2019 (12) TMI 1263 - HC - Income Tax

Reopening of assessment u/s 147 - duplication of six entries, which are mentioned in the Form 26 AS generated by the respondents and filed with the petition at page 51 - HELD THAT - AO has ducked the issues raised by the petitioner. The right to file objections to a proposed re-opening of assessment under Section 147 of the Income Tax Act is a meaningful right, and not a mere empty formality. While dealing with the objections, AO should apply his mind. The whole purpose of this exercise is to examine whether in the light of the objections raised, the notice under Section 148 of the Act should be dropped, or pursued, so as to prevent the assessee from facing unnecessary and avoidable harassment and expenditure in the process of re-assessment and also to save a wasteful exercise being undertaken by the Assessing Officer. Assessing Officer has completely failed to apply his mind to the submissions of the petitioner and also to examine as to how the two different Form 26 AS have been generated by the system. Set aside the impugned order dated 15.11.2019 since it suffers from complete non-application of mind. The Assessing Officer shall proceed to pass a fresh order after dealing with the submissions raised by the petitioner in its objections.

Summary

Issues:
Challenge to initiation of re-assessment proceedings under Section 148 of the Income Tax Act for Assessment Year 2012-13 and rejection of objections to reassessment proceedings.

Analysis:
The petitioner, a company incorporated in Cyprus, challenged the re-assessment proceedings initiated against it for the Assessment Year 2012-13. The petitioner provided IT services to the financial industry and loaned US$ 2 million to its Indian group company, earning interest income. The petitioner claimed that the interest income was taxed at source by TSYS India at 10% and was liable to tax in India under the Indo-Cyprus DTAA. The petitioner argued it was not required to file an income tax return under Section 115A(5) as the tax was already deducted and deposited. However, the respondent issued a notice under Section 148, alleging income had escaped assessment for the said year.

The petitioner contended that it was not provided with reasons for the re-opening and filed objections, emphasizing its exemption under Section 115A(5). The respondent's order did not address the petitioner's submissions adequately and failed to explain discrepancies in Form 26AS details. The court noted the Assessing Officer's failure to consider the petitioner's objections and discrepancies in the forms. The court emphasized that the right to object to re-assessment is significant and not a mere formality. It criticized the evasive nature of the order and the lack of application of mind by the Assessing Officer.

The court set aside the impugned order, citing a complete lack of application of mind by the Assessing Officer. It directed the Assessing Officer to issue a fresh order after properly addressing the petitioner's objections. The judgment highlighted the importance of a meaningful consideration of objections to prevent unnecessary harassment and expenditure for the assessee. The court stressed the need for a thorough examination of submissions to avoid wasteful re-assessment processes and protect the rights of the taxpayer.

In conclusion, the court disposed of the petition by quashing the order and instructing a fresh assessment considering the petitioner's objections properly. The judgment underscored the necessity for Assessing Officers to diligently assess objections raised by taxpayers to ensure a fair and just process of re-assessment under the Income Tax Act.