New Delhi Television Limited v. Deputy Commissioner Of Income Tax Circle-18(1), New Delhi And Anr

IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 08.03.2017 Pronounced on: 10.08.2017 + W.P.(C) 9120/2015 + W.P.(C) 11638/2015 NEW DELHI TELEVISION LIMITED ..... Petitioner Through : Sh. S. Ganesh, Sr. Advocate with Sh. Sachit Jolly and Sh. Gautam Swarup, Advocates. versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-18(1), NEW DELHI AND ANR. ..... Respondents Through : Sh. P.S. Patwalia, ASG with Sh. N.P. Sahni, Sh. Rahul Chaudhary, Sr. Standing Counsel and Ms. Lakshmi Gurung, Jr. Standing Counsel. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S. RAVINDRA BHAT % Facts: 1. The present writ petitions have been filed by NDTV Ltd. (hereinafter, “NDTV”) against the notice proposing reassessment proceedings initiated by r the Commissioner of Income Tax (hereinafter, “Respondent” or “CIT” o“Revenue”) under Section 147/148 of the Income Tax Act, 1961 (hereinafter, “Act”) and the order of provisional attachment of Petitioner’s assets under Section 281B of the Act. Since the two writ petitions arise out of common set of facts, the brief facts are set-out below. 2. NDTV operates news channels. In the FYs 2007-08 to 2011-12, it invested in a number of foreign subsidiaries, primarily in the UK and Netherlands. During the FY 2006-07 and FY 2008-09, NDTV received funds amounting to ` 1127 crore through these subsidiaries as under: a.US $ 20 million (` 86 crores) through investment made in M/s. NDTV Networks Plc, UK (hereinafter, “NNPLC”) by M/s. Com Ventures, V.I., L.P. during FY 2006-07. NDTV Networks Plc, UK (hereinafter, “NNPLC”) by M/s. Com Ventures, V.I., L.P. during FY 2006-07. b.US $ 100 million (` 405 crores) through Step Up Coupon Bonds due 2012 issued by NNPLC during FY 2007-08. due 2012 issued by NNPLC during FY 2007-08. c.US $150 million (` 642 crores) through investment made in M/s. NDTV Networks International Holding BV (hereinafter. “NNIH”) by M/s. Universal Studios International BV, Netherlands (hereinafter, “USBV”) during FY 2008-09. NDTV Networks International Holding BV (hereinafter. “NNIH”) by M/s. Universal Studios International BV, Netherlands (hereinafter, “USBV”) during FY 2008-09. 3. NDTV filed its Return of Income for the AY 2008-09, which was selected for scrutiny during the original assessment proceedings under Section 139 of the Act. The Assessing Officer (hereinafter, “AO”) examined the issue of Step Up Coupon Bonds issued by NNPLC, for which NDTV stood as guarantor and revised the assessment income by adding the guarantee commission for this transaction. In addition, the AO also made certain additions relating to commission on advertisement income that was later set aside by the Commissioner of Income Tax (Appeals) (Appeal No. 50/2012-13/CIT(A)-XX). With regard to the AY 2008-09, NDTV thus, earned a right to refund of over ` 19.88 crores. 4. With respect to the AY 2009-10, the investment of ` 642 crores in NNIH by USBV was examined by the AO after a reference to the Transfer Pricing Officer (TPO). The AO was of the view that the introduction of funds in NNIH was actually NDTV’s unaccounted money and concluded that it was a sham transaction. This was further examined by the Dispute Resolution Panel (hereinafter, “DRP”), which allowed the lifting of the corporate veil. The DRP, examining the said transaction held: 4. With respect to the AY 2009-10, the investment of ` 642 crores in NNIH by USBV was examined by the AO after a reference to the Transfer Pricing Officer (TPO). The AO was of the view that the introduction of funds in NNIH was actually NDTV’s unaccounted money and concluded that it was a sham transaction. This was further examined by the Dispute Resolution Panel (hereinafter, “DRP”), which allowed the lifting of the corporate veil. The DRP, examining the said transaction held: “DRP has carefully considered entire gamut of transaction and is of the opinion that the structure of the holding/ subsidiary companies and the transaction as narrated above, without any commercial substance, do warrant lifting the corporate veil to identify the true nature of the transaction. Though AD in his remand report has said that the money has not been recorded in the books of assessee, after lifting the corporate veil, the DRP finds that in this case a sum of Rs.642,54,22,000/-has been found credited in the books of assessee/ its subsidiary for the previous year (FY 2008-09) under consideration. Though the assessee has sought to explain the above amount through the lengthy and circuitous transactions, the commercial substance/ economic rationale for such transaction has not been satisfactorily explained. Assessee's theory of having sold a "Dream" to the investor has not been substantiated by any credible evidence as no details have been filed whatsoever for the so called business projections and the basis for computation of the sale price of the share at the astronomical price of Rs.7,015/-which is 159 times of its face value of Rs.45/. Needless to mention that the subject company whose shares were sold was incurring huge losses and there was hardly any worthwhile business to justify the above sale price. Interestingly, the