Bharti Cellular Ltd. Vs DCIT (ITAT Delhi)
It is trite that in order to reopen an assessment made under Section 143 (3) of the Act after the expiry of four years from the end of the relevant assessment year, the reasons recorded must allege that there was failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment. Such allegation is necessary since it is a condition precedent to the assumption of jurisdiction. In the absence of such allegation, the reassessment proceedings have to be held as without jurisdiction.
We note that at the time when the assessee’s assessment was completed, the law as it stood was that there was no liability to deduct tax at source in respect to discount and roaming charges. Therefore, in our considered opinion, 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 as reported in [1999] 189 ITR 285 (SC) 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.
The Hon’ble Calcutta High Court in the case of Calcutta Club Ltd. vs. Income Tax Officer, in W.P. No.719 of 2014, vide order dated 14.02.2020, after duly considering the judgment of the Hon’ble Apex Court in A.L.A. Firm vs. CIT (supra), ITO vs. Saradbhai M. Lakhani [2002], 242 ITR 01 (SC) and Maharaj Kumar Kamal Singh vs. CIT [1959] 35 ITR 01 (SC) concluded that when there was not even a whisper in the reasons that there was any omission or failure on the part of the assessee in disclosing fully and truly material facts for assessment, subsequent decision of the Hon’ble Apex Court reversing the legal position prevailing at the time of assessment cannot be called an omission or failure on the part of the assessee in disclosing fully and truly the material facts necessary for relevant assessment. The Hon’ble Calcutta High Court went on to quash the notice issued u/s 148 of the Act and the proceedings u/s 147 of the Act.
Therefore, in view of the above mentioned judicial precedents, we find that in the circumstances, the impugned notice is not sustainable and is liable to be quashed. Therefore, we hold that the impugned notice u/s 148 of the Income Tax Act and the proceedings u/s 147 of the Act are not sustainable in law for the reason that there is no whisper in the recorded reason that there was any omission or failure on the part of the assessee in disclosing fully and truly facts for assessment. We quash the reassessment proceedings accordingly.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the assessee against order dated 13.11.2012 passed by the Learned Commissioner of Income Tax (Appeals)-V, New Delhi {CIT(A)} for Assessment Year 2004-05.
2.0 The brief facts of the case are that the return of income for the Assessment Year was filed declaring income at Rs. Nil and the same was assessed at Nil income vide order u/s 143(3) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) after adjusting brought forward losses of Rs.2,09,40,31,589/-. In the assessment framed u/s 143(3) of the Act, the Assessing Officer had made an addition in respect of free air time to distributors amounting to Rs.54.29 crores and roaming charges amounting to Rs. 13.74 Crores.
2.1 Subsequently, proceedings u/s 147 of the Act were initiated by issuance of notice u/s 148 of the Act after recording of reasons. The first re-opening was initiated on 10.04.2008 which reached finality at the ITAT on 14.07.2017 whereas the second reopening was initiated on 24.02.2011. The case was reopened for the second time in view of the findings of the Hon’ble Delhi High Cour in the case of CIT vs. Idea Cellular Ltd. as reported in (2010) 325 ITR 148 (Delhi) that free time allowed to the distributors and roaming services provided to the customers fell within the ambit of section 194H and 194J of the Act and as such were liable for deduction of tax at source. Since, no tax had been deducted at source, disallowance in terms of section 40(a)(ia) of the Act were warranted. The assessee raised objections against the reopening of the case which were dismissed by the Assessing Officer. The re-assessment was completed after making a disallowance of Rs.69,04,34,000/- which included disallowance of Rs.51,82,86,000/- on account of discount in the shape of free air time and disallowance of Rs. 17,21,48,000/- on account 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 Rs.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:
