Ravindra Vamanrao Desale, Pune V. Deputy Commissioner of Income-tax, Circle - 13, Pune

CO 04/PUN/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2256 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-11-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Double taxation relief; Tangible material; Reason to believe
• Section: 143(3); 143(1); 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, P UNE (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT(KZ) . / ITA NO.1672/PUN/2019 / ASSESSMENT YEAR: 2007-08 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 13, PUNE. . APPELLANT V/S RAVINDRA VAMANRAO DESALE, FLAT NO.10, SNEHA AVENUE, DR. KETKAR ROAD, OPP. KALMADI HIGH SCHOOL, ERANDWANE, PUNE 411016. PAN : AHWPD3760B. RESPONDENT . / CO NO.04/PUN/2020 (ARISING OUT OF ITA NO.1672/PUN/2019) / ASSESSMENT YEAR : 2007-08 RAVINDRA VAMANRAO DESALE, FLAT NO.10, SNEHA AVENUE, DR. KETKAR ROAD, OPP. KALMADI HIGH SCHOOL, ERANDWANE, PUNE 411016. PAN : AHWPD3760B. . CROSS-OBJECTOR. V/S THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 13, PUNE. . APPELLANT IN THE APPEAL. ASSESSEE BY : SHRI RAJENDRA AGIWAL. REVENUE BY : SHRI SUDHENDU DAS. / DATE OF HEARING : 25.11.2020 / DATE OF PRONOUNCEMENT : 26.11.2020 / ORDER PER P.M. JAGTAP, VP : 1. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 3 PUNE DATED 06.0 8.2019 AND THE 2 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 SAME IS BEING DISPOSED OF ALONGWITH THE CROSS-OBJECTION FILED BY THE ASSESSEE BEING C.O.NO.4/PUN/2020. 2. THE MAIN GRIEVANCE OF THE REVENUE AS PROJECTED IN GROUND NO.1 IS THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN TREATING THE RE-ASSESSME NT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER TO BE INVALID. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO FILE D HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.07.2007 DEC LARING TOTAL INCOME AT NIL. ALTHOUGH, THE SAID RETURN WAS INITIALLY PROCESSED BY THE ASSES SING OFFICER U/S 143(1) OF THE ACT, THE ASSESSMENT WAS SUBSEQUENTLY RE-OPENED BY HIM AFTER RECORDING THE FOLLOWING REASONS : 2. IN THIS CASE THE ASSESSEE CLAIMED SALARY EARNE D BY HIM IN UK OF RS.3287834/- AS NON TAXABLE IN INDIA AS PER CLAUSE 15(1) OF UK DTAA. WHILE CLAIMING THE SALARY EARNED IN UK OF RS.32,87,834/- AS NON-TAXABLE IN INDIA, HE IGNORED THE CLAUSE 15(2)(B) OF THE DTAA. AS PER THE SAID PROVISION WHICH READS AS UNDER : ARTICLE 15(2), NOTWITHSTANDING THE PROVISIONS OF P ARAGRAPH 1, REMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EMPLOYMENT EXERCISED IN THE OTHER CONTRACTING STATE SHALL BE TAXABLE IN THE FIRST-MENTIONED STATE IF: (A) THE RECIPIENT IS PRESENT IN THE OTHER CONTRACTI NG STATE FOR A PERIOD OR PERIODS NOT EXCEEDING IN THE AGGREGATE 183 DAYS IN ANY 12 MONTHS PERIOD; AND (B) THE REMUNERATION IS PAID BY, OR ON BEHALF OF, A N EMPLOYER WHO IS NOT A RESIDENT OF THE OTHER CONTRACTING STATE; AND (C) THE REMUNERATION IS NOT BORNE BY A PERMANENT ES TABLISHMENT OR FIXED BASE WHICH THE EMPLOYER HAS IN THE OTHER CONT RACTING STATE. IN VIEW OF THIS ASSESSEES CLAIM THAT SALARY EARNED BY HIM OF RS.32,87,834/- IN UK IS NON-TAXABLE IN INDIAN AS PER ARTICLE 15(1) OF THE UKDTAA, WHICH READS AS UNDER : DEPENDENT PERSONAL SERVICES :- 1. SUBJECT TO THE P ROVISIONS OF ARTICLE 16, 18, 19, 20 AND 