assessee/ subsidiaries have again repurchased the same share in the very next financial year at the price of Rs.634.17 per share totaling Rs.58 crores. Here also no details/ justification has been given by the assessee as to how the above buy back price was fixed by the assessee when the so called "Dream" went bust, as being claimed by assessee. What was the justification for the assessee to buy back the shares of nearly defunct and own subsidiary company at a value which was more than 12 times of the face value. The totality of the transaction clearly lead to the inescapable conclusion that the entire transaction of sale & subsequent buy back of shares was a "sham" transaction entered into by the assessee with the sole motive of introducing Rs.642,54,22,000/-in its books and providing loss of Rs.584.46 crores to Universal Studios BV Netherlands. 5.16.1. In view of the facts and finding as mentioned above and taking the totality of the picture into consideration, it is held that assessee has brought an amount of Rs.642,54,22,000/-being unexplained money in to its books through its subsidiary NDTV Networks BV Netherlands. It is pertinent to mention that, as per the admission of the assessee the above subsidiary has been subsequently liquidated, which shows that the same was floated only to create a front for introducing the above amount.” 5. Additionally, the DRP granted relief to NDTV on the issue of disallowance of commission on advertisement revenue and disallowance of transmission and up-linking charges by the AO. The final assessment order of AO was further appealed before the ITAT. With respect to the AY 2010-11, the draft Assessment Order has made additions relating to the commission on advertisement income and transmission and up-linking charges. 6. In this background of circumstances, the revenue issued a notice, dated 31.03.2015 under Section 148 of the Act (hereinafter, “impugned notice”) and sought to re-open the assessment of AY 2008-09. Responding to this notice, the assessee requested the reasons for the re-opening of the re-assessment to be furnished. 7. The Respondent acceded to NDTV’s request and furnished the following reasons: 6. In this background of circumstances, the revenue issued a notice, dated 31.03.2015 under Section 148 of the Act (hereinafter, “impugned notice”) and sought to re-open the assessment of AY 2008-09. Responding to this notice, the assessee requested the reasons for the re-opening of the re-assessment to be furnished. 7. The Respondent acceded to NDTV’s request and furnished the following reasons: “Return declaring loss of Rs.53,19,275/- was filed on 29.09.2008 and the assessment was completed u/s 143(3) on 03.08.2012 at an income of Rs.93,98,18,728/-. 2. The main additions included disallowance of ESOP expenses amounting to Rs.17.86cr, disallowance of commission u/s 40(a)(ia) amounting to Rs.45.53cr, addition of Rs.18.72cr on account of corporate guarantee expenses chargeable, disallowance of transmission and uplinking charges u/s 40(a)(ia) to the extent of Rs.7.38cr and addition of Rs.10.57cr as income from sale of shares of Astro Awani Networks Limited. 3. Perusal of the assessment record reveals that during the assessment proceedings, information was sought by the AO from the foreign tax jurisdiction through FTD, CBDT in respect of foreign transactions of the assessee with its subsidiaries abroad. 4. During the assessment proceedings for AY2009-10, in the draft assessment order, the AO had proposed an addition of Rs.642 crores on account of money 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 NDTV Networks Plc, UK (NNPLC). The assessee raised its objections before the Dispute Resolution Panel (DRP) which, after considering all facts, confirmed, through its directions, the addition and also held that the said transaction was sham. Further, the DRP also enhanced the assessee's income by another Rs.254 crores on account of unexplained unsecured loans. 5. In its directions issued u/s 144C(5) of the Act for AY 2009-10, the DRP has held that the money amounting to US $150 million received by an NDTV subsidiary NDTV Networks International Holdings BV, Netherlands from Universal Studios International BV, Netherlands on account of issue of shares of its indirect subsidiary NDTV BV, resulting in transfer of 26% effective indirect stake in NNPLC, represents NDTV's own unaccounted money introduced into its books through its subsidiary NDTV Networks BV through this 'sham' transaction and the same was directed to be added to the taxable income of NDTV. Further, the unsecured loan amounting to Rs.254.75 crores raised by NDTV Networks Plc, UK from NDTV·BV was also held to be the income of NDTV. Thus, within the meaning of clause 2.2.6 of the Manual on Exchange of Information, there is a reason to believe that the group companies of NDTV Limited have been non-compliant with the provisions of the income tax law in India. 6. Raising funds by issuing US$ 100m coupon convertible bonds 6.1 Perusal of the assessment record for AY 2008-09 reveals that during the financial year -2007-08 relevant to AY 2008-09, NNPLC, NDW's indirect subsidiary incorporated in UK, raised funds by issuing $ 100m coupon convertible bonds due in 2012 (redeemable at premium of 7.5%). In this regard, NDTV gave an undertaking to provide a corporate guarantee for and on behalf of NNPLC, as and when required. 