Tax Residency Certificate cannot be rejected on treaty-shopping allegations without confronting the assessee with supporting material.

A Tax Residency Certificate supporting treaty protection under the India-Mauritius DTAA could not be rejected on tentative allegations of treaty shopping without first supplying the assessee with the material relied upon. Where the adverse inference was drawn without confronting the petitioner with relevant information, the jurisdictional order could not be sustained. The proper course was to set aside the impugned order and require the Assessing Officer to disclose the material, if any, before taking further action; the connected notices issued thereafter could not survive.

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Issues: Whether the Assessing Officer could reject the petitioner's reliance on a Tax Residency Certificate and proceed on the basis of tentative allegations of treaty shopping without first confronting the petitioner with the material relied upon.

Analysis: The petitioner claimed entitlement to treaty protection under Article 13 of the India-Mauritius Double Taxation Avoidance Agreement on the strength of its Tax Residency Certificate. The order under challenge proceeded on the premise that the certificate was not conclusive of residential status and that the assessee may be indulging in tax evasion through treaty shopping, but no material or information was placed before the petitioner to support that inference. In the absence of relevant material being supplied and put to the petitioner, the rejection of the certificate and the continuation of proceedings could not be sustained. The proper course was to set aside the order and require the Assessing Officer to confront the petitioner with the material, if any, before taking the next step.

Conclusion: The challenge succeeded. The impugned order was set aside, and the Assessing Officer was required to proceed only after supplying the relevant material to the petitioner.

Final Conclusion: The petitioner obtained relief against the jurisdictional order, and the connected notices issued thereafter could not survive.

Ratio Decidendi: A Tax Residency Certificate cannot be rejected, and treaty-related adverse action cannot be sustained, unless the assessee is first confronted with the material forming the basis of the proposed adverse inference.

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