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Income Tax Appellate Tribunal, DELHI BENCH :D: DELHI
Before: SHRI SAKTIJIT DEY, VICE- & DR. B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH :D: DELHI)
BEFORE SHRI SAKTIJIT DEY, VICE-PRESIDENT & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No. 605/Del/2023 Assessment Year: 2013-14
Cricket Australia, ACIT (International Taxation), No.60, Jolimont Street, Circle-1(2)(1), Jolimont, Victoria, Vs. New Delhi. Australia – AU 3002
(PAN:AAECC5341D) (Appellant) (Respondent)
Present for: Assessee by : Shri Percy Pardiwalla, Sr. Adv. & Mr. Nitesh Jodhi, Adv. Department by : Shri Vizay B. Vasanta, CIT-DR
Date of Hearing : 12.10.2023 Date of Pronouncement : 31.10.2023
O R D E R PER SAKTIJIT DEY, VICE PRESIDENT: Captioned appeal has been filed by assessee challenging the final
assessment order dated 24.01.2023 passed under Section 147 of the
Income-Tax Act,1961 pertaining to assessment year 2013-14, in
pursuance to directions of learned Dispute Resolution Panel (DRP).
2 ITA No. 605/Del/2023 - AY: 2013-14 2. In the Memorandum of Appeal, assessee has raised multiple
grounds. However, in ground no.1, assessee has raised a purely legal
issue challenging the validity of reopening of assessment under Section
147 of the Act.
Briefly, the facts relating to this issue are, assessee is a non-
resident corporate entity incorporated in Australia and a tax resident of
Australia. For the assessment year under dispute, assessee did not file
any return of income under Section 139(1) of the Act. However, based
on AIR information available in AIMS module of ITBA, the Assessing
Officer noticed that assessee has entered into certain financial
transactions aggregating to Rs.5,11,77,717. Since, the Assessing Officer
was of the view that the activities undertaken by assessee are income
generating activities, whereas, the assessee has not filed any return of
income in India, the Assessing Officer reopened the assessment under
Section 147 of the Act. In response to the notice issued under Section
148 of the Act, assessee filed its return of income and also raised
objections against reopening of assessment under Section 147 of the
Act. It was the case of the assessee that it had entered into an Asian
3 ITA No. 605/Del/2023 - AY: 2013-14 Broadcast Agreement with ESPN on 04.11.2011 granting certain rights
for telecasting certain matches played in Australia. It was pleaded,
ESPN Star Sports is a partnership incorporated in USA and has principal
palace of business at Singapore. It was submitted by the assessee that the
fee received by the assessee from another non-resident company is not
subject to tax in India. It was further submitted, even otherwise also, the
fee received cannot be treated as royalty under Article 12(3) of India-
Australia Double Taxation Avoidance Agreement (DTAA). However,
the Assessing Officer rejected the submission of the assessee and
proceeded to tax the license fee of Rs.30,00,68,200 received from ESPN
Star Sports as royalty taxable at the hands of assessee in India.
Accordingly, he proposed the draft assessment order. Against the draft
assessment order, assessee raised objections before learned DRP, inter
alia, on the ground that reopening of assessment under Section 147 of
the Act is invalid. Learned DRP, however, rejected the objections of the
assessee.
We have heard Shri Percy Pardiwalla, Senior Advocate, appearing
for the assessee and Shri Vizay B. Vasanta, learned CIT- DR.
4 ITA No. 605/Del/2023 - AY: 2013-14 5. Parties have agreed that the facts involved relating to the aforesaid
issue are same and identical to similar issue in case of Cricket South
America decided by us in ITA No.604/Del/2023 in order dated
27.10.2023.
Having considered the submissions of the parties and perused the
material on record, we find that there is no material difference in facts
between the two cases qua the issue of validity of reopening of
assessment under Section 147 of the Act. In case of the present assessee,
the reasons recorded by the Assessing Officer for reopening of
assessment are as under:
“Reasons of reopening of the assessment in the case of M/s. CRICKET AUSTRALIA, for Assessment Year 2013-14 u/s. 147 of the Act. Name of the assessee M/s. Cricket Australia Address of the assessee 60, Jolimont Street Jolimont Victoria, Australia, AU 3002 Foreign PAN of the assessee AFECC5341D Assessment Year 2013-14 Details of the Assessing Officer DCIT Cir-1(2)(a), Intl. Tax, New having jurisdiction over the Delhi Assessee
5 ITA No. 605/Del/2023 - AY: 2013-14 2. As per NMS information disseminated through AIMS module of ITBA M/s. Cricket Australia (PAN No.AAECC5341D) has not filed ITR during F.Y. 2013-14. 3. As per AIR information, it is noticed that the said assessee has filed TDS return u /s 195 of Rs.3,19,44,410- and u/s. 194E of Rs.1,92,33,307/-, but couldn’t file ITR onwards. In light of this, the genuineness of financial transaction/business activity of this company could not be ascertained. 4. Thus from the above discussion, it is clear that the incomes during FY 2012-13 has escaped assessment in India as M/s. Cricket Australia has not filed return in India for A.Y. 2013-14. 5. In view of the above, I have reason to believe that the income during the FY 2012-13 relevant to A.Y. 2013-14 has escaped assessment as defined u/s. 147 of the Income-Tax Act, 1961. Accordingly, notice u/s. 148 of the Act may be issued in this case. 6. In this case, the only requirement to initiate proceedings u/s. 147 is reason to believe which has been recorded above. This case is beyond four years & within six years from the end of the assessment year under consideration. Therefore, approval u/s 151(1) of the Act is solicited. Accordingly, put for your kind perusal and approval please. Sd/- (Praduman Meena) Dy.Commissioner of Income Tax Circle-1(2)(1), Intl. Tax, New Delhi”
In this case also, the Assessing Officer has stated that, though, the
assessee has filed TDS return under Section 195 for Rs.3,19,44,410 and
6 ITA No. 605/Del/2023 - AY: 2013-14 under Section 194E of Rs.1,92,33,307, however, the assessee didn’t file
any return of income. However, it is a fact on record, in the year under
consideration, neither the assessee has made remittances to anyone
outside India or in India nor deducted any tax at source. Therefore, there
is no question of assessee filing any TDS return. This fact has been
accepted subsequently by the Assessing Officer while disposing of the
objections of the assessee in order dated 19.01.2022. Thus, the present
case stands on identical footing as the case of Cricket South Africa being
ITA No.604/Del/2023. While deciding the identical issue in the said
appeal, we have held as under:
“8. It is wholly well-settled principle of law that the foundation of assessment of jurisdiction under Section 147 of the Act is the reason recorded by the Assessing Officer to form a belief that income chargeable to tax in a particular assessment year has escaped assessment. The reason recorded by the Assessing Officer for reopening of assessment, a copy of which is placed at page 8 of the paper books reads as under: “Reasons of reopening of the assessment in the case of M/s. CRICKET SOUTH AFRICA (ASSOCIATION), for Assessment Year 2014-15 u/s. 147 of the Act. Name of the assessee M/s. CRICKET SOUTH AFRICA (ASSOCIATION) Address of the assessee Post Box 55009, Northlands ZA 2116, South Africa ZA 999999, Foreign
7 ITA No. 605/Del/2023 - AY: 2013-14 PAN of the assessee AFECC7322E Assessment Year 2013-14 Details of the Assessing Officer DCIT Cir-1(2)(a), Intl. Tax, New having jurisdiction over the Delhi Assessee
As per NMS information disseminated through AIMS module of ITBA M/s. CRICKET SOUTH AFRICA (ASSOCIATION) (PAN No.AAECC7322E) has not filed ITR during F.Y. 2012-13. 3. As per AIR information, it is noticed that the said assessee has filed TDS return u /s 194E of Rs.4,68,56,484/- and u/s. 195 of Rs.1,07,16,433/-, but couldn’t file ITR during F.Y.2012-13. In light of this, the genuineness of financial transaction/business activity of this company could not be ascertained. 4. Thus from the above discussion, it is clear that the incomes during FY 2012-13 has escaped assessment in India as M/s. Cricket Australia has not filed return in India for A.Y. 2013-14. 5. In view of the above, I have reason to believe that the income during the FY 2012-13 relevant to A.Y. 2013-14 has escaped assessment as defined u/s. 147 of the Income-Tax Act, 1961. Accordingly, notice u/s. 148 of the Act may be issued in this case. 6. In this case, the only requirement to initiate proceedings u/s. 147 is reason to believe which has been recorded above. This case is beyond four years & within six years from the end of the assessment year under consideration. Therefore, approval u/s 151(1) of the Act is solicited. Accordingly, put for your kind perusal and approval please. Sd/- Dy.Commissioner of Income Tax Circle-1(2)(1), Intl. Tax, New Delhi”
