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Judgment
International Transaction,Amount,
Receipt for [the] acquisition of Advertisement airtime
inventory","2,586,079,609",
Date of orders,"Assessment Year
(AY)",Proceedings
26.12.2014,AY 2010-2011,Order passed by the DRP.
27.03.2015,AY 2011-2012,"Final assessment order passed under Section 143(3) of the Act and not a
draft assessment order as petitioners were not eligible assesses,
10.03.2016,AY 2012-13,"Final assessment order passed under Section 143(3) of the Act and not a
draft assessment order as petitioners were not found to be eligible
assessees,
23.03.2016,AY 2010-2011,"This Court quashed the draft and final assessment order as petitioners
were not found to be eligible assessees.
xii. Twelfth, the sanctions granted under Section 151 of the Act, have been accorded without due application of mind. The sanctions granted by the",,
concerned officer are mechanical as is evident from the reasons given while approving initiation of impugned proceedings: ""This is [a] fit case for",,
issue of [sic ""issuing""] notice u/s 148 of the IT Act, 1961. Approved"" [See CIT vs. S Goyanka Lime & Chemical Ltd., (2019) 237 Taxman 378 (SC),",,
Chhugamal Rajpal vs. S.P. Chaliha, (1971) 79 ITR 603 (SC), PCIT vs. NC Cables Ltd., (2017) 391 ITR 11 (Del) and United Electrical CO (P.) Ltd.",,
vs. Commissioner of Income-Tax, (2002) 258 ITR 317 (Del)]",,
Submissions advanced on behalf of the respondent:,,
On behalf of the respondent, arguments were advanced by Ms. Vibhooti Malhotra. Ms. Malhotra argued, broadly, on the following lines.",,
i. An alternate statutory remedy that was equally efficacious was available to the petitioners, and therefore, the instant writ petition should not be",,
entertained. [See: CIT vs. Chhabil Dass Agarwal, (2014) 1 SCC 603]",,
ii. The petitioners have wrongly sought to place reliance on this Courtâ€s order dated 23.03.2016 [passed in W.P. (C) Nos. 2384/2015 and 2397/2015,,
concerning AY 2010-2011]. This Court, via the said order, quashed final assessment orders and reiterated the principle that assessment orders passed",,
contrary to the requirement of Section 144C of the Act are, entirely without jurisdiction. This observation was made by this Court, in the said order, as",,
it took exception to the AO attempting to finalize the assessment; conduct which was found contrary to the principles laid down in the judgement of,,
the Supreme Court rendered in Union of India vs. Kamlakshi Finance Corporation Limited, 1992 Supp (1) SCC 443. Thus, the said judgement dated",,
23.03.2016 is distinguishable. In the present cases, the AO has validly exercised his jurisdiction for initiating reassessment proceedings. In the instant",,
cases, although, scrutiny proceedings were initiated, final assessment orders could not be framed as the DRP declined to issue any directions qua the",,
draft assessment orders. Therefore, the action taken by the AO aligned with this Court's decision dated 23.03.2016. Significantly, this Court in the",,
aforementioned judgement, clarified that it had not expressed any opinion regarding the validity of proceedings taken out against ESSA and ESSD [i.e.,",,
the petitioners] under Section 147 and 148 of the Act.,,
iii. The contention of the petitioners, that (re)assessment proceedings could not have been initiated in the absence of new and tangible material and",,
therefore the impugned action of the AO suffers from an error of change of opinion, is without merit as it flies in the face of provision of explanation 2",,
appended to Section 147 of the Act.,,
iv. The assertion made on behalf of the petitioners that the draft assessment orders passed by the AO were final insofar as AO was concerned, is",,
flawed. It is an admitted fact that the additions proposed in the draft assessment orders were not examined on merits by the DRP given the conclusion,,
reached by it that the petitioners were not eligible assessees. Had such a step been taken, it is only then the AO could have completed the",,
proceedings, having regard to the provisions of sub-section (5) and (13) of Section 144C of the Act. [See Principal Appraiser (Exports), Collectorate",,
of Customs and Central Excise and Ors. vs. Esajee Tayabally Kapasi, 1995 (80) ELT 3]",,
v. The draft assessment orders passed by the AO were ""inchoate"" and cannot be termed as an assessment creating binding obligations either on the",,
respondent or the assessees, i.e., ESSA and ESSD, in these cases. The reliance placed by the petitioners on the judgement of the Supreme Court in",,
C.A. Abraham v. Income-tax Officer, Kottayam and Anr. [1961] 41 ITR 425 (SC) is misplaced, as the draft assessment orders in the present cases",,
did not produce any definitive consequences. The instant cases fall squarely within the ambit of Explanation 2 attached to Section 147 of the Act.,,
Furthermore, it requires to be emphasized that a draft assessment order is final qua the AO only when assessment jurisdiction is exercised under",,
