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TMI Blog2021 (7) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... and vitiates the assumption of jurisdiction by the learned Assessing Officer to reopen the assessment proceedings by issuance of notice under section 153C of the Act. Non-adherence of the provisions of section 144C - The assessee company incorporated in Cyprus as per laws of Cyprus and have been resident of Cyprus. The assessee has been filing the Incometax Return with Cyprus Revenue Authorities. Since the transaction between Focus Energy Ltd. with the assessee was accepted as an international transaction continuously over a period of time, it goes without saying that other party, i.e., the assessee is a foreign company. Any transaction between Indian Company and Indian company cannot be an international transaction and therefore, the international transaction of Focus Energy Ltd. which is an Indian Company, will necessarily be with the foreign company. CIT(A) concluded that it an unmistakable pointer that the assessee is a foreign company and such a fact is admitted by the Assessing Officer while dealing with the transactions of Focus Energy Ltd. with its foreign AEs continuously over a period of time. Basing on these facts, learned CIT(A) concluded that the material o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se appeals. 2. Brief facts of the case to the extent of necessity for disposal of appeals are that the assessee is a company incorporated in Nicosia, Cyprus on 17.02.2005 as a 100% subsidiary of Gynia Holdings Ltd. In Financial Year 2006-07, it became 100% subsidiary of Focus oil Inc., BVI. It had a share capital of 50000 CYP. Company registration number is 157598 and Shri Kul Bhushan Sharma was one of its Directors. Assessee company-company acquired PAN from India bearing No. AADCN3458P and started filing its return of income in India since A.Y. 2011-12. Through a share exchange agreement dated 17.04.2008, it became the subsidiary of Indus Gas Ltd. and through a production sharing agreement dated 18.02.2005, i.e. very next day to its incorporation, it became the owner of 25% participating interest in exploration right of RJ-ON/6 Oil block of Rajasthan allotted to M/s. Focus Energy Ltd. 3. Pursuant to search and seizure operation u/s. 132 of the Incometax Act, 1961 ( the Act ) conducted on 22.03.2012 in M/s. Focus Energy Group of cases, satisfaction note for invoking the provisions of section 153C of the Act against the assessee was recorded on 18.11.2013 and notice u/s. 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is required to follow the procedure provided under section 144C of the Act by passing the draft assessment order, but such a procedure is not followed by the Assessing Officer and therefore, the assessment order needs to be quashed. Reliance is placed on the decisions in the case of Turner International India Pvt. Ltd. v. DCIT (2017) 398 ITR-177. Learned DR places reliance on the orders of the Assessing Officer. Lastly, it was contended that there was no incriminating material found during the search and, therefore, in view of the decision of the Hon ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, (2016) 380 ITR 573 (Del), no addition could be made. 6. We have gone through the record in the light of submissions made on either side. It can be seen from the assessment order that the Assessing Officer invoked the provisions of section 6(3) of the Act for bringing to tax the income of the assessee as taxable in India; that the Assessing Officer also invoked the provisions of section 9 of the Act on the ground that during the assessment year 2011-12, the assessee earned profit from companies whose underlying assets were wholly and totally situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose as a foot board to reopen the case of the assessee company for a block period of 6 years. 10. On the analysis of all the material available before her, Ld. CIT(A) found that the satisfaction note was recorded in wholesale consolidated manner pertaining to all the Indian companies and overseas companies which may have one or the other transaction with M/s Focus Energy Ltd, an Indian Incorporated company, resident in India and were put together, with intermixed, unconnected and unrelated aspects pertaining to the assessee company; that the contents of the seized material were not brought on record translating the same into proper satisfaction note other than just identifying them to utilise for the purpose of reopening the case which was not desirable to be approved. With such observations and finding of facts, Ld. CIT(A) held that there is merit in the contentions of the assessee regarding the unlawful initiation of proceedings under section 153C of the Act. 11. Ld. AR argued before us on the same lines of observations and finding of facts returned by the Ld. CIT(A) and placed reliance on the decisions reported in Pepsi Foods (P.) Ltd.v ACIT [2014] 52 taxmann.com 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . 11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word satisfaction or the words I am satisfied in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any satisfaction of the kind required under Section 153C of the said Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R Division to the Assessing Officer. On examining these documents, Ld. CIT(A) recorded finding of fact that the information with the Ld. Assessing Officer amply and evidently substantiate as a pointer to the assessee s contention that it is a resident of Cyprus. Learned CIT(A) further referred to the observations of the Assessing Officer of the assessee in Cyprus that the assessee was registered outside India in accordance with the laws of Cyprus and such location was not challenged. CIT(A) found that the submissions made by the assessee tallied with the information and documents provided by FT TR, more particularly at paragraph No. 5.9 of such an assessment order. 15. There is no challenge to the observation of the CIT(A) that the assessee is a resident in Cyprus. Learned CIT(A) examined the material available before her in the light of the provisions of section 6(3) of the Act and also the orders passed by TPO in the case of Focus Energy Ltd for the assessment years 2006-07 to 2012-13. All these materials had shown that M/s. Focus Energy Ltd. had international transactions with the assessee. M/s. Focus Energy Ltd. is undisputedly an Indian Company. It is, therefore, inferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law. 14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of Indi [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interest of such assessee. 2. Explanatory Circular for Finance (No.2) Act, 2009 i.e. Circular No. 5 of 2010 dated 03.06.2010, in para 45 has explained the said new section 144C and the consequential amendments made in other sections of Income-tax Act. Para 45.5 of the Circular No.5/2010 dated 03.06.2010 reads as under: 45.5 Applicability: These amendments have been made applicable with effect from 1st October, 2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel Rules have been notified by S. O. No. 2958 (E) dated 20thNovember, 2009. In the above extracted Para 45.5 there has been an inadvertent error in stating the applicability of the provisions of section 144C inserted vide Finance (No.2) Act, 2009 that amendments will apply in relation to the assessment year 2010- 11 and subsequent assessment years. Accordingly, para 45.5 is replaced with the following: 45.5. Applicability: Section 144C has been inserted with effect from 1stApril, 2009. Accordingly, the Assessing Officer is required to forward a draft assessment order to the eligible assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., 08.11.2013, the immediately preceding six years will be assessment years 2008-09 to 2013-14. Assessment year 2012-13 falls in this block only and therefore, provisions of section 153C of the Act are attracted and not section 143(3) or section 144 of the Act. Assessment order was, however, passed u/s. 144 read with section 142(1) of the Act. 23. In the case of CIT v RRJ Securities Ltd. (supra), the Hon ble High Court held as under: - 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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