ITAT Grants Relief to Bharti Airtel By Quashing Re-Assessment Proceedings Initiate Against It

ITAT Grants Relief to Bharti Airtel By Quashing Re-Assessment Proceedings Initiate Against It

The Income Tax Appellate Tribunal (ITAT), Delhi bench, on 12 April 2021, in the case titled M/s Bharti Cellular Ltd. (Now Bharti Airtel Limited) [Appellant] v. Dy. CIT [Respondent] has quashed the reassessment proceedings against Bharti Airtel as all the material facts were fully and truly disclosed.

The ITAT coram headed by President V.S. Pannu observed that at the time when the assessee's assessment was completed, the law as it stood was that there was no liability to deduct tax at source in respect to discount and roaming charges. There cannot even be an allegation of failure to disclose fully and truly any material fact necessary for assessment.

The factual matrix of the case is that the assessee filed the return of income for the Assessment Year was filed declaring income at Rs Nil and the same was assessed at Nil income vide order under Section 143(3) of the Income Tax Act, 1961 (IT Act) after adjusting brought forward losses of Rs. 2,09,40,31,589.

In the assessment framed under Section 143(3) of the IT Act, the Assessing Officer (AO) had made an addition in respect of free air time to distributors amounting to Rs 54.29 crore and roaming charges amounting to Rs. 13.74 Crores.

The proceedings under Section 147 of the IT Act were initiated subsequently, by the issuance of notice under Section 148 of the Act after the recording of reasons.

On 10 April 2008, the first reopening was initiated which reached finality at the ITAT on 14 July 2017, and on 24 February 2011, the second reopening was initiated.

The case was reopened for the second time in view of the findings of the Delhi High Court (HC) in the case titled CIT v. Idea Cellular Ltd. that free time allowed the distributors and roaming services provided to the customers fell within the ambit of Section 194H and 194J of the IT Act and as such were liable for deduction of tax at source. Since no tax had been deducted at source, disallowance in terms of Section 40(a)(ia) of the Act was warranted.

Objections were raised by the assessee against the reopening of the case which was dismissed by the Assessing Officer. The re-assessment was completed after making a disallowance of Rs. 69,04,34,000/- which included disallowance of Rs. 51,82,86,000/- on account of discount in the shape of free air time and disallowance of Rs. 17,21,48,000/- on account of roaming and interconnection charges.

The assessee preferred an appeal before the First Appellate Authority, who dismissed the assessee's appeal both on the ground of the issue of assumption of jurisdiction as well as on the merits of the case.

The ITAT held that the impugned notice under Section 148 of the IT Act and the proceedings under Section 147 of the Act is not sustainable in law for the reason that there was no omission or failure on the part of the assessee in disclosing fully and truly facts for assessment.