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2019 (12) TMI 149

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..... 39; in the eyes of law. - Decision in the case of Bodhisattva Chattopadhyay [2019 (11) TMI 1031 - ITAT KOLKATA] followed. - Decided in favor of assessee. - I.TA No.1303/Kol/2019, I.TA No.1307/Kol/2019, I.TA Nos.1309/Kol/2019, I.TA No.1310/Kol/2019, I.TA No.1312/Kol/2019, I.TA No.1313/Kol/2019, I.TA No.1316/Kol/2019 - Dated:- 29-11-2019 - Shri J. Sudhakar Reddy, AM And Shri A. T. Varkey, JM For the Assessee/Appellant : Shri Nageswar Rao, Advocate For the Respondent : Dr. P. K. Srihari, CIT, DR ORDER PER SHRI A.T.VARKEY, JM All these appeals preferred by the different assessee s are against the separate orders of the Ld. CIT(IT & TP), Kolkata passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) all dated 29.03.2019for AY 2014-15. Since facts are identical and grounds are common we dispose of all these appeals by this consolidated order for the sake of convenience. 2. The common facts permeating in all the appeals are that all the assessee s are the employees of IBM India Pvt. Ltd. (hereinafter referred to as IBM ) who have been sent to Switzerland on company s foreign assignment. The undisputed facts are that the residential status of all the assessee .....

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..... dhyay(supra). After hearing we note that the present appeals are similar/identical to that of the appeals preferred by Shri Bodhisattva Chattopadhyay & Ors. Vs. CIT (IT & TP)[ ITA No. 1314/Kol/2019] We also note that the impugned order of Ld. CIT in these appeals and that of ITA No. 1314/Kol/2019 is on the same date i.e. 29.03.2019, similarly worded (except the figures) and by the same Ld. CIT (IT&TP) and so we treat these appeals as also heard and the decision in ITA No. 1314/Kol/2019 will be followed mutatis mutandis. Further we note that on 15.11.2019, we have pronounced the judgment in Shri Bodhisattva Chattopadhyay & Ors. Vs. CIT (IT&TP), wherein we allowed the appeals of the assessee s and since as afore stated, the facts being similar and issues are identical, the result of Bodhisattva Chattopadhyay (supra). Since we note that the facts are similar/identical and the Ld. DR could not point out any difference in the facts as decided by this Tribunal in the case of DCIT Vs. Sandip Maity & Ors. in ITA No. 1128, 416 to 425/Kol/2017 as well as that preferred by Shri Bodhisattva Chattopadhyay (supra) and the distinguishing points raised by the Ld. CIT in his .....

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..... adhyay) was sent by his employer IBM on short term assignment to Switzerland for which he was stationed there for 349 days during the relevant financial year 2013-14. Since his stay outside India for the purpose of employment exceeded 182 days during the relevant year, his residential status for the year under consideration was Non-Resident . During the year, the assessee had received the following emoluments from IBM. a) Gross salary received in India - ₹ 18,65,767/-, and b) Foreign allowances on account of the international assignment, received in Switzerland - ₹ 42,97,092/- 4. It is noted that IBM had deducted tax at source (TDS) of ₹ 16,94,180/- on the entire emoluments paid to the assessee including the foreign assignment allowance u/s. 192(1) of the Act. The assessee filed his return of income for the Asst. Year 2014-15 declaring taxable income of ₹ 17,52,360/- (comprising only of the salary of ₹ 18,65,767/- received in India) after claiming the deduction of ₹ 1,01,405/- under chapter VIA of the Act. After claiming the credit of taxes deducted at source by the employer u/s 192, the assessee claimed a refund of ₹ 13,27,800/- in his ret .....

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..... the contract inter alia including the right to receive salary arose only in India. Referring to the term receive or deemed to receive as used in Section 5(2)(b)of the Act, the Ld. CIT observed that the situs of income received would be the place of delivery of cash/cheque. According to Ld. CIT, the point of receipt is the point of payment . He observed that the income was received by the assessee in India when the employer transferred his foreign assignment allowance from their bank account held in Bangalore to Axis Bank s Nostro Account for top-up to the Travel Currency Card ( TCC ) which was earlier made available to the assessee in India. He thus held that in real terms the income was received in India. To support his case, the Ld. CIT further referred to the salary statement of the assessee wherein the allowance was denominated in Indian currency. The Ld. CIT also emphasized that the assessee had not offered the foreign assignment allowance in Switzerland nor claimed the benefit of the DTAA and therefore the assessee had allegedly not paid taxes on the foreign assignment allowance either in India or in Switzerland. Relying on the decision of this Tribunal in the case of Tapas .....