21, SALARIES, WAGES AND OTHER SIMILAR R EMUNERATION DERIVED BY A RESIDENT OF A CONTRACTING STATE IN RESPECT OF AN EM PLOYMENT SHALL BE TAXABLE ONLY IN THAT STATE UNLESS THE EMPLOYMENT IS EXERCIS ED IN THE OTHER CONTRACTING STATE. IF THE EMPLOYMENT IS EXERCISED, SUCH REMUNERATION AS DERIVED THERE FROM MAY BE TAXED IN THE OTHER CONTRA CTING STATE.' IS INADMISSIBLE. THEREFORE, I HAVE REASON TO BELIEVE THAT THE SALARY OF 3 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 RS.32,87,834/- EARNED BY THE ASSESSEE AND CLAIMED B Y HIM AS NOT TAXABLE IN INDIA HAS ESCAPED ASSESSMENT. IT IS THEREFORE PROPOSED TO ASSESSEE THE SAID SALAR Y INCOME BY ISSUING NOTICE U/S 148 FOR THE A.Y. 2007-08. ISSUE U/S 148 OF THE I.T. ACT, 1961. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A DETA ILED SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF HIS CASE TH AT THE AMOUNT OF RS.32,87,834/- PAID TO HIM BY IBM UK LTD., WAS NEITHER RECE IVED NOR DEEMED TO BE RECEIVED OR AROSE IN INDIA AND THE SAME THEREFORE W AS LIABLE TO BE TAXED ONLY IN UNITED KINGDOM AND NOT IN INDIA. THE ASSESSING OFFICER, HO WEVER, DID NOT FIND MERIT IN THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND PROCEEDED TO COMPLETE THE ASSESSMENT U/S 143(3) R.W.S 148 OF THE AC T VIDE ORDER DATED 30.11.2012 DETERMINING THE TOTAL INCOME OF THE ASSESSEE CH ARGEABLE TO TAX IN INDIA AT RS.32,87,834/-. 5. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 148 OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFO RE LD.CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS DISPUTING TH E ADDITION OF RS.32,87,834/- MADE THEREIN ON MERIT. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE, THE LD.CIT(A) FOUND MERIT IN THE P RELIMINARY ISSUE RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ASSE SSMENT MADE BY THE ASSESSING OFFICER U/S 143(3) / 147 OF THE ACT AND ACCORDIN GLY THE SAID ASSESSMENT WAS CANCELLED BY HIM FOR THE FOLLOWING REASONS G IVEN AT PARA NO.4.3 TO 4.7 OF HIS IMPUGNED ORDER : 4.3. DECISION : THE OBSERVATIONS O F THE AO , SUBMISSIONS OF THE APPELLANT AND TH E M ATE R IAL ON RECORD HAVE BEEN CONSIDERED . 4.4. IN H I S CASE , IT IS SEEN THAT THE AO I S SUED NOTICE U/S 148 OF T HE AC T F O R T HE FOLLOWING REASON : IN THIS CASE THE ASSESSEE CLAIMED SALARY EARNED BY HIM IN UK OF RS.32,87,834/- AS NON TAXABLE IN INDIA AS PER CLAUS E 15(1) UK DTAA. WHILE CLAIMING THE SALARY EARNED IN UK OF RS.32,87, 834/- AS NON-TAXABLE 4 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 IN INDIA HE IGNORED THE CLAUSE 15(2)(B) OF THE DTAA . 4 . 5 TR E E C ASE OF T HE APPELLANT IS THA T THE AO HA D ISSUED NOTICE UND E R S EC T IO N 148 OF THE ACT BASED ON FORM 16 AND RETURN OF INCOME ALONG WITH CO M PUTATI ON AND N OTES FIL E D BY THE APPELLANT WITH THE LEARNED ASSESSING OFFIC ER. H OWEVER, T H E R E WERE NO TANGIBLE FRESH DOCUMENTS AVAILABLE ON RECORDS WITH T HE L EARN ED ASSESSING OFFICER TO REOPEN THE CASE UNDER S E CT I ON 147 OF THE ACT . T HE C A SE WAS REOPENED UNDE R SECTION 147 BASED ON THE SUBMISSIONS FILED BY US O N JULY, 07, 2010, IN RESPONSE TO THE NOTICE ISSUED BY THE LEARN ED ASSESSING OFFICER ON JUNE 18, 2010 UNDER SECTION 154 OF THE ACT, WITHOUT ANY FRESH REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 4.6 THE APPELLANT HAS RELIED UPON THE DECISION