6.2 Subsequently, during the financial year 2010-11 relevant to AY 2011-12, NNPLC repurchased the US $100 million Step up Coupon Bonds, which were due in 2012. The Bonds were repurchased for US $ 72.4 million. The transaction resulted in a gain on buy back amounting to Rs.128.28 crores (US$ 27.60 million) for NNPLC. 6.3 The above transactions of issue of coupons and the subsequent repurchase resulted in introduction of Rs.405.09 crores in the account books of NNPLC, out of which Rs.128.28 crores finally stayed with NNPLC. 6.4 NNPLC had only a small capital of Rs.40 lacs and did not have any business activities, any fixed assets, any place of business except a postal address in UK, was a new entrant 6.2 Subsequently, during the financial year 2010-11 relevant to AY 2011-12, NNPLC repurchased the US $100 million Step up Coupon Bonds, which were due in 2012. The Bonds were repurchased for US $ 72.4 million. The transaction resulted in a gain on buy back amounting to Rs.128.28 crores (US$ 27.60 million) for NNPLC. 6.3 The above transactions of issue of coupons and the subsequent repurchase resulted in introduction of Rs.405.09 crores in the account books of NNPLC, out of which Rs.128.28 crores finally stayed with NNPLC. 6.4 NNPLC had only a small capital of Rs.40 lacs and did not have any business activities, any fixed assets, any place of business except a postal address in UK, was a new entrant without any performance record, was a loss making company having incurred loss of about Rs.8.34 crores during the year, had invested in loss making companies and had its share's face value of Rs.40-45 per share and book value in the negative. Under these circumstances, it appears unnatural and out of place to imagine that the investors will make such a huge investment in a little known company named NNPLC. Further, it is still more unnatural and out of place to imagine that instead of earning any profit, the investors will absolve NNPLC by accepting a value equal to just 72% of their original investment. The natural inference could be that it was NDTV's own funds introduced in NNPLC in the garb of the impugned bonds. 6.5 Regarding the investors in these Bonds, the information furnished by NDTV during the proceedings before DRP for AY 2009-10 revealed that the following entities had invested in these Bonds :- XXXXXX XXXXXX XXXXXX 6.6 There are complaints received in the case of NDTV from a minority shareholder alleging that the money introduced in NNPLC was shifted to NDTV's another subsidiary in Mauritius, from where it was taken to NDTV's subsidiaries in Mumbai, which finally merged In NDTV. NNPLC was placed under liquidation on 28.03.2011. The period relating to the shifting of funds from NNPLC is covered by the later assessment years, wherein the assessment proceedings in the case of NDTV are pending. 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 reason to believe that the funds amounting to Rs. 405.09 crores introduced into the books of NNPLC during the FY 2007-08 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 2008-09 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.” 8. NDTV preferred its objections to the proposal for reassessment, on 27.08.2015. These objections elaborated why re-opening was not feasible or permissible in law and that the issues on which the revenue was proposing to issue notice, had been examined during regular assessment proceedings. According to NDTV, therefore, reassessment in effect amounted to review or a second look at the same material, which was not permissible in law. The objections were however, rejected by the AO in his letter dated 23.11.2015. Dissatisfied with the order of the AO, NDTV has preferred the present proceedings under Article 226 of the Constitution of India. 9. The AO, keeping in mind the estimated position of demands that would likely to arise from the re-assessment proceedings for the AY 2008-09 and the assessment proceedings for the AY 2010-11, 2011-12, 2012-13 and 2013-14 as well as the declining net worth of NDTV, passed an order dated 14.09.2015 under Section 281B of the Act provisionally attaching the immovable properties, non-current investments and refund of `19.88 crores due to NDTV for the AY 2008-09. 9. The AO, keeping in mind the estimated position of demands that would likely to arise from the re-assessment proceedings for the AY 2008-09 and the assessment proceedings for the AY 2010-11, 2011-12, 2012-13 and 2013-14 as well as the declining net worth of NDTV, passed an order dated 14.09.2015 under Section 281B of the Act provisionally attaching the immovable properties, non-current investments and refund of `19.88 crores due to NDTV for the AY 2008-09. –10. Aggrieved by that order, NDTV has filed the second Writ Petition W.P.