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2015 (9) TMI 273 - ITAT JAIPUR

2015 (9) TMI 273 - ITAT JAIPUR - TMI - Notice issued under section 143(2) by the ACIT Circle-2 Udaipur challenged - Held that:- The assessee as per section 124(3) had not challenged the jurisdiction before the AO within one month from the date on which he was served notice under section 143(2) of the IT Act as he challenged the jurisdiction of the ADIT (Intl. Taxation), Jaipur on 12.10.2010 whereas first notice under section 143(2) was issued on 22nd September, 2009. Further, even the objection .....

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esident was decided by the Addl. Director of Income-tax (International Taxation), Jaipur as per direction of the CBDT issued for non-resident assessee. Therefore, there is no need to pass order under section 127 of the IT Act as Additional DIT (International Taxation) Jaipur had passed the order in pursuance of direction of CBDT. The case laws referred by the assessee are not squarely applicable to the facts of this case. The ld. A/R had not controverted the findings given by ld. CIT (A). Theref .....

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balance sheet prepared in India. Therefore, it is clear from section that in case of assessee non-resident and income accrues or arises outside India shall not be included in the income of the assessee. The shares were held by the assessee. The employer company issued these shares on the basis of Scheme and performance of the assessee. There was a restriction on this Award which proved that these shares were allotted to the assessee but on request same were issued in the name of his wife Smt. Su .....

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by the assessee are squarely applicable as real owner of the shares was assessee, not his wife. Therefore, same should be taxed in the hands of non-resident assessee but as per section 5(2), this income accrued or arise outside India. Thus there is no tax in the case of the assessee. We are of the considered view that the ld. CIT (A) was not right in upholding the share transaction as taxable in the hands of the assessee. Accordingly we reverse the order of ld. CIT (A). - Decided in favour of a .....

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-2, Udaipur and not quashing the whole asstt. proceedings on the basis of following facts :- That the notice issued u/s 143(2) of the I. Tax Act, 1961 dtd. 22.9.2009 (served on 30-9-2009) by the Asstt. Commissioner of I. Tax, Circle-2, Udaipur (Raj.) picking up the case in scrutiny is invalid, bad in law and without jurisdiction. As per the notification issued vide F. No. Addl DIT (Intl. tax)Jpr/Juris/2008-09/93 dtd. 1st Sept. 2008 in exercise of powers conferred by the Central Board of Direct T .....

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oceeds of shares of Vedanta Resources Plc. At U. K.) as belonging to his wife and further erred in taxing the same in India treating it as received in India whereas in fact the income was earned and received in U. K. which was only remitted to India. Further the ld. CIT (A)-II, Jaipur also erred in law and facts while upholding the above addition. 3. That the ld. Asstt. Director of I. Tax (Intl. Taxation), Jaipur erred in law and facts while taxing the foreign income in case of non-resident asse .....

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above addition. 4. That without prejudice to above, addition of ₹ 41,98,615/- by the ld. Asstt. Director of I. Tax (Intl. Taxation), Jaipur is too excessive, without any basis & justification and further upholding the additions by the ld. CIT (A)-II, Jaipur is also without any basis and justification. 2. Ground no. 1 is against challenging the notice issued under section 143(2) dated 22.09.2009 served on 30.09.2009 by the ACIT Circle-2 Udaipur. The assesee is a nonresident. He filed hi .....

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, Circle-2, Udaipur by Transfer Memo Dy. No. 719 dated 13.09.2010. A fresh notice under section 143(2) along with notice under section 142(1) was issued on 16.09.2010 which was returned unserved with the remarks assessee has left the premises . Fresh Notice dated 06.10.2010 for compliance on 19.10.2010 was issued after telephonic conversation with the ld. Counsel of the assessee at his address. This time the assessee challenged the jurisdiction vide letter dated 12.10.2010. The Asstt. Director o .....

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ee challenged the jurisdiction of the AO before ld. CIT (A) who dismissed the assessee s appeal by observing as under :- 3.1. I have duly considered the submissions of the appellant. As per the Notification issued vide F. No. Addl. DIT (Intl. Tax) Jpr/Juris/2008-09/93 dated 01.09.2008 in exercise of powers conferred by the Central Board of Direct Taxes u/s (1) & (2) of section 120 of the Income Tax Act, 1961, the jurisdiction of the case (i.e. non resident) lies with the Assistant Director o .....

