KNIGHT RIDERS SPORTS PVT LTD vs. ASST.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 4 2 AND ORS

Since the pleading are completed, by consent of the counsels we took up the Petition for hearing at the admission stage.

Rule. Rule made returnable forthwith.

Petitioner is impugning a notice dated 17th March 2023 received under Section 148A(b) of the Income Tax Act, 1961 (“the Act”), the order dated 30th March 2023 passed under Section 148A(d) of the Act and the reassessment notice dated 30th March 2023 issued under Section 148 of the Act.

Various grounds have been raised in the Petition but the preliminary ground is that no assessment can be reopened on change of opinion.

Petitioner, for the year under consideration, i.e., Assessment Year (“A.Y.”) 2016-2017, carried on the business of operating and running a team in India Premium League, i.e., Kolkata Knight Riders. Petitioner 2/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023 filed return of income on 13th October 2016 declaring total income of Rs.11,17,62,590/-. During the years Petitioner paid a sum of Rs.3,04,85,970/- as management fees towards consultancy and team management fees. A sum of Rs. 1.90 crores was paid as consultancy fees to one Insignia Sports International Ltd. (“Insignia”).

During the course of assessment proceedings, Petitioner received various notices under Section 142(1) of the Act. In the notice dated 17th January 2018 under Section 142(1) of the Act petitioner was called upon to furnish in writing and verify in the prescribed manner information to justify the outward remittances to any non-resident (not being a company) or to a foreign company and in that regard also submit relevant 15CA and 15CB certificate. Petitioner replied through its Chartered Accountant’s letter dated 29th January 2018 in which Petitioner provided details of the expenses that were incurred to non residents/foreign company. As regard Form 15CA and Form 15CB Petitioner stated that since the data were voluminous it would help if a specific list of expenses in respect of which the two forms are required is made available.

This was followed by another notice dated 10th December 2018 under Section 142(1) of the Act by which Petitioner was called upon to 3/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023 provide details of foreign payments. The name of the players/parties, their address the amount paid, Tax Deducted at Source (“TDS”) with narration were to be provided. By its chartered accountant’s letter dated 13th December 2018 Petitioner provided the details in the format asked for. Petitioner specifically provided that consultancy and team management fees of Rs.3,04,85,970/- was paid and the breakup of Rs.3,04,85,970/- was also provided. In the breakup the amount of Rs.1.90 crores paid to Insignia is mentioned and also that no TDS was deducted.

This was followed by another notice dated 14th December 2018 under Section 142(1) of the Act whereby the Assessing Officer (“AO”) raised a specific query calling upon Petitioner to justify why no TDS was deducted on payment made to one Adrain Le. Roure and Jacques Kallis. This would indicate that the explanation regarding payment made to Insignia had already been accepted because in this notice and even later, no further query regarding Insignia was raised. Petitioner replied through its chartered accountant’s letter dated 17th December 2018 explaining why no taxes were withheld on the payment made to these two players. Petitioner explained that the income from rendering professional services in India will be taxed only in South Africa by virtue of Article 14 of India – South Africa DTAA. 4/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023

Thereafter an assessment order dated 25th December 2018 under Section 143(3) of the Act was passed. The assessment order specifically refers to the various notices issued to Petitioner under Section 142(1) of the Act as referred above. The payments made to Insignia or non deduction of TDS was, however, not discussed in the assessment order.

Subsequently, Petitioner received the impugned notice dated 17th March 2023 under Section 148A(b) of the Act alleging that there was information suggesting that income chargeable to tax for A.Y. 2016- 2017 has escaped assessment within the meaning of Section 147 of the Act. The details of the information was made available and relevant portion reads as under: “Audit scrutiny of the assessment records including the Financial Statements for the relevant Previous Year (PY) showed that the assessee had claimed a total amount of 31480970/- as consultancy and team management fees. Out of this, an amount of 1,90,00,000/- pertained to payment to a foreign entity, namely, Insignia Sport International Ltd., an entity based in United Kingdom. As per the submission of the assessee, no tax was deducted on this payment as per the provisions of the Act sated above. This non deduction of tax made this amount ineligible for deduction as per section 40(a)(i) of the Act quoted above. The tax effect on 1,90,00,000/- worked out to 65,75,520/- @30 percent tax, 12 percent surcharge and 3 percent cess.”

