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Issues involved: Assessment of income tax on consultancy services, jurisdiction of assessing authority, validity of impugned order, authority of Tribunal's decision.
Assessment of Income Tax on Consultancy Services: The writ petitioner, a foreign company, provided consultancy services to an Indian company and paid advance tax. Dispute arose regarding the taxability of the income earned, leading to appeals and tribunal proceedings. The Tribunal held that the income was not taxable as the petitioner had no place of business in India, and the tax paid was refundable. Jurisdiction of Assessing Authority: The assessing authority initiated penalty proceedings u/s 271B and 271(1)(c) despite the Tribunal's decision in favor of the petitioner. The petitioner argued that the authority's actions were without jurisdiction and breached quasi-judicial discipline by disregarding the Tribunal's final decision. Validity of Impugned Order: The High Court found that the assessing authority's order assessing income tax on the consultancy services was an act of hierarchical indiscipline. The Court held that the order was without jurisdiction and set it aside, emphasizing the principle that a junior authority must obey the orders of a superior authority. Authority of Tribunal's Decision: The Court affirmed the finality of the Tribunal's decision, stating that the assessing authority's attempt to reassess the tax was improper. The Court ruled in favor of the petitioner, setting aside the demand notices for penalty and charges, and directing the return of the original bank guarantee to the petitioner. The Court also ordered the payment of costs and interest on the refunded amount within a specified timeframe.
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