M/s. Bharti Cellular Ltd., New Delhi V. DCIT, New Delhi

ITA 735/DEL/2013

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6844 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Keywords: Depreciation; Bonafide belief; Non-deduction of tax; Wrong claim; Reassessment proceedings; TDS
• Section: 143(3); 234B; 40(a)(ia); 201; 80HH; 48; 194J; 40a(ia); 72; 13; 22; 147; 148; 28; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.735/DEL/2013 (ASSESSMENT YEAR 2 004-05) M/S BHARTI CELLULAR L TD. (NOW BHARTI AIRTEL LIMITED) BHARTI CRESCENT 1, NELSON MANDELA ROAD, VASANT KUNJ, PHASE-II, NEW DELHI- 110 070 PAN-AAACB 2894G VS. DY.CIT CIRCLE-2(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. ANIL BHALLA, CA RESPONDENT BY SH. SATPAL GULATI, CIT- DR DATE OF HEARING 12.01.2021 DATE OF PRONOUNCEMENT 12.04.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST ORDER DATED 13.11.2012 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-V, NEW DELHI {CIT(A)} FOR ASSESSMENT YEAR 2004-05. 2 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 2.0 THE BRIEF FACTS OF THE CASE ARE THAT T HE 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 TH E ASSESSMENT FRAMED U/S 143(3) OF THE ACT, THE ASSESSING OFFICER HAD MADE AN ADDITION IN RESPECT OF FREE AIR TIME TO DISTRIBUTOR S AMOUNTING TO RS.54.29 CRORES AND ROAMING CHARGES AMOUNTING TO RS .13.74 CRORES. 2.1 SUBSEQUENTLY, PROCEEDINGS U/S 147 OF THE A CT 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 T HE SECOND RE- OPENING WAS INITIATED ON 24.02.2011. THE CASE WAS REO PENED FOR THE SECOND TIME IN VIEW OF THE FINDINGS OF THE HONBLE D ELHI 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 ROA MING SERVICES PROVIDED TO THE CUSTOMERS FELL WITHIN THE A MBIT OF SECTION 3 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 194H AND 194J OF THE ACT AND AS SUCH WERE LIABLE FO R DEDUCTION OF TAX AT SOURCE. SINCE, NO TAX HAD BEEN DEDUCTED AT S OURCE, DISALLOWANCE IN TERMS OF SECTION 40(A)(IA) OF THE AC T WERE WARRANTED. THE ASSESSEE RAISED OBJECTIONS AGAINST THE REOPENIN G OF THE CASE WHICH WERE DISMISSED BY THE ASSESSING OFFICER. THE R E-ASSESSMENT WAS COMPLETED AFTER MAKING A DISALLOWANCE OF RS.69,0 4,34,000/- WHICH INCLUDED DISALLOWANCE OF RS.51,82,86,000/- ON A CCOUNT OF DISCOUNT IN THE SHAPE OF FREE AIR TIME AND DISALLOWA NCE OF RS.17,21,48,000/- ON ACCOUNT OF ROAMING AND INTERCO NNECTION CHARGES. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE LD. FIRST APPELLATE AUTHORITY, WHO DISMISSED THE ASS ESSEES APPEAL BOTH ON THE GROUND OF THE ISSUE OF ASSUMPTION OF JU RISDICTION AS WELL AS ON THE MERITS OF THE CASE. 2.3 AGGRIEVED, THE ASSESSEE HAS NOW APPROAC HED THIS TRIBUNAL CHALLENGING THE DISMISSAL OF ITS APPEAL BY THE LD. CIT(A) AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 4 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] HAS ERRED BOTH ON FACT AND IN LAW IN CO NFIRMING THE ACTION OF THE ASSESSING OFFICER [AO] IN ASSUMING JU RISDICTION UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (THE ACT), DISREGARDING THE FACTS THAT THE INGREDIENTS FOR APP LYING 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 LA W IN COMPLETING THE IMPUGNED ASSESSMENT VIDE ORDER DATED 09.11.2011 UNDER SECTION 147 /143(3) OF THE ACT AT AN INCOME OF RS.6 9,04,34,000 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 : DISALLOWANCE OF FREE AIRTIME TO DISTRIBUTORS U/S 40(A)(IA) RS. 51,82,86,000 DISALLOWANCE OF ROAMING CHARGES U/S 40(A)(IA) RS. 17,21,48,000 4. THAT THE LEARNED CIT (A) HAS ERRED BOTH ON FA CTS AND IN LAW IN CONFIRMING THE ADDITIONS MADE BY THE AO OF RS. 5 1,82,86,000 REPRESENTING FREE AIRTIME GIVEN AS DISCOUNT/ TRADE MARGIN TO THE DISTRIBUTORS ON RETAIL PRICE OF PREPAID COUPONS UND ER SECTION 40(A)(IA) OF THE ACT. 4.1 THAT THE LEARNED CIT (A) HAS ERRED BO TH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN HOLDING T HAT DISCOUNT/ TRADE MARGIN GIVEN TO THE DISTRIBUTORS ON RETAIL PR ICE OF THE PREPAID PRODUCTS WAS IN THE NATURE OF COMMISSION EX PENSE ON 5 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT WHICH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE UND ER SECTION 194H OF THE ACT. 4.2 THAT THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN HOLDING T HAT THE BUSINESS RELATIONSHIP BETWEEN THE APPELLANT AND DIS TRIBUTORS OF PREPAID PRODUCTS WAS IN THE NATURE OF AGENCY AS AGA INST ACTUAL RELATIONSHIP OF PRINCIPAL TO PRINCIPAL, WHICH DOES NOT FALL WITHIN THE PURVIEW OF SECTION 194H OF THE ACT. 4.3 WITHOUT PREJUDICE, THAT THE DISALLOWANC E UNDER SECTION 40(A)(IA) OF THE ACT SHOULD HAVE BEEN RESTRICTED ON LY TO TRANSACTIONS WHERE NO TAX HAS BEEN DEDUCTED AT SOUR CE AT ALL. 4.4 FURTHER, WITHOUT PREJUDICE, THAT THE A O FAILED TO APPRECIATE THAT DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT WAS, IN ANY CASE, NOT WARRANTED, SINCE NON DEDUCTIO N OF TAX AT SOURCE WAS ON ACCOUNT OF BONA FIDE VIEW TAKEN BY TH E APPELLANT. 