TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 957
X X X X Extracts X X X X
X X X X Extracts X X X X
....Taxation, Hyderabad under Section 142(1) of the Act (Annexure P-21); and (3) Order dated 17.11.2018 passed by the Deputy Commissioner of Income Tax-I, International Taxation, Hyderabad (Annexure P-23). 3. By the first impugned notice dated 27.03.2018, Additional Deputy Commissioner of Income Tax (International Taxation) informed the petitioner that he had reasons to believe that its income chargeable to tax for the assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the Act and therefore, he proposed to assess/reassess the income of the petitioner for the said assessment year. For this purpose, petitioner was called upon to file a return of income in the prescribed form for the said assessment year. It was mentioned in the said notice issued under Section 148 of the Act that the same was being issued after obtaining necessary satisfaction of the Commissioner of Income Tax (International Taxation and Transfer Pricing), Hyderabad. 4. The second impugned notice dated 24.10.2018 has been issued by the Deputy Commissioner of Income Tax-I, International Taxation, i.e., first respondent under Section 142(1) of the Act, whereby petitioner has been called....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccepted by the first respondent. 10. However, petitioner was served with a notice dated 12.11.2014 issued by the first respondent under Section 148 of the Act, in response to which, petitioner informed the first respondent on 11.12.2014 that its return filed on 28.03.2013 may be treated as the return filed pursuant to the notice under Section 148 of the Act. Petitioner also sought for a copy of reasons recorded for initiating reassessment proceedings. 11. Petitioner was thereafter served with a notice dated 20.08.2015 under Section 142(1) of the Act seeking certain details from it. Petitioner vide letter dated 09.09.2015 once again requested first respondent for furnishing it the reasons recorded for the reassessment proceeding. In response thereto, first respondent vide letter dated 27.11.2015 furnished the petitioner the reasons recorded. 12. Petitioner submitted a detailed response to the notice under Section 142(1) of the Act on 17.12.2015 whereafter it was called for a hearing on 20.02.2016. By its letter dated 26.02.2016 petitioner explained the nature of software club charges as being allocation of costs and therefore claimed it as not chargeable to tax. After hearing the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ombay being W.P.No.3624 of 2018 as according to the petitioner, a part of the cause of action had taken place in Mumbai. Initially an interim order was passed restraining the respondents from proceeding further with the assessment. However, on 01.07.2019 Bombay High Court passed an order observing that issue of the High Court where the assessee was served with a notice of reopening of assessment getting territorial jurisdiction to entertain a writ petition challenging such notice is not free from doubt. Therefore, Bombay High Court refused to exercise jurisdiction and instead granted liberty to the petitioner to file appropriate petition before the High Court having jurisdiction over the assessing officer at Hyderabad. Interim order granted earlier was extended for a period of two weeks. It was thereafter that the present writ petition came to be filed before this Court seeking the reliefs as indicated above. 16. The challenge has been made on the ground that petitioner had disclosed fully and truly all material facts necessary for completion of assessment. Therefore, the assessing officer could not have assumed jurisdiction to reopen a concluded assessment and reassessment. The i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondent could not have known or suspected that such charges were in fact in the nature of royalty payments. It was only during assessment proceedings for assessment years 2013-14 and 2014-15 that the first respondent had examined the transactions and found them to be colourable devices used to evade tax. It is further contended that order dated 31.03.2016 was passed on the basis of information made available and being an order passed pursuant to initial assessment proceedings it would be an assessment order and not a reassessment order. 18.3. First respondent has initiated proceedings under Section 147 of the Act only after recording reasons to believe that there is escapement of income and after having obtained approval from the second respondent. All procedural requirements have been duly complied with. 18.4. It is further submitted that petitioner being a non-resident foreign company had declared income of Rs.32,35,27,521.00 earned in India during assessment year 2011-12 claiming refund of Rs.4,05,88,568.00 only upon being called to file return of income vide notice dated 21.11.2012. The return was processed under Section 143(1) of the Act and was not selected for scrutiny. Sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re was no response from the petitioner to the notice under Section 142(1) of the Act dated 24.10.2018, petitioner was called upon to show cause as to why assessment should not be completed under Section 144 of the Act. In response, petitioner submitted letter dated 19.07.2019 stating that it had filed a writ petition before the High Court of Telangana. Since no order of the High Court was placed before the first respondent and as the first respondent was mandated to pass the draft assessment order under Section 153 of the Act within sixty days from the date of expiry of the interim stay, the same was passed on 06.08.2019. At the time of passing the draft assessment order, there was no stay on the proceeding. 18.7. Contending that impugned notices and order are perfectly within jurisdiction and valid, answering respondent seeks dismissal of the writ petition. 