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nt cases lay with the ADIT (Intl. Tax.), Jaipur, there was no need to pass order u/s 127 of the I T Act. On the contrary, it is obvious that the appellant had filed his return of income with ACIT, Circle-2, Udaipur deliberately to escape the scrutiny. The ACIT after becoming aware of the status of the appellant immediately transferred the case to ADIT (Intl. Tax.), Jaipur. Thus no fault could be found with the approach of the AO. When the appellant has himself filed his return with a particular .....

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to conclusion that his status was non-resident and immediately his case was transferred to ADIT (Intl. Tax.), Jaipur. Therefore, no failure of justice is occasioned or prejudice is caused to the assessee. The mistake in filing return with the AO at Udaipur has to be solely attributed to the assessee. In view of section 124(5), the assessee was not entitled to call in question the Jurisdiction of the ACIT, Circle-2, Udaipur, as he ought to have raised the objection under clause (a) of sub-sectio .....

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taken wherein it has been argued that the ACIT, Circl3e-2, Udaipur could not have issued notice u/s 143(2) as he did not have the jurisdiction over the case of the assessee. The appellant is therefore guilty of shift in stand as per his convenience. The Supreme Court in the case of Central Potterries (AIR 1966 SC 932), while dealing with a case under the provisions of the C. P. and Bazar Sales Tax Act, 1947, held that when the taxing authorities derive their Jurisdiction to make assessment under .....

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over the case of assessee then issue of notice u/s 143(2) by ACIT, Circle-2, Udaipur was invalid as it was without jurisdiction. Hence no valid notice within the period prescribed u/s 143(2) has been issued and, therefore, assessment was invalid and bad-in-law. 3.2. The alternate contention was that if transfer of case to ADIT (Intl. Taxation) is valid then such transfer of jurisdiction could have been only u/s 127 of Income Tax Act. Such transfer of jurisdiction is bad-in-law as no opportunity .....

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ssessee and therefore return of income was filed with ACIT, Circle-2, Udaipur. It is not the case of revenue that assessee was are of the notification for change in the jurisdiction for non-resident assessee to ADIT (International Taxation), Jaipur. The assessee in the computation of income had mentioned that status of assessee was of non-resident and this fact is not disputed. Once the revenue has accepted that the return filed by the assessee is valid then notice u/s 143(2) should have been is .....

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d Gupta 135 TTJ 9 (Jodhpur)(UO) CIT vs. Smt. Anjali Dua (2008) 219 CTR 183 (Delhi) Dr (Mrs) K. B. Kumar vs. ITO (2010) 131 TTJ 511 (Delhi) ITO vs. Naseman Farms (P) Ltd. (2010) 134 TTJ 472 (Delhi) Ranjeet Singh vs. ACIT (2009) 120 TTJ 517 (Delhi) The ld. A/R has also drawn our attention on section 292BB and argued that the same is not applicable on the assessee as three situations prescribed in this section has not been matched. The assessee has objected the jurisdiction of the AO. He further re .....

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ssued notice under section 143(2) of the IT Act as he was not having any jurisdiction on non-resident assessee vide instructions issued by the CCIT. The case laws quoted by the ld. CIT (A) i.e. Central Potteries Ltd. vs. State of Maharashtra & Others (1966) AIR 932) is distinguishable because it was delivered in different context. The Hon ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (1992) 198 ITR 297 (SC) also relied upon by the ld. A/R, has cautioned on how to apply the .....

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led return for A.Y. 2008-09 on 09.01.2009 with ACIT Circle-2, Udaipur. The case was processed under section 143(1) on 25.06.2009. The case was selected for scrutiny by issuing notice under section 143(2) on 22.09.2009. As per notification issued vide F. No. Addl. DIT (Intl. Tax/JPR/Juris/2008-09/93 dated 1st September, 2008, the jurisdiction over the case of non-resident assessee vests with the Asstt. Director of Income Tax (International Taxation), Jaipur, under section 120 of the IT Act as per .....

