TMI Blog2014 (11) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as a pretence - The formation of belief must have rational connection with or relevant bearing from the material on record having live link nexus with income escaping assessment - The reasons recorded by the AO clearly shows that the reopening has been done merely on some kind of a possibility for which he himself is not sure - There is even no reference to any material that assessee’s claim for benefit under Article 14 of DTAA is false or incorrect - the reopening is merely pretence to examine, whether the assessee is a taxable unit or not and whether there could be possibility of loss of revenue. Once the Tax Residency Certificate was there in the record, then there could not have been any ground for presumption that the assessee is not a taxable entity in Denmark - He has not referred to any other information or material that the assessee is not a tax resident of Denmark and there was loss of revenue because the assessee has falsely claimed the benefit under Article 14 of the DTAA - The reasons as recorded by the AO falls in the realm of surmises and presumption de hors any material fact having live link nexus with the formation of `reasons to believe’ that income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of hearing of the appeal as it may be advised. 4. Besides this, an additional ground has also been raised, challenging the reopening of assessment proceedings on the ground of change of opinion . 5. The brief facts of the case are that the assessee is a Foreign Institutional Investor (FII) and a tax resident of Denmark. The assessee is a Fund, which made capital gains both long term and short term on shares of listed Indian companies. In the return of income filed for the assessment year 2006-2007, the capital gains, earned were claimed as exempt under Article 14 of Indo-Denmark DTAA. Alternatively it was claimed that, so far as the long term capital gains, are concerned the same should be treated as exempt u/s 10(38). The return of income was filed at Nil income on 26.07.2007 and such a return of income was also processed u/s 143(1) vide intimation dated 28.03.2008. Thereafter on 16.03.2011, such an assessment was reopened u/s 148, mainly on the following reasons recorded:- 16.03.2011 : Reasons for reopening the assessment Return of income for A.Y.2006-07 was filed by the assessee on 26.07.2006 declaring total income of Rs.Nil/-. Assessment u/s. 143(1) of the I.T.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreningen BankInvest I Afd. Pension Indien Kina (PAL) is an approved sub-account of AmagerBanken Aktieselskab, a Foreign Institutional Investor (FII) registered with Securities and Exchange Board of India (SEBI). Accordingly, and with respect to Regulation 13(3) of the Securities and Exchange Board of India (Foreign Institutional Investor) Regulations, 1995, the Fund is a FII for the purpose of section 115AD of the Act. The Fund is tax resident of Denmark. 2. Submissions In the subject year, the Fund had claimed that capital gains are not taxable in view of Article 14(5) of the agreement for Double Taxation Avoidance Agreement between India and Denmark (`the Treaty ) read with section 90(2) of the Act. In this connection we draw your attention to Article 1 of the Treaty which reads as under: Article 1 : Personal scope The Convention shall apply to persons who are residents of one or both of the Contracting Stages. Article 1 extracted above says that the Treaty shall apply to persons who are residents of one or both of the Contracting States. Clause (c) of Para 1 of Article 3, the term Contracting State and other Contracting State means India or Denmark, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly filed the Tax Residency Certificate issued by the Danish Tax Authority. All such information for claiming benefit under the DTAA was furnished alongwith the return of income itself. Once such an information was there in the return of income, then the Assessing Officer was not justified in reopening the case, merely on some kind of possibility that the assessee may not be a taxable unit under the tax law of Denmark. Before the A.O., vide letter dated 25.11.2011, the assessee had again furnished the Tax Residency Certificate and also made its submission that how it is eligible for benefit under Article 14 of the DTAA. From the perusal of the reasons recorded , he submitted that it can be seen that the A.O. has sought to reopen the case merely on presumption and on hypothetical ground, which is completely divergent from the facts and material on record. While recording the reasons, the Assessing Officer himself was not sure whether under the tax laws in force in Denmark, the assessee was taxable unit or not, and secondly, the reasons recorded by him do not fall within the realm of `reason to believe as contemplated in section 147 but is based on conjectures. Thus, the entire reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the words satisfied as held by the Hon ble Supreme Court in the case of Ganga Saran and Sons Pvt. Ltd. v. ITO [(1981) 130 ITR 1 (SC)]. The belief entertained by the Assessing Officer must not be irrational or hypothetical but must be held in good faith and not merely as a pretence. The formation of belief must have rational connection with or relevant bearing from the material on record having live link nexus with income escaping assessment. The reasons recorded by the A.O. clearly shows that the reopening has been done merely on some kind of a possibility for which he himself is not sure. There is even no reference to any material that assessee s claim for benefit under Article 14 of DTAA is false or incorrect. He is even not sure whether assessee is a tax resident when TRC was there in the return of income. It appears that the reopening is merely pretence to examine, whether the assessee is a taxable unit or not and whether there could be possibility of loss of revenue. Once the Tax Residency Certificate was there in the record, then there could not have been any ground for presumption that the assessee is not a taxable entity in Denmark. He has not referred to any other info ..... X X X X Extracts X X X X X X X X Extracts X X X X
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