OF HONBLE ITAT PUNE DATED 10- NOV-2017 IN THE CASE OF SANDVIK SYSTEM DEVELOPMENT AB VS. DCIT, TAXMANN.COM 55 (2017). THE FACTS OF THE CASE WERE THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING INCOME OF RS. NIL ON 30.09.2008. NOTICE UNDER SECTION 148 OF THE ACT ON 28.03.2013 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE I TS LETTER DATED 30.04.2013 SUBMITTED THAT THE ORIGINAL RETURN OF INCOME MAY BE CONSIDERED AS FILED IN RESPONSE TO THE SAID NOTICE. THE ASSESSEE IN THE CO MPUTATION OF TOTAL INCOME, COPY OF WHICH PLACED AT PAGE 2 OF THE PAPER BOOK, HAD IN THE NOTE GIVEN A DECLARATION IN RESPECT OF SUCH RECEIPTS AND HAD POINTED OUT THAT T HE SAME DO NOT FALL WITHIN AMBIT OF ROYALTY OR FEES FOR TECHNICAL SERVICES. ON THESE FACTS, THE HON'BLE ITAT HELD AS GIVEN BELOW : '16. IN VIEW OF THE ABOVE SAID DECLARATIONS MADE BY THE ASS ESSEE WHICH HAS ALSO BEEN CONSIDERED BY THE PUNE BENCH OF TRIBUNAL IN SISTER CONCERN OF THE ASSESSEE I.E., SANDVIK INFOR MATION TECHNOLOGY AB, THOUGH FOR ASSESSMENT YEAR 2005-06, WE HOLD THA T IN THE ABSENCE OF ANY TANGIBLE MATERIAL ESTABLISHING ESCA PEMENT OF INCOME IN THE HANDS OF ASSESSEE, THERE IS NO MERIT IN THE EXERCISE C{ INVOKING OF RE- ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE ESCAPEMENT OF INCOME SHOULD HAVE A LIVE LINK. THERE IS NO MERIT IN (HE STAND OF AUTHORITIES BELOW THAT IN THE PRESENT CASE, WHERE THE ASSESSMENT ORDER WAS PASSED UNDER S ECTION 143(1) OF THE ACT, THEN THE ASSESSING OFFICER HAD NO ACTIO N TO LOOK AT OR TO CONSIDER THE SAME. UNDER THE PROVISIONS OF THE ACT , IT IS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO FINDING ON T HE BASIS OF TANGIBLE MATERIAL TO ESTABLISH HIS CASE OF REASON T O BELIEVE OF ESCAPEMENT OF INCOME,' IN THE ABSENCE OF 'WHICH, RE - ASSESSMENT PROCEEDINGS ARE INVALID AND BAD IN LAW. ACCORDINGLY , WE HOLD SO AND CANCEL THE SAME. THE CONSEQUENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ALSO DOES NOT STAND. THUS, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALLOWED AND THE BALA NCE GROUNDS OF APPEAL BECOME ACADEMIC IN NATURE. 17. IN THE RESULT, APPEAL OF THE ASSESSEE I S ALLOWED. 4.7. IN THE INSTANT CASE ALSO, THE APPELLANT HAS F URNISHED COPY OF RETURN OF INCOME ALONG WITH COMPUTATION OF INCOME (PLACED AT PB 50-5 2), WHEREIN THE APPELLANT HAS DECLARED IN THE N OTES AS GIVEN BELOW : THE AMOUNT OF RS.18,85,763/- OUT OF OTHER ALLOWANC ES OF RS.24,17,550/- IN THE FORM 16 REPRESENT THE ALLOWANCES RECEIVED BY THE ASSESSEE OUTSIDE INDIA FOR SERVICES RENDERED IN UK. THEREFORE, AS T HE ASSESSEE QUALIFIES AS NON-RESIDENT, THE SAME IS NOT TAXABLE IN INDIA. 5 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 THEREFORE, FOLLOWING THE DECISION OF THE HONBLE PU NE ITAT IN THE CASE OF SANDVIK SYSTEM DEVELOPMENT (SUPRA), IT IS HELD THAT RE-ASSE SSMENT PROCEEDINGS ARE INVALID AND BAD IN LAW. THE CONSEQUENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ALSO DOES NOT STAND. ACCORDINGLY, GROUND N O.1 AND 2 OF THE APPELLANT ARE ALLOWED. 6. KEEPING IN VIEW OF THE DECISION RENDERED BY HIM ON THE P RELIMINARY LEGAL ISSUE CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFIC ER U/S 143(3) / 147 OF THE ACT, THE LD.CIT(A) DID NOT ADJUDICATE UPON THE OTH ER ISSUES RAISED BY THE ASSESSEE CHALLENGING THE ADDITION MADE BY THE ASSESSING O FFICER ON MERIT BY TREATING THE SAME AS ACADEMIC. AGAINST THE ORDER OF LD.C IT(A), REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL WHILE THE ASSESSEE H AS ALSO FILED HIS CROSS OBJECTIONS. 