4.5 FURTHER, WITHOUT PREJUDICE, THAT THE A O FAILED TO APPRECIATE THAT DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT SHOULD HAVE, IF AT ALL, BEEN RESTRICTED TO THE AMOU NT REMAINING AS PAYABLE AS ON THE LAST DATE OF THE RELEVANT PREVIOU S YEAR. 6 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 4.6 FURTHER WITHOUT PREJUDICE, THE LEARN ED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE AC TION OF AO IN APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IGNORING THE FACT THAT THE DISTRIBUTOR HAS DECLARED INCOME IN RE SPECT OF THE TRANSACTIONS OF PREPAID PRODUCTS AND THUS SUCH INCO ME WOULD HAVE BEEN SUBJECT TO PAYMENT OF INCOME TAX AND THE ASSESSEE WOULD NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT UN DER THE PROVISO TO SUB-SECTION (1) OF SECTION 201. 5. THAT THE LEARNED C1T (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN DISALLOWI NG ROAMING CHARGES OF RS. 17,21,48,000 PAID TO OTHER TELECOM O PERATORS UNDER SECTION 40(A)(IA) OF THE ACT. 5.1 THAT THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN HOLDING T HAT ROAMING CHARGES PAID BY THE APPELLANT WERE ON ACCOUNT OF TE CHNICAL SERVICES PROVIDED BY OTHER TELECOM OPERATORS ON WHI CH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE UNDER SECTION 194 J OF THE ACT. 5.2 WITHOUT PREJUDICE, THAT THE AO FAILED TO APPRECIATE THAT SERVICES, IF ANY, WERE BEING RENDERED BY OTHER TELE COM OPERATORS DIRECTLY TO THE SUBSCRIBERS OF THE APPELLANT AND TH E APPELLANTS ROLE WAS ONLY RESTRICTED TO COLLECTING SUCH ROAMING CHARGES FROM ITS SUBSCRIBERS AND MAKING PAYMENT TO THE TELECOM O PERATORS ON 7 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT THEIR BEHALF, WHICH, IN ANY CASE, DID NOT INVOLVE R ENDERING OF ANY TECHNICAL SERVICES. 5.3 WITHOUT PREJUDICE, THAT THE AO FAILED TO APPRECIATE THAT THE TELECOM OPERATORS WERE ONLY SHARING THEIR REVEN UE IN RELATION TO USE OF THEIR GATEWAY/NETWORKS, WHICH DID NOT CON STITUTE TECHNICAL SERVICE WITHIN THE MEANING OF SECTION 1 94J OF THE ACT. 5.4 WITHOUT PREJUDICE, THAT THE AO FURTHER FAILED TO APPRECIATE THAT DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT WAS, IN ANY CASE, NOT WARRANTED, SINCE NON-DEDUCTIO N OF TAX AT SOURCE WAS ON ACCOUNT OF BONA FIDE VIEW TAKEN BY TH E APPELLANT. 5.5 WITHOUT PREJUDICE, THAT THE AO FURTHER F AILED TO APPRECIATE THAT DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT SHOULD HAVE, IF AT ALL, BEEN RESTRICTED TO THE AMOU NT REMAINING AS PAYABLE AS ON THE LAST DATE OF THE RELEVANT PREVIOU S YEAR. 5.6 FURTHER WITHOUT PREJUDICE THE AO HAS ERRED BOTH ON FACTS AND IN LAW IN APPLYING THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT IGNORING THE FACT THAT THE OTHER TELECOM SE RVICE PROVIDERS HAVE DECLARED INCOME IN RESPECT OF THE TRANSACTIONS OF TELECOM ROAMING AND THUS SUCH INCOME WOULD HAVE BEEN SUBJEC T TO PAYMENT OF INCOME TAX AND THE ASSESSEE WOULD NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE PROVISO TO S UB-SECTION (1) OF SECTION 201. 8 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 6. THAT THE AO ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBE D DEPRECIATION UNDER 72 AND SECTION 32(2) OF THE ACT RESPECTIVELY. 7. THAT THE AO ERRED ON FACTS AND IN LAW IN C HARGING INTEREST UNDER SECTIONS 234B OF THE ACT. THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR VARY, ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF THE APPEAL. 