M/s Spice Communication Ltd., Mumbai V. DCIT, New Delhi

CO 14/DEL/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8508 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2003-2004
• Appeal Filed On: 12-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAMESH CHANDRA
• Keywords: Reopening of assessment; Audit objection; Difference of opinion; Accommodation entries; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUN TANT MEMBER ITA NO. 5700/DEL/2010 ASSESSMENT YEAR: 2003- 2004 DCIT VS. M/S. SPICE COMMUNICATION LTD. CIRCLE 9 (1), ROOM NO. 163 C/O ID EA CELLULAR LTD., C.R. BUILDING, A-68, SECTOR -64 NEW DELHI. NOIDA (UP) (PAN AAGCS6070H) (APPELLANT) (RESPONDENT) AND CO NO. 14/DEL-11 (ARISING APPEAL NO. 5700/DEL/2010) ASSESSMENT Y EAR 2003-04 M/S. SPICE COMMUNICATION LTD. VS, DCI T C/O IDEA CELLULAR LTD. CIRCLE 9(1), ROOM NO. 163 5 TH FLOOR, WINDSOR, C. R. BUILDING, OFF. CST ROAD, NEAR VIDYANAGARI, NE W DELHI. KALINA, SANTACRUZ (E) MUMBAI 400 098 (PAN AAGCS6070H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAMESH CHANDRA, CIT, DR RESPONDENT BY : SHR I RONAK DOSHI, FCA ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS IMPUGNED FIRST APPELLAT E ORDER ON THE GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON MERITS IN HOLDING THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT BAD IN LAW, WHICH WAS REOPENED BY THE AO AFTER ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 2 DUE APPLICATION OF MIND AND FOLLOWING DUE PROCEEDI NGS AS PROVIDED IN THE ACT. THE RELEVANT FACTS ARE THAT ON 29 TH MARCH, 2006 ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT. SUBSEQUENTLY ON 2.6.2008 NOTICE U/S 148 OF THE ACT WAS ISSUED AND ASSESSMENT U/S 147 READ WITH SECTION 143 (3) WAS FRAMED ON 29.12.2009. BEFORE THE LD. CIT(A) THE ASSESSEE QUES TIONED THE VALIDITY OF ACTION OF REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT. IT WAS CONTENDED THAT THE AO WHILE REOPENING THE CASE AFTER FOUR YEARS SHOULD HAVE MENTIONED AS TO WHAT WAS THE OMISSION OR FAILURE ON THE PART OF THE ASSE SSEE WHICH HAS RESULTED IN ESCAPEMENT OF INCOME. IT WAS SUBMITTED THAT THE ASS ESSEE HAS MADE FULL AND TRUE DISCLOSURE OF ITS INCOME IN ITS RETURN OF INCO ME. THERE WAS NO NEW INFORMATION / MATERIAL FOUND BY THE AO FOR REOPENIN G THE PROCEEDINGS U/S 147 OF THE ACT AND THEREFORE THE REASONS RECORDED FOR REO PENING REFLECT A MERE CHANGE OF THE OPINION BY THE AO. RELIANCE WAS PLACED ON SE VERAL DECISIONS INCLUDING DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. FORAMER FRANCE 264 ITR 566 (SC). BEING CONVINCED WITH THE CONTENTION O F THE ASSESSEE THE LD. CIT(A) HAS HELD THE REOPENING TO BE INVALID ON THE BASIS THAT THE AO NOWHERE HAS BEEN ABLE TO POINT OUT THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN THE REASONS RECORDED FOR