2013 (7) TMI 933 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of Assessing Officer.
2. Validity of assessment proceedings.
3. Taxability of interest income.
4. Allowance of expenses and waiver of interest.
5. Validity of reopening of assessment.

Summary:

1. Jurisdiction of Assessing Officer:
The primary issue was whether the ADIT (International Taxation)-II, Hyderabad had jurisdiction over the assessee, Platex Ltd. The assessee contended that the jurisdiction lay with the DDIT (International Taxation), Circle 1(1), New Delhi, where the PAN was registered, and the return was initially processed. The Tribunal referenced the judgment in Vijayasanthi Investments Pvt. Ltd. vs. CCIT & Ors. (187 ITR 405) and ruled that the transfer of jurisdiction must comply with the due process u/s 127, including giving the assessee a reasonable opportunity to be heard and recording reasons for the transfer. The Tribunal found no evidence of such compliance and annulled the order passed by the ADIT (International Taxation)-II, Hyderabad.

2. Validity of Assessment Proceedings:
The Tribunal noted that the assessment proceedings by the ADIT (International Taxation)-II, Hyderabad were invalid due to the lack of a proper transfer order u/s 127. The proceedings initiated by the ADIT (International Taxation), New Delhi, were not lawfully transferred to Hyderabad, rendering the subsequent actions by the Hyderabad office without jurisdiction.

3. Taxability of Interest Income:
The Tribunal addressed the taxability of interest income earned by Platex Ltd. from debentures issued by PVP Ventures Pvt. Ltd. The Assessing Officer had taxed the interest income at 20% under section 115A, considering the provisions of the DTAA between India and Mauritius. However, the Tribunal found that the interest income was already assessed in the hands of the representative assessee, PVP Ventures Ltd., and thus, could not be reassessed in the hands of Platex Ltd.

4. Allowance of Expenses and Waiver of Interest:
The Tribunal upheld the CIT(A)'s decision allowing the deduction of expenses incurred by Platex Ltd. and recognizing the waiver of interest. The CIT(A) observed that the interest amount of Rs. 49,54,68,397 was neither paid by PVP Ventures Ltd. nor received by Platex Ltd., and thus, could not be taxed. The Tribunal supported this view, citing judgments like CIT vs. Giriraj Udyog (P) Ltd. (273 ITR 495) and Pranav Vikas (India) Ltd. vs. ACIT (116 ITD 141).

5. Validity of Reopening of Assessment:
The Tribunal found the reopening of the assessment u/s 148 invalid as the notice was issued before the cancellation of the certificate u/s 192, which was still in force. The reopening was deemed without valid reasons to believe that income had escaped assessment, leading to the allowance of the assessee's cross-objections.

Conclusion:
The Tribunal annulled the assessment order passed by the ADIT (International Taxation)-II, Hyderabad, due to lack of jurisdiction and upheld the CIT(A)'s decision on the taxability of interest income, allowance of expenses, and waiver of interest. The reopening of the assessment was also found invalid. The appeals by the Revenue were dismissed, and the assessee's appeals and cross-objections were allowed.