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2015 (5) TMI 278 - GUJARAT HIGH COURT

2015 (5) TMI 278 - GUJARAT HIGH COURT - [2015] 377 ITR 354 (Guj) - Reopening of assessment - non deduction of tds under section 195, thus disallowance u/s 40(a)(i) - Held that:- Specific questions were asked by the Assessing Officer regarding the expenditure in foreign currency, which shall be inclusive of the amount paid to the aforesaid 5 companies and Bhupendra Singh and even the reasons for non-deduction of tax with supporting evidence and the petitioner assessee furnished necessary document .....

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nd of Assessing Officer while accepting such a claim, could not be a ground for issuing notice under section 148 for reassessment.

Considering the aforesaid facts and circumstances of the case, we are of the opinion that the initiation of the reassessment proceedings is nothing but a mere change of opinion by the Assessing Officer and as per the catena of decision of this Hon'ble Court the impugned notice under section 148 of the Act to reopen the assessment even within a period of fo .....

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ection 148 of the Income Tax Act (for short the Act ) dated 27.3.2014 issued by the respondent herein, by which the assessment for AY 2009-2010 is sought to be reopened in exercise of powers under section 147 of the Act. 2. That by impugned notice at Annexure A to the petition, the assessment for AY 2009-2010 is sought to be reopened on the reasons to believe that the income chargeable to tax for AY 2009-2010 has escaped assessment within the meaning of section 147 of the Act. On the reasons rec .....

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226 of the Constitution of India for the aforesaid relief. 3. Shri BS Soparkar, learned advocate appearing on behalf of the petitioner has vehemently submitted that the impugned notice of reopening the assessment for AY 2009-2010 issued under section 148 of the Act is absolutely illegal, wholly without jurisdiction and invalid. 3.1 It is further submitted that as such, the reasons recorded for reopening the assessment is nothing but a change of opinion by the Assessing Officer, which is not perm .....

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tted that only thereafter, the Assessing Officer framed the assessment. It is submitted that the issue with respect to non-deduction of tax on the amount paid to the foreigners was already deliberated by the Assessing Officer during the original assessment proceedings and specific queries were raised to which the petitioner furnished the relevant documents/evidences including the certificate of the concerned chartered accountant. 3.3 It is further submitted that even the amendment to section 195 .....

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e petitioner has heavily relied upon the decision of the Division Bench of this Court in the case of Cliantha Research Ltd. Vs. Deputy Commissioner of Income Tax, Ahmedabad Circle - I reported in [2013] 35 taxmann.com 61 (Gujarat) as well as the decision of the Division Bench of this Court in case of Classic Network Ltd. Vs. Deputy Commissioner of Income Tax, Circle -1 reported in [2014] 45 taxmann.com 234 (Gujarat) in support of his above submissions and in support of his prayer to allow the pr .....

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iture that the assessee had paid a total sum of ₹ 396.93 lac to 5 companies as fees for technical service. However, it did not deduct TDS under section 195 on the plea that the said companies were registered outside India and did not have permanent establishment in India and services rendered and utilized were outside India. It is submitted that the Assessing Officer also similarly noticed that payment of ₹ 25.29 lac to one Bhupendra Singh was not subjected to TDS on the plea that he .....

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usiness connection in India; or (2) the non resident has rendered services in India. It is submitted that therefore, the Assessing Officer found that the amount paid to the aforesaid 5 companies as well as Bhupendra Singh had accrued in India and therefore, on the aforesaid amount, TDS under section 195 of the Act was liable to be deducted, which the assessee did not deduct and therefore, considering the provisions of section 40(a)(i) of the Act, said amount of expenditure was liable to be disal .....

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assessee to deduct tax at source. It is submitted that even the Assessing Officer also did not address itself and/or did not raise any question whether the payment made to the aforesaid 5 companies and Bhupendra Singh for the services provided by them was technical service or not. It is submitted that therefore, when they have reasoned to believe that the amount of income has escaped assessment and they have formed an opinion and by recording reasons when the reassessment proceedings have been i .....

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t is requested to dismiss the present Special Civil Application with costs. 5 Heard learned advocates appearing on behalf of the respective parties at length. 5.1 At the outset, it is required to be noted that the reassessment proceedings have been initiated by the Assessing Officer and the assessment for AY 2009-2010 is sought to be reopened in exercise of powers under section 47 of the Act within a period of four years from the date of relevant assessment year for the reasons recorded as under .....

