CRICKET SOUTH AFRICA (NPC),SOUTH AFRICA vs. ACIT, CIRCLE 1(2)(1), INTERNATIONAL TAXATION, NEW DELHI

per AIR information available in AIMS module of ITBA, it was found

that the assessee had entered into certain transactions resulting in

generation of income in India. Whereas, assessee had not filed any

return of income in India offering such income. Based on such

information, the Assessing Officer reopened the assessment under

Section 147 of the Act after recording reasons. In response to notice

3 ITA No. 604/Del/2023 - AY: 2013-14 issued under Section 148 of the Act, assessee filed its return of income

and objected to the reopening of assessment under Section 147 of the

Act. The case of the assessee was, during the year under consideration, it

had entered into an agreement with TAJ Television Ltd., another non-

resident entity, in respect of certain rights pertaining to live transmission

of certain matches played in South Africa as well as transmission of

recorded programs. It was submitted by the assessee that the license fee

received from TAJ Television Ltd. is not taxable in India as neither the

assessee nor TAJ Television Ltd. are Indian residents. Assessing Officer,

however, was not convinced with the submissions of the assessee. He

was of the view that the license fee received of Rs.53,40,00,000 from

TAJ Television Ltd. is in the nature of royalty, hence, taxable in India.

Accordingly, he brought the receipts to tax at the hands of the assessee

while framing draft assessment order. Against the draft assessment order

so passed, assessee raised objections before learned DRP, inter alia, on

the ground that reopening of assessment under Section 147 is without

jurisdiction. Learned DRP did not find merits in the objections of the

assessee and accordingly, rejected them. In terms with the directions of

learned DRP, assessment was finalized.

4 ITA No. 604/Del/2023 - AY: 2013-14 4. Before us, learned senior counsel appearing for the assessee

submitted that assumption of jurisdiction under Section 147 of the Act is

totally invalid as the Assessing Officer has considered non-existent and

wholly irrelevant facts for coming to conclusion that income chargeable

to tax at the hands of the assessee has escaped assessment.

Officer to reopen the assessment, a copy of which is placed at page 8 of

the paper books, learned counsel submitted, in the heading of reasons

recorded, which was sent for approval of the higher authority, the

Assessing Officer has mentioned the assessment year 2014-15, whereas,

he has actually reopened the assessment for assessment year 2013-14.

He submitted, even, the Assessing Officer has wrongly mentioned the

name of the assessee. He submitted, in the opening paragraph, though,

the Assessing Officer has stated that the assessee has not filed any return

of income for financial year 2012-13, however, referring to AIR

information, he has observed that assessee has filed TDS return under

Section 194E for Rs.4,68,96,484 under Section 195 for Rs.1,07,16,433,

whereas, the assessee has not filed any return of income. Therefore,

5 ITA No. 604/Del/2023 - AY: 2013-14 genuineness of financial transaction/business activities of the company

could not be ascertained. Further, drawing our attention to paragraph 4

of the reasons recorded, he submitted that the Assessing Officer, while

alleging escapement of income has referred to M/s. Cricket Australia not

filing return of income in India. Thus, he submitted, the reasons

recorded reveal complete non-application of mind by the Assessing

Officer. He submitted, the facts discussed in the reasons recorded have

absolutely no nexus with the material available on record.

authorities under Section 151 of the Act, learned counsel submitted,

while granting approval also, neither the Additional CIT nor the CIT

have applied their mind to the facts and material on record and have

granted approval in a thoroughly mechanical manner. Thus, he

submitted, the assessment having been reopened under total factual

misconception and without any tangible material on record to establish

that income chargeable to tax has escaped assessment, assumption of

jurisdiction under Section 147 of the Act is wholly invalid. Thus, he

submitted, the assessment order is invalid. He submitted, without

6 ITA No. 604/Del/2023 - AY: 2013-14 properly examining the issue, the DRP has rejected assessee’s

contention in a purely perfunctory manner. Thus, he submitted, the

assessment order deserves to be quashed.

of learned DRP.

record.

assumption of jurisdiction under Section 147 of the Act is the reasons

recorded by the Assessing Officer to form the belief that income

chargeable to tax in a particular assessment year has escaped

assessment. The reasons 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

7 ITA No. 604/Del/2023 - AY: 2013-14 2116, South Africa ZA 999999, Foreign 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

8 ITA No. 604/Del/2023 - AY: 2013-14 Dy.Commissioner of Income Tax Circle-1(2)(1), Intl. Tax, New Delhi”

they are replete with various factual misstatement/inaccuracies 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 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 returns whatsoever under Section 194E or section 195 of the Act.

In fact, there is no reason for the assessee to file any TDS returns in

India as it has not remitted any amount out of India to any other party.

9 ITA No. 604/Del/2023 - AY: 2013-14 11. On the contrary, the assessment order itself would reveal, instead

of making any payment, assessee had receipts 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 no live link or nexus with any

tangible material available on record. Rather the reasons recorded are

based on either non-existent or completely irrelevant facts. In fact, while

disposing of the objections of the assessee questioning the validity of the

reopening of the assessment, the Assessing Officer has clearly

admitted/owned up 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 are

reproduced:

“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

10 ITA No. 604/Del/2023 - AY: 2013-14 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]

reopened the assessment under Section 147 of the Act on 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 a safeguard against any arbitrary or highhanded

exercise of power by the Assessing Officer while reopening of

assessment under Section 147 of the Act. Therefore, the burden casts on

the approving authority is onerous, 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.

11 ITA No. 604/Del/2023 - AY: 2013-14 13. In the facts of the present appeal, undoubtedly, the reasons

recorded by the Assessing Officer certainly do not make out a case for

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 miscarriage of justice, as, reopening of

assessment involves reopening of an already concluded assessment.

Therefore, it should not be used as a tool for harassment to the assessee.

Unless there is concrete evidence and tangible material before 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

cavalier manner while reopening of assessment under Section 147 of the

Act but the approving authorities have also failed in discharging the

duties cast upon them by the Statue while granting approval under

Section 151 of the Act.

12 ITA No. 604/Del/2023 - AY: 2013-14 14. The most unfortunate part in the entire exercise is the approach

adopted by learned DRP. Pertinently, while disposing of assessee’s

objections 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.” 15. 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. This, in our view,

is totally unacceptable. When the Assessing Officer, while disposing of

the objections of the assessee has admitted errors committed by him, it is

surprising that learned DRP has fallen into the same error while

13 ITA No. 604/Del/2023 - AY: 2013-14 referring to non-filing of TDS return and related transaction as the cause

for reopening of assessment.

alternative dispute resolution mechanism for speedy disposal/resolution

of dispute 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 objections 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 are issued by

the DRP, assessee gets no further opportunity before the Assessing

Officer as the Assessing Officer has to implement the directions of DRP

in letter 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 on merits with valid reasoning. The

instant case is a classic example of failure of the DRP to effectively deal

with the issues at hand.

14 ITA No. 604/Del/2023 - AY: 2013-14 17. Be that as it may, on overall consideration of facts and material

available on record and based on the detailed 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 quash it.

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.

Order pronounced in the open court on 27.10.2023.

Sd/- ( DR. BRR KUMAR ) Sd/- (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT Dated: 27th October, 2023 Mohan Lal