(C) 9120/2015. Issues involved 11. The following questions arise for decision, in the two petitions: i.Whether the impugned notice for re-opening of assessment for the AY 2008-09 is valid as per Section 147 of the Act? the AY 2008-09 is valid as per Section 147 of the Act? ii.Whether the impugned order of provisional attachment of NDTV’s assets is valid and permissible under Section 281B of the Act? Issue 1: 12. The learned counsel for NDTV has argued that the complete details regarding the issuance of the Step Up Coupon Bonds by NNPLC and guaranteed by NDTV were submitted during the original assessment proceedings under Section 143 of the Act. On the basis of this information, the AO had made enquiries to FT &TR, Central Board of Direct Taxes(CBDT) in respect of the bonds issued and made a transfer pricing adjustment of the guarantee fee earned by NDTV in the original assessment order. NDTV stressed that there had been no suppression or withholding of any material fact by it and the impugned notice under Section 147 of the Act was issued on a “mere change of opinion”. For this, the learned counsel for NDTV relied on Madhya Pradesh Industries Ltd. v. ITO, 57 ITR 637 (SC) and Ranbaxy Laboratories Ltd. v. CIT, 336 ITR 136 (Del.) 13. It was submitted by Mr. S. Ganesh, learned senior counsel, for NDTV that the “reasons to believe” supplied by the AO did not substantiate on how it had failed to disclose all material facts and instead merely repeated the statutory language. Additionally, it was submitted that the AO’s allegation that it were the funds that belonged to NDTV that were introduced in NNPLC under the pretext of the issued bonds is baseless and merely a reason to suspect. It was urged on behalf of NDTV that the re-assessment has been opened not on the basis of any tangible material, but only on a mere change of opinion and therefore the notice has been issued without jurisdiction. NDTV placed reliance on CIT v, Kelvinator of India Ltd. [2010] 228 CTR 488. 14. Mr. Ganesh argued that during the course of proceedings in the regular, scrutiny assessment, for the relevant assessment year, the AO had made inquiries with respect to the investment in the Step Up coupons. In reply to these queries, it had written a letter: "During the course of assessment proceedings, the assessee was asked to state whether any corporate guarantee has been given by the assessee for NNPLC and justification thereof. The assessee was further asked to specify the fee charged for the same and computation thereof. In this regard, it is respectfully submitted that during the financial year relevant to the subject assessment year, NDTV Networks Plc, (NNPLC), had raised funds by issuing US $100 million convertible bonds. As per the terms of the bonds, NDTV had given an undertaking to provide a corporate guarantee for and on behalf of NNPLC, as and when required. "During the course of assessment proceedings, the assessee was asked to state whether any corporate guarantee has been given by the assessee for NNPLC and justification thereof. The assessee was further asked to specify the fee charged for the same and computation thereof. In this regard, it is respectfully submitted that during the financial year relevant to the subject assessment year, NDTV Networks Plc, (NNPLC), had raised funds by issuing US $100 million convertible bonds. As per the terms of the bonds, NDTV had given an undertaking to provide a corporate guarantee for and on behalf of NNPLC, as and when required. However, the requirement for giving the corporate guarantee never arose and therefore no corporate guarantee was given. Accordingly, no fee was charged as there was no requirement to charge the same and neither any corporate guarantee was given. The assessee had duly submitted these details vide submission dated I91h December'20I I and 26th December'2011 along with a Copy of the extracts of the resolution dated 22nd May'2007. The above understanding was contained in Terms and Conditions of the Bonds which form a part of the Subscription Agreement. A copy Subscription Agreement alongwith the relevant Terms and Conditions of the Bonds is attached as Annexure.” Reliance was placed on NDTV’s letter of 28.05.2011, to the revenue, 15. the relevant part of which is extracted below: “Further, in respect of corporate guarantee extended with respect to NNPLC, you have asked to give a note on benefit accruing to NDTV from the same and also specify when the coupon bonds were received and profits arising to NNPLC/NOTV from the same. In regard to above query, it is submitted that no corporate guarantee was issued by the NDTV in respect of the above transaction for or on behalf of NDTV Networks Plc. The above fact had duly been reported in the Audited Accounts of the assessee Company wherein it has been stated that the Company has merely give n an undertaking to provide a corporate guarantee for and on behalf of NNPLC, as and when required . However, it is again reiterated that no such corporate guarantee was issued by the assessee Company in favour of any person in relation to raising USO 100m from the issue of step-up coupon convertible bonds by NNLPC. Accordingly, it is respectfully submitted that the question of accruing any benefit in the h ands of NOTV does notarise. It is further submitted that NOTV had not received any income for giving an undertaking to provide a corporate guarantee for and on behalf of NOTV Networks in relation to raising USO 100m Step Up Coupon Convertible bonds. With respect to the query when the coupons were received, it is submitted that, NNPLC has raised funds by issuing $ 100m coupon convertible bonds on 30 May 2007 by entering into Subscription Agreement with the Jefferies International Ltd ('Jefferies’), a leading global securities and investment banking group having it s registered office at Brachen House, 4th Floor, One Friday Street, London EC4M9J A, UK. Jefferies were also appointed, as an underwriter and the placing agent for offer and issuance of bonds..” 