Wp/53286/2016 Of Infosys Ltd v. The Assistant Commissioner Of Income Tax

Digitally signed by BKMAHENDRAKUMARLocation: HighCourt of Karnataka NC: 2023:KHC:20709WP No. 53286 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 15 DAY OF JUNE, 2023 BEFORE. THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV|)WRIT PETITION NO. 53286 OF 2016 (TIT) BETWEEN: 1.INFOSYS LTDNO.44, INFOSYS AVENUEELECTRONIC CITY,HOSUR ROAD,BANGALORE-560 100REPRESENTED HEREIN BY ITS.PRINCIPAL - CORPORATE TAXATIONMR.P.PRAKASHNO.44, INFOSYS AVENUEELECTRONIC CITY,HOSUR ROAD,BANGALORE-560 100REPRESENTED HEREIN BY ITS.PRINCIPAL - CORPORATE TAXATIONMR.P.PRAKASH _ PETITIONER| (BY SRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR| SMT. TANMAYEE RAJKUMAR, ADVOCATE A/W_SMT. MANASA ANANTHAN, ADVOCATE)SMT. MANASA ANANTHAN, ADVOCATE) AND: 1.THE ASSISTANT COMMISSIONER OF INCOME TAX|CIRLCE 3(1) (1), BANGALORE|' FLOOR, BMTC BUILDING,6 BLOCK, 80FEET ROADKORAMANGALABANGALORE-560 095,CIRLCE 3(1) (1), BANGALORE|' FLOOR, BMTC BUILDING,6 BLOCK, 80FEET ROADKORAMANGALABANGALORE-560 095, 2.THE PRINCIPAL COMMISSIONER OF INCOME TAXBANGALORE-3 BANGALORE-3 5 FLOOR, BMTC BUILDING, 6 BLOCK, 80FEET ROAD | KORAMANGALA |BANGALORE-560 095 (BY SRI. K V ARAVIND, ADVOCATE A/W|SRI M. DILIP, ADVOCATE) RESPONDENTS THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OFTHE CONSTITUTION OF INDIA, PRAYING TO DECLARE THAT|THE JMPUGNED PROCEEDINGS INITIATD BY R-1 UNDER|SECTION 147 R/W SECTION 148 OF THE ACT ARE BARRED BY)LIMITATION AND OPPOSED TO THE SAID PROVISIONS AND|ARE THEREFORE WITHOUT JURISDICTION AND ETC. THIS WRIT PETITION COMING ON FOR HEARING, THIS—DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for setting aside of theproceedings initiated by respondent No.1 under Section|147 read with Section 148 of the Income Tax Act, 1961||the Act’ for short], as being barred by limitation, opposedto law and without jurisdiction. Further, the petitioner hasalso challenged the validity of the notice issued underSection 148 read with Section 14/7 as regards theAssessment Year 2009-2010 and the communication dated26.09.2016 rejecting the petitioner's objections. -3- NC: 2023:KHC:20709WP No. 53286 of 2016 2 |SrlT.Suryanarayana,the|learned|Senior.Counsel appearing on behalf of Smt. Tanmayee Rajkumar.for the petitioner submits that the petitioner had filed itsreturn on 30.09.2009 for the Assessment Year J2JOO9-201alongwith all the other supporting documents. It is furtherborne out from the facts that on 29.03.2016, the notice|under Section 148 came to be issued and in terms of the.procedure prescribed, the petitioner had called upon the.respondents for reasons recorded for reopening the.assessment under Section 14/7 of the Act. 3.|The respondent is stated to have addressed the.letter dated 25.04.2016 disclosing the reasons for.reopening the assessment, the copies of which are found)at Annexure- K'. | 4 |Learned Senior Counsel appearing on behalf of the|petitionerdrawsattention to.the|contents _. Annexure-'‘K' and submits that the reasons made out donot satisfy the requirements under the Proviso to |un-amended Section 14/7 of the Act. It is submitted that| -4.- the extended period available under Section 14/7 is fouryears and in the present case, the extended period of four.years comes to 31.03.2013 and if the extended period isto be availed of to justify the issuance of notice beyondfour years, it is necessary that there must be a record ofthe assessee‘failing to disclose fully and truly all material|facts necessary for his assessment for, that assessmentyear’.| 4 |Learned Senior Counsel appearing on behalf of the|petitionerdrawsattention to.the|contents _. Annexure-'‘K' and submits that the reasons made out donot satisfy the requirements under the Proviso to |un-amended Section 14/7 of the Act. It is submitted that| -4.- the extended period available under Section 14/7 is fouryears and in the present case, the extended period of four.years comes to 31.03.2013 and if the extended period isto be availed of to justify the issuance of notice beyondfour years, it is necessary that there must be a record ofthe assessee‘failing to disclose fully and truly all material|facts necessary for his assessment for, that assessmentyear’.| 5 |It is also Submitted that the material availablefor claim of deduction is the payment towards ‘sub-contract charges’ towards M/s.Infosys China Pvt. Ltd., andsuch information is a part of Form-3CEB as well as the Tax.Audit Report in Form-3CD. Accordingly, it is submitted|that once the material was available before the Assessing.Officer and the Assessment Order is passed, the verySame material cannot be a ground justifying the reopening.for the purpose of re-assessment on different grounds that.are made out. -5- NC: 2023:KHC:20709WP No. 53286 of 2016 6.|Learned counsel appearing for the Revenue hasrelied on the contents of the statement of objections. J |Learned Senior Counsel appearing on benalf of the petitioner has relied on the judgment of Bombay HighCourt in the case ofHindustan Lever Ltd.VV.RB.Wadkarreported in.[2004] 137 TAXMAN 479 (BOM.) 8.|Heard both sides. 9.