TaxTMI 
TaxTMI 
2022 (5) TMI 1285
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmitting nil income. The case of assessee was selected for scrutiny and the assessment was completed U/s.143(3) of IT Act an addition of Rs.4,19,86,627/- Gross tax at the rate of 15% (6297994) was taxed on the assessed income. 2. Texmo Precision Castings UK Limited is a company registered and incorporated in UK. TPC (UK) is engaged in the business of providing Market and support Services in UK to the Indian firm Texmo Precision Castings, India. The assessee Company levies professional charges for the services rendered to the Indian firm. During the P.Y relevant to the A.Y 2015- 16, the assessee Company received professional charges 15% margin and Director's salary to the tune of Rs.4,19,86,627/- including TDS borne by the Indian Company. The break up is as follows: Professional Charges : Rs.2,58,05,691/- 15% Margin : Rs.38,70,852/- Director's Salary : Rs.54,47,732/- TDS : Rs.70,52,015/- Exchange Rate Difference : Rs.1,89,663/- 3. The assessee Company claimed that as per India UK DTAA Treaty, the receipts are not taxable in India and therefore claimed refund of the amount of TDS deducted by the Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has been perused and it is observed that the applicability of the provisions of Section 115JB have not been thoroughly examined since there is a finding in the Assessment Order that the assessee has a PE in India. The AO arrived at the estimated profit 25% without any basis. Therefore, 115JB provision was required to be looked into and since the same has not been examined, therefore the assessment framed vide Assessment Order dated 19.02.2018 requires to be set aside since the same is erroneous insofar it is pre-judicial to the interest of Revenue. 9. The Assessing Officer is directed to thoroughly examine the issue after giving opportunity of being heard to the assessee. 3. It is submitted that the earlier a draft assessment order dated 29.12.2017 was passed by the Deputy Commissioner of Income Tax [International Taxation] under Section 143(3) r/w 144C of Income Tax Act, 1961. The case of the petitioner is that the petitioner accepted the draft assessment order pursuant to which the assessment order dated 19.02.2018 came to be passed under Section 143(3) of the Income Tax Act, 1961 against which the petitioner preferred an appeal under Section 246A of the Income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....02.2022 to which also the petitioner appears to have given a response on 18.03.2020. 10. It is in this background, the 1st respondent issued a notice under Section 263 of the Income Tax Act, 1961 on 15.3.2021 to revise the above Assessment Order passed on 19.02.2018. The show cause notice was limited to examination of the committee of MAT provisions under section 115JB of the Income Tax Act, 1961. 11. In the said notice, it was stated that the 2nd respondent failed to note that the petitioner is having a permanent establishment in India and therefore would have been taxed under Section 115JB of the Income Tax Act, 1961. 12. The learned counsel for the petitioner submitted that the petitioner is a marketing company from UK and caters to the need of the manufacturing partnership firm viz., Texmo Precision Casting, which is engaged in manufacture of casting mould for medical equipments and aerospace equipments. It is submitted that the petitioner and the manufacturing firm in India have entered into marketing service agreement dated 01.04.2009 whereby the petitioner is required to provide marketing service to Texmo Precision Casting company. 13. It is the specific case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted in the draft assessment order dated 29.12.2017 and final assessment order dated 19.02.2018 were beyond the scope of show cause notice dated 22.12.2017. It is therefore submitted that the impugned proceedings seeking to nullify the assessment under Section 253 of the Income Tax Act, 1961 is without jurisdiction. 18. It is further submitted that the CIT(A) and Commissioner under Section 263 are officers of the same rank and have equal powers. It is submitted that what the Commissioner can do under Section 263, is the same under Section 251 of the Act by the CIT(A). Power of CIT(A) u/s 251 - (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment" "... (c) in any other case, he may pass such orders in the appeal as he thinks fit" Power of CIT u/s 263 - "263(1)- "... pass such order thereon as the circumstances of the case justify, including an order of enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." 19. It is submitted that it is for this precise reason, there is a statutory bar under Section 263 to invoke provisions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing particulars:- Particulars Receipts treated as Fees for Technical Services Receipts treated as income from business or profession Gross Receipts Rs.4,19,86,627 Rs. 4,19,86,627 Income from business or profession - 25% of the gross receipt* - Rs.1,04,96,656 Tax as per Normal Provisions of the Act Rs.62,97,994 Rs.42,41,489 Minimum Alternate Tax as per Section 115JB* NA Rs.19,61,689 Tax Liability higher of the Minimum Alternate Tax or Normal provisions of the Tax Rs.62,97,994 Rs.42,41,489 22. However, in the impugned order, the Commissioner has not dealt with this issue and neither has come to any finding as to how the order dated 19/02/2018 is prejudicial to the interest of revenue. A reference was also made from the following passages which is reproduced below [CIT v Gabriel India Ltd. (1993) 203 ITR 108 (Bom)] :- 11. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e with are dealt with separately in other Articles of this convention, then the provisions of those Articles shall not be affected by the provisions of this Article. Therefore, the Assessing Officer has taken legally tenable position to tax the income under the head fees for technical services. Therefore, it is not known as to how order of the Assessing Officer is erroneous. 24. It is submitted that a specific plea was raised by the petitioner in its reply to Show cause notice. However, the same was not considered by the Commissioner in the impugned order and it was erroneously assumed jurisdiction and concluded that the order dated 19/02/2018 is erroneous. CIT v Gabriel India Ltd. (1993)203 ITR 108 (Bom), it was observed as under:- "14. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....certain cases, it may not be possible to come to a definite finding and therefore, it is not necessary that in all cases the Commissioner is bound to express a final view, as held by this court in Gee Vee Enterprises, [1975] 99 ITR 375. But, the least that was expected was to record a finding that the order sought to be revised was erroneous and prejudicial to the interest of the Revenue (see Seshasayee Paper, [2000] 242 ITR 490 (Mad)). No basis for this is disclosed. In sum and substance, the accounting practice of the assessee is questioned. However, that basis of the order vanishes in thin air when we find that this very accounting practice, followed for a number of years, had the approval of the income-tax authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. 24 ........... Likewise, whether the Commissioner should have recorded a definite finding or not, may not be very relevant factor in the present case where on the facts of this case we have found that the opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Commissioner of I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x under Section 263 of the Income Tax Act, 1961 issued Show cause notice with the following reason: "... It is observed that the Assessing Officer has given a finding of assessee having a Permanent Establishment in Indi and the assessed income could have been taxed u/s. 115JB also." 29. However, in the impugned order, it supplied new reason altogether to sustain the impugned proceedings, which are otherwise wholly without jurisdiction as stated above. In the impugned order, the Commissioner of Income Tax for the first time has observed that the Assessing Officer has failed to make enquiry regarding the estimation of income and this failure makes the order erroneous and concluded that the Assessing Officer arrived at the estimated profits of 25% without any basis. Whereas as seen from the reasons provided in SCN, the CIT, nowhere calls upon the Petitioner to show-cause on the aspect of estimation of income at 25% being erroneous. 30. It is therefore submitted that the impugned order has travelled beyond the scope of show-cause notice and is liable to be quashed. [Oryx Fisheries Private Ltd. v. Union of India and Others, (2010) 13 SCC 427]. 31. Finally, it was submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....finding of the Deputy Commissioner of Income Tax in the draft assessment order dated 29.12.2017 as confirmed by the assessment order dated 19.02.2018 and therefore, the scope of the appeal of the petitioner was only relating to the consultancy charges on which a tax of Rs.62,97,994/- has been demanded from the petitioner. The learned Senior Standing counsel for the respondents further submits that the submission of the the petitioner is devoid of merits. It is submitted that the petitioner has an alternate and efficacious remedy and therefore the jurisdiction of this Court under Article 226 of Constitution of India not be invoked. 38. The learned counsel for the respondents submits that both under Section 246A r/w 251 of the Income Tax Act, 1961, the Appellate Commissioner as also the Commissioner of Income Tax under Section 263 of the Income Tax Act can nullify the assessment, save that in the appellate proceedings, the Appellate Commissioner can pass fresh order of assessment, as if it were the assessment order against which the remedy lies before the Tribunal. In this case, the petitioner's appeal has been allowed indirectly and the matter has been remitted back to the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax has to be determined on the basis and the tax rate in the case of non-resident at the rate of 40% whereas the case of a non-resident having no permanent Establishment taxes to be paid at 15% as per Article 13 of the UK India DTAA. It is submitted that once there is finding of fact regarding permanent Establishment in India, the assessment has to be completed under Section 115JB of the Income Tax Act, 1961. 44. It is submitted that the profit that was required to be worked out valid estimation or from the books of the petitioner was not done. It is therefore submitted that the order was erroneous and prejudicial to the interest of the revenue and therefore the jurisdiction has been rightly invoked Section 263 of the Income Tax Act, 1961 45. The issue that arises for consideration in this writ petition whether the notice issued to the petitioner under Section 263 of the Income Tax Act, 1961, pursuant to which, the impugned order dated 30.03.2021 was without jurisdiction or not . Explanation Section 1(c) of the Income Tax Act, 1961, Explanation 1(c) to Section 263 reads as under:- "1(c) : Where any order referred to in this sub-section and passed by the Assessing Of....