Section 144C of the Act.,,
vi. Since no final assessment orders were passed, (re)assessment proceedings could have been initiated against the petitioners. [See Deputy",,
Commissioner of Income-tax vs. Zuari Estate Development & Investment Co. Ltd., [2015] 373 ITR 661.",,
vii. The petitioners had raised objections on merits against the draft assessment orders before the DRP; the main issue being, as to whether the",,
advertising revenue (in case of ESSA) and subscription fee received from SSIPL (in case of ESSD) was taxable in the AY in issue, i.e., AY 2013-",,
2014. The DRP has not expressed any view on this aspect.,,
viii. This apart, since no original assessment has been carried out, it was not necessary for the AO to come up with fresh tangible material to form",,
reasons to believe"" that the taxable income of the petitioners had escaped assessment. [See Indu Lata Rangwala vs. Deputy Commissioner of",,
Income-tax, [2016] 384 ITR 337 (Delhi]",,
ix. Since the draft assessment orders did not attain finality, there could be no impediment in law in initiating (re)assessment proceedings on the same",,
material which led to the framing of the draft assessment orders. [See Krishna Developers and Company vs. Dy. Commissioner of Income Tax,",,
[2018] 400 ITR 260 (Guj)],,
Analysis and Reasons:,,
Having heard learned counsel for the parties, and perused the record, what has emerged and qua which there is no rebuttal is that, before the draft",,
assessment orders dated 23.12.2016 for the AY in issue, i.e., 2013-14 were passed, there was in place the order of the DRP dated 26.12.2014,",,
concerning the assessees [i.e. petitioners in the instant cases], which was confirmed by this Court via order dated 23.03.2016 [related to AY 2010-",,
2011], which noted that the petitioners were not eligible assesses within the meaning of Section 144C(15)(b) of the Act. Pertinently, the petitionersâ€",,
declared status, even then, was, a non-resident foreign partnership firm.",,
13.1. Therefore, at the relevant time, the AO could not have taken recourse to the procedure for assessment provided under Section 144C. It needs to",,
be emphasized that Section 144C falls in Chapter XIV which is titled “Procedure for Assessmentâ€.,,
13.2. Notably, for two AYs, i.e., AY 2011-2012 and 2012-2013, recourse was taken for passing final assessment orders qua the petitioners to the",,
provisions of Section 143(3) of the Act. These orders were passed on 27.03.2015 (AY 2011-2012) and 10.03.2016 (AY 2012-2013).,,
13.3. Therefore, there was no good reason, according to us, for the AO to resort to the procedure for assessment provided under Section 144C of the",,
Act when such orders [i.e., the aforementioned orders] had already been passed and there was no change in the status of the petitioners in the AY in",,
issue, i.e., AY 2013-2014. The petitioners†status in AY 2013-2014, as in the above referred years, continued as a non-resident foreign partnership",,
firm. The AO, however, as noticed above, took the aid of the assessment regime prescribed under Section 144C of the Act despite the TPO having",,
passed two separate but similar orders dated 05.09.2016, which concluded that no action was called for qua the petitioners though, their associated",,
enterprise, i.e., SSIPL was being subjected to TP Audit.",,
13.4. Therefore, it is difficult to fathom, why the AO would continue to embark on a route that would lead, figuratively speaking, to perdition.",,
13.5. It is when the DRP, via its orders dated 11.09.2017, ruled once again, that the petitioners were not eligible assessees within the meaning of",,
Section 144C(15)(b) of the Act, as neither the TPO had proposed a variation in their returned income and nor were they a foreign company, did the",,
AO take recourse to the impugned proceedings. It is pertinent to note, as noticed above, that the DRP had concluded that it did not have jurisdiction in",,
the matter, and therefore, was not inclined to issue any directions in the case. The proceedings qua the petitioners were, accordingly, dismissed.",,
13.6. What is important, though, is that the draft assessment orders concerning the petitioners, [which were passed vis-Ã -vis the AY in issue, i.e., AY",,
2013-2014] - have been passed under Section 144C(1)/143(3) of the Act. More importantly, in both the draft assessment orders, which are dated",,
23.12.2016, there is a detailed discussion made as to why the income of the petitioners is attributable to PE in India and in particular, vis-Ã -vis ESSD,",,
as to why the income received from subscriptions took the character of royalty. Furthermore, the variation in the taxable income proposed, both in the",,
case of ESSA and ESSD, i.e., Rs.85,68,23,883/- and Rs.490,07,43,680/- is the exact sum, which the respondent says, has escaped assessment. This is",,
evident upon a perusal of the two notes containing reasons, which are dated 20.03.2018.",,