|Tne Proviso to Un-amended Section 14/7 readsas follows:- “Provided that where an assessment Under|sub-section (3) of section 1435 or this section hasbeen made for the relevant assessment year, noaction shell be taken under this section after the|expiry of four years from the end of the relevant:assessment year, unless any income chargeable totax Nas escaped assessment for sucn assessmentyear by reason of the failure on the part of theassessee to make a return under section 139 or in|response to a notice issued under sub-section (1)of section 142 or section 148 or to disclose fullyand truly all material facts necessary for hisassessment, for that assessment year: -6§- The jurisdictional requirement leading to reopening ofre-assessment is a finding to be recorded that assessee|has failed to ‘disclose fully and truly all material facts)necessary for assessment’, which ought to be recorded in|the reasons for reopening. 10. Perused the judgment of Bombay High Court inthe case of Hindustan Lever Ltd.(supra)and theobservations made at para-20 are of relevance and readsas follows:- "20. The reasons recorded by the Assessing Officernowhere state that there was failure on the part of theassessee to disclose fully and truly all material factsnecessary for the assessment of that assessment year.It is needless to mention tnat the reasons are requiredto be read as they were recorded by the assessingofficer. No substitution or deletion is permissible. Noadditions can pe meade to those reasons. No inferencecan be allowed to be drawn based on reasons notrecorded. It is for the assessing officer to disclose andopen his mind through reasons recorded by him. Hehas to speak through his reasons. It is for the assessingofficer to reach to the conclusion as to whether therewas failure on the part of the assessee to disclose fully "20. The reasons recorded by the Assessing Officernowhere state that there was failure on the part of theassessee to disclose fully and truly all material factsnecessary for the assessment of that assessment year.It is needless to mention tnat the reasons are requiredto be read as they were recorded by the assessingofficer. No substitution or deletion is permissible. Noadditions can pe meade to those reasons. No inferencecan be allowed to be drawn based on reasons notrecorded. It is for the assessing officer to disclose andopen his mind through reasons recorded by him. Hehas to speak through his reasons. It is for the assessingofficer to reach to the conclusion as to whether therewas failure on the part of the assessee to disclose fully andtruly|allmeaterialfacts|NeceSSad’yforhis_assessment for the concerned assessment year. It is forthe assessing officer to form nis opinion. It is for him toput his opinion on record tn black and white. Thereasons recorded should be clear and unambiguous andshould not suffer from any vagueness. The reasonsrecorded must disclose his mind. Reasons ere themanifestation of mind of tne assessing Officer. Thereasons recorded should be self-explanatory and shouldnot keep the assessee guessing for the reasons.Reasons provide link between conclusion and evidence.The reasons recorded must pe based on evidence. Theassessing officer, in the event of challenge to thereasons, must be able to justify the same based onmaterial available on record. He must disclose in thereasons as to which fact or material was not disclosedDythedSsSs@e@sfully|andtrulyhl€CESSd/yfor.assessment of that assessment year, so as to establisnvital link Detween the reasons and evidence. Thet vitallink is the safeguard against arbitrary reopening of theconcluded assessment. The reasons recorded by theassessing officer cannot be supplemented by filingaffidavit or making oral submission, otnerwise, thereasons whicn were lacking in the material particularswould get supplemented, by the time the matterreacnes to the Court, on the strength of affidavit or oralSUDMISSIONS advanced. -8- NC: 2023:KHC:20709WP No. 53286 of 2016 The same has been noticed in the order passed inLTANos.406/200/7c/w)407/2007disposedoffOn)19.09.2011 by the Division Bench of this Court. © 11. The only point for consideration is to whetherthe reasons for reopening the assessment as contained atAnnexure-'K' meets the _ jurisdictional requirement oProviso to Section 14/7 (un-amended) of the Act. The)reasons assigned by the Assessing Officer does not contain|a whisper as regards the failure to disclose fully and trulyall material facts. 12. In light of the contention made on behalf of thepetitionertnat|tnematerialfactsrelating»CO Rs.86,51,99,628/- towards the sub-contract chargesbeing a part of the record, it cannot be stated that there is)failure of disclosure of material facts fully and truly, suchfactual assertion made is not controverted to by the otherside. -9OQ- 13. Accordingly, on the sole ground that there is|absence of finding that there is failure on the part of theassessee to disclose fully and truly all material facts, which is a jurisdictional requirement, the notice at Annexure-'H'’dated 29.03.7016 issued under Section 148 of the Act jisset aside. 14. As the petition is being disposed off on this|jurisdictional point, the other contention raised by the|assessee including that there has been disclosure at an!earlier point of time and accordingly, the proceedings for.re-assessment cannot be initiated on a different view of the same facts, is a contention that is not entered into. The petition is accordingly|disposed off Sd/-| JUDGE|