Supreme Court: IN a major for the NDTV Ltd, the bench of L. Nageswara Rao and Deepak Gupta, JJ has quashed the notice of the Income Tax department seeking to re-assess the income of the media house for financial year 2007-08. The Court said,
“the notice and reasons given thereafter do not conform to the principles of natural justice and the assessee did not get a proper and adequate opportunity to reply to the allegations which are now being relied upon by the revenue.”
Factual Background
The case relates to the re-assessment notice issued by the Income Tax department in March 2015 to NDTV after noting that Rs 642 crore had allegedly not been computed for the tax assessment purposes of NDTV for financial year 2007-2008.
- NDTV Ltd. had submitted the return for the financial year 2007-2008 declaring a loss.
- it later came to notice that stepup coupon bonds amounting to US$100 million were issued in July, 2007 through the Bank of New York for a period of 5 years by NDTV’s UK based subsidiary named NDTV Network PLC (NNPLC).
- On 31.03.2015, the revenue sent a notice to the assessee wherein it was stated that the authority has reason to believe that net income chargeable to tax for the assessment year 2008 09 had escaped assessment within the meaning of Section 148 of the Act. This notice did not give any reasons.
- The assessee then asked for reasons and thereafter on 04.08.2015 reasons were supplied.
- Reason given: In the following assessment year i.e. assessment year 200910, the assessing officer had proposed a substantial addition of Rs.642 crores to the account of the assessee on account of monies raised by the assessee through its subsidiaries NDTV BV, The Netherlands, NDTV Networks BV, The Netherlands (NNBV), NDTV Networks International Holdings BV, The Netherlands (NNIH) and NNPLC.
“All these transactions with the subsidiary companies in Netherlands were sham and bogus transactions and that these transactions were done with a view to get the undisclosed income, for which tax had not been paid, back to India by this circuitous round tripping.”
Considering all the facts of the case and the material placed before the Court, it said that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case.
Regarding the scope of the applicability of the second proviso of Section 147 of the Income Tax Act, 1961, the Court said that if the revenue is to rely upon the second proviso and wanted to urge that the limitation of 16 years would apply, then in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice that the revenue relies upon the second proviso.
“The 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 Section 147 of the Act.”
If not in the first notice, at least at the time of furnishing the reasons the assessee should have been informed that the revenue relied upon the second proviso. The assessee must be put to notice of all the provisions on which the revenue relies upon.
The Court, hence, held that the notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment but since the revenue has failed to show nondisclosure of facts the notice having been issued after a period of 4 years is required to be quashed.
[New Delhi Television Ltd. v. Deputy Commissioner of Income Tax, 2020 SCC OnLine SC 351, decided on 03.04.2020]