspect of royalty payment and also noted the fact that the petitioner had claimed the same as revenue expenditure. In fact, the Assessing Officer disallowed
34,63,07,373/- out of the entire claim of 70,60,25,973/- and made an addition on account thereof.
Consequent upon the above discussion, we are of the view that the very condition that the assessee must not have made full and true disclosure of the material facts is not satisfied and therefore, the reopening cannot be permitted. The impugned notice dated 30.03.2009 and all proceedings pursuant thereto including the impugned order dated 11.2009 are set aside. We are making it clear that we have arrived at the above conclusion upon examining the case from the stand point of validity of assumption of jurisdiction under Section 147/148 and have not examined the merits of the matter as to whether the royalty payments were of a revenue or capital nature.