Whether the notice under Sec.147 [1] issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment ? No -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. Whether the subsequent facts which come to the knowledge of the assessing officer can be taken into account to decide whether the assessment proceedings should be re­opened or not. ? Yes – the 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 under Section 147 of the Act. whether the revenue can take the benefit of theextended period of limitation of 6 years for initiating proceedings under the first proviso Section 147 of the Act. Held that This can only be done if the revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the factsit 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. Whether the disclosure of secondary facts is not necessary. No- it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. Whether the notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment ? No 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. whether on facts of this case the revenue could take benefit of the second proviso or not.? but the revenue may issue fresh notice taking benefit of the second proviso extended limitation of 6 years, if otherwise permissible under law.

2020 [4] advocatemmmohan apex court cases 2

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1008 OF 2020
NEW DELHI TELEVISION LTD. …APPELLANT(S)
VERSUS
DEPUTY COMMISSIONER OF
INCOME TAX …RESPONDENT(S)
J U D G M E N T
Deepak Gupta, J.

  1. The appellant New Delhi Television Limited (hereinafter
    referred to as ‘the assessee’) is an Indian company engaged in
    running television channels of various kinds. It has various
    foreign subsidiaries to which we shall refer in detail later on but
    we are concerned mainly with the subsidiary based in the United
    Kingdom (UK) named NDTV Network Plc., U.K. (hereinafter
    referred to as ‘NNPLC’).
  2. The assessee submitted a return for the financial year 2007­
    08 i.e. assessment year 2008­09 on 29.09.2008 declaring a loss.
    1
    2
    This return was processed under Section 143 of the Income Tax
    Act, 1961 (hereinafter referred to as ‘the Act’). The case was
    selected for scrutiny and notice under Section 143(2) of the Act
    was issued and a notice under Section 142(1) of the Act was also
    sent to the assessee. Thereafter, the case of the assessee was
    taken up for consideration and final assessment order was
    passed on 03.08.2012.
  3. We are mainly concerned with that part of the assessment
    order which relates to the issue of step­up coupon bonds
    amounting to US$100 million. These bonds were issued in July,
    2007 through the Bank of New York for a period of 5 years. The
    case of the assesee is that NNPLC issued step­up coupon bonds
    of US$ 100 million which were arranged by Jeffries International
    and the funds were received by NNPLC through Bank of New
    York. The assessee had agreed to furnish corporate guarantee for
    this transaction. These bonds were subscribed to by various
    entities to whom we shall refer to in detail at a later stage. These
    bonds were to be redeemed at a premium of 7.5% after the expiry
    of the period of 5 years. However, these bonds were redeemed in
    2
    3
    advance at a discounted price of US $74.2 million in November,
    1. The assessing officer held that NNPLC had virtually no
      financial worth, it had no business of the name and therefore it
      could not be believed that it could have issued convertible bonds
      of US$ 100 million, unless the repayment along with interest was
      secured. This was secured only because of the assessee agreeing
      to furnish guarantee in this regard. Though the assessee had
      never actually issued such guarantee, the assessing officer was of
      the view that the subsidiary of the assessee could not have raised
      such a huge amount without having this assurance from the
      assessee. The transaction was of such a nature that the assessee
      should be required to maintain an arm’s length from its
      subsidiary, meaning that it should be treated like a guarantee
      issued by any corporate guarantor in favour of some other
      corporate entity. The assessing officer did not doubt the validity
      of the transaction but imposed guarantee fee @ rate of 4.68% by
      treating it as a business transaction and added Rs. 18.72 crores
      to the income of the assessee, vide order dated 03.08.2012.
      3
      4
  4. 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. The main reason given was that 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.
    The assessee had raised its objection before the Dispute
    Resolution Panel (DRP) which came to the conclusion that 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.
    4
    5
  5. The assessing officer relies upon the order of the DRP
    holding that there is reason to believe that funds received by
    NNPLC were actually the funds of the assessee. It was specified
    that NNPLC had a capital of only Rs.40 lakhs. It did not have
    any business activities in the United Kingdom except a postal
    address. Therefore, it appeared to the assessing officer that it
    was unnatural for anyone to make such a huge investment of
    $100 million in a virtually non­functioning company and
    thereafter get back only 72% of their original investment.
