TATA COMMUNICATIONS LTD ( FORMERLY VIDESH NIGAM LTD), MUMBAI v. ADDL CIT RG 1(3), MUMBAI

ITA 5543/MUM/2009 | 1999-2000
Pronouncement Date: 11-10-2013 | Result: Allowed

Appeal Details

RSA Number 554319914 RSA 2009
Assessee PAN AAACV2808C
Bench Mumbai
Appeal Number ITA 5543/MUM/2009
Duration Of Justice 4 year(s) 2 day(s)
Appellant TATA COMMUNICATIONS LTD ( FORMERLY VIDESH NIGAM LTD), MUMBAI
Respondent ADDL CIT RG 1(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 11-10-2013
Date Of Final Hearing 25-09-2013
Next Hearing Date 25-09-2013
Assessment Year 1999-2000
Appeal Filed On 09-10-2009
Judgment Text
` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI . . ! ' #'' '$ % ! & BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI VIVEK VARMA JUDICIAL MEMBER . : 5543 / / 2009 A.Y. 1999-2000 ITA NO. : 5543/MUM/2009 (ASSESSMENT YEAR: 1999-2000) TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) M.G. ROAD FORT MUMBAI -400 001 .: PAN: AAACV 2808 C VS ADDL. CIT RANGE - 1(3) AAYAKAR BHAVAN MAHARSHI KARVE MARG MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DINESH VYAS SENIOR ADVOCATE SHRI NIRANJAN GOVINDEKAR SHRI MADHAV KHANDELWAL RESPONDENT BY : SHRI O.P. SINGH /DATE OF HEARING : 25-09-2013 !' / DATE OF PRONOUNCEMENT : 11-10-2013 * O R D E R #'' '$ : PER VIVEK VARMA JM: INSTANT APPEAL IS AGAINST THE ORDER OF CIT(A) XXI MUMBA I DATED 15.07.2009 WHEREIN THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: BEING AGGRIEVED BY THE ORDER DATED JULY 15 2009 P ASSED UNDER SECTION 250 OF THE INCOME-TAX ACT 1961 (HEREUNDER REFERRED TO AS THE ACT) BY THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) XXI MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] THE APPELLANT SUBMITS THE FOLLOWING GROUNDS OF APPEAL FOR YOUR SYMPATHETIC CO NSIDERATION: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THAT THE ASSESSMENT W AS VALIDLY REOPENED UNDER SECTION 147 OF THE INCOME TAX ACT 1961. TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 2 2. WITHOUT PREJUDICE TO THE ABOVE GROUND THE LEARN ED CIT(A) HAS ERRED IN CONFIRMING AN ADDITION OF THE DIFFERENTIAL INTEREST INCOME OF RS. 7.70 CRORES ON AN AD-HOC BASIS AND MERELY ON THE SURMISE S AND CONJECTURES. 3. IT IS PRAYED THAT THE ASSESSING OFFICER MAY KIND LY BE DIRECTED TO GRANT INTEREST UNDER SECTION 244A ON THE REFUND IF ANY A RISING OUT OF ABOVE GROUNDS IN ACCORDANCE WITH THE LAW. 2. GROUND NO. 1 PERTAINS TO REOPENING OF ASSESSMENT UND ER SECTION 147/148. 3. THE FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF IN COME ON 31.12.1999. THE REGULAR ASSESSMENT UNDER SECTION 143(3) WA S FRAMED ON 26.06.2002. AS PER THE DESCRIPTION THE AO INITIATED PRO CEEDINGS UNDER SECTION 148 BY THE ISSUE OF NOTICE DATED 30.03.200 6. FROM THE FACT SHEET SUBMITTED (APB 121) THE ENTIRE PROCESS OF RECO RDING OF REASONS TAKING APPROVAL FROM THE CCIT SANCTION OBTAINED FROM CCIT AND ISSUE OF NOTICE UNDER SECTION 148 COMMENCED AND CUL MINATED ON 30.03.2006. THIS FACT IS NOT DISPUTED BY THE REVENUE AUTHO RITIES OR THE DR. THE REASONS AS RECORDED BY THE AO AFTER THE ELAPSE OF FOUR YEARS TO REOPEN THE PROCEEDINGS ARE : ON VERIFICATION OF THE RECORDS DURING THE COURSE O F ASSESSMENT PROCEEDINGS FOR SUBSEQUENT YEAR IT WAS NOTICED THAT THE ASSESSEE H AD EARNED INTEREST INCOME OF RS. 145 71 15 000/- DURING THE A.Y. 1999-00 IN F OREIGN EXCHANGE. HOWEVER THIS INCOME WAS NOT REFLECTED IN THE P&L A/C FOR TH E SAME YEAR. FURTHER IN SCHEDULE 22 NOTE XIIB-5 (ANNUAL REPORT FOR THE YEA R 1998-99) MENTIONS THAT THE ASSESSED HAD EARNED THIS INCOME ON ACCOUNT OF U NUTILIZED PORTION OF GDR PROCEEDS KEPT IN THE BANKS ABROAD IN SHORT TERM DEP OSITS. IT IS FURTHER MENTIONED IN THIS NOTE THAT THIS AMOUNT OF INTERES T ON SUCH DEPOSITS HAS BEEN CONSIDERED AS INCOME EARNED DURING THAT PERIOD AND THE SAME HAS BEEN REDUCED/DEDUCTED FROM FIXED ASSETS/CAPITAL WORK IN PROGRESS/INVESTMENTS IN TELE COMMUNICATION PROJECT AS THE CASE MAY BE. IT I S A1SO MENTIONED IN THE SAME NOTE THAT IN TERMS OF APPROVAL OF THE GOVERNME NT OF INDIA THE GDR PROCEEDS WERE TO BE UTILIZED FOR CAPITAL EXPENDITUR E TO THE EXTENT OF NOT LESS THAN 75% THEREOF. AS IS SEEN FROM THE ABOVE REFERRED NOTE IN TERMS OF PPROVA1 FROM GOVERNMENT OF INDIA THE COMPANY WAS SUPPOSED TO UTILIZE NOT LESS THAN 75% OF GDR PROCEEDS BUT THERE IS / WAS NO CONDITION THAT THE INCOME EAR NED ON UNUTILIZED GDR PROCEEDS WAS ALSO TO BE UTILIZED FOR CAPITAL EXPEND ITURE. WHILE THE COMPANY ACCEPTS (IN THE NOTE 5 REFERRED ABOVE) THAT THE INT EREST INCOME EARNED ON SHORT TERM BANK DEPOSITS OF UNUTILIZED GDR IS AN INCOME E ARNED DURING THE YEAR 1998-99 (AY. 1999-00) BUT THE SAME IS NOT SHOWN I N THE P&L ALE. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT OF INDIA IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. (227 ITR 172) THIS INTEREST INCOM E IS TAXABLE AS INCOME FROM OTHER SOURCES FOR THE A.Y. 1999-00. THE ASSESSEE HAS NOT CLAIMED THIS INCOME AS EXEMPT IN THE PART V OF ITS RETURN OF INCOME FOR THE A.Y. 1999-00. IN THE ABSENCE OF S UCH CLAIM IN THE RETURN OF INCOME THIS INCOME HAS NOT COME TO THE NOTICE OF T HE ASSESSING OFFICER. THOUGH IT IS MENTIONED IN NOTE 5 REFERRED ABOVE THAT THIS INCOME HAS BEEN DEDUCTED TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 3 FROM FIXED ASSETS/CAPITAL WORK IN PROGRESS THE INVE STMENTS IN TELE COMMUNICATION PROJECT BUT THERE IS NO WORKING/DETA ILS FILED BY THE ASSESSEE WITH REGARD TO THE SAME. A SIMPLE NOTE IN THE ANNUA L REPORT WITHOUT THERE BEING ANY CLAIM IN THE RETURN C. R DETAILS FURNISHED BY T HE ASSESSEE DOES NOT ABSOLVE THE ASSESSEE FROM DISCLOSING FULLY AND TRULY ALL MA TERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT A.Y.1999-2000. IN VIEW OF EXPLA NATION (1) TO SEC.147 II HAVE REASON TO BELIEVE THAT THE ABOVE SAID INTEREST INCOME OF RS. 145 71 15 000/- WHICH WAS CHARGEABLE TO TAX HAS ESC APED ASSESSMENT FOR A.Y. 1999-00BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCUSS FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT FOR A.Y. 1999-00. 2. THE VERIFICATION OF THE RECORDS FURTHER REVEAL T HAT THE ASSESSEE HAS SHOWN NEGATIVE INCOME AMOUNTING TO RS. 24 70 01 000/- UND ER THE HEAD TRAFFIC REVENUES IN SCHEDULE 13 TO THE P&.L ALE FOR AY. 199 9-00. THIS NEGATIVE INCOME HAS BEEN SHOWN AGAINST THE HEAD VARIANCE IN ESTIMAT ES (NET). THE ASSESSEE HAS NOT FURNISHED ANY WORKING/DETAILS WITH REGARD T O THIS HEAD OF NEGATIVE INCOME IN ITS RETURN OF INCOME. AS THE ASSESSEE HAS NETTED OF INCOME WITH A LOSS/EXPENSES AND HAS DECLARED NEGATIVE INCOME WITH OUT FURNISHING OR FILING DETAILS OF THE AID LOSS/EXPENSES THIS ASPECT HAS GO NE UNNOTICED AT THE TIME OF ORIGINAL ASSESSMENT. THE ASSESSEE WAS REQUIRED TO F URNISH SEPARATE DETAILS OF THE LOSSES/EXPENDITURE. MERE SHOWING NET INCOME/LOS S UNDER THE REVENUE HEAD DOES NOT ABSOLVE THE ASSESSEE FROM DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESSM ENT YEAR. IN VIEW OF EXPLANATION (1) TO SEC. 147 I HAVE REASON TO BELIE VE THAT THE ABOVE SAID INTEREST INCOME OF RS. 145 71 15 000/- AND RS. 24 70 01 000/ - SHOWN NEGATIVE INCOME UNDER THE HEAD TRAFFIC REVENUE WHICH WERE CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT FOR A.Y. 1999-00 BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT FOR A.Y. 1999-00. SEND PROPOSAL TO THE CCIT(OSD) MUMBAI FOR HIS KIND APPROVAL FOR ISSUE OF NOTICE UNDER SECTION. 148 IN THE CASE FOR THE A.Y. 1999-2000. 4. THE ISSUE REVOLVING HERE HAVE TWO LIMBS: A) INTEREST INCOME OF RS. 145 71 15 000/- AS MENTIONED I N THE REASONS; B) SINCE THE INITIATION OF REASSESSMENT IS AFTER THE LAPSE OF FOUR YEARS WHAT MATERIAL HAD BEEN GATHERED BY THE AO INDICATING ESCAPEMENT OF INCOME WHICH WAS NOT DEALT IN THE REGULAR ASSESSMENT AND CAME TO KNOWLEDGE OF THE AO AFTER THE REGULAR ASSESSMENT UNDER SECTION 143(3) WA S FRAMED THAT LEAD TO FORMATION OF INDEPENDENT BELIEF THEREBY RESULTING IN RECORDING OF REASONS BY THE AO. 5. AS SEEN FROM THE IMPUGNED FIGURE I.E. RS. 145.71 CRORES OF INTEREST WAS A PART OF THE NOTES FORMING PART OF THE AC COUNTS. THE SENIOR COUNSEL THEREFORE SUBMITTED THAT WHEN ONCE THE FIGURE IS A PART OF THE PRIMARY MATERIAL FILED ALONG WITH THE RETURN OF IN COME THE MATERIAL IS DEEMED TO HAVE BEEN CONSIDERED. 6. THE SENIOR COUNSEL POINTED OUT THAT THE ASSESSEE A T THE GIVEN POINT OF TIME THE ASSESSEES NAME WAS M/S VIDESH SANCHA R NIGAM TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 4 LTD. A WHOLLY OWNED GOVERNMENT ENTERPRISE. IN THE WRITT EN SUBMISSIONS DATED 27.11.2006 IT WAS POINTED OUT : THE COMPANY WAS A MONOPOLISTIC INTERNATIONAL TELEC OMMUNICATION SERVICES PROVIDER PUBLIC SECTOR UNDERTAKING (PSU) DURING THE YEAR UNDER CONSIDERATION HAVING SUBSTANTIAL EARNINGS IN FOREIGN CURRENCY. AS A PSU EVERY YEARS THE FINANCIAL STATEMENTS INCLUDING THE SCHEDULES THERE ON ARE AUDITED BY THE STATUTORY AUDITORS APPOINTED BY THE COMPTROLLER & A UDITOR GENERAL (C&AG) OF THE INDIA AND SUBSEQUENTLY AUDITED AND REVIEWED BY THE COMPTROLLER & AUDITOR GENERAL OF INDIA. AT THE OUTSET WE WOULD LIKE TO BRING TO YOUR ATTEN TION THAT AT NOTE NO.5 TO SCHEDULE 22 B THE COMPANY HAS STATED ITS ACCOUNTING METHODOLOGY/PRACTICE W.R.T. INTEREST EARNED ON GDR PROCEEDS AND HAS ALSO STATED THAT THIS INCOME HAS NOT BEEN CREDITED TO PROFIT & LOSS ACCOUNT. THI S FACT HAS BEEN AUDITED AND REPORTED BY THE STATUTORY AUDITORS OF THE COMPANY A ND C&AG OF INDIA. THE FACT THAT NEITHER THE STATUTORY AUDITORS NOR THE C&AG OF INDIA HAVE OTHERWISE REPORTED IN THEIR RESPECTIVE REPORTS AT PAGE NUMBER S 56 AND 83 RESPECTIVELY OF THE ANNUAL REPORT JUSTIFIES OUR POSITION. 7. THE SENIOR COUNSEL FURTHER SUBMITTED THAT OUT OF RS. 145.71 CRORES THE ASSESSEE HAD SHOWN THE AMOUNTS OF RS. 83.25 CRORES IN THE PROFIT & LOSS ACCOUNT AND HAD ADDED BACK RS. 54.75 CROR ES IN THE COMPUTATION (APB 20 & 1). THIS WAS ALSO CONSIDERED BY TH E AO IN THE ORIGINAL/REGULAR ASSESSMENT FRAMED UNDER SECTION 143(3). THE SENIOR COUNSEL THEREFORE SUBMITTED THAT THE AO AND OTHER REV ENUE AUTHORITIES WERE INCORRECT TO SUGGEST THAT RS. 145.71 CR ORES HAD ESCAPED ASSESSMENT. 