13.7. The only reason given in the said notes, for triggering the impugned proceedings, is that since the draft assessment orders dated 23.12.2016 were",,
not taken to their ""logical conclusion"" on account of the orders passed by the DRP on 11.09.2017, there was no ""regular assessment"" made and hence,",,
the impugned action was in order. In support of this plea, reference is made to Explanation 2 to Section 147 of the Act and the judgement of this Court",,
dated 17.02.2016, passed in W.P. (C) 4262/2015, titled Honda Cars Ltd. vs. Deputy Commissioner of Income Tax & Anr. In short “Honda Cars",,
Caseâ€. As would be evident, from the date of the judgement rendered in the Honda Cars Case, despite the view of this Court that assessment",,
procedure provided under Section 144C was only available against eligible assessees, the AO chose to ignore the dicta; although the AO knew, as",,
noticed above, that the TPO had not ordered any variation in income and that the status of the petitioners [i.e., that they were non-resident foreign",,
partnership firm] was not in doubt.,,
Section 147 Income escaping assessment.,,
Explanation 2.â€"For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped",,
assessment, namely:â€"",,
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of,,
which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;,,
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the,,
assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;",,
71[(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;],,
(c) where an assessment has been made, butâ€"",,
(i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or,,
(iii) such income has been made the subject of excessive relief under this Act ; or,,
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;],,
71a[(d) where a person is found to have any asset (including financial interest in any entity) located outside India.],,
13.8. As is clear from the facts, which have emerged in this case, once a scrutiny notice was issued under Section 143(2) of the Act, the route open, if",,
at all, to the AO for framing an assessment order was the one provided under Section 143(3) of the Act, as was done in AYs 2011-2012 and 2012-",,
2013, vide order dated 27.03.2015 and 10.03.2016.",,
The AO, however, chose to assess the petitioners, by resorting to the procedure provided under Section 144C of the Act despite the record",,
concerning the previous AYs showing that such attempts had failed and there was (in the AY in issue, i.e., AY 2013-2014) no change in",,
circumstances/status of the petitioners.,,
14.1. As noticed above, the draft assessment orders for AY 2013-2014 have not only been passed under Section 144C but also Section 143(3) of the",,
Act. It almost appears that the AO had made up its mind that, if the DRP were to hold once again that the petitioners were not eligible assessees, the",,
draft assessment orders would be sustained under Section 143(3) of the Act. The DRP, instead, dismissed the proceedings vide order dated",,
11.09.2017.,,
14.2. The question, therefore, which arises for consideration is: whether the respondent can continue with the impugned proceedings based on the",,
same material which was examined and qua which opinion was rendered by the AO while passing the draft assessment orders?,,
14.3. There can be no dispute that the material that has been used for triggering the impugned proceedings is the same material that was available to,,
the AO while passing the draft assessment orders. The notes which contained reasons for initiating the impugned proceedings make no bones about,,
the fact that the same material has been used. The only argument advanced is that the exercise did not culminate in the passing of the orders under,,
Section 143(3) of the Act. Clearly, the respondent took recourse to Section 147/148 of the Act as she found that she did not have any room to vary",,
the taxable income declared by the petitioners, as proposed, under the provisions of Section 143(3) of the Act.",,
Thus, the moot question, which arises for consideration, is: should the respondent be permitted to assess the petitioners†income chargeable to",,
tax, which, according to the respondent, had escaped assessment in the facts and circumstances obtaining in the instant cases?",,
15.1. We are consciously using the expression 'assess' as against 'reassess' since according to the respondent, no assessment has taken place. That",,
being said, the exercise of assessing petitioners†income, in the instant cases, under Section 147 of the Act, could only have been carried out if it was",,
based on new material and fresh facts that had not already been disclosed.,,
15.2. Explanation 2(b) to Section 147 of the Act cannot be divorced from the main provision and read in isolation. Therefore, even if we were to",,
accept the argument advanced on behalf of the respondent that the assessment proceedings remained ""inchoate"", assessment under Section 147 of the",,
