Non-striking of Irrelevant limb amounts to Vagueness and Ambiguity in Notice which tantamount to Non-Application of Mind: ITAT grants relief to Global Cricket [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) granted relief to Global Cricket and held that non-striking of irrelevant limbs amounts to vagueness and ambiguity in the notice which is tantamount to non-application of mind.

The assessee company is incorporated in Singapore and has obtained Worldwide Media and sponsorship rights with regard to various cricketing events and has earned income from granting broadcasting and sponsorship rights to various broadcasters and sponsors. The assessee had filed its return of income declaring total income at Rs.55,67,480/- and the same was processed under Section 143(1) of the Income Tax Act, 1961.

The Assessing Officer (AO) had reopened the assessee’s case for the reason that the assessee is not entitled to treaty benefit as per Article 24 the reason that the payment received for broadcasting and sponsorship agreements was not received in Singapore and the same is liable to be taxed as ‘royalty’ under Section 9(1)(vi) of the Income Tax Act and also the payment from sponsorship agreement is to be treated as payment for the use of ‘commercial equipment’.

The AO then passed the assessment order under Section 143(3) read with Section 147 of the Income Tax Act and determined the total income at Rs.153,47,12,241/- and initiated the penalty proceeding under Section 271(1)(c) of the Income Tax Act for furnishing of inaccurate particulars of income and for concealment of income.

The Authorized Representative contended that the assessee’s case is covered by the full bench decision of theJurisdictional High Court in the case of Mohd. Farhan A. Shaikh vs. Dy. CIT.

The Departmental Representative contended that there was no prejudice caused to the assessee and that the penalty was levied both for concealment of income as well as for furnishing inaccurate particulars. He relied on the orders of the lower authorities.

The Commissioner of Income Tax (Appeal) [CIT(A)] partly allowed the appeal filed by the assessee, on the ground that the payments received by the assessee from SET Satellite Capital Singapore Ltd. were a debatable issue, as the Tribunal has held that the said payment does not arise in India andas SET Satellite was not required to deduct TDS on the payment made to the assessee. He upheld the penalty levied by the AO excluding the payment received on account of Broadcasting rights from the SET Satellite (Singapore) Pte. Ltd.

The Two-member bench comprising of Om Prakash Kant (Accountant member) and Kavitha Rajagopal (Judicial member) held that “non-striking of the irrelevant limb has been held to be a violation of the mandatory condition, which in turn violates the principle of natural justice”.

The non-striking of the irrelevant limb amounts to vagueness and ambiguity in the notice which is tantamount to non-application of mind by the AO. It also does not give the assessee a proper opportunity fora hearing manifested in the provision of Section 274 of the Income Tax Act. Therefore, the AO was directed to delete the impugned penalty and the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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