In a major setback to New Delhi Television (NDTV), the Delhi High Court upheld the Income Tax Department’s move to initiate Re-Assessment Proceedings for the assessment years 2008-09 and 2009-10, holding that the authority had reasons to believe that some transactions of those years were ‘bogus’.
The NDTV Ltd had moved Delhi High Court against the notice proposing reassessment proceedings initiated by the Commissioner of Income Tax (CIT) under Section 147/148 of the Income Tax Act, 1961 and the order of provisional attachment of Petitioner’s assets under Section 281B of the Act.
A division bench refused to quash the department’s provisional attachment of the channel’s immovable properties, non-current investments and tax refund, on the ground that the IT department’s apprehension that NDTV may liquidate its assets was ‘not unwarranted’.
While dismissing the Petition, The Court accepted the revenue department’s contention that, the annual reports and financial statements of the assessee show that its net worth has constantly declined over the years and has in fact declined to ` 339.42 crore, as on 31.03.2015 from ` 421.06 crore as on 31.03.2012.
The department also contended that NDTV has created further charge on its assets without taking previous permission from the AO. In terms of Para 10 of the provisional attachment order dated 14.09.2015, NDTV issued unconditional and irrevocable guarantee to the extent of ` 3.5 crore and ` 5 crore for obtaining a term loan from Yes Bank by its subsidiary NDTV Convergence Limited. However, while pledging these assets, NDTV failed to seek permission from the Department as per the provisions of section 281 of the Act read with CBDT’s Circular No. 4 of 2011 dated 19.07.2011. It is submitted that NDTV is aware of the Circular, because the AO had issued an advisory to the petitioner by letter no. 529 dated 01.08.2014.
The bench comprising of Justice S. Ravindra Bhat and Justice Najmi Waziri observed that, a reasonable apprehension that NDTV may liquidate the assets thwarting the recovery of tax liability is not unwarranted.
The court also observed that, the AO’s decision not to attach the bank accounts and other trade receivables of NDTV so as to ensure unhampered operation of its business.
The Court also relied the judgment of the Bombay High Court in Gandhi Trading v. Assistant Commissioner of Income Tax and Others wherein the Court held that the action taken under Section 281B must not hamper the business activities of the assessee and accordingly, attachment of bank accounts must be the last resort.
Read the full text of the Judgment below.
