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2015 (4) TMI 845 - ALLAHABAD HIGH COURT

2015 (4) TMI 845 - ALLAHABAD HIGH COURT - [2015] 376 ITR 281 (All) - Reopening of assessment - non stating any failure on the part of the assessee to disclose complete and full facts/concealment of facts is bad as submitted by assessee - Held that:- It is in respect of items mentioned at serial no. 2 i.e. payments made to L.G. Electronics, Korea, there is no disclosure with regards to non-resident company having P.E. In India as has been found after survey and as affirmed up to the High Court. W .....

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s the assessee had failed to disclosed fully and truly the complete facts in respect of L.G. Electronics, Korea having a P.E. In India to which payments have been made. Thus there is a nexus between the reasons recorded and the belief that income had escaped assessment because of fully and truly information having not been furnished by the assessee. The Assessing Officer has given valid reasons to believe that income had escaped assessment. No illegality in the notice issued under Section 148 - .....

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DA for the Assessment Year 2006-07 under Section 148 of the Income Tax Act, 1961 (herein after referred to as the 'Act, 1961') wherein it has been stated that the officer has reasons to believe that the income chargeable to tax at the hands of the assessee for the year 2006-07 has escaped assessment within the meaning of Section 147 of the Act, 1961 in respect of which the assessee was assessable. The assessee was called upon to submit the return of the income within 30 days for which he .....

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Enterprises, on which no TDS has been deducted. The same expenses are dis-allowable u/s 40 (a) (i) of the Income Tax Act. The details of the remittances made by the Company are as follows : Sl. No. Description of transaction F.Y. 2005-06 1. Import of raw material and consumables, service spares and spare parts 3,134,465,989/- 2. Import of finished goods 2,003,499,385/- 3. Import of capital goods 29,153,894/- 4. Export Commission paid 99,157,209/- 5. Reimbursement of Expenses 119,094/- TOTAL 5,2 .....

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letter dated 28.03.2013." The notice has been challenged on the ground that the assumption of jurisdiction by the respondent authorities was bad as the basic requirements of Section 147 of the Act, 1961 were not satisfied. It has been stated that initiation of re-assessment proceedings beyond a period of four years as provided for under proviso to Section 147 of the Act, 1961 without stating that any income has escaped assessment on account of any failure on the part of the assessee to dis .....

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2, CIT vs. SIL Investments reported in 339 ITR, 166, Haryana Acrylic vs. CIT reported in 308 ITR 38 and DTDC vs. ACIT reported in 324 ITR 234. Counsel for the petitioner also contended that at the time of assessment the petitioner assessee had furnished all the particulars in the balance-sheet along with the original return. Assessment was made considering these details. Mere change of opinion cannot be the basis for re-opening of a complete assessment and does not confer jurisdiction for procee .....

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Additional queries were also made by the Assessing Officer and it is only thereafter that the assessment proceedings were completed. Lastly it is submitted that the objections filed by the petitioner in the matter of existence of reasons to believe under Section 148 of the Act, 1961 have been disposed of by a non-speaking order dated 28.02.2014. Counsel for the assessee has referred the following judgements : 1. Lamna Lal Kabra v. Income Tax Officer (69 ITR 461). 2. CIT v. Pardeshiya Industrial .....

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T (239 ITR 587). 8. DIT v. Morgan Stanley (292 ITR 416). 9. Indraprastha Chemicals Pvt. Ltd. And Others v. CIT and Another (271 ITR 113). 10. Gwalior Rayon Silk Co. Ltd. v. CIT (140 ITR 832). 11. Commissioner of Income Tax v. Suren International P. Ltd. (357 ITR 24). 12. Commissioner of Income Tax v. S. Khander Khan Son (300 ITR 157). 13. Remfry and Sagar v. CIT (351 ITR 75). 14. Qualcomm Incorporated v. Assistant Director of Income Tax (W.P. (C) 224/2007). 15. Crompton Greaves Ltd. v. Assistant .....

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zadi Bachao Andolan reported in 263 ITR, 707 (S.C.) submits that the DTAA prevails and supersedes the provisions of Section 40(a) (i) of the Act, 1961. He submits that since the impugned notice is founded entirely on the provisions of Section 40(a) (i), the re-assessment proceedings are untenable and misconceived. Counsel for the department however disputes the correctness of the pleas raised by the petitioner assessee. It is pointed out that on 10.06.2010 a survey operation was carried out at t .....

