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TMI Blog2024 (12) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... Admittedly, in the present case as accepted by the regular Assessment Officer, the commissions paid by the petitioner were for the services rendered outside India. This factual position is also not denied by the Assessment Officer even in the present proceedings and in fact, show-cause notice was not issued on the ground that such commission was wrongly paid and such services were not outside India. Thus, the provision of Section 195 would not apply and therefore, we are of the opinion that the present proceedings are without any jurisdiction. In the circumstances, the other judgments relied upon by the learned counsel for the parties are not required to be dealt with. The argument that Writ petition is not maintainable against the show-cause notice has no merit to stand. The reason is that there is no law that there is an absolute prohibition with regard to maintainability of writ against a show-cause notice. There are exceptions, under which a writ petition can also be entertained. The present petition is falling under the said exception. Therefore, such contention is rejected. Rectification of mistake - In the present impugned proceedings, allowance of deduction for the commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount of Rs.58,04,455/- and the petitioner has produced all the material in proof of commission. The Assessment Officer after satisfying the information furnished with regard to payment of commission accepted the deduction on account of commission paid for services obtained from the non-resident outside the India. 3) A notice under Section 148 of the Income Tax Act dated 17.09.2013 was issued against the petitioner and the Department had initiated the re-assessment proceedings on account of escaped income for the Assessment Year 2009-10. According to the petitioner, such notice is ex facie illegal, arbitrary and without jurisdiction. The further grievance of the petitioner is that having received a notice under Section 148 of the Income Tax Act, the petitioner made an application to furnish the reasons assigned preceded to the issuance of notice and there was no valid reasons recorded for the same. It is also the grievance of the petitioner that the sanction for proceedings under Section 148 of Income Tax Act for re-assessment was granted without speaking order supported by reasons. 4) In response to the notice, the petitioner submitted preliminary objections dated 24.10.2014. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the person who is paying such commission, if deduction has not been made, then the consequences contemplated under Section 40(a)(i) of the Income Tax Act would follow. The assessment Officer failed to make out any provision under which such commission paid to the non-resident is chargeable under the provisions of Income Tax Act. According to the learned counsel for the petitioner, this is a settled law that such a commission is not chargeable under the Income Tax Act. In support of his arguments, learned counsel for the petitioner has relied upon the judgments rendered by the Apex Court in the cases (i) Joint Commissioner of Income Tax. Vs. Cognizant Technology Solutions India (P) Ltd., reported in (2023) 6 SLPCTO 63, (ii) Assistant Commissioner of Income Tax Vs. Marico Ltd., reported in (2020) 16 Supreme Court Cases 354, (iii) Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd., reported in (2010) 2 Supreme Court Cases 723, (iv) Calcutta Discount Co. Ltd. Vs. Income Tax Officer, Companies District Calcutta, reported in (1961) 41 ITR 191 and the judgments rendered by this Court in the cases (i) Commissioner of Income Tax Vs. Modern Insulators Ltd., reported in (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Raj., reported in 2021(50) G.S.T.L. 167, (iv) Banswara Syntex Ltd. Vs. Union of India Ors., reported in 2008(2) WLN 320 (Raj.). [2024:RJ-JD:50724-DB] (7 of 12) [CW-9783/2014] 12) We have considered the rival submissions of both the parties and perused the impugned notice as well as material available on record. 13) In the light of the rival submissions of both the parties, it is apt to refer to Sections 195, 40(a)(i) and Section 9(1)(i) Explanation (1)(a) of the Income Tax Act. Section 195 of the Income Tax Act, reads as follows: 195. Other sums. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC or section 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: xxx xxx xxx] From a reading of Section 195 of Income Tax Act, it is clear that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonably attributable to the operations carried out in India; xxx xxx xxx From a reading of Section 9(1)(i) Explanation (1)(a), it is clear that if the business activity of which all operations are not carried out in India, the income of business deemed under this Clause to accrue or arise in India shall be only such a part of Income as is reasonably attributable to the operations carried out in India. This means, if the part of the operations are carried out in India and any income derived therefrom shall be deemed to accrue or arise in India. This implies that when the business operations were done outside India, such income shall not be deemed to accrue or arise in India. 16) The interpretation of above provision fell for consideration before the Apex Court in the case of Commissioner of Income Tax, Vs. Toshoku Ltd., reported in [1980] 125 ITR 525 (SC), which reads as follows:- The second aspect of the same question is whether the commission amounts credited in the books of the statutory agent can be treated as incomes accrued, arisen, or deemed to have accrued or arisen in India to the non-resident assessees during the relevant year. This takes us to s.9 of the Act. It is urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that there is an absolute prohibition with regard to maintainability of writ against a show-cause notice. There are exceptions, under which a writ petition can also be entertained. The present petition is falling under the said exception. Therefore, such contention is rejected. 19) Dealing with the other contention, the original assessment proceedings were result of the return being taken up for scrutiny. During the process of scrutiny, the petitioner submitted all the books of accounts, payment details to the Assessment Officer and the Assessment Officer having considered the details of the payment found that the deduction with regard to amount paid by way of commission to the services rendered outside India, were not chargeable and consequently, the returns were accepted. It is needless to say that the settled law is re-assessment proceedings is impermissible by way of review or by way of change of opinion. However, it is permissible to re-assess the income, if previous proceedings were result of mistake. Rectification of proceedings on ground of mistake cannot be said to be a change of opinion or an exercise of power of review. Mistakes can be rectified at any stage. 20) In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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