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Thereafter a fresh notice under section 143(2) along with notice under section 142(1) was issued on 16.09.2010 which was returned unserved with the remarks that the assessee had left the premises. Fresh Notice dated 06.10.2010 for compliance on 19.10.2010 was issued after telephonic conversation with the ld. Counsel by the Assistant Director (International Taxation), Jaipur at the counsel s address. The assessee first challenged the jurisdiction vide letter dated 12.10.2010 which was explained .....

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the knowledge of the AO. When he came to know that jurisdiction of non-resident assessee is with ADIT (International Taxation), Jaipur, he immediately transferred the file to ADIT (International Taxation) Jaipur. The assessee as per section 124(3) had not challenged the jurisdiction before the AO within one month from the date on which he was served notice under section 143(2) of the IT Act as he challenged the jurisdiction of the ADIT (Intl. Taxation), Jaipur on 12.10.2010 whereas first notice .....

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processing made by the ACIT, Circle-2, Udaipur on 25.06.2009. The jurisdiction of nonresident was decided by the Addl. Director of Income-tax (International Taxation), Jaipur as per direction of the CBDT issued for non-resident assessee. Therefore, there is no need to pass order under section 127 of the IT Act as Additional DIT (International Taxation) Jaipur had passed the order in pursuance of direction of CBDT. The case laws referred by the assessee are not squarely applicable to the facts of .....

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assessee had claimed exemption in respect of capital gain income arising out of sale proceeds of ₹ 41,98,615/- on account of sale of shares of Vedanta Resources Plc in lieu of his nonresident status. The AO further observed that through a letter dated 16.04.2004 of Vedanta Resources Plc the assessee was allotted 3500 shares of Vedanta Resources Plc under the Long Term Incentive Plan. However, from the copy of share certificate issued on 27.03.2007 by the company, it was observed that the .....

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lc amounting to ₹ 41,98,615/- are in the name of Mrs. Sunita Pathak as per the Share Certificate dated 27.03.2007. The sale instruction form dated 21.05.2007 is also in the name of Mrs. Sunita Pathak. Under these circumstances how the resultant capital gain has been claimed exempt in the name of the assessee. 2. Elaborate the circumstances and manner in which the shares offered by M/s. Vedanta Resources Plc vide letter dated 16.06.2004 were transferred in the name of Mrs. Sunita Pathak and .....

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levant assessment years in support of your claim. The assessee submitted reply vide letter dated 13th November, 2010 and submitted as under :- The Assessee has been on employee of Vedanta Resources Plc. And as a result of employment based on his performance the company granted him share options in the company with a lock in period. His wife Mrs. Sunita Pathak has never been employed by any company and therefore question of performance bonus does not arise. The original shares had been issued in .....

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me to her name, no gift deed was signed. At all the times the assessee was the legal owner of the share options. Sir, Your attention is invited to section 64 of the I. Tax Act, 1961 which reads as under :- Income of Individual to include income of spouse minor child etc. 64 In computing the total income of any individual there shall be included all such income as arises directly or indirectly (iv) subject to the provisions of clause (i) of section 27 to the spouse of such individual from assets .....

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s of transactions as to how the shares allotted to the assessee were registered in the name of his wife. Earlier the assessee took the plea that the wife was made nominee of the shares but failed to answer the query how the nominee could be the registered owner of the shares and be able to sign the sale instruction form. The assessee had himself admitted that he had no evidence to show how the shares got transferred from his name to his wife s name. No Gift Deed was signed. The assessee had also .....

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per the provisions of sec. 64, income of another person is to be included in the total income of the individual. However, such an income will first be computed in the hands of recipient as if it was his income and such recipient will compute this income under the relevant head after claiming exemption/allowances/deductions permissible under the relevant head in which it falls. Such income computed, under the relevant head, will be included in the total income of the individual under the same he .....

