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2016 (5) TMI 787 - ITAT HYDERABAD

2016 (5) TMI 787 - ITAT HYDERABAD - TMI - Validity of proceedings under section 163(1) - Held that:- The proceedings under section 163(1) were initiated pursuant to search and seizure operation but beyond the time prescribed under section 149(3) of the Act. Therefore, we are satisfied that the above decision is applicable to the facts of the case before us. Respectfully following the same, we set aside the orders of the A.O. under section 163(1) of the I.T. Act for the A.Ys. 2004-05 to 2008-09. .....

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1) of the Act, the assessee is not pressing the appeal before the Tribunal against the order passed under section 163(1) of the I.T. Act and may be allowed to withdraw the same. A letter dated 03.05.2016 is filed to this effect. Accordingly, the assessee’s appeal for the A.Y. 2009-10 is dismissed as withdrawn. - ITA. No. 489 to 494/H/2013 - Dated:- 18-5-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For the Assessee : Mr. P. Murali Mohan Rao For the Rev .....

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53C of the I.T. Act, 1961. 2. At the time of hearing, the Ld. Counsel for the assessee, submitted that the assessee is mainly aggrieved by the order passed under section 163(1) of the I.T. Act dated 12.12.2011 in spite of the fact that the time for issuance of a notice under section 148 had lapsed for the A.Ys. 2004-05 to 2008-09 as prescribed under section 149(3) of the I.T. Act for the years under consideration. The relevant ground i.e., Ground No.18 is reproduced hereunder for ready reference .....

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Lanka. Its main activity is processing and sale of granite and marble. The assessee owns about 65% equity in SAM. There was a search operation under section 132 of the I.T. Act in the case of the assessee herein, an Indian company, and also in the premises of one of the ex-employees of the assessee company. Prima facie, the material seized during the course of search relate to unaccounted cash receipts, under-invoicing of the quantity by SAM and subsequent realization of such receipts by the as .....

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cause notice under section 163(1) of the I.T. Act on 29.11.2011 for treating the assessee as a Representative Assessee of the Foreign Company . The assessee furnished his objections for treating it as an agent of the foreign company and also took an objection that the time limit for completion of the assessment under section 153C has expired as the time to issue notice under section 148 of the I.T. Act had expired. The A.O. however, was not convinced with the assessee s contentions and treated .....

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of time limit fixed under section 149(3) of the Act. Aggrieved, the assessee is in appeal before us. 4. Ld. Counsel for the assessee, submitted that search had taken place in the case of the assessee and some of its ex-employees and Directors on 24.07.2011 under section 132 of the I.T. Act. The Ld. Counsel for the assessee further submitted that these proceedings under section 163(1) for the A.Ys. 2004-05 to 2008-09 are beyond the time prescribed under section 149(3) of the I.T. Act. He drew our .....

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o India Ltd., vs. DCIT (2012) 20 taxmann.com 206 (Bom.). 5. The Ld. D.R. however, supported the orders of the authorities below and submitted that the time limit prescribed under section 149(3) are not applicable to the assessee s case as the assessee s case was consequent to a search under section 132 of the I.T. Act and therefore, the provisions of section 153B are applicable. He, therefore, submitted that the orders of the authorities below be confirmed. 6. Having regard to the rival contenti .....

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der section 153A/153C of the I.T. Act. Sub-section (3) of section 149 provides as under : (3) If the person on whom a notice under section 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 the period of two years from the end of the relevant assessment year. 6.1. Th .....

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he provisions of section 153B are not applicable. As per sub-section (3) of section 149, the assessment under section 148 on the representative- assessee shall not be made after expiry of a period of two years from the end of the relevant assessment year. In the case before us, the relevant assessment years are the A.Ys. 2004-05 to 2008-09 wherein notice under section 163(1) has been issued after the expiry of the period of two years from the end of the relevant assessment year. Consequent to th .....

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on 163 on two grounds; (1) Firstly, it has been urged that under Section 160(1)(i), a representative assessee is defined to mean, in respect of the income of a non-resident specified in sub-Section (1) of Section 9, the agent of the non-resident, including a person who is treated as an agent under Section 163. In other words, a person can be treated as a representative assessee in respect of the income of a nonresident specified under Section 9(1). In the present case, what is sought to be broug .....

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to the Bermudian Company nor did any consideration flow to it. Hence, the Petitioner cannot be treated as a representative assessee under Section 160(1)(i); (2) The notice which has been issued under Section 163 is ex-facie barred by limitation. Under Section 149(3) a notice for assessment was required to be served upon the Petitioner within two years of the expiry of the relevant Assessment Year. The relevant Assessment Year being 2005-06, such a notice ought to have been issued on or before 31 .....

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Bermudian Company, the limitation for initiating proceedings would expire on 31 March 2008 which was two years of the end of the relevant Assessment Year. The notice which was issued on 22 November 2010 was barred by limitation. Learned Counsel submitted that Section 149 of the Income Tax Act, 1961 provides for a period of limitation on the initiation of assessment proceedings following the order under Section 163. The assessment proceedings would ex-facie be barred upon the expiry of two years .....

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f the proceedings. Counsel appearing on behalf of the Revenue has relied upon the observations contained in paragraphs 15.1 and 15.2 of the impugned order in support of the submissions that the proceedings are not barred by limitation. No further submissions have been urged. 9. Clause (i) of sub-Section (1) of Section 160 provides that for the purposes of the Act, "representative assessee" means in respect of the income of a non-resident specified in sub- Section (1) of Section 9, the .....

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ustee of the non-resident and includes also any other person who, whether a resident or non-resident, has acquired by means of a transfer, a capital asset in India. Sub-section (2) of Section 163 provides that no person shall be treated as the agent of a nonresident unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such. What needs emphasis is that under Clause (i) of Section 160(1) a person is treated as a representative assessee in re .....

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an order under Section 163(2), a notice is liable to be issued under the provisions of Section 148. Under sub-Section (3) of Section 149 if the person on whom a notice is issued under Section 148 is a person treated as the agent of a non-resident under Section 163 and the assessment, re-assessment 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 two years from the end of t .....

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asset in India. The First Respondent, in our view, was clearly in error in relying upon the provisions of Section 153(B). The search and seizure operation took place in respect of the Indian company but it is an admitted position that what is sought to be brought to tax as capital gains are capital gains alleging to accrue to the Bermudian company. The Petitioner is treated as a representative assessee on the finding that it is an agent within the meaning of Section 163. In other words, what is .....

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he relevant assessment year is prohibited by the statute." In that case, the Income Tax Officer had issued notice to the agents of the assessee whereupon the agent took the defence of Section 149(3). The Income Tax Officer upheld their objection and dropped the proceedings since it was time barred. The Supreme Court held that the Officer had acted correctly in quashing the reassessment of the agent, since the provisions of Section 149(3) must be strictly construed. Thereafter, the Court wen .....

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