INFOSYS LTD V. THE ASSISTANT COMMISSIONER OF INCOME TAX

WP/53286/2016

AI Insights

The case involves Infosys Ltd., the petitioner, challenging the proceedings initiated by the Assistant Commissioner of Income Tax, Bangalore, under Section 147 read with Section 148 of the Income Tax Act, 1961, for the Assessment Year 2009-2010. The petitioner argued that the proceedings were barred by limitation, opposed to law, and without jurisdiction. The core issue was whether the notice issued for reopening the assessment was justified under the provisions of the Act, particularly focusing on the requirement of disclosing all material facts necessary for the assessment. The court examined the reasons recorded for reopening the assessment and found them insufficient to meet the legal requirements, leading to the setting aside of the notice.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 690409 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 15-06-2023
• Assessment Year: misc
• Other Referred Cases: Hindustan Lever Ltd. v. R.B. Wadkar [2004] 137 TAXMAN 479 (BOM.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND; M DILIP
• Assessee Lawyers: T SURYANARAYANA; TANMAYEE RAJKUMAR; MANASA ANANTHAN
• Keywords: Income Tax; Jurisdiction; Limitation; Material facts; Reassessment
• Section: 147; 148

Judgement Text

" - 1 - NC: 2023:KHC:20709 WP No. 53286 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF JUNE, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 53286 OF 2016 (T-IT) BETWEEN: 1. INFOSYS LTD NO.44, INFOSYS AVENUE ELECTRONIC CITY, HOSUR ROAD, BANGALORE-560 100 REPRESENTED HEREIN BY ITS PRINCIPAL - CORPORATE TAXATION MR.P.PRAKASH … PETITIONER (BY SRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR SMT. TANMAYEE RAJKUMAR, ADVOCATE A/W SMT. MANASA ANANTHAN, ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRLCE 3(1) (1), BANGALORE 2ND FLOOR, BMTC BUILDING, 6TH BLOCK, 80FEET ROAD KORAMANGALA BANGALORE-560 095 2. THE PRINCIPAL COMMISSIONER OF INCOME TAX BANGALORE-3 5TH FLOOR, BMTC BUILDING, 6TH BLOCK, 80FEET ROAD Digitally signed by B K MAHENDRAKUMAR Location: High Court of Karnataka - 2 - NC: 2023:KHC:20709 WP No. 53286 of 2016 KORAMANGALA BANGALORE-560 095 … RESPONDENTS (BY SRI. K V ARAVIND, ADVOCATE A/W SRI M. DILIP, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE THAT THE IMPUGNED PROCEEDINGS INITIATD BY R-1 UNDER SECTION 147 R/W SECTION 148 OF THE ACT ARE BARRED BY LIMITATION AND OPPOSED TO THE SAID PROVISIONS AND ARE THEREFORE WITHOUT JURISDICTION AND ETC. THIS WRIT PETITION COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for setting aside of the proceedings initiated by respondent No.1 under Section 147 read with Section 148 of the Income Tax Act, 1961 ['the Act' for short], as being barred by limitation, opposed to law and without jurisdiction. Further, the petitioner has also challenged the validity of the notice issued under Section 148 read with Section 147 as regards the Assessment Year 2009-2010 and the communication dated 26.09.2016 rejecting the petitioner's objections. - 3 - NC: 2023:KHC:20709 WP No. 53286 of 2016 2. Sri T.Suryanarayana, the learned Senior Counsel appearing on behalf of Smt. Tanmayee Rajkumar for the petitioner submits that the petitioner had filed its return on 30.09.2009 for the Assessment Year 2009-2010 alongwith all the other supporting documents. It is further borne out from the facts that on 29.03.2016, the notice under Section 148 came to be issued and in terms of the procedure prescribed, the petitioner had called upon the respondents for reasons recorded for reopening the assessment under Section 147 of the Act. 3. The respondent is stated to have addressed the letter dated 25.04.2016 disclosing the reasons for reopening the assessment, the copies of which are found at Annexure-'K'. 4. Learned Senior Counsel appearing on behalf of the petitioner draws attention to the contents of Annexure-'K' and submits that the reasons made out do not satisfy the requirements under the Proviso to un-amended Section 147 of the Act. It is submitted that - 4 - NC: 2023:KHC:20709 WP No. 53286 of 2016 the extended period available under Section 147 is four years and in the present case, the extended period of four years comes to 31.03.2013 and if the extended period is to be availed of to justify the issuance of notice beyond four years, it is necessary that there must be a record of the assessee \"failing to disclose fully and truly all material facts necessary for his assessment for, that assessment year\". 5. It is also submitted that the material available for claim of deduction is the payment towards 'sub- contract charges' towards M/s.Infosys China Pvt. Ltd., and such information is a part of Form-3CEB as well as the Tax Audit Report in Form-3CD. Accordingly, it is submitted that once the material was available before the Assessing Officer and the Assessment Order is passed, the very same material cannot be a ground justifying the reopening for the purpose of re-assessment on different grounds that are made out. - 5 - NC: 2023:KHC:20709 WP No. 53286 of 2016 6. Learned counsel appearing for the Revenue has relied on the contents of the statement of objections. 7. Learned Senior Counsel appearing on behalf of the petitioner has relied on the judgment of Bombay High Court in the case of Hindustan Lever Ltd. v. R.B. Wadkar reported in [2004] 137 TAXMAN 479 (BOM.) 8. Heard both sides. 9. The Proviso to un-amended Section 147 reads as follows:- \"Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:\": - 6 - NC: 2023:KHC:20709 WP No. 53286 of 2016 The jurisdictional requirement leading to reopening of re-assessment is a finding to be recorded that assessee has failed to \"disclose fully and truly all material facts necessary for assessment\", which ought to be recorded in the reasons for reopening. 10. Perused the judgment of Bombay High Court in the case of Hindustan Lever Ltd. (supra) and the observations made at para-20 are of relevance and reads as follows:- \"20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the assessing officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the assessing officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully - 7 - NC: 2023:KHC:20709 WP No. 53286 of 2016 and truly all material facts necessary for his assessment for the concerned assessment year. It is for the assessing officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the assessing officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The assessing officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the assessing officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.\" - 8 - NC: 2023:KHC:20709 WP No. 53286 of 2016 The same has been noticed in the order passed in ITA Nos.406/2007 c/w 407/2007 disposed off on 19.09.2011 by the Division Bench of this Court. 11. The only point for consideration is to whether the reasons for reopening the assessment as contained at Annexure-'K' meets the jurisdictional requirement of Proviso to Section 147 (un-amended) of the Act. The reasons assigned by the Assessing Officer does not contain a whisper as regards the failure to disclose fully and truly all material facts. 12. In light of the contention made on behalf of the petitioner that the material facts relating to Rs.86,51,99,628/- towards the sub-contract charges being a part of the record, it cannot be stated that there is failure of disclosure of material facts fully and truly, such factual assertion made is not controverted to by the other side. - 9 - NC: 2023:KHC:20709 WP No. 53286 of 2016 13. Accordingly, on the sole ground that there is absence of finding that there is failure on the part of the assessee to disclose fully and truly all material facts, which is a jurisdictional requirement, the notice at Annexure-'H' dated 29.03.2016 issued under Section 148 of the Act is set aside. 14. As the petition is being disposed off on this jurisdictional point, the other contention raised by the assessee including that there has been disclosure at an earlier point of time and accordingly, the proceedings for re-assessment cannot be initiated on a different view of the same facts, is a contention that is not entered into. The petition is accordingly disposed off. Sd/- JUDGE VGR "