2011 (11) TMI 81 - AAR - Income Tax

Tax Authority Upholds Filing Order, Emphasizes Compliance with Procedural Rules

SEPCOIII Electric Power Construction Corporation In re

The Authority for Advance Rulings dismissed the applicant's challenge to the Tribunal's decision, upholding that filing a return of income before ... Scope of section 245R(4) - pending case before AO - rejection of application of advance ruling - The applicant submits that the reasoning leading to the invocation of the bar contained in section 245R(2) of the Act is incorrect and requires to be corrected. - Held that:- how can one say that the question raised before us is not a question pending before the Assessing Officer in respect of the return already filed by the applicant? After all, what we have held in our order dated 25.8.2011 is that once the return was filed by the applicant, the question that is raised before us, has come within the purview of the Assessing Officer and the assessment on that return. - It is not necessary to reiterate the reasons given by us in the earlier order in support of the view we have taken therein. Suffice it to say that, we are not satisfied that we have committed any mistake in refusing to entertain the application made by the applicant under section 245Q of the Act on the facts and in the circumstances of the case. - Application dismissed. Issues: Application under Rule 19 of Authority for Advance Rulings(Procedure) Rules 1996, interpretation of section 245R(2) of the Income-tax Act, relevance of filing a return of income before approaching the Authority, consideration of income for which ruling is sought, impact of section 153 and explanation 1, reliance on previous rulings by the Authority.The judgment pertains to an application made by the applicant under Rule 19 of the Authority for Advance Rulings(Procedure) Rules 1996, challenging the order of the Tribunal declining to allow the application under section 245R(2) of the Income-tax Act and refusing to admit it for a ruling under section 245R(4) of the Act. The Authority had previously held that the application was barred by clause (i) of the proviso to section 245R(2) of the Act, as the applicant had filed a return of income before approaching the Authority. The applicant argued that the mere filing of a return does not mean the question was pending before the Assessing Officer. However, the Authority disagreed, stating that once the return was filed, the question raised before them was within the purview of the Assessing Officer and the assessment process.Regarding the relevance of the income for which the ruling was sought, the applicant contended that the Assessing Officer would need to conduct a roving enquiry to discover such income unless claimed as non-taxable. The Revenue argued that an order under section 197(2) of the Act had already directed the withholding of tax, eliminating the need for further inquiry. The Authority questioned how the income could be assessed if not claimed as non-taxable, suggesting that their ruling could impact the assessment process.The applicant also relied on section 153 of the Act and explanation 1 to argue that the period of pendency of the application should be excluded while computing the period of limitation for completing the assessment. However, the Authority found this argument unconvincing and maintained their decision to reject the application. The applicant further cited a previous ruling by the Authority to support their position, emphasizing that the filing of a return should not render the application for advance ruling futile. The Authority, however, found no error in their previous order and dismissed the application, upholding their initial decision.In conclusion, the Authority dismissed the application, maintaining that they had not committed any mistake in refusing to entertain the application under section 245Q of the Act based on the facts and circumstances of the case. The judgment underscores the importance of understanding the statutory provisions and the implications of filing returns before seeking advance rulings from the Authority.