TaxTMI 
TaxTMI 
2016 (12) TMI 1663
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....see is a non-resident company incorporated in Sweden. During the period relevant to the assessment year under appeal the assessee received fees for I.T. support service to the tune of Rs. 2,43,74,970/-. The assessee filed its return of income for the A.Y. 2005-06 on dated 28-10-2005 declaring Nil income. The original assessment was completed u/s.143(1). Thereafter, the Assessing Officer issued notice u/s.148 of the Act on 30-03-2012. The reasons for reopening were communicated to the assessee. The prime reason for reopening was that as per the details furnished by M/s. Sandvia Asia Ltd. (in short "SAL") in report 3CEB it was found that payment of Rs. 2,38,85,567/- was made to the assessee. According to the Assessing Officer the information derived from the report 3CEB of SAL constitutes tangible material and has reason to believe that income chargeable to tax for A.Y. 2005-06 has escaped assessment. Accordingly, the provisions of section 148 r.w.s. 147 of the Act were invoked. The Assessing Officer vide draft proposed assessment order dated 31-12-2012 passed u/s.144C r.w.s. 143(3) r.w.s.147 of the Act proposed the addition of Rs. 2,43,74,790/-. 4. Aggrieved by the draft proposed....
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....ion. Since the Assessing Officer had not formed any opinion at the time of original assessment, there is no question of change of opinion at all. The Ld. Departmental Representative in support of his submissions placed reliance on the decision of Hon'ble Supreme Court of India in the case of Dy.CIT Vs. Zuari Estate Development & Investment Co. Ltd. reported as 63 taxmann.com 177 and the decision of Hon'ble Bombay High Court in the case of Indian Hume Pipe Co. Ltd. Vs. ACIT reported as 16 taxmann.com 180 (Bom.). The Ld. Departmental Representative further submitted that the DRP has no power to annul the assessment. A conjoint reading of provisions of section 144C(5) and (8) of the Act would show that the DRP has power to confirm, reduce or enhance the additions proposed in draft assessment order but does not have sweaping powers to set aside the assessment order. 7. On the contrary, Shri Danesh Bafna appearing on behalf of the assessee submitted that the information on which the Assessing Officer has relied for initiating reassessment proceedings was already furnished by the assessee in prescribed Form 3CEB filed along with the return of income. The Ld. Authorised Representati....
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....facts. In the case of DCIT Vs. Zuari Estate Development and Investment Company Ltd. (supra) the Assessing Officer came across certain documents which form tangible material for initiating reassessment proceedings. Whereas, in the present case the Assessing Officer had no fresh material to form such belief. In the case of Indian Hume Pipe Co. Ltd. Vs. ACIT, the assessee at the time of filing original return of income had claimed exemption u/s.54EC without disclosing dates on which amounts were invested in specified securities. For claiming exemption u/s.54EC, date of investment is vital and material information for determining assessee's eligibility for claiming exemption. There was no full and proper disclosure by assessee of all material facts necessary for assessment. In such circumstances the Hon'ble Court upheld the reopening of assessment. 10. The Ld. Authorised Representative to reinforce his submissions placed reliance on the decision of Hon'ble Bombay High Court in the case of Khubchandani Healthparks (P.) Ltd. Vs. ITO reported as 68 taxmann.com 91 (Bom.). The Ld. Authorised Representative contended that the Hon'ble jurisdictional High Court in the said case has consi....
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....he representatives of both the sides : (a) whether the reassessment proceedings initiated by the Assessing Officer are valid and sustainable; and (b) whether the DRP has power to annul assessment. 13. The Assessing Officer initiated reassessment proceedings on the basis of details furnished by SAL (one of the group company of assessee) in Report 3CEB. As per the information derived from the documents of SAL, payment of Rs. 2,38,85,567/- has been made to the assessee on account of I.T. support service fees. The Assessing Officer treated the said information as tangible material and initiated proceedings u/s.148 r.w.s. 147 of the Act against the assessee. The case of the Department is that on the basis of above said information the Assessing Officer has "reason to believe" that income of assessee for A.Y. 2005-06 has escaped assessment. 14. The Ld. Authorised Representative has brought to our notice that the information derived from alleged tangible material for initiating reassessment proceedings was already furnished by the assessee in Form 3CEB filed along with return of income. The assessee has placed on record its return of income along with the computation of income....
