2017 (4) TMI 919

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....the A.Y. 2009-2010 alleging inter-alia that the income chargeable to tax for the A.Y. 2009-2010 has escaped assessment within the meaning of section 147 of the Act. 4.00. Facts leading to the present Special Civil Application, in nutshell, are as under :- 4.01. That the petitioner assessee engaged in the business of manufacturing and trading of chemicals, filed its return of income for the A.Y. 2009-2010 declaring total income at Rs. 10,40,01,690. Subsequently the return was selected for scrutiny and notice under section 143(2) of the Act was issued. A further Notice under section 142(1) of the Act along with the questionnaire was also issued to the petitioner. That thereafter the A.O. framed scrutiny assessment under section 143(3) of the Act accepting the returned income. That thereafter beyond the period of four years, the A.O. has issued the impugned notice by which the assessment for the A.Y. 2009-2010 is sought to be reopened. 4.02. At the request of the assessee, the A.O. has furnished reasons recorded to reopen the assessment for the A.Y. 2009-2010, which read as under : "On verification of details, it was observed that as per section 40(a) [(I) any interest (not being ....

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....s liable to deduct TDS under section 195 of the amount of Rs. 205.53 lakh. Failure of deduct TDS on 205.53 lakh under section 195 attracts the provisions of section 40(a)(i), under which the interest expenses on which the tax was deductible at source in accordance with the provisions of section 195 under Chapter XVII-b and such tax has not been deducted or after deduction has not been paid into Central Government's Account during the previous year or in subsequent year before the expiry of the time prescribed under section 200(1), shall not be allowed for computing the income chargeable under the head "profit and gains of the business or profession. The assessee company has paid the Tanker Hire Charges mainly to UK and France parties. As per Article 9 of the DTAA with UK and France, no TDS is required to be deducted for the above payment. Thus, having regard to the applicable provisions of the act and the DTAA between India and other countries, no tax is required to be withhold from the remittance of Tanker Hire Charges. It is also a fact that under normal taxation provision, the above income is not accrued or arise in India and also not received or deemed to be received in India....

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....ffic is specifically included from the definition of the term royalty and the said income is taxable as per the shipping article of the said tax treaties. However, as in the case of treaty with France, if the agreement states that the payments received by foreign shipping companies are for use and hire of the vessel, based on judicial pronouncements discussed above, the said income may partake the character of royalty under the tax treaty. Thus, payment for time charter of ship in respect of parties of France was taxable as royalty and was liable for TDS under section 195 of the Act. Thus, by not deducting TDS on the same assessee became assessee in default attracting the provisions of section 40(a)(i) of the Act. Hence, that "I have reason to believe that Rs. 205.53 lakhs which was income chargeable to tax has escaped assessment or that the assessee has failed to make a return of his income for that assessment year or that the assessee has failed to disclose fully and truly all material facts necessary for assessment of that year, as per the case may be" within the meaning of section 147 of the IT Act, 1961. Therefore, I am satisfied that this is the fit case for initiation of....

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.... during the year under consideration was made. He has submitted that however, the same has not been dealt with the by the A.O. It is submitted that, therefore, assumption of the jurisdiction by the A.O. to reopen the assessment and that too beyond the period of four years is wholly without jurisdiction and bad in law, which deserves to be quashed and set aside. 5.03. Mr.S.N. Soparkar, learned Senior Advocate appearing on behalf of the assessee has further submitted that as such no interest was paid to any of the banks situated in India and therefore, the impugned reopening on the aforesaid ground is also bad in law. 6.00. Mr.K.M. Parikh, learned counsel appearing on behalf of the revenue has tried to oppose the present petition, however, when a pointed question was asked to him that though in the petition it was specifically pointed out that by the assessee that no payment of Tanker Hire Charges to the resident of France during the year under consideration was made, the A.O. has not dealt with the same, Mr.Parikh, learned counsel appearing on behalf of the revenue is not in a position to satisfy the Court that the same has been in fact dealt with by the A.O. We also asked the lea....