Act could only have been completed based on fresh facts and not based on material already traversed.,,
15.3. The case in point is the judgement of the Division Bench of this Court in KLM Royal Dutch Airlines vs. Assistant Director of Income-tax [In,,
short “KLM Royal Dutch Airlines Caseâ€], [2007] 292 ITR 49 (Delhi). This was a case where the assessee had filed returns for two AYs in",,
which it had declared NIL taxable income, and consequently, sought a refund of tax that had already been deposited. The assessee had been served in",,
the first instance, a notice under Section 143(2) of the Act, and thereafter, notices under Section 148 of the Act. The Division Bench of this Court",,
allowed the writ petitions which assailed the proceedings initiated under Section 147/148 of the Act and while doing so, made the following relevant",,
observations.,,
“7. … The neat question which arises before us is whether on the commencement of assessment proceedings must they first be brought to their,,
logical conclusion by framing an assessment before embarking on the proceedings as envisaged in section 147/148 of the Income-tax Act; or more,,
precisely stated, can resort to section 147 be made even whilst the normal assessment proceedings are pending conclusion. To find the answer we",,
must keep in perspective that every return of income filed under section 139 may not result in its active and in-depth perusal or consideration by the,,
Assessing Officer as it may receive an automatic onward passage under section 143(1). However, once an inquiry has been initiated by the Assessing",,
Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or for an assessment",,
being conducted and concluded thereon by the Assessing Officer. The provisions of section 147 would have no role to play at this stage of the,,
proceedings. Once a return of income attracts the attention and scrutiny of the Assessing Officer, it is his bounden duty to delve into every aspect",,
thereof. The Assessing Officer is sufficiently empowered to ask for all information necessary for framing the assessment. The only fetter on the,,
amplitude of his discretion is that the assessment must be framed within the time limit set-down by section 153 which, in substance, is two years from",,
the end of the assessment year in which the income was first assessable or one year from the end of the financial year. A perusal of its second sub-,,
section makes it clear that proceedings under section 147 are altogether different to those under section 143. This distinction appears to have escaped,,
the attention of the revenue. Sub-section (2) stipulates that no order under section 147 shall be made after the expiry of one year from the end of the,,
financial year in which notice under section 148 was served.,,
Section 147 of the Income-tax Act deals with the powers of the Assessing Officer to 'assess' or reassess the income chargeable to tax which has,,
escaped assessment. Section 148 contemplates making the 'assessment', reassessment or recomputation under section 147. Keeping the factual",,
matrix before us in perspective, it becomes critical to define the word assess since the Assessing Officer is avowedly not reassessing or recomputing",,
the income presented by the assessee for taxation in the form of its return. It is trite that the words assess, reassess or recompute are not synonymous",,
of each other. It seems to us that an assessment must entail a conscious and concerted calculation carried out by the concerned officer with a view to,,
determine the amount of tax payable by any person. The exercise commencing with section 139 and ending at section 145A cannot be interpreted as,,
identical to or overlapping section 147/148/149. They are predicated on different circumstances and operate in disparate dimensions. The Income-tax,,
Act makes it incumbent upon every person whose total income exceeds the maximum amount which is not chargeable to Income-tax to file a return,,
of income in order to kick-start the normal assessment procedure. However, it may happen that a person fails to file a return of income, say for the",,
assessment year 2000-01, even though he is liable to pay tax. It could also happen that a person may file a return of income incorrectly offering for",,
purposes of taxation a sum lower than the correctly calculated income. Both these situations have been obviously kept in view in 2nd Explanation to,,
section 147 and in its clauses (a) and (b). In either event the Assessing Officer would invoke the powers conferred upon him by section 147 of the,,
Income-tax Act culminating with the completion of the assessment. It is also conceivable that the incorrectness of the return may not be detected or,,
noticed within the time period set-down in section 153. In these circumstances if the Assessing Officer has reason to believe, predicated on",,
information received by him, that income chargeable to tax has escaped assessment, he would invoke the powers under section 147. On the other",,
