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TMI Blog2016 (3) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... etc under different provisions of the Act. 2. In this Petition, rule was issued on 23rd June, 2014 and interim relief in terms of prayer clause (d) was granted. Thereafter, a request was made on behalf of the Revenue that the Writ Petition be taken up out of turn as the total tax impact in the present proceedings was a very large sum. In this view of the matter, this Writ Petition is taken up for hearing and final disposal. 3. The two principal grounds of challenge to the impugned Assessment Order are that:- (i) none of the notices [viz. under sections 148, 142(1) or 143(2) of the Act] were ever served on the Petitioner which is a company incorporated under the laws in Bermuda. Since service of these notices was mandatory before any Assessment Order could be passed under section 144 of the Act, the impugned Assessment Order is wholly without jurisdiction; and (ii) that in any event, the notice issued under section 148 of the Act and which finally led to the Assessment Order being passed under section 144 of the Act, was wholly without jurisdiction as Respondent No.1 could not have any reason to believe that income chargeable to tax had escaped assessment. This argument is canv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding company of the Techpac Group. (c) The Techpac Group was a technology distributor and a leading technology sales, marketing and logistics group in the Asia Pacific region. One Ingram Micro Inc., USA, a company registered in the United States of America is also one such company who has its presence worldwide. The Ingram Micro Group also consists of several companies throughout North America, Europe, Middle East, Africa, Latin America and Asia Pacific regions which support global operations through an extensive sales and distribution network (hereinafter referred to as the "Ingram Group"). We must mention here that Ingram Micro Inc., USA was the holding Company of inter alia a company called Ingram Micro Asia Holdings Inc., USA (hereinafter referred to as "Ingram Micro Asia") which was also a company incorporated in USA. Ingram Micro Asia had a fully owned subsidiary in India by the name Ingram Micro India Pvt. Ltd. (d) The Ingram Group felt that it required to strengthen its presence in the Asia Pacific region and accordingly offered to take over the Techpac Group. Accordingly, in November 2004, Ingram Micro Asia acquired the shares of the Petitioner company under a share purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. By an order dated 7th December, 2010, this Court disposed of the said Writ Petition directing Respondent No.1 to give a hearing to Ingram Micro India before passing any order under section 163 of the Act. The said order further recorded that in case the order passed by Respondent No.1 was adverse to Ingram Micro India, no further action would be taken thereupon for a period of four weeks from the date of communication of the said order. (g) Be that as it may, Respondent No.1, after hearing Ingram Micro India passed an order dated 14th January, 2011 under section 163 of the Act inter alia holding it to be an agent of the Petitioner company and also computing capital gains in the hands of the Petitioner at Rs. 575.39 crores. (h) Being aggrieved by the aforesaid order, Ingram Micro India approached this Court in its writ jurisdiction by filing Writ Petition No.285 of 2011. This Court by its order dated 30th November, 2011 quashed the order passed by Respondent No.1 under section 163 of the Act on the ground that the same was beyond the period of limitation prescribed under the Act. In other words, this Court quashed the order of Respondent No.1 treating Ingram Micro India as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id address. He submitted that in the facts of the present case before any Assessment Order could be passed under section 144 of the Act, it was a sinequa- non that a notice under section 148 of the Act ought to have been served on the Assessee. If this was not done, the Assessment Order passed under section 144 was wholly without jurisdiction requiring our interference under Article 226 of the Constitution of India. In support of the aforesaid proposition, Mr Mistry relied upon a decision of the Supreme Court in the case of Y. Narayana Chetty and another v/s Income Tax Officer, Nellore and others; [1959] 35 ITR 388. (B) that in any event of the matter, in law, no capital gains had accrued in the hands of the Petitioner as the shares of the Petitioner company were transferred by its shareholders to Ingram Micro Asia and therefore Respondent No.1 could never have any reason to believe that income chargeable to tax had escaped assessment as contemplated under section 147 of the Act. To elaborate this point further, Mr Mistry contended that in the facts of the present case, it was the shares of the Petitioner company that were transferred by its shareholders to Ingram Micro Asia. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India] for submitting the correspondence address of the Petitioner, which was not supplied to them. Since Ingram Micro India [earlier known as Tech Pacific India] was having a business understanding with the Petitioner, the service of the notice issued under section 148 of the Act on Ingram Micro India [earlier known as Tech Pacific India] was good service on the Petitioner; (B) With reference to the service of notices dated 16th January, 2013 issued under sections 142(1) and 143(2) of the Act, Mr Malhotra gave an identical explanation. Mr Malhotra submitted that these notices were also served on the last known address being that of Ingram Micro India [earlier known as Tech Pacific India] and the same were returned back to the Revenue authorities with the remarks "Refused". He submitted that since these notices were duly served and not responded to by the Petitioner, and time to carry out the assessment proceedings was getting over, the Revenue had no option but to pass an ex-parte Assessment Order under section 144 of the Act on 25th March, 2013. In these circumstances, Mr Malhotra submitted that there was no merit in the contention of the Petitioner that they were not served wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering that admittedly on the date when these notices were sought to be served on Ingram Micro India [earlier known as Tech Pacific India], the Revenue was aware of the address of the Petitioner. This is clearly borne out by (i) the share purchase agreement that was in the possession of the revenue authorities on the said dates in which (at Recital "A" pg 34 of the paper-book) the registered office of the Petitioner company is clearly mentioned; and (ii) the letter dated 30th March, 2012 (Exh.R-2, page 203 of the paper-book) addressed by Respondent No.1 to the Joint Secretary, (FT & TR)-II, Central Board of Direct Taxes, North Block, New Delhi 110 001 in which Respondent No.1 clearly mentions that the registered office of the Petitioner is Charladon House, 2- Churchstreet, Hamilton, HM-11, Bermuda. Despite having this address prior to issuance of the notices under section 148, 142(1) and 143(2) of the Act, we fail to understand why these notices were not served on the Petitioner at this address. In these circumstances, we cannot accede to the contention of Mr Malhotra that service of the aforesaid notices on Ingram Micro India [earlier known as Tech Pacific India] (which is a subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Y. Narayana Chetty and another. [1959] 35 ITR 388. The Supreme Court, whilst considering similar provisions under the Income Tax Act, 1922 held that service of the requisite notice on the assessee is a condition precedent to the validity of any re-assessment. If a valid notice is not issued as required, proceedings taken by the Income Tax Officer in pursuance of the invalid notice and the consequent orders on assessment passed by him, would be void and inoperative. The Supreme Court opined that the notice under section 34 of the 1922 Act (similar to section 148 of the 1961 Act) cannot be regarded as a mere procedural requirement. It is only if the said notice is served on the assessee as required, that the Income Tax Officer would have jurisdiction to proceed further against him. If no notice is issued or if the notice issued is invalid, then the proceedings taken by the Income Tax Officer without a notice, or in pursuance of the invalid notice, would be illegal and void. The relevant portion of the Supreme Court decision [at pg 392 of the ITR report] reads thus:- "The first point raised by Mr Sastri is that the proceedings taken by Respondent No.1 under Section 34 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under section 148 of the Act, the Assessing Officer does not acquire jurisdiction to proceed further, the notices issued under section 142(1) and 143(2) both dated 16th January, 2013 (and which, in the facts of this case, can only be issued post the service of notice issued under section 148), also fall to the ground. Nevertheless, in the present facts we find that both these notices under section 142(1) and 143(2) were not served on the Petitioner. More importantly, we fail to understand how a notice under section 142(1) and under section 143(2) can be issued on the same date. Section 142(1) of the Act stipulates that for the purpose of making an assessment under the Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case, the time allowed under sub-section (1) of section 139 for furnishing the return has expired, a notice requiring him on a date therein specified (a) where such person has not filed a return within the time allowed under sub-section (1) of section 139 of the Act or before the end of the relevant assessment year, inter alia to furnish a return of income. Section 143(2) in turn applies where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee 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:" 15. Section 147 of the Act stipulates that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. Therefore, before any notice under section 148 of the Act can be issued for initiating assessment / re-assessment proceedings, the Assessing Officer ought to have reason to believe that any income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Consequently, the Assessment Order passed under section 144 of the Act was therefore wholly without jurisdiction. On this count also, we find that the Assessment Order passed under section 144 of the Act is unsustainable and has to be set aside. 17. Faced with this situation, Mr Malhotra very feebly tried to contend that the share purchase agreement entered into in November, 2004 was one which was actually between the Petitioner company and Ingram Micro Asia and not between the shareholders of the Petitioner and Ingram Micro Asia. We are afraid we are unable to accept this argument for more than one reason. Firstly, the impugned Assessment Order does not proceed to compute the capital gains on the basis that the aforesaid share purchase agreement was ostensibly entered into between the Petitioner company and Ingram Micro Asia. This argument is being canvassed for the first time by the Revenue in this Writ Petition. Secondly, we find this argument without any substance as we fail to see how the Petitioner company can enter into any agreement for sale of its own shares. The shares of the Petitioner company are held by its shareholders who are the owners of the shares and who alo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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