Delhi High Court held In the case of Turner Broadcasting Systems Asia Pacific INC. vs. DDIT that the assessing officer has merely intended to revisit the concluded assessments and it is a clear case of change of opinion, which is not permissible in law. It is clear that no fresh information or material has been referred to in the reasons recorded for reopen the assessment. The material that is referred to is the very same material that was already before the Assessing Officer at the time of framing of the assessment under Section 143 (3).
Facts of the Case
Turner Broadcasting Systems Asia Pacific Inc. (TENA), is a company incorporated in the state of Georgia, U.S.A. and is a tax resident of the U.S.A. During the relevant financial years, TENA derived income from the grant of exclusive rights to Turner International India Private Limited (TIIPL) in India to sell advertising on the products and to distribute the products. The assessee filed its return of income for the AY 2007-08 on 27.03.2009 declaring an income of Rs. 12,40,99,555 . On 11.08.2009,a questionnaire was issued by the revenue seeking details/evidence/explanations on various aspects pertaining to taxability of the petitioner. In total 38 queries were raised. On 5.10.2009, the assessee filed a detailed reply to the said questionnaire.
On 24.12.2009, the proceedings u/s 143 (3) of the Income Tax Act were concluded and the assessment was framed. The Assessing Officer came to the conclusion that only 10% of the total advertisement and distribution revenue earned in India was taxable in India. The Assessing Officer in the assessment order has specifically recorded that since the facts of the year under consideration remain the same, therefore, following the agreement reached by the respective competent authorities in the earlier years, the tax was computed at 10% as per the mutual agreement to avoid double taxation under India /USA DTAA (MAP resolutions). As per the terms of the mutual agreement, 10% of the advertisement revenues received from Indian Sources during the relevant previous years by the appellant is deemed to net profit chargeable to tax in India. On 27.03.2012 notice under Section 147/148 was issued, within the period of four years and the said notice was served on 30.03.2012.On 14.05.2012, the petitioner filed objections to the reasons. By order dated 22.02.2013, the objections have been disposed of.
Held by High Court
It is clear that a detailed questionnaire had been issued to the petitioner, which was duly replied to. As many as 38 queries had been raised and a detailed reply along with all annexure and supporting documents were furnished by the petitioner in response to the queries raised. The copies of the relevant agreements, the generation of income and the tax treatment given by the petitioner to the said income was duly disclosed to the assessing officer. The material based on which the reopening has been sought to be done by the department was available before the assessing officer at the time of the framing of the assessment under Section 143. Not only was the same before the Assessing Officer, the Assessing Officer has referred to the same in the Assessment Year and taken note of the same.
In Commissioner of Income Tax vs. Usha International Ltd. 348 ITR 485 (Del.) (FB), Full Bench of Court held that “Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, whether or not he had recorded his reasons in the assessment order.”
In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income-tax (1999) 234 ITR 170 (Del) a division bench of this court held that “Following the settled trend of judicial opinion and the law laid down by their Lordships of the Supreme Court time and again, different High Courts of the country have taken the view that if an expenditure or a deduction was wrongly allowed while computing the taxable income of the assessee, the same could not be brought to tax by reopening the assessment merely on account of subsequently the assessing officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction.”
On applying, the above principles to the facts of the present case and on perusal of the reasons we find that no fresh information or material has been referred to in the reasons recorded for seeking to reopen the assessment. The material that is referred to is the very same material that was already before the Assessing Officer at the time of framing of the assessment under Section 143 (3). Thus, as seen from above, it is clearly a case of change of opinion, which is clearly not permissible.
Accordingly, appeal of the assessee allowed.