8 ITA No. 605/Del/2023 - AY: 2013-14
On going through the reasons recorded, we are of the view that they are replete with various factors misstatement/inaccuracy and silly mistakes, though, the Assessing Officer has reopened the assessment for assessment year 2013-14, however, the heading of the reasons recorded refers to assessment year 2014-15. Even, the name of the assessee has been wrongly mentioned. In a paragraph 3 of the reasons recorded, the Assessing Officer has very clearly and categorically stated that, though, the assessee had filed TDS return under Section 194E of Rs.4,68,56,484 and under Section 195 of Rs.1,07,16,433, however, it didn’t file any return of income. As a result of which, genuineness of financial transaction business activities of the assessee could not be ascertained. In paragraph 4 of the reasons recorded, the Assessing Officer has mentioned filing of return of income by M/s. Cricket Australia. Whereas, admitted facts are, the assessee has not filed any TDS return whatsoever under Section 194E or section 195 of the Act, in fact, there is no reason for the assessee to file any TDS return in India as it has not remitted any amount out of India to any other party. 10. On the contrary, as the assessment order itself would reveal instead of making any payment, assessee had receipt from Taj Cricket Ltd., another non-resident entity. Thus, the reasons recorded by the Assessing Officer for reopening of assessment under Section 147 of the Act clearly reveals that the formation of belief has neither any live link or nexus with any tangible material available on record rather the reasons recorded are based on non- existent/completely irrelevant facts. In fact, while disposing of the objections of the assessee questioning the validity of the assessment of the assessment, the Assessing Officer has clearly admitted/owned of various factual inaccuracies in the recorded reasons in this regard following observations of the Assessing Officer in communication dated 19.01.2022 while disposing of the objections of the assessee, a copy of which is placed at page 61 of the assessee:
9 ITA No. 605/Del/2023 - AY: 2013-14 “As per information available on records, the assessee had received certain payments from India on which TDS had been deducted by the remitters during the subject year and even in response to the aforesaid letter dated 17.03.2021, the assessee chose not to file any Income Tax Return or submit an appropriate response. In view of the same, the Assessing Officer formulated the reasons to believe that the assessee has willingly not filed ITR for the subject year to escape assessment. The Assessing Officer recorded the reasons that due to the failure of the assessee to file ITR, the transactions on record with the department and business activity of the assessee could not be verified. However, the Assessing Officer had inadvertently written that the assessee had filed TDS return during the year, instead of writing that the assessee had received incomes on which TDS had been deducted by the remitters, as evident from the TDS returns filed by them.” [Emphasis by us]
Thus, facts on record clearly reveal that the Assessing Officer has reopened the assessment under Section 147 of the Act with complete non-application of mind. Unfortunately, the higher authorities while granting approval under Section 151 of the Act have approached the issue in a mechanical manner without verifying the facts. The concept of approval under Section 151 of the Act by the higher authorities in the matter of reopening of assessment under Section 147 of the Act is only for the purposes of putting place a system of change and measure so that the Assessing Officer while reopening of assessment under Section 147 of the Act doesn't act in an arbitrary and highhanded manner. Therefore, the burden of proof on the approving authority is honourious as based on the reasons recorded by the Assessing Officer for reopening of assessment, approving authority has to find out whether a case for reopening of assessment is made out. In the facts of the present appeal, undoubtedly, the reasons recorded by the Assessing Officer certainly do not make out a case for
