TMI Blog2016 (12) TMI 1663X X X X Extracts X X X X X X X X Extracts X X X X ..... are time barred by 142 days. The assessee has filed petition for condonation of delay supported by an affidavit citing reasons causing delay. After perusal of the same, we are satisfied that the delay in filing of the cross objections is not willful or deliberate. The delay of 142 days in filing of the cross objections is condoned. The cross objections are admitted for adjudication and are disposed of alongwith the appeal. 3. The brief facts of the case as emanating from records are : The assessee is a non-resident company incorporated in Sweden. During the period relevant to the assessment year under appeal the assessee received fees for I.T. support service to the tune of ₹ 2,43,74,970/-. The assessee filed its return of income for the A.Y. 2005-06 on dated 28-10-2005 declaring Nil income. The original assessment was completed u/s.143(1). Thereafter, the Assessing Officer issued notice u/s.148 of the Act on 30-03-2012. The reasons for reopening were communicated to the assessee. The prime reason for reopening was that as per the details furnished by M/s. Sandvia Asia Ltd. (in short SAL ) in report 3CEB it was found that payment of ₹ 2,38,85,567/- was made to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal. 6. Shri Amol Kamat representing the Department submitted that the original assessment in the case of assessee was framed u/s.143(1). The Assessing Officer had no occasion to verify the details furnished by the assessee. Subsequently, when the Assessing Officer examined the records of SAL it transpired that the assessee has received a sum of ₹ 2,38,85,567/- from the said company on account of I.T. support services. It is not a case of reappraisal of documents on record or change of opinion. Since the Assessing Officer had not formed any opinion at the time of original assessment, there is no question of change of opinion at all. The Ld. Departmental Representative in support of his submissions placed reliance on the decision of Hon ble Supreme Court of India in the case of Dy.CIT Vs. Zuari Estate Development Investment Co. Ltd. reported as 63 taxmann.com 177 and the decision of Hon ble Bombay High Court in the case of Indian Hume Pipe Co. Ltd. Vs. ACIT reported as 16 taxmann.com 180 (Bom.). The Ld. Departmental Representative further submitted that the DRP has no power to annul the assessment. A conjoint reading of provisions of section 144C(5) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 148 r.w.s. 147 of the Act. The Ld. Authorised Representative contended that the case of assessee is not based on change of opinion . The contention of the assessee is that there is no tangible material for reopening and the Assessing Officer has no fresh material or reason to believe that income of the assessee has escaped assessment within the meaning of section 147 of the Act. 9. The Ld. Authorised Representative contended that the case laws on which the department has placed reliance are distinguishable on facts. In the case of DCIT Vs. Zuari Estate Development and Investment Company Ltd. (supra) the Assessing Officer came across certain documents which form tangible material for initiating reassessment proceedings. Whereas, in the present case the Assessing Officer had no fresh material to form such belief. In the case of Indian Hume Pipe Co. Ltd. Vs. ACIT, the assessee at the time of filing original return of income had claimed exemption u/s.54EC without disclosing dates on which amounts were invested in specified securities. For claiming exemption u/s.54EC, date of investment is vital and material information for determining assessee s eligibility for claiming exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. UOI others reported as 359 ITR 133 (Bombay) and subsequently followed in Vodafone India Services Pvt. Ltd. Vs. ACIT reported as 361 ITR 531(Bom.) (hereinafter referred to as Vodafone-II case ) 12. We have heard the submissions made by the representatives of rival sides and have perused the orders of authorities below. We have also considered various decisions on which reliance has been placed by both the sides. Two issues have emerged from the grounds raised in the appeal and the submissions made by the representatives of both the sides : (a) whether the reassessment proceedings initiated by the Assessing Officer are valid and sustainable; and (b) whether the DRP has power to annul assessment. 13. The Assessing Officer initiated reassessment proceedings on the basis of details furnished by SAL (one of the group company of assessee) in Report 3CEB. As per the information derived from the documents of SAL, payment of ₹ 2,38,85,567/- has been made to the assessee on account of I.T. support service fees. The Assessing Officer treated the said information as tangible material and initiated proceedings u/s.148 r.w.s. 147 of the Act against the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 issued under section 195 of the Income-tax Act, 1961, authorized Sandvik Asia Limited to make payment to the assessee for such services without deducting tax at source. Note 2: Walter Tools India Private Limited has made certain payments in respect of IT support services to the assessee on the basis of actual costs incurred by the assessee. The assessee believes that such receipts being in the nature of reimbursement of expenses cannot be regarded as his income. 