3.0 THE LD. AUTHORIZED REPRESENTATIVE ( AR) SUBMITTED THAT THIS WAS THE SECOND TIME THAT THE ASSESSEES CASE HA D BEEN REOPENED U/S 148 OF THE ACT FOR THE YEAR UNDER CONS IDERATION. IT WAS SUBMITTED THAT THE ORIGINAL ASSESSMENT U/S 143(3) O F THE ACT WAS COMPLETED ON 29.12.2006 WHICH WAS RECTIFIED U/S 154 OF THE ACT ON 27.07.2007. THE ORDER OF THE LD. CIT(A) AGAINST THE ASSESSMENT WAS PASSED ON 10.12.2009 AND SUBSEQUENTLY, THE APPEAL B EFORE THE ITAT WAS DISPOSED OFF VIDE ORDER DATED 24.01.2013. IT WAS FURTHER SUBMITTED THAT IN THE MEANWHILE NOTICE U/S 148 OF TH E ACT WAS ISSUED FOR THE FIRST TIME ON 10.04.2008 AND THE ORD ER U/S 147 READ WITH SECTION 143(3) OF THE ACT WAS PASSED ON 30.10.20 09 AND THE 9 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT ASSESSEES APPEAL WAS DECIDED IN ITS FAVOUR BY THE L D. CIT(A) VIDE ORDER DATED 02.09.2013. IT WAS FURTHER SUBMITTED THA T THE DEPARTMENTS APPEAL AGAINST ORDER OF THE LD. CIT(A) WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT VIDE ORDER DATED 14.07.2017. IT WAS SUBMITTED THAT IN THESE PROCEEDINGS U/S 148 OF T HE ACT, THE ISSUE WAS DISALLOWANCE OF SOFTWARE EXPENSES. THE LD. A R FURTHER SUBMITTED THAT THE SECOND ROUND OF PROCEEDING U/S 1 48 WERE INITIATED ON 24.02.2011 WHEN THE NOTICE U/S 148 OF T HE ACT WAS ISSUED. THE LD. AR SUBMITTED THAT THIS RE-ASSESSMEN T PROCEEDING WAS AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD. AR FURTHER SUBMITTED THAT IN THESE RE- ASSESSMENT PROCEEDINGS THE ISSUE IS DISALLOWANCE U/ S 40A(IA) OF THE ACT WITH RESPECT TO NON-DEDUCTION OF TAX U/S 194H OF THE ACT ON THE DISCOUNT ENJOYED BY THE DISTRIBUTORS ON SALE OF PRE PAID CARDS AMOUNTING TO RS.51,82,86,000/- AND U/S 194J OF THE ACT PERTAINING TO PAYMENT OF ROAMING CHARGES TO TELECOM SERVICE PR OVIDERS AMOUNTING TO RS.17,21,48,000/-. 10 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 3.1 THE LD. AR DREW OUR ATTENTION TO THE REASONS RECORDED IN THIS CASE AND SUBMITTED THAT IN TERMS OF FIRST P ROVISO TO SECTION 147 OF THE ACT WHEREIN AN ASSESSMENT HAS BEEN MADE U /S 143(3) OF THE ACT, NO ACTION CAN BE TAKEN BY THE ASSESSING OF FICER AFTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNLESS TH ERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSM ENT FOR THAT RELEVANT ASSESSMENT YEAR. DRAWING OUR ATTENTION TO T HE REASONS RECORDED, IT WAS SUBMITTED THAT A PERUSAL OF THE REA SONS WOULD SHOW THAT THERE IS EFFECTIVELY NO MENTION IN THE RE ASONS RECORDED WITH RESPECT TO ANY FAILURE ON THE PART OF THE ASSES SEE TO HAVE DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS REQUIR ED FOR THE PURPOSE OF ASSESSMENT. IT WAS FURTHER SUBMITTED THAT NO SPEC IFIC MATERIAL OR INFORMATION HAS BEEN SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSING OFFICER WITH RESPECT TO THE IMPUGNED ISSUES SUBSEQUE NT TO THE ORIGINAL ASSESSMENT PROCEEDINGS. IT WAS FURTHER SUB MITTED THAT ALL THE FACTS RELATING TO THE IMPUGNED EXPENDITURE WERE AVAILABLE ON RECORDS DURING THE COURSE OF ORIGINAL ASSESSMENT PR OCEEDINGS ITSELF. IT WAS SUBMITTED THAT INFORMATION WITH RESPECT TO DIS COUNT/FREE 11 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT TIME TO DISTRIBUTORS AMOUNTING TO RS.51,82,86,000/- WAS DULY REFLECTED IN NOTE-7 OF SCHEDULE-21 OF THE AUDITED A NNUAL ACCOUNTS OF THE ASSESSEE WHEREAS THE INFORMATION ABOUT ROAMING CHARGES AMOUNTING TO RS.17,21,48,000/- WAS AVAILABLE IN SCH EDULE-9 OF THE AUDITED ACCOUNTS. IT WAS SUBMITTED THAT, THEREFORE, IT WAS APPARENT THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE TO HAVE TRULY DISCLOSED THE MATERIAL FACTS NECESSARY FOR THE PURP OSE OF ASSESSMENT. THE LD. AR PLACED RELIANCE ON NUMEROUS JUDICIAL PRECEDENTS IN SUPPORT OF HIS CONTENTION THAT IF THE RE IS NO FAILURE ON THE PART OF THE ASSESSEE AS CONTEMPLATED BY THE FIR ST PROVISO TO SECTION 147 OF THE ACT AND WHERE THERE HAS BEEN NO S UPPRESSION OF PRIMARY FACTS, INITIATION OF REASSESSMENT PROCEEDIN GS WOULD BE BAD IN LAW. THE LD. AR REITERATED THAT MERELY HAVING A R EASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IS NOT SUFFICIEN T TO REOPEN THE ASSESSMENT BEYOND A PERIOD FOR FOUR YEARS IF THERE HAS BEEN NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MAT ERIAL FACTS FULLY AND TRULY. 12 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 3.2 THE LD. AR ALSO POINTED OUT THAT WHILE INV OKING THE PROVISIONS OF SECTION 147, THE ASSESSING OFFICER HA D PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IDEA CELLULAR LTD. AS REPORTED IN (2010) 325 IT R 148 (DELHI) AS WAS APPARENT FROM THE ASSESSMENT ORDER ITSELF, BUT R EOPENING ON THE BASIS OF SUCH JUDGMENT CANNOT BE TREATED AS INF ORMATION FOR THE PURPOSES OF REOPENING. IT WAS SUBMITTED THAT AS PER PROVISIONS OF SECTION 147, THE ASSESSING OFFICER HAS TO HAVE REA SONS TO BELIEVE WHICH SHOULD HAVE A LIVE LINK TO THE NEW INFORMATION OR KNOWLEDGE WHICH COMES IN THE POSSESSION OF THE ASSESSING OFFIC ER WHEREAS THE JUDGMENT OF THE HONBLE DELHI HIGH COURT CANNOT BE TERMED AS INFORMATION BUT RATHER INTERPRETATION OF LAW BY THE HONBLE DELHI HIGH COURT. IT WAS SUBMITTED THAT THERE WAS NO CHANG E IN THE FACTS OF THE CASE, THEY