8. AT THE TIME OF HEARING THE DR FAIRLY SUBMITTED THAT T HE MENTION OF SUBSEQUENT YEAR HAS NEITHER BEEN USED NOR ELABORA TED ANYWHERE FOR THE PURPOSE OF REOPENING. THE DR ALSO ACCEPTED THE FA CTUM OF BRINGING INTO THE ASSESSMENT FOLD THE FIGURES OF RS. 83.25 C RORES AND RS. 54.75 CRORES IN THE REGULAR ASSESSMENT. 9. ON THESE FACTS THE SENIOR COUNSEL SUBMITTED THAT LAW D OES NOT ALLOW THE REASSESSMENT PROCEEDINGS. 10. COMING TO THE SECOND LIMB AS WHAT IS THE MATERIAL GATH ERED BY THE AO WITHIN THE DATE OF REGULAR ASSESSMENT AND THE RE CORDING OF REASONS THE SENIOR COUNSEL SUBMITTED THAT THE AO HAS P ICKED UP THE FIGURE FROM NOTES FORMING PART OF THE ACCOUNTS AND WITHOU T ANY EVIDENCE WITH REGARD TO REASONS PROCEEDED TO REOPEN T HE REGULAR TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 5 ASSESSMENT. THE SENIOR COUNSEL POINTED OUT THAT THE FACT S ARE VERY CLEAR THAT THE ENTIRE CASE OF THE DEPARTMENT HINGED ON THE PRIMARY FACTS ALREADY PART OF THE ORIGINAL RETURN FILED ON 31.12.1999. NO NEW MATERIAL FACT OR EVIDENCE INDICATING THE ESCAPEMENT HAS BE EN FOUND BY THE REVENUE AUTHORITIES. THE SENIOR COUNSEL SUBMITTED THA T EVEN THE GAP OF RS. 7.71 CRORES PERTAINED TO FINAL CALCULATIONS DONE BY THE INTERNAL TREASURY DEPARTMENT OFFICERS AND THE ACTUAL FIGURE TAKEN TO PROFIT & LOSS ACCOUNT BY THE AUDITORS. THE SENIOR COUNSE L ONCE AGAIN SUBMITTED THAT AT THAT POINT OF TIME THE ASSESSEE WAS V SNL WHOSE ACCOUNTS WERE AUDITED AND CONTROLLED BY C & AG WHICH ME ANT THAT THE WRONG OR MISLEADING FINANCIAL STATEMENTS CANNOT EVEN B E COMPREHENDED. 11. ON THESE FACTS THE SENIOR COUNSEL SUBMITTED THAT EV EN THE COURTS HAVE MADE THE LAW VERY CLEAR. HE THEREFORE SUBMIT TED CHART/SYNOPSIS GIVING PROPOSITIONS AND THE RELEVANT CASE LAWS WHICH ARE: A. SINCE ALL FULL DISCLOSURES MADE IN THE DOCUMENTS MANDATORILY FILED WITH THE RETURN OF INCOME REOPENING BEYOND FOUR YEARS I S BAD IN LAW AND LIABLE TO BE QUASHED IN ABSENCE OF FAILURE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS: I) 3I INFOTECH VS ACTI 329 ITR 257 (BOM) II) NYK LINE (INDIA) LTD. VS DCIT 346 ITR 355 (BOM) III) MODEPRO INDIA PVT. LTD. VS. DCT 2010 TIOL237(MUM) B. REOPENING BEYOND FOUR YEARS IS BAD IN LAW AND LI ABLE TO BE QUASHED IN ABSENCE OF FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS: I) CIT VS. FORARMER FRANCE 264 ITR 566 (SC) II) CIT VS. CORPORATION BANK LTD. 254 ITR 791 (SC) III) MANGALORE REFINERY & PETROCHEMICALS VS. CIT 282 ITR 516 (BOM) IV) OTIS ELEVATORS CO. (I) LTD. VS. DCIT 112 TTJ 50 (MUM) V) ITO VS. NEWAB MIR BANKET ALI KHAN BHADUR 97 ITR 239(S C) VI) DCIT VS. DAIMLER CHRYSLER INDIA (P) LTD. 98/PUNE/2004 VII) DCIT VS. ORBITECH LTD. 2010TIOL333 (MUM) VIII) CIT VS. TN TRANSPORT DEVELOPMENT FINANCE CORP. 172 T AXMAN 248/MAD) C. REOPENING IN ABSENCE OF TANGIBLE MATERIAL IS BAD IN LAW I) CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) II) PURITY TECH TEXTILE PVT. LTD. VS. ACIT 325 ITR 459 (BOM ) III) ASTEROIDS TRADING & INVT. P LTD. VS DCIT ITA NO. 308 ITR 190 (BOM) IV) TELCO DADJEE BHACKJEE LTD. VS. DCIT ITA NO. 4613/M/2 005(MUM TR) V) KELVINATOR OF INDIA VS. CIT 256 ITR 1 (DEL-FB) VI) HV TRANSMISSIONS LTD. VS. ITO ITA 2230/MUM/2010(MUM) D. THE POWER TO GRANT APPROVAL UNDER SECTION 151 OF TH E ACT BY THE COMMISSIONER IS NOT TO BE EXERCISED CASUALLY OR IN A ROUTINE MANNER BUT THERE HAS TO BE AN APPLICATION OF MIND BY THE COMMI SSIONER I) CHHUGAMAL RAJPAL VS S.P. CHALIHA AND OTHERS 79 ITR 603(S C) TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 6 II) THE CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. VS ITO 333 I TR 237(DEL) III) UNITED ELECTRICAL CO. P. LTD. VS CIT 258 ITR 317 (DEL) IV) GOVINDA CHOUDHARY & SONS VS ITO 109 ITR 370 (ORI) V) CHANCHAL KUMAR CHATTERJEE VS ITO 93 ITR 130 (CAL) VI) GERMAN REMEDIES 287 ITR 494 (BOM) VII) ARJUN SINGH 246 ITR 363 (MP) VIII) EQUITABLE INVESTMENT 174 ITR 714 (CAL) (ITA NO. 611/MU M/2004)(MUM) IX) M.P. EXPORT 117 TTJ 417 (DEL.) E. BONA FIDE DISCREPANCY BETWEEN THE AUDITED ACCOUN TS (BY CHARTERED ACCOUNTS AND NOTES TO ACCOUNT (PREPARED BY OPERATIO NS STAFF) CANNOT BE THE ONLY JUSTIFICATION FOR AN ADDITION AND THE REAS ONABLE EXPLANATION OF THE ASSESSEE SHOULD BE ACCEPTED I) SHOORJI VALLABHDAS 46 ITR 144 (SC) II) CIT VS. MAYA ENGINEERING WORKS (BOM)(HC) (ITXA NO. 2287 OF 2009 ORDER DATED JUNE 7 2010) III) HINDOOSTAN SPINNING & WEAVING MILLS LTD. VS ACIT (MUM)(TRI) [ITA NO. 1361/MUM/2008 ORDER DATED SEPTEMBER 22 2010] IV) JCIT VS. DEVA SINGH SHAM SINGH 95 ITD 235 (ASR)] F. EXPLANATION OFFERED BY A WHOLLY-OWNED GOVERNMENT COMPANY SHOULD BE ACCEPTED AS THERE CAN BE NO INTENTION OF AN ORGANI ZATION OWNED AND RUN BY THE GOVERNMENT OF INDIA TO CONCEAL ITS INCOM E OR FURNISH INACCURATE PARTICULARS THEREOF. I) DENA BANK VS IAC 25 ITD 109 (BOM TRIBUNAL) II) ITO VS HINDUSTAN PETROLEUM CORPN LTD. 16 ITD 574 (BOM