    According to the assessing officer “The natural inference could be
    that it was NDTV’s own funds introduced in NNPLC in the grab of
    the impugned bonds.” The details of the investors are given in
    this communication giving reasons. Mention has also been made
    of complaints received from a minority shareholder in which it is
    alleged that the money introduced in NNPLC was shifted to
    another subsidiary of the assessee in Mauritius from where it
    was taken to a subsidiary of the assessee in Mumbai and finally
    to the assessee. NNPLC itself was placed under liquidation on
    28.03.2011. Therefore, the assessing officer was of the opinion
    that there were reasons to believe that the funds received by
    NNPLC were the funds of the assessee under a sham transaction
    5
    6
    and that the amount of Rs.405.09 crores introduced into the
    books of NNPLC during the financial year 2007­08 corresponding
    to the assessment year 2008­09 through the transaction
    involving the step­up coupon convertible bonds pertains to the
    assessee. The last portion of the communication dt. 04.08.2015
    giving reasons to the assessee reads as follows:­
    “7. In view of the above facts and circumstances of the case
    and considering the findings of the DRP holding the funds
    received by NNPLC as the funds of the assessee New Delhi
    Television Limited under sham transactions, there is a reason
    to believe that the funds amounting to Rs.405.09 crores
    introduced into the books of NNPLC during the FY 2007­08 in
    the form of Step Up Coupon Bonds pertain to the assessee
    New Delhi Television Limited only. I have therefore reason to
    believe that the income of the assessee New Delhi Television
    Limited for AY 2008­09 amounting to at least Rs.405.09 crores
    has escaped assessment. It is also recorded that the
    escapement is due to failure on the part of the assessee to
    disclose fully and truly all facts material for assessment.”
  6. The assessee filed reply to the notice and reasons given, and
    claimed that there had been no failure on the part of the assessee
    to disclose fully and truly all material facts necessary to make an
    assessment. Assessee also claimed that the proceedings had
    been initiated on a mere change of opinion and there was no
    reason to believe. The assessee also claimed that the transaction
    of step­up bonds was a legal and valid transaction. In addition,
    it was claimed that the assessing officer had no valid reasons to
    6
    7
    believe that the income of the assessee had escaped assessment.
    According to the assessee the assessment officer had accepted
    the genuineness of the transaction wherein NNPLC, the
    subsidiary, had issued convertible bonds which had been
    subscribed by many entities. It was urged that the assessing
    officer had treated the transaction to be genuine by levying
    guarantee fees and adding it back to the income of the assessee.
    In the alternative, it was submitted that the notice had been
    issued beyond the period of limitation of 4 years. According to
    the assessee it had not withheld any material facts and,
    therefore, limitation of 6 years as applicable to the first proviso to
    Section 147 would not apply.
  7. The assessing officer did not accept these objections. The
    claim of the assessee was disposed of by the assessing officer vide
    order dated 23.11.2015 wherein the assessing officer held that
    there was non­disclosure of material facts by the assessee and
    the notice would be within limitation since NNPLC was a foreign
    entity and admittedly a subsidiary of the assessee and the
    income was being derived through this foreign entity. Hence, the
    case of the assessee would fall within the 2nd proviso of Section
    7
    8
    147 of the Act and the extended period of 16 years would be
    applicable. The objections were accordingly rejected.
  8. Aggrieved, the petitioner filed a writ petition in the High
    Court challenging the notice. The writ petition was dismissed on
    10.08.2017. Against this the assessee has filed the present
    Appeal.
  9. We have heard Shri Arvind P. Datar, learned senior counsel
    for the assessee, Shri Tushar Mehta, learned Solicitor General
    and Shri Zoheb Hossain, learned counsel appearing for the
    revenue.
  10. In our opinion, the following issues arise for consideration
    in this case:­
    (i) Whether in the facts and circumstances of the case, it
    can be said that the revenue had a valid reason to
    believe that undisclosed income had escaped
    assessment?
    (ii) Whether the assessee did not disclose fully and truly
    all material facts during the course of original
    assessment which led to the finalisation of the
    8
    9
    assessment order and undisclosed income escaping
    detection?
    (iii) Whether the notice dated 31.03.2015 along with
    reasons communicated on 04.08.2015 could be termed
    to be a notice invoking the provisions of the second
    proviso to Section 147 of the Act?
  11. At the outset we may note that it has been strenuously
    urged on behalf of the assessee that its assessment was done
    under scrutiny procedure and a very detailed procedure was
    followed during the original assessment proceedings and all
    aspects of the case were noted by the assessing officer. That may
    be true, but merely the fact that the original assessment is a
    detailed one, cannot take away the powers of the assessing officer
    to issue notice under Section 147 of the Act.