REMAINED THE SAME AND, THEREFORE, THE SUBSEQUENT JUDGMENT BY THE HONBLE DELHI HIGH COURT WOULD NOT BE CONSIDERED AN INFORMATION TO JUSTIFY REOPENING AFTER FOUR YEAR S. 3.3 IT WAS FURTHER SUBMITTED THAT THE REOP ENING BASED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR 13 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT LTD. (SUPRA) IS A DEBATABLE INTERPRETATION AND IS O N APPLICABILITY OF SECTION 201 OF THE ACT AND, THEREFORE, IT DOES NOT AUTOMATICALLY LEAD TO DISALLOWANCE U/S 40A(IA) OF THE ACT. THE LD. AR A LSO SUBMITTED THAT SUBSEQUENT TO THE JUDGMENT OF THE HONBLE DELH I HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. (SUPRA) OTHER HIGH C OURTS AND CO- ORDINATE BENCHES OF THE ITAT HAVE HELD THAT THE PRO VISIONS OF SECTION 194H ARE NOT ATTRACTED ON THE DISCOUNT ENJO YED BY THE DISTRIBUTORS OF PREPAID CARDS. OUR ATTENTION WAS DRA WN TO THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHARTI AIRTEL LTD. AS REPORTED IN [2015] 372 ITR 33 (KAR.) AND ON ANOTHER JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE VODAFONE ESSAR CELLULAR LTD. VS. ACIT AS REPORTED IN [2011] 332 IT R 255 HAD DULY BEEN CONSIDERED AND IT HAD BEEN HELD THAT THE PROVI SIONS OF SECTION 194H WERE NOT ATTRACTED TO THE DISCOUNT ENJOYED BY THE DISTRIBUTORS ON THE PREPAID CARDS. 3.4 ON MERITS OF THE DISALLOWANCE, THE L D. AR ARGUED THAT THE IMPUGNED DISALLOWANCE HAS BEEN CONFIRMED BY THE LD. CIT(A) PURELY ON THE GROUND THAT THE PROVISIONS U/S 201 OF THE ACT ONE APPLICABLE TO THE DISCOUNT ENJOYED BY THE DISTRIBUT ORS OF PREPAID 14 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT CARDS AND IS SUBJECT TO DEDUCTION OF TAX U/S 194H A S HELD IN THE CASE OF IDEA CELLULAR LTD. (SUPRA). IT WAS SUBMITTED THAT THIS JUDGMENT IS NOT ON THE ISSUE OF DISALLOWANCE U/S 40 A(IA) OF THE ACT BUT ON THE ISSUE OF APPLICABILITY OF SECTION 201 OF THE ACT AND, THEREFORE, THE SAID JUDGMENT HAS BEEN WRONGLY APPLIE D BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THERE WERE N UMEROUS ORDERS IN FAVOUR OF THE ASSESSEE COMPANY PRIOR TO T HIS JUDGMENT OF THE HONBLE DELHI HIGH COURT WHEREIN IT HAD BEEN HEL D THAT NO TAX WAS DEDUCTIBLE AT SOURCE ON SUCH DISCOUNTS. IT WAS AL SO REITERATED THAT THE OTHER HONBLE HIGH COURTS LIKE THE HONBLE HIGH COURT OF KARNATAKA AND HONBLE RAJSTHAN HIGH COURT HAVE HELD THAT SUCH DISCOUNTS WERE NOT LIABLE TO DEDUCTION OF TAX AT SO URCE. THE LD. AR ALSO REFERRED TO AN ORDER OF THE DELHI BENCH IN THE CASE OF BHARAT SANCHAR NIGAM LTD. IN ITA NO.920/DEL/2017 WHEREIN IT WAS HELD BY THE TRIBUNAL THAT IN CASE OF DISCOUNT OFFERED TO PR EPAID DISTRIBUTORS, THE PROVISION OF SECTION 194H DID NOT APPLY AND, TH EREFORE, THERE CAN BE NO DISALLOWANCE U/S 40A(IA) OF THE ACT. REFER ENCE WAS ALSO MADE TO THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF JDS APPARENTS AS REPORTED IN 53 TAXMANN.COM 139, WHEREIN IT HAD BEEN 15 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT HELD THAT SECTION 40A(IA) ITSELF IS A PENAL CONSEQU ENCE AND THE PRINCIPLES OF DOUBTFUL PENALIZATION, WHICH REQUIRES STRICT INTERPRETATION, WILL HAVE TO BE APPLIED TO DETERMINE WHETHER INDEED A DISALLOWANCE CAN BE MADE U/S 40A(IA) OF THE ACT. 3.5 IT WAS ALSO SUBMITTED THAT THE ASSESSE E WAS UNDER BONAFIDE BELIEF THAT TAX WAS NOT TO BE DEDUCTED AT S OURCE WHILE MAKING THE IMPUGNED PAYMENTS AND, THEREFORE, SUCH A N ACT UNDER A BONAFIDE BELIEF WOULD NOT WARRANT DISALLOWANCE U/S 4 0A(IA) OF THE ACT. IT WAS SUBMITTED THAT ON THIS COUNT ALSO, NO FA ULT CAN BE ATTRIBUTED TO THE ASSESSEE FOR NOT HAVING DEDUCTED TAX AT SOURCE. IT WAS SUBMITTED THAT FOR THE PERIOD 1995 TO DECEMBER, 2010 BOTH THE REVENUE AS WELL AS THE ASSESSEE WERE PROCEEDING ON T HE PREMISE THAT PROVISIONS OF SECTION 194H OF THE ACT WERE NOT APPLICABLE. IT WAS FURTHER SUBMITTED THAT A SIMILAR PLEA HAD BEEN M ADE IN THE CASE OF BHARTI AIRTEL LTD. BEFORE THE TRIBUNAL IN A SSESSMENT YEAR 2007-08 AND 2008-09 IN MA NOS.27/DEL/2017 AND M.A NO.28/DEL/2017 RELATING TO THE ITA NO.5363/DEL/2011 AND 5816/DEL/2012 AND IT HAD BEEN HELD BY THE TRIBUNAL THAT IN VIEW OF THE DIVERGENT VIEW OF THE HONBLE HIGH COURT AND CO- ORDINATE 16 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT BENCHES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE. IT WAS SUBMITTED THAT THE CO-ORDI NATE BENCHES OF THE TRIBUNAL HAD FOLLOWED THE JUDGMENT OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. AS REPORTED IN 340 ITR 333 WHILE COMING TO THIS CONCLUSION. 