Wp/3451/2019 Of Knight Riders Sports Pvt. Ltd v. Dy. Commissioner Of Income Tax Central Circle-4(2) And 2 Others

Mr. J.D. Mistri, Senior Advocate a/w. Mr. Hiten Chande i/b. PDS Legal forpetitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM &AMIT B. BORKAR, JJ. DATED : 20[th] DECEMBER 2021 P.C. : 1Petitioner, unhappy with the notice dated 31[st] March 2019 andorder dated 22[nd] November 2019, has approached this Court by way of thiswrit petition. As the notice dated 31[st] March 2019 under Section 148 of theIncome Tax Act, 1961 (the said Act) has been issued after the expiry of fouryears from the end of the assessment year 2012-2013 and the assessmentunder Section 143(3) of the said Act has been completed, proviso to Section147 of the said Act shall apply in as much as respondents will have to showthat there is failure to truly and fully disclose material facts by the assessee. 2With the assistance of Mr. Mistri and Mr. Suresh Kumar we haveconsidered the petition and the documents annexed thereto alongwith thereasons for reopening, copy whereof is at Exhibit “M” to the petition. Thereasons only indicate the proposal to reopen is only because of change of opinion which is not permissible in law. The reasons do not indicateanywhere what was the material fact that petitioner had failed to disclose.In the reasons for reopening, the Assessing Officer infact states "on goingthrough the case records of the assessee, it is found....". In the reasons forreopening, there is not even a whisper as to what was not disclosed. Even inthe order rejecting the objections, respondent states that the assessee filedits return of income declaring at Rs.Nil and subsequently, the return ofincome was selected for scrutiny and assessment under Section 143(3) ofthe said Act and on going through the case record of the assessee, he foundthe details which have been mentioned in the reasons. The basis, ascontained in the reasons for reopening, is that assessee, being an Indiancompany, is paying equal annual installments of franchisee fee ofRs.30,03,60,000/- to BCCI every year using the same exchange rate of1 USD = INR 40. However, as per the requirements of the invitation totender, the payment of franchisee fee is required to be made in Indianrupees by using the TT selling exchange rate and as such non considerationof exchange rate had benefited the assessee to the extent ofRs.33,80,77,707/- which has not been offered by the assessee to tax. Hence,there is an escapement of income. 3Admittedly, assessee and BCCI are both Indian entities andpayments have to be made only in rupees and not in dollars. BCCI has also accepted this and has raised invoice on the basis that the amount ofRs.3,00,36,00,000/- has to be paid over a period of ten years and raisedinvoice as such. If we have to go on the basis of what the Assessing Officerthinks, the amount payable would be almost double, which is not the termwhich parties have agreed upon. Moreover, when the return of income forAssessment Year 2012-2013 was selected for scrutiny assessment underSection 143(2) of the said Act, respondent no.1 raised a query as to why thefranchisee fee of Rs.30,03,60,000/- should not be disallowed as it is capitalin nature. Petitioner responded and explained why it should not be and whythe franchisee fee payable to BCCI is revenue in nature and allowable asdeduction under Section 37(1) of the said Act. 4To a specific query raised by respondent no.1, petitioner by itssaid letter dated 17[th] November 2014 also submitted a statement receivedfrom the BCCI for sharing of the central rights income which was to beshared with petitioner, wherein BCCI adjusted the amount that was payableby petitioner to BCCI on account of IPL played during the year andthereafter, paid the balance amount to petitioner. Ofcourse on 26[th] March2015 respondent no.1 passed the assessment order holding that franchiseefee was not allowable as revenue expenditure, which was challenged bypetitioner before Commissioner of Income Tax (Appeals) [CIT (A)].Impugning the order passed by CIT (A) dismissing petitioner’s appeal, 4To a specific query raised by respondent no.1, petitioner by itssaid letter dated 17[th] November 2014 also submitted a statement receivedfrom the BCCI for sharing of the central rights income which was to beshared with petitioner, wherein BCCI adjusted the amount that was payableby petitioner to BCCI on account of IPL played during the year andthereafter, paid the balance amount to petitioner. Ofcourse on 26[th] March2015 respondent no.1 passed the assessment order holding that franchiseefee was not allowable as revenue expenditure, which was challenged bypetitioner before Commissioner of Income Tax (Appeals) [CIT (A)].Impugning the order passed by CIT (A) dismissing petitioner’s appeal, petitioner has filed an appeal before the Income Tax Appellate Tribunal(ITAT), which was pending on the date petition was filed. That appeal hasbeen disposed by ITAT vide its order pronounced on 10[th] November 2020holding that the franchisee fee paid by petitioner to BCCI was revenueexpenditure and directed the Assessing Officer to delete the addition. 5What we are driving at is that these figures were all availablebefore the Assessing Officer, who has considered the same and afterapplying his mind, passed the original assessment order dated 26[th] March2015. Therefore, in our considered view, the reason to reopen on change ofopinion, which as held by this Court, the Apex Court and many otherCourts, is not permissible. We will have to hold that the Assessing Officerhad in his possession all primary facts and it was for him to makenecessary enquiries and draw proper inference, which he did. TheAssessing Officer had all materials facts before him when he made theoriginal assessment. When the primary facts necessary for assessment arefully and truly disclosed, the Assessing Officer is not entitled on change ofopinion to commence proceedings for reassessment. Even if the AssessingOfficer, who passed the assessment order, may have raised too many legalinferences from the facts disclosed, on that account the Assessing Officer,who has decided to reopen assessment, is not competent to reopenassessment proceedings. Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not beopen to reopen the assessment based on the very same material with aview to take another view. 6Therefore, the notice dated 31[st] March 2019 under Section 148of the said Act and the order dated 22[nd] November 2019 are quashed andset aside. 7Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)