    Question No.1
  12. We would like to make it clear that we are not going into the
    merits of the allegations made against the assessee. At this stage
    we are only required to decide whether the revenue has sufficient
    reasons to believe that undisclosed income of the asseessee has
    escaped assessment and therefore there are grounds to issue
    notice. Obviously, during the assessment proceedings the
    assessee will have the right to place material on record to show
    that the transaction in question was a genuine transaction.
    9
    10
  13. It is trite law that an assessing officer can only re­open an
    assessment if he has ‘reason to believe’ that undisclosed income
    has escaped assessment. Mere change of opinion of the
    assessing officer is not a sufficient to meet the standard of
    ‘reason to believe’. Relevant portion of Section 147 reads as
    follows:­
  14. Income escaping assessment.­If the Assessing
    Officer, has reason to believe that any income chargeable to
    tax has escaped assessment for any assessment year, he may,
    subject to the provisions of sections 148 to 153, assess or
    reassess such income and also any other income chargeable to
    tax which has escaped assessment and which comes to his
    notice subsequently in the course of the proceedings under
    this section, or recompute the loss or the depreciation
    allowance or any other allowance, as the case may be, for the
    assessment year concerned (hereafter in this section and in
    sections 148 to 153 referred to as the relevant assessment
    year):
    Provided that where an assessment under sub­section (3) of
    section 143 or this section has been made for the relevant
    assessment year, no action shall be taken under this section
    after the expiry of four years from the end of the relevant
    assessment year, unless any income chargeable to tax has
    escaped assessment for such assessment year by reason of the
    failure on the part of the assessee to make a return under
    section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and
    truly all material facts necessary for his assessment for that
    assessment year:
    Provided further that nothing contained in the first proviso
    shall apply in a case where any income in relation to any asset
    (including financial interest in any entity) located outside
    India, chargeable to tax, has escaped assessment for any
    assessment year:
    Provided also that the Assessing Officer may assess or
    reassess such income, other than the income involving matters
    which are the subject­matter of any appeal, reference or
    revision, which is chargeable to tax and has escaped
    assessment.
    10
    11
    Explanation 1.—Production before the Assessing Officer of
    account books or other evidence from which material evidence
    could, with due diligence, have been discovered by the
    Assessing Officer will not necessarily amount to disclosure
    within the meaning of the foregoing proviso.
    Explanation 2.—For the purposes of this section, the following
    shall also be deemed to be cases where income chargeable to
    tax has escaped assessment, namely :—
    (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 income­tax;
    (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;
    (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, but—
    (i) income chargeable to tax has been underassessed;
    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.
    (ca) where a return of income has not been furnished by
    the assessee or a return of income has been furnished
    by him and on the basis of information or document
    received from the prescribed income­tax authority,
    under sub­section (2) of section 133C, it is noticed by
    the Assessing Officer that the income of the assessee
    exceeds the maximum amount not chargeable to tax,
    or as the case may be, the assessee has understated
    the income or has claimed excessive loss, deduction,
    allowance or relief in the return;
    (d) where a person is found to have any asset (including
    financial interest in any entity) located outside India. xxx xxx xxx 11
    12
  15. The case of the assessee is that the transaction of step­up
    coupon bonds was scrutinised in great detail by the assessing
    officer before he passed the order of assessment dated
    03.08.2012. According to the assessee there is an attempt on
    behalf of the revenue to deliberately mix­up the transactions
    relating to the Netherlands subsidiary with the U.K. subsidiary.
    According to the assessee the order of the DRP for the
    assessment year 2009­10 is in two distinct compartments. While
    the DRP held the Netherlands’ transactions of Rs.642 crores to be
    a sham, the transaction of issuance of US$ 100 million
    convertible bonds was not questioned. Therefore, according to
    the assessee there was no fresh material before the assessing
    officer to have reason to believe that the undisclosed income of
    the assessee had escaped assessment.
  16. On behalf of the assessee it has been urged that once the
    transaction of step­up coupon bonds has been accepted to be
    correct, then the revenue cannot re­open the same and doubt the
    genuiness of the transaction. We are not in agreement with the
    first part of the submission but we make it clear that we are not
    commenting on the genuineness of the transaction, which will be
    considered by the concerned assessing officer.
