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TMI Blog2024 (12) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of payment to non-resident without deduction of tax at source is a wilful act of assessee in order to reduce its taxable income is also an allegation that assessee has failed to disclose fully and truly all material facts, we do not find any reason to compare these findings of the AO for allegation of failure on the part of assessee for disclosure. Therefore, on this solitary ground, we quash the reassessment order passed by the ld. AO. When the dispute is settled for a particular assessment year involving same point in VSV 2020, the learned assessing officer could not have reopened the assessment on the same issue - in this case originally additions were made for non-deduction of tax at source with respect to the payment made to the resident Indian, whereas the issue involved in the reopening of the assessment is with respect to payment made to the non-resident. According to provisions of section 5 of VSV 2020 Act on matters stated in the application for settlement of disputes are covered therein. In this case, the matter settled in the VSV Act and the matter for which reopening is made are two different issues and therefore there is no infirmity in the action of the learned as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to the erstwhile section 147. 2.2. The learned assessing officer has erred by not appreciating the fact that the disallowance of payments to foreign vendors for non-deduction of TDS. is a subject matter of appeal before the Commissioner of Income Tax (Appeals) filed by the Appellant against the order us 201 issued for the same assessment year. The learned assessing officer has thus erred in reassessing income under section 147 involving a matter which is already a subject matter of appeal, in violation of third proviso to erstwhile section 147. 2.3. The learned assessing officer erred in issuing the notice under section 148 dated 31.3.2021. on 1.04.2021 as applicable under the provisions that existed before the substitution of section 148 by Finance Act 2021 w.e.f. 1.04.2021. 2.4. The learned assessing officer erred in not following the procedure laid down by the substituted provisions of section 148 and section 148A of the Act effective from 01.04.2021. 2.5. The learned assessing officer has erred in not appreciating the fact that the procedure for re-assessment is a procedural law and hence has to be read as it exists on the date on which such procedure is being carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer and the CIT(A), NFAC have erred in not appreciating that certain payments classified as AMC and maintenance charges were in the nature of purchase of spares and other maintenance equipment and will thus not be taxable in India in the absence of permanent establishments of such foreign vendors in India. 4.3. Without prejudice to the above, the learned assessing officer and the CIT(A). NFAC have erred in not adopting the beneficial provisions under the Double Tax Avoidance Agreements. 4.4. The learned AO and the CIT(A). NFAC have erred in not appreciating that payments for annual maintenance contracts shall not constitute fees for technical services under relevant articles of the Double Tax Avoidance Agreement as the make available condition is not satisfied. 4.5. Based on the facts and circumstances of the case and law, payments for AMC and maintenance charges were not chargeable to tax as technical services as per the provisions of the Act and DTAA. 5. Ground relating to deduction of tax at source on payments made to non-residents-Section 195 and disallowance under section 40(a)(i) 5.1. The learned AO and CIT(A). NFAC have erred in not appreciating that payments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. Therefore, on corelation of these details with records of assessee, the ld. AO formed a reason to believe that an amount of Rs. 49,17,872 paid without tax deduction at source to a non-resident is wilful act of the assessee to reduce the taxable income. Thus, this amount has escaped assessment within the meaning of section 147 of the Act. Notice u/s. 143(2) of the Act was issued on 16.11.2021. The assessee filed its objection on 30.11.2021 which was disposed on 17.1.2022. Assessee was asked to show cause the above. 6. The assessee submitted that liability to deduct tax at source u/s. 195 of the Act arises only when income is chargeable to tax in India as per the Act. The recipient does not have any business connection in India and therefore such sum is not liable to tax in India. The assessee also referred to DTAA Article 13(4)(c) and stated that mere rendering of the services will not result taxability of income in India. It was further stated that the condition of make available is also not satisfied. 7. The ld. AO rejected all the contentions of the assessee and held that assessee is required to deduct tax at source u/s. 195 of the Act and therefore disallowance of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO, International Taxation, Ward 1(1), Bangalore, based on which the AO has reopened the assessment. Therefore, it is a borrowed opinion. 12. He further submitted that as in the original assessment proceedings the ld. AO has applied his mind on the facts of the issue and examine the same in detail, there is change of opinion now for reasons recorded for reopening of the assessment which is not valid. He referred to the various notices and reply furnished during the course of assessment proceedings. 13. Lastly, he submitted that notice u/s. 148 of the Act was issued to the assessee for AY 2013-14 on 31.3.2021 with the reasons recorded which are placed at page 392-293 of the PB. It was submitted that the reopening of the assessment is made beyond four years from the end of the assessment year and therefore in such a situation, the AO can get a right to reopen the assessment only if there is an allegation in the reasons recorded that escapement of income is on account of failure on the part of assessee. He submits that on the reading of the whole of the reasons, there is no such allegation by the AO. Therefore, on this ground itself, the reassessment proceedings deserves to be quashe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmity for reopening of the assessment. 16. With respect to change of opinion, it was submitted that only when the order u/s. 201 was issued, the AO has come to know about the payment to non-resident of similar sum without deduction of tax at source. Therefore, this issue was not therefore before the AO during the original assessment proceedings and hence there cannot be an argument that reassessment is on account of change of opinion. 17. On the issue that there is no allegation in the reasons recorded for reopening of assessment that there is a failure on the part of assessee, he referred to the basis for forming reason to believe and details of escapement, wherein it is categorically stated that there is a wilful act of assessee in order to reduce its taxable income for payment to non-resident without deduction of tax at source not disallowed and therefore it should be sufficient enough to invoke the provisions of section 147 of the Act. 18. In the rejoinder, the ld. AR vehemently submitted that decisions of Gujarat High Court though are on section 263 of the Act, they apply with equal force in the reassessment proceedings also because the same issue cannot be reagitated when i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.-2013-14, the undersigned has reason to believe that an amount of Rs. 49,17,872 /- paid to non-resident service providers/vendors on account of AMC Maintenance charges without making TDS is wilful of act of the assessee in order to reduce its taxable income. In light of the same undersigned has reason to believe that an amount to tune of Rs. Rs. 49,17,872 /- has escaped assessment within meaning of section 147 of Income-tax Act. 20. According to the provisions of section 147 of the Act, if the AO has reason to believe that income chargeable to tax has escaped assessment for any assessment year, subject to the provisions of section 148 to 153, he has every right to assess or reassess such income and also any other income which has escaped assessment and comes to his notice during the reassessment proceedings. However, there is one fetter to his right, i.e., if any action has to be taken after the expiry of four years from the end of the relevant assessment year, he could make the reassessment order assessing such income, only if the income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of assessee:- (i) to make a return u/s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Firstly, you like to state that in this case originally additions were made for non-deduction of tax at source with respect to the payment made to the resident Indian, whereas the issue involved in the reopening of the assessment is with respect to payment made to the non-resident. According to provisions of section 5 of VSV 2020 Act on matters stated in the application for settlement of disputes are covered therein. In this case, the matter settled in the VSV Act and the matter for which reopening is made are two different issues and therefore there is no infirmity in the action of the learned assessing officer in not considering that the matter settled in VSV 2020 is the same as involved in the reopening. The judicial precedents cited before us are in fact related to section 263 of the income tax act, but those decisions have quashed the revisionary proceedings only for the reasons not the matter settled in that scheme and the matter for which the revisionary proceedings are initiated are same. Therefore, we dismiss this argument of the learned authorised representative. 25. Accordingly, ground no. 2 relating to reopening of the assessment is allowed as indicated above. 26. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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