3.6 IT WAS FURTHER SUBMITTED THAT SIMILARL Y THE DISALLOWANCE OF RS.17,21,48,000/- WITH RESPECT TO FAILURE TO DEDUCT TAX U/S 194H WAS CONFIRMED BY THE LD. CIT(A) BY FOLLOWING HIS DECI SION ON AN IDENTICAL ISSUE RELATING TO HEXACOM LTD., WHICH WAS D ELETED BY ITAT DELHI BENCH VIDE ORDER DATED 21.04.2016. 4.0 IN RESPONSE, THE LD. CIT-DR SUBMITTED THAT AS FAR AS THE ISSUE OF REOPENING WAS CONCERNED, MERE PRODUCTION OF AN INFORMATION IN THE FINANCIAL STATEMENTS WOULD NOT T ANTAMOUNT TO ADEQUATE DISCLOSURE BY THE ASSESSEE SO AS TO TAKE T HE ASSESSEE OUT OF THE AMBIT OF THE FIRST PROVISO TO SECTION 147 OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WAS DUT Y BOUND TO FOLLOW THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. (SUPRA) AND, THEREFORE, THE REOP ENING WAS VALID IN 17 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT THE EYES OF LAW. IT WAS FURTHER SUBMITTED THAT AT THE TIME OF RECORDING OF REASONS, SUFFICIENCY OF MATERIAL IS NO T RELEVANT. IT WAS SUBMITTED THAT THE REOPENING ITSELF IS AN INDICATIO N THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO HAVE DISCLOS ED MATERIAL FACTS TRULY AND FULLY. IT WAS FURTHER SUBMITTED THAT JUDGM ENTS WHICH ARE RELEVANT BUT NOT CONSIDERED AT THE TIME OF ORIGINAL ASSESSMENT WOULD CONSTITUTE INFORMATION U/S 148 OF THE ACT EVEN IF THE JUDGMENT WAS RENDERED SUBSEQUENT TO THE PASSING OF T HE ORIGINAL ASSESSMENT ORDER AND THEREFORE, THE REOPENING CAN B E MADE. THE LD. CIT-DR PLACED RELIANCE ON NUMEROUS JUDICIAL PRE CEDENTS IN SUPPORT OF HIS CONTENTION. 4.1 ON MERITS OF THE CASE, THE LD. CIT-DR PLACED R ELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. BEFORE WE PROCEED WI TH THE ADJUDICATION OF THE ISSUE AS TO WHETHER THE JURISDI CTION U/S 147 OF THE ACT WAS RIGHTLY INVOKED BY THE ASSESSING OFFICER OR NOT, IT WOULD 18 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT BE WORTHWHILE TO REPRODUCE THE REASONS RECORDED. THE Y ARE REPRODUCED AS UNDER: RETURN OF INCOME IN THIS CASE FOR A.Y. 2004-05 WAS FILED ON 01/11/2004 DECLARING NIL INCOME. THE SAME WAS ASSESSED U/S 143(3)/154 OF THE I.T. ACT AT NIL INCO ME ON 27/07/2007. FURTHER, ASSESSMENT U/S 143(3)/147 OF T HE I.T. ACT WAS ALSO MADE IN THIS CASE ON 30/10/2009 A T NIL INCOME AFTER SETTING OFF BROUGHT FORWARD LOSSES TO THE TUNE OF RS.2,92,59,37,829. AN INFORMATION IN THIS CASE WAS RECEIVED FROM DCIT(TDS), CIRCLE-57, KOLKATA VIDE HIS LETTER NO. DCIT(TDS)/CIRCLE-57/194H/10-L 1/1139 DATED 16/12/2010 THAT THE ASSESSEE COMPANY HAS PAID RS.32,60,471 IN THE FORM OF DISCOUNT TO ITS FRANCHISES/DISTRIBUTORS WITHOUT EFFECTING TDS U/S 1 94H OF THE I.T. ACT. HONBLE ITAT, B-BENCH KOLKATA IN ITS ORDER IN ITA NOS. 1678 & 1679 (KOL) OF 2005 (UNREPORTED) HAS HELD THAT THESE PAYMENTS WERE LIABLE FOR DEDUCTION OF TD S U/S 194H OF THE I.T. ACT. HENCE, THE PAYMENT OF RS.32,60,471/- ARE TO BE DISALLOWED U/S 40(A)(IA) O F THE I.T._ACT. THIS ISSUE HAS ALSO BEEN ADJUDICATED BY H ONBLE DELHI HIGH COURT (JURISDICTIONAL HIGH COURT) IN THE FAVOUR OF REVENUE IN THE JUDGMENT OF CIT VS. IDEA CELLULAR LTD. (2010) TIOL 139, WHEREIN THE RELATIONSHIP BETWEEN T HE ASSESSEE, WHO WAS ALSO TELECOM SERVICE PROVIDER LIK E THE ASSESSEE IN THE PRESENT CASE, AND THE DISTRIBUTORS WAS HELD TO BE ONE OF PRINCIPAL TO AGENT AND THE CLAIME D DISCOUNTS WERE HELD AS COMMISSION LIABLE TO TDS U/S 194H OF THE I.T. ACT. 19 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT HENCE, THE SUM OF RS.32,60,471/- HAS ESCAPED ESCAPEMENT WITHIN THE MEANING OF CLAUSE C(I) OF EXPLANATION 2 BELOW 2ND PROVISO APPENDED TO SECTION 147 OF THE I.T. ACT. BESIDES, THE ABOVE, THE SUM OF RS.32,60,471/- IS RELATED TO KOLKATA CIRCLE ONLY. ACTUALLY THE DISCOU NT TO DISTRIBUTORS/FRANCHISES IS HUGE ON ALL INDIA BASIS IN THE FORM OF FREE AIRTIME/DISCOUNT WHICH HAS BEEN PAID WITHOUT EFFECTING TDS U/S 194H OF THE I.T. ACT. ASS ESSEE HAS ALSO PAID ROAMING/INTER-CONNECTION CHARGES WITH OUT EFFECTING TDS U/S 194J OF THE I.T. ACT, WHICH IS CL EARLY AND UNAMBIGUOUSLY IN THE NATURE OF FEES FOR TECHNIC AL SERVICES. THE SAME ALSO NEEDS EXAMINATION. MOREOV ER, THE ASSESSEE HAS DISCLOSED SALES REVENUE NET OF DISCOUNT/FREE AIRTIME TO ITS DISTRIBUTORS/FRANCHIS ES IN ITS AUDITED ACCOUNTS AND ALSO NOT DISCLOSED THAT ROAMIN G CHARGES/INTERCONNECTION CHARGES WERE IN THE NATURE OF FEE FOR TECHNICAL SERVICES. ASSESSEE HAS CLASSIFIED THE SE PAYMENTS IN ITS ACCOUNTS IN SUCH A WAY, SO THAT TH E SAME COULD NOT BE IDENTIFIED BY THE ASSESSING OFFIC ER AS COMMISSION OR FEE FOR TECHNICAL SERVICES AND ALSO N OT EFFECTED TDS AS PER PROVISIONS OF THE I.T. ACT. HEN CE, TAXABLE INCOME ON THESE ISSUES HAVE ESCAPED ASSESSM ENT BY REASONS OF THE FAILURE ON PART OF THE ASSESSEE COMPANY. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME OF RS.32,60,471/- AS DISCUSSED ABOVE, WHICH IS TO BE DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT AND UN QUANTIFIED INCOME TO BE DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT FOR OTHER CIRCLES ON ACCOUNT OF FREE AIRTIME/DISCOUNT TO DISTRIBUTORS/FRANCHISES IN THE 'NATURE 20 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT OF COMMISSION AND ROAMING/ INTERCONNECTION CHARGES IN THE NATURE OF FEE FOR TECHNICAL SERVICES FOR NON DE DUCTION OF TDS U/S 194H AND 194J RESPECTIVELY, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT AND IT IS A FIT CASE FOR THE ISSUE OF NOTICE U/ S 148 OF THE I.T. ACT. NOTICE U/S 148 OF THE I.T. ACT WILL BE ISSUED AFTER TAKING APPROVAL OF THE COMMISSIONER OF INCOME TAX, DELHI U/S 151(1) OF THE I.T. ACT. 5.1 IT IS UNDISPUTED THAT THE IN THE PRESEN T CASE, THE IMPUGNED NOTICE WAS ISSUED AFTER FOUR YEARS FROM THE END OF T HE RELEVANT ASSESSMENT YEAR. A PERUSAL OF THE REASONS, AS REP RODUCED ABOVE, WOULD ALSO SHOW THAT THE CASE WAS REOPENED IN VIEW OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF IDEA CELLULAR LTD. (SUPRA) THAT FREE TIME ALLOWED TO THE DISTRIBUTORS AND ROAMING SERVICE PROVIDED TO THE CUSTOMERS COME WITHI N THE AMBIT OF SECTION 194H AND 194J RESPECTIVELY AND AS SUCH ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE. REFERENCE HAS ALSO BEEN MADE BY THE ASSESSING OFFICER TO AN INFORMATION HAVING BEEN REC EIVED FROM THE DCIT (TDS) CIRCLE-57, KOLKATA REGARDING PAYMENT BY THE ASSESSEE COMPANY IN FORM OF DISCOUNT TO ITS DISTRIBUTORS WITH OUT DEDUCTION OF 21 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT TAX AT SOURCE U/S 194H OF THE ACT. REFERENCE HAS AL SO BEEN MADE IN THE REASONS TO AN ORDER OF THE KOLKATA BENCH OF ITA T WHEREIN IT HAD BEEN HELD THAT SUCH PAYMENTS WERE LIABLE FOR DEDUCT ION OF TAX AT SOURCE. IT IS UNDISPUTED THAT THE HONBLE DELHI HIG H COURT IN THE CASE OF IDEA CELLULAR LTD. (SUPRA) HAS TAKEN A VIEW THAT DISCOUNT PAID TO DISTRIBUTORS WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE. IT IS ALSO UNDISPUTED THAT THE JUDGMENT OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF IDEA CELLULAR LTD. (SUPRA) WAS RENDE RED SUBSEQUENT TO THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT WHICH WAS DATED 29.12.2006 AND ALSO SUBSEQUENT TO THE ORDE R PASSED U/S 147/143(3) OF THE ACT WHICH WAS PASSED ON 30.10.2009. IT IS THE ASSESSEES CONTENTION THAT THE ASSESSEE HAD MADE CO MPLETE DISCLOSURE OF ALL THE MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT AND THAT THERE WAS NOT FAILURE ON THE PAR T OF THE ASSESSEE TO HAVE DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS. IT HAS ALSO BEEN ARGUED THAT THERE HAS BEEN NO MENTION IN THE RECORDED REASONS WITH REGARD TO ANY FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS REQUIRED FOR THE PURPOSE OF ASSESSMENT. THE LD. AR HAS ALSO DRAWN OUR ATTENTION TO 22 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT THE NOTES TO THE AUDITED ANNUAL ACCOUNT WHEREIN THE RELEVANT INFORMATION REGARDING DISCOUNT AS WELL AS ROAMING C HARGES HAS BEEN DISCLOSED. ON THE OTHER HAND, IT IS THE CONTEN TION OF THE DEPARTMENT THAT ASSESSMENT COMPLETED EARLIER CAN BE REOPENED SUBSEQUENTLY ON THE BASIS OF A JUDGMENT OF THE HON BLE APEX COURT OR THE HONBLE HIGH COURT. IT HAS BEEN PLEADED BY T HE LD. CIT-DR THAT SUCH JUDGMENTS WOULD CONSTITUTE INFORMATION FO R THE PURPOSE OF REOPENING EVEN IF SUCH JUDGMENT WAS PRONOUNCED SU BSEQUENT TO THE COMPLETION OF THE ORIGINAL ASSESSMENT PROCEEDIN GS. 5.2 AFTER HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY BOTH THE PARTIES ON THE ISSUE O F VALIDITY OF REASSESSMENT PROCEEDINGS, THE FACTUAL AND LEGAL POS ITION AS APPEARING ON PERUSAL OF RELEVANT RECORDS INCLUDING THE RECORDED REASONS IS THAT- (I) THE IMPUGNED NOTICE UNDER SECTION 148 OF T HE INCOME TAX ACT HAS BEEN ISSUED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. 23 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT (II) NOWHERE IN THE RECORDED REASON HAS THE ASS ESSING OFFICER SPECIFICALLY STATED THAT THERE WAS ANY OMIS SION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING F ULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT UNDER S ECTION 143(3) OF THE ACT. (III) AT THE TIME OF PASSING THE ASSESSMENT OR DER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 IT WAS SE TTLED LEGAL POSITION BY VARIOUS JUDICIAL PRECEDENTS THAT THE PR OVISIONS FOR DEDUCTION OF TAX AT SOURCE WERE NOT APPLICABLE IN R ESPECT OF DISCOUNTS AND ROAMING CHARGES. 