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TMI Blog2017 (12) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is allowed. - ITA No.464/PUN/2015 - - - Dated:- 10-11-2017 - MS . SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri Danesh Bafna For The Respondent : Ms . Nirupama Kotru, CIT ORDER PER SUSHMA CHOWLA, JM : The appeal filed by the assessee is against the order of DCIT (IT)-II, Pune, dated 23.02.2015 relating to assessment year 2008-09 passed under section 143(3) r.w.s. 147 r.w.s. 144C(13) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1 . Ground 1 : On the facts and circumstances of the case, and in law, the Learned Dispute Resolution Panel ( Ld . DRP ) erred in confirming the action of the Learned Assessing Officer ( Ld . AO ) in reopening the assessment proceedings without any reason to believe as required by the provisions of section 147 . 2 . Ground 2 : Without prejudice to Ground 1 above, on the facts and circumstances of the case, and in law, the Ld . DRP erred in upholding the action of Ld . AO of taxing receipts for IT support services provided to its Indian affiliates amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef that income chargeable to tax had escaped the assessment. The reopening was on the basis of material which was definite and not vague and fanciful and in view of explicit reasons, it was fit case for reopening. With regard to assessee s reliance on the order of Dispute Resolution Panel (DRP) in earlier year i.e. assessment year 2005-06, it was pointed out that an appeal was filed before the Tribunal and hence, the same cannot be accepted. The Assessing Officer passed draft assessment order, against which the assessee filed objections before the DRP. The DRP relying on the decision of the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), held that reopening was valid. The Assessing Officer in this regard passed the assessment order under section 143(3) r.w.s. 144C(13) of the Act and also decided the issue on merits against the assessee. 5. The assessee is in appeal against the order of Assessing Officer. 6. The learned Authorized Representative for the assessee has pointed out before us that in the absence of any tangible material for reason to believe that income has escaped assessment, there is no merit in exercise of ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in all the earlier years, the DRP gave relief and in the absence of any tangible material in the year under appeal, there is no merit in the order of DRP/Assessing Officer. The assessment framed therein is thus, bad in law. The learned Authorized Representative for the assessee referred to the ratio laid down by the Hon ble High Court of Delhi in Orient Craft Ltd. Vs. CIT reported in 354 ITR 536 (Del) and reliance was placed on various judicial precedents which are mentioned in the order of DRP for assessment year 2005-06. 7. The learned Departmental Representative for the Revenue pointed out that in the year under appeal, it was case of escapement of income. Our attention was drawn to the copy of reasons recorded for reopening the assessment. The learned Departmental Representative for the Revenue pointed out that after four year proviso comes into play and on that basis, the DRP has quashed re-assessment proceedings in earlier years. However, in this year, there is no proviso in operation. He further stated that in the absence of any assessment completed in the case of assessee, where the assessee has failed to offer income to tax, then it cannot be held to be review as la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Assessing Officer further holds that on examination of nature of payments made to the assessee as per agreement dated 01.04.2002, it could be concluded that the payments received by the assessee constitute royalty and fees for technical services, as per sections of the Act as well as Article 12 of the DTAA between India and Sweden. Reference was made to several decisions in this regard and also to the order under section 201(1) and 201(1A) of the Act in the case of Sandvik Asia Pvt. Ltd. for assessment year 2008-09, wherein the Assessing Officer held that the payments received constitute royalty and fees for technical services. After recording aforesaid reasons for reopening the assessment, the Assessing Officer issued notice under section 148 of the Act. The assessee filed letter stating that earlier return of income may be treated as filed in response to the notice under section 148 of the Act. Thereafter, the assessee sought reasons for reopening the assessment and filed objections. The objections filed by the assessee were rejected by the Assessing Officer as there was no assessment under section 143(3)/147 of the Act and the Assessing Officer was satisfied that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee or the Revenue. 