    12
    13
  17. On the other hand, on behalf of the revenue it is submitted
    that at the stage of issue of show cause notice the revenue only
    has to establish a tentative and prima facie view. At this stage,
    this Court is not expected to go into the merits of the case but
    can only ascertain whether the revenue has prima facie ground to
    show that it had reasons to believe that income has escaped
    assessment. It is further submitted that the scope of judicial
    review in such matters is very limited. It is also submitted that
    since the revenue discovered fresh tangible material subsequent
    to the assessment order of 03.08.2012, it cannot be said that the
    assessing officer did not have reasons to believe that income had
    escaped assessment.
  18. The main issue is whether there was sufficient material
    before the assessing officer to take a prima facie view that income
    of the assessee had escaped assessment. The original order of
    assessment was passed on 03.08.2012. It was thereafter on
    31.12.2013 that the DRP in the case of AY 2009­10 raised doubts
    with regard to the corporate structure of the assessee and its
    subsidiaries. It was noted in the order of the DRP that certain
    shares of NNPLC had been acquired by Universal Studios
    International B.V., Netherlands, indirectly by subscribing to the
    13
    14
    shares of NNIH. As already noted above it was recorded in the
    reasons communicated on 04.08.2015 that NNPLC was not
    having any business activity in London. It had no fixed assets
    and was not even paying rent. Other than the fact that NNPLC
    was incorporated in the U.K., it had no other commercial
    business there. NNPLC had declared a loss of Rs.8.34 crores for
    the relevant year. It was also noticed from the order of the
    assessing officer that the assessee is the parent company of
    NNPLC and it is the dictates of the assessee which are important
    for running NNPLC.
  19. Pursuant to the directions of the DRP, the assessing officer
    passed the final assessment order for AY 2009­10 on 21.02.2014
    which also disclosed similar facts.
  20. According to the revenue Tax Evasion Petitions were filed by
    the minority shareholders of the assessee company on various
    dates, i.e., 11.03.2014, 25.07.2014, 13.10.2014 and 11.03.2015,
    which complaints describe in detail the communication between
    the assessee and the subsidiaries and also allegedly showed
    evidence of round tripping of the assessee’s undisclosed income
    through a layer of subsidiaries which led to the issuance of the
    notice in question.
    14
    15
  21. Whether the facts which came to the knowledge of the
    assessment officer after the assessment proceedings for the
    relevant year were completed, could be taken into consideration
    for coming to the conclusion that there were reasons to believe
    that income had escaped assessment is the question that
    requires to be answered. Though a number of judgments have
    been cited in this behalf, we shall make reference to only a few.
    In Claggett Brachi Co. Ltd., London vs. Commissioner of
    Income Tax, Andhra Pradesh1
    , this Court held as follows:­
    “7. Two points have been urged before us by learned
    counsel for the assessee. It is contended that the Income Tax
    Officer has no jurisdiction to take proceedings under Sections
    147 and 148 of the Income Tax Act because the conditions
    prerequisite for making the reassessments were not satisfied.
    The re­assessments were made with reference to clause (b) of
    Section 147 of the Act, and apparently the Income Tax Officer
    proceeded on the basis that in consequence of information in
    his possession he had reason to believe that income
    chargeable to tax had escaped assessment for the two
    assessment years. From the material before us it appears that
    the Income Tax Officer came to realise that income had
    escaped assessment for the two assessment years when he
    was in the process of making assessment for a subsequent
    assessment year. While making that assessment he came to
    know from the documents pertaining to that assessment that
    the overhead expenses related to the entire business including
    the business as commission agents and were not confined to
    the business of purchase and sale. It is true, as the High Court
    has observed, that this information could have been acquired
    by the Income Tax Officer if he had exercised due diligence at
    the time of the original assessment itself. It does not appear,
    however, that the attention of the Income Tax Officer was
    directed by anything before him to the fact that the overhead
    expenses related to the entire business. The information
    derived by the Income Tax Officer evidently came into his
    possession when taking assessment proceedings for the
    1 1989 Supp(2) SCC 182
    15
    16
    subsequent year. In the circumstances, it cannot be doubted
    that the case falls within the terms of clause (b) of Section 147
    of the Act, and that, therefore, the High Court is right in
    holding against the assessee.”