5.3 IT IS TRITE THAT IN ORDER TO REOPEN AN A SSESSMENT MADE UNDER SECTION 143 (3) OF THE ACT AFTER THE EXPIRY O F FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE REASON S RECORDED MUST ALLEGE THAT THERE WAS FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ITS AS SESSMENT. SUCH ALLEGATION IS NECESSARY SINCE IT IS A CONDITION PRE CEDENT TO THE ASSUMPTION OF JURISDICTION. IN THE ABSENCE OF SUCH ALLEGATION, THE REASSESSMENT PROCEEDINGS HAVE TO BE HELD AS WITHOUT JURISDICTION. 24 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 5.4 WE NOTE THAT AT THE TIME WHEN THE ASSES SEES ASSESSMENT WAS COMPLETED, THE LAW AS IT STOOD WAS THAT THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE IN RESPECT TO DISCOUNT AND ROA MING CHARGES. THEREFORE, IN OUR CONSIDERED OPINION, THERE CANNOT EVEN BE AN ALLEGATION OF FAILURE TO DISCLOSE FULLY AND TRULY A NY MATERIAL FACT NECESSARY FOR ASSESSMENT. RELIANCE BY THE REVENUE O N THE JUDGMENT OF THE HONBLE 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 HONBLE APEX COURT RELATES TO REOPE NING OF ASSESSMENT WITHIN A PERIOD OF FOUR YEARS ON THE BASI S OF INFORMATION, BEING A JUDGMENT WHICH CAME TO THE NOTI CE OF THE ASSESSING OFFICER SUBSEQUENT TO THE ASSESSMENT. IN OUR CONSIDERED OPINION, THIS PRINCIPLE WILL NOT APPLY WHERE THE ASSE SSMENT IS SOUGHT TO BE REOPENED AFTER THE EXPIRY OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR ON THE BASIS OF A SUBS EQUENT JUDGMENT OF THE HONBLE DELHI HIGH COURT WHICH IS BE ING INTERPRETED AS REVERSING THE LEGAL POSITION AND IN SUCH CASE TH E ASSESSING OFFICER WILL HAVE TO ESTABLISH FAILURE ON THE PART O F THE ASSESSEE TO 25 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. THE HONBLE APEX COURT IN THE CASE DCIT VS. SIMPLEX CONCRETE PILES (INDIA) LTD. AS REPORTED IN [2013] 3 58 ITR 129 (SC) HELD AS UNDER: 'WE SEE NO ERROR IN THE OBSERVATION MADE BY THE DIV ISION BENCH OF THE HIGH COURT IN THE IMPUGNED PERIOD OF FOUR YE ARS PROVIDED UNDER SECTION 147/149 (LA) OF THE INCOME TAX ACT, 1 961, (FOR SHORT, 'THE ACT') EXPIRES THEN THE QUESTION OF REOP ENING BY THE DEPARTMENT DOES NOT ARISE. IN ANY EVENT, AT THE REL EVANT TIME, WHEN THE ASSESSMENT ORDER GOT COMPLETED, THE LAW AS DECLARED BY THE JURISDICTIONAL HIGH COURT, WAS THAT THE CIVI L CONSTRUCTION WORK CARRIED OUT BY THE ASSESSEE WOULD BE ENTITLED TO THE BENEFIT OF SECTION 80HH OF THE ACT, WHICH VIEW WAS SQUARELY REVERSED IN THE CASE OF CIT VS N.C. BUDHARAJA AND C O. REPORTED IN (1993) 204 ITR 412. THE SUBSEQUENT REVERSAL OF T HE LEGAL POSITION BY THE JUDGMENT OF THE SUPREME COURT DOES NOT AUTHORISE THE DEPARTMENT TO REOPEN THE ASSESSMENT, WHICH STOOD CLOSED ON THE BASIS OF THE LAW, AS IT STOOD A T THE RELEVANT TIME. ' (EMPHASIS SUPPLIED BY US). 5.5 WE ALSO DRAW SUPPORT FROM THE JUDGMENT OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF TANTIA CONSTRUCTION CO. LTD. VS. 26 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT DCIT & ORS AS REPORTED IN [2002] 257 ITR 84 (KOL) WHEREIN IT WAS HELD AS UNDER: 'BUT, IN THE PRESENT CASE, THE REASONS DISCLOSED WI TH THE AFFIDAVIT-IN-OPPOSITION ADMITTEDLY ONLY SHOW ESCAPE MENT OF ASSESSMENT AND THAT TOO ACCORDING TO THE EXPLANATIO N OF THE LAW BY THE APEX COURT SUBSEQUENT TO THE ASSESSMENT. THE RE IS NO MATERIAL THAT THE SECOND REQUIREMENT OF FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ANY MATERIAL FACT, HAS EVEN BEEN ALLEGED. LEARNED COUNSEL FOR THE RESPONDENTS R ELIED ON THE LAW AS DECIDED BY THE APEX COURT IN THE CASE OF RAY MOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 FOR SHO WING THAT THIS COURT, AT THIS STAGE OF ISSUANCE OF NOTICE, IS NOT TO ASSESS THE CORRECTNESS OR SUFFICIENCY OF MATERIALS. BUT THIS C ONTENTION CANNOT BE ACCEPTED AS AT THIS STAGE NOT THE CORRECT NESS OR SUFFICIENCY OF THE MATERIALS BUT THE VERY EXISTENCE OF THE ALLEGATION IS BEING CONSIDERED AND THAT IS WITHIN T HE POWER OF THE COURT WHEN THE NOTICE IS CHALLENGED.' 'BUT IN THE PRESENT CASE THE RESPONDENTS HAVE FAILE D TO SHOW THAT THE SECOND CONDITION WAS SATISFIED AT ALL. THE REFORE, IN SUCH CIRCUMSTANCES, I AM OF THE OPINION THAT IN THE ABSE NCE OF SATISFACTION OF ONE OF THE STATUTORY REQUIREMENTS A S CONTAINED IN SECTION 147, THE NOTICES IMPUGNED UNDER SECTION 148 CANNOT BE HELD TO BE VALID AS THEY WERE ISSUED AFTER THE EXPI RY OF FOUR YEARS FROM THE LAST DATE OF THE CONCERNED ASSESSMEN T YEAR AND 27 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT THERE WAS AN ASSESSMENT UNDER SECTION 143(3) IN RES PECT OF THE ASSESSEE.' 