The Delhi High Court ruled that the Assessing Officer (AO) is not empowered to carry out Assessment based on mere change of opinion on the same set of facts and materials.
The petitioner, M/s ESS Distribution (Mauritius) is a partnership firm established under the laws of Mauritius. The two partners in ESSA are ESPN Mauritius Ltd. [now known as World Wide Wickets, Mauritius]; an entity incorporated in Mauritius and having a 99.9% share in the profits of ESSA. While the other partner, i.e. ESPN Network Pte Ltd., incorporated in Singapore, held a 0.1% share in the profits earned by ESSA. This position was also obtained in the AY in issue, i.e., AY 2013-2014. ESSA is engaged in the business of acquiring and allocating advertising time and program sponsorship in connection with television programming. ESSA entered into agreements for the sale of advertising time with ESPN Software India Private Limited [now known as Star Sports India Private Limited (SIPL), a company incorporated under the laws of India, which in turn has merged with Star India Private Limited. ESSA has claimed that it entered into the aforementioned agreement with SSIPL on a principal to principal basis and that SSIPL, on its own steam carried on the business of allocating advertising time slots to various advertisers and advertising agencies in India.
ESSA filed its return of income for the AY 2013-2014, wherein it declared its taxable income as Rs.4,22,65,500/-, along with Form 3CEB, whereby it disclosed the amount received upon the sale of advertisement inventory from SSIPL. Initially, the return was processed under Section 143(1) of the Act, and intimation in that regard was given. Thereafter, the return was picked up for scrutiny by the AO under Section 143(2) of the Act, and accordingly, a notice was issued. In the course of the assessment proceedings, the respondent sought information from ESSA via several questionnaires, which were issued under Section 142(1) of the Act. In this context, it would be relevant to note that information was sought via communication. ESSA appears to have filed with the AO in response, in quick succession, two replies. Consequent thereto, vide another notice issued under Section 142(1) of the Act, the respondent sought additional information from ESSA, which, according to it, was furnished via communication.
Mr. Porus Kaka on behalf of the petitioner contended that even before the issuance of the draft assessment orders passed in other AYs had held that the petitioners were not an “eligible assessee” within the meaning of Section 144C(15) of the Act.
On the other hand, Ms. Vibhooti Malhotra reassessment 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.
The Coram of Justice Rajeev Shakdher and Justice Talwant Singh held 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 AO‟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 assessee‟s income chargeable to tax has escaped assessment.
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