    In M/s Phool Chand Bajrang Lal and Another vs. Income
    Tax Officer and Another2
    , this Court held as follows:­
    “19…Acquiring fresh information, specific in nature and
    reliable in character, relating to the concluded assessment
    which goes to expose the falsity of the statement made by the
    assessee at the time of original assessment is different from
    drawing a fresh inference from the same facts and material
    which was available with the ITO at the time of original
    assessment proceedings. The two situations are distinct and
    different. Thus, where the transaction itself on the basis of
    subsequent information, is found to be a bogus transaction,
    the mere disclosure of that transaction at the time of original
    assessment proceedings, cannot be said to be disclosure of the
    “true” and “full” facts in the case and the ITO would have the
    jurisdiction to reopen the concluded assessment in such a
    case. It is correct that the assessing authority could have
    deferred the completion of the original assessment proceedings
    for further enquiry and investigation into the genuineness to
    the loan transaction but in our opinion his failure to do so and
    complete the original assessment proceedings would not take
    away his jurisdiction to act under Section 147 of the Act, on
    receipt of the information subsequently. The subsequent
    information on the basis of which the ITO acquired reasons to
    believe that income chargeable to tax had escaped assessment
    on account of the omission of the assessee to make a full and
    true disclosure of the primary facts was relevant, reliable and
    specific. It was not at all vague or non­specific.”
    In Ess Kay Engineering Co.(P) Ltd. vs. Commissioner of
    Income Tax, Amritsar3
    , this Court held as follows:­
    “This is a case of reopening. We have perused the
    documents. We find there was material on the basis of which
    the Income Tax Officer could proceed to reopen the case. It is
    not a case of mere change of opinion. We are not inclined to
    interfere with the decision of the High Court merely because
    the case of the assessee was accepted as correct in the original
    2 (1993) 4 SCC 77
    3 (2001) 10 SCC 189
    16
    17
    assessment for this assessment year. It does not preclude the
    Income Tax Officer from reopening the assessment of an
    earlier year on the basis of his findings of fact made on the
    basis of fresh materials in course of assessment of the next
    assessment year. The appeal is dismissed. No order as to
    costs.”
  22. A perusal of the aforesaid judgments clearly shows that
    subsequent facts which come to the knowledge of the assessing
    officer can be taken into account to decide whether the
    assessment proceedings should be re­opened or not. 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 under Section 147 of the Act.
  23. The material disclosed in the assessment proceedings for
    the subsequent years as well as the material placed on record by
    the minority shareholders form the basis for taking action under
    Section 147 of the Act. At the stage of issuance of notice, the
    assessing officer is to only form a prima facie view. In our opinion
    the material disclosed in assessment proceedings for subsequent
    years was sufficient to form such a view. We accordingly hold
    that there were reasons to believe that income had escaped
    assessment in this case. Question No.1 is answered accordingly.
    Question No.2
    17
    18
  24. Coming to the second question as to whether there was
    failure on the part of the assessee to make a full and true
    disclosure of all the relevant facts. The case of the assessee is
    that it had disclosed all facts which were required to be disclosed.
  25. The revenue has placed reliance on certain complaints made
    by the minority shareholders and it is alleged that those
    complaints reveal that the assessee was indulging in roundtripping of its funds. According to the revenue the material
    disclosed in these complaints clearly shows that the assessee is
    guilty of creating a 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. We make it clear
    that we are not going into this aspect of the matter because those
    complaints have not seen light of the day either before the High
    Court or this Court and, therefore, it would be unfair to the
    assessee if we rely upon such material which the assessee has
    not been confronted with.
  26. Even before the assessment order was passed on
    03.08.2012, the assessing officer was aware of the entities which
    had subscribed to the convertible bonds. This is apparent from
    the communication dated 08.04.2011. The case of the revenue is
    that the assessee did not disclose the amount subscribed by each
    18
    19
    of the entities and furthermore the management structure of
    these companies. We are not in agreement with this submission
    of the revenue. It is apparent from the records of the case that
    the revenue was aware of the entities which subscribed to the
    convertible bonds. It has been urged that these are bogus
    companies, but we are not concerned with that at this stage. The
    issue before us is whether the revenue can take the benefit of the
    extended period of limitation of 6 years for initiating proceedings
    under the first proviso Section 147 of the Act. This can only be
    done if the revenue can show that the assessee had failed to
    disclose fully and truly all material facts necessary for its
    assessment. The assessee, in our view 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.
  27. The High Court held that there was no “true and fair
    disclosure” in view of the law laid down by this Court in Phool
    Chand’s case (supra), and the judgment of the Delhi High Court
    in Honda Siel Power Products Limited vs. Deputy
    Commissioner Income­Tax and Another4
    . We have already
    4 (2012) 340 ITR 53 (Delhi)
    19
    20
    referred to the judgment in Phool Chand’s case (supra), wherein
    it was held that where the transaction of a particular assessment
    year is found to be a bogus transaction, the disclosures made
    could not be said to be all “true” and “full”. Relying upon the
    said judgment the High Court held that merely because the
    transaction of convertible bonds was disclosed at the time of
    original assessment does not mean that there is true and full
    disclosure of facts.