THE REOPENING OF THE CASE. THE ASSESSEE HAD ALSO QUESTIONED THE ADDITIONS MADE BY THE AO IN THE ASSE SSMENT FRAMED U/S 147 / 143 (3) OF THE ACT ON ITS MERITS BUT THE SAME HAS N OT BEEN ADJUDICATED UPON BY THE LD. CIT(A) IN VIEW OF HIS FINDING ON THE VALIDI TY OF REOPENING OF ASSESSMENT ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 3 ITSELF. BEFORE THE TRIBUNAL THE REVENUE HAS QUESTIO NED THE ACTION OF THE LD. CIT(A) IN HOLDING THE REOPENING OF ASSESSMENT AS IN VALID. THE GRIEVANCES OF THE ASSESSEE IN THEIR CROSS OBJECTION ARE THAT THE LD. CIT(A) HAS ERRED IN NOT QUASHING THE REOPENING U/S 148 OF THE ACT AS IT WAS BASED ON AUDIT OBJECTION, CHANGE OF OPINION AND ON SAME INFORMATION AND IN AB SENCE OF NEW MATERIAL. THEIR FURTHER GRIEVANCE IS THAT THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATING GROUND NOS. 2 TO 6 RAISED BEFORE HIM QUESTIONING TH E ADDITIONS ON MERITS. IN SUPPORT OF THE GROUND RAISED IN THE APPEAL PREFERRE D BY THE REVENUE, THE LD. DR SUBMITTED THAT THE FIRST APPELLATE ORDER IN QUESTIO N ON THE ISSUE OF VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT IS C RYPTIC AND SHORT. HE SUBMITTED THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT REASONS TO BELIEVE RECORDED BY THE AO ITSELF SHOW THAT THERE WAS OMISS ION ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT IN ITS RETURN AND DURING THE ASSESSMENT INITIALLY FRAMED U/S 143(3) OF THE ACT. HE REFERRED CONTENTS OF THE REASONS TO BE LIEVE RECORDED BY THE AO FOR THE INITIATION OF REOPENING PROCEEDINGS WHICH HAS B EEN REPRODUCED BY THE LD. CIT(A) AT PAGE NO. 9 & 10 OF THE FIRST APPELLATE O RDER. HE SUBMITTED FURTHER THAT NO QUERY WAS RAISED BY THE AO DURING THE ASSESSMENT INITIALLY FRAMED U/S 143(3) OF THE ACT ON THE SUBJECT MATTER OF REASONS FOR THE REOPENING RECORDED BY THE AO FOR INITIATION OF REOPENING PROCEEDINGS. THERE WAS NON APPLICATION OF MIND BY THE AO IN THE ORIGINAL ASSESSMENT ON THE SUBJECT MATTER OF THE REASONS. THUS IT IS NOT ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 4 A CASE OF CHANGE OF OPINION FOR THE REOPENING OF TH E ASSESSMENT. HE SUBMITTED FURTHER THAT MERE SUBMISSION OF BOOKS BY THE ASSESS EE IS NOT SUFFICIENT TO DRAW AN INFERENCE THAT THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL MATERIAL FACT NECESSARY FOR HIS ASSESSMENT. THE AO HAD INITIATED THE REOPENING PROCEEDINGS ON THE BASIS OF OBJECTIONS RAISED IN THE AUDIT OBJECTI ON. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- JAWAND SONS V. CIT 195 TAXMAN 144 (P & H) DALMIA BROTHERS (P) LTD. VS. CIT (2011) 16 TAXMANN. COM 336 (DELHI) CIT V. PVS BEEDIES 237 ITR 13 (SC) NEWS LIGHT TRADING CO. VS. CIT (2002) 256 ITR 391 ( DELHI) ACIT VS. CHAMPDANY INDUSTRIES LTD. 95 ITD 169 (KO L) PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. VS. DCIT (2003) 133 TAXMAN 257 (CAL) NANCY KRAFTS (P) LTD. VS. ACIT (2012) 20 TAXMANN.CO M 163 (DELHI) ACIT VS. MANUBHAI SONS & CO. (2007) 18 SOT 297 (MUM ) SOM DATT BUILDERS (P) LTD. VS. DCIT (2006) 98 ITD 7 8 (KOL) KALYANJI MAVJI & CO. VS. CIT (1976) 102 ITR 287 (SC ) CIT VS. INDIA TERMINAL CONNECTOR SYSTEM LTD. (2012) 21 TAXMANN.COM 69 (DELHI) 2. THE LD. AR ON THE OTHER HAND TRIED TO JU STIFY THE FIRST APPELLATE ORDER ON THE ISSUE. WITH THE ASSISTANCE OF FOLLOWING CHART H E SUBMITTED THAT ASSESSEE HAD FURNISHED DISCLOSURE OF ALL MATERIAL FACTS FULLY AN D TRULY ON THE SUBJECT MATTER OF ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 5 THE REASONS WHICH WERE NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR ON WHICH THE AO DURING THE COURSE OF ORIGINAL ASSESSME NT HAD ALSO RAISED QUERY : ITEM AS PER THE REASONS RECORDED DISCLOSURE AND MATERIAL AVAILABLE ON RECORD BUSINESS PROMOTION EXPENSES OF RS. 42,60,149/- AO ENQUIRED IN POINT NO. 9 OF THE QUESTIONNAIRE DATED AUGUST 22, 2005 OF ALL EXPENSES EXCEEDING RS. 1 LAKH (SEE PB PAGE 25) APPELLANT VIDE LETTER DATED FEBRUARY 14, 2006 IN POINT NO. 7 HAD REPLIED DETAILS OF THE MISCELLANEOUS EXPENDITURE INCURRED (SEE PB PAGE 27-29 AND PAGE 67 AND 68,84,87 TO 89); DISCLOSURE MADE AT PAGE 11 AND 12 OF MISCELLANEOUS EXPENDITURE AND BREAK UP GIVEN IN ASSESSMENT. INTEREST ON DELAYED PAYMENT OF LICENSE FEE OF RS. 6,24,41,000/- THE AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT AND DISCLOSED IN SCHEDULE 14 UNDER THE NOMENCLATURE INTEREST ON DELAYED PAYMENT OF LICENSE FEES. (SEE FACTUAL PB PAGES 12) AOS AT PAGE 3 IN PARA 4 OF HIS REASSESSMENT ORDER HAS OBSERVED THAT AS PER NOTES TO ACCOUNTS, THE ENTIRE AMOUNT OF RS. 6,24,41,000/- WAS DUE AND PAYABLE AS ON MARCH 31,2003. INTEREST ON DEBENTURES OF RS. 17,17,92,000/- DISCLOSED IN SCHEDULE 2 SECURED LOANS AND IN SCHEDULE -15 NOTES TO ACCOUNTS IN POINT NO. 4 OF THE FINANCIAL STATEMENTS. (SEE FACTUAL PB PAGE 6,12,14,18) AO IN HIS REASSESSMENT ORDER IN PAGE NO. 4 AT LAST PARA HE HAS MADE THE REFERENCE TO THE NOTES TO ACCOUNTS. MANAGERIAL REMUNERATION OF RS. 95,44,000/- DISCLOSED IN POINT NO. 14 OF SCHEDULE 15 TO THE FINANCIAL ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 6 STATEMETN. (SEE FACTUAL PB PAGE 23) AO IN HIS REASSESSMENT ORDER AT PAGE NO. 5 IN LAST PARA HAS MADE THE REFERENCE TO DISCLOSURE MADE IN NOTES TO ACCOUNT. 3. THUS THERE WAS NO FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSM ENT DURING THE COURSE OF ORIGINAL ASSESSMENT NOR ANY ALLEGATION TO THIS EFFECT HAS BE EN MADE AGAINST THE ASSESSEE BY THE AO IN THE REASONS TO BELIEVE RECORDED BY H IM FOR THE INITIATION OF REOPENING PROCEEDINGS. LD. AR REFERRED PAGE NUMBER S 1 TO 155 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THESE ARE THE COPIES OF RETURN OF INCOME, COMPUTATION OF INCOME, AUDITED ACCOUNTS ALONGWITH N OTES TO ACCOUNT, A NOTICE ISSUED U/S 142(1) WITH QUESTIONNAIRE DATED 22.8.200 5, RELEVANT PAGES OF REPLY FILED BY THE ASSESSEE, ASSESSMENT ORDER DATED 29.3. 