2023 (5) TMI 1180 - AT - Income Tax

Revision u/s 263 - LTCG chargeable in India - tax treaty entitlement, - whether the assessee is a resident for tax purposes? - CIT was of the view that the Ld. AO did not carry out factual inquiry/verification to ascertain that the assessee is a genuine investor or not and he should have called for and verified the details of key personnel who manage the investment decisions of the fund - whether appellant is not entitled to the benefit of India-Mauritius Double Taxation Avoidance Agreement (India- Mauritius DTAA)? - HELD THAT - AO communicated the reasons for selection of case and sought the explanation of the assessee - there is no Linkling in the assessment order as to what explanation was given by the assessee. The assessment order only mentions that the assessee filed details. What details were filed is not forthcoming from the assessment order. However, the details examined by the Ld. AO are not known. No reasons have been recorded by him to arrive at the conclusion that income returned by the assessee at Rs. Nil is acceptable and conforms to the legal position. Nothing is discernable as to how the issues raised were examined and found acceptable by him. In such a scenario wherein the assessment is completed without any enquiry/verification of the issues involved, in Gee Vee Enterprises vs. Addl. CIT 1974 (10) TMI 29 - DELHI HIGH COURT that the assessment order is erroneous as also prejudicial to the interests of revenue as it caused prejudice to revenue administration as emphasised in Venkatakrishna Rice Co. 1981 (3) TMI 1 - MADRAS HIGH COURT - Therefore, we are of the view that the CIT was justified in resorting to the provisions of section 263 of the Act. Decided against assessee.

Summary

Issues:
The appeal challenges the order of the Ld. Commissioner of Income Tax (International Tax) Delhi-3 under section 263 of the Income Tax Act, 1961 for the Assessment Year 2017-18.

Grounds of Appeal:
1. The order under section 263 is alleged to be without jurisdiction.
2. The CIT erred in holding the assessment order under section 143(3) as erroneous and prejudicial to revenue.
3. The CIT erred in denying the benefit of India-Mauritius Double Taxation Avoidance Agreement.
4. The CIT erred in taxing long-term capital gains under section 115JB of the Act.

Facts of the Case:
The assessee, a non-resident company, primarily engaged in investment holding, filed a return declaring income at Rs. Nil for AY 2017-18. The case was scrutinized to examine foreign remittances, business income, and capital gains from listed securities. The Assessing Officer accepted the returned income after scrutiny.

Review by CIT:
The CIT, upon reviewing the assessment, found that the assessee had earned long-term capital gains from the sale of Indian securities, which he deemed taxable in India. He raised concerns about the genuineness of the assessee's investor status and lack of factual inquiry by the AO. The CIT issued a notice under section 263, questioning the assessment order.

Assessee's Response:
The assessee, a Mauritius tax resident, claimed treaty benefits under India-Mauritius DTAA, supported by a Tax Residency Certificate. The CIT, however, found the explanations unsatisfactory, alleging tax avoidance and lack of commercial rationale for the company's establishment in Mauritius.

Judicial Review:
The CIT directed the AO to revise the assessment order based on his findings. The Tribunal, noting the absence of the assessee during hearings, upheld the CIT's decision. It highlighted the lack of inquiry by the AO, citing legal precedents where incomplete assessments were deemed prejudicial to revenue.

Conclusion:
As the assessee failed to appear or provide arguments, the Tribunal rejected the grounds of appeal and dismissed the case. The order was pronounced on 26th May, 2023.