  28. We are unable to agree with this reasoning given by the
    High Court. The assessee as mentioned above made a 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. As
    we have observed above, all relevant facts were duly within the
    knowledge of the assessing officer. The assessing officer knew
    who were the entities who had subscribed to other convertible
    bonds and in other proceedings relating to the subsidiaries the
    20
    21
    same assessing officer had knowledge of addresses and the
    consideration paid by each of the bondholders as is apparent
    from assessment orders dated 03.08.2012 passed in the cases of
    M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in
    our opinion there was full and true disclosure of all material facts
    necessary for its assessment by the assessee.
  29. The fact that step­up 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 a guarantee fees on the same which was
    added to its income. Without saying anything further on merits
    of the transaction we are of the view that it cannot be said that
    the assessee had withheld any material information from the
    revenue.
  30. According to the revenue the assessee to avoid detection of
    the actual source of funds of its subsidiaries did not disclose the
    details of the subsidiaries in its final accounts, balance sheets,
    and profit and loss account for the relevant period as was
    21
    22
    mandatory under the provisions of the Indian Companies Act,
  31. It is not disputed that the assessee had obtained an
    exemption from the competent authority under the Companies
    Act, 1956 from providing such details in its final accounts,
    balance sheets, etc. As such it cannot be said that the assessee
    was bound to disclose this to the Assessing Officer. The
    Assessing Officer before finalising the assessment of 03.08.2012
    had never asked the assessee to furnish the details.
  32. The revenue now has come up with the plea that certain
    documents were not supplied but according to us all these
    documents cannot be said to be documents which the assessee
    was bound to disclose at the time of assessment. The main
    ground raised by the revenue is that the assessee did not disclose
    as to who had subscribed what amount and what was its
    relationship with the assessee. As far as the first part is
    concerned it does not appear to be correct. There is material on
    record to show that on 08.04.2011 NNPLC had sent a
    communication to the Deputy Director of Income Tax
    (Investigation), wherein it had not only disclosed the names of all
    the bond holders but also their addresses; number of bonds
    along with the total consideration received. This chart forms part
    22
    23
    of the assessment orders dated 03.08.2012 in the case of M/s.
    NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. The said two
    assessment orders were passed by the same officer who had
    passed the assessment order in the case of the assessee on the
    same date itself. Therefore, the entire material was available with
    the revenue.
  33. A number of decisions have been cited as to what is meant
    by true and full disclosure. It is not necessary to multiply
    decisions, as law in this regard has been succinctly laid down by
    a Constitution Bench of this Court in Calcutta Discount Co.
    Ltd. vs. Income­tax Officer, Companies District I, Calcutta
    and Another5
    , wherein it was held as follows :­
    “(8)…The words used are “omission or failure to disclose fully
    and truly all material facts necessary for his assessment for
    that year”. It postulates a duty on every assessee to disclose
    fully and truly all material facts necessary for his assessment.
    What facts are material, and necessary for assessment will
    differ from case to case. In every assessment proceeding, the
    assessing authority will, for the purpose of computing or
    determining the proper tax due from an assessee, require to
    know all the facts which help him 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 assessing
    authority has to draw inferences as regards certain other facts;
    and ultimately, from the primary facts and the further facts
    inferred from them, the authority has to draw the proper legal
    inferences, and ascertain on a correct interpretation of the
    taxing enactment, the proper tax leviable. Thus, when a
    question arises whether certain income received by an
    5 AIR 1961 SC 372
    23
    24
    assessee is capital receipt, or revenue receipt, the assessing
    authority has to find out what primary facts have been proved,
    what other facts can be inferred from them, and taking all
    these together, to decide what the legal inference should be.