16. Mr. Ganesh also stated that NNPLC’s identity is as a non-resident, and accordingly is liable to tax in UK and that any gain/(loss) on the redemption of bonds was duly considered in accordance with UK Tax Laws and disclosed in the Tax Returns filed by the NNPLC in UK. He relied on the letter written to the revenue, for AY 2008-09, on 31.05.2012. A letter dated 20.07.2012, reiterating the same facts, was shown to the court. 16. Mr. Ganesh also stated that NNPLC’s identity is as a non-resident, and accordingly is liable to tax in UK and that any gain/(loss) on the redemption of bonds was duly considered in accordance with UK Tax Laws and disclosed in the Tax Returns filed by the NNPLC in UK. He relied on the letter written to the revenue, for AY 2008-09, on 31.05.2012. A letter dated 20.07.2012, reiterating the same facts, was shown to the court. 17. It was submitted that all the documents placed on record in the regular assessments, demonstrated that the AO sought and obtained every possible piece of information regarding the Step Up Coupon Bonds. The Subscription Agreement, names of bondholders, Trust Deed were all referred to and relied upon in the said letters filed by the Petitioner and NNPLC. If the AO wanted any further details/information, he could have asked for the same from NDTV. After examination of all the aforesaid data, the AO vide Order dated 03.08.2012 passed under 143(3) of the Act holds that since NDTV stood as a guarantor for issuance of the Step up Coupon Bonds and"exposed itself to risks pertaining to the transaction", it should have received arm's length consideration for such service/guarantee. Accordingly, a transfer pricing adjustment of`18.72 crores was made in the hands of the NDTV. AO was of the view that the issuance of Step Up Coupon Bonds by NNPLC was a bonafide and genuine commercial transaction and without the provision of the guarantee by NDTV, NNPLC would not have been able to raise the money through the said bonds. The case made out in the reasons recorded by revenue that the money introduced in NNPLC is the NDTV's own money is, therefore, inconsistent and diametrically opposite, to the case made out by AO in the original assessment proceedings. 18. Mr. Ganesh argued that in the assessment proceedings for the AY 2009-10, the same transfer pricing adjustment in respect of the Step up Coupon Bonds was proposed by the AO against which the Petitioner filed objections before the Dispute Resolution Panel ("DRP").Before the DRP, though the AO doubted the legality of other transactions, however, in respect of the issuance of Bonds, the revenue contended that unless NDTV stood guarantor for the issuance of Step up Coupon Bonds, NNPLC would not have been able to raise the funds from the Bondholders. The DRP by directions dated 31.12.2013, upheld the submissions of the AO and confirmed the transfer pricing addition proposed in the draft order, albeit after reducing the quantum of adjustment. The CIT(A), for AY 2008-09, by Order dated 29.4.2014 followed the order of the DRP for AY 2009-10 and confirmed the addition in principle, but reduced the quantum of adjustment. Therefore, the consistent case of the Respondents has been that the issuance of Step up Coupon Bonds by NNPLC was a legitimate and genuine commercial transaction and without the NDTV’s provision of the guarantee, NNPLC would not have been able to raise the money through the said bonds.Lastly, NDTV also contended that second proviso of Section 147 cannot be invoked by the revenue as no mention of this ground is found in the reasons recorded by the AO. This amounts to supplementing the reasons recorded, which is not permitted by the law. 19. It is submitted that a mere allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment is insufficient for initiating proceedings under Section147 of the Act. The mere repetition of the expression in the “reasons to believe” about failure to disclose fully and truly all material facts will not empower the AO to assume jurisdiction under section 147 of the Act and he is required to state in the reasons recorded which material facts have not been disclosed in the reasons recorded. Learned senior counsel emphasized that there is no whisper or even an allegation that the facts disclosed by the Petitioner were false and that there has been any denial by the investors i.e. 19. It is submitted that a mere allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment is insufficient for initiating proceedings under Section147 of the Act. The mere repetition of the expression in the “reasons to believe” about failure to disclose fully and truly all material facts will not empower the AO to assume jurisdiction under section 147 of the Act and he is required