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..... on precedent to usurp/invoke the revisional jurisdiction u/s 263 of the Act, by the ld. CIT. In the circumstances since the conditions precedent to usurp the revisionary jurisdiction u/s 263of the Act is claimed to be absent in the present case, the assessee has contended that the impugned order is wholly without jurisdiction and is, therefore, bad in law. 8. Having heard both the parties, and on a careful consideration of the facts and circumstances of the case, we find that the ld. CIT invoked the revisionary jurisdiction on the broad allegation that the AO had failed to conduct enquiries which the facts of the case required the AO to conduct. According to ld. CIT before passing of the assessment order, there was lack of application mind to the facts and incorrect application of applicable legal provisions in the facts of the case. As a result the AO passed an order which in the opinion of ld. CIT was unsustainable in law and therefore liable for revision u/s 263 of the Act. Before adjudicating the issues arising from the impugned order of the ld. CIT, we have to remind ourselves as to the scope of revisional jurisdiction u/s. 263 of the Act. For that, let us take the guidance of .....

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..... to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 9. In the given facts of the present case, we find that the primary fault found by the ld. CIT to interfere with the order of AO was the alleged non-examination of the relevant facts concerning taxability of the foreign assignment paid through TCC. We are aware of the fact that the Assessing Officer's role while framing an assessment is not only as that of an adjudicator but he is also an investigator. The AO has a dual role to perform i.e. he is an investigator as well as an adjudicator and therefore, if he fails in any one of the two roles as afore-stated, his order can be termed as erroneous. From the order of the Ld. CIT, we note that he firstly found fault with the AO's role of an investigator because in his subjective opinion the AO did not properly conduct the investigation of the relevant facts and legal aspects concerning taxability of foreign assignment allowance. We however note that the assessee s case was selected for scrutiny assessment on the CASS parameter of salary income shown in ITR is less than the salary income as per Form 26AS . We find that the asse .....

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..... to 53 of paper book], the A/R of the assessee explained the modality of payment of Foreign Assignment Allowance by IBM as under: "We would like to submit before your goodself that the foreign assignment allowance paid by IBM India Private Limited employer of the captioned assessee, to the International Travel Card outside India. The said card is denominated in foreign currencyonly and can be used only outside India. Once an employee is sent on foreign assignment, a travel currency card is issued to the employee by Axis Bank Limited. Upon instructions from IBM, Axis Bank pays the amount of foreign assignment allowance to the international travel card of the employee outside India through its Nostro account situated outside India. A Nostro Account is a bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro Accounts are used to facilitate settlement of foreign exchange and trade transactions. A Nostro Account is always maintained outside India and denominated in Foreign Currency. In view of the same, since the foreign assignment allowances are paid from Nostro Account situated outside India to the international travel card o .....

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..... sessee s plea for exclusion of foreign assignment allowance was not chargeable to tax in India. In such a scenario, the finding recorded by the ld. CIT that the action of the AO in allowing the amount of ₹ 42,97,092/- as exempt from taxation (i.e. the foreign assignment allowance) is in violation of the provision of sec. 5(2)(a) of the Act without any enquiry, is factually erroneous. 11. In order to understand the difference between "lack of inquiry" and "inadequate inquiry" and when it can be termed as erroneous, let us look at the judgment of the Hon ble Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593), wherein on similar facts & circumstances, their Lordships explained the difference between the two as follows:- "14. The case of the CIT in his notice dated 26th November, 2009 under Section 263 of the Act reads as follows :- "1. During the said A.Y., you have received a sum of ₹ 18.00 Crore from M/s. Beierdorf AG., Germany (BDF) as one-time settlement for termination of contracts of producing and selling of the products of the latter company in India as well as issuing a NOC for setting up a 100% subsidiar .....