19. In its rejoinder affidavit, petitioner has reiterated the contentions made in the writ affidavit. It is stated that it was only when the first respondent had called upon the petitioner to explain the nature of software club charges, that the same were furnished by the petitioner. Details of amounts received on account of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T Domains Cost Sharing Agreement and other agreements in the proceedings for the assessment year 2011-12 is concerned, he submits that there was no obligation on the part of the petitioner to furnish the agreements in question. Obligation of the petitioner was limited to furnish the primary facts only. According to him, the primary facts included receipts, details of the payers, exemption claimed on the same and the reason why the same was claimed as being exempt from tax were all furnished by the petitioner. In fact, it was the burden of the assessing officer to have called for the agreements which he did not do. In any event, the IT Domains Cost Sharing Agreement as well as the other agreements were furnished by the petitioner in the course of the assessment proceedings for the assessment year 2013-14 on 22.12.2015 in response to a specific requisition by the first respondent. Therefore, it would be incorrect to say that the said agreements were not furnished or that those were not available with the first respondent. The assessing officer for the two assessment years i.e., 2011-12 and 2013-14 being the same he could have very well used the agreements submitted in one proceedings....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax (Appeals) and thereafter before the Income Tax Appellate Tribunal. 22.1. On merits, she submits that in the hearing held on 20.02.2016 at the time of the assessment proceedings for the assessment year 2011-12, petitioner was called upon to reconcile the differences between Form 26AS and the return of income filed for assessment year 2011-12 along with supporting documents. In its explanation dated 26.02.2016, petitioner furnished a reconciliation statement on its own volition and annexed a note on software club charges claimed as reimbursement of expenditure. Assessing Officer believing the petitioner accepted the explanation of the petitioner and passed the assessment order dated 31.03.2016. She submits that the software club charges were incorrectly projected, as the true nature of the royalty income in the hands of the petitioner was concealed and misrepresented as reimbursement of expenditure. According to her, there was no reference or disclosure whatsoever in the petitioner's explanation dated 26.02.2016 that such payments were made pursuant to any agreement(s). On the limited information on software club charges made available by the petitioner claiming those to be rei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or by the first respondent were furnished by the petitioner. First respondent did not ask for the agreements and therefore, those being not relatable to the claim of the petitioner were not furnished. When subsequently in assessment proceedings for the assessment year 2013-14, the same assessing officer specifically sought for the agreements those were submitted by the petitioner. Therefore, it cannot be said that petitioner had failed to disclose fully and truly all material facts. 23.2. He further submits that though each assessment year may be a separate proceeding, nonetheless the law has now been made clear that documents furnished in other assessment years can be relied upon in the proceedings for the assessment year under consideration. He finally submits that respondents have failed to show or substantiate even a prima facie case for valid initiation of reassessment proceedings. Therefore, the writ petition should be allowed quashing the impugned notices and order. 24. Submissions made by learned counsel for the parties have received the due consideration of the Court. 25. Pursuant to the notice dated 27.03.2018 issued by the first respondent under Section 148 of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed subsequently and the belief formed by the assessing officer that taxable income has escaped assessment. The belief of the assessing officer is based on direct evidence and not based on any gossip or rumour; nor on any suspicion. 26. According to the respondents, first respondent had passed assessment order on 06.08.2019 under Section 144 read with Section 147 of the Act. Such draft assessment order is subject to the provisions of Section 144C of the Act. 27. Let us now examine the provisions of Section 144C of the Act. 28. Section 144C was inserted in the Act by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009. It provides for and deals with reference to Dispute Resolution Panel. As per sub-section (1), the assessing officer shall notwithstanding anything to the contrary contained in the Act, in the instance, forward a draft of the proposed order of assessment (briefly, "the order") to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Thus, sub-section (1) makes it clear that provisions of Section 144C shall have over-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n (5) for further enquiry and passing of the assessment order. 28.7. Sub-section (9) clarifies that if members of the Dispute Resolution Panel differ in opinion on any point, that point shall be decided according to the opinion of the majority. Sub-section (10) makes it clear that every direction issued by the Dispute Resolution Panel shall be binding on the assessing officer. However, as per subsection (11) no direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the assessing officer on such directions which are prejudicial to the interest of the assessee or to the interest of the revenue respectively. There is a time limit of nine months for issuance of such direction under sub-section (12). 28.8. Sub-section (13) says that upon receipt of the directions issued under sub-section (5), the assessing officer shall, in conformity with the directions, complete the assessment notwithstanding anything to the contrary contained in Section 153 or Section 153B. However, at this stage, the assessing officer is not required to provide any further opportunity of being heard to the assessee. 28.9. Sub-sections (14) to (14C) are no....