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TMI Blog2012 (1) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... icable. The principle of estoppel u/s 292BB will, therefore, not apply. In respect of returns filed pursuant to notice u/s 148 after 1st October, 2005, it is mandatory to serve notice u/s 143(2), within the stipulated time limit. Thus, in present case, notice u/s 143(2) is deemed not to be served within the stipulated time. See ACIT vs. Hotel Blue Moon (2010 - TMI - 35251 - Supreme Court Of India. In view of the aforesaid position, reassessment proceedings should not continue as no notice u/s 143(2) was served on the assessee within the stipulated time. Accordingly, the writ petition is allowed and a Writ of Certiorari is issued quashing the assessment proceedings pursuant to the notices u/s 148. A Writ of Mandamus is issued to the Department to issue NOC to the petitioner as per the needs and requirements of the RBI within the stipulated time – Decided in favor of petitioner. X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the petitioner was only maintaining a liaison office and was receiving money from abroad for meeting the administrative expenses and it was not authorised to carry on any business activity. The liaison office was doing coordination work and getting market information on behalf of its principal. It was further pointed out that the company in Singapore was a 100% subsidiary of the parent company Alpine Electronics, Japan. The company in Singapore was being liquidated in terms of restructuring plan. The existing business of the Singapore company, i.e., the petitioner had been taken over by another company Alpine Electronics of Asia Pacific company Ltd., Bangkok, which is 100% subsidiary of Alpine Electronics, Japan. The Alpine Electronics of Asia Pacific Company Limited, Bangkok had opened a liaison office in India. Further a new company Alpine Asia Pacific India Limited had also been incorporated in India. 5. It was stated that the Alpine Electronics, Japan had an exclusive distributor agreement with Supreme Hi-Fidelity (P) Limited, who are conducting business activities, including sale etc of the products manufactured by Alpine Electronics, Japan. The sales turnover of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b of no objection/no tax due certificate, the issuing authority had initiated detailed enquiry proceedings for which he has no authority or sanction under the law. (For record, it is stated that the stand of the respondent is that Section 230 is not applicable. It applies to an individual and not to a company). 8. It is alleged in the writ petition that on 8th July, 2009 the petitioner‟s representative visited the office of the respondent and was asked to withdraw/modify the representation and was issued a veiled threat that action under Section 147/148 of the Act shall be initiated. 9. Aggrieved, the petitioner filed Writ Petition (Civil) No. 10267/2009 before the High Court and notice was issued vide order dated 21st July, 2009. Advance copy of this writ petition was served on the respondent on 16th July, 2009 and was listed for hearing on 21st July, 2009. Direction was given to the respondent to file counter affidavit within two weeks. On 21st October, 2009, when Writ Petition (Civil) No. 10267/2009 came up for hearing, it was pointed out by the respondent that they had issued notices under Section 147/148 of the Act but the same had been received back undelivered as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Director of Income Tax on 23rd July, 2009 and notices under Section 147/148 of the Act for assessment years 2003-04 and 2004-05 were issued. 13. The respondent thereafter issued notices under Section 142(1) dated 1st November, 2010. 14. It may be only noted that the Writ Petition (Civil) No. 10267/2009 has been disposed of in view of the reassessment proceedings, which have been initiated. Subsequently, the petitioner filed the present writ petition challenging the reassessment proceedings on various grounds. 15. The petitioner has filed CM No. 10573/2011 raising additional grounds. It is pointed out that the petitioner had filed a letter dated 19th November, 2009 stating that the returns of income filed under Section 139(1) should be treated as filed in response to the notice under Section 147/148 of the Act. It is stated that the Assessing Officer had issued notice under Section 143(2) of the Act only on 23rd November, 2010 which is beyond the period of six months prescribed in the proviso to Section 143(2)(ii). For the sake of convenience, the said Section 143(2) including the proviso to clause (ii) is reproduced below: "Section 143. Assessment X X X X (2) Where a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer/respondent No. 1 was asked to redraft the same with specific emphasis on the material on record, conclusion drawn and statement of income in a more crystallized and concise form. In the reasons to believe, which are common to all the assessment years, the Assessing Officer has observed that the liaison office in India was in fact a permanent establishment as the petitioner was involved in activities which were beyond the scope of ancillary activities. It was observed that the liaison office was doing core acts, responsible to its head office and earning income for Alpine Electronics, Japan and Alpine Singapore. Reasons recorded by the Assessing Officer are as under:- "(i) The Liaison Office is engaged in various kinds of activities in India. The assessee has on 26.03.09 inter alia stated that "the fact that the principal‟s located in Singapore has commenced the process of liquidation and it has been imperative to keep the presence in India intact and meet the expenses in India, another Liaison Office has been opened as a Liaison Office of company located in BANGKOK i.e. a Liaison Office in India of ALPINE ELECTRONICS OF ASIA PACIFIC CO LIMITED, BANGKOK". This shows the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India which should have been remunerated at cost plus markup is: F.Y. Expenses (Rs.) 5% Markup 2004-05 46,24,440 2,31,222 2005-06 50,44,083 2,52,204 2006-07 50,54,502 2,52,725 2007-08 46,86,430 2,34,321 2008-09 37,95,114 1,89,755 (For first half of F.Y. 08-09) The 5% markup represents the income escaping assessment, on account of mark up, which should have been received by the India Liaison Office from its Head Office for this assessment year. The Liaison Office is present in India since F.Y. 1997-98. The amount of income escaping assessment on account of attributable profit, which should have been attributed, but has not been, is linked to the sales made in India. The details of the sales made in India by the Alpine Group Companies (Incorporated outside India), have been submitted by the assessee under the cover of its letter dated 25.03.2009. The sales have been: F.Y. Sales (Rs.) 2006-07 25,80,69,345 2007-08 17,78,44,737 2008-09 2,57,62,698 (Note: 1) Note 1: Liaison Office effectively worked for a small part of the year. As the sales have gone down with the slowing/non-working of Liaison Office, further supports the fact that Liaison Office is crit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the sales figure is declining over the years. There is a decline of approximately 30 percent in sales in FY 2007-08 vis a vis FY 2006-07. Assuming that this is the trend that was there in the earlier years also, the sales in FY 2002-03, which is also the year under review, would be 30 percent more than the sales that took place in FY 2003-04, which is taken as Rs.60,71,43,490/-. This amounts to 1.33 times the sales figure of FY 2003-04 which works out at Rs.80,75,00,842/-. Invoking Rule 10 of the Income Tax Rules, 1962, I estimate 20 percent of the sale made in India during the year under reference (Rs.80,75,00,842/-) by the assessee company as reasonable estimates of the profits made and 50 percent of such profits are attributable to the activities of the PE in India in the form of the alleged LO. Following this method, 20% of the sales during FY 2002-03 is Rs.16,15,00,168/-. 50 percent of these profits are attributable to the PE in India, that is Rs.8,07,50,084/- which is taxable as business profits @40%. 15. With these remarks, the computation is as follows: Income on account of Cost plus the actual Expenses incurred by LO (Para 13) @40% Rs.2,50,000/- Add: Business pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143(2). However, if an assessment is to be completed under section 143(3) read with section 158BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with." 24. Section 143(2) is applicable to proceedings under Sections 147/148 of the Act. Proviso to Section 148 of the Act protects and grants liberty to the Revenue to serve notice under Section 143(2) of the Act before passing of the assessment order for returns furnished on or before 1st October, 2005. In respect of returns filed pursuant to notice under Section 148 of the Act after 1st October, 2005, it is mandatory to serve notice under Section 143(2) of the Act, within the stipulated time limit. 25. Section 292BB reads:- "292-BB. Notice deemed to be valid in certain circumstances.--W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt by him of the draft order,-- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,-- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if-- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in Section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,-- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:-- (a) draft order; (b) objections filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of Section 92-CA; and (ii) any foreign company." 27. It is clear from the said Section that the Assessing Officer is still to complete the assessment and pass an assessment order. Draft order is not the final assessment order and does not result in completion of assessment. Under sub-section (2) to Section 143, the assessee has a right to accept, within 30 days, the draft assessment order or has right to file objections with the Dispute Resolution Panel and the Assessing Officer. Under Section 144C(3), the Assessing Officer shall complete assessment proceedings on the basis of the draft order only if the assessee files his acceptance to the variations or if no objections are received within 30 days. In case objections are filed, the Assessing Officer is to await directions of the Dispute Resolution Panel. Sub-section (5) states that the Dispute Resolution Panel can issue directions, as it thinks fit, for guidance of the Assessing Officer to enable him to complete the assessment. Section 144C(13) stipulates that the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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