7. I HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND ALSO PE RUSED THE RELEVANT MATERIAL AVAILABLE ON THE RECORD. IT IS OBSERVED THAT THE RE-OPENING OF ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT FOR THE YEAR UNDER CONSIDERATION WAS HELD TO BE INVALID BY THE LD.CIT(A) VIDE HIS IMPUGNED ORD ER AS THE SAME WAS BASED ON THE SAME SET OF FACTS AND MATERIAL AVAILABLE ON THE RECORD BEFORE THE ASSESSING OFFICER AND THERE WAS NO NEW TANGIBLE MATER IAL THAT HAD COME TO THE POSSESSION OF THE ASSESSING OFFICER ON THE BASIS OF WHI CH THE ASSESSMENT WAS RE-OPENED. A PERUSAL OF THE REASONS RECORDED BY T HE ASSESSING OFFICER ALSO CLEARLY SHOWS THAT THE ASSESSMENT WAS RE-OPENED BY H IM ON THE BASIS OF SAME SET OF FACTS AND THE MATERIAL WHICH WAS AVAILABLE ON RECOR D AND THERE WAS NO NEW TANGIBLE MATERIAL THAT HAD COME TO HIS POSSESSION WHIC H FORMED THE BASIS OF RE-OPENING. EVEN THE LD. D.R. HAS NOT BEEN ABLE TO DISP UTE THIS POSSESSION WHICH IS CLEARLY EVIDENT FROM THE REASONS RECORDED BY TH E ASSESSING OFFICER. HE HAS ALSO NOT BEEN ABLE TO POINT OUT ANY SUCH FRESH TANG IBLE MATERIAL THAT HAD COME TO THE POSSESSION OF THE ASSESSING OFFICER WHICH FORME D THE BASIS OF RE- OPENING. IN THE CASE OF SANDVIK SYSTEM DEVELOPMENT AB VS. DCIT REPORTED IN 6 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 TAXMAN.COM 55 (2017) RELIED UPON BY THE LD.CIT(A) IN HIS IMPU GNED ORDER, IT WAS HELD BY THIS TRIBUNAL THAT UNDER THE RELEVANT PRO VISIONS OF THE ACT, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO FINDING ON THE BASIS OF TANGIBLE MATERIAL TO ESTABLISH HIS CASE OF REASON TO BELIEVE OF ESCAPEMENT OF INCOME, IN THE ABSENCE OF WHICH RE-ASSESSMENT PROCEEDINGS ARE INVALID AND BAD-IN-LAW. IN MY OPINION, THE RATIO OF THE SAID DECISION OF T HIS TRIBUNAL IS CLEARLY APPLICABLE IN THE FACTS OF THE PRESENT CASE AND T HE LD.CIT(A) WAS FULLY JUSTIFIED IN HOLDING THE RE-ASSESSMENT PROCEEDINGS TO BE IN VALID BY RELYING ON THE SAID DECISION SINCE THERE WAS NO FRESH TANGIBLE MATE RIAL WHICH HAD COME TO THE POSSESSION OF THE ASSESSING OFFICER AND WHICH FORMED TH E BASIS OF RE- OPENING. I THEREFORE UPHOLD THE IMPUGNED ORDER OF THE LD .CIT(A) ON THIS ISSUE AND DISMISS THIS APPEAL FILED BY THE REVENUE. 8. AS A RESULT OF THE DECISION RENDERED BY US UPHOLDING THE IMPUGNED ORDER OF THE LD.CIT(A) CANCELLING THE RE-ASSESSMENT MADE BY THE ASSESSING OFFICER BY TREATING THE SAME AS INVALID AND DISMISSING THE APPEAL OF THE REVENUE, THE CROSS-OBJECTIONS FILED BY THE ASSESSEE HAS BECOME INFRUCT UOUS AS AGREED EVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE. ACCORDINGLY, THE SAME IS D ISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS-OBJECTION FILED BY THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF NOVEMBER, 2020. SD/- ( P.M. JAGTAP ) VICE PRESIDENT / PUNE; / DATED : 26 TH NOVEMBER, 2020. YAMINI 7 ITA NO.1672/PUN/2019 & CO NO.4/PUN/2020 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-3, PUNE. 4. THE PR.CIT-2, PUNE. 5 . , , / DR, ITAT, SMC PUNE; 6. ! / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.