    (9) There can be no doubt that the duty of disclosing all the
    primary facts relevant to the decision of the question before
    the assessing authority lies on the assessee. To meet a
    possible contention that when some account books or other
    evidence has been produced, there is no duty on the assessee
    to disclose further facts, which on due diligence, the Incometax Officer might have discovered, the Legislature has put in
    the Explanation, which has been set out above. In view of the
    Explanation, it will not be open to the assessee to say, for
    example — “I have produced the account books and the
    documents: You, the assessing officer examine them, and find
    out the facts necessary for your purpose: My duty is done with
    disclosing these account­books and the documents.” His
    omission to bring to the assessing authority’s attention these
    particular items in the account books, or the particular
    portions of the documents, which are relevant, will amount to
    “omission to disclose fully and truly all material facts
    necessary for his assessment.” Nor will he be able to contend
    successfully that by disclosing certain evidence, he should be
    deemed to have disclosed other evidence, which might have
    been discovered by the assessing authority if he had pursued
    investigation on the basis of what has been disclosed. The
    Explanation to the section, gives a quietus to all such
    contentions; and the position remains that so far as primary
    facts are concerned, it is the assessee’s duty to disclose all of
    them — including particular entries in account books,
    particular portions of documents and documents, and other
    evidence, which could have been discovered by the assessing
    authority, from the documents and other evidence disclosed.
    (10) Does the duty however extend beyond the full and
    truthful disclosure of all primary facts? In our opinion, the
    answer to this question must be in the negative. Once all the
    primary facts are before the assessing authority, he requires
    no further assistance by way of disclosure. It is for him to
    decide what inferences of facts can be reasonably drawn and
    what legal inferences have ultimately to be drawn. It is not for
    somebody else — far less the assessee — to tell the assessing
    authority what inferences — whether of facts or law should be
    drawn. Indeed, when it is remembered that people often differ
    as regards what inferences should be drawn from given facts,
    it will be meaningless to demand that the assessee must
    disclose what inferences — whether of facts or law — he
    would draw from the primary facts.
    (11) If from primary facts more inferences than one could
    be drawn, it would not be possible to say that the assessee
    should have drawn any particular inference and
    communicated it to the assessing authority. How could an
    24
    25
    assessee be charged with failure to communicate an inference,
    which he might or might not have drawn?”
    A careful analysis of this judgment indicates that the Constitution
    Bench held that it is the duty of the assessee to disclose full and
    truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is
    not necessary. In light of the above law, we shall deal with the facts
    of the present case.
  34. In our view the assessee disclosed all the primary facts
    necessary for assessment of its case to the assessing officer.
    What the revenue urges is that the assessee did not make a full
    and true disclosure of certain other facts. We are of the view 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. In the present case the
    assessing officer on the basis of the facts disclosed to him did not
    doubt the genuiness of the transaction set up by the assessee.
    This the assessing officer could have done even at that stage on
    the basis of the facts which he already knew. The other facts
    25
    26
    relied upon by the revenue are the proceedings before the DRP
    and facts subsequent to the assessment order, and we have
    already dealt with the same while deciding Issue No.1. However,
    that cannot lead to the conclusion that there is non­disclosure of
    true and material facts by the assessee.
  35. It is interesting to note that whereas before this Court the
    revenue is strenuously urging that the assessee is guilty of nondisclosure of material facts, before the High Court the case of the
    revenue was just opposite. We may quote a portion of the
    counter­affidavit filed by the revenue in response to the writ
    petition filed by the assessee before the High Court which reads
    as follows:­
    “…It is evident from these facts that second proviso to
    Section 147 is clearly attracted in this case and first proviso to
    Section 147 is not applicable to facts of this case, i.e. in this
    case, the only requirement to reopen assessment U/s 147 was
    that the AO has reason to believe that any income chargeable
    to tax has escaped assessment. The second condition that the
    income should have escaped assessment due to failure on the
    part of the assessee to disclose fully and truly all material facts
    necessary for making assessment is not relevant to decide
    issue before the Hon’ble Court”

This submission has been repeated a number of times in the
counter­affidavit. Therefore, in our opinion the revenue cannot
now turn around and urge that the assessee is guilty of nondisclosure of facts. We are also of the view that the revenue could
not be permitted to blow hot and cold at the same time.
26
27

  1. We are clearly of the view that the revenue in view of its
    counter­affidavit before the High Court that it was not relying
    upon the non­disclosure of facts by the assessee could not have
    been permitted to orally urge the same. Even otherwise we find
    that the assessee had fully and truly disclosed all material facts
    necessary for its assessment and, therefore, the revenue cannot
    take benefit of the extended period of limitation of 6 years. We
    answer Question No.2 accordingly.