2006 FRAMED U/S 143(3) , NOTICE ISSUED U/S 148 DATED 2.6.2008, REPLY TO THE SAID NOTICE , NOTICE U/S 143 (2) ISSUED ON 24.6.2008, REPLY TO THE SAID NOTICES, NOT ICE ISSUED U/S 142(1) ALONGWITH ANNEXURE ON 30.7.2008, OBJECTION OF THE ASSESSEE AG AINST THE REOPENING , DISPOSAL OF THE OBJECTION , NOTICE ISSUED U/S 143(2 ) AND 142 (1) DATED 14.5.2009, SUBMISSIONS THAT 16.11.2009 OF THE ASSESSEE, WRITTE N SUBMISSIONS FLED BEFORE THE LD. CIT(A) DATED 2.8.2010 AND 16.9.2010 AND NOTE MA DE DURING INSPECTION OF ACCOUNTS BY MR. ALOK MAHESHWARI. 4. LD. AR ALSO PLACED RELIANCE ON THE FOL LOWING DECISIONS :- SUDHIR GENSETS LTD. VS. ITO (2011) 12 TAXMANN.COM 3 32 (DELHI) ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 7 ATMA RAM PROPERTIES (P) LTD. VS. DCIT (2011) 16 TAX MANN.COM 67 (DELHI) CIT VS. PUROLATOR INDIA LTD. 2011-TIOL-848-HC-DEL-I T M/S. MARUBENI INDIA PVT. LTD. V. DCIT (ITA NO. 4963 /DEL/2011) DATED JANUARY 13, 2012 JAL HOTELS CO. LIMITED VS ACIT (2009)-TIOL-282-HC-D EL-IT) (DEL) XEROX MODICORP. LTD. VS. DCIT WP (C) 8483/2010 AND OTHERS, JUDGMENT DATED 2.1.2013 (DELHI HIGH COURT) SAK INDUSTRIES PRIVATE LTD.& ANR VS. DCIT 2012-TI OL-562-HC-DEL-IT DCIT VS. RPG CELLCOM LTD. ITA NO. 4202/DEL/2010 F OR BLOCK PERIOD 2001-02 5. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON, WE FIND THAT THERE IS NO DISPUTE ON THE RATIO LAID DOWN IN THE ABOVE DECISIO NS CITED BY THE PARTIES BUT FACTUAL MATRIX OF EACH CASE UNDER ADJUDICATION IS M ATERIAL TO APPLY THESE RATIOS ON THE ISSUE. FOR A READY REFERENCE THE REASONS TO BELIEVE RECORDED BY THE AO IN THE PRESENT CASE FOR INITIATION OF REOPENING PROCEE DINGS AND REPRODUCED BY THE LD. CIT(A) AND PAGES 9 AND 10 ARE BEING REPRODUCED HEREUNDER :- 'IT HAS NOW BEEN NOTICED THAT THE ASSESSEE WHILE CO MPUTING INCOME FROM HOUSE PROPERTY, DEDUCTION ON ACCOUNT OF GROUND RENT AMOUNTING TO RS.3,89,853/- WAS CLAIMED WHICH IS NOT ADMISSIBLE A S PER THE PREVISIONS OF THE ACT. I) IT HAS BEEN NOTICED THAT AS PER NOTES TO ACCOU NTS, THE ASSESSEE HAS DEDUCTED, MANAGERIAL REMUNERATION TO ONE OF THE MAN AGERS AMOUNTING TO RS. 95,44,000/- WHICH HAD ACCRUED BUT NOT PAID PEND ING FINALIZATION OF CONTRACT OF EMPLOYMENT AND APPROVAL OF THE CENTRAL GOVERNMENT FOR WHICH APPLICATION WAS YET TO BE MADE. SINCE, THIS IS A PR OVISION WHICH HAS NOT BEEN ASCERTAINED IT DOES NOT QUALIFY FOR DEDUCTION. ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 8 II) FURTHER, THE ASSESSEE HAS CLAIMED AN EXPENDITU RE OF RS. 42,60,149/- ON ACCOUNT OF BUSINESS PROMOTION UNDER THE HEAD' MISC. EXPENDITURE' AS THIS GAVE AN ENDURING BENEFIT TO TH E ASSESSEE AND THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE AND IS NOT ALLOWABLE AS A DEDUCTION IN COMPUTING INCOME UNDER HEAD 'MISC. EXPE NDITURE' AS THIS GAVE AN ENDURING BENEFIT TO THE ASSESSEE AND THE SA ME IS IN THE NATURE OF CAPITAL EXPENDITURE AND IS NOT ALLOWABLE AS A DEDUC TION IN COMPUTING INCOME UNDER HEAD 'PROFIT AND GAINS FROM THE BUSINE SS OR PROFESSION. ' III} THE ASSESSEE HAD ALSO CLAIMED AN EXPENDITURE OF RS. 6,24,41,000/- ON ACCOUNT OF INTEREST ON DELAYED PAYMENT OF LICENS E FEE. THIS EXPENDITURE IS IN THE PAYMENT OF LICENSE FEE. THIS EXPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE AND THUS, NOT ALLOWAB LE AS A DEDUCTION IN COMPUTING THE INCOME UNDER THE HEAD 'PROFITS & GAIN FROM THE BUSINESS OR PROFESSION. IV) THE ASSESSEE HAS CLAIMED AND EXPENDITURE OF RS. 17,17,92,OOO/- TOWARDS INTEREST OF DEBENTURES. HOWEVER, AS PER NOT ES TO ACCOUNT THE ASSESSEE HAD DEFAULTED THE. PAYMENT, OF INTEREST ON DEBENTURES. IT IS THEREFORE, CLEARLY A PROVISION WHICH IS NOT ALLOWAB LE AS DEDUCTION. ' 6. WE FIND THAT NOWHERE IN THE REASONS TO BELIEVE RECORDED BY THE AO, THE AO HAS ALLEGED THAT THERE WAS FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR IT S ASSESSMENT. THE LD. CIT(A) HAS HELD THE REOPENING PROCEEDINGS AS INVALID ON THE BA SIS THAT IN THE REASONS RECORDED BY THE AO HE HAS NOT BEEN ABLE TO POINT OU T THE OMISSION OR THE FAILURE ON THE PART OF THE ASSESSEE, FOR INITIATION OF REO PENING THE CASE. THERE IS NO DISPUTE THAT ASSESSMENT IN QUESTION HAS BEEN REOPEN ED AFTER PASSING OF FOUR YEARS. HENCE WE HAVE TO NOW EXAMINE AS TO WHETHER P ROVISO TO SECTION 147 OF THE ACT HAS BEEN PROPERLY APPLIED BY THE LD. CIT(A) OR NOT ESPECIALLY THE CORRECTNESS OF HIS ABOVE FINDING THAT IN THE REASON S RECORDED OMISSION OR FAILURE ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 9 ON THE PART OF THE ASSESSEE WAS NOT WHISPERED. THER E IS ALSO NO DISPUTE THAT UNLESS THERE IS FAILURE ON THE PART OF THE ASSESEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT THE ASS ESSMENT ALREADY FRAMED U/S 143(3) OF THE ACT CANNOT BE REOPENED AFTER THE EXPI RY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT. IN ITS RECENT DECISION IN THE CASE OF X EROX MODICORP LTD. VS. DCIT (SUPRA) THE HONBLE DELHI HIGH COURT HAS BEEN PLEA SED TO HOLD AS UNDER : 9. IT IS SETTLED LAW THAT THE ASSESSING AUTHORITY CANNOT KEEP IMPROVING HIS CASE FROM TIME TO TIME AND THAT THE REASSESSMENT PROCEED INGS HAVE TO STAND OR FALL ON THE BASIS OF WHAT WAS STATED IN THE REASONS RECO RDED U/S 148(2) AND NOTHING MORE. NO FAILURE TO FURNISH FULL AND TRUE PARTICULA RS RELATING TO THE ROYALTY PAYMENTS INCLUDING THE FAILURE TO TILE THE RELEVANT AGREEMENTS, HAS BEEN ALLEGED IN THE REASONS RECORDED. IF ANYTHING, THE REASONS A RE AN ADMISSION THAT IT WAS THE AO WHO DID NOT DRAW THE APPROPRIATE INFERENCE F OR THE ROYALTY PAYMENT WERE CAPITAL IN NATURE. IT WAS FOR HIM TO DRAW THE APPRO PRIATE INFERENCE AND NOT FOR THE ASSESSEE TO TELL HIM WHAT INFERENCE OF FACT OR LAW SHOULD BE DRAWN FROM THE PRIMARY FACTS FURNISHED. THAT IS THE RATIO OF CALCU TTA DISCOUNT CO. LTD. (1961) 41 ITR 191 (SC). ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 10 FOLLOWING THIS RATIO THE HONBLE HIGH COURT HAS QUA SHED THE REASSESSMENT NOTICES AS ALSO THE CONSEQUENT PROCEEDINGS. IN THAT CASE BEFORE THE HONBLE HIGH COURT FOR THE FIRST TIME IN THE COUNTER AFFIDAVIT F ILED ON BEHALF OF THE REVENUE, AN STAND WAS TAKEN THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEEE TO FURNISH THE ROYALTY AGREEMENT INCLUDING THE SUPPLEMENTARY A GREEMENT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE YEAR IN QUESTION . THE HONBLE HIGH COURT OBSERVED THAT NO SUCH REASON WAS STATED IN THE REAS ONS RECORDED U/S 148 (2) OF THE ACT. ALL THAT WAS SAID IN THE REASONS RECORDE D WAS ONLY THAT IN VIEW OF THE AO, THE ROYALTY PAYMENT OUGHT TO HAVE BEEN HELD TO BE CAPITAL IN NATURE. AGAIN IN THE CASE OF SAK INDUSTRIES PVT. LTD. AND ANOTHER VS. DCIT (SUPRA) THE HONBLE DELHI HIGH COURT HAS BEEN PLEASED TO HOLD THAT THE ASSESSMENT CANNOT BE REOPENED U/S 147 AFTER A PERIOD OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WHERE THE ASSESSEE HAD PLACED ALL T HE PRIMARY AND RELEVANT FACTS BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROC EEDINGS. THE DUTY OF THE ASSESSEE IS LIMITED TO THE DISCLOSURE OF PRIMARY FA CTS AND DOES NOT EXTEND TO ADVISING THE AO AS TO WHAT INFERENCES FACTUAL AND LEGAL HE SHOULD DRAW FROM THE FACTS. IN THE PRESENT CASE BEFORE US WE ON THE PERU SAL OF RECORD FIND THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT DURING THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS. THE AO VIDE POINT NO. 9 OF THE QUESTIO NNAIRE DATED 22.8.2005 HAD ENQUIRED ABOUT ALL EXPENSES EXCEEDING RS. 1 CRORE ( PAGE 24 OF THE PAPER BOOK). ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 11 THE SAME WAS RESPONDED VIDE LETTER DATED 14.2.2006 POINT NO. 7 BY THE ASSESSEE FURNISHING DETAILS OF THE MISC. EXPENSES I NCURRED, MADE AVAILABLE AT PAGE NO. 26 TO 28 OF THE PAPER BOOK. IT WAS REGARDING BUSINESS PROMOT ION EXPENSES OF RS. 42,60,149/-. SO FAR AS INTEREST ON DELAYED PAYMENT OF LICENSE FEE OF RS. 6,24,41,000/- IS CONCERNED THE AMOUNT WAS DE BITED TO PROFIT AND LOSS ACCOUNT AND DISCLOSED IN THE SCHEDULE 14 UNDER THE NOMENCLATURE INTEREST ON DELAYED PAYMENT OF LICENCE FEE (PAGE 11 OF PAPER B OOK). THE AO AT PAGE NO. 3 IN PARA NO. 4 OF HIS REASSESSMENT ORDER HAS OBSERVE D AS AS PER NOTES OF ACCOUNTS, THE ENTIRE AMOUNT OF RS. 6,24,41,000/- WA S DUE AND PAYABLE AS ON 31.3. 