Petitioner replied vide letter dated 25th March 2023. Petitioner’s objections were rejected and an order dated 30th March 2023 under Section 148A(d) of the Act came to be passed followed by the impugned reassessment notice also dated 30th March 2023 u/s 148 of the Act. 5/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023

Mr. Mistri submitted that the subject matter of the information, i.e., payment to Insignia and non deduction of TDS was a subject of the consideration during the assessment proceedings. Mr. Mistri submitted that once a query is raised during the assessment proceeding and assessee has replied to it, it follows that the query raised was a subject of consideration of AO while completing the assessment and it is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Mr. Mistri submitted that in view of the query being raised, answers given and considering the assessment order, it was rather obvious that the reopening of the assessment was merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings that led to the assessment order dated 25th December 2018. Relying on the judgment of division bench of this Court in Aroni Commercials Ltd vs. Assistant Commissioner of Income-tax 2(1) 1, Mr Mistri submitted that change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment.

Even in the audit objection annexed to the Affidavit in Reply, it is admitted that Petitioner had submitted during the assessment proceedings that no tax was deducted on this payment of Rs.1.90 crores 1 44 taxmann.com 304 (Bombay) 6/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023 made to Insignia as per the provisions of the Act. This also indicates that Tax Circle-8(2)(1) & Ors. 2, that the AO does not have any power to review his own assessment because it is settled law that proceedings under Section 148 of the Act cannot be initiated to review the earlier stand adopted by the AO.

Mr. Bajpayee relying upon the affidavit in reply filed through one Amit Kumar affirmed on 14th July 2023 submitted that the AO who passed the assessment order dated 25th December 2018 never applied his mind to the information that TDS were not deducted and that should

In our view Mr. Mistri’s submission have to be accepted. This is because the law as held in Siemens Financial Services (supra) is clear that reopening of assessment is not permissible based on change of opinions as the AO does not have any power to review his own assessment when during the original assessment Petitioner has provided all the relevant information which was considered by the AO before passing the assessment order under Section 143(3) of the Act. This would be their position even if there is an audit objection. Paragraphs Nos. 34 to 39 of Siemens Financial Services Pvt. Ltd. (supra) reads as under: “34 On the facts of this case, as regards change of opinion, the information made available is the same reason to believe. If one considers it clearly, it indicates change of opinion. Paragraphs 2 to 6 of the information read as under:

The reason we say that there is a change of opinion is because once a query has been raised during the assessment and query has been answered and accepted by the AO while passing the assessment order, it follows that the query raised was a subject of consideration of the AO while completing the assessment. This would apply even if the assessment order has not specifically dealt with that issue. It is not necessary that an assessment order should contain reference and/or discussion to disclose his satisfaction in respect of the query raised. As held in Aroni Commercials Ltd (supra) if an AO has to record the consideration bestowed by him on all issues raised by him during the assessment proceedings even where he is satisfied, then it would be impossible for the AO to complete all the assessment which are required to be scrutinized by him under Section 143(3) of the Act.

In our view, therefore, it would follow that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion from that held earlier during the course of assessment proceedings that led to the passing of the assessment order dated 25th December 2018. In our view, this change of opinion does not constitute 13/14 443-wp-2269-2023.doc Sumedh Uploaded on - 30/09/2023 justification to believe that income chargeable to tax has escaped assessment.

Therefore, we allow the Petition and make the rule absolute in terms of prayer clause (a) which reads as under: “(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 and/or Article 227 of the Constitution of India calling for the records of the Petitioner’s case and after examining the legality and validity thereof quash and set aside the Impugned Notice dated 17 March 2023 (Exhibit “M”) the Impugned Order dated 30 March 2023 (Exhibit “O”) and, Impugned Reassessment Notice dated 30 March 2023 (Exhibit “P”);”

Petition disposed. (KAMAL KHATA, J.)