TMI Blog2019 (3) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier year. Merely because in the later year, the AO takes a different view on the basis of similar material, which may have been collected during such process, would not permit him to reopen the assessment. Under these circumstances, the AO's reference to further exercise undertaken while carrying out scrutiny assessment for the assessment year 2014-15 during which he decided to tax the assessee at higher rate would not enable the AO in the present case to reopen the assessment beyond four years. - Decided in favour of assessee. - Writ Petition No. 3342 of 2018 - - - Dated:- 25-2-2019 - AKIL KURESHI M.S. SANKLECHA, JJ. Mr. Jehangir Mistri, Senior Counsel a/w Mr. Madhur Agrawal i/by Atul Jasani for the Petitioner Mr. P.C. Chhotaray for the Respondents ORAL JUDGMENT (Per Akil Kureshi, J.) 1. The petitioner has challenged a notice of reopening of assessment dated 3.4.2018. 2. Brief facts are as under:- 2.1 Petitioner is a company incorporated in Cyprus enjoying tax residency certificate issued by the Cyprus Authorities. Petitioner's principal activity is to act as an investment holding company. During the assessment year 2011-12, the petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest income on such investments on receipt basis. The said income of ₹ 55,01,17,499/- has been offered to tax @ 10% as per the provisions of Article 11(2) of the DTAA by the assessee as beneficial owner of interest income. 6. To be beneficial owner of interest income assessee should be independent and free to utilize its interest income on its own and it should have substantial commercial activity in Cyprus. 7. In order of the interest income at lower tax rate @ 10%, assessee has to be beneficial owner of such interest income. 8. Accordingly in order to verify the same movement of the receipts and payments through bank account transfer was verified and analyzed. Source of the investment made by the assessee was inquired into and nature of payback to investors was analyzed. A inquiry regarding whether assessee has any office and employees on its payroll in Cyprus was made. Activities of directors were studied and related party transactions if any were looked into. Articles of Association and memorandum of association of company were gone through and terms and conditions of issue of various types of shares were studied. 9. Thus, it is clearly established t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue notice u/S. 148 has been obtained separately from the Commissioner of Income Tax(IT)-3, Mumbai as per the provisions of Section 151 of the Act. 2.2 The petitioner raised objections to the notice of reopening of assessment under communication dated 28.5.2018. Such objections were disposed of by the Assessing Officer by order dated 25.9.2018. Upon which, this petition came to be filed. 3. Appearing for the petitioner, learned senior counsel Shri. Mistri raised the following contentions in support of challenge:- i. The impugned notice has been issued beyond the period of four years from the end of relevant assessment year. The petitioner had made true and full disclosures in the return filed. The Assessing Officer, therefore, could not have reopened the assessment; ii. During the scrutiny assessment, the entire issue was examined by the Assessing Officer. Only after which the order of assessment was passed accepting the stand of the petitioner that the interest income was correctly offered to tax @ 10%. Even in the order of assessment, this aspect has been referred by the Assessing Officer; iii. Even on merits, the Assessing Officer's stand is compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. On the basis of such material, the Assessing Officer had come to certain important conclusions ultimately leading to his belief that the assessee was not the beneficial owner of the interest income and that, therefore, the reduced rate of tax @ 10% was not available, instead, the assessee would have to pay tax at higher rate on such income. 7. In the reasons, the Assessing Officer further records that in respect of the scrutiny assessment for the assessment year 2012-13, the Assessing Officer has not raised any query on the above issue and the same was not verified during the course of the assessment proceedings for the assessment year 2012-13 . Keeping in view the above fact, the issue requires to be verified for the assessment year 2012-13 8. We notice that during the course of the assessment proceedings for assessment year 2012.13, the Assessing Officer had raised multiple queries and elicited replies from the petitioner assessee. For example, under a letter dated 16.2.2016, the Assessing officer had called for, besides other, following information:- 7. Furnish the details of share holding / investments / loans / advances interest earned / paid with M/s. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th this communication, the petitioner had annexed certain documents which included the bank statement. On 16.3.2016, the petitioner supplied further information to the Assessing Officer which included the following:- The total grossed up amount of interest was INR 119,341,705. WRPL deducted tax at the rate of 10 percent as per Article 11 of Double Taxation Avoidance Agreement between India and Cyprus. 3. The assessee company was formed on 20 April 2011. IL FS Realty Fund II LLC and Saffron India Real Estate I invested into 74.46% and 25.54% of equity shares of the assessee respectively. The assessee had invested the money received against the equity shares into CCDs of WRPL. Copy of the bank statement depicting the flow is enclosed as Annexure III. 4. Details of the shareholders of the assessee are as under Sr.No. Name of the Shareholder Percentage of shareholding 1 IL FS Realty Fund II LLC Address : IFS Court, Twenty Eight Cybercity, Ebene, Mauritius 74.46% 2 Saffron India Real Estate Fund I Address : Rogers Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es during the said period resulting into only one principal transaction of earning interest income. The Assessing officer had inquired about the nature of activities of the assessee and the nature of source of income. Even if, it is believed that the question of taxing such interest income at the concessional rate as per the DTAA was not in the mind of the Assessing Officer when such queries were raised and the order of assessment was passed, one thing that cannot be denied is that there was no failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. Whatsoever allegations by the Assessing Officer in the reasons recorded that there was no failure on the part of the assessee to disclose true and full all material facts. The assessee had filed the return of income making all necessary declaration. Detailed scrutiny examination during the original assessment was carried out. The assessee supplied full information called for by the Assessing Officer and also placed on record voluminous documents for his consideration. Nowhere in the reasons, the Assessing Officer contends that in the process of such scrutiny also, there was any fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee during the year under consideration were untrue. It was on that basis that reopening of assessment was permitted, however, observing that at that stage, the Court would consider only whether there was prima facie material on which the assessment could be reopened. 12. In case of Rabo India Finance Ltd Vs. Deputy CIT (Bom) [2013] 356 ITR 200 (Bom), this Court observed that the judgments of the Supreme Court lay down a principle that the Assessing Officer acts within jurisdiction in reopening the assessment on the basis of the information which comes to him after the original assessment and during the course of the assessment proceedings for subsequent assessment years. This principle was reiterated in later judgment in case of Multiscreen Media Pvt Ltd Vs. Union of India Anr. [2010] 324 ITR 54 (Bom). With this proposition, there cannot be any doubt or dispute. What is to be gathered in a given case as in the present one is whether the Assessing Officer can be stated to have received any such additional information during the course of subsequent assessment. Significantly, in both these cases, the notice of reopening was issued within the period of four yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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