AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1407
X X X X Extracts X X X X
X X X X Extracts X X X X
....e records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon by both the sides were duly considered. 4. Briefly stated, the facts of the case are that the assessee company e-filed its return of income on 30.11.2015 declaring NIL income. Return was selected for scrutiny under CASS and, accordingly, statutory notices were issued and served upon the assessee. A detailed questionnaire alongwith notice u/s 142(1) of the Act was issued and, thereafter, the case was referred to the Transfer Pricing Officer. 5. A perusal of the assessment order shows that simultaneous proceedings were undertaken, one by the Assessing Officer and the other by the TPO. Notes to Indian Income tax return for Assessment Year 2015-16 reads as under: "1. Headstrong Consulting (Singapore) Pte. Limited {'HCS' or 'the Company') is a company incorporated under the laws of Singapore arid has its effective place of management in Singapore. 2. During the Year 2015, it was a tax resident of Singapore and held a valid Tax Residency Ce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n from the above that in the notes to accounts, the assessee has explained the transactions relating to the transfer of shares and consideration received thereon. It can also be seen that the assessee has explained as to why the said transfer of shares does not result into any capital gains tax liability and why the income is exempt. 7. The first notice issued by the Assessing Officer during the course of scrutiny assessment proceedings is dated 16.08.2017 wherein the Assessing Officer had asked the assessee to submit copies of acknowledgement of filing return of income alongwith Income tax return form and notes to return and also Form No. 3CEB for the year ending on 31.03.2015. 8. On 18.10.2018, the Assessing Officer again issued a notice which reads as under: NOTICE UNDER SECTION 142(1) OF THE INCOME - TAX ACT, 1961 OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION, CIRCLE 2(1 X ROOM NO. 310, 3RD FLOOR, E-2 BLOCK, CIVIC CENTRE. MINTO ROAD, NEW DELHI - 110011 PAN : AADCH4943D Dated : 18/10/2018 To The Principal Officer M/s Headstronge Consulting (Singapore) Pte Ltd., 220 Orchard, 05-01, Singapore. Sir/Madam, In conn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year "or has accrued or arisen during the year may also be provided. 6. Please confirm whether you have maintained books of accounts for your Indian operation as required u/s44AA of the Act. If yes, please confirm whether they have been audited as required u/s 44AB of the Act, and furnish the same. If not, give your explanation for not complying with provisions u/s 44AA and u/s 44AB of the Act. 7. Please furnish computation of income. 8. Please furnish copy of order of Advance Ruling obtained in your case, if any. 9 Please explain the Large international transaction(s). Please send your reply through email and also furnish the hard copy of your reply in this office by 25/10/2018," (Arindam Misra) Assistant Commissioner of Income Tax. International Taxation, Circle 2(1)(1) New Delhi, 10. It can be seen from Point No. 9 to the Annexure that the Assessing Officer had sought explanation from the assessee to explain the large international transactions. 11. The assessee filed reply dated 31.10.2018 which reads as und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Pte. ltd. [now known as 'Genpact Consulting (Singapore) Pte. Ltd.'] ['the Company' or 'the assessee'] PAN: AADCH4943D A.Y. 2015-16 Sub : Notice dated October 13. 2018 under Section 142(1) of the-income-tax Act. 1961 - Response, thereto In response to the captioned notice dated October 18, 2018 issued by your goodself's office (copy of the notices are collectively enclosed herewith as Annexure I) and in continuation to our earlier submission dated August 16, 2017, we respectfully submit the following information: 1. Note on the Business of the Company The Company was incorporated as a private limited company in Singapore. The principal activity of the Company was that of Software, Computer Consultants and Advisors and Investment holding. 2. Assessment order for the last year No assessment under section 143(3) of the Act has taken place in the Company's case for any of the earlier assessment years. 3. Permanent Establishment in India The Company has not carried out any activity which could lead to constitution of its Permanent Establishment in India, in terms of Article 5 of the 'Agreement for avoid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Income Tax, Circle- 2(i)( 1), (International Taxation) New Delhi. Respected Sir, Re: Headstrong Consulting (Singapore) Pte. Ltd. [now known as 'Genpact Consulting (Singapore) Pte. Ltd,') ['the Company' or 'the assessee'] PAN: AADCH4943D Assessment Year: 2015-16 Sub: Notice dated Novembe r27, 2018 under Section 142(1) of the Income-tax Act, 1961 - Response thereto In response to the captioned notice dated November 27, 2018 issued by your office (copy of the notice is enclosed herewith as Annexure 1) and in continuation to our earlier submissions dated August 16, 2017, October 31, 2018 and November S, 2018, we respectfully submit the following information: 1. The Company, during the year under consideration, transferred 1,486,025 equity shares held in Genpact India Ian Indian company) to its wholly owned Indian subsidiary Empower Research Knowledge Services Private Limited (hereinafter referred to as 'Empower India', now known as Genpact India Private Limited), for a total consideration of USD 1,397,263,241. The said shares were transferred in two tranches, viz., 701,675 shares on January 28, 2015 and 784,350 shares on March 25, 2015. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to tax if any. If not reasons for the same. 4. The valuation report of the shares sold or purchased. As many notices sent earlier have not been complied, with it is requested that the compliance for the above questions be made on time to avoid the initiation and levy of penalty u/s 271(l)(b) of the Income Tax Act. 15. The assessee filed reply alongwith the following Annexure: 16. As mentioned elsewhere, the transfer pricing assessment proceedings were also undertaken simultaneously and on 19.09.2017, TPO sought explanation /details of all international transactions. The details/explanation sought by the TPO were duly replied/answered by the assessee vide replies dated 06.12.2017, 04.01.2018, 10.01.2018 and 31.07.2018. 17. All these replies are exhibited at pages 140 to 148 of the paper book. In fact, vide reply dated 31.07.2018, the assessee has also furnished valuation report relating to fair valuation of equity shares transferred by the assessee during the year under consideration. 18. Vide reply dated 11.09.2018, the assessee has explained the transfer of equity shares of Genpact India to its AE namely, Empower Research Knowledge Services Pvt Ltd. on 28.01.2015 and 25.03.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... where the Assessing Officer has left many loose ends, that too in a case where huge cash was found during search, most of which was surrendered by giving statement at the time of search, it was necessary for the Assessing Officer to properly adjudicate upon that issue [surrender] and assessment order should have at least reflected that he was satisfied with the explanation disclosing source of cash found. In the present case, the facts are different. 25. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision of the Incometax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Incometax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order." 27. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thu....