2022 (6) TMI 31 - HC - Income Tax

Reopening of assessment - Notice under Section 148A(d) - interest income derived from Non-Convertible Debentures NCDs floated by Genpact India Pvt. Ltd. GIPL had not been appropriately offered to tax due to mischaracterization of income - HELD THAT - Issue notice. Mr.Puneet Rai, learned standing counsel accepts notice on behalf of the respondents. He states that the petitioner knew the stand of the Respondents-Revenue as a draft assessment order u/s 144C of the Act has already been passed in petitioner s case for the Assessment year 2017-18 on 30.09.2021, in which similar allegations had been made by the Revenue and the said income had been categorized as Income from Other Sources falling under Article 22 of the Double Taxation Avoidance Agreement between India and Luxembourg. In rejoinder, learned senior counsel for the petitioner states that in the impugned order issued under Section 148A(d) of the Act, the income of the petitioner in question seeks to be categorized as dividend income for the first time, which, in any event, would be exempt in the hand of the petitioner/assessee and the liability to pay the dividend distribution tax, if any, would be on the payer i.e. GIPL. This Court is of the view that the matter requires to be examined. Let a counter affidavit be filed by learned counsel for the respondents-Revenue within six weeks. Rejoinder affidavit, if any, be filed before the next date of hearing. List on 01st September, 2022.

Summary

Issues:
Challenging notice under Section 148A(b) of the Income Tax Act, 1961, order under Section 148A(d), and notice under Section 148 for Assessment Year 2018-19.

Analysis:
The writ petition challenges a notice dated 11th March, 2022 issued under Section 148A(b) of the Income Tax Act, 1961, an order dated 29th March, 2022 issued under Section 148A(d), and a notice dated 30th March, 2022 issued under Section 148 for the Assessment Year 2018-19. The petitioner contends that the interest income from Non-Convertible Debentures (NCDs) was not appropriately offered to tax due to mischaracterization of income. However, the order issued under Section 148A(d) categorized the interest income as fictitious and in the nature of dividend payment by Genpact India Pvt. Ltd. (GIPL), alleging that the income had escaped assessment. The petitioner argues that the impugned notice and order were passed without clarifying the nature of the alleged mischaracterization of income, violating principles of natural justice.

The respondents argue that the petitioner was aware of the Revenue's stance as a draft assessment order for the previous assessment year had similar allegations. In response, the petitioner's counsel highlights that the impugned order categorizing the income as dividend income for the first time would be exempt in the hands of the assessee, and any liability for dividend distribution tax would fall on GIPL. The Court deems the matter necessitates examination and directs the Revenue to file a counter affidavit within six weeks, allowing a rejoinder affidavit if necessary before the next hearing date scheduled for 01st September, 2022. Although the assessing officer can proceed with the reassessment/assessment order, the Court instructs that it should not be implemented until further orders are issued.