11. Now, coming to the appeal in assessment year 2008-09. The Assessing Officer recorded reasons for reopening assessment on the basis of reasons recorded in assessment year 2005-06. The Assessing Officer very categorically states that information came to his knowledge during proceedings in assessment year 2005-06 that the assessee had received IT Support fees and Licence fees, which has not been offered to tax. The question which arises before us is whether any tangible material is available with the Assessing Officer to come to finding of escapement of income. The second aspect of the issue is in case no assessment has been completed under section 143(3) of the Act, where there is escapement of income, proceedings can be reopened under section 147/148 of the Act keeping the spirit of provisions which are applied in the present case. The first and foremost for invoking the said provisions is the reason to believe of escapement of income and such reason to believe has to be based on tangible material or otherwise there has to be live link between the reason to believe and escapement of income then only the proceedings under section 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation, payments were made on account of IT Support services which information was treated as tangible material by the Assessing Officer and proceedings were initiated under section 147/148 of the Act. The case of Revenue before the Tribunal was that the Assessing Officer had reason to believe that income of assessee had escaped assessment. The case of assessee was that the said information derived from alleged tangible material for re-assessment proceedings were already furnished by the assessee in form No.3CEB filed along with return of income. The said information is reproduced at page 9 of the order of Tribunal dated 28.12.2016. The Tribunal held that the Assessing Officer can have belief for reopening assessment if there is any tangible material in his possession. The Tribunal further held that in the said case, the Assessing Officer had no new information or tangible material to come to the conclusion that there was escapement of income. The relevant findings of the Tribunal are as under:- 16 . In so far contentions of the department that the Assessing Officer did not get opportunity to apply his mind on the documents furnished by assessee as the original assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roving valid reasons to believe could be circumvented by first accepting the return under Section 143 ( 1 ) and thereafter issue notices to reopen the assessment . An interpretation which makes a distinction between the meaning and content of the expression reason to believe in cases where assessments were framed earlier under Section 143 ( 3 ) and cases where mere intimations were issued earlier under Section 143 ( 1 ) may well lead to such an unintended mischief . It would be discriminatory too . An interpretation that leads to absurd results or mischief is to be eschewed . 13. The Tribunal also took note of the contention of the Department that where the original assessment was completed under section 143(1) of the Act, then the Assessing Officer does not get opportunity to apply the mind and relied upon the Hon ble Bombay High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO reported in 68 taxmann.com 91 (Bom.), which was also in relation to assessment being completed by issue of intimation under section 143(1) of the Act and thereafter, issue of notice under section 148 of the Act. The Hon ble Bombay High Court also considered the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment made under Section 143 ( 3 ). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter . The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143 ( 1 ) and thereafter issue notices to reopen the assessment . An interpretation which makes a distinction between the meaning and content of the expression reason to believe in cases where assessments were framed earlier under Section 143 ( 3 ) and cases where mere intimations were issued earlier under Section 143 ( 1 ) may well lead to such an unintended mischief . It would be discriminatory too . An interpretation that leads to absurd results or mischief is to be eschewed . 17 . The Hon ble Bombay High Court in the case of Khubchandani Healthparks ( P ) Ltd . Vs . ITO ( supra ) has reiterated that notice issued u / s . 148 would be without jurisdiction for absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143 ( 1 ) of the Act . As rightly pointed out by Mr . Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits . 18 . Thus, in view of the facts of the present case and the case laws discussed above we hold that the Assessing Officer had no tangible material to justify his reason to believe that income has escaped assessment . The reassessment proceedings initiated by the Assessing Officer u / s . 147 are without jurisdiction and hence, are not sustainable . Accordingly ground No . 1 to 3 raised by Department in appeal are dismissed . 14. In the facts of the present case also the assessee in the computation of total income, copy of which is placed at page 2 of the Paper Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 12 ( a ) Clause 12 ( b ) Clause 12 ( c ) Clause 12 ( d ) 1 Sandvik Asia Limited, Mumbai - Pune Road, Dapodi, Pune - 411012 Receipt for IT support services 19,414,642 19,414,642 Refer Note 7 to Appendix C 2 Walter Tools India Private Limited, Mumbai - Pune Road, Dapodi, Pune - 411012 Receipt for IT support services 310,396 310,396 Refer Note 7 to Appendix C 16. In view of the above said declarations made by the assessee which has also been considered by the Pune Bench of Tribunal in sister concern of the assessee i.e. Sandvik Information Technology AB, though for assessment year 2005-06, we hold that in the absence of any tangible material establishing escapement of income in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X
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