$~39
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 08.10.2015
W.P.(C) 1873/2013 & CM No. 3570/2013
ORACLE SYSTEM CORPORATION ..... Petitioner
versus
DEPUTY DIRECTOR OF INCOME TAX ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr M.S. Syali, Sr. Advocate with Mr Mayank Nagi,
Advocate
For the Respondents: Mr Rahul Chaudhary, Senior Standing Counsel for the
Revenue
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. This writ petition pertains to the assessment year 2004-05. The
notice under section 148 dated 28.03.2011 and proceedings pursuant
thereto including the order rejecting the objections dated 01.11.2011 are
under challenge in this petition.
2. The original assessment under Section 143(3) was completed on
WP(C) 1873/2013 Page 1 of 4
22.12.2006.
3. We have heard the counsel for the parties. Without going into great
detail, the simple point taken by the learned counsel for the assessee is that
this is a case of reopening of assessment beyond 4 years from the end of the
assessment year and therefore the first proviso of section 147 of the Income
Tax Act, 1961 would come into play. One of the pre-conditions for
reopening of assessment stipulated in the first proviso is that there must be
failure on the part of the assessee to fully and truly disclose all the material
facts necessary for the assessment. It is the case of the petitioner/assessee
that the reasons recorded for reopening the assessment do not even allege
that there has been any failure on the part of the assessee to fully and truly
disclose all the material facts necessary for the assessment.
4. Reliance has been placed by the learned counsel on the decision of
this court in Haryana Acrylic Manufacturing Co. Vs. CIT (2009) 308
ITR (Delhi). In that case, this court had observed as under:
"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, it 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
WP(C) 1873/2013 Page 2 of 4
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. Consequently, one of the conditions
precedent for removing the bar against taking action
after the said four year period remains unfulfilled. In
our recent decision in Wel Intertrade P. Ltd. (2009)
308 ITE 22(Delhi) we had agreed with the view taken
by the Punjab and Haryana High Court in the case of
Duli Chand Singania (2004) 269 ITR 192 (P&H) that,
in the absence of an allegation in the reasons recorded
that the escapement of income had occurred by reason
of failure on the part of the assessee to disclose fully
and truly all material facts necessary for his
assessment, any action taken by the Assessing Officer
under section 147 beyond the four year period would
be wholly without jurisdiction. Reiterating our view-
point, we hold that the notice dated March 29, 2004,
under Section 148 based on the recorded reasons as
supplied to the petitioner as well as the consequent
order dated March 2, 2005, are without jurisdiction as
no action under section 147 could be taken beyond the
four year period in the circumstances narrated above."
5. The said decision was also followed in Rural Electrification
Corporation Ltd. Vs. CIT & Anr. 355 ITR 356 (Delhi).
6. The reasons in the present case, are as under:
"Reasons for reopening For the year under review.
OIPL has been held to be the PE of the assessee in
India. The royalty was paid at 15%. The assessee
company is earning royalties in India linked to the PE.
Therefore, this royalty income must be taxed @ 20%
WP(C) 1873/2013 Page 3 of 4
gross instead of 15%. Further, the royalty income
offered by the assessee includes Rs. 11,064,710
towards the interest on delayed royalty which should
be taxed at 41.82 percent. "
7. It is be evident from the above quoted recorded reasons, that there is
no whisper of the petitioner having failed to disclose fully and truly all
material facts necessary for his assessment. Therefore, the necessary
ingredient for inviting the provisions of Section 147 is missing. As such,
the initiation of the re-assessment proceedings pertaining to assessment
year 2004-05 does not have the backing of law. Consequently, the
impugned notice under Section 148 and all proceedings pursuant thereto
including the order disposing of the objections are set aside.
8. The writ petition is allowed. There shall be no order as to costs.
BADAR DURREZ AHMED, J
SANJEEV SACHDEVA, J
OCTOBER 08, 2015
rs
WP(C) 1873/2013 Page 4 of 4
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