to state in the reasons recorded which material facts have not been disclosed in the reasons recorded. Learned senior counsel emphasized that there is no whisper or even an allegation that the facts disclosed by the Petitioner were false and that there has been any denial by the investors i.e. bond holders that they did not make any such investment or that investment made by them was the investment made from NDTV’s funds. Counsel also argues that in the reasons recorded the AO's inference that it could be NDTV's own funds introduced in NNPLC in the garb of impugned bonds is without any materialand only on account of suspicion and conjectures andthe assessment has been reopened to make roving and fishing enquiries. Counsel submitted that all particulars relating to the transactions were fully disclosed; further the UK revenue authorities furnished the documents. 20. Learned counsel relied on JSRS Udyog Limited and Another v. Income Tax Officer [2009] 313 ITR 321 (Del) where this court held that "Apart from merely saying that the receipts of the share application money were bogus and sham transactions, there is nothing indicated either in the reasons or in the impugned order dated November 28, 2008, to enable us to arrive at such a conclusion.." "20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation.” 21. It was argued that the tangibility of materials should be the basis for valid “reasons”; they cannot be merely based on “reasons to suspect”. In 21. It was argued that the tangibility of materials should be the basis for valid “reasons”; they cannot be merely based on “reasons to suspect”. In other words, there should be a trigger by an external matter, outside the record, leading to a genuine “reasons to believe”. Learned counsel relied on Union of India v Rai Singh Deb Bisht 77 ITR 802 in this regard. It is submitted that in the “reasons” recordedthere is reference to some complaints. However, the revenue acknowledges that the complaint relates to a later year. Therefore it has no nexus with the matter of issuance of bonds by NNPLC in the year under consideration. Furthermore, the revenue in the impugned letter/order dated 23.01.2015 has sought to supplement the reasons recorded and has referred to second Proviso to Section 147 of the Act as an afterthought. It is submitted that it is well settled that the AO cannot supplement the reasons recorded and it is the reasons, alone which are to be looked into to justify the reopening of proceedings under Section147 of the Act. Mr. Ganesh relied on Atma Ram Properties Pvt. Ltd. v. Deputy Commissioner of Income Tax 343 ITR 141 (Del) and Bombay Stock Exchange Ltd. v Deputy Director Income Tax (2014) 365 ITR 160. Counsel also relied on Pardesi Developers and infrastructure (P) Ltdv. CIT (2013) 351 ITR 8 (Del) and Rasalika Trading & Investment Co. (P) Ltd v Deputy Commissioner of Income Tax & Anr (2014) 365 ITR 447. 22. Mr. P.S. Patwalia, learned Additional Solicitor General appearing for the revenue argued that despite repeated notices, NDTV had not submitted the financial statements of its subsidiaries including the Balance Sheet, Profit & Loss Accounts, report of Board of Directors, Report of auditors etc., during the original assessment. It was further contended that the AO. had “reason to believe” that there had been escapement of income. This was on the basis of the DRP proceedings for the AY 2009-10 wherein the DRP held that the transaction routed through NDTV’s subsidiary NNBV was sham and required lifting of the corporate veil. The DRP also noted that given the financial strength of NNPLC, it was doubtful that investors purchased the Step Up Coupon bonds only to resell them at a loss in AY 2011-12. In addition to this, the AO also relied on the tax evasion petitions filed by the shareholders of NDTV alleging that the investment introduced in NDTV’s subsidiaries was NDTV’s own unaccounted money that was later transferred to NDTV through merger and liquidation of the said subsidiaries. On the basis of this information, the AO formed an opinion that the investment made through Step Up Coupon Bonds is a sham transaction and NDTV’s own unaccounted money, similar to the investment made in NNBV of US $150 million. Thus, there was tangible material to reopen the assessment for AY 2008-09 and the impugned notice must not be quashed. 23. The learned ASG also submitted that in cases of sham transactions, it was not necessary to record how NDTV had failed to disclose material facts. The counsel further argued that second proviso to Section 147 can be invoked in the present case. The respondent contended that the law does not bar applicability of the second proviso as the reasons recorded by the AO can be supplemented through the counter-affidavit. Accordingly, on both grounds, the impugned notice issued by the AO is valid. 24. It was submitted that during FY 2005-06, the NDTV had only two subsidiaries, i.e. 'M/s NDTV News Limited' and 'M/s NDTV Media Limited', both Indian companies. During FY 2006-07, it incorporated two subsidiaries –M/s Emerging Markets 24X7 and M/s. NDTV Networks BV ("NNBV") in Netherlands and one subsidiary - M/s. NDTV Networks Plc ("NNPLC") in UK apart from four subsidiaries in India, namely M/s. NDTV Imagine Limited, M/s. NDTV Labs Limited, M/s. NDTV Convergence Limited and 24. It was submitted that during FY 2005-06, the NDTV had only two subsidiaries, i.e. 