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2016 (4) TMI 467 - HC - Income TaxReopening of assessment - Held that - The Court considers it appropriate to modify para 27 of its judgment dated 11th February 2016 and substitute it as under 27. Turning to the notice issued in the instant case to the Petitioner under Section 143(2) (ii) of the Act it is seen that it is in a standard format which merely states that there are certain points in connection with the return of income on which the AO would like some further information. In any event the question raised in the applications by the Petitioner before the AAR do not appear to be forming the subject matter of the said notice under Section 143 (2) (ii) of the Act. Consequently the mere fact that such a notice was issued prior to the filing of the application by the Petitioner before the AAR will not constitute a bar in terms of clause (i) to the proviso to Section 245-R (2) of the Act on the AAR entertaining and allowing the application.
Issues:
1. Challenge to the order of the Authority for Advance Rulings (AAR) rejecting the application for determining taxability of profits from offshore supplies. 2. Interpretation of when a question can be considered pending for the purposes of the proviso to Section 245R(2) of the Income Tax Act, 1961. 3. Examination of the notice issued under Section 143(2) of the Act and its relevance to the AAR application. 4. Analysis of the notice issued under Section 143(2)(ii) and its impact on the AAR application. Detailed Analysis: 1. The main issue in this case was the challenge to the AAR's order rejecting the application regarding taxability of offshore supplies profits. The AAR's decision was based on the bar under clause (i) below the proviso to Section 245R(2) of the Income Tax Act, which was deemed to be attracted due to a notice issued to the Petitioner under Section 143(2) of the Act. The Court examined whether the AAR was justified in reaching this conclusion and analyzed when a question can be considered pending for the proviso's purposes. 2. The Court scrutinized the notice issued under Section 143(2) of the Act and observed that it did not meet the requirements specified by the Act. The notice lacked the necessary particulars of the claim, loss, exemption, deduction, or relief as mandated by the Act. The Court concluded that the notice issued did not form the subject matter of the questions raised in the AAR application, thereby not constituting a bar to the AAR entertaining and allowing the application. 3. The Petitioner highlighted that the notice issued to them was under Section 143(2)(ii) and not Section 143(2)(i) as previously observed. However, the Court explained that this distinction did not alter the conclusion reached in the judgment under review. The Court further analyzed the scope of an AO's enquiry under Section 143(2)(ii) and emphasized that the notice must be issued based on a genuine necessity to ensure accurate income reporting. 4. The Court examined the notice issued under Section 143(2)(ii) by the AO and noted that it did not contain the AO's opinion on the necessity or expediency of issuing the notice as required by the Act. Consequently, the Court determined that the notice did not refer to any specific question pending consideration and thus did not constitute a bar to the AAR's jurisdiction in entertaining and allowing the application. The Court modified its previous judgment to reflect these findings and disposed of the review petition accordingly.
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