2016 (5) TMI 787

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....148 had lapsed for the A.Ys. 2004-05 to 2008-09 as prescribed under section 149(3) of the I.T. Act for the years under consideration. The relevant ground i.e., Ground No.18 is reproduced hereunder for ready reference : "18. The Ld. CIT(A) erred in upholding the order passed u/s.163(1) of the I.T. Act, 1961 dated 12.12.2011 in spite of the fact that no notice under section 148 was issued to the appellant for the year under consideration." 3. Brief facts of the case are that M/s. South Asia Granites & Marbles P. Ltd., P.O. Malwana, BEPZ, Biyagama, Sri Lanka (henceforth will be referred to as SAM) is a company located in Sri Lanka near Colombo and was incorporated on 16.07.2002 under the Companies Act of Sri Lanka. Its main activity is processing and sale of granite and marble. The assessee owns about 65% equity in SAM. There was a search operation under section 132 of the I.T. Act in the case of the assessee herein, an Indian company, and also in the premises of one of the ex-employees of the assessee company. Prima facie, the material seized during the course of search relate to unaccounted cash receipts, under-invoicing of the quantity by SAM and subsequent realization ....

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....on, the Ld. Counsel for the assessee, also placed reliance upon the decision of Hon'ble Bombay High Court in the case of Ingram Micro India Ltd., vs. DCIT (2012) 20 taxmann.com 206 (Bom.). 5. The Ld. D.R. however, supported the orders of the authorities below and submitted that the time limit prescribed under section 149(3) are not applicable to the assessee's case as the assessee's case was consequent to a search under section 132 of the I.T. Act and therefore, the provisions of section 153B are applicable. He, therefore, submitted that the orders of the authorities below be confirmed. 6. Having regard to the rival contentions and the material on record, we find that sub-section (2) of section 163 of the Act, provides that an assessee shall be heard before treating it 'as a representative-assessee' under section 163(1) of the I.T. Act. Subsequent to treating the assessee 'as a representative-assessee', assessment proceedings have to be initiated. In the case of regular assessment, the assessment would have to be initiated under section 148 and in the case of search proceedings, the proceedings have to be initiated under section 153A/153C of the I.T. Act. Sub-section (3) of s....

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....under Section 9(1). In the present case, what is sought to be brought to tax is a capital gain arising upon a transfer of shares of the Bermudian Company from the existing shareholders to the transferee shareholders. The submission is that no part of the consideration for the transfer of shares has flowed to the Bermudian Company and as a matter of first principle, income representing capital gains arising out of the transfer of shares can accrue or arise only to the transferor and not to the company whose shares are transferred. There was no accrual of income to the Bermudian Company nor did any consideration flow to it. Hence, the Petitioner cannot be treated as a representative assessee under Section 160(1)(i); (2) The notice which has been issued under Section 163 is ex-facie barred by limitation. Under Section 149(3) a notice for assessment was required to be served upon the Petitioner within two years of the expiry of the relevant Assessment Year. The relevant Assessment Year being 2005-06, such a notice ought to have been issued on or before 31 March 2008. The First Respondent has relied upon the provisions of Section 153(b). Reliance on those provisions of Section 153(b) ca....

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....des also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India. Sub-section (2) of Section 163 provides that no person shall be treated as the agent of a nonresident unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such. What needs emphasis is that under Clause (i) of Section 160(1) a person is treated as a representative assessee in respect of the income of a nonresident where he is either an agent or a person who is treated as an agent under Section 163. Therefore, it is in respect of the income of the non-resident that a person is treated as a representative assessee. The income which is sought to be brought to tax is the income of the non-resident, in the hands of the representative assessee. By the impugned order, the First Respondent has held the Petitioner to be an agent of the non-resident under Section 163. Following an order under Section 163(2), a notice is liable to be issued under the provisions of Section 148. Under sub-Section (3) of Section 149 if the person on whom a notice is issued under Section 148 is a person treated as the agent of a n....