DELHI TELEVISION LTD. versus DEPUTY COMMISSIONER OF INCOME TAX

Citation: [2020] 7 S.C.R. 649 · Decided: 03-04-2020 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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NEW DELHI TELEVISION LTD.
v.
DEPUTY COMMISSIONER OF INCOME TAX
(Civil Appeal No. 1008 of 2020)
APRIL 03, 2020
[L. NAGESWARA RAO AND DEEPAK GUPTA, JJ.]
Income Tax Act, 1961 : s.147 – Power under, invocation of –
Whether the revenue had sufficient reasons to believe that
undisclosed income of the assessee has escaped assessment and
there were grounds to issue notice u/s.147 – Held: Information which
comes to the notice of the assessing officer during proceedings for
subsequent assessment years can definitely form tangible material
to invoke powers vested with the assessing officer u/s.147 of the
Act – At the stage of issuance of notice, the assessing officer is to
only form a prima facie view – In the instant case, material disclosed
in assessment proceedings for subsequent years was sufficient to
form such a view – Accordingly, there were reasons to believe that
income had escaped assessment in this case.
Income Tax Act, 1961: s.147, first proviso – Limitation –
Invocation of extended period – Allegation of non-disclosure of
material facts – Allegation that the assessee was guilty of creating
network of shell companies with a view to transfer its untaxed income
in India to entities abroad and then bring it back to India thereby
avoiding taxation – Revenue placed reliance on certain complaints
made by the minority shareholders and it was alleged that those
complaints revealed that assessee was indulging in round tripping
of its funds – Held: These complaints did not see light of the day
either before the High Court or before this Court and, therefore, it
was unfair to the assessee if they were relied upon – Revenue can
take the benefit of the extended period of limitation of 6 years for
initiating proceedings under the first proviso s.147 of the Act, only
if revenue can show that the assessee had failed to disclose fully
and truly all material facts necessary for its assessment – Assessee
had disclosed all the facts it was bound to disclose – If the revenue
wanted to investigate the matter further at that stage it could have
easily directed the assessee to furnish more facts – Assessee made a
[2020] 7 S.C.R. 649
649
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SUPREME COURT REPORTS
[2020] 7 S.C.R.
disclosure about having agreed to stand guarantee for the
transaction by NNPLC and it had also disclosed the factum of the
issuance of convertible bonds and their redemption – The income,
if any, arose because of the redemption at a discounted price – This
was an event which took place subsequent to the assessment year
in question though it may be income for the assessment year – All
relevant facts were duly within the knowledge of the assessing officer
– Assessing officer knew who were the entities who had subscribed
to other convertible bonds and in other proceedings relating to the
subsidiaries the same assessing officer had knowledge of addresses
and the consideration paid by each of the bondholders – The fact
that step-up coupon bonds for US$ 100 million were issued by
NNPLC was disclosed; who were the entities which subscribed to
the bonds was disclosed; and the fact that the bonds were discounted
at a lower rate was also disclosed before the assessment was
finalised – This transaction was accepted by the assessing officer
and it was clearly held that the assessee was only liable to receive
guarantee fees on the same which was added to its income – It
cannot be said that the assessee had withheld any material
information from the revenue.
Income Tax Act, 1961: s.147, second proviso – Plea of revenue
that in terms of second proviso to s.147 r/w s.149(1)(c), limitation
period would be 16 years since assessee has derived income from
foreign entity – Held: The notice issued to assessee was silent with
regard to second proviso – In the notice, there was no mention of
any foreign entity – There was only mention of s.148 – There was
nothing to indicate that revenue was intending to apply the extended
period of 16 years – It was only after assessee filed its reply to the
reasons given, that in the order of rejection for the first time,
reference was made to the second proviso by the revenue – This is
not fair or proper procedure – 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 s.147 of
the Act – Accordingly, the notice and the supporting reasons did
not in

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