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lty equal to amount of tax is also leviable u/s 271C. Further, as per amended provision of section 9 vide Finance Act, 2010, w.r.e.f. 1-6- 1976 explanation was amended read as For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and, shall be included in the total income of the nonresident. whether or not, - (i) The non residen .....

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8377; 4,91,50.842. The same was assessed u/s 143(3) and income was assessed at ₹ 5,55,76,400 vide order dated 07.12.2011. It was noticed from P/L, 3CD and details regarding project work expenditure that assessee had paid a total sum of ₹ 396.93 Iakh to 5 companies as fees for technical services. It did not deduct TDS u/s 195 on the plea that these companies were registered outside India and did not have permanent establishment in India and services rendered and utilized were outside .....

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377; 191.01 Iakh. 3. In view of the above {acted have reason to believe that the income chargeable to tax has escaped assessment. 5.2 Thus, from the aforesaid, it appears that the Assessing Officer has reopened the assessment for AY 2009-2010 on the ground that in view of the amended provisions w.e.f. 1976, the income was required to be treated as income accrued in India i.e. with respect to amount paid to 5 companies and one Bhupendra Singh and therefore, TDS was required to be deducted under s .....

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sequent short levy of tax of ₹ 191.01 lac. It is required to be noted that when the petitioner - assessee filed return of income for AY 2009-10, it declared income of ₹ 4,91,50,842/-. The petitioner assessee in the return of income specifically claimed deduction with respect to the payment made to the aforesaid 5 foreign companies as well as Bhupendra Singh including other expenses also. The case was selected for scrutiny and the notice under Sections 142(1) and 143(2) were issued an .....

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ificate of the concerned chartered accountant. 5.3 That during the course of assessment proceedings, the Assessing Officer asked the following question/particulars from the assessee. 2. Expenditure in foreign currency (Point No.8 of Schedule - 21) It is observed from audited balance sheet that during the year under consideration, the assessee Company has incurred the following foreign expenditure- IMAGE NO. 2 In this regard, the assessee company is required to submit the following details:- i. N .....

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ccountant certificate for no deduction of tax with reasons and the bank details of foreign remittance. That thereafter, the Assessing Officer finalized the assessment and allowed the expenses as claimed including the amount paid to the aforesaid 5 companies as well as Bhupendra Singh and did not make any addition by disallowing the expenses under section 40(a)(i) of the Act on the ground that with respect to the amount paid to the aforesaid 5 companies as well as Bhupendra Singh, the income had .....

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w.e.f. 1.6.1976 (explanation to section 195(1) of the Act), the income of a non-resident shall be deemed to have accrued or arise in India under clause (v), clause (vi) and clause (vii) of sub section (1) of section 195 and shall be included in the total income of non resident whether or not; (1) the non resident has a residence or place of business connection in India; or (2) the non resident has rendered services in India and therefore, the amount paid to the aforesaid 5 companies and one Bhu .....

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ng Officer finalized the assessment and did not make any addition by disallowing the expenses under section 40(a)(i) of the Act on the ground that there was a failure on the part of the assessee not to deduct the TDS on the amount paid to the aforesaid 5 companies and Bhupendra Singh, it can safely be said that it is nothing, but a change of opinion by the Assessing Officer. It is required to be noted that when the Assessing Officer passed original assessment order, by the time, section 9 alread .....

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consequently relied upon by the Assessing Officer while reopening the assessment was very much there and therefore, the Division Bench observed and held that such provision being always there on record and the Assessing Officer having already scrutinized the entire issue threadbare, even though notice is issued within four years from the end of the relevant assessment years, issuance of such notice has to be held as nothing but a change of opinion on the part of the Assessing Officer. 5.6 Now, s .....

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e, it cannot be said to be a change of opinion is concerned, the aforesaid cannot be accepted. As observed herein above, specific questions were asked by the Assessing Officer regarding the expenditure in foreign currency, which shall be inclusive of the amount paid to the aforesaid 5 companies and Bhupendra Singh and even the reasons for non-deduction of tax with supporting evidence and the petitioner assessee furnished necessary documents with supporting reasons why the tax at source has not b .....

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