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rgeable to tax in India in respect of payment received from the petitioner Indian Company. As a necessary corollary the petitioner-assessee had committed default of non-deductions of tax at the time of making payments to the said Korean Company which had a P.E. in India in contravention of provisions contained in Section 195 of the Act, 1961. Because of the said facts, three consequences follow :- (a) Initiation of proceedings against the Korean Co. & its related entities to bring to tax the .....

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ng writ petition no. 148 of 2015. All such petitions have been dismissed vide judgement and order dated 13.02.2015. The High Court while dismissing another bunch of writ petitions leading being Civil Misc. Writ Petition (Tax) No. 1366 of 2015, filed by the non-resident Company, by means of an order dated 05.11.2014 recorded that the said non-resident entities were carrying on business in India through a Permanent Establishment. Once P.E. was found to be in existence, attribution of profits liabl .....

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tion of tax has two consequences : (a) Recovery of tax not deducted. (b) Dis-allowance of corresponding expenditure under Section 40 (a) (i) of the Act. Counsel for the department submits that from the judgements cited by the petitioner-assessee, it is apparently clear that the question of failure to disclose "fully" & "truly", all material facts in the matter of reopening of the assessment after four years is essentially a question of fact which has to be adjudicated in .....

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audit report was not full and true as from the evidence collected through survey operation it had been clearly brought out that the payee Company had a taxable presence in India and its income was chargeable to tax. Counsel for the department clarifies that sufficient reasons have been recorded for arriving at a satisfaction that the Korean Company to whom the payments have been made had a permanent establishment in India and chargeable to tax which information has not been disclosed nor forms p .....

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he judgement of the Apex Court relied upon by the assessee is clearly distinguishable in the facts of the case. We have heard learned counsel for the parties and have examined the records. The Apex Court in the case of Indi-Aden Salt Mfg. & Trading Co. (P) Ltd. v. Commissioner of Income Tax reported in [1986] 25 TAXMAN 356 (SC) in paragraph nos. 7 and 8 has held as follows : "7. The assessee's contentions is that the ITO could have found out the position by further probing. That, ho .....

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isclosure, if some material for the assessment lay embedded in the evidence which the revenue could have uncovered but did not, then, it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts, the assessing authority might not. In respect of the material failure, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the .....

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) Ltd. v. CIT [1970] 78 ITR, 466. 8. Furthermore, bearing these principles in mind in this particular case whether there has been such non-disclosure of primary facts which has caused escapement of income in the assessment was basically a question of fact." At the very outset we may record that the legal principle which flows from the various judgements cited by the counsel for the parties in the matter of reopening of the assessment beyond a period of four years is that there should be two .....

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sessment that year. Facts material necessary for re-assessment will differ from case to case. Judged in the aforesaid legal background, we find that in Annexure-H of the report of the Chartered Accountant of the petitioner's Company under Section 80 (JJ) (AA) of the Act, 1961 Form 10- (D) (A) enclosed at page 100 onwards to the present petition, details of the amount inadmissible under Section 40 (a) (ia) on which TDS has not been deducted has been given. The same is being reproduced herein .....

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6,493 Vehicle Running Expenses 37,084 Repairs 247,935 Miscellaneous 296,045 TOTAL : 68,994,836 Similarly,in Annexure-I to the same report of the Chartered Accountant the assessee has given the particulars of payment made to persons under Section 40-A (2) (b) of the Act, 1961 during the year ended 31.03.2006. It reads as follows : L.G. Electronics India Private Limited ANNEXURE-I FINANCIAL YEAR 2005-06 STATEMENT SHOWING PARTICULARS OF PAYMENTS MADE TO PERSONS SPECIFIED UNDER SECTION 40 A(2) (b) O .....

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7; 1,207,325 It is in respect of items mentioned at serial no. 2 i.e. payments made to L.G. Electronics, Korea, there is no disclosure with regards to non-resident company having P.E. In India as has been found after survey and as affirmed up to the High Court. We are satisfied that because of non-disclosure of the fact qua the L.G. Electronics, Korea having a P.E. In India, there has not been fully and truly complete disclosure of the material facts which could have led the Assessing Officer to .....

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ns recorded and the belief that income had escaped assessment because of fully and truly information having not been furnished by the assessee. The Assessing Officer has given valid reasons to believe that income had escaped assessment. We may refer to the judgement of the Apex Court in the case of DIT (International Taxation) Vs. Morgan Stanley and Co. Inc., reported in 292 ITR, 416. Relevant paragraph reads as follows : "The object behind enactment of transfer pricing regulations is to pr .....

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