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TMI Blog2014 (9) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise - The very condition precedent for issuing a notice u/s 148 read with Section 149(1)(c) invoking the extended period of limitation of sixteen years is that the income which has escaped assessment must have relation to any asset located outside India - This pre-condition is not satisfied - there is a complete bar to the issuance of such a notice beyond the period of four years – thus, the notice for reopening of assessment is set aside – Decided in favour of assessee. - W. P. (C) 1226/2014 & CM 2558/2014 - - - Dated:- 28-8-2014 - Badar Durrez Ahmed And Siddharth Mridul,JJ. For the Petitioners : Mr. Arvind Datar, Sr. Advocate with Mr Tarun Gulati, Mr Kishore Kunal and Ms Amrita Chatterjee. For the Respondents : Mr Balbir Singh and Mr Abhishek Singh Baghel for R-1 to R-4. Mr Vivek Goyal and Mr R.P.Singh for R-5. JUDGMENT Badar Durrez Ahmed, J (Oral) 1. This writ petition challenges the impugned notice dated 13.06.2013 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the said Act ). A prayer is also sought for quashing the order dated 19.12.2013, which has been passed by the Assessing Officer rejecting the objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1. Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2. For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) Where no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Explanation. In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation. For the removal of doubts, it is hereby clarified that the provisions of sub-section (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 3. From the above provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the above extract, this section prescribes the time limits for notices to be issued under Section 148. The wordings of the section make it clear that there is complete bar to the issuance of a notice under Section 148 unless and until the conditions stipulated in clauses (a), (b) or (c) of Section 149(1) of the said Act are satisfied. It is evident from the above provision that if the notice under Section 148 is to be issued beyond the period of four years but not more than six years then it is required to be shown that the income chargeable to tax which has escaped assessment is or is likely to be ₹ 1 lakh or more for that year. This is, of course, coupled with the requirement of the first proviso to Section 147 of the said Act. Insofar as the period of limitation extending up to sixteen years, as stipulated under Section 149(1)(c), is concerned, it would have to be further shown that the income which is said to have escaped assessment was in relation to any asset (including financial interest in any entity) located outside India. We may note that the explanation after sub-section (1) of Section 149 makes Explanation 2 to 147 applicable for the purpose of Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had been recorded prior to the issuance of notice under Section 148. The said letter reads as under:- To, M/s Deccan Digital Networks Pvt. Ltd. 13, Abul Fazal Road, Bengal Market, New Delhi-110001. Sir, Sub: Notice u/s 148 read with Sec.149(1)(c) of the I.T.Act 1961 for Assessment Year 2006-2007 - reg. Please refer to the above subject. Notice u/s 148 read with Sec.149(1)( c) of the I.T.Act, 1961 was issued in your case for A.Y. 2006-2007 on 13th June 2013. In response to the same you filed return of income for A.Y. 2006-2007 (Under protest) on 12.08.2013. Alongwith return of income letter dated 12.08.2013 was also filed. On going through the return of income it was observed that the return of income was not accompanied with balance sheet, profit and loss account and audit report. The deficiency was brought into your notice by letter dated 16.09.2013 of this office. In response to this, vide letter dated 08.10.2013 it was stated that alongwith letter dated 10.07.2013 the assessee company had submitted the balance sheet, profit and loss account for the subject assessment year. It was also stated by letter dated 08.10.2013 that the balance sheet, profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 30 days from the date of the receipt of the amount of consideration and issuance of equity. On perusal of records, it is found that the assessee company has not filed its return of income for the assessment year 2006-2007. In view of the above facts and circumstances of the case and as per the provisions of Section 149(1)(c) of the LT.Act, notice u/s 148 is to be issued for reopening the cas of M/s. Deccan Digital Networks Pvt. Ltd. for the assessment year 2006-07. In view of the above,. I have reason to belive that the assessee company during the financial year 2005-2006 relevant to assessment year 2006-2007 has escaped assessment. Therefore, the approval of the Addl. CIT, Range-10, New Delhi is solicited as per provisions of Section 151(2) of the I.T.Act As the reasons for issue of notice u/s 148 have been furnished to you, you are required to furnish following details. 11. Please furnish name and address with confirmation of the persons from which equity share capital Non-convertible, Redeemable preference share capital of ₹ 1639.59 crore has been received. 12. Please furnish documentary evidence of investment of ₹ 1684.89 crores. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 149(1)(c) when the issue of Limitation was pointed out by us, it is clear that the reasons recorded made no reference to any foreign asset or foreign income. It can clearly be inferred that the issue of foreign assets and foreign income has been raised subsequently only to get over the plea of limitation and is a clear after thought and does not constitute a reasons for issuing the Notice. In view of the aforesaid, the notice under section 148 is clearly time barred and should be withdrawn forthwith. (underlining added) 9. It is evident from the above extract that the petitioner had taken the specific stand that it was an Indian company and that it has no foreign asset and no foreign income and that Section 149(1)(c) of the said Act had no application in the facts of the case. It was urged that as the company did not have any foreign asset there was no question of any escapement of income in relation to a foreign asset and that the reliance of the department on the provisions of the Section 149(1)(c) of the said Act was misplaced. 10. This was succeeded by the order dated 19.12.2013 which is impugned before us whereby the objections including the objection with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthermore, neither the letter dated 16.09.2013 nor the impugned order dated 19.12.2013 nor the counter affidavit filed by the respondent before this court controvert the statement made by the petitioner that it has no asset located outside India. Therefore, the question of deriving an income from any such asset also does not arise. In these circumstances, it will have to be accepted that the petitioner does not have any asset outside India and, therefore, the question of the petitioner having any income in relation to such an asset would not arise. The very condition precedent for issuing a notice under Section 148 read with Section 149(1)(c) invoking the extended period of limitation of sixteen years is that the income which has escaped assessment must have relation to any asset located outside India. This pre-condition is not satisfied. Therefore, there is a complete bar to the issuance of such a notice beyond the period of four years. 13. In view of the foregoing discussion, the impugned notice dated 13.06.2013, the impugned order dated 19.12.2013 and all proceedings pursuant to the notice dated 13.06.2013 are set aside. We are, however, making it clear that this order has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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