hand, where a return of income has been filed but has been taken at its face value, without any proceedings under section 143(2) and 143(3) having",,
been conducted, no assessment exercise would obviously have been undertaken. After the expiry of the time period set-down in section 153, this",,
situation can be remedied by the Assessing Officer by invoking section 147. …,,
… However, in the present case since inquiries had been initiated under section 143(2), it became mandatory that they should have culminated in",,
an order under section 143(3).,,
In Trustees of H. E. H. the Nizam's Supplemental Family Trust v. CIT [2000] 242 ITR 381 the Apex Court has observed that it is ""settled law that",,
unless the return of income already filed is disposed of, notice for reassessment under section 148 of the Income-tax Act, 1961, cannot be issued, i. e.",,
, no reassessment proceedings can be initiated so long as assessment proceedings pending on the basis of the return already filed are not terminated.",,
…,,
We would arrive at this very destination even if we were to traverse along a different dialectic, namely, if we were to analyse the circumstances",,
in which section 147 of the Income-tax Act could be invoked. There is plenitude of precedents on this aspect of the law; hence only some of them,,
shall be discussed. The question that had arisen before the Bombay High Court in Western Outdoor Interactive (P.) Ltd. v. A. K. Phute, ITO [2006]",,
286 ITR 620 was whether, upon the rectification being set aside by the Commissioner (Appeals), notice for reassessment on the same grounds could",,
validly be initiated; there was no failure on the part of the assessee to disclose material facts and no fresh information had been received by the,,
Assessing Officer.,,
At best, it was possible to say that two views were available and in such a situation it was held that the said provision was not available. In particular,",,
the Bench noted the following enunciation of the law in Indian Oil Corpn. v. ITO [1986] 159 ITR 956 (SC) :,,
The principles on this branch of law are well-settled.",,
To confer jurisdiction under clause (a) of section 147 of the Act beyond the period of four years but within a period of eight years from the end of the,,
relevant year under section 148,. . . two conditions were required to be fulfilled: the first is that the Income-tax Officer must have reason to believe",,
that the income, profits or gains chargeable to tax had been underassessed or escaped assessment; the second is that he must have reason to believe",,
that such escapement or underassessment was occasioned by reason, so far as relevant for the present purpose, to disclose fully and truly all material",,
facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied. See, in this connection, the",,
observations of this court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 .,,
** ** **,,
As is well-settled now by the several authorities of this court and of several High Courts, there must be materials to come to the conclusion that there",,
was 'omission or failure to disclose fully and truly all material facts necessary for the assessment of the year'. It postulates a duty on every assessee,,
to disclose fully and truly all material facts necessary for the assessment. Therefore, an obligation is to disclose facts; secondly, those which are",,
material; thirdly, the disclosure must be full and fourthly, true. What facts are material and necessary for assessment will differ from case to case. In",,
every assessment proceeding, for computing or determining the proper tax due from the assessee, it is necessary to know all the facts which help the",,
assessing authority in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered",,
by him on the basis of the facts disclosed, or otherwise, the assesssing authority has to draw inferences as to certain other facts. But on the primary",,
facts, it is for the taxing authority to draw inferences. It is not necessary for the assessee to draw inferences for him. See, in this connection, the",,
observations in Calcutta Discount Ltd. 's case (supra). "" (p. 967)",,
The Full Bench of this Court in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 had opined that the amendments introduced into section 147 with,,
effect from 1-4-1989 have not altered the position that a mere change of opinion of the Assessing Officer was not sufficient ground for embarking on,,
a reassessment. Calcutta Discount was duly considered and applied by the Full Bench. The Full Bench further observed that an order of assessment,,
must be presumed to have been passed by the Assessing Officer concerned after due and proper application of mind.,,
xxx xxx xxx,,
Applying this line of decisions to the facts of the present case, the inescapable conclusion that would have to be reached is that while assessment",,
proceedings remain inchoate, no 'fresh evidence or material' could possibly be unearthed. If any such material or evidence is available, there would be",,
