SC quashes I-T case against NDTV

A view of the Supreme Court of India.   | Photo Credit: Sushil Kumar Verma

In a major relief for New Delhi Television Limited (NDTV), the Supreme Court on Friday quashed an income tax re-assessment notice issued by revenue authorities against the premier news broadcasting company.

Though the Income Tax department had accused NDTV of “round-tripping” finances in connection with a July 2007 issuance of step-up coupon bonds amounting to $100 million through its U.K. subsidiary, the Supreme Court stood firm to hold that the revenue authorities failed to show that the channel did not make a “full and true” disclosure of its income for the assessment year 2008-09.

“In our view the assessee (NDTV) disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts… We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case,” the Supreme Court Bench of Justices L. Nageswara Rao and Deepak Gupta held in its judgment.

The court held that NDTV had disclosed the fact “that step-up coupon bonds for $100 million were issued by NNPLC (the U.K. subsidiary). It had also disclosed the entities which subscribed to these bonds.

The fact that these bonds were discounted at a lower rate was also disclosed, among other relevant factors.

“Without saying anything further on merits of the transaction, we are of the view that it cannot be said that the assessee had withheld any material information from the Revenue,” Justice Gupta, writing the judgment, observed.

The court dismissed the department’s argument that the limitation period for issuing a re-assessment notice could be extended to 16 years under the second proviso to Section 147 (income escapement assessment) of the Income Tax Act as the alleged “undisclosed” income under scanner was derived by the company from a foreign entity. Usually, the period of limitation for issuance of re-assessment notice is four years under the first proviso of Section 147.

Justice Gupta said the re-assessment notice, issued in March 2015, do not conform to the principles of natural justice. This notice does not mention the allegation about any undisclosed income derived from a foreign entity. There was nothing in the notice to indicate that Revenue authorities were intending to apply the extended period of 16 years’ limitation.

“If the revenue wanted to urge that the limitation of 16 years would apply, then in our opinion in the notice or at least in the reasons in support of the notice, the assessee should have been put to notice… The assessee could not be taken by surprise at the stage of rejection of its objections or at the stage of proceedings before the High Court,” the court held, denying the department the benefit of 16-year extended limitation period under the second proviso of Section 147.

However, the court found that the Revenue had sufficient reasons to believe that undisclosed income of the assessee escaped assessment, and therefore, there were grounds to issue the notice in question.

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Printable version | Jul 28, 2021 10:31:13 AM |

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