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The Delhi High Court has dismissed a petition filed by NDTV challenging the order of the Income Tax Department for reassessment of its transactions for AY 2008-09 and provisional attachment of its assets.
NDTV had initially raised objections against the proposal for reassessment by the Assessing Officer (AO) of the Income Tax, elaborating why re-opening was not feasible or permissible in law. According to NDTV, reassessment in effect amounted to review or a second look at the same material, which was not permissible in law. Dissatisfied by the rejection of its objections by the AO, the channel approached the High Court under Article 226 of the Constitution.
The AO was also of the opinion that NDTV’s 642 crore investment in NDTV Networks International Holding (NNIH) was actually NDTV’s unaccounted money and concluded that it was a sham transaction.
The Division Bench of Justices S Ravindra Bhat and Najmi Waziri formulated two questions for consideration:
The Bench observed,
“In the background of the circumstances, this court is of opinion that the complex and circuitous structure of subsidiaries and the transactions entered therein are closely connected and provide a live link for the formation of the belief of the AO that there has been escapement of income in AY 2009-10 and for the previous assessment year, AY 2008-09 as well because the investments continued that year.”
This is the structure of NDTV as per their website as of September 2014
Appearing for NDTV, Senior Advocate S Ganesh argued that complete details regarding the transactions/investments were submitted during the original assessment proceedings. It was also emphasized that that there is no whisper or even an allegation that the facts disclosed were false.
While holding that the reassessment is valid, the Court stated that mere disclosure of a transaction at the time of the original assessment proceedings does not protect the assessee from a re-assessment under Section 147, if the AO has information that indicates that the transaction is sham or bogus.
“This argument of NDTV falls flat in light of the judicial decisions mentioned considering that the AO has reason to believe that this transaction is bogus.”
NDTV also contended that the provisional attachment of its assets is mala fide and patently illegal as the IT Dept failed to demonstrate that the channel was likely to thwart any attempt to recover legitimate taxes.
“Extraordinary power under Section 281B cannot be invoked merely on grounds of difficulty in recovering taxes and the Respondent has failed to indicate any overt activities of NDTV in alienating its assets to the detriment of the Respondent.”
Appearing for the Revenue Dept, ASG PS Patwalia submitted that the order of provisional attachment was legal and valid and that it is not essential to prove that NDTV will thwart the recovery of future demand,
“For passing an order of attachment under Section 281B of the Act, the AO must be of the opinion that such an order is necessary to protect the interests of the Revenue.”
While holding that the decision to attach properties by the AO does not suffer from any infirmity, the Court observed that a reasonable apprehension that NDTV may liquidate the assets, thwarting the recovery of tax liability is not unwarranted.
Read the judgment: