TaxTMI 
TaxTMI 
2025 (8) TMI 1164
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.... for AY 2015-16 is dismissed as not maintainable and the C.O. of the assessee for AY 2015-16 which has become infructuous is also dismissed. ITA.No. 3041/Mum/2024 - AY 2013-14 3. The assessee is a company and tax resident of Cyprus. Asia Property Fund II Gmbh and Co. Germany held 100% shares in assessee company. The assessee filed the return of income for AY 2013-14 on 28.11.2013 declaring a total income of Rs. 11,87,38,528/-. Subsequently the assessee filed the revised return of income on 11.11.2014 declaring total income of Rs. 9,13,20,446/-. During the year the assessee received interest income from investment in "Compulsory Convertible Debentures" (CCD) from Pacifica Chennai Infrastructure Company Pvt. Ltd. to the tune of Rs. 4,38,90,309/- and from Pacifica (Chennai Old Mahabalipuram Road Project) Infrastructure Pvt. Ltd. to the tune of Rs. 2,40,48,219/- and Rs. 2,33,81,918/- from Marathon IT Infrastructure Pvt. Ltd. The assessee offered the interest income from investment of CCD for tax in India at 10% under Article 10 of India-Cyprus DTAA. The return was processed under section 143(1) of the Act. Subsequently a notice under section 148 dated 29.11.2018 was issued and th....
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....which is done beyond 4 years is not valid since the assessee has disclosed all material facts and evidences in the first round of reassessment itself and that the AO has once again initiated the reassessment proceedings on mere change of opinion. The CIT(A) allowed the contention in favour of the assessee stating that the AO is not justified in reopening the assessment when true and full disclosure of all material facts were disclosed by the assessee during the original reassessment proceedings itself. The CIT(A) also allowed the contentions of the assessee that the reassessment proceedings has been initiated without any new tangible material that is brought on record. However, the CIT(A) did not accept the contention of the assessee that the reopening is based on mere change of opinion and the CIT(A) also rejected the claim on percentage of tax on merits. 6. The grounds raised in the appeal of the Revenue and the C.O. of the assessee are reproduced below: Grounds in Revenue's appeal "1. On the facts and circumstances of the case & in law, the Ld. CIT (A) erred in holding that the reassessment proceedings initiated under section 147 of the Act is bad in law....
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....e were concluded without providing the assessee a copy of the sanction obtained under section 151 of the Act. 1.3. Erred in holding that the Ld. AO was justified in invoking Explanation 2(b) to section 147 of the Act. 1.4. Erred in holding that there was no change of opinion by Ld AO in the second reopening of assessment. 1.5. Erred in not appreciating that the Ld. AO had erred in short grating TDS credit amounting to Rs. 1,38,08,222/-" 7. The ld. AR vehemently argued that the reason recorded by the AO while reopening the assessment in 2nd time is based on the same issue to test the beneficial ownership of interest income which was already examined by the AO in the first reassessment proceeding. The ld. AR in this regard drew our attention to the reason recorded in the first round of reassessment proceeding (page no. 2 to 8 of PB) and also the reasons recorded in the 2nd round of reassessment proceeding (page no. 341 to 348 of PB). The ld. AR further drew our attention to the final assessment order passed under section 143(3) r.w.s. 147 r.w.s. 144C(3) (page no. 169 to 247 of PB) in the first round, where the issue of beneficial ownership of interest in....
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....f the Board, number of employees working in Cyprus office, etc. In the first round of appellate proceedings, the CIT(A) quashed the reassessment order stating that the AO is not correct in adopting the procedure prescribed under section 144C since there is no variation in the income or loss returned by the assessee. 10. Subsequently the AO once again issued a notice under section 148 dated 31.03.2021 recording the reasons that the assessee has incorrectly availed the benefit of treaty provisions and that the assessee is not the beneficial owner of the interest income. On perusal of the reasons recorded, we notice that the documents relied on by the AO in the 2nd round of reassessment are part of the submissions made by the assessee during the first round of reassessment [refer para (a) to (f) of reasons recorded in page 343 & 344 of PB]. In assessee's case the 2nd reassessment notice dated 31.03.2021 is issued beyond four years and therefore there is merit in the contention of ld AR that the Proviso to section 147 which reads as under is applicable in assessee's case - Income escaping assessment. 147. If the Assessing Officer has reason to believe that ....
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....having beneficial interest in respect of interest from CCD. Again in the present re-opening of assessment order dated 27.05.2022, the AO came to the same conclusion that the appellant was not beneficial owner of the interest income received from Indian company and, therefore, the benefits of Article 11 of the India-Cyprus DTAA was not available to the appellant. The finding of the AO in the first reassessment order and the second re-assessment order is identical. It is a repetition of decision already taken in the first re-assessment, therefore, it is not a case of change of opinion by the AO. Therefore, this argument of the appellant is rejected. 6.2.5 Even though there was no change of opinion by AO in the second reopening of assessment, the AO was not in possession of any new tangible material in his possession on which he could form a belief and had reason to believe that income has escaped assessment for AY. 2013-14. Therefore, notice u/s.148 and consequent order u/s. 147 is quashed and set aside." 12. It is an undisputed fact the AO has reopened the assessment, both times for the same reason that the assessee not being a beneficial owner has incorrectly availed th....
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....as confirmed by this Court via order dated 23-3-2016 (related to AY 2010-2011), which noted that the petitioners were not eligible assesses within the meaning of Section 144C(15)(6) of the Act. Pertinently, the petitioners' declared status, even then, was, a non-resident foreign partnership firm. 13.1 Therefore, at the relevant time, the AO could not have taken recourse to the procedure for assessment provided under section 144C. It needs to be emphasized that Section 144C falls in Chapter XIV which is titled "Procedure for Assessment" 13.2 Notably, for two AYs, Le., AY 2011-2012 and 2012-2013, recourse was taken for passing final assessment orders qua the petitioners to the provisions of Section 143(3) of the Act. These orders were passed on 27-3-2015 (AY 2011-2012) and 10-3-2016 (AY 2012-2013). 13.3 Therefore, there was no good reason, according to us, for the AO to resort to the procedure for assessment provided under section 144C of the Act when such orders [i.e., the aforementioned orders] had already been passed and there was no change in the status of the petitioners in the AY in issue, i.e., AY 2013-2014. The petitioners' status in AY 2013....
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....ence is made to Explanation 2 to Section 147 of the Act and the judgment of this Court Honda Cars India Lad v. Dy CIT (2016) 67 taxmann.com 29/240 Taxman 7072. As would be evident, from the date of the judgment rendered in the Honda Cars Case (supra) despite the view of this Court that assessment procedure provided under section 144C was only available against eligible assessees, the AO chose to ignore the dicta, although the AO knew, as noticed above, that the TPO had not ordered any variation in income and that the status of the petitioners [i.e., that they were non-resident foreign partnership firm was not in doubt. 13.8 As is clear from the facts, which have emerged in this case, once a scrutiny notice was issued under section 143(2) of the Act, the route open, if at all, to the AO for framing an assessment order was the one provided under section 143(3) of the Act, as was done in AYs 2011-2012 and 2012-2013, vide order dated 27-3-2015 and 10-3-2016 14. The AO, however, chose to assess the petitioners, by resorting to the procedure provided under section 144C of the Act despite the record concerning the previous AYs showing that such attempts had failed and th....