10 ITA No. 605/Del/2023 - AY: 2013-14 reopening of assessment under Section 147 of the Act. However, without examining the facts on record, both the Additional CIT and CIT have granted approval under Section 151 of the Act. Granting approval under Section 151 of the Act is not an empty formality. Approval has to be granted with caution and proper application of mind to the facts and material on record, to prevent to miscarriage of justice as reopening of assessment involves reopening of an already concluded assessment. Therefore, it should not be used as a trail of harassment to the assessee unless there is concrete evidence that the Assessing Officer indicating escapement of income, powers under Section 147 of the Act should not be exercised. However, this is not the case in the present appeal. Not only the Assessing Officer has acted in a caliber manner while reopening of assessment under Section 147 of the Act but the proving authorities under Section 151 of the Act have failed in discharging the duties cast upon them by the Statue. 12. The most unfortunate part in the entire exercise is the approach adopted by learned DRP. Pertinently, while disposing of assessee’s objection with regard to the validity of reopening of assessment under Section 147 of the Act, learned DRP has held as under: “3.1.2 |The Panel has considered the submission, non filing of TDS return and related transactions, the business activity associated therewith cannot be considered totally shorn off income generating activities. Further, mere typographical error in the name does not or would not vitiate the proceedings. The Panel, therefore, finds no reasons to interfere with the action of the AO. The case law relied upon by the assessee is in the context of distinguishable facts and therefore does not lay down any general law of universal application. This objection is accordingly rejected.”
11 ITA No. 605/Del/2023 - AY: 2013-14 13. As could be seen from the observations of learned DRP, they have disposed of the objections of the assessee being completely oblivious of the factual position as the DRP has referred to non- filing of TDS return and related transactions as the reasons for reopening. Thus, in our view, is totally unacceptable. When the Assessing Officer while disposing of the objections of the assessee as admitted errors committed by him, it is surprising that learned DRP has fallen in the same error while referring to non-filing of TDS royalty and TDS transaction as the cause for reopening of assessment. As a matter of fact, DRP was set up under the statute as an alternative dispute resolution mechanism for speedy disposal resolution between the assessee and the department in certain areas of taxation. The DRP is constituted by three very senior officers of the department in the rank of Principal CIT/CIT. Therefore, it is expected that when the panel decides the objection raised by the aggrieved assessee, they must decide the issues raised before them by considering both the facts and law. This is so because after directions issued by the DRP, assessee got no further opportunity before the Assessing Officer as the Assessing Officer has to implement the directions of DRP in latter and spirit. However, we have come across several instances where the DRP has failed to discharge its obligation in a proper manner by dealing with the objections of the on merit with valid reasoning. The instant case is a classic example on failure of the DRP to effectively deal with the issue at hands. 14. Be that as it may, on overall consideration of facts and material available on record and based on the delayed discussion made by us, in foregoing paragraphs, we hold that the reopening of assessment in the present case is invalid. Accordingly, we declare the assessment order as void ab initio and quashed it. 15. In view of our decision in ground no.1, the issues raised in various other grounds including the grounds on merit of the additions made have become academic. Therefore, we desist from deciding them, however, all these issues are kept open. 16. In the result, appeal is allowed as indicated above.”
12 ITA No. 605/Del/2023 - AY: 2013-14
The aforesaid observations given in case of Cricket South Africa,
would apply mutatis mutandis to assessee’s case as well. In view of our
decision in ground no.1 above, the issue raised in other grounds have
become academic for the purpose of present appeal, hence, they are kept
open. Thus, we hold that reopening of assessment under Section 147 of
the Act in the facts of the present appeal is wholly without jurisdiction,
hence, invalid. Accordingly, we quash the assessment order.
In the result, appeal is allowed as indicated above.
Order pronounced in the open court on 31 .10.2023.
Sd/- Sd/- ( DR. BRR KUMAR ) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT Dated: 31st October, 2023 Mohan Lal