TaxTMI 
TaxTMI 
2024 (4) TMI 201
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....he provisions of the Act. 3. Petitioner is a company incorporated in Malaysia, resident of Malaysia and also assessed to tax in Malaysia. Petitioner is engaged in the business of manufacturing and selling aluminum form work to its customers. It is an associated enterprise of an Indian company namely, MFE Formwork Technology India Private Ltd ("MFE India"). Petitioner entered into a marketing service agreement and a technical service agreement with MFE India. MFE India constitutes a Dependent Agent Permanent Establishment ("DAPE") of Petitioner in India and determines profits that are attributable to its DAPE in India and accordingly offers the same to tax in India. 4. For AY 2016-17, Petitioner filed its original Return of Income ("ROI") on 4th August 2016, declaring a total income of Rs. 3,72,58,690/-. Petitioner filed revised ROI on 30th November 2016 wherein the income remained unchanged but Petitioner revised its claim for credit of Tax Deducted at Source ("TDS"). The case of Petitioner was selected for scrutiny assessment under Section 143(3) of the Act. The Assessing officer ("AO") required Petitioner to provide details as sought in his notice dated 24th July 2018 issued un....
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....ior Counsel appearing for Petitioner, challenges the action of the AO primarily as untenable for lack of satisfaction of the prerequisite jurisdictional conditions. The additional contentions of Mr Pardiwalla are briefly encapsulated as under : (a) The genesis of the information with the AO was an order passed by Commissioner of Income Tax under Section 263 of the Act for AY 2017-18. The said order stood set aside by the Income Tax Appellate Tribunal ("ITAT") upon an appeal preferred by Petitioner. Since the only information sought to be relied upon by the AO to allege escapement of income was the said order passed under Section 263 of the Act, which itself does not survive, notices and the order impugned cannot be sustained. (b) Secondly, all material information including methodology for attribution of profit along with FAR analysis was fully disclosed and other details as required by the AO were provided by Petitioner and were within the knowledge of the AO at the time of passing of the original assessment order. There was thus, no tangible material to arrive at a conclusion that income had escaped assessment. This also amounts to reopening of assessment proceedings on the ....
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....edy to file a revision petition before the Jurisdictional Commissioner of Income Tax, who has the power to adjudicate on the matter under Section 264 of the Act. iii. There is no prejudice caused to Petitioner in absence of any recovery of demand issued to Petitioner as no reassessment order for AY 2016-17 is yet passed and thus, the Petition is premature. iv. The procedure laid down and to be followed in such cases, have been strictly adhered to in the case of Petitioner. Information in the case of Petitioner was flagged on the portal of the Income Tax Department under CRIU/VRU cases. The information was categorized under head of 'any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the board from time to time.' The risk management strategy of the Central Board for Direct Taxes ("CBDT") for reopening cases is under a separate, centralized team that has developed and runs the insight E-portal to implement the risk management strategy of the CBDT. The information about Petitioner was flagged on the insight portal with necessary details regarding the quantum of income having escaped as....
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....e order u/s 263 of the IT Act, 1961 dated 25.03.2022 Assessee should have attributed 35% of its Global Profit to itself based on the FAR analysis carried out by the Department. This issue is present even in AY 2015-16 and AY 2016-17 for which this information is being shared, since it is an urgent Time barring Matter. Details of the issue as per the order u/s 263 of the IT Act, 1961 dated 25.03.2022. From Page 27 of aforesaid show cause notice "Thus, since the assessee has been claiming every year high ratio of refund to TDS and showing Profit of just 24% of the Global Profit in India by applying FAR analysis submitted by the assessee itself, it becomes necessary to look into the FAR analysis of each year in light of the findings surfaced in order u/s 263 of the IT Act dated 25.03.2022 passed for A.Y. 2017-18. As per the provisions of the I.T. Act, re-opening for A.Y. 2015-16 & AY 2016-17 can be initiated up to 31.03.2022, this information needs to be shared and reflected in Insight portal for further necessary action at the AO's end." 6. In view of the above information following facts emerge: a) the weight given to each activity is arbitrary and has no paramete....
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....upheld the dual taxpayer approach, but then the said decision did not find favour with the Hon'ble High jurisdictional Court which has reversed the said decision of the coordinate bench. We are thus alive to the fact that in the light of Hon'ble Jurisdictional High Court judgment in the case of Set Satellite Singapore Pte Ltd Vs DCIT [(2008) 307 ITR 205 (Bom)], so far as profit attribution of a DAPE is concerned, the prevailing legal position is that as long as an agent is paid an arm's length remuneration for the services rendered, nothing survives for taxation in the hands of the dependent agency permanent establishment. Viewed thus, the existence of a dependent agency permanent establishment is wholly tax neutral, and there are a large number of decisions of the coordinate benches, following Hon'ble jurisdictional High Court's judgment in the case of Set Satellite (supra), holding so. The question that we put to the parties was whether an order can be said to be prejudicial to the interest of the revenue even when the income is determined on the basis of the correct legal position of the single taxpayer approach, which has the approval of the Hon'ble juri....
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....017-18 has quashed and set aside the revision orders by the CIT concerned. 11. No notice can be issued under Section 148 of the Act unless there is 'information' with the AO that income chargeable to tax has escaped assessment. The only information forming the origin of reason to believe escapement of income from assessment is contents of the order passed by the CIT. In the light of the aforesaid admitted position, as on date the order passed by the CIT does not survive, as being set aside by the ITAT, the very basis of the AO to reopen assessment and assume jurisdiction is misplaced and unjustifiable. 12. Another contention advanced by Mr. Pardiwalla is that the attempt to reopen assessment is based on a 'change of opinion' of the AO which is impermissible under tax jurisprudence. We have already noted the contents of the notice dated 30th March 2023 as aforesaid. The concluding paragraph 8 of the same notice reads thus: "8. Therefore, based on the above observations which originate from the material/information available on record with this office, income to the tune of Rs. 11,98,30,019/- has escaped assessment for the year under consideration." 13. The AO, by his letter da....
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....hich no more survives in view of the same already set aside by the ITAT. 15. We agree with the submissions of Mr. Pardiwalla that if 'change of opinion' concept is given a go by, that will result in giving arbitrary powers to the AO to reopen assessments. It would in effect sanctify powers to review which he does not possess. This Court in its decision in the matter of Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors. (2023) 457 ITR 647 (BOM) has held as follows: "36 We would agree with the submissions of Mr. Pardiwalla that if change of opinion concept is given a go by, that would result in giving arbitrary powers to the Assessing Officer to reopen the assessments. It would in effect be giving power to review which he does not possess. The Assessing Officer has only power to reassess not to review. If the concept of change of opinion is removed as contended on behalf of the Revenue, then in the garb of re-opening the assessment, review would take place. The concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer. As held in Dr. Mathew Cherian (supra), whether under old or new regime of reas....