'M/s NDTV News Limited' and 'M/s NDTV Media Limited', both Indian companies. During FY 2006-07, it incorporated two subsidiaries –M/s Emerging Markets 24X7 and M/s. NDTV Networks BV ("NNBV") in Netherlands and one subsidiary - M/s. NDTV Networks Plc ("NNPLC") in UK apart from four subsidiaries in India, namely M/s. NDTV Imagine Limited, M/s. NDTV Labs Limited, M/s. NDTV Convergence Limited and M/s. NDTV Lifestyle Limited. During the FYs 2007-08 to 2011-12, NDTV created a complex web of Indian and foreign subsidiaries and the number of NDTV's subsidiaries and associates drastically increased to 33, with 21 subsidiaries, one Joint Venture (JV) and 11associates. Of these 33 entities, 11 subsidiaries were incorporated abroad - 4 each in Mauritius and Netherland and 1 each in UK, Sweden and UAE. The key subsidiaries were situated in UK and Netherlands and these were all liquidated by FY 2011-12. During FY 2006-07 to FY 2008-09, NDTV received funds amounting to `1127 crore through these subsidiaries situated in Netherlands and UK, as per following details: (i) US $ 20 million (`86 crores) through investment made in M/s. NDTV Networks Plc, UK ("NNPLC") by M/s. Com Ventures, V.I.,L.P. during FY 2006-07 (ii) US $ 100 million (`405 crores) through Step Up Coupon Bonds due 2012 issued by NNPLC during FY 2007-08; (iii) US $ 150 million (` 642 crores) through investment made in M/s. NDTV Networks International Holding BV ("NNIH") by M/s. Universal Studios International BV, Netherlands ("USBV") during FY 2008-09. 25. The introduction of funds in these main subsidiaries, followed by immediate routing of these funds to other supporting entities, which finally merged into the ultimate parent company NDTV, i.e. destination of these funds was the petitioner. It was argued that, the entities investing funds in NDTV’s subsidiaries incurred huge losses within short period of time; for example, the investors in bonds were allegedly returned ` 290 crores out of investment of ` 405 Crores, while USBV was returned only ` 58 crores out of investment of `642 Crores. The balance funds of `699 Crores [i.e. `115 Crores (` 405 Crore - ` 290 Crores) + ` 584 Crore (` 642 Crore - ` 58 Crore) = ` 699 Crores] were retained by the foreign subsidiaries of the petitioner, which were ultimately transferred to petitioner itself. The real source of these funds was and is unexplained and all the key subsidiaries in Netherlands and UK were liquidated by FY 2011-12, which created considerable problems for the revenue in gathering of information from tax officials of foreign countries, particularly about their bank accounts. It was argued that during the original assessment proceedings, by notice issued under Sections 143(2)/142(1) dated 05.11.2009, the AO specifically required NDTV to furnish all statutory reports as per the Income Tax Act, copies of which could not be filed with return of income. However, in response to this notice, it furnished only “standalone” financial statements of NDTV and did not furnish copies of financial statements including Balance Sheet, Profit and Loss account, Report of Board of Directors, report of its auditors of each subsidiary. Such information was in fact not furnished throughout the assessment proceedings. 26. The learned ASG relies on the judgment in Phoochand Bajrangi Lal v Income Tax Officer 1993 (203) ITR 456 (SC) where the Supreme Court held as follows: 26. The learned ASG relies on the judgment in Phoochand Bajrangi Lal v Income Tax Officer 1993 (203) ITR 456 (SC) where the Supreme Court held as follows: “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 some facts and material which was available which the I.T.O. 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 I.T.O. 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 I.T.O. 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.” 27. The revenue also relies upon the decision reported as ALA Firm v Commissioner of Income Tax 1991 (189) ITR 289 (SC) which held that: “This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the formation of such opinion is consequent on “information” in the shape of some light thrown on aspects of facts or law which the I.T.O. had not earlier been conscious of. To give a couple of illustrations, suppose an I.T.O., in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the I.T.O. derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose if I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under S.147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later.” 28. It was argued that tax assessments are completed on the assumption that the transactions disclosed are genuine; no doubt, the AO has the authority to verify the accounts and is expected to do so. In the exercise of such powers, the AO- in his wisdom chose only to consider the transfer pricing aspect of the overseas investments and transactions and the potential income that might have accrued to the assessee/NDTV in this case. Therefore, when other facts came to light that these investments were not genuine but rather bogus and the monies were circulated in sham transactions, the revenue correctly sought recourse to Sections 147/148. 