2003. THUS THERE WAS DISCLOSURE BY THE ASSES SEE IN THIS REGARD AS WELL. INTEREST ON DEBENTURE OF RS. 17,17,92,000/- WAS DIS CLOSED IN SCHEDULE II SECURED LOANS AND IN SCHEDULE 15 NOTES TO ACCOUNTS IN P OINT NO. 4 OF THE FINANCIAL STATEMENTS (PAGE 11, 17 OF THE PAPER BOOK). THE AO IN HIS REASSESSMENT ORDER AT PAGE NO. 4 IN THE LAST PARA HAS MADE REFERENCE TO THESE NOTES TO ACCOUNTS. ON MANAGERIAL REMUNERATION OF RS. 95,44,000/- DISC LOSURE HAS BEEN MADE IN POINT NO. 14 OF SCHEDULE 15 OF THE FINANCIAL STAT EMENT (PAGE 22 OF THE PAPER BOOK). THE AO IN HIS REASSESSMENT ORDER AT PAGE NO. 5 IN LAST PARA HAS MADE THE REFERENCE TO DISCLOSURE MADE IN NOTES TO ACCOUNTS. 7. IN VIEW OF THESE FACTS WE DO NOT HAVE A NY REASON TO DOUBT THE ASSERTION OF THE LD. AR THAT THE ASSESSEE HAD DISCLOSED FULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT ON THE ISSUES RAISED IN THE REAS ONS TO BELIEVE, DURING THE ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 12 COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IT ALSO FINDS SUPPORT FROM THE ABSENCE OF ALLEGATION OF THE AO IN THIS REGARD IN T HE REASONS TO BELIEVE RECORDED BY HIM FOR INITIATING THE REOPENING PROCEEDINGS. TH E AO HAS NOWHERE ALLEGED IN THE REASONS TO BELIEVE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE FACTS. IN THE CASE OF ATMA R AM PROPERTIES (P) LTD. VS. DCIT (SUPRA) WHEREIN THE ISSUE RAISED BEFORE THE HONBLE HIGH COURT WAS AS TO WHETHER WHERE ASSESSEE HAD FURNISHED FULL AND TRUE DETAILS, LAPSE OR ERROR ON THE PART OF ASSESSING OFFICER TO APPLY LAW TO SAID FACT S CAN BE ATTRIBUTED AND REGARDED AS A FAILURE ON PART OF THE ASSESSEE TO MA KE FULL AND TRUE DISCLOSURE OF MATERIAL FACT IN ORIGINAL ASSESSMENT PROCEEDINGS, T HE FINDING OF THE HONBLE HIGH COURT WAS IN NEGATIVE. THE HONBLE HIGH COURT HELD FURTHER THAT FAILURE TO APPLY LAW OR A SECTION TO ADMITTED FACTS ON RECORD IS NO T COVERED BY EXPLANATION I TO SECTION 147 OF THE ACT. SIMILAR VIEW HAS BEEN EXPRE SSED BY THE HONBLE HIGH COURT IN THE CASE OF CIT VS. PUROLATOR INDIA LTD. (SUPRA). SO FAR AS THE DECISIONS RELIED UPON BY THE LD. DR ARE CONCERNED THESE ARE H AVING DISTINGUISHABLE FACTS HENCE ARE NOT HELPFUL TO THE REVENUE. IN THE CASE O F CIT VS. CIT VS. INDIA TERMINAL CONNECTOR SYSTEM LTD. (SUPRA) BEFORE THE H ONBLE HIGH COURT THE REOPENING OF THE ASSESSMENT WAS INITIATED DUE TO CH ANGE IN FACTS AFTER COMPLETION OF ORIGINAL ASSESSMENT U/S 143 (3) OF TH E ACT. THE AO HAD RECEIVED INFORMATION FROM THE INVESTIGATION WING OF THE DEPA RTMENT THAT ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES OF RS. 42,60,149/- . THE REASONS TO BELIEVE TO ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 13 THIS EFFECT WAS RECORDED BY THE AO THAT TAXABLE INC OME HAS ESCAPED ASSESSMENT TO THAT EFFECT. UNDER THESE FACTS THE HONBLE HIGH COURT CAME TO THE