5.6 SIMILARLY, THE BOMBAY HIGH COURT IN THE CASE OF TITANOR COMPONENTS LTD. VS. ACIT, AS REPORTED IN [2012] 343 ITR 183 (BOMBAY) HELD AS UNDER: 'NOWHERE HAS THE ASSESSING OFFICER STATED THAT THER E IS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HAVING REG ARD TO THE PURPOSE OF THE SECTION, WE ARE OF THE VIEW THAT THE POWER CONFERRED BY SECTION 147 DOES NOT PROVIDE A FRESH O PPORTUNITY TO THE ASSESSING OFFICER TO CORRECT AN INCORRECT ASSES SMENT MADE EARLIER UNLESS THE MISTAKE IN THE ASSESSMENT SO MAD E IS THE RESULT OF A FAILURE OF THE ASSESSEE TO FULLY AND TR ULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. INDEED, WH ERE THE ASSESSEE HAS FULLY DISCLOSED ALL MATERIAL FACTS, IT IS OPEN FOR THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE G ROUND THAT THERE IS A MISTAKE IN ASSESSMENT. MOREOVER, IT IS N ECESSARY FOR THE ASSESSING OFFICER TO FIRST OBSERVE WHETHER THER E IS A FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT AND HAVING OBSERVED THAT THERE IS SUCH A FAILURE TO PROCEED UNDER SECTION 147. IT MUST FOLLOW THAT WHER E THE ASSESSING OFFICER DOES NOT RECORD SUCH A FAILURE HE WOULD NOT BE ENTITLED TO PROCEED UNDER SECTION 147. 28 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT AS OBSERVED EARLIER, THE ASSESSING OFFICER HAS NOT RECORDED THE FAILURE ON THE PART OF THE PETITIONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT YEAR 1997-9 8. WHAT IS RECORDED IS THAT THE PETITIONER HAS WRONGLY CLAIMED CERTAIN DEDUCTIONS WHICH HE WAS NOT ENTITLED TO. THERE IS A WELL KNOWN DIFFERENCE BETWEEN A WRONG CLAIM MADE BY AN ASSESSE E AFTER DISCLOSING ALL THE TRUE MATERIAL FACTS AND A WRONG CLAIM MADE BY THE ASSESSEE BY WITHHOLDING THE MATERIAL FACTS FULL Y AND TRULY. IT IS ONLY IN THE LATTER CASE THAT THE ASSESSING OFFIC ER WOULD BE ENTITLED TO PROCEED UNDER SECTION 147. WE ARE SUPPO RTED IN THIS VIEW BY A DECISION OF A DIVISION BENCH OF THIS COUR T IN HINDUSTAN LEVER LTD. VS R.B. WADKAR, ASST. CIT (NO. L) (2004) 268 ITR 332 (BOM) WHERE IN A SIMILAR CASE THE DIVIS ION BENCH HELD THAT REASON THAT THERE WAS A FAILURE TO DISCLO SE FULLY AND TRULY THAT ALL MATERIAL FACTS MUST BE READ AS RECOR DED BY THE ASSESSING OFFICER AND IT WOULD NOT BE PERMISSIBLE T O DELETE OR ADD TO THOSE REASONS AND THAT THE ASSESSING OFFICER MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL RECORD. THE DIVISION BENCH OBSERVED AS FOLLOWS: 'HE MUST DISCLOSE IN THE REASON AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECES SARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABL ISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE.' 29 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 5.7 THE HONBLE 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 HONBLE APEX COURT IN A.L.A. FIRM VS. CIT (SUPRA), ITO VS. SARADBHAI M. LAKHANI [2002], 242 ITR 01 (SC) AND MA HARAJ KUMAR KAMAL SINGH VS. CIT [1959] 35 ITR 01 (SC) CONCLUDED THAT WHEN THERE WAS NOT EVEN A WHISPER IN THE REASONS THAT THER E WAS ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY MATERIAL FACTS FOR ASSESSMENT, SUBSEQUENT DECISION OF THE HONBLE APEX COURT REVERSING THE LEGAL POSITION PRE VAILING 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 HONBLE CALC UTTA HIGH COURT WENT ON TO QUASH THE NOTICE ISSUED U/S 148 OF THE AC T AND THE PROCEEDINGS U/S 147 OF THE ACT. 5.8 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. THE REFORE, WE HOLD 30 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT 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 REAS ON THAT THERE WAS ANY OMISSION OR FAILURE ON THE PART OF THE ASSES SEE IN DISCLOSING FULLY AND TRULY FACTS FOR ASSESSMENT. WE QUASH THE REASSESSMENT PROCEEDINGS ACCORDINGLY. 5.9 SINCE, WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS, THE GROUNDS RAISED BY THE ASSESSEE ON THE MERITS OF THE ADDITION DO NOT REQUIRE ANY ADJUDICATION AS THEY HAVE BECOME AC ADEMIC IN NATURE. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASS ESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 12 TH APRIL, 2021. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 12/04/2021 PK/PS 31 ITA NO.735 /DEL /2013 M/S BHART I CELLULAR LTD. VS. DCIT COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI