9911796707
TMI Blog2024 (8) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... lared as dividend and subjected to DDT. It is in the aforesaid backdrop that Mr. Jolly had contended that there is an evident and manifest variation between the reasons which had been originally recorded in the notice dated 11 March 2022 and the final order passed by the respondents disposing of the objections of the petitioner on 29 March 2022. The ineffaceable connect which must exist between the reasons initially disclosed proposing reassessment and which constitute the basis for formation of opinion with respect to escapement of income and the final decision to commence reassessment, was an aspect which was duly highlighted by us in our judgment in ATS Infrastructure Limited [ 2024 (7) TMI 1441 - DELHI HIGH COURT ] Quite apart from the above, the impugned proceedings are liable to be quashed on a more fundamental ground. Undisputedly, the petitioner had offered the interest income to tax in terms of the provisions contained in Section 194LD of the Act. The ultimate order u/s 148A (d), however, alleges that the remittance in fact, constituted dividend and which was liable to be taxed in terms of Section 115-O of the Act. As is plainly evident from a reading of that provision, DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which accompanied the aforesaid notice which appear at page 40 of our record are reproduced hereinbelow:- This case has been picked up by the Risk management Strategy of Insight. On perusal of the information available with the Department, it appears that the alleged interest income derived from NCDs floated by Genpact India Pvt. Ltd. has not been appropriately offered to tax due to mischaracterization of income. 2. Moreover, on perusal of the records of the assessee it is seen that your case has not been picked up for scrutiny assessment u/s 143 (3) of the Income-tax Act,1961. Hence, the true character of these receipts could not be ascertained. 3. You are therefore required to show cause why the amount of Rs. 5,06,00,00,000/-shall not be treated as income escaping assessment and proceedings be initiated u/s 147/148 of the Act. 4. You are required to justify your claim with the relevant bank statement/documentary evidence. You are required to submit the details within 7 days of the receipts of this notice. 4. The petitioner is stated to have furnished a response on 26 March 2022 to the aforesaid notice taking various objections to the proposed assumption of jurisdiction. On 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Department. In this regard, this demand of the assessee, at this stage is certainly unwarranted. It is reiterated that these issues will be taken during the course of assessment proceedings assessee will be afforded adequate opportunity to explain the case and the resultant assessment order will be passed after an objective appraisal of the evidence available. Consequently, all the contentions of the assessee are dismissed as untenable. 5. Therefore, in view of the above facts and circumstances, I consider it is a fit case to issue notice u/s 148 of the Act as income has escaped assessment. Hence notice under Section 148 of the Income-tax Act, 1961 is being issued in the case of the assessee for A. Y 2018-19 along with this order u/s 148(d) the Income-tax Act, 1961 with due approval of the competent authority as per the provisions u/s 149(1)(a) and 151(i) of the Income-tax Act, 1961. 5. As would be apparent from a reading of the impugned order, the respondents principally placed reliance upon an order passed by the Commissioner of Income Tax (International Taxation)-2, New Delhi [CIT (IT)] under Section 263 of the Act in the case of M/s. Headstrong Consulting (Singapore) Pte. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were taken out in the form of interest payment on artificial liability instead of declaring dividend. This helped in re-characterizing, what should have been dividend payment, to principal payment, leading to evasion of taxes which should have been paid as dividend distribution tax. Thus, on amount of interest payment out of claimed interest expense, GIPL was needed to pay DDT before remitting it out of country. Headstrong Consulting Singapore Pte. Ltd. played a key role in this scheme and claimed exempt short term capital gain which was not genuine in nature. AO by accepting the claim of Headstrong Consulting Singapore Pte Ltd. without conducting any enquiry has passed an order which is erroneous and prejudicial to the interest of revenue. This interest expenses are claimed against a fictitious liability i.e., funds which were never utilized by the company, but it had to bear the liability. This has led to inflation of business expense and reduction of profitability leading evasion of taxes in India. No scrutiny assessment u/s 143 (3) of the Income-tax Act, 1961 was conducted. The nature and source of these receipts have not been scrutinized. The income from the aforemention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala, learned senior counsel appearing in support of the writ petitioner on that day. Having heard Mr. Sachit Jolly as well as Mr. Puneet Rai, learned counsels appearing for the respective sides, we find that the following indisputable facts emerge from the record. 9. As is evident from a reading of the initial notice under Section 148A(b), the respondents had taken the stand that the interest income derived from the NCDs floated by GIPL had not been appropriately offered to tax on account of mischaracterization of income. By the time the Section 148A (d) order came to be passed, the respondents sought to buttress their case of proposed reassessment on an order under Section 263 of the Act passed by the CIT (IT) in the case of Headstrong Consulting Singapore Pte. Ltd. The principal allegation now laid was that although the funds were taken out in the form of interest payments, they were in fact liable to be declared as dividend and subjected to DDT. 10. It is in the aforesaid backdrop that Mr. Jolly had contended that there is an evident and manifest variation between the reasons which had been originally recorded in the notice dated 11 March 2022 and the final order passed by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an intimation under section 143 (1) has been issued. But it is also a settled principle of law that when the Assessing Officer issues a notice under section 148, at that stage the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief (Rajesh Jhaveri (supra). At that stage, an established fact of the escapement of income does not have to be proved, since it is not necessary that the Assessing Officer should have finally ascertained that income has escaped assessment. The nature of the jurisdiction of the Assessing Officer which was dealt with by the judgment of the two learned judges of the Supreme Court in Rajesh Jhaveri's case was revisited in a decision of three learned judges in CIT v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC). The Supreme Court has held that though after April 1, 1989, a wider power has been conferred upon the Assessing Officer to reopen an assessment, the power cannot be exercised on the basis of a mere change of opinion nor is it in the nature of a review. The Supreme Court has laid down the test of whether there is tangible material on the basis of which the Assessing Officer has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAA and that based on the provisions of article 7 the profits of Rs. 131.70 crores from transactions in Indian securities were not liable to tax in India. The only basis on which the assessment is sought to be reopened is on the assumption that the provisions of section 115AD would stand attracted. That is on the assumption that the assessee is an FIL Though the attention of the Assessing Officer was drawn to the fact that the assessee is not an FII and that the provisions of section 115AD would not be attracted, the Assessing Officer persisted in rejecting the objections to the reopening of the assessment. In the order disposing of the objections which were raised by the assessee, the succeeding Assessing Officer has clearly attempted to improve upon the reasons which were originally communicated to the assessee. The validity of the notice reopening the assessment under section 148 has to be determined on the basis of the reasons which are disclosed to the assessee. Those reasons constitute the foundation of the action initiated by the Assessing Officer of reopening the assessment. Those reasons cannot be supplemented or improved upon subsequently . While disposing of the objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded under section 148(2) in the sense that it also states one more reason for initiating re-assessment proceedings, namely, that there is a difference between the profit before tax (Rs. 42,79,340) and the amount declared in the VDIS (Rs. 7,23,490). The reasons recorded, however, are not so explicit and do not refer to this fact. We are to be guided only by the reasons recorded for reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. This legal position is well settled and if any authority is needed, reference may be made to the following judgments: (i) Jamna Lal Kabra v. ITO, (1968) 69 ITR 461 (All); (ii) CIT v. Agarwalla Brothers, (1991) 189 ITR 786 (Patna); (iii) C.M. Rajgharia v. ITO, (1975) 98 ITR 486 (Patna); (iv) Asa John Devinathan v. Addi. CIT, (1980) 126 ITR 270 (Mad); (v) East Coast Commercial Co. Ltd. v. ITO, (1981) 128 ITR 326 (Cal); (vi) Equitable Investment Co. P. Ltd. v. ITO, (1988) 174 ITR 714 (Cal); and (vii) S. Sreeramachandra Murthy v. Deputy CIT, (2000) 243 ITR 427 (AP). 15. The ratio laid down in all these cases is that, having regard to the entire scheme and pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 13. Section 115-O, insofar as it is relevant for our purposes, is extracted hereinbelow:- 115-O. Tax on distributed profits of domestic companies. [( 1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003 [but on or before the 31st day of March, 2020], whether out of current or accumulated profits shall be charged to additional income tax (hereafter referred to as tax on distributed profits) [at the rate of fifteen per cent] : ] [Provided that in respect of dividend referred to in sub-clause (e) of clause (22) of Section 2, this sub-section shall have effect as if for the words fifteen per cent. , the words thirty per cent. Had been substituted;] [(1-A) The amount referred to in sub-section (1) shall be reduced by, [(i) the amount of dividend, if any, received by the domestic company during the financial year, if such dividend is received from its s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
