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2015 (7) TMI 840 - ITAT HYDERABAD

2015 (7) TMI 840 - ITAT HYDERABAD - TMI - Validity of re-assessment proceeding - assessee urged that reassessment proceedings were initiated after the expiry of the 4-years from the end of the relevant assessment year without the sanction of the concerned Principal C.I.T. or C.I.T., as the case may be - Held that:- Assessing Officer is not bound to blindly follow the order of Hon’ble Tribunal without applying his mind independently to the facts of the case, as to whether the ingredients that are .....

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Officer had applied his mind independently and arrived at a belief that on the basis of material, which he had before him, income had escaped assessment. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the finding given by the Hon’ble Tribunal. What is recorded by the Assessing Officer as his “reasons to believe” is nothing but reproduction of a portion of order of Hon’ble Tribunal.

The provisions of sub-section (3) of Section 149 m .....

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fore 31.3.2008. Whereas, in the case on hand the reassessment notice was issued on 30.03.2013, which is clearly beyond the period of limitation prescribed under sub-section (3) of Section 149 of the Act. The amended period of six years is applicable only from the assessment year 2012-13 onwards as per the Explanation to the above sub-section. Thus, viewed from any angle, the reassessment proceedings launched by the Assessing Officer cannot be upheld - Decided in favour of assessee. - I.T.A. No. .....

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s of the case. (2) The learned Assessing Officer erred in holding that the assessee Madhucon Sino Hydro JV, as the Agent of Sino Hydro Corporation and in holding that the assessee is liable for payment of tax when the appellant deducted tax at source at the prevailing rates as required u/s. 195 of the I.T. Act. The learned DRP erred in confirming the same while passing the order. (3) The learned DRP erred in holding that the notice u/s. 147 is valid and further erred in holding that the assessme .....

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DTAA. Both the Assessing Officer and DRP ought to have seen that the correct amount of tax was deducted at source in view of Article 12 of the DTAA between India and China and, therefore, no further assessment is required to be made on the appellant treating it as an Agent. (6) Without prejudice to the contention of the appellant that no part of the amount paid by the Joint Venture is assessable as the business income, the Assessing Officer and the DRP are not justified in holding that 70% of t .....

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and 234C of the I.T. Act. The Assessing Officer and DRP ought to have considered the fact that the assessee is an NRI and the amount is to be subjected to tax u/s. 195 of the I.T. Act and, therefore, the provisions u/s. 234B and 234C have no application. (9) Any other ground or grounds that may be urged at the time of hearing. 2. M/s. Madhucon Sino Hydro JV (the Appellant) had been declared as an agent of non-resident M/s. Sino Hydro Corporation, China, vide Order dated 30-03-2013 by the Assista .....

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s. 148 of the Act. 3. The order was appealed before the Hon ble DRP, Hyderabad, who, vide order dated 24.12.2014, who had dismissed the Grounds of Appeal. Hence, the present appeal. 4. The Appellant had raised the preliminary ground challenging the very validity of re-assessment proceedings. Since this ground goes to the very root of the matter, we shall now first deal with this ground of appeal. 5. The Learned Counsel for Appellant had urged that the reassessment proceedings initiated were bad .....

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on for issue of notice u/s 148 of the Act with the stamp of YES on 30.03.2013. He submitted that there was no approval given by the concerned C.I.T., in the case. Therefore, he submitted that the reassessment proceedings were null and void ab initio. 6. On the other hand, the learned CIT DR placed reliance on the orders of the lower authorities. 7. We heard the rival parties and perused the material on record. A mere perusal of the reasons recorded by the Assessing Officer reveals that the basis .....

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ction for bringing the amount to tax in accordance with provisions of the I.T. Act, 1961. 8. The ITO, Ward-6(3), Hyderabad had passed on this information to the Assessing Officer of M/s. Sino Hydro Corporation. He informed that M/s. Sino Hydro Corporation does not have PAN and is not assessed to tax in India. 9. Therefore, based on this information, the Assessing Officer had come to the conclusion that payments made by the Appellant to M/s. Sino Hydro Corporation, China are assessable in the han .....

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er expiry of period of four years from the end of the relevant assessment year. The above observation made by the Hon ble Tribunal can at best be said to be a suggestion made to the Assessing Officer to consider as to whether the addition of said sum can be made or not. Therefore, the contention of the Assessing Officer that the Hon ble Tribunal had directed the reassessment proceedings cannot be accepted. In this context It is very apt to extract the observation of Hon ble Supreme Court in the .....

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we are of the opinion that the direction of the Tribunal cannot be construed as a direction to the Assessing Officer to reopen the assessment proceedings. In fact, from the perusal of the Order of the Hon ble Tribunal, it is clear that there is no positive direction to this effect. Therefore, the order of the Hon ble Tribunal cannot form a basis for initiation of reassessment proceedings. Even assuming that there is such a finding or direction as assumed by the Assessing Officer, such a finding .....

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on to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A s income. A finding respecting .....

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for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expression finding and direction in section 153(3)(ii) must be accordingly confined. Section 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. The Supreme Court remanded the case to the High Court for deciding the question whether section 147(a) was applicable to the case. 10. Therefore, .....

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te law that the reassessment proceedings are valid in law only when the Assessing Officer applied his mind independently to the information on hand. In the present case, it is not at all discernible as to whether the Assessing Officer had applied his mind independently and arrived at a belief that on the basis of material, which he had before him, income had escaped assessment. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the finding given by .....

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urt in Chhugamal Rajpal [1971] 79 ITR 603 , which is clearly applicable to the facts of this case. Therefore, the reassessment proceedings cannot be upheld as the condition precedent for exercise of jurisdiction u/s. 147 of the Act is not fulfilled. 12. We further notice that this order of assessment also suffers from the vice of illegality for want of sanction from the competent authority. Admittedly, in this case, the reassessment notice was issued after the expiry of 4-years from the end of t .....

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rements of Section 151 of the Act were not complied with by the Assessing Officer. There is long line of authorities in support of the proposition that non-compliance of the provisions with Sec. 151 of the Act would vitiate the notice issued u/s. 148, as well as the resultant reassessment proceedings, relying on the decision of Hon ble Supreme Court in CIT vs. Maharaja Pratap Singh (1961) 41 ITR 421. Accordingly, the present reassessment proceedings are also not valid in law, in as much as, the .....

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ion 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of *[six] years from the end of the relevant assessment year. [Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-section (1) and (3), as amended by the Finance Act .....

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