2023 (2) TMI 1275 - HC - Income Tax

Reopening of assessment - foreign outward remittance is income chargeable to tax on the ground it has allegedly escaped assessment - principal allegation leveled against the petitioner is that it has failed to collect withholding tax in respect of remittances made to an Associated Enterprise(USA) - as petitioner sought 10 days time to furnish a response to the notice issued u/s 148A(b) but AO seems to have not addressed his mind to the request for accommodation made by the petitioner, and proceeded to pass, as indicated above, an order u/s 148A(d) of the Act, on the very next day, i.e., 05.04.2022. HELD THAT - As to whether this resulted in a breach of principles of natural justice will also be examined on the next date of hearing. The matter requires further examination. Issue notice. Respondent accepts notice on behalf of the respondents/revenue.Counter-affidavit will be filed within the next four weeks. Rejoinder thereto, if any, will be filed at least five days before the next date of hearing. List the matter on 25.09.2023.

Summary

Issues Involved:
1. Failure to collect withholding tax on remittances made to an Associated Enterprise.
2. Upward adjustment by Transfer Pricing Officer (TPO) in scrutiny assessment proceedings.
3. Allegations of flawed reassessment proceedings under Section 148A(d) of the Income Tax Act, 1961.
4. Allegations of breach of principles of natural justice due to non-addressal of request for response time by Assessing Officer (AO).

Detailed Analysis:
1. The writ petition pertains to the Assessment Year 2018-19 regarding the failure to collect withholding tax on remittances made to an Associated Enterprise, specifically Avery Dennison Corporation (USA). The petitioner remitted Rs. 5,54,85,253/- to Avery Dennison Corporation during the Financial Year 2017-18 without deducting tax at the source.

2. During the scrutiny assessment proceedings, an upward adjustment of Rs. 82,87,90,616/- was made by the Transfer Pricing Officer (TPO). It was highlighted that the remittance amount subject to reassessment was already included in this upward adjustment amount.

3. The Assessing Officer (AO) passed an order under Section 148A(d) of the Income Tax Act, 1961, stating that the entire foreign outward remittance amount is income chargeable to tax as it allegedly escaped assessment. However, the petitioner's representative argued that this assertion seems flawed based on the submissions made during the proceedings.

4. Concerns were raised regarding the AO not addressing the petitioner's request for additional time to respond to the notice issued under Section 148A(b) of the Act. The AO proceeded to pass the order under Section 148A(d) the day after the request, potentially leading to a breach of principles of natural justice, which will be further examined in subsequent hearings.

5. The court noted the need for a more in-depth examination of the matter and issued notices to the concerned parties. The respondents/revenue accepted the notice, and timelines were set for filing counter-affidavits and rejoinders. The case was scheduled for the next hearing date, with a stay on the operation of the impugned order and notices until then. Parties were instructed to act based on a digitally signed copy of the order issued.