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..... cer were duly furnished and the matter was discussed from time to time on the various days indicated above, appearing from the assessment records produced by Mr. Nizamuddin, leave no scope for any doubt as regards the fact that the Assessing Officer after satisfying himself passed the order dated 28th March, 2008. 79. Mr. Poddar also drew our attention to the impugned judgment of the learned Tribunal which reads as follows:- "Therefore, on combined reading of the assessment order for the assessment year under consideration along with the order sheet entries, it can be said that the A.O. had carried out such enquiry as the circumstances warranted and permitted before accepting the claim of the assessee and passing assessment order accordingly. It was an entirely different matter that the Commissioner did not agree with the conclusion derived by the A.O. from the enquiries made. Failure to carry out an enquiry is one thing and in such cases the commissioner would be justified in saying that the mere failure to make any enquiry was erroneous and prejudicial to the interests of the Revenue. But it would not be open to him to hold that the assessment order was erroneous and prejudi .....

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..... a civil dispute. That an income tax proceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The Income Tax authorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State: they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income, and to assess tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the State." 83. He also drew our attention to the judgment in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 /71 Taxman 585 (Bom.) 'The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-ta .....

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..... 6. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time. In deciding the question Court has to bear in mind the presumption in law laid down in Section 114 Clause - e of the Evidence Act:- "that judicial and official acts have been regularly performed;" 87. Therefore, the Court has to start with the presumption that the assessment order dated 28th March 2008 was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. 88. The Assessing Officer was required to examine the return filed by the assessee in .....

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..... e High Court in that case was dealing with the need on the part of the learned Tribunal to give reasons in support of its order. 94. The judgment in the case of Hindusthan Tin Works Ltd. (supra) also does not apply because there the Delhi High Court was dealing with the duty of the learned Tribunal to disclose reasons in support of its appellate order. 95. The judgment in the case of S.N. Mukherjee (supra) is clearly distinguishable. The point for consideration in that case was whether it was incumbent for the Chief of Army Staff while confirming the findings and the sentence of the General Court Martial, and for the Central Govt. while rejecting the post confirmation petition of the appellant, to record reasons for the orders passed by them. 96. The function of an Assessing Officer is to estimate the income of the assessee and to recover tax on the basis of such estimate as laid down by the Apex Court in the case of S.S Gadgil (supra). Their Lordships opined that the income tax proceedings do not partake the character of a judicial proceeding between the State and the citizen. Therefore, the principles applicable to a proceeding before a judicial or a quasi-judicial authority wher .....

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..... that the enquiry conducted by the AO is not in accordance with his subjective standards, then the ld. CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law and therefore the order of the AO was erroneous. In addition, the ld. CIT should also prima facie show that the erroneous order caused prejudice to the Revenue and thereby twin conditions prescribed by Section 263 are satisfied. If even one condition is not satisfied, then it is open for the ld. CIT to usurp the revisionary jurisdiction u/s 263 of the Act. 13. In the given facts of the present case, as noted earlier, the AO had made due enquiries into the nature and mode of receipt of foreign assignment allowance as also about its taxability in India. The AO had also obtained declaration from the employer to the effect that the allowance in question was paid in relation to services rendered in Switzerland. The AO had also obtained requisite documentary evidence in support of fact that the applicable taxes on such allowance was paid in Switzerland. After examining the specific details furnished .....

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..... the assessee pursuant to his employment contract with a company which was tax resident in India. It may also be true that the contract of employment was executed in India. However for such fact alone it cannot be held that assessee s right to receive the entire remuneration accrued or deemed to accrue in India. Admittedly the assessee would not have been entitled to receive the allowance in question if the services were rendered or performed by the assessee in India. The essential pre-requisite for receiving the foreign assignment allowance was that the assessee was required to render his services in a foreign country viz., Switzerland in this case. In other words, it was only in the event that the assessee left the place where his employment contract was signed and he migrated to a foreign country for rendering services that such foreign assignment allowance was receivable by him. It is not in dispute that the amount in question was received by the assessee in connection with the services which the assessee actually rendered to his employer outside India. In the circumstances therefore before the said foreign assignment allowance was brought within the taxing net, it was necessar .....

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..... dia, and therefore liable to tax in India in terms of Section 5(2) of the Act. Accordingly, even where the assessee s make payments for import of goods and for which the payment is made by the Indian importer from his Indian bank account, the foreign supplier of the goods shall be liable to be taxed in India since the point of payment as well as receipt is in India and therefore the income is received in India. Such proposition is devoid of any merit. 18. It is also noted that the ld. CIT was factually incorrect in concluding that the payment of foreign assignment allowance was first received by the assessee in India and thereafter remitted to his TCC at his express directions. We note that there no material or evidence was brought on record by the ld. CIT to support this conclusion. As noted in the earlier Para, the modus operandi for receiving the said allowance through TCC was as follows: a) When an employee of IBM India Private Limited is sent on international assignment, Axis Bank upon instruction from IBM, issues a Travel Currency Card (TCC) to an employee who is sent to a foreign assignment. b) IBM maintains an Exchange Earners Foreign Currency (EEFC) Account with Deutsche B .....