TRIBUNAL) III) M/S EXPORT IMPORT BANK OF INDIA VS DY CIT (ITA NO. 1380/MUM/2008) (MUM ITAT) IV) RURAL ELECTRIFICATION CO-OPERATIVE SOCIETY (279 ITR 319)(MP ) 12. THE SENIOR COUNSEL THEREFORE SUBMITTED THAT LOOKING INTO THE FACT AND ANALYZING THEM WITH THE LAW AS PREVAILING AND JUD ICIAL INTERPRETATIONS ON VARIOUS FACTS ALL COME TO THE CONCLUSION THAT THE REVENUE AUTHORITIES ERRED IN INITIATING THE REASSESSMENT PROCEEDIN GS. 13. THE DR ON THE OTHER HAND STRENUOUSLY SUPPORTED T HE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT EVEN IF EVERY THING REMAINS IN FAVOUR OF THE ASSESSEE BUT THE FACT REMAINS THAT RS. 7 .71 CRORES DID REMAIN UNTAXED. HE THEREFORE SUBMITTED THAT THE REVENU E AUTHORITIES WERE CORRECT MAY BE THE FIGURES COULD BE AT VARIANCE. 14. WE HAVE HEARD THE RIVAL ARGUMENTS AND HAVE ANALYZE D THE FACTS AND EVIDENCE AS SUBMITTED BY THE THEN ASSESSEE VSNL W HILE FILING ITS ORIGINAL RETURN OF INCOME AND WE FIND AS A MATTER OF FACT THAT THE FIGURES AND THE OCCASION FOR RAISING OF FUNDS THROUGH GDR A ND PARKING OF UNUTILIZED FUNDS EITHER ABROAD OR IN INDIA IN TERM DEPOSIT S HAVE BEEN DULY SUBMITTED ALONG WITH THE ORIGINAL RETURN FILED ON 31.12.1999. TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 7 15. WE FIND THAT THE REVENUE AUTHORITIES DID NOT HAVE ANY IDEA AS TO WHICH FIGURES WERE THEY MENTIONING AND HOW THAT FIGURE APP EARING IN THE NOTES TO ACCOUNTS GOT THE TREATMENT IN THE PROFIT & LOSS ACCOUNT. THE REVENUE AUTHORITIES WHILE RECORDING THE REASONS DID N OT EVEN BOTHER TO RECONCILE THE FIGURE WHICH HAD BEEN CLARIFIED IN SU BMISSIONS DATED 27.11.2006 BEFORE THE AO (ADD. CIT) WHICH WAS PICKE D UP BY THEM AND FOR WHICH THE APPROVAL HAD BEEN GRANTED BY TH E CCIT. THESE FACTS HAD BEEN DEALT WITH THE CASE OF ORIENT BEVERAGES L TD. VS ITO REPORTED IN 208 ITR 518 WHEREIN HONBLE CALCUTTA HIGH COURT HELD THAT WHEN AN ORIGINAL ASSESSMENT WAS MADE UNDER SE CTION 143(3) A REASSESSMENT NOTICE ISSUED AFTER A PERIOD OF FOUR Y EARS IS BARRED BY LIMITATION AS PER THE PROVISIONS OF SECTION 147 IF IT COULD NOT BE PROVED THAT THE UNDERASSESSMENT WAS DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS SIMILARLY HONBLE GUJARAT HIGH COURT IN THE CASE OF KARIA D ISTRICT COOP. MILK PRODUCERS UNION LTD. VS ACIT REPORTED IN 216 I TR 371 HELD THAT FOR THE PURPOSE OF REOPENING THE ASSESSMENT AFTER A PERIOD OF FOUR YEARS THE ONUS IS SQUARELY ON THE INCOME-TAX DEPT. TO PROVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE HO NBLE COURT HAS FURTHER HELD THAT THIS CONDITION PRECEDENT NECESSAR Y FOR INVOKING JURISDICTION UNDER SECTION 147 WAS NOT SHOWN TO BE EXISTING: THE ISSUING OF NOTICE WAS WHOLLY WITHOUT JURISDICTION AND COULD NOT BE SUSTAINED. 16. FROM THE UNDISPUTED FACTS THAT THE RECORDING OF REAS ONS SEEKING APPROVAL GETTING THE APPROVAL AND ISSUING OF NOTICE WAS DO NE WITHIN THE PERIOD OF SINGLE WORKING DAY AND ALSO THAT THE NOTICE WAS SERVED BEFORE THE CLOSE OF THE BARRING PERIOD I.E. ANOTHER DAY A DDED TO IT. WE ALSO FIND THAT THE SANCTION ACCORDED BY THE CIT ONLY INS CRIBES YES I AM SATISFIED THIS TOO WAS DONE ON 30.03.2006. EVEN IN THE NOTICE UNDER SECTION 143(2) DATED 29.09.2006 WHICH READS AS UNDER BY SPEED POST 29/9/2006 NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT 1961 P.A.N./GIR AAACV2808C OFFICE OF THE ADDL.CIT RG.1( 3) DATED: 29/09/2006 THE PRINCIPAL OFFICER M/S. VIDESH SANCHAR NIGAM LTD. LOKMANYA VIDESH SANCHAR BHAVAN TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 8 KASHINATH DHURU MARG OPP. KIRTI COLLEGE PRABHADEVI MUMBAI 400 028 SIR / MADAM THERE ARE CERTAIN POINTS IN CONNECTION WITH THE RET URN OF INCOME SUBMITTED BY YOU FOR THE ASSESSMENT YEAR 1999-00 ON WHICH I WOULD LIKE FURTHER INFORMATION. YOU ARE HEREBY REQUIRED TO ATTEND MY OFFICE ON 10.1 0.06 AT 4.00 P.M. EITHER IN PERSON OR BY A REPRESENTATIVE DULY AUTHOR IZED IN WRITING IN THIS BEHALF OR PRODUCE OR CAUSE THERE TO BE PRODUCED AT THE SAID TIME ANY DOCUMENTS ACCOUNTS AND ANY OTHER EVIDENCE ON WHICH YOU AY RELY IN SUPPORT OF THE RETURN FILED BY YOU. SD/- YOURS FAITHFULLY (DR. SUBHASH CHANDRA) ADDL. COMMISSIONER OF INCOME TAX RG. 1(3) MUMBAI SEAL . AND NOTICE UNDER SECTION 142(1) DATED 03.10.2006 WHICH REA DS AS UNDER: BY SPEED POST 03/10/2006 NOTICE UNDER SECTION 142(1) OF THE INCOME TAX ACT 1961 P.A.N./GIR AAACU2808C OFFICE OF THE ADDL.CIT RG.1( 3) DATED: 03.10.2006 THE PRINCIPAL OFFICER VIDESH SANCHAR NIGAM LTD. LOKMANYA VIDESH SANCHAR BHAVAN OPP. KIRTI COLLEGE PRABHADEVI MUMBAI SIR / MADAM IN CONNECTION WITH THE ASSESSMENT FOR THE ASSESSMEN T YEAR 1999-00 YOU HAVE MADE A RETURN UNDER SECTION 139 A NOTICE D ATED ______ WAS SERVED UPON YOU ON ____________ UNDER SECTION 139(2 ) OF THE INCOME TAX ACT 1961. YOU ARE HEREBY REQUIRED *(1) TO PRODUCE OR CAUSE TO BE PRODUCED THE ACCOUNT S AND/OR DOCUMENTS SPECIFIED OVERLEAF (2) TO FURNISH IN WRITING AND VERIFIED IN PRESCRIB ED MANNER THE INFORMATION CALLED FOR ON THE POINTS AND/OR MATTERS SPECIFIED OVERLEAF. AS