15. A comparative study of Form 3CEB of SAL on the basis of which the Assessing Officer has invoked the provisions of section 148 r.w.s 147 of the Act and Form 3CEB furnished by the assessee reveal that similar Note has been made in Form 3CEB of both the companies. Further, the fact that the assessee has charged for the services rendered is also mentioned in computation sheet. Thus, it cannot be said that any fresh tangible material has come to the knowledge of the Assessing Officer. The material on the basis of which the Assessing Officer has initiated reassessment proceedings was already placed on record by the assessee at the time of filing of return of income. The assessee had made full disclosure of the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words reason to believe vis- -vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the issue whether before invoking Section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment has been completed by Intimation under Section 143(1) of the Act. The Revenue is trying to infer that because the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has set aside the order of this Court and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143(1) of the Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits. 18. Thus, in view of the facts of the present case and the case laws discussed above we hold that the Assessing Officer had no tangible material to justify his reason to believe that income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside any proposed variation or issue any directions to pass assessment order after further enquiry. 20. The Hon ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. Vs. UOI and others (supra) and Vodafone-II case had explained the provisions of section 144C relating to the powers of DRP in adjudicating various issues including jurisdictional issues. The Hon ble High Court held that the DRP has wide powers to adjudicate objections filed by the assessee. The DRP s power to confirm would also include the power not to confirm. The relevant extract of the judgment rendered by Hon ble Apex Court in the case of Vodafone India Services Pvt. Ltd. Vs. UOI and others is as under : 85. Once this is accepted the fallacy in the petitioner s interpretation of section 144C(8) is clear. The words the variations proposed in the draft order used in sub-section (8) obviously refer to the variations in the income or loss return in the draft assessment order referred to in subsection (1)of section 144-C. Thus, sub-section (8) of section 144-C empowers the DRP to confirm, reduce or enhance the variations proposed in the draft order as a whole and not the variations in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantification of the arm s length price is unfounded. A reduction or an enhancement indeed relate to the valuation or quantification. The word confirm , however, is much wider. The DRP s power to confirm would include the power not to confirm. It would include the power to annul the variations or any of them. The doubt, if any, is set to rest by the use of the words may confirm . Once the entire draft order is before the DRP for confirmation, it is axiomatic that it would have the power to consider the entire draft assessment order, including the question as to whether the unreported transactions are international transactions or not or even whether the TPO considered was a transaction at all. The Division Bench of the Gujarat High Court in Veer Gems (supra) also held that the issue whether there was an international transaction or not can also be examined by the DRP. 89. This view, in fact, protects the right of an assessee who would otherwise be deprived of a valuable right of one appeal. An appeal against the order of the DRP lies only to the ITAT. The Legislature could hardly be expected to have intended to deprive an assessee of a valuable right of an appeal without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completion of assessment is expedited within available limited time of nine (9) months. In the present case, the Department has taken just the opposite stand. Here, the Department has contended that the powers of DRP are not wide enough to set aside the assessment. The Department cannot be allowed to approbate and reprobate on same issue in different cases, before different forums. The Department while defending/assailing the orders of the authorities below is oscillating between two extreme views. 23. The assessee in cross objections has raised the following solitary ground : Without prejudice to the relief granted by the Hon ble Dispute Resolution Panel [ the DRP ] in relation to reopening of the assessment proceedings beyond four years, the Learned DRP erred in not adjudicating upon Objection No.2 being receipts for IT Support Services amounting to INR 2,43,74,790. It is further prayed that the Hon ble Appellate Authority is entitled to consider the claim and has the power to adjudicate the same in accordance with law. Since, the appeal of Revenue has been dismissed, the ground raised by assessee in CO has become academic and hence requires no adjudication. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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