TaxTMI 
TaxTMI 
2012 (1) TMI 100
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....February, 2009 asked the petitioner to obtain ITCC or "no objection certificate" from the Income Tax Department in terms of their Master Circular No. 2/2008-09 dated 1st July, 2008. 3. On 27th February, 2009, the petitioner filed an application with the Deputy Director of International Tax for issue of no objection certificate/ITCC. The said application was transferred and assigned to Assistant Director of Income Tax, Circle 1(1), Directorate of International Taxation, the respondent No. 1 herein. In response to the said application, the respondent No. 1 issued letters/questionnaire dated 2nd March, 2009 asking for various details and information, including document and business activities overall and in India, specific financial details, i.e., receipt, income and expenses and year wise details of all purchases and details of services from India or of head office or any group company etc. Details of purchases or sales by the head office or group company to any Indian party, commission income earned by the liaison office in India or the head office or group company in relation to the purchases/sales to Indian parties, copy of ledger account of liaison office in India and acc....
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....ated that the car stereos were installed in the cars manufactured by Honda Siel Cars India Limited. Monthly returns were also furnished vide letter dated 9th April, 2009. Further details were furnished on 30th April, 2009. Salary paid to staff members (four in number, including one who had left in late 2006) in the liaison office who were retrenched, was furnished. Various other details, which were asked for were also furnished including a copy of the agreement between Alpine Electronics Incorporated, Japan and Alpine Electronics Asia Private Limited, Singapore. 6. It is stated in the petition that during the course of hearing the respondent had warned and threatened that he shall initiate reassessment proceedings under Section 147/148 of the Income Tax Act, 1961 (Act, for short). It may be noted here that the petitioner had been filing its returns of income under Section 139(1) of the Act. It is not disputed that the returns of income for the assessment years 2003-04, 2004-05, 2005-06 and 2006-07 along with audited balance sheets were duly filed. 7. The petitioner on 12th June, 2009 wrote a letter to the Director General of International Taxation protesting against the de....
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....ce to the reasons to the reopening has been made and contents thereof have been mentioned below. 10. On 28th January, 2010, the petitioner was furnished a copy of the reasons for initiating proceedings under Section 147/148 of the Act. By order dated 28th January, 2010, the petitioner was asked to file objections and follow the procedure in G.K.N. Driveshafts (I) Limited versus Income Tax Officer and Others, (2003) 259 ITR 19 (SC). The respondent was asked to pass a reasoned order and proceed in accordance with law. 11. The petitioner filed objections on 13th July, 2010 and 19th July, 2010 to the reopening. In the objections, it was mentioned that they had requested for a copy of the approval granted by Additional Director of Income Tax under Section 151 of the Act but this had not been furnished. 12. On 20th August, 2010, the petitioner was furnished the order dated 19th August, 2010 passed by the Assessing Officer rejecting the objections. The said order has been referred to and examined below. The court order dated 29th August, 2010 also records that on 18th August, 2010 the petitioner had filed supplementary objections to the issue of notice under Section 147/1....
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.... of such claim: Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003; (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not under-stated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished." 16. In response to the said application, the respondent has filed additional counter affidavit. In the additional counter affidavit, the said factual position is admitted. It is not disputed that the petitioner had filed returns of income pursuant to the notice under Section 147/148 vide letter dated 19th November, 2009 adopting their earlier returns under Section 139(1) of the Act and the notice under Section 143(2) issued only....
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....thly Reports the assessee is involved into several activities of core nature like (for example: from the report for July 2008): a. Discoutinous compensation. b. Delivery Defect Reporting. c. Dispatch of defective unit to Daesung in China. Which appear to be the manufacturing/repairing centre of the Alpine products. d. Preparing Mid-Term Analysis. e. Presentation of 2NS to HSCI (Honda Siel), with help of APN-TC. f. Proposal presentation for 2NS to HSCI. g. Presentation to Honda Access Asia Oceania, Mr. Iwai, same proposal as HSCI. * * India Liaison Office has been deciding about proposals & making proposals to potential customers and has been doing the marketing activities also. h. < Action Plan for next Month> (7) Service setup, with the help of AOAP Service Dept. (v) The assessee was specifically asked to submit the calculation of Bonus. Calculation of Bonus is not submitted and the assessee just submitted that bonus payment is not linked with sales. The presumption is drawn that the bonus is linked to sales, as per the general nature & meaning of bonus." 18. On the question of the quantum of tax/inc....
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....the 5% loading margin paid under the agreement between Alpine Electronics, Japan and Alpine, Singapore must be attributed or treated as income of the liaison office in India, and this was merely a hunch or suspicion and not a reason to believe. The Assessing Officer rejected the said contention holding that these aspects were required to be examined and determined at the time of final assessment. 20. We have referred to the aforesaid aspect to project a complete history of the litigation and the manner in which the proceedings were initiated. In the draft assessment order, which has been passed under Section 144C of the Act, the Assessing Officer has substantially reproduced the reasons to believe. For the sake of convenience and completeness we are reproducing paragraph 14 of the draft assessment order for the Assessment Year 2003-04 which records as under:- "14. As observed in Para 8, the assessee is definitely a PE of the foreign company. The amount of income escaping assessment on account of attributable profit, which should have been attributed, but has not been, is linked to the sales made in India. The details of the sales made in India by the Alpine Group Companies....
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....sp; Rs.8,10,00,084/- Rounded off to Rs.8,10,00,100/-" 21. This brings us to the core issue what is the effect of the failure to issue notice under Section 143(2) within the period stipulated in the proviso to clause (ii) and effect of Section 292BB of the Act. It is now well settled that service of notice under Section 143(2) of the Act within the statutory time limit is mandatory and is not a procedural requirement, which is inconsequential. In Commissioner of Income Tax vs. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Del.), the issue which arose for consideration was whether the word "served" and "issued" are interchangeable. The ....
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....o to Section 148 of the Act protects and grants liberty to the Revenue to serve notice under Section 143(2) of the Act before passing of the assessment order for returns furnished on or before 1st October, 2005. In respect of returns filed pursuant to notice under Section 148 of the Act after 1st October, 2005, it is mandatory to serve notice under Section 143(2) of the Act, within the stipulated time limit. 25. Section 292BB reads:- "292-BB. Notice deemed to be valid in certain circumstances.-Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or ....
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....cceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations prop....