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2012 (12) TMI 1008

tion 147/148 of the Act were never furnished to the assessee by the Assessing Officer before completion of the assessment proceedings on 29/12/2008, 33 months after the request was made by the assessee by letter dated 16/4/2007. The subsequent furnishing of the reasons recorded to the assessee by the learned CIT(A) by letter dated 28/1/2010 does not achieve any purpose or mitigate the illegality of the action of depriving the assessee its right to raise objections against the initiation of proceedings under section 147/148 of the Act. - In this view of the matter, we hold that the order of assessment passed under section 143(3) rws 148 of the Act dated 29/12/2008 for the assessment year 2005-06 without the Assessing Officer furnishing the recorded reasons for initiation of proceedings under section 147/148 of the Act to the assessee within reasonable time and prior to the completion of the assessment proceedings, renders this order of assessment invalid and unsustainable in law. - ITA No.549/Bang/2011 - 10-12-2012 - SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI N V VASUDEVAN, JUDICIAL MEMBER For the Appellant : Shri K P Kumar, Advocate For the Respondent : Shri Farhat Hussain .....

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tomers as royalty 3.1 The DDIT/CIT(A) erred in holding that the payments received by the appellant are royalty under the Income- tax Act, 1961 ( the Act ). 3.2 The DDIT/CIT(A) erred in not holding that the payments received by the appellant do not qualify as royalty under the Double Taxation Avoidance Agreement between India and Ireland ( the DTAA ). 3.3 The DDIT/CIT(A) erred in not holding that whether the payments received by the appellant from Indian parties was in the nature of royalty had most appropriately to be judged under clause (v) of Explanation 2 to section 9(1)(vi) of the Act, which clause did not apply because there was no right in respect of any copyright granted by the appellant. 3.4 The DDIT/CIT(A) erred in holding that the payments received by the appellant from Indian parties was towards the use of process within the meaning of clause (iii) of Explanation 2 to section 9(1)(vi) of the Act, and accordingly, are royalty as defined in section 9(1)(vi) of the Act. 3.5 The DDIT/CIT(A) erred in not holding that, as the appellant did not give the right to Indian customers to reproduce and distribute to the public the copyrighted programme, the payments received by the ap .....

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appellant prays that the DDIT be directed to grant all such relief arising from the preceding grounds as also all relief consequential thereto. 4.0 In the ground at sl.no.1, the assessee has contended that the order of assessment is bad in law as the re-assessment proceedings initiated under section 147 and pursuant to issue of notice under section 148 of the Act were carried out in violation of the procedure laid down by law and the judicial decisions on the subject and therefore, the order of assessment required to be struck down as invalid, null and void ab-initio. The learned AR, at the outset, submitted that, the assessee had been required to file the return of income for the assessment year 2005-06 pursuant to the issue of notice under section 148 of the Act on 2/4/2007, which admittedly, it did on 30/4/2007. The return of income was enclosed with a covering letter dated 16/4/2007 (filed on 30/4/2007) addressed to the Assessing Officer wherein the assessee had requested him to provide the reasons for initiating the proceedings under section 148/147 of the Act (at page 10 of the paper book filed by the learned AR on 07/11/2012). It was submitted by the learned AR that the reas .....

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at the request for copy of reasons recorded for initiation of 147 proceedings vide letter dt.16/4/2007 addressed to the Assessing Officer was for filing of the return of income for the assessment year 2005-06. No separate application was made by the assessee to the Assessing Officer, for obtaining the reasons. It was further submitted that as the reasons were provided to the assessee by the learned CIT(A) that would suffice as compliance with the requirements of law and procedure as laid down by the Courts and therefore, proceedings initiated under section 147/148 of the Act and the resultant order of assessment under section 143(3) rws 148 of the Act dated 29/12/2008 were valid in law. In support of this proposition, the learned DR placed reliance on the decision of the Hon ble Delhi High Court in the case of Nestle India Ltd. v DCIT reported in (2004) 189 CTR (Del.) 70. 4.1.1 We have heard the rival contention, perused and carefully considered the relevant material on record and the judicial decisions cited. Though the arguments on merits were also made, however, at this stage, we will confine ourselves to the issue of the validity of the initiation of proceedings under section 1 .....

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sessee is to enable/facilitate it to present its defence and objections to the initiation of proceedings under section 147/148 of the Act. We are of the considered opinion that there was no justifiable reason for the Assessing Officer to deprive the assessee of the recorded reasons by him for initiating proceedings under section 147/148 of the Act. 4.1.4 In the decision cited by the learned AR in CIT v Videsh Sanchar Nigam Ltd. (ITA No.4235 of 2010 dt.20/7/2011), the Bombay High Court has held that re-assessment proceedings were invalid for the reason that the reasons recorded for reopening of the assessment were not furnished despite requests by the assessee till the completion of the assessment and were furnished only after completion of the assessment. From this decision it is clear that the reasons recorded for initiation of proceedings under section 147/148 of the Act are required to be furnished by the Assessing Officer to the assessee within a reasonable period in order for the assessee to raise its objections at the preliminary stage of proceedings. If the reasons are not furnished to the assessee during the assessment proceedings, then the subsequent furnishing of the reas .....

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