TMI Blog2018 (9) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... within the ambit of Section 149(1)(b) of the Act. The mandatory requirement of Section 149(1)(b) of the Act is not complied with. Hence, the assumption of jurisdiction by respondent No.1 under Section 147 of the Act is untenable - Decided in favour of assessee - Writ Petition No. 21206/2014 (T-IT) - - - Dated:- 25-6-2018 - MRS. S. SUJATHA J. Petitioner [By Sri Nageswar Rao, Adv. For Sri Arun Sri Kumar, Adv.] Respondents [By Sri K.V. Aravind, Adv.) O R D E R The petitioner has called in question the notice dated 28.3.2013 issued by respondent No.1 under Section 148 of the Income Tax Act, 1961 ['Act' for short] as well as the order dated 12.03.2014 passed by the Deputy Commissioner of Income-tax under Section 152 of the Act and the consequential notice dated 6.2.2014 issued by respondent No.1 under Section 143(2) of the Act. 2. The petitioner is a company incorporated under the laws of India and is a resident for the purposes of the Act. Petitioner is a subsidiary of Novo Investments Pvt. Ltd., a company incorporated under the laws of Singapore, which in turn is held by Novo Nordisk A/s (Novo Denmark) and Novo Nordisk Region International Ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) issued by the respondent-authorities are challenged mainly on the ground that the proceedings initiated are contrary to the statutory requirements as envisaged under clause (b) of Subsection (1) of Section 149 of the Act. 5. Sri. Arun Sri Kumar, learned counsel for the petitioner submitted that Section 147 deals with income escaping the assessment. The Assessing Officer is empowered to invoke Section 147, when he has the reason to believe that any income chargeable to tax has escaped assessment for any assessment year, subject to the provisions of Section 148-153. Section 149 provides for the time limit for notice. In terms of Section 149(1)(b), no notice under Section 148 shall be issued for the relevant Assessment year, if four years, but not more than six years, have elapsed from the end of the relevant year unless the income chargeable to tax which has escaped tax amounts to or is likely to amount to one lakh for that year or more. The reasons recorded by respondent No.1 to initiate proceedings under Section 147 does not disclose that the amount of tax which has escaped assessment is Rs. One Lakh or more. 6. Nextly, it was contended that by Finance Bill 2012, deemed esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07. Nextly, it was submitted that the reasons recorded by the Assessing Officer is suffice to invoke the proceedings under Section 147 of the Act and there is no lacuna of whatsoever manner in issuing notice under Section 148. 10. I have given my thoughtful consideration to the arguments advanced by the learned counsel for the parties and perused the material on record. The proceeding concluded on 15.12.2009 for the AY 2006-07 in terms of the order passed by respondent No.1 pursuant to the order passed by the TPO under Section 92CA(3) of the Act on 27.10.2009 concluding that no adjustment was required to the Arms Length price determined by the tax payer in respect of international transactions entered into by the petitioner with his associated enterprises is not in dispute. Now the question would be whether initiation of proceedings under Section 147 of the Act is sustainable? 11. To answer this question it is apt to refer to the relevant provisions of the Act and the same are extracted for ready reference: S. 92E. Report from an accountant to be furnished by persons entering into international transaction [or specified domestic transaction] Every person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, unless the income in relation to any asset including financial interest in any entity] located outside India, chargable to tax, has escaped assessment.] (2) The provisions of sub- section (1) as to the issue of notice shall be subject to the provisions of section 151 (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 re-computation 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 the relevant assessment year. S. 151 Sanction for issue of notice. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect for invoking the extended period of limitation under Section 149 (1)(b) not being forthcoming, further proceedings in pursuance to the said notice cannot be sustained. The notice issued being not in conformity with the provisions of the Act, it being the base or the foundation, edifice built upon it, has to fall. 13. In the case of Sheo Nath Singh V/s. Appellate Assistant Commissioner of Income Tax, reported in [1971] 82 ITR 147 , the Hon'ble Supreme Court while considering the Section 147 of the Act, observed thus: The words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. 14. The phrase reasons to believe categoric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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