9911796707
TMI Blog2012 (3) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Income Tax Act, 1961. The Petitioner was incorporated on 20 October 1995 and carries on the business of investment in different jurisdictions across the world, including in India. For the financial year 2005-06 the Petitioner had a profit of Rs. 131.70 Crores from the business of investment in Indian securities. The Petitioner filed a return of income on 31 October 2006 for Assessment Year 2006-07 returning a nil income taxable in India on the basis of the provisions of the Double Taxation Avoidance Agreement, between India and Singapore. The returns initially filed by the Petitioner on 20 October 2006 before the Assessing Officer were in the electronic form. The Petitioner filed a conventional copy of the return on 31 October 2006. On 28 March 2008 the Petitioner received an intimation under Section 143(1). On 16 March 2011 a notice was issued to the Petitioner under Section 148 proposing to reopen the assessment. This was followed by a communication of the reasons on the basis of which the assessment was sought to be reopened. The reasons on the basis of which the assessment for Assessment Year 2006-07 is sought to be reopened are as follows : "Return of income for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upon receipt of the reasons, the Petitioner submitted its objections to the reopening of the assessment by a letter dated 14 June 2011. The Petitioner stated in the objections that while filing its return on 31 October 2006 it had provided a full disclosure by way of notes to the return about its Indian sourced income and as to why it was not chargeable to tax. The Petitioner in the course of the objections dealt with the two reasons on the basis of which the assessment was sought to be reopened. As regards the first reason, the Petitioner submitted that it has been wrongly treated in the notice as a Foreign Institutional Investor (FII) or a sub account of an FII registered with the Securities and Exchange Board of India and sought to be taxed under Section 115AD which is a special provision applicable to FIIs. The Petitioner clarified that it is neither an FII nor a sub account registered with SEBI and hence, the provisions of Section 115AD were not applicable to it. As regards the second ground, it was submitted that the reasons wrongly postulate that the Petitioner has realised short term capital gains whereas factually all the investments were held for a period in excess of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. 6. On the other hand counsel appearing on behalf of the Revenue submits that - (i) The assessee failed to make a full and proper disclosure in the return of income which was filed electronically in the first instance and thereafter in a conventional mode. According to the submission the assessee had to first determine the taxable income and thereupon claim the relief which was available under Section 90(2) having regard to the provisions of the Double Taxation Avoidance Agreement between India and Singapore. Instead of doing this, the assessee left the relevant columns in the return of income blank. Consequently since there was no proper disclosure by the assessee, the Assessing Officer has acted within his jurisdiction in coming to the conclusion that there was a possibility of escapement. (ii) In the present case, there was no scrutiny assessment and merely an intimation was furnished to the assessee under Section 143(1). The fact that the Assessing Officer had not exercised his jurisdiction under Section 143(2) would not preclude him from seeking to reopen the assessment under Section 147. (iii) The Assessing Officer was within his jurisdiction in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished in original during the course of scrutiny proceedings. The new forms which were devised for electronic filing were made "annexure-less". Assessees were, however, informed that in pursuance of a notice under Section 143(2), they could avail of the opportunity to file documents, furnish reasons and make disclosures in support of various claims made by them. 8. Parliament amended the provisions for filing returns by the insertion of Section 139C and 139D by the Finance Act of 2007 with retrospective effect from 1 June 2006. Under Section 139C the Board is empowered to make rules providing for a class or classes of persons who may not be required to furnish documents, statements, receipts, certificates, reports of audit or any other documents, which are required otherwise to be furnished along with the return. Under Section 139D the Board is empowered to make rules providing for the class or classes of persons who shall be required to furnish the return in an electronic form. Rule 12(1)(a) of the Income Tax Rules 1962 provides for the filing of a return in the case of a company in Form No.1. Rule 12(3) which was inserted with effect from 24 July 2006 inter alia provides that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pore tax treaty'). As a Singapore tax resident, Indivest's taxability in India will be governed by the provisions of the Act and the India-Singapore tax treaty 4. Article 7 of the India-Singapore tax treaty, provides that a resident of Singapore will be taxable on its 'Business Profits' only in Singapore, unless the Singapore resident carries on business in India through a permanent establishment ('PE') situated in India. In such a case, the business profits will be taxable in India to the extent to which the profits are attributable to the PE of the Singapore resident in India. 5. Indivest is engaged in the business of investing in securities. Accordingly, any profits that it may realize from its transactions in securities constitute Indivest's profits from its business. Indivest does not have an office or any other place of business in India. On this basis, Indivest does not have a PE in India, as defined in Article 5 of the India-Singapore tax treaty. Hence, based on the provisions of Article 7 of the India-Singapore tax treaty, the profits earned by Indivest from its transactions in Indian securities amounting to Rs. 1,317,020,173 are not liable to tax in India." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not attracted. During the course of the hearing, this position is not in dispute. 11. Reading the reasons of the Assessing Officer, it is evident that there is absolutely no tangible material on the basis of which the assessment for Assessment Year 2006-07 could have been reopened. Upon the return of income being filed by the assessee both in the electronic form and subsequently in the conventional mode, the assessee received an intimation under Section 143(1). The Assessing Officer would have been legitimately entitled to issue a notice under Section 143(2) within the statutory period. That period has expired. We must clarify that the non-issuance of a notice under Section 143(2) does not preclude the Assessing Officer from reopening the assessment under Section 147. For that matter, as has been held by the Supreme Court in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., [2007] 291 ITR 500 (SC) the failure of the Assessing Officer to take steps under Section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when an intimation under Section 143(1) has been issued. But it is also a settled principle of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer." 12. If the test of whether there exists any tangible material were to be applied in the present case, it would be evident that the Assessing Officer has not acted within his jurisdiction in purporting to reopen the assessment in exercising the powers conferred by Section 148. There was a disclosure clearly by the assessee that it is a body corporate incorporated in Singapore, the principal business of which is to invest in Indian securities; that the assessee is a tax resident of Singapore and that the profits which the assessee realised from its transactions in securities constituted its profits from business. The assessee stated that it had no permanent establishment in India as defined in Article 5 of the DTAA and that based on the provisions of Article 7 the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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