TaxTMI 
TaxTMI 
2024 (8) TMI 759
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....ble with the Department, it appeared that interest income derived from Non-convertible Debentures [NCDs] floated by Genpact India Private Limited [GIPL] had not been appropriately offered to tax due to mischaracterization of income. The petitioner was consequently called upon to show cause why an amount of INR 5,06,00,00,000/- should not be treated as income having escaped assessment. 3. The reasons which accompanied the aforesaid notice which appear at page 40 of our record are reproduced hereinbelow:- "This case has been picked up by the Risk management Strategy of Insight. On perusal of the information available with the Department, it appears that the alleged interest income derived from NCDs floated by Genpact India Pvt. Ltd. has not been appropriately offered to tax due to mischaracterization of income. 2. Moreover, on perusal of the records of the assessee it is seen that your case has not been picked up for scrutiny assessment u/s 143 (3) of the Income-tax Act,1961. Hence, the true character of these receipts could not be ascertained. 3. You are therefore required to show cause why the amount of Rs. 5,06,00,00,000/-shall not be treated as income escaping assessment a....
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....ght to issue a re-opening notice to make fishing enquiries. In this regard, the assessee has submitted the Assessment Orders for A.Y. 2015-16 and 2016-17. However, the assessee has conveniently disregarded the proceedings for A.Y. 2017-18, wherefrom, information was available to the department. The assessee has also requested evidence and grounds under which the case has been flagged by the Risk Management Strategy of the Department. In this regard, this demand of the assessee, at this stage is certainly unwarranted. It is reiterated that these issues will be taken during the course of assessment proceedings & assessee will be afforded adequate opportunity to explain the case and the resultant assessment order will be passed after an objective appraisal of the evidence available. Consequently, all the contentions of the assessee are dismissed as untenable. 5. Therefore, in view of the above facts and circumstances, I consider it is a fit case to issue notice u/s 148 of the Act as income has escaped assessment. Hence notice under Section 148 of the Income-tax Act, 1961 is being issued in the case of the assessee for A. Y 2018-19 along with this order u/s 148(d) the Income-tax Act,....
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.... be arising out of a share-restructuring arrangement within the Genpact Group involving 'Empower Research Knowledge Services' ('EKRS') and Genpact Ltd. Bermuda. The interest claimed liability was fictitious in nature and was only a garb to takeaway funds without paying taxes. As both Headstrong Consulting Singapore Pte Ltd and Genpact Luxembourg have common holding companies and common ultimate holding company, funds were taken out in the form of interest payment on artificial liability instead of declaring dividend. This helped in re-characterizing, what should have been dividend payment, to principal payment, leading to evasion of taxes which should have been paid as dividend distribution tax. Thus, on amount of interest payment out of claimed interest expense, GIPL was needed to pay DDT before remitting it out of country. Headstrong Consulting Singapore Pte. Ltd. played a key role in this scheme and claimed exempt short term capital gain which was not genuine in nature. AO by accepting the claim of Headstrong Consulting Singapore Pte Ltd. without conducting any enquiry has passed an order which is erroneous and prejudicial to the interest of revenue. This inter....
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....knowledged. It is thereafter that, the respondents chose to initiate action for assessment in terms of the notice under Section 148A(b) dated 11 March 2022. The said notice ultimately culminated in the passing of the Section 148A (d) order and the consequential notice under Section 148 which stands impugned herein. 8. We had in terms of our order of 19 July 2024 taken note of the principal submissions which were advanced by Mr. Pardiwala, learned senior counsel appearing in support of the writ petitioner on that day. Having heard Mr. Sachit Jolly as well as Mr. Puneet Rai, learned counsels appearing for the respective sides, we find that the following indisputable facts emerge from the record. 9. As is evident from a reading of the initial notice under Section 148A(b), the respondents had taken the stand that the interest income derived from the NCDs floated by GIPL had not been appropriately offered to tax on account of mischaracterization of income. By the time the Section 148A (d) order came to be passed, the respondents sought to buttress their case of proposed reassessment on an order under Section 263 of the Act passed by the CIT (IT) in the case of Headstrong Consulting Si....
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....fy that the non-issuance of a notice under section 143 (2) does not preclude the Assessing Officer from reopening the assessment under section 147. For that matter, as has been held by the Supreme Court in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITR 500 (SC), the failure of the Assessing Officer to take steps under section 143 (3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when an intimation under section 143 (1) has been issued. But it is also a settled principle of law that when the Assessing Officer issues a notice under section 148, at that stage the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief (Rajesh Jhaveri (supra). At that stage, an established fact of the escapement of income does not have to be proved, since it is not necessary that the Assessing Officer should have finally ascertained that income has escaped assessment. The nature of the jurisdiction of the Assessing Officer which was dealt with by the judgment of the two learned judges of the Supreme Court in Rajesh Jhaveri's case was revisited in a decision of three learned ....
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....ers conferred by section 148. There was a disclosure clearly by the assessee that it is a body corporate incorporated in Singapore, the principal business of which is to invest in Indian securities; that the assessee is a tax resident of Singapore and that the profits which the assessee realised from its transactions in securities constituted its profits from business. The assessee stated that it had no permanent establishment in India as defined in article 5 of the DTAA and that based on the provisions of article 7 the profits of Rs. 131.70 crores from transactions in Indian securities were not liable to tax in India. The only basis on which the assessment is sought to be reopened is on the assumption that the provisions of section 115AD would stand attracted. That is on the assumption that the assessee is an FIL Though the attention of the Assessing Officer was drawn to the fact that the assessee is not an FII and that the provisions of section 115AD would not be attracted, the Assessing Officer persisted in rejecting the objections to the reopening of the assessment. In the order disposing of the objections which were raised by the assessee, the succeeding Assessing Officer has ....
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....s sheet recorded in the course of the reassessment proceedings. We have already seen that the said entry records that the authorised representative of the petitioner was asked to show cause why the difference in the amount of profit before tax and the amount declared under the VDIS cannot be treated as its income for the assessment year 1997-1998 as no return of income had been filed. The entry made in the proceeding sheet is perhaps more elaborate and informative than the reasons recorded under section 148(2) in the sense that it also states one more reason for initiating re-assessment proceedings, namely, that there is a difference between the profit before tax (Rs. 42,79,340) and the amount declared in the VDIS (Rs. 7,23,490). The reasons recorded, however, are not so explicit and do not refer to this fact. We are to be guided only by the reasons recorded for reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. This legal position is well settled and if any authority is needed, reference may be made to the following judgments: (i) Jamna Lal Kabra v. ITO, (1968) 69 ITR 461 (All); (ii) CIT ....
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....148A(b) of the Act, the same cannot be incorporated by issuing a supplementary notice" 12. Quite apart from the above, the impugned proceedings are liable to be quashed on a more fundamental ground. Undisputedly, the petitioner had offered the interest income to tax in terms of the provisions contained in Section 194LD of the Act. The ultimate order under Section 148A (d), however, alleges that the remittance in fact, constituted dividend and which was liable to be taxed in terms of Section 115-O of the Act. 13. Section 115-O, insofar as it is relevant for our purposes, is extracted hereinbelow:- "115-O. Tax on distributed profits of domestic companies.-[(1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003 [but on or before the 31st day of March, 2020], whether out of current or accumulated profits shall be charged to additional income tax (hereafter....