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..... to 02.05.2014 @ 16.58% and 12.68% respectively. In light of these documentary evidences therefore the ld. CIT s finding that the foreign assignment allowance in question did not suffer any tax in Switzerland and therefore the case of assessee is distinguishable with that of Shri SudiptaMaity decided by this Tribunal reported in (2018) 172 ITD 94 (Kol), since the assessee has not shown his foreign assignment allowance was subjected to tax in Switzerland is therefore per se wrong. 21. In the impugned order the ld. CIT relying on the decision of the coordinate Bench of this Tribunal in the case of Tapas Kumar Bandyopadhyay (supra) held that the amount received by the assessee from his Indian employer which he had received in India was chargeable to tax in terms of Section 5(2) of the Act. According to ld. CIT, the judgment of the Hon ble Calcutta High Court reported in 397 ITR 406, overturning the decision of the Tribunal in that case was of no help to the assessee because the Hon ble High Court had reversed the decision of the Tribunal keeping in view the concession granted by the Board to the specific class of assessee s being sea-farers. Since the assessee in the present case was n .....

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..... e, the Tribunal has noted the following facts: 4. The brief facts of this issue are that the assessee was an employee in IBM India Private Limited and during the financial year 2012-13 was sent on short term assignment to Switzerland. He had stationed in Switzerland for 331 days during the year under consideration. Accordingly, his residential status for the year under consideration would be Non-Resident. During the year under consideration, the assessee had received the following emoluments from IBM :- a) Gross Salary received in India - ₹ 6,77,128/- and b) Foreign allowances on account of the international assignment received in Switzerland - ₹ 51,84,489/- IBM had effected TDS of ₹ 16,04,063/- on the entire emoluments paid to the assessee including the foreign allowances paid to the assessee u/s 192(1) of the Act. The assessee filed his return of income for the Asst Year 2013-14 declaring taxable income of ₹ 5,73,320/- (being the salary received in India alone) after claiming deduction of ₹ 1,01,405/- under Chapter VIA of the Act and claimed a refund of ₹ 15,58,060/- in his return of income. 4.1. During the financial year 2012-13, the assessee .....

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..... is Bank TCC for the period 30.11.1999 to 14.12.2015 - enclosed in apges 130 to 145 of paper book. d) List of various Nostro Accounts held by Axis Bank in various countries , out of this list, the relevant Nostro Account from where payments were made to assessee herein is ZurcherKantonal Bank (ZKB) from Account Number 0700-00037.370 - enclosed in Page 146 of paper book. e) Sample instructions given by IBM India Private Limited authorizing the Axis Bank, Bangalore to load currencies to the TCC of assessee - enclosed in pages 147 to 148 of paper book. 7.1. From the facts narrated above and on hearing the learned counsels of assessee as well as for the revenue, we find that:- a) The assessee is a non-resident individual and had rendered services outside India for which he has received foreign assignment allowance. b) IBM maintains money in foreign currency in its EEFC account maintained with Deutsche Bank, Bangalore. c) IBM instructs Axis Bank to issue Travel Currency Card to its employees who are sent on foreign assignment, which is loosely called Axis TCC. d) Axis Bank has maintained a Nostro Account with its Correspondent Banker (ZuercherKantonal Bank, Zurich). e) IBM transfers fund .....

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..... only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2 - For the removal of doubts, it is herby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 7.4. We find that the reliance placed by the ld AR on the Co-ordinate Bench decision of Jaipur Tribunal in the case of ADIT (International Taxation) vs Sri Kartik Vyas in ITA No. 375/JP/2012 dated 31.12.2014 is directly on this point which was rendered in the context of an IBM employee under similar circumstances. It was held as under:- 5. At the outset, the learned AR for the assessee reiterated the submissions made before the ld. CIT(A) and submitted that the appellant is an employee of IBM India Pvt. Ltd., was sent on an International assignment to Netherlands during the previous year 2007-08. The appellant received foreign allowances of ₹ 17,27,360/- outside India for the services rendered in Netherlands. As the appellant, qualified as a non-resident during the relev .....