28. It was argued that tax assessments are completed on the assumption that the transactions disclosed are genuine; no doubt, the AO has the authority to verify the accounts and is expected to do so. In the exercise of such powers, the AO- in his wisdom chose only to consider the transfer pricing aspect of the overseas investments and transactions and the potential income that might have accrued to the assessee/NDTV in this case. Therefore, when other facts came to light that these investments were not genuine but rather bogus and the monies were circulated in sham transactions, the revenue correctly sought recourse to Sections 147/148. 29. It was urged that the assessment regarding introduction of funds amounting to ` 642 crores during FY 2008-09 (relevant to AY 2009-10) has already been completed on 21.02.2014 and addition of this amount was made to NDTV’s taxable income of the petitioner, after lifting the corporate veil and holding the impugned transaction as a sham one. The revenue highlights that the AO’s findings in the assessment order were confirmed by the DRP, after detailed enquiries under Section 144C(7) of the Income Tax Act, 1961 (the"Act"). The introduction of funds amounting to ` 405 Crores through Bonds issued by NNPLC are the subject matter of the reassessment proceedings for AY 2008-09, which were initiated by way of issue of notice to NDTV under Section 148 of the Act on 31.03.2015. The reassessment proceedings were initiated on the basis of new information received from following two sources after completion of original assessment proceedings on 03.08.2012. The first source was the findings of the DRP, recorded in the assessment order for AY 2009-10 (finalized on 21.02.2014, i.e. after a gap of approximately seventeen months from the date of finalization of assessment in question)in order to initiate proceedings under Section 147 of the Act. These were : • Transactions routed through subsidiaries of the petitioner company, namely NDTV BV, Netherlands, NDTV Networks BV, Netherlands(NNBV) and NDTV Networks Plc, UK (NNPLC) were sham. The revenue relies on paragraph 4 of reasons recorded and paragraph 5.16 of the DRP's order. • Transactions routed through NDTV’s foreign subsidiaries reflected introduction of unaccounted money in the books of accounts of the petitioner through its subsidiary companies. The revenue relies on paragraph 5 of reasons recorded in paragraph 5.16.1 of the DRP's order. • It is stated that NNPLC had only a small capital of ` 40 lakh and did not have any business activities, any fixed assets, any place of business except a postal address in UK. NNPLC was a new entrant without any performance record, was a loss making company having incurred loss of about ` 8.34 crore during the year and book value of its share(having face value of ` 40-50 per share) was in the negative. The revenue relies on Para 6.4 of the reasons recorded and para 5.14 (2.3.11.1) of the DRP's order. • Considering financial conditions of the NNPLC, it was quite unlikely that any prudent investor will make investment of US$ 100mn (`405.09 crore) in coupon convertible bonds during the year under consideration which were repurchased later in subsequent AY 2011-12at loss. Para2.1.18 of the DRP's order is relied on. • Most of investors were located in known tax heavens namely British Virgin Islands, Cayman Islands and Switzerland. Even the bifurcation of the amounts of investment by each of eight investors was not disclosed by the petitioner company during assessment proceedings for AY 2008-09 and not even during of subsequent assessment year, i.e. AY 2009-10. • Considering financial conditions of the NNPLC, it was quite unlikely that any prudent investor will make investment of US$ 100mn (`405.09 crore) in coupon convertible bonds during the year under consideration which were repurchased later in subsequent AY 2011-12at loss. Para2.1.18 of the DRP's order is relied on. • Most of investors were located in known tax heavens namely British Virgin Islands, Cayman Islands and Switzerland. Even the bifurcation of the amounts of investment by each of eight investors was not disclosed by the petitioner company during assessment proceedings for AY 2008-09 and not even during of subsequent assessment year, i.e. AY 2009-10. 30. In addition to credible information from above referred to Source 1,the AO has also taken into account several specific tax evasion petitions received from a shareholder of the petitioner company that money introduced in the NNPLC through money laundering activities was actually transferred to the petitioner company through liquidations and mergers. The Director of the complainant company was part of the team of the petitioner at some point of time, which designed the complex corporate structure to route and reroute funds and layering of funds. Copies of these tax evasion petitions received from 11.03.14 onwards, i.e. 18 months after the date of finalization of original assessment order now form part of the official record. 31. It is stated that after receipt of initial complaint on11.03.2014, further complaints against