9911796707
TMI Blog2019 (8) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... Merely because the notice issued to the Petitioner was a system generated notice since the NMS detected the Petitioner as a non-filer does not automatically mean that the Petitioner has to be issued a notice u/s 147. Even assuming that at the time notice was issued the Respondent was perhaps not fully aware of all the relevant facts, once the Petitioner submitted its objections drawing his attention to the specific legal position, it was obligatory for the Respondent to have applied his mind to those points. The order passed by the Respondent rejecting the objections on 23rd October, 2018 shows that there is no reference whatsoever to the specific objections of the Petitioner. Even a cursory examination of those objections would have dissuaded the Respondent from persisting with the proceedings consequent upon the impugned notice dated 26th March, 2018. Filing of the return by the Petitioner could not have been construed as an admission by it of a legal obligation to file a return. In the Petitioner s case, the admitted facts make it abundantly clear that there was no obligation on the Petitioner to file a return of income for the AY in question. The principal objection o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia from its subsidiary Nestle India consisted of dividend and interest on which tax was duly deducted at source in accordance with the provisions of the Act. The Petitioner states that it has received approximately ₹ 419 crores from Nestle India as dividend and interest over the past three years. 4. During AY 2011-12, the Petitioner purchased an additional 8,85,125 shares of Nestle India for ₹ 282 crores approximately (CHF 60 million in value) at market price through a recognised stockbroker, registered with the Securities and Exchange Board of India (SEBI), and through the National Stock Exchange and Bombay Stock Exchange after payment of Securities Transaction Tax. For this purchase through the open market in accordance with the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, the Petitioner obtained approval from the Reserve Bank of India (RBI). It is stated that the transaction was also in line with the applicable regulations in India including those pertaining to foreign investment and foreign exchange. The relevant documents granting such approvals and those filed by the authorized bank with the RBI have been enclosed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further stated that there was no material on record to examine such source of income and whether it was offered to tax and that from the said discussion it was clear that the Petitioner had not offered the details of income of ₹ 2,79,23,68,985/-. Accordingly, the Respondent stated that he had reason to believe that income in the above sum, which was chargeable to tax, escaped assessment by reason of the failure on part of the Petitioner to fully introduce all material facts. 9. The Petitioner on 26th July, 2018 through its authorized representative submitted its objections to the above notice dated 26th March, 2018. As regards the non-filing of return of income, it was pointed out that the Petitioner s income from India consisted only of dividend and interest on which TDS has been deducted in accordance with the Act and/or the Double Taxation Avoidance Agreement ( DTAA ) between India and Switzerland. It was pointed out that the Petitioner, a tax resident of Switzerland (i.e. non-resident for Indian tax purpose), was specifically exempted from filing of return under Section 115A (5) of the Act. It was further pointed out that the CBDT Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 20th February, 2019. 12. Pursuant to the above notice a counter-affidavit has been filed by the Respondent in which, inter alia, the stand taken is more or less the same as stated in the reasons for issuance of the notice under Section 147 of the Act. Apart from standard defences that the Petitioner has an efficacious alternative remedy and that the Respondent at this stage is to only form a prima facie view that income has escaped assessment, it is asserted that as long as there is a live link between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings under Section 147 of the Act would be valid . 13. Mr. Porus Kaka, learned Senior Counsel appearing for the Petitioner submitted that this is a case of non-application of mind by the Respondent to the undisputed facts that the Petitioner was not required to file any return for the AY in question in terms of Section 115A (5) of the Act, as further clarified in para 5 of the CBDT Instruction No.14 of 2013. A fundamental error had been committed by treating the investment made by the Petitioner in its subsidiary as income. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that at this stage no interference was called for and all defences could be raised by the Petitioner in the assessment proceedings before the Respondent. 17. The above submissions have been considered. At the outset, it requires to be noticed that in the counter-affidavit filed by the Respondent there was no denial of the fact that the Petitioner is a company established under the laws of Switzerland and that it is a tax resident of Switzerland. It is undisputed that the Petitioner is entitled to protection under India s DTAA with Switzerland. The averments in para 6 of the petition where the Petitioner, enclosing its financials for the years ending 31st December, 2010 and 31st December, 2011 showing its consolidated revenue of CHF 109 Billion and 83 Billion respectively have not been disputed by the Respondent. The averments in para 7 of the petition that during the AY in question its receipts from its Indian subsidiary was to the tune of ₹ 158 crores comprising only of dividend and interest on which tax is deductible at source and has been deducted in accordance with the provisions of the Act has also not been disputed by the Respondent. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2) of section 194LBA; (iii) income received in respect of units, purchased in foreign currency, of a Mutual Fund specified under clause (23D) of section 10 or of the Unit Trust of India, the income-tax payable shall be aggregate of- (A) the amount of income-tax calculated on the amount of income by way of dividends other than dividends referred to in section 115-O, if any, included in the total income, at the rate of twenty per cent; (B) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (ii), if any, included in the total income, at the rate of twenty per cent; (BA) the amount of income-tax calculated on the amount of income by way of interest referred to in sub-clause (iia) or sub-clause (iiaa) or sub-clause (iiab) or sub-clause (iiac), if any, included in the total income, at the rate of five per cent; (C) the amount of income-tax calculated on the income in respect of units referred to in sub-clause (iii), if any, included in the total income, at the rate of twenty per cent; and (D) the amount of income-tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 147 of the Act has to be carried to its logical end of an assessment. It is to avoid such a consequence which could end up being a futile exercise that the Supreme Court has devised a procedure in GKN Driveshafts (India) Ltd. v. Income Tax Officer (supra). The procedure outlined by the Supreme Court reads thus: We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years. 23. The above procedure has to be mandatorily ..... X X X X Extracts X X X X X X X X Extracts X X X X
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