2017 (8) TMI 855 - HC - Income Tax

Reopening of assessment - benefit of the DTAA between India and UAE disclosure - Held that - In the present case whilst taking the impugned action we find that there are no specific reasons recorded what was the material which was not truthfully disclosed. As pointed out herein above the fact that the petitioner was claiming the benefit of the DTAA between India and UAE would clearly disclose that at the relevant time the requirement of period of residence in UAE was not necessary. Whilst completing the regular assessment the queries sought by the Assessing Officer were answered by the petitioner and accordingly being satisfied the regular assessment came to be completed. In this background whilst the action on the part of the respondents-Revenue is a change of opinion it cannot be the reason for reopening the assessment under Section 148 of the said Act. In such circumstances we find that the question of reopening the assessment under Section 148 of the said Act would not at all be justified. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of the respondent to issue notices under Section 148 of the Income Tax Act, 1961.
2. Validity of reopening the assessment for the Assessment Year 2005-06.
3. Applicability of the Double Tax Avoidance Agreement (DTAA) between India and UAE.
4. Requirement of Tax Residency Certificate for claiming benefits under the DTAA.
5. Alleged failure of the petitioner to disclose material facts fully and truly.
6. Time-barred nature of the reassessment proceedings.

Detailed Analysis:

1. Jurisdiction of the Respondent to Issue Notices under Section 148:
The petitioner contended that respondent No.3 had no jurisdiction to issue the impugned notices and pass the order under Section 148 of the Income Tax Act, 1961. The petitioner argued that he was governed by the jurisdiction of the officers in the State of Goa. The court did not delve deeply into this issue as it resolved the case on other grounds.

2. Validity of Reopening the Assessment:
The petitioner challenged the validity of the notice under Section 148, arguing that the reasons recorded for reopening the assessment were insufficient and based on a change of opinion. The court found that the reasons recorded by the Assessing Officer did not indicate any failure by the petitioner to disclose fully and truly all material facts necessary for the assessment. The court held that the reopening of the assessment was unjustified and amounted to a mere change of opinion, which is not permissible under the law.

3. Applicability of the DTAA between India and UAE:
The petitioner claimed benefits under the DTAA between India and UAE, asserting that he was a tax resident of UAE. The court noted that the requirement to produce a Tax Residency Certificate was introduced by the Finance Act, 2012, effective from 1st April 2013, and was not applicable to the Assessment Year 2005-06. The court observed that the petitioner had disclosed his status as a Non-Resident and provided his passport details during the original assessment, which was accepted by the Assessing Officer.

4. Requirement of Tax Residency Certificate:
The respondents argued that the petitioner failed to provide a Tax Residency Certificate or other documents to substantiate his claim under the DTAA. The court found that such a requirement was not in place during the Assessment Year 2005-06 and was introduced only in the Finance Act, 2012. Therefore, the petitioner was not required to produce the Tax Residency Certificate for the relevant assessment year.

5. Alleged Failure to Disclose Material Facts:
The respondents contended that the petitioner did not fully and truly disclose all material facts necessary for the assessment, particularly his residency status in UAE. The court noted that the petitioner had disclosed his status as a Non-Resident and provided details of his stay abroad, which were accepted by the Assessing Officer during the original assessment. The court held that there was no failure on the part of the petitioner to disclose material facts.

6. Time-Barred Nature of the Reassessment Proceedings:
The petitioner argued that the reassessment proceedings were time-barred as the notice under Section 148 was served on 31.3.2012, and the assessment was not completed within one year from the end of the financial year in which the notice was served. The court did not need to address this issue in detail as it resolved the case on other grounds.

Conclusion:
The court quashed and set aside the impugned notices dated 28th March 2012 and 29th March 2012, as well as the impugned order dated 27/09/2013. The court ruled that the reopening of the assessment was unjustified and based on a mere change of opinion, which is not permissible under the law. The requirement to produce a Tax Residency Certificate was not applicable to the Assessment Year 2005-06, and the petitioner had disclosed all necessary material facts during the original assessment. Consequently, the court made the rule absolute in favor of the petitioner and did not impose any costs.

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