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re registered in her name which originally belonged to the assessee. The mode and manner in which the shares were got registered in the name of the wife on 27.03.2007 and sold on 21.05.2007 had not been disclosed by the assessee. The cost of shares to the wife is also not disclosed. Under these circumstances, the AO had choose to compute the entire proceeds in the hands of the wife as short term capital gain which by virtue of section 64 of the Act is being clubbed in the taxable income of the a .....

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he year under reference and entire sale proceeds were remitted in ICICI bank account of Smt. Sunita Pathak held jointly with her husband on 20.6.2007. On the other hand, it was the contention of the appellant that he was allotted these shares (technically on option ) of Vedanta Resources Plc on 16.04.2004. It was a London based company and was listed in the London Stock Exchange and it was the holding company of assessee employer company M/s. Sterlite Industries India Ltd. It was argued that the .....

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ies in London and the entire sale proceeds of ₹ 41,98,615/- were remitted in his ICICI Bank account (held jointly with his wife Smt. Sunita Pathak) in India on 20.06.2007 by HSBC Securities, London under the instructions of the assessee. On careful consideration of facts in entirety, I am unable to accept the arguments of the appellant. The share certificate dated 27.03.2007 shows that 3500 shares of Vedanta Resources Plc were standing in the name of Smt. Sunita Pathak and she was the regi .....

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o explain as to how the alleged nominee being his wife i.e. Smt. Sunita Pathak had sold the shares, in what capacity she had instructed the broker to sell the shares and why the sale proceeds were credited in her bank account with ICICI Bank in Indian Rupee. When a person authorizes his wife to be a nominee then in such an eventuality he continues to be the registered owner of the movable property. However in the present case, the shares were registered in the name of Smt. Sunita Pathak and she .....

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n of the AO to club the capital gain in the hands of the appellant is proper since as per the provisions of section 5 of I T Act, the total income of a non resident shall include all the income from whatsoever source derived which is received or deemed to be received in India in such year. It was held by Hon ble Supreme Court in the case of CIT vs. Calcutta Agency Ltd. (19 ITR 191) that the burden of proving the necessary facts in order to entitle the assessee to claim an exemption is upon the a .....

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.05.2007, the resultant capital gain has to be treated as short term capital gain. The counsel of the appellant has also placed reliance on the decision of Hon ble Mumbai High Court in the case of CIT vs. Khambaty FY (159 ITR 203) but the facts of the cited case are clearly distinguishable. In the cited case, the AO clubbed the share of profit arising to the wife & minor children of the assessee in the hands of non-resident assessee and firm in which assessee, his wife and minor children wer .....

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the company. The purchase price was paid by the assessee himself, by way of deduction from his salary. The assessee was non-resident but his wife was a resident in India. Under the allowed mechanism the assessee got the shares issued in his wife s name. These shares were sold at ₹ 41,98,615/- out of India. The controversy in appeal is whether gain on such share sale belongs to the assessee or his wife, as, if belonging to assessee, the same is not taxable in India, he being non-resident. W .....

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brought from the company and submitted now. Page 25 is the Pay slip of assessee Shri Rajendra Pathak for the financial year 2006-07. Pages 26 to 28 are letters received by the assessee from the company regarding cost of shares. Page 29 is regarding intimation of the progress of the company and page 30 is an authorization request form for dealing in Vedanta Resources Plc. During the course of assessment proceedings as well as appellate proceedings, these facts were made available to both the low .....

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opposed the admission of additional evidences filed by the assessee stating that sufficient opportunity has been given by the lower authorities during the course of assessment and appellate proceedings. As per Rule 29, the ITAT has not directed to file suo moto additional evidences for disposal of the appeals. Therefore, same should not be entertained. 10. We have heard rival contentions and perused the material on record. It is found that these documents were not submitted before the lower aut .....

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ditional evidences. 11. The ld. A/R of the assessee further submitted that both the lower authorities have erred in deciding the issue against the assessee by misdirecting themselves about the real ownership of shares. The decision of the lower authorities is based on the sole reason of shares being registered in the name of the wife of the assessee. The authorities have ignored the other peculiar facts of the case. The assessee, on 05.03.2004 was awarded share/given option under the Vedanta Lon .....