no restrictions or constraints on its being taken into consideration by the Assessing Officer for framing the then current assessment. If the assessment,,
is not framed before the expiry of the period of limitation for a particular assessment year, it would have to be assumed that since proceedings had not",,
been opened under section 143(2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to section 147,",,
provided fresh material had been received by the Assessing Officer after the expiry of limitation fixed for framing the original assessment. So far as,,
the present case is concerned we are of the view that it is evident that, faced with severe paucity of time, the Assessing Officer had attempted to",,
travel the path of section 147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law.â€,,
15.4. In sum, the sum and substance of the aforesaid discussion is that, AO has no power to carry out an assessment based on a mere change of",,
opinion on the same set of facts and materials which was available on record. The AOâ€s power under Section 147 of the Act does not extend to,,
carry out the review of the material that was always available on record, and by this route conclude that the assesseeâ€s income chargeable to tax",,
has escaped assessment. [See Commissioner of Income-tax, Delhi vs. Kelvinator of India Ltd. [In short “Kelvinator Caseâ€], [2010] 187 Taxman",,
312 (SC)],,
15.5. Besides this, there is another aspect of the matter which requires to be highlighted. This aspect concerns the grant of approval under Section 151",,
for issuance of notice under Section 148 of the Act. As noted in the narration of the facts, concerning the above captioned writ petitions, the ACIT,",,
while granting approval on 28.03.2018, made the following identical endorsement.",,
Sanction for issue of notice.,,
(1) In a case where an assessment under sub-section (3) of section 143 or section,,
147 has been made for the relevant assessment year, no notice shall be issued under section",,
148 93[by an Assessing Officer, who is below the rank of Assistant Commissioner 94[or Deputy Commissioner], unless the 95[Joint] Commissioner is",,
satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] :,,
Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief",,
Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such",,
notice.,,
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the",,
rank of 95[Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the 95[Joint] Commissioner is",,
satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.]",,
96[Explanation.â€"For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the",,
case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need",,
not issue such notice himself.],,
“This is fit case for issue of notice u/s 148 of the IT Act, 1961. Approvedâ€",,
15.6. The notes recording reasons dated 20.03.2018, which were before the ACIT, clearly pointed out the following.",,
i. First, the draft assessment orders which are dated 23.12.2016 were passed under Section 144C/143(3) of the Act.",,
ii. Second, the DRP had held that the petitioners were not being eligible assessees as they were neither a foreign company nor had the TPO ordered a",,
variation of their income. Consequently, the DRP had dismissed the proceedings filed before it.",,
iii. Third, the only reason approval for initiating proceedings under Section 147/148 of the Act was sought to be taken was on account of the draft",,
assessment orders not reaching a logical conclusion.,,
15.7. Given this backdrop, the ACIT while giving approval under Section 148 of the Act, ought to have applied his mind, to the crucial question as to",,
whether any new or fresh facts had come to the notice of the AO for triggering the provisions of Section 147/148 of the Act. The ACIT, on the other",,
hand, mechanically replicated the language of the provision [i.e., Section 151 of the Act] by making the aforesaid endorsement in both cases.",,
15.8. What the ACIT forgot was that this endorsement was really his conclusion and the reasons which were to form a link between the material that,,
was placed before him and was required to be appraised by him, were missing. The approval, thus, given by ACIT, in our view, is flawed in law and",,
cannot pass muster. The observations made in Synfonia Tradelinks (P.) Ltd. vs. Income-tax Officer, [2021] 127 taxmann.com 153 (Delhi) being",,
apposite are extracted hereafter.,,
“10. In our view, the sanction-order passed by respondent no.2 presents, metaphorically speaking “the inscrutable face of sphinx†(See: Breen",,
v. Amalgamated Engineering Union [1971] 2 QB 17500; Also see: State of H.P. v. Sardara Singh, (2008) 9 SCC 392). In our view, the satisfaction",,
arrived at by the concerned officer should be discernible from the sanction-order passed under Section 151 of the Act. In this context, the",,
observations made by the Supreme Court in Chhugamal Rajpal vs. S.P. Chaliha, (1971) 1 SCC 453 being apposite are extracted hereafter:",,
“… Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a,,
fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded,,
permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To,,
Question 8 in the report which reads “whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section,,
148â€, he just noted the word “yes†and affixed his signatures thereunder. We are of the opinion that if only he had read the report",,
carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The",,
important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner.,,
Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the,,
form for the substance.â€,,
[Emphasis is ours],,
10.1. Also see the observations made in the judgment of the Division Bench of this Court in The Central India Electric Supply Co. Ltd. vs. Income,,
Tax Officer, Company Circle â€" X, New Delhi & Anr., (2011) SCC OnLine Del 472 : (2011) 333 ITR 237.",,
“19. In respect of the first plea, if the judgments in Chuggamal Rajpal's case (supra); Chanchal Kumar Chatterjee's case (supra); and Govinda",,
Choudhury & Sons's case (supra) are examined, the absence of reasons by the assessing officer does not exist. This is so as along with the proforma,",,
reasons set out by the assessing officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting",,
to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by a Under Secretary underneath,,
a stamped 'Yes' against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is,,
hardly a process which can get the imprimatur of this Court as it suggests that the decision has been taken in a mechanical manner. Even if the,,
reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out",,
brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they",,
help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in,,
Union of India v. M.L. Capoor and Ors. MANU/SC/0405/1973 : AIR 1974 SC 87 wherein it was observed as under:,,
... We find considerable force in the submission made on behalf of the Respondents that the ""rubber-stamp"" reason given mechanically for the",,
supersession of each officer does not amount to ""reasons for the proposed supersession"". The most that could be said for the stock reason is that it is",,
a general description of the process adopted in arriving at a conclusion. ... ... ... ...,,
... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the",,
conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose,,
how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus,,
between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and,,
reasonable. ...,,
(emphasis supplied),,
This is completely absent in the present case. Thus, we find force in the contention of learned Counsel for the Appellant that there has not been",,
proper application of mind by the Board and if a proper application had taken place, there would have been no reason to re-open the closed chapter in",,
view of what we are setting out hereinafter.â€,,
[Emphasis is ours],,
Therefore, the argument advanced on behalf of the respondent, that the petitioners should be relegated to an alternate remedy cannot be sustained",,
as the errors committed in the instant cases go to the root of the respondent's jurisdiction. As noticed above, the stand taken that Explanation 2(b)",,
appended to Section 147 of the Act would come to the aid of the respondent is completely misconceived given the fact that, in instant cases, the",,
proceedings under the said provision have been undertaken based on a review of the material which was already available on record.,,
As noticed by the Division Bench of this Court, in its judgement dated 31.10.2017, passed in a batch of writ petitions (the lead petition being W.P.",,
(C) 11968/2016), concerning the petitioners herein, [pertaining to AYs 2010-2011 and 2008-2009] that, the questions relating to whether or not, the",,
petitioners had a PE in India, had been engaging the revenue since AY 2003-2004. Undoubtedly, the respondent was attempting to regurgitate old",,
facts by taking recourse to the provisions of Section 147/148 of the Act, which, according to us, is not permissible.",,
The failure to arrive at a logical conclusion in a Section 144C proceeding cannot become the ruse for initiating the proceedings under Section,,
147/148 of the Act in the absence of new material emerging before the AO which gives the AO reason to believe that assessee's income chargeable,,
to tax had escaped assessment.,,
Conclusion:,,
Thus, for the foregoing reasons, we are of the view that the above-captioned writ petitions would have to be allowed, and consequently, the",,
notices issued under Section 148 of the Act dated 29.03.2018, the underlying reasons contained in the notes dated 20.03.2018, and the orders disposing",,
of the objections dated 24.09.2018 would have to be quashed. It is ordered accordingly. Resultantly, pending applications shall stand closed.",,
There shall, however, be no order as to costs.",,