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TMI Blog2018 (2) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... HOWLA, JM AND SHRI ANIL CHATURVEDI, AM Appellant by : Shri Danesh Bafna Respondent by : Ms. Nirupama Kotru, CIT ORDER PER SUSHMA CHOWLA, JM: This bunch of three appeals filed by the assessee are against separate orders of DCIT (IT)-II / DCIT(IT), Circle 2, Pune, dated 30.03.2015, 27.01.2016 29.01.2016 relating to assessment years 2008-09, 2007-08 2009-10, respectively passed under section 144C(1) r.w.s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short the Act ). 2. This bunch of appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, in order to adjudicate the issues, reference is being made to the facts and issues in ITA No.466/PUN/2015, relating to assessment year 2008-09. 3. The assessee in ITA No.466/PUN/2015, relating to assessment year 2008-09 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilarly, re-assessment proceedings were upheld in assessment years 2007-08 and 2009-10. He further pointed out that identical reasons were recorded for reopening the assessment in the case of Sandvik Systems Development AB, for assessment year 2008-09. He referred to the copy of reasons recorded for reopening of assessment dated 26.07.2013 in the said case, which are placed in Compilation No.II at pages 1 to 3. He also referred to the computation of income where the declaration in respect of receipts from Sandvik Asia Ltd. towards IT Support Services were declared in the Note No.3 and it was reported that the same do not fall within ambit of Royalty / Fees for Technical Services within the meaning of Article 12 of the Tax Treaty read with Protocol thereto. He also referred to Annexure to the audit report in this regard. He further referred to the order of Tribunal in ITA No.464/PUN/2015, relating to assessment year 2008-09, order dated 10.11.2017 and pointed out that the issue was considered at length by the Tribunal and relying on earlier order of Tribunal in the case of DDIT Vs. Sandvik Information Technology AB in ITA No.128/PUN/2014 along with CO No.10/PUN/2015, relating to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld become academic in case the ground of appeal No.1 is decided in favour of assessee. He further pointed out that the issues raised in assessment years 2007-08 and 2009-10 were similar and identical to the issues in assessment year 2008-09. 6. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of DRP/Assessing Officer. 7. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against applicability of provisions of section 147 of the Act. The said section lays down the proposition that in case where there is any escapement of income, which comes to the knowledge of the Assessing Officer on the basis of some tangible material, then the said proceedings could be reopened in order to assess the escapement of income in the hands of assessee. The assessee for the year under consideration had furnished the return of income in time declaring total income at Nil. The Assessing Officer under the provisions of section 147 of the Act, recorded reasons for reopening assessment on the ground that it was noticed from Form No.3CEB of Sandvik Asia Ltd. for assessment year 2008-09 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs) (Rs) 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 8,072,286 8,072,286 Refer Note 6 to Appendix D 10. The Notes to this effect was also given in Form No.3CEB. The original assessment in the case was completed by issue of intimation under section 143(1) of the Act. The grievance of the Department in this regard is that in the absence of any assessment being completed under section 143(3) of the Act, since no enquiry was made by the Assessing Officer and the income had escaped assessment, hence re-assessment proceedings were correctly initiated in the hands of assessee. However, on the other hand, the case of assessee before us is that in the absence of any tangible material which had come to the knowledge of the Assessing Officer for recording reasons for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weden. 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 was escapement of income on the basis of tangible material before him, then it was fit case for reopening the assessment. The DRP also upheld the action of Assessing Officer, in view of the ratio laid down by the Hon‟ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra). 10. The assessee is in appeal ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 the Act can be initiated. The proviso under section 147 of the Act provides that where assessment under section 143(3) of the Act has been made, then no action under the main section would be taken after expiry of four years from the end of relevant assessment year, unless escapement of income is by re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 assessment was completed u/s.143(1), we do not find any force in the said contentions. The Hon‟ble Delhi High Court in the case of CIT Vs. Orient Craft Ltd. (supra) has held that expression, reason to believe‟ does not have different meaning, where assessments are framed u/s.143(1) and where assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation 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 ratio laid down by the Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra). The relevant observations of the Tribunal in this regard 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 assessment was completed u/s.143(1), we do not find any force in the said contentions. The Hon‟ble Delhi High Court in the case of CIT Vs. Orient Craft Ltd. (supra) has held that expression, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reason to believe‟ that income has escaped assessment even in case where assessment has been completed earlier by intimation u/s.143(1) of the Act. The Hon‟ble High Court while holding so, considered the decisions rendered by the Hon‟ble Apex Court in the case of CIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. reported as 291 ITR 500 and CIT Vs. Zuari Estate Development investment Co. Ltd. (supra). The relevant extract of the judgment rendered in the case of Khubchandani Healthparks (P) Ltd. Vs. ITO (supra) reads as under : 3. On hearing the parties, we find that the Apex Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500, had an occasion to deal with identical facts, namely reopening Notices issued under Section 148 of the Act where asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case also the assessee in the computation of total income, copy of which is placed at page 2 of the Paper Book, had in the Note given a declaration in respect of such receipts and had pointed out that the same do not fall within ambit of royalty or fees for technical services. The relevant Note reads as under:- Note: 1. Sandvik Systems Development AB ( SSDAD‟) is a non-resident company incorporated in Sweden. SSDAB does not have any office (or any other establishment) in India. It is a tax resident of Sweden under the Double Taxation Avoidance Agreement between India and Sweden ( Tax treaty‟). 2. SSDAB provides IT support services to Sandvik AB Group companies all over the world, including Sandvik Asia Limited ( SAL‟) and Walter Tools India Private Limited ( Walter India‟) in India. 3. During the year ended 31 March 2008, SSDAB has charged ₹ 19,414,642 to SAL and ₹ 310,396 to Walter India towards the aforesaid IT support services. The receipts towards such IT support services rendered by SSDAB do not fall within the ambit of Royalties or Fees for technical services within the meaning of Article 12 of the Tax treaty read with the Prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve link. There is no merit in the stand of authorities below that in the present case, where the assessment order was passed under section 143(1) of the Act, then the Assessing Officer had no action to look at or to consider the same. Under the provisions of the Act, it is incumbent upon the Assessing Officer to come to finding on the basis of tangible material to establish his case of reason to believe of escapement of income; in the absence of which, re-assessment proceedings are invalid and bad in law. Accordingly, we hold so and cancel the same. The consequent order passed under section 143(3) r.w.s. 147 of the Act also does not stand. Thus, the ground of appeal No.1 raised by the assessee is allowed and the balance grounds of appeal become academic in nature. 12. We find that issue raised in the present appeal is identical to the issue before the Tribunal and following the same parity of reasoning as in the case of sister concern of the assessee, we hold that in the absence of any tangible material establishing escapement of income in the hands of assessee, the Assessing Officer has erred in exercise of jurisdiction under section 147 of the Act by reopening assessment afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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