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2020 Supreme(SC) 293
SUPREME COURT OF INDIA
L. Nageswara Rao, Deepak Gupta, JJ.
NEW DELHI TELEVISION LTD. – APPELLANT(S)
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX – RESPONDENT(S)
Civil Appeal No. 1008 of 2020
Decided on : 03-04-2020
For the Appellant :B. Vijayalakshmi Menon, Advocate
For the Respondent:Anil Katiyar, Advocate
IMPORTANT POINT
Assessing officer can only reopen an assessment if he has ‘reason to believe’ that undisclosed income has escaped assessment – Mere change of opinion of assessing officer is not a sufficient to meet standard of ‘reason to believe’.
Headnote:
(A) Income Tax Act, 1961 – Section 147 – Escaped assessment – Assessing officer can only reopen an assessment if he has ‘reason to believe’ that undisclosed income has escaped assessment – Mere change of opinion of assessing officer is not a sufficient to meet standard of ‘reason to believe’ – Subsequent facts which come to knowledge of assessing officer can be taken into account to decide whether assessment proceedings should be reopened or not – Information which comes to notice of assessing officer during proceedings for subsequent assessment years can definitely form tangible material to invoke powers vested with assessing officer under Section 147 of Act – Material disclosed in assessment proceedings for subsequent years as well as material placed on record by minority shareholders form basis for taking action under Section 147 of Act – At the stage of issuance of notice, assessing officer is to only form a prima facie view – Material disclosed in assessment proceedings for subsequent years was sufficient to form such a view – There were reasons to believe that income had escaped assessment in this case. (Paras 14, 22 and 23)
(B) Income Tax Act, 1961 – Section 147 – Concealment by assessee – Failure on part of assessee to make a full and true disclosure of all relevant facts – Revenue was aware of entities which subscribed to convertible bonds – Assessee had disclosed all facts it was bound to disclose – If revenue wanted to investigate the matter further at that stage it could have easily directed assessee to furnish more facts – All relevant facts were duly within knowledge of assessing officer – Notice issued to assessee shows sufficient reasons to believe on part of assessing officer to reopen assessment but since revenue has failed to show non-disclosure of facts notice having been issued after a period of 4 years is required to be quashed. (Paras 26, 28, 43 and 44)
Facts of the Case:
Appellant New Delhi Television Limited (Assessee) is an Indian company engaged in running television channels of various kinds. It has various foreign subsidiaries. Issues that arise for consideration in this case are i) Whether in the facts and circumstances of the case, it can be said that the revenue had a valid reason to believe that undisclosed income had escaped assessment?
(ii) Whether the assessee did not disclose fully and truly all material facts during the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection? (iii) Whether the notice dated 31.03.2015 along with reasons communicated on 04.08.2015 could be termed to be a notice invoking the provisions of the second proviso to Section 147 of the Act?
Findings of the Court:
If the revenue is to rely upon the second proviso and wanted to urge that the limitation of 16 years would apply, then in our opinion in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice that the revenue relies upon the second proviso. The assessee could not be taken by surprise at the stage of rejection of its objections or at the stage of proceedings before the High Court that the notice is to be treated as a notice invoking provisions of the second proviso of Section 147 of the Act.
Result : Appeal allowed.
JUDGMENT
Deepak Gupta, J.
The appellant New Delhi Television Limited (hereinafter referred to as 'the assessee') is an Indian company engaged in running television channels of various kinds. It has various foreign subsidiaries to which we shall refer in detail later on but we are concerned mainly with the subsidiary based in the United Kingdom (UK) named NDTV Network Plc., U.K. (hereinafter referred to as 'NNPLC').
2. The assessee submitted a return for the financial year 2007-08 i.e. assessment year 2008-09 on 29.09.2008 declaring a loss. This return was processed under Section 143 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The case was selected for scrutiny and notice under Section 143(2) of the Act was issued and a notice under Section 142(1) of the Act was also sent to the assessee. Thereafter, the case of the assessee was taken up for consideration and final assessment order was passed on 03.08.2012.
3. We are mainly concerned with that part of the assessment order which relates to the issue of step-up coupon bonds amounting to US$100 million. These bonds were issued in July, 2007 through the Bank of New York for a period of 5 years. The case of the assesee is that NNPLC issued step-up coupon bonds of US$ 100 million which were arranged by Jeffries International and the funds were received by NNPLC through Bank of New York. The assessee had agreed to furnish corporate guarantee for this transaction. These bonds were subscribed to by various entities to whom we shall refer to in detail at a later stage. These bonds were to be redeemed at a premium of 7.5% after the expiry of the period of 5 years. However, these bonds were redeemed in advance at a discounted price of US $74.2 million in November, 2009.
4. The assessing officer held that NNPLC had virtually no financial worth, it had no business of the name and therefore it could not be believed that it could have issued convertible bonds of US$ 100 million, unless the repayment along with interest was secured. This was secured only because of the assessee agreeing to furnish guarantee in this regard. Though the assessee had never actually issued such guarantee, the assessing officer was of the view that the subsidiary of the assessee could not have raised such a huge amount without having this assurance from the assessee. The transaction was of such a nature that the assessee should be required to maintain an arm's length from its subsidiary, meaning that it should be treated like a guarantee issued by any corporate guarantor in favour of some other corporate entity. The assessing officer did not doubt the validity of the transaction but imposed guarantee fee @ rate of 4.68% by treating it as a business transaction and added Rs. 18.72 crores to the income of the assessee, vide order dated 03.08.2012.
5. On 31.03.2015, the revenue sent a notice to the assessee wherein it was stated that the authority has reason to believe that net income chargeable to tax for the assessment year 2008-09 had escaped assessment within the meaning of Section 148 of the Act. This notice did not give any reasons. The assessee then asked for reasons and thereafter on 04.08.2015 reasons were supplied. The main reason given was that in the following assessment year i.e. assessment year 2009-10, the assessing officer had proposed a substantial addition of Rs.642 crores to the account of the assessee on account of monies raised by the assessee through its subsidiaries NDTV BV, The Netherlands, NDTV Networks BV, The Netherlands (NNBV), NDTV Networks International Holdings BV, The Netherlands (NNIH) and NNPLC. The assessee had raised its objection before the Dispute Resolution Panel (DRP) which came to the conclusion that all these transactions with the subsidiary companies in Netherlands were sham and bogus transactions and that these transactions were done with a view to get the undisclosed income, for which tax had not been paid, back to India by this circuitous round tripping.
6.
