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TMI Blog2012 (8) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... he AAR would be exclusively dealing with the matter before it - thus AAR held that in the case of the applicants, keeping the dates of filing of return in mind, its jurisdiction to entertain the application was barred under Section 245R(2) Proviso (1) - that upon a return of income being filed, the matter is "pending", in the sense that the Assessing Officer has the right to take such steps, including issuance of notice, etc, the further duty cast on the assessee to disclose all facts, including every potential income. The argument that the AAR erred in not following a so called past practice is unpersuasive as no practice, without its roots in the law, but based on an unchallenged understanding can be pursued, holding otherwise would be creating an estoppel against a statute - thus AAR was correct in rejecting the application for ruling. - W.P.(C) Nos. 3959, 4040 & 4041 of 2012, c.m. appl. Nos. 8300, 8469 & 9783 OF 2012 - - - Dated:- 14-8-2012 - S. RAVINDRA BHAT AND R.V. EASWAR, JJ. ORDER S. Ravindra Bhat, J. These writ petitions involve decision on identical questions of law, and were, with consent of counsel for parties, taken up for final hearing. All the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not apply. 5. The Authority considered these contentions but in its final ruling differed from the Applicants. On the question of what questions "arise" before the assessing authority, when returns are filed before it, the Authority stated that merely by filing the return, all questions that can possibly arise, are ushered into the proceeding, and every question is left at large, such that the AAR cannot exercise jurisdiction to entertain the question. All questions that can possibly arise with respect to that transaction are then within the purview of the assessing authority. This means that once returns are filed before the assessing authority, there are no questions that cannot be raised, and no questions left for the AAR to entertain, thereby effectively ousting its jurisdiction. The AAR held that the jurisdiction did not depend upon such vagaries such as whether the assessing officer or the parties raised all the pertinent questions at the time of filing of returns. When a return is after scrutiny or without scrutiny, the implication is that the questions were answered in favour of the assessee. 6. The AAR also held that it was consistent with the purpose of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns whenever returns had been filed, and were the subject matter of assessment. Relying on the decision in Union of India v . Paras Laminates (Pvt.) Ltd 186 ITR 722 it was urged that when authorities, even quasi-judicial authorities, adopt a particular approach or interpretation, unless there is fundamental infirmity or illegality in such interpretation, there should be no departure from it. It was argued that therefore, the AAR should have, having regard to consistency, at least entertained and examined the application on merits. Reliance was also placed on the judgment of the Supreme Court, reported as Auto and Metal Engineers Ors v Union of India 229 (ITR) 399 to say that regular assessment proceedings commence on issuance of notice under Section 142 (1) of the Income Tax Act. Lastly, it was argued that if something is not mentioned, and consciously kept out of the return for the purpose of securing an advance ruling, it cannot be treated as a question pending before the Assessing Officer. Relevant Provisions of the Income Tax Act 10. The relevant provisions of the Income Tax Act, dealing with advance ruling are extracted below: " 245N. Definitions.- In this Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation shall be made in quadruplicate and be accompanied by a fee of two thousand five hundred rupees. (3) An applicant may withdraw an application within thirty days from the date of the application. 245R. Procedure on receipt of application - (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner and, if necessary, call upon him to furnish the relevant records: Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the Commissioner. (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application : [ Provided that the Authority shall not allow the application where the question raised in the application,- ( i ) is already pending before any income-tax authority or Appellate Tribunal [except in the case of a resident applicant falling in sub-clause (iii) of clause (b) of Section 245N] or any court; ( ii ) involves determination of fair market value of any property; ( iii ) relates to a transaction or issue which is designed prima facie for the avoidance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with the application in view of the mandate contained in the proviso to Section 245R(2). At first sight and on a cursory reading of the above proviso, it might appear that the Authority will have to reject the application as the question sought to be raised before the Authority is "already pending" i.e., pending as on the date of the hearing and disposal of the application. But this, on second thoughts, would be seen to be not a tenable view. The date on which the Authority hears the application and the date on which it disposes of application may not be the same and the maintainability of the application cannot be made to depend on the pendency of the issue before the income-tax authorities on varying dates. It would appear more correct and practical to construe the embargo as applicable to cases where, while the issue is already pending before the income-tax authorities, the Appellate Tribunal or any court, the applicant also seeks recourse under Section 245Q. Having already availed himself of the remedies available under the Act, the Legislature understandably requires that an applicant should not be encouraged to have recourse to another remedy by way of an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause he will, invariably, be compelled or constrained to file a return and make his claim in the regular assessment proceedings as well if he wishes to keep such claim alive. The words "already pending" should, therefore, be interpreted to mean : "already pending as on the date of the application" and not with reference to any future date. In the present case, since there was no return or claim before the authorities before the application was filed before this Authority, the application cannot be rejected by invoking Clause (a) of the proviso to Section 245R(2). 12. In re Rotem Co. [2005] 195 CTR (AAR) 289 : [2005] 145 Taxman 488 (AAR) a different view was taken, when it was held that: "Insofar as the third objection of the CIT referred to above, namely, pendency of the questions before the AO is concerned, we have held in our order dt. 22nd Nov., 2004 that mere filing of returns by the applicants would not fall within the mischief of Clause (i) referred to above. Where, however, a notice is issued under Section 143(2) of the Act, within the statutory period, the situation may warrant an enquiry into the identity of questions before the AO and the authority. In this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending"? In my opinion, it includes every insolvency in which any proceeding can by any possibility be taken. That I think is the meaning of the word "pending....... A cause is said to be pending in a Court of justice when any proceeding can be taken in it. That is the test." There is no doubt therefore that the case of the appellant was not concluded and was pending before the learned Presidency Magistrate at the date of the commencement of the impugned Act." In the case of Rambhai Jethabhai Patel v . Commissioner of Income Tax 108 ITR 771, the Gujarat High Court held that it could safely be said that a matter can be said to be pending in a Court of Justice when any proceedings could be taken in it and that was the test which was required to be applied. 16. It would be relevant here to notice a decision of the Supreme Court rendered in the context of when are income tax proceedings said to be "pending". In Auto and Metal Engineers (supra), it was held that: "The process of assessment thus commences with the filing of the return or when the return is not filed by the issuance by the Assessing Officer of the notice to file the return under Section 142(1) and it culmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the question before the assessing authority lies on the assessee." 18. The proviso to Section 245R(2) of the Act creates a bar upon the AAR to admitting an application (for advance ruling); it is also is a jurisdictional bar to the Authority to rule, under Section 245R(4). The proviso to Section 245R(2) of the Act creates a bar to the jurisdiction of the Authority if it is seen that any of the conditions are fulfilled. The rationale for the bar appears to be straightforward; if the applicant wishes to plan its affairs and transactions in advance, it is free to do so to consider the wider tax ramifications. However, once it proceeds to file a return, or take a similar step, the Authority's jurisdiction to entertain the application for advance ruling is taken away, because the Income Tax authority concerned would then be seized of the matter, and would potentially possess a multitude of statutory powers to examine and rule on the return. Conversely, if the authority is approached before an income tax return is filed, or any other income tax authority is approached, the application can be entertained, and the AAR would be exclusively dealing with the matter before it. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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