    Question No.3
  2. It is urged before this Court by the revenue that in terms of
    second proviso to Section 147 of the Act read with Section 149(1)
    (c) of the Act, the limitation period would be 16 years since the
    assessee has derived income from a foreign entity. We may make
    specific reference to the second proviso and explanation 2(d)
    which reads as follows:­
    Provided further that nothing contained in the first
    proviso shall apply in a case where any income in relation to
    any asset (including financial interest in any entity) located
    outside India, chargeable to tax, has escaped assessment for
    any assessment year:
    xxx xxx xxx
    Explanation 2.—For the purposes of this section, the
    following shall also be deemed to be cases where income
    chargeable to tax has escaped assessment, namely :—
    xxx xxx xxx
    27
    28
    (d) where a person is found to have any asset
    (including financial interest in any entity) located outside
    India.
    xxx xxx xxx
  3. On behalf of the assessee it has been urged that no income
    was derived from the foreign entity and a loan cannot be termed
    to be an asset or an income and it is submitted that the notice
    cannot be said to have been issued under the second proviso.
  4. In this regard we may make reference to the notice dated
    31.03.2015. The notice is conspicuously silent with regard to the
    second proviso. It does not rely upon the second proviso and
    basically relies on the provision of Section 148 of the Act. The
    reasons communicated to the assessee on 04.08.2015 mention
    ‘reason to believe’ and non­disclosure of material facts by the
    assessee. There is no case set up in relation to the second
    proviso either in the notice or even in the reasons supplied on
    04.08.2015 with regard to the notice. It is only while rejecting
    the objections of the assessee that reference has been made to
    the second proviso in the order of disposal of objections dated
    23.11.2015.
  5. The High Court relied upon the judgment in Mohinder
    Singh Gill & Anr. vs. The Chief Election Commissioner,
    28
    29
    New Delhi & Ors.6
    and came to the conclusion that the
    revenue cannot rely upon the second proviso because the notice
    was silent in this regard. However, the High Court held that the
    assessee was guilty of non­disclosure of material facts. We have
    already held that in our view the assessee was not guilty of nondisclosure of material facts. The revenue has not challenged the
    judgment of the High Court in so far as this finding against it is
    concerned but the revenue is entitled to defend the petition even
    on a ground which may have been decided against it by the High
    Court.
  6. On behalf of the revenue it is urged that mere non­naming
    of the second proviso in the notice does not help the assessee. It
    has been urged that even if the source of power to issue notice
    has been wrongly mentioned, but all relevant facts were
    mentioned, then the notice can be said to be a notice under the
    provision which empowers the revenue to issue such notice.
    There can be no quarrel with this proposition of law. However,
    the noticee or the assesee should not be prejudiced or be taken
    by surprise. The uncontroverted fact is that in the notice dated
    31.03.2015 there is no mention of any foreign entity. There is
    only mention of the Section 148. Even after the assessee
    6 (1978) 2 SCR 272
    29
    30
    specifically asked for reasons, the revenue only relied upon facts
    to show that there was reason to believe that income has escaped
    assessment and this escapement was due to the non­disclosure
    of material facts. There is nothing in the reasons to indicate that
    the revenue was intending to apply the extended period of 16
    years. It is only after the 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.
  7. In our view this is not a fair or proper procedure. 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. At the risk of
    repetition, we reiterate that we are not going into the merits of
    the case but in case the revenue had issued a notice to the
    assessee stating that it relies upon the second proviso, the
    assessee would have had a chance to show that it was not
    deriving any income from any foreign asset or financial interest in
    any foreign entity, or that the asset did not belong to it or any
    other ground which may be available. The assessee cannot be
    deprived of this chance while replying to the notice.
    30
    31
  8. Therefore, even if we do not fall back on the reason given by
    the High Court that the revenue cannot take a fresh ground, we
    are clearly of the view that 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.
  9. If the revenue is to rely upon the second proviso and wanted
    to urge that the limitation of 16 years would apply, then in our
    opinion 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. Accordingly, we answer the
    third question by holding that the notice issued to the assessee
    and the supporting reasons did not invoke provisions of the
    second proviso of Section 147 of the Act and therefore at this
    stage the revenue cannot be permitted to take benefit of the
    second proviso.
    31
    32
    Conclusion
  10. We accordingly allow the appeal by holding 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. Having held so, we make it clear that we have not
    expressed any opinion on whether on facts of this case the
    revenue could take benefit of the second proviso or not.
    Therefore, the revenue may issue fresh notice taking benefit of
    the second proviso if otherwise permissible under law. We make
    it clear that both the parties shall be at liberty to raise all
    contentions with regard to the validity of such notice. All
    pending application(s) shall stand(s) disposed of.
    …………………………….J.
    (L. Nageswara Rao)
    …………………………….J.
    (Deepak Gupta)
    New Delhi
    April 3, 2020
    32