PER ANNEXURE. PLEASE NOTE THAT THE DATE AND TIME FIXED FOR YOUR C OMPLIANCE IN THIS NOTICE IS 10.10.06 AT 4.00 P.M. IN MY OFFICE AT AAYAKAR BHAVAN 5 TH FLOOR ROOM NO. 547 MUMBAI 20 . SD/- YOURS FAITHFULLY (DR. SUBHASH CHANDRA) ADDL. COMMISSIONER OF INCOME TAX RG. 1(3) MUMBAI TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 9 SEAL . NOTE: FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH THE TERMS OF THIS NOTICE WILL ENTAIL EX-PARTE ASSESSMENT AND MAY FURTHER ENTAIL P ENALTY OR EVEN PROSECUTION. *STRIKE OUT WHATEVER IS INAPPLICABLE. NOTHING CAN BE INFERRED AS TO WHAT EXACTLY THE AO HAS IN HIS POSSESSION AND IN MIND. 17. FROM THE ENTIRE SET OF CIRCUMSTANCE AND ANALYZING THE EVENT S WE CANNOT COMPREHEND AS TO HOW THE FILE MOVE SO FAST AND A S TO HOW THE CIT ACCORDED THE APPROVAL WHERE HE OUGHT TO HAVE APP LIED HIS MIND. WE FIND IN CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. VS ITO RE PORTED IN 333 ITR 237 HONBLE DELHI HIGH COURT HELD THAT REASONS ARE THE LINK BETWEEN THE MATERIAL P LACED ON RECORD AND THE CONCLUSION REACHED BY AN AUTHORITY IN RESPECT O F AN ISSUE SINCE THEY HELP IN DISCERNING THE MANNER IN WHICH THE CONCLUSI ON IS REACHED BY THE CONCERNED AUTHORITY. IT WAS A CASE WHERE LITERALLY A MERE STAMP WAS AFFIXED AND WAS SIGNED BY AN UNDER SECRETARY UNDERN EATH A STAMPED YES AGAINST THE COLUMN WHICH QUERIED AS TO WHETHE R THE APPROVAL OF THE BOARD HAD BEEN TAKEN. RUBBER STAMPING OF UNDERL YING MATERIAL SUGGESTED THAT THE DECISION WAS TAKEN IN A MECHANIC AL MANNER. THUS A PROPER APPLICATION OF MIND HAD NOT TAKEN PLACE. UNI ON OF INDIA V. CAPOOR (M.L.) [1994] AIR 1974 SC 87 APPLIED. 18. SIMILARLY HONBLE BOMBAY HIGH COURT IN THE CASE OF GER MAN REMEDIES VS DCIT REPORTED IN 287 ITR 494 HELD WHILE GRANTING APPROVAL TO THE NOTICE IT WAS OBLIG ATORY ON THE PART OF THE COMMISSIONER TO VERIFY WHETHER THERE WAS ANY FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE RELEVANT FAC TS IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT OF INCOME OF THAT A SSESSMENT YEAR. IT WAS ALSO OBLIGATORY ON THE PART OF THE COMMISSIONER TO CONSIDER WHETHER OR NOT POWER TO REOPEN WAS BEING INVOKED WI THIN A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR TO W HICH THE PROCEEDINGS RELATED. NONE OF THESE ASPECTS HAD BEEN CONSIDERED BY HIM. THE NOTICES AND CONSEQUENTLY THE ORDER JUSTIFYING R EASONS RECORDED WERE UNSUSTAINABLE. THE HONBLE HIGH COURT FINALLY HELD IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER ON SEPTEMBER 15 2003 HAD HIMSELF CARRIED THE FILE TO THE COMMISSIONER OF INCOME-TAX AND ON THE VERY SAME DAY RATHER THE SAME MOMENT IN THE P RESENCE OF THE ASSESSING OFFICER THE COMMISSIONER OF INCOME-TAX GRANTED APPROVAL. AS A MATTER OF FACT WHILE GRANTING APPROVAL IT WAS OBLIGATORY ON HIS PART TO VERIFY WHETHER THERE WAS ANY FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULL AND TRUE RELEVANT FACTS IN THE RETUR N OF INCOME FILED FOR THE ASSESSMENT OF INCOME OF THAT ASSESSMENT YEAR. IT W AS ALSO OBLIGATORY ON THE PART OF THE COMMISSIONER TO CONSIDER WHETHER OR NOT POWER TO REOPEN IS BEING INVOKED WITHIN A PERIOD OF FOUR YEA RS FROM THE END OF THE ASSESSMENT YEAR TO WHICH THEY RELATE. NONE OF THESE ASPECTS HAVE BEEN CONSIDERED BY HIM WHICH IS SUFFICIENT TO JUSTIFY TH E CONTENTION RAISED BY TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 10 THE PETITIONER THAT THE APPROVAL GRANTED SUFFERS FR OM NON-APPLICATION OF MIND. IN THE ABOVE VIEW OF THE MATTER THE IMPUGNED NOTICES AND CONSEQUENTLY THE ORDER JUSTIFYING REASONS RECORDED ARE UNSUSTAINABLE. THE SAME ARE LIABLE TO BE QUASHED AND SET ASIDE. 19. HONBLE SUPREME COURT OF INDIA IN THE CASE OF CHHUGA MAL RAJPAL VS S P CHALIHA REPORTED IN 79 ITR 602 (SC) HELD (I) THAT THE INCOME-TAX OFFICER HAD NOT EVEN COME TO PRIMA FACIE CONCLUSION THAT THE LOAN TRANSACTIONS TO WHICH HE R EFERRED WERE NOT GENUINE TRANSACTIONS: HE APPEARED TO HAVE ONLY A VA GUE FEELING THAT THEY MIGHT BE BOGUS TRANSACTIONS. SUCH A CONCLUSION DID NOT FULFILL THE REQUIREMENTS OF SECTION 151(2). UNDER THAT SECTION HE HAD TO GIVE REASONS FOR ISSUING A NOTICE UNDER SECTION 148. HE SHOULD HAVE SOME PRIMA FACIE GROUNDS BEFORE HIM FOR TAKING ACTION UN DER SECTION 148. HIS CONCLUSION THAT THERE WAS A CASE FOR INVESTIGATING THE TRUTH OF THE ALLEGED TRANSACTIONS WAS NOT THE SAME THING AS SAYI NG THAT THERE WERE REASONS FOR THE ISSUE OF THE NOTICE. THE COMMISSION ER HAD MECHANICALLY ACCORDED PERMISSION. THE IMPORTANT SAFEGUARDS PROVI DED IN SECTIONS 147 AND 151 WERE LIGHTLY TREATED BY THE OFFICER AND THE COMMISSIONER. THE INCOME-TAX OFFICER COULD NOT HAVE HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT BY REASON OF THE APPELLANT-F IRM'S FAILURE TO DISCLOSE MATERIAL FACTS AND IF THE COMMISSIONER HAD READ THE REPORT CAREFULLY HE COULD NOT HAVE COME TO THE CONCLUSION THAT THIS WAS A FIT CASE FOR ISSUING A NOTICE UNDER SECTION 148. THE NO TICE ISSUED UNDER SECTION 148 WAS THEREFORE INVALID. 20. FROM THE DETAILS WE FIND THAT THE REASON TALKS ABOUT NOT BRINGING TO TAX INTEREST INCOME OF RS. 145.71 CRORES. HOWE VER FROM THE EVIDENCE ALREADY ON RECORD AT THE ORIGINAL STAGE RS. 138 CRORES WERE SUO MOTO OFFERED. FROM THESE FACTS IT IS CLEAR THAT THE REVENUE AUTHORITIES DID NOT EVEN KNOW AS TO WHAT AMOUNT WAS TO BE CONSIDERED FOR THE PURPOSES OF REASSESSMENT PROCEEDINGS . THE HONBLE SUPREME COURT HAS CATEGORICALLY LAID DOWN THE RATIO THAT THE REASONS TAKEN FOR INITIATION OF REASSESSMENT PROCEEDING HAVE TO BE SPECIFIC AND PRECISE. THESE QUALIFICATIONS WE DO NOT FIND FROM THE REASO NS RECORDED BY THE AO NOR WAS THE DR ABLE TO THROW ANY LIGHT TO SUPPORT THE AO. 21. THE SENIOR COUNSEL HAS LIKE WISE RELIED ON A NUMBER OF JUDGMENTS AS MENTIONED IN THE PRE PARAS WHICH HAVE BEE N CONSIDERED BY US SINCE THE CRUX OF THE ISSUE REMAINS THE SAME WE ARE NOT REFERRING INDIVIDUALLY AND INDEPENDENTLY ON EACH OF THE CASE CITED BY THE SENIOR COUNSEL. TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 11 22. WE MAY MENTION HERE THAT IT WAS THE SENIOR COUNSEL WHO POINTED OUT THE GAP OF RS. 7.71 CRORES AND IT IS NOT COMIN G OUT FROM THE REASONS. EVEN THE DR ACCEPTED THE FACT THAT THE R EVENUE AUTHORITIES DID NOT HAVE THE IDEA AS TO WHAT HAS ESCAPE D ASSESSMENT. THIS FACT CAN BE GAUGED FROM THE STATUTORY NOTICES SENT TO VSNL UNDER SECTION 143(2) DATED 29.09.2006 AND UNDER SECTION 142(1) D ATED 03.10.2006 (WHICH HAVE BEEN REPRODUCED IN PRE PARAS). TH ESE NOTICES IT CAN BE SEEN DOES NOT HAVE ANY ALLEGATION OR GIVEN ANY INKLING OF THE THOUGHT PROCESS OF THE REVENUE AUTHORITIES (THESE NOTIC ES HAVE BEEN PLACED AS DPB BY THE DR). SINCE THE FACTS AS EXPLAINED AN D ACCEPTED BY THE DR TO BE CORRECT AND ARE ACCEPTED TO BE AT VARIANCE WITH THE REASONS RECORDED BY THE AO TO INITIATE THE REASSESSMENT PROCEEDINGS. THIS FACT ITSELF IS A GOOD ENOUGH BASIS FOR US TO QUASH THE REASSESSMENT PROCEEDINGS. HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561 HAS HELD AFTER APRIL 1 1989 THE ASSESSING OFFICER HAS P OWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL T O COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASON MUST HAVE A LINK WITH THE FORMATION OF THE B ELIEF. 23. WE FIND FROM THE FACTS THAT THERE IS NO LINK AT ALL BECA USE THE REVENUE AUTHORITIES ARE BASING THEIR REASONS WHICH ARE FA R & DIVERGENT FROM THE FACTS. ACTUALLY THE FACTS WERE ALREADY FILED BY THE ASSESSEE IN ITS ORIGINAL RETURN. 24. HONBLE BOMBAY HIGH COURT IN THE CASE OF PURITY TECH TEXTILE PVT. LTD. VS ACIT REPORTED IN 325 ITR 459 HAS HELD THE JURISDICTIONAL CONDITION UNDER SECTION 147 OF THE INCOME-TAX ACT 1961 IS THE FORMATION OF A BELIEF BY THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR. THE REASONS WHICH ARE RECORDED BY THE ASSESSING OFF ICER ARE CRUCIAL AND IT IS ON THE BASIS OF THOSE REASONS ALONE THAT THE VALIDITY OF THE ORDER REOPENING AN ASSESSMENT HAS TO BE DECIDED. WH ERE AN ASSESSMENT HAS BEEN MADE UNDER SECTION 143(3) ACTI ON CAN BE INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT BECAUSE OF THE FAILURE OF THE ASSESSEE TO MAKE FULLY AND TR ULY A DISCLOSURE OF THE MATERIAL FACTS. TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 12 25 . HONBLE BOMBAY HIGH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENT PVT. LTD. REPORTED IN 308 ITR 190 HAS HELD THERE WAS NO MATERIAL BEFORE THE ASSESSING OFFICER THAT WOULD LEAD TO A FORMATION OF BELIEF THAT INCOME HAD ESCAPED ASSES SMENT. IN THIS CASE AS WELL THE ASSESSING OFFICER HAD RELIED EXCLUSIVE LY ON AN AUDIT OBJECTION. THERE WAS HENCE A TOTAL ABSENCE OF 'TANG IBLE MATERIAL' TO JUSTIFY THE CONCLUSION THAT INCOME HAD ESCAPED ASSE SSMENT. 26. WE HAVE TO TAKE INTO CONSIDERATION THE TWIN CONSIDERATION/FACTORS I.E. THE FIGURE USED BY THE AO WAS ALR EADY THERE WHEN THE REGULAR ASSESSMENT WAS FRAMED UNDER SECTION 1 43(3) AND IT HAS TO BE PRESUMED THAT THE ISSUE HAD BEEN CONSIDERED BY THE AO WHILE FRAMING THE REGULAR ASSESSMENT AND THAT THE PRESENT PROCE EDINGS ARE BEYOND THE FOUR YEARS PERIOD. TO LEGALLY JUSTIFY THE CORRECTNESS OF THE PROCEEDINGS SOME MATERIAL HAD TO COME TO NOTICE OF T HE AO WHICH WAS NEVER THERE AND NO NEW/FRESH MATERIAL CAME TO THE NOTICE OF THE AO IN THE PERIOD BETWEEN REGULAR ASSESSMENT AND RECORD ING OF REASONS. 