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Agfa India Pvt. Ltd. (now merged with Afga Healthcare India Pvt. Ltd.) Versus The Assistant Commissioner of Income Tax, Circle – 1, Thane

2017 (9) TMI 1223 - ITAT PUNE

Reopening of assessment - validity of reasons to believe - independent application of mind by AO and no borrowed reasons - Held that:- As ‘reason to believe’ says that income chargeable to tax has escaped assessment should be of Assessing Officer. It is Assessing Officer’s ‘reason to believe’ that taxable income has escaped assessment that forms bedrock for reopening assessment u/s. 147 of the Act. Directions from JCIT or CIT to issue notice cannot in any manner be construed as Assessing Officer .....

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ceedings clearly show that they are against the sprit of provisions of section 147 of the Act. The Assessing Officer has issued notice u/s. 148 on the directions of JCIT and CIT. Therefore, in our considered opinion the notice issued u/s. 148 is bad in law and thus, the subsequent proceedings arising there from are vitiated. Appeal of assessee is allowed. - ITA No. 1020/PUN/2015 - Dated:- 15-9-2017 - SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Girish Dave with M .....

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learned CIT (A) on aspects agitated in appeal is contrary to the provisions of law and facts of the case and without appreciation of the facts and circumstances of the case in their right perspective. 2. The learned CIT(A) erred in confirming the action of the Assessing Officer ( AO ) of re-opening the assessment under section 147 of the Act. 3. The learned CIT (A) erred in not appreciating that considering the facts and circumstances of the case and the law prevailing on the subject, the reass .....

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ead with section 147 is null and void and needs to be quashed. 6. The learned CIT(A) erred in not deciding on merit the addition of INR 11,22,74,613 on account of international transactions entered into by the Appellant with its AEs in respect of the medical imaging diagnostic segment (transfer pricing adjustment). 7. Each one of the above grounds of appeal is without prejudice to the other. 8. The appellant reserves the right to amend, alter or add to the grounds of appeal. The assessee has als .....

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e Income Tax Act, 1961 (hereinafter referred to as the Act ) have been initiated by Assessing Officer in an illegal manner. The ld. AR referred to satisfaction note at page 72 of the paper book. The ld. AR pointed that the Assessing Officer initiated reassessment proceedings on the directions of Joint Commissioner of Income Tax, Range-1, Thane. The provisions of section 147 mandates that reassessment proceedings can be initiated only if the Assessing Officer has reason to believe that any income .....

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er course of action for the noticee is to file return and if he so desires, seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. The assessee is thereafter required to file objections. The Assessing Officer before proceeding with the assessment has to dispose of the objections filed by the assessee by passing a speaking order. In the present case, the notice u/s. 148 was issued to the assessee on 19-01-2012. The assessee vide letter dated 0 .....

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ions of the assessee on 12-03-2013 and immediately on the next day i.e. 13-03-2013 issued show cause notice in respect of Transfer Pricing adjustment. The assessee could barely file reply to show cause notice on 19-03-2013, immediately thereafter, the Assessing Officer passed order u/s. 143(3) r.w.s. 147 of the Act, on 25-03-2013. The sequence of events clearly indicate that the Assessing Officer passed assessment order in reassessment proceedings in violation of the directions of Hon ble Jurisd .....

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he legal remedies available to him against the order of Assessing Officer rejecting objections. In the present case, the Assessing Officer in first instance has initiated reassessment proceedings without supplying the reasons of reopening and thereafter in a hasty manner has issued show cause notice on merits without granting period of four weeks after having rejected the objections of assessee. 3.2 The ld. AR of assessee submitted that the assessee before First Appellate Authority has challenge .....

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he ld. AR finally contended that the Commissioner of Income Tax (Appeals) has erred in dismissing the appeal of assessee as infructuous as the Commissioner of Income Tax, Thane had invoked the provisions of section 263 and has set aside the assessment order dated 25-03-2013 passed u/s. 143(3) r.w.s. 147 of the Act. validity of reopening before deciding the issue on merits. To support his submissions, the ld. AR placed reliance on the decision of Delhi Bench of the Tribunal in the case of Ballarp .....

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ld. DR submitted that once the assessment order impugned by the assessee in present appeal has been set aside by the Commissioner of Income Tax in revision proceedings, the present appeal filed by the assessee does not survive. The ld. DR further contended that reassessment proceedings were carried out in a fair manner. Proper opportunity of hearing has been granted to the assessee at each stage, therefore, no prejudice is caused to the assessee. The Assessing Officer had sufficient fresh materi .....

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ground of appeal, the assessee has assailed reopening of assessment u/s. 147 of the Act. The Assessing Officer issued notice u/s. 148 of the Act on 07-02-2012 after recording of satisfaction on 19-01-2012. The copy of satisfaction for initiating reopening of assessment was provided to the assessee vide communication dated 20-12-2012. Before proceeding further it would be necessary to first examine the reasons for initiating reassessment proceedings. The relevant extract of the satisfaction note .....

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xamine the reasons for initiating reassessment proceedings. The relevant extract of the satisfaction note is reproduced here-in-below : In this case, the Addl. CIT, Transfer Pricing-1(1), Mumbai, by virtue of letter No.Addl.CIT/TP-1(1)/2011-12/788, dated 09.01.2008, has informed the Jt.CIT, Range-1, Thane, on 12.01.2012, that income has escaped assessment during the year in question. The requisite details/bifurcation of the arms length price has been submitted, wherein it is informed that income .....

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CIT-1, Thane too, vide letter No.THN/CIT-1/TP/AI/2011-12/2395 dated 16.01.2012, has given directions to take necessary action. Based on the above facts and perusal of the information, it is seen that the assessee has overpaid its AE in transaction of import from AE relating to medical imaging segment. The difference had been worked out after holding the benchmark margin of 4.17%. The communication received from the Addl.CIT, Transfer Pricing-1(1), Mumbai is self explanatory in this aspect. As p .....

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/s. 148 of the I.T. Act, 1961. Sd/- (C.T. MATHEWS) ACIT, Circle-1, Thane A perusal of satisfaction note shows that the Assessing Officer has issued notice u/s. 148 on the directions of JCIT, Range-1, Thane and CIT-I, Thane. A perusal of satisfaction note shows that the Assessing Officer has issued notice u/s. 148 on the directions of JCIT, Range-1, Thane and CIT-I, Thane. 7. The full bench of Hon ble Delhi High Court in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. reported .....

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viz., (i) the AO must have reason to believe that income chargeable to tax has escaped assessment; and (2) he must also have a reason to believe that such escapement occurred by reason of either (a) omission or failure on the part of the assessee to make a return of his income under s. 139; or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. The afore-mentioned requirements of law must be held to be con .....

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the Act mandates that before jurisdiction under s. 147 of the Act is invoked by the AO he is to record his reasons for doing so or before issuing any notice under s. 147 of the said Act. Therefore, formation of reason to believe and recording of reasons were imperative before the AO could reopen a completed assessment. A perusal of above observations of Hon ble High Court makes it unambiguous clear that reason to believe that income chargeable to tax has escaped assessment should be of Assessing .....

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