2016 (2) TMI 433 - AT - Income Tax

Validity of reopening of assessment - Held that - mere mentioning that sanctioning authority was satisfied is not sufficient to initiate re-assessment proceedings, where during the original assessment proceedings AO takes a particular view after considering the submission of the assessee. It is not the case where assessee had not filed details required by the AO. If the AO decided not to call for particular information the assessee cannot he held responsible for that omission/ commission. Therefore, we hold that there was no failure on part of the assessee to disclose material facts truly and fully. Considering all the facts cumulatively, we are of the opinion, that the order passed by the AO for both the AY. s were invalid. C. O. s filed by the assessee are decided in its favour.

Summary

Issues:
1. Validity of re-opening assessment for assessment years 2000-01, 2001-02, and 2003-04.
2. Taxability of interchange income (fees) received by the Head Office/foreign branches of the assessee.

Detailed Analysis:
Issue 1: Validity of re-opening assessment
The Appellate Tribunal considered the challenge to the re-opening of assessments for the mentioned assessment years. The AO re-opened the assessments under section 147 of the Income Tax Act. The assessee objected to the re-opening, arguing that there was no failure to disclose material facts. The First Appellate Authority (FAA) upheld the re-opening based on the rule of consistency from previous years. However, the Appellate Tribunal found that the notice for re-opening was issued without the approval of the competent authority, rendering the assessment order invalid. Consequently, the Cross-Objections filed by the assessee were allowed.

Issue 2: Taxability of interchange income
Regarding the taxability of interchange income received by the Head Office/foreign branches of the assessee, the AO made an addition to the total income of the assessee based on estimated interchange fees received. The FAA upheld the re-opening but deleted the addition made by the AO, citing the decision in an earlier case related to taxability of commission with regard to Credit Cards. The Appellate Tribunal, after considering the submissions and relevant case law, upheld the deletion of the addition, stating that the fees in respect of such transactions were not taxable in India. The Tribunal confirmed the FAA's decision on this issue, deciding the effective ground of appeal against the AO.

In conclusion, the Appellate Tribunal dismissed the appeals filed by the Assessing Officers for the assessment years 2000-01, 2001-02, and 2003-04. The Cross-Objections filed by the assessee were allowed, emphasizing the invalidity of the assessment orders due to the lack of approval for re-opening assessments and the non-taxability of interchange income as per relevant legal interpretations.