27. BOMBAY HIGH COURT IN THE CASE OF 3I INFOTECH VS ACIT REPORTED IN 329 ITR 257 HAS HELD WHERE A REOPENING OF ASSESSMENT TAKES PLACE BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE TEST WHICH THE STATUTE REQUIRES TO BE APPLIED IS BASED ON THE NATU RE OF THE DISCLOSURE THAT IS MADE BY THE ASSESSEE. IF THE ASSESSEE HAS M ADE A FULL AND TRUE DISCLOSURE OF ALL THE MATERIAL FACTS FOR HIS ASSESS MENT THE ACTION OF REOPENING THE ASSESSMENT WOULD STAND BARRED. PARLIA MENT HAS USED THE WORD 'NECESSARILY' IN EXPLANATION 1 TO SECTION 147 OF THE INCOME-TAX ACT 1961. THE EXPRESSION 'NECESSARILY' MEANS INEVI TABLY OR AS A MATTER OF A COMPELLING INFERENCE. A GROUND WHICH HAS NO B ASIS EITHER IN THE NOTICE FOR REOPENING THE ASSESSMENT OR IN THE ORDER DEALING WITH THE OBJECTIONS OF THE ASSESSEE CANNOT BE HEARD TO BE UR GED BY THE DEPARTMENT FOR THE FIRST TIME IN PROCEEDINGS INSTI TUTED BY THE ASSESSEE UNDER ARTICLE 226 OF THE CONSTITUTION TO CHALLENGE THE REOPENING OF THE ASSESSMENT. HELD ALLOWING THE PETITION THAT THE F IRST GROUND ON WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED WAS THAT T HE ASSESSEE HAD ENGAGED A WHOLLY OWNED SUBSIDIARY FOR PROVIDING MAR KET DEVELOPMENT AND SALES SUPPORT IN THE US. THE SUBSIDIARY WAS BEI NG REMUNERATED ON A COST PLUS BASIS. OUT OF SUCH REMUNERATION EXPENS ES AMOUNTING TO RS. 218.54 MILLION (RS. 21.85 CRORES) WERE TREATED AS D EFERRED OVER A PERIOD OF TWO YEARS. THE ASSESSEE HAD AMORTISED RS. 9.36 C RORES OUT OF THE AMOUNT OF RS. 21.85 CRORES. ACCORDING TO THE ASSESS ING OFFICER THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS. 21.85 CRORE S IN THE COMPUTATION OF INCOME WHILE ADDING BACK THE AMORTIS ED AMOUNT. HOWEVER THE EXPENDITURE SHOULD HAVE BEEN TREATED A S CAPITAL TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 13 EXPENDITURE AND THE ASSESSEE WAS STATED TO HAVE WRO NGLY CLAIMED THE DEDUCTION TOWARDS SUCH EXPENSES. THE MATERIAL ON RE CORD SHOWED THAT THE STATEMENT OF TOTAL INCOME OF THE ASSESSEE INCLU DED AN AMOUNT OF RS. 9.36 CRORES WHICH WAS ADDED BACK AS AN ITEM NOT ALL OWABLE OR CONSIDERED SEPARATELY. AN AMOUNT OF RS. 21.85 CRORE S WAS DEDUCTED AS MARKET DEVELOPMENT AND SUPPORT EXPENSES. NOTE 5 OF THE NOTES ATTACHED TO AND FORMING PART OF THE RETURN CONTAINED A DISCL OSURE TO THE EFFECT THAT MARKET DEVELOPMENT AND SUPPORT EXPENDITURE AMOUNTIN G TO RS.21.85 CRORES HAD BEEN CLAIMED AS A DEDUCTION IN THE YEAR. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD S OUGHT INTER ALIA A DISCLOSURE TOGETHER WITH DOCUMENTARY EVIDENCE IN RE LATION TO THE MARKET DEVELOPMENT AND SUPPORT EXPENSES WHICH WERE AMORTIS ED. IT WAS AFTER THE ASSESSEE HAD FILED ITS RESPONSE THAT AN ORDER O F ASSESSMENT WAS PASSED BY THE ASSESSING OFFICER. HENCE THERE WAS N O FAILURE TO DISCLOSE FACTS NECESSARY FOR ASSESSMENT 28. SIMILARLY IN NYK LINE (INDIA) LTD. VS DCIT REPORTED IN 346 ITR 355 HONBLE BOMBAY HIGH COURT HAS HELD UNDER THE PROVISO TO SECTION 147 OF THE INCOME-TAX ACT 1961 THE PRIMARY REQUIREMENT WHICH MUST BE FULFILLED WHERE A N ASSESSMENT IS SOUGHT TO BE REOPENED BEYOND A PERIOD OF FOUR YEARS IS THAT THERE MUST BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOS E FULLY AND TRULY ALL NECESSARY FACTS FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. BEYOND A PERIOD OF FOUR YEARS THE TEST IS NOT MERELY WHETHER THERE HAS BEEN AN ESCAPEMENT OF INCOME BUT WHETHER THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT. 29. BESIDES THESE DECISIONS THE SENIOR COUNSEL PLACED RELIANCE O N A PLETHORA OF DECISIONS AS MENTIONED IN THE PRE PARAS. ALL THE DECISIONS AS RELIED UPON BY THE SENIOR COUNSEL HAVE BEEN TAKEN INT O CONSIDERATION AND SINCE THE ISSUE IS SIMILAR WE ARE NOT G OING INTO THE DETAILS OF EACH OF THE DECISIONS CITED BY THE SENIOR COUNSEL. 30. IN THESE CIRCUMSTANCES THE BENCH ENQUIRED FROM THE DR WITH REGARD TO MATERIAL BROUGHT ON RECORD IN THE INTERIM PER IOD BETWEEN REGULAR ASSESSMENT TO THE DATE OF RECORDING OF REASONS FOR WHICH THE DR MENTIONED THAT THE TIME MAY BE GIVEN FOR SEEKING FURTH ER DETAILS. THIS REQUEST OF THE DR AT THIS STAGE CANNOT BE ACCEPTE D HENCE IT HAS BEEN NEGATED. THIS SIMPLY MEANS THAT THE REVENUE AUTHO RITIES WANT TO GAIN SOME TIME AND IT IS EVIDENT THAT THE REVENUE AUTHOR ITIES SIMPLY WORKED MECHANICALLY WITHOUT APPRECIATION OF FACTS AND EVIDE NCES ALREADY BEFORE THEM. IN ANY CASE WHAT THE DR ULTIMATELY ZEROED IN WAS THE UNRECONCILED DIFFERENCE BETWEEN THE NOTES TO ACCOUNT S AND THE TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 14 FINAL PROFIT & LOSS ACCOUNT THAT TOO WHICH WAS CLARIFIED BY T HE SENIOR COUNSEL. THIS ALSO IS AN UNDISPUTED FACT THAT THE RECONC ILIATION WAS EXPLAINED BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS DATE D 27.11.2006. THIS CERTAINLY CANNOT BE CALLED A DISCREPANCY A S HELD BY THE HONBLE SUPREME COURT OF INDIA IN CIT VS SHOORJI VALLB HDAS & CO. REPORTED IN 46 ITR 144 WHEREIN IT WAS HELD THAT THE SUBSEQUENT AGREEMENT HAD ALTERED THE RATE OF COMMISSION IN SUCH A WAY AS TO MAKE THE INCOME WHICH REALLY ACCRU ED TO THE ASSESSEE DIFFERENT FROM WHAT HAD BEEN ENTERED IN THE BOOKS O F ACCOUNT. THIS WAS NOT A CASE OF A GIFT BY THE ASSESSEE TO THE MANAGED COMPANIES OF A PORTION OF INCOME WHICH HAD ALREADY ACCRUED BUT AN AGREEMENT TO RECEIVE A LESSER REMUNERATION THAT WHAT HAD BEEN AG REED UPON. THE ASSESSEE HAD IN FACT RECEIVED ONLY THE LESSER AMOUN T IN SPITE OF THE ENTRIES IN THE ACCOUNT BOOKS AND THIS LESSER AMOUN T ALONE WAS TAXABLE. INCOME-TAX IS A LEVY ON INCOME. THOUGH THE INCOME-T AX ACT TAKES INTO ACCOUNT TWO POINTS OF TIME AT WHICH THE LIABILITY T O TAX IS ATTRACTED VIZ. THE ACCRUAL OF THE INCOME OR ITS RECEIPT YET THE S UBSTANCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL TH ERE CANNOT BE A TAX EVEN THOUGH IN BOOK-KEEPING AN ENTRY IS MADE ABOUT A 'HYPOTHETICAL INCOME' WHICH DOES NOT MATERIALIZE. WHERE INCOME H AS IN FACT BEEN RECEIVED AND IS SUBSEQUENTLY GIVEN UP IN SUCH CIRCU MSTANCES THAT IT REMAINS THE INCOME OF THE RECIPIENT EVEN THOUGH GI VEN UP THE TAX MAY BE PAYABLE. WHERE HOWEVER THE INCOME CAN BE SAID NOT TO HAVE RESULTED AT ALL THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT IN CERTA IN CIRCUMSTANCES HAVE BEEN MADE IN THE BOOKS OF ACCOUNT. 31. THIS IS EVIDENT FROM THE FACT THAT THE AMOUNT PICKED UP BY THE AO TO INITIATE REASSESSMENT PROCEEDINGS WAS MENTIONED IN THE NOTES TO ACCOUNTS AND NOT THE FINAL PRESENTATION OF ACCOUNTS IN TH E FORM OF PROFIT & LOSS ACCOUNT OR THE BALANCE SHEET. 32. SIMILAR VIEW WAS TAKEN BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS MAYA ENGINEERING WORKS IN ITA NO. 228 7 OF 2009 WHEREIN IT WAS HELD THE TRIBUNAL HAS FURNISHED A FINDING OF FACT ON TH E BASIS OF WHICH IT HAS COME TO THE CONCLUSION THAT THE FIGURES CONTAIN ED IN THE TAX AUDIT REPORT COULD NOT BE ACCEPTED. FOR INSTANCE THE TRI BUNAL HAS HELD THAT EVEN AS PER THE EXCISE RECORDS THE QUANTITY OF CLOS ING STOCK COULD NOT HAVE BEEN MORE THAN 60 TONS BUT THE ASSESSING OFFI CER SIMPLY ADOPTED THE FIGURE CONTAINED IN THE TAX AUDIT REPORT FOR CL OSING STOCK DISREGARDING OTHER CONTEMPORANEOUS EVIDENCE. AND ALSO SIMILARLY HELD BY THE COORDINATE BENCHES OF THE ITAT IN THE CASES OF HINDUSTAN SPINNING & WEAVING MILLS LTD. VS ACIT IT A NO. TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 15 1361/MUM/2008 (MUM) AND IN JCIT VS DEVA SINGH SHAM SINGH REPORTED IN 95 ITD 235 (ASR). 33. WE CANNOT IGNORE THE FACT THAT THE ASSESSEE IN THE CURRENT YEAR WAS A WHOLLY OWNED GOVERNMENT OF INDIA ENTERPRISE AND T HE RESULTS DECLARED BY THEM CANNOT BE EXPECTED TO BE WRONG INFIRM OR ILLEGAL. BESIDES THIS THERE CANNOT BE ANY INTENSION OF THE ASSES SEE HEREIN FOR CONCEALMENT OR TO FURNISH INACCURATE PARTICULARS IN INCOME RESULTING IN ESCAPEMENT OF INCOME WHICH WOULD JUSTIFY INITIATION OF REASSESSMENT PROCEEDINGS. THE RATIO ON ACCOUNT OF INTENT ION OF THE ASSESSEE TO NOT TO MISLEAD THE REVENUE WAS DEALT WITH IN THE CASE OF DENA BANK VS IAC REPORTED IN 25 ITD 109 (ITAT BOM) BE ING A CASE UNDER PENALTY PROVISIONS IT WAS OBSERVED A FRAUDULENT CLAIM OF DEDUCTION IN WORKING OUT THE INCOME AS SUCH AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING INAC CURATE PARTICULARS THEREOF AS SUPPRESSION OF ANY ITEM OF INCOME. HOWEV ER IN THE INSTANT CASE THE ASSESSEE WAS A NATIONALIZED BANK WHICH WA S FULLY OWNED BY THE GOVERNMENT OF INDIA AND ADMINISTERED BY ITS NOM INEES. IT WOULD NOT BE AN UNREASONABLE PRESUMPTION THAT IT COULD NOT BE THE INTENTION OF AN ORGANIZATION OWNED AND RUN BY THE GOVERNMENT OF IND IA TO CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS THEREOF WI TH A VIEW TO EVADE PAYMENT OF PROPER TAXES DUE TO THE GOVERNMENT OF IN DIA. AND IN ITO VS HPCL REPORTED IN 16 ITD 574 (ITAT BOM) IT WAS NOT UNDER DISPUTE THAT THE ASSESSEE WAS A W HOLLY-OWNED GOVERNMENT COMPANY. THERE WAS THEREFORE MERIT IN THE ARGUMENT THAT THERE COULD BE NO DELIBERATE INTENTION ON THE PART OF THE ASSESSEE TO UNDERESTIMATE ITS INCOME AND ADVANCE TAX PAYABLE BA SED THEREON IN THE FIRST TWO INSTALMENTS WITH ANY MOTIVE WHATSOEVER ALSO IN EXIM BANK VS DCIT ITA NO. 1380/MUM/2008 (MUM) ALSO UNDER PENAL PROVISIONS IT WAS HELD IT IS THE SUBMISSIONS OF THE LEARNED COUNSEL FOR T HE ASSESSEE THAT SINCE THE ASSESSEE IS A PUBLIC FINANCIAL INSTITUTION AND ITS BOARD OF DIRECTORS ALWAYS CONSIST OF EMINENT PERSONALITIES AND SENIOR BUREAUCRATS OF GOVERNMENT OF INDIA THEREFORE THERE CANNOT BE ANY DELIBERATE ATTEMPT TO CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICU LARS OF INCOME. AND OTHER CASES REFERRED TO BY THE SENIOR COUNSEL. 34. THESE FACTUAL CIRCUMSTANCES AND THE VARIOUS DECISION S DISCUSSED BY US AND OTHER PLETHORA OF DECISIONS AS REFER RED BY THE AR TATA COMMUNICATION LIMITED (FORMERLY VIDESH SANCHAR NIGAM LIMITED) ITA NO. 5543/MUM/2009 16 DOES NOT INSPIRE ANY CONFIDENCE TO SUSTAIN THE REASSESSM ENT PROCEEDINGS. 35. WE THEREFORE HOLD THAT INITIATION OF REASSESSMENT PROCE EDINGS WERE BAD IN LAW AND THE CONSEQUENT REASSESSMENT MADE BY THE AO IS LIABLE TO BE QUASHED BEING INVALID. 36. SINCE WE HAVE QUASHED THE REASSESSMENT THE OTHER GROUNDS OF APPEAL ON MERIT BECOME INFRUCTUOUS. WE HOLD ACCORDINGLY. 37. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCTOBER 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE: 11 TH OCTOBER 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) & & ' ( ) - XXI MUMBAI / THE CIT (A)-XXI MUMBAI. 4) & & ' CITY-I MUMBAI / THE CIT CITY -I MUMBAI 5) )*+ & & -. / THE D.R. I BENCH MUMBAI. 6) +/ 0 COPY TO GUARD FILE. &12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 & -. DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI *784 . . * CHAVAN SR. PS