CONCLUSION THAT TRIBUNAL WAS NOT JUSTIFIED IN SETTING ASIDE RE ASSESSMENT PROCEEDINGS ON THE BASIS THAT THE AO HAD FAILED TO STATE / RECORD THAT ASSESSEE HAD NOT MADE FULL DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSE SSMENT. THE HONBLE HIGH COURT OBSERVED THAT INFORMATION PROVIDED BY THE INVESTIGA TION WING WAS NOT AVAILABLE WITH THE AO DURING THE COURSE OF THE ORIGINAL PROCE EDINGS. THE SAID INFORMATION CONSTITUTE THE NEW AND FRESH EVIDENCE ON WHICH THE AO WOULD HAVE DRAWN INFERENCE AND FORMED A PRIMA FACIE OPINION WHETHER OR NOT TO SHIFT REASSESSMENT PROCEEDINGS. AS DISCUSSED ABOVE THE ISSUE RAISED IN THE GROUND OF THE APPEAL PREFERRED BY THE REVENUE IS FULLY COVERED BY THE AB OVE CITED DECISION OF HONBLE DELHI HIGH COURT WE THUS DO NOT FIND INFIRMITY IN T HE FIRST APPELLATE ORDER, SINCE IN ABSENCE OF A FINDING OF THE AO IN THE REASONS RE CORDED THAT DURING THE ORIGINAL ASSESSMENT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR IS ASSESSMENT, THERE WAS ANY FAILURE OR OMISSION ON TH E PART OF THE ASSESSEE, INVOCATION OF THE REOPENING PROCEEDINGS ON THE BASI S OF THE SUBJECT MATTER OF THE REASONS TO BELIEVE, WHICH WERE ALREADY MADE AVAILAB LE BEFORE THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT AND HE HAD APPLIED HI S MIND THEREON, THE LD. CIT(A) HAS RIGHTLY HELD THAT REOPENING PROCEEDINGS WAS INVALID. THE SAME IS UPHELD. WE ALSO MAKE IT CLEAR THAT AS PER THE PROV ISO TO S.147 THE INITIATION OF REOPENING PROCEEDINGS IN THE PRESENT CASE IS BARRE D BY THE PRESCRIBED TIME LIMIT ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 14 IN THE SAID PROVISO AND AS SUCH IT IS INVALID AS IT WAS NOTHING BUT DUE TO CHANGE OF OPINION BY THE AO. THE GROUND IS ACCORDINGLY REJ ECTED. 8. IN THE RESULT APPEAL PREFERRED BY THE R EVENUE IS DISMISSED. 9. THE ISSUE IN THE CROSS OBJECTION REGARDING QUESTIONING THE VALIDITY OF REOPENING PROCEEDINGS ON THE BASIS OF SOME OTHER LE GAL OBJECTIONS AND QUESTIONING THE MERITS OF THE ADDITIONS MADE IN THE REASSESSMENT RAISED BEFORE THE LD. CIT(A) WHICH WAS NOT ADJUDICATED UPON, THUS DO NOT NEED ADJUDICATION. IN VIEW OF THE ABOVE FINDING ON THE ISSUE RAISED IN THE GROUND OF THE APPEAL PREFERRED BY THE REVENUE, THESE OBJECTIONS HAVE BEC OME INFRUCTUOUS AND OF ACADEMIC INTEREST ONLY. THE CROSS OBJECTION IS ACCO RDINGLY DISPOSED OFF. 10. IN SUMMARY APPEAL PREFERRED BY THE REV ENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS HAVING BE COME INFRUCTUOUS IN VIEW OF THE OUTCOME OF THE APPEAL PREFERRED BY THE REVENUE. THE ORDER IS PRONOUNCED IN THE OPEN COUR T ON 10 TH MAY, 2013. SD/- SD/- (T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 10 TH MAY, 2013 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT ITA NO. 5700/DEL/2010 AND C/O NO. 14/DEL/11 15 5. DR BY ORDER DEPUTY REGISTRAR, ITAT