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.... fresh tangible material has come to the knowledge of the Assessing Officer. The material on the basis of which the Assessing Officer has initiated reassessment proceedings was already placed on record by the assessee at the time of filing of return of income. The assessee had made full disclosure of the receipts. The said receipts are claimed by the assessee to be reimbursement of expenditure and not as income. It is clearly evident from records that the assessee had already made disclosure of the receipts from SAL and Walter Tools India Pvt. Ltd. at the time of filing of return of income. The Assessing Officer has erred in invoking the provisions of section 148 r.w.s. 147 of the Act, for reopening on the basis of same information derived from the documents of group concern, i.e., SAL. The Assessing Officer can have ' reason to believe' for reopening assessment if there is any 'tangible material' in his possession. In the present case we are of considered view that the Assessing Officer had no new information or tangible material to come to the conclusion that there is escapement of income. If the Assessing Officer chooses to close his eyes on the material/documents furnished b....
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....ch is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression "reason to believe" in cases where assessments were framed earlier under Section 143(3) and cases where mere intimations were issued earlier under Section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed." 17. The Hon'ble Bombay High Court in the case of Khubchandani Healthparks (P) Ltd. Vs. ITO (supra) has reiterated that notice issued u/s.148 would be without jurisdiction for absence of 'reason to believe' that income has escaped assessment even in case where assessment has been completed earlier by intimation u/s.143(1) of the Act. The Hon'ble High Court while holding so, considered the decisions rende....
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....escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits." 18. Thus, in view of the facts of the present case and the case laws discussed above we hold that the Assessing Officer had no tangible material to justify his "reason to believe" that income has escaped assessment. The reassessment proceedings initiated by the Assessing Officer u/s.147 are without jurisdiction and hence, are not sustainable. Accordingly ground No.1 to 3 raised by Department in appeal are dismissed. 19. The second issue in appeal is, Whether the DRP has power to annual assessment. Before proceeding further to decide the issue, it would be relevant to first see the relevant provisions of the Act which define the powers of DRP. Reference to DRP is made u/s.144C. The scope of DRPs jurisdiction is envisaged in subsection (5) to (8) of section 144C. For the sake of quick reference, the relevant provisions of section 144C are reproduced hereinunder : "(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 ena....
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.... the draft order" used in sub-section (8) obviously refer to the variations in the income or loss return in the draft assessment order referred to in subsection (1)of section 144-C. Thus, sub-section (8) of section 144-C empowers the DRP to confirm, reduce or enhance the variations proposed in the draft order as a whole and not the variations in the arm's length price of the international transactions alone. The DRP, therefore, is entitled to confirm, reduce or enhance any variations in the draft order and the draft order, as we have held, may contain variations in the income or loss return generally. 86. We also agree with the Advocate General that if the assessee chooses to file an objection before the DRP, he must do so in respect of the entire draft order and not merely in respect of a part thereof. In other words, once an assessee opts to file objections before the DRP he cannot restrict the same only insofar as it relates to the international transactions. A view to the contrary would render the entire assessment proceedings unworkable. The assessee cannot possibly have a part of the assessment order decided by the DRP and a part of it decided in an appeal before the CI....
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.... or not can also be examined by the DRP. 89. This view, in fact, protects the right of an assessee who would otherwise be deprived of a valuable right of one appeal. An appeal against the order of the DRP lies only to the ITAT. The Legislature could hardly be expected to have intended to deprive an assessee of a valuable right of an appeal without express words to that effect. We do not suggest that the Legislature is not competent to do so. We are not inclined, however, to ascribe to the Legislature an intention to deprive an assessee of such a right in the absence of any provision or even words to that effect." Again in Vodafone-II case, where the petitioner/assessee had contended that the powers of DRP are limited and the DRP has no power to set aside any proposed variation, the Hon'ble High Court reiterated the law laid down in Vodafone India Services Pvt. Ltd. Vs. UOI (supra) and held : "28. Thus it would be open to DRP to consider all issues, including the jurisdictional issue of no income arising and/or affected by the International Transaction. This the DRP can do by issuing final directions under section1 44C(5) to the Assessing Officer or before issuing final dir....