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mance conditions which was to be satisfied by the assessee himself. • Till the time the shares were vested in the name of the assessee, the assessee was not entitled to sell, transfer, pledge, assign or otherwise dispose of the shares under the plan. The ld. A/R further submitted that on satisfying the performance conditions under the plan the assessee vide letter dated 09.04.2007 was allotted shares of Vedanta Resources Plc under the Vedanta Long Term Incentive Plan. The said shares were l .....

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Smt. Sunita Pathak executed the Sale Instruction Form of HSBC Securities, London (being broker appointed by Vedanta for selling shares for its employees) for selling the shares allotted under the LTIP on the London Stock Exchange. Although the Authorization Request Form for dealing in Vedanta Resources Plc. Shares were signed by the wife of the assessee, Smt. Sunita Pathak, yet at sl. No. 3 of the said request form the position was specified as AGM (Commercial), also at sl. No. 5 the date of com .....

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ld. A/R also submitted that once it is established that the consideration was paid by the assessee then the assessee is the real owner. Allotment of shares was to the assessee employee for acknowledging his employment contribution. This was not a transaction of purchase of shares from open market. Under the Long Term Incentive Plan Scheme the entitlement was for employee only. For all purposes and intent, the assessee was owner of share and in the note attached with the return of income, it is c .....

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0 (SC) in which it has been held that the company for its purpose recognize the registered shareholder as owner but for the purpose of tax, the dividend will be deemed to accrue or arise to the real owner of the shares. Hence for the purpose of the transfer of shares, the registered holder has to complete the formalities and this will not make the registered holder to be owner for tax purposes. The shares, if held in the name of the coparcener of HUF and funds provided by HUF then dividend and p .....

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the decision of the Hon ble Bombay High Court and has simply mentioned that the decision is of no help to the assessee. The ld. A/R placed reliance on the following judicial pronouncements :- CIT vs. Keshavlal Lallubhai Patel (1965) 55 ITR 637 (SC) O. N. Mohindroo vs. CIT (1975) 99 ITR 583 (Delhi) CIT vs. Pravin Ratilal Thakkar (1988) 170 ITR 224 (Bombay) CIT vs. M. Vinoda Rao & Others (1993) 200 ITR 50 (Kar) Arvind Singh Chauhan vs. ITO (2014) 31 ITR (T) 105 (Agra Trib) Ranjit Kumar Bose v .....

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cannot arise in the hands of resident wife of the assessee and, therefore, provisions of section 64 and Section 5 would have no application. 12. We have heard rival contentions and perused the material on record. M/s. Vedanta Resources Plc vide letter dated 05.03.2004 had informed to the assessee that the Remuneration Committee of Vedanta Resources Plc has granted to the assessee an Award under the Indian Sub Plan to the Plan in respect of 3,500 ordinary shares in the Company. The award to asse .....

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essee not to sell/transfer, pledge, assign or otherwise dispose all or any shares which are the subject of an Award or any interest therein. Any attempt by the assessee to sell, transfer, pledge, assign or otherwise dispose of such shares before the shares have vested or any interest therein shall result in the immediate lapse of the Award. The Vedanta Alumina Ltd. as per letter dated 9th April, 2007 had sent shares certificate for the Vedanta Resources Plc Award by the company under the Long Te .....

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said plan was deducted from the assessee s salary for the month of March, 2007 under the head LTIP 04 at ₹ 15,260/-. On 21.05.2007 the assessee through his wife Smt. Sunita Pathak executed the Sale Instruction Form of HSBC Securities, London for selling the shares allotted under the LTIP on the London Stock Exchange. The authorization request form for dealing the Vedanta Resources Plc was signed by his wife Smt. Sunita Pathak, date of start of employment has been shown as 10.08.2002 by the .....

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The assessee was real owner of these shares although the shares were in the name of the wife of the assessee Smt. Sunita Pathak. The shares sold by the HSBC Securities, London on the instructions of the wife of the assessee. The sale proceeds were received outside India. Later on it was transferred by it in Indian Bank account maintained with ICICI Bank on 20.06.2007. The capital gain arise or deemed to be arise outside India as assessee is a non-resident. As per section 5(2) of the Act, to the .....

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