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..... Chennai Tribunal. Hence the reliance placed on the decision of Chennai Tribunal supra does not come to the rescue of the assessee herein. 7.6. We also find that the Hon ble Karnataka High Court in the case of DIT (International Taxation) vs PrahladVijendra Rao reported in 198 Taxman 551 (Kar) and Hon ble Bombay High Court in the case of CIT vs Avtar Singh Wadhwan reported in 247 ITR 260 (Bom) had held that in the case of a non-resident, when services are rendered outside India , the accrual of income thereon happens outside India and hence the same cannot be brought to tax in India as per section 5(2) of the Act. As stated above, we find that the assessee was able to get control over the funds in his TCC for the first time only in Switzerland and not in India and first point of receipt also happens only in Switzerland. Hence it could be safely concluded that both accrual and receipt of funds happens outside India thereby making the said receipt to stay outside the ambit of taxability u/s 5(2) of the Act. 7.7. We also find that identical claim of exemption of the assessee was allowed by the ld AO for the Asst Year 2014-15 u/s 143(3) of the Act dated 10.12.2016 after detailed examin .....

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..... f the Act, which is reproduced as under:- 263. (1) The Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation 1.]-For the removal of doubts, it is hereby declared that, for the purposes of this subsection,- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer con .....

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..... proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 26. A reading of Section 263 of the Act and the Explanations as well as the amendments brought in by the Finance Act, 2015, w.e.f. 01.06.2015, by inserting Explanation 2, we note that Explanation -2, is a deeming provision and the well settled position of law is that while construing a deeming provision, it has to be strictly interpreted and that the legal fictions should not be stretched beyond the purpose for which they were enacted and should not extend that legitimate field (Raymond Vs. State of Chattisgarh AIR 20-07 SC 2854) and it should be kept in mind that deeming provision should be in respect of facts, from which legal consequences will follow. However, a legal consequence cannot be deemed[DCM Vs. State of Rajasthan (1996) 2 SCC 449. AIR 1996 SC 2930 (3 judges of Hon ble Supreme Court) and same view reiterated in State of Karnataka Vs. State of Tamil Nadu (2017) 3 SCC 362. So when we look at Explanation-2, we note that deeming fiction of law that the order of the Assessing Officer is deemed to be erroneous insofar a .....

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..... situation where inquiries or verifications should be made by reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Commissioner to revise each and every assessment order. The applicability of the clause is thus essentially contextual. It has to be the opinion of a prudent person instructed in law. The Hon ble Supreme Court in Maneka Gandhi Vs. Union of India reported in 1978 AIR (SC) 597 has laid down the law that a public authority should discharge his duties in a fair, just and reasonable, manner and the principle of due process of law was recognized by the Hon ble Supreme Court. Therefore the opinion of the Ld. CIT has to be in consonance with that of the well settled judicial principles and cannot be arbitrarily made discarding the judicial precedent on the subject. The opinion of the Ld. Pr. CIT has to be reasonable and that of a prudent person instructed in law. Moreover, it has to be kept in mind that an Explanation to substantive section should be read as to harmonize with and clear up any ambiguity in the main section and should not be so construed as to widen the ambit of the section as held by .....

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..... provisions, the AO recorded the specific finding that the assessee was in India only for 16 days and the rest of the period he was in assignment to Switzerland and had received foreign assignment allowance . In such a scenario, the finding recorded by the AO, cannot be termed as a case of no-enquiry at all in respect of foreign assignment allowance of the assessee. Therefore, the ld. CIT s view that the action of the AO in allowing the amount of ₹ 42,97,092/- as exempt from taxation is in violation of the provision of sec. 5(2) of the Act without any enquiry, is factually incorrect. We note that this issue was considered by the AO and after enquiry he has taken a view to allow the claim of the assessee that this foreign assignment allowance is not taxable in India. We therefore hold that the AO s view cannot be held to be erroneous for want of enquiry. 30. We further find that when confronted with the reasons set out in the SCN, the assessee had led before the ld. CIT sufficient documentary evidence which proved that the SCN had proceeded on assumption of incorrect facts and wrong interpretation of applicable legal provisions. It was also established before the ld. CIT that .....

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