Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 4739 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 5 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-08-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I1
Next Hearing Date
29-06-2017
Assessment Year
2004-2005
Appeal Filed On
14-03-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 1 , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM ITA NO. 1587 /DEL/201 4 : ASSTT. YEAR : 2004 - 05 ITA NO. 1588/DEL/2014 : ASSTT. YEAR : 2005 - 06 M/S ORACLE INDIA PVT. LTD., (SUCCESSOR IN INTEREST FOR SUN MICROSYSTEMS INDIA PVT. LTD.), F - 01/02, SALCON RAS VILAS, D - 1, DISTRICT CENTRE, SAKET, NEW DELHI - 110017 VS ASSTT. COMM ISSIONER OF INCOME TAX, RANGE - 13 , NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A ECS7710C AS SESSEE BY : SH. K. M. GUPTA, DAKSH S. BHARDWAJ, SH. ANUBHAV JAIN, ADVS. & NAVEEN DHAMIJA, CA REVENUE BY : SH. AMRENDER KUMAR, CIT DR & SH. KUMAR PRANAV, SR. DR DATE OF HEARING : 29 .08 .201 7 DATE OF PRONOUNCEMENT : 31 . 0 8 .201 7 ORDER PER N. K. SAINI, AM: THESE TWO APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S EACH DATED 27.12.2006 PASSED BY THE AO U/S 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 . SINCE THE ISSUES INVOLVED ARE COMMON AND THE APPEALS WERE HEARD TOGETHER SO THESE ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE AND BREVITY. ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 2 3. AT THE FIRST INSTANCE WE WILL DEAL WITH THE APPEAL IN ITA NO. 1587/DEL/2014 FOR THE ASSESSMENT YEAR 2004 - 05. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER ('LD. AO ') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT PURSUANT TO THE DIRECTIONS OF HONOURABLE DISPUTE RESOLUTION PANEL (HON'BLE DRP') IS BA D IN LAW AND VOID AB - INITIO. 2. THE ASSESSMENT ORDER PASSED BY THE LD. AO (FOLLOWING THE DIRECTIONS OF THE H ON'BLE DRP) WAS VOID AB - INITIO AND IS LIABLE TO BE QUASHED ON ACCOUNT OF BEING BARRED BY LIMITATION DUE TO NON - ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT WITHIN THE PRESCRIBED TIME LIMIT, I.E. SEPTEMBER 30, 2012, IN THE INSTANT CASE. 3. THE LD. AO HAS GROSSLY ERRED IN FAILING TO DISPOSE OFF THE OBJECTION RAISED BY THE APPELLANT IN THE ASSESSMENT ORDER WITH RESPECT TO THE FACT THAT THE SUBJECT REASSESSMENT PROCEEDINGS ARE BARRED BY LIMITATION ON ACCOUNT OF NON - SERV ICE OF NOTICE UNDER SECTION 143(2 ) OF THE ACT, WITHIN THE PRESCRIBED TIME LIMIT AND ACCORDINGLY, THIS ORDER IS LIABLE TO BE QUASHED. 4. THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT SUFFERS FROM JURISDICTIONAL ERROR AND IS VOID AB INITIO AS THE LD. AO HAS ERRED IN RELYING O N THE SHOW CAUSE NOTICE ('SCN') ISSUED BY DIRECTORATE OF REVENUE INTELLIGENCE ('DRI') WHICH IS NOT A TANGIBLE MATERIAL IN FORMING THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 5. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE APPELLANT SUB MITS THAT HON'BLE DRP HAS ERRED IN STATING THAT HON'BLE ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 3 DRP IS NOT EMPOWERED TO ADJUDICATE ON THE VALIDITY OF ASSESSMENTS. 6. THE ASSESSMENT ORDER PASSED BY THE LD. AO IN PURSUANCE TO THE DIREC TIONS ISSUED BY THE HON'BLE DRP IS A VITIATED ORDER AS THE HON 'BLE DRP ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING PART OF THE TRANSFER PRICING (TP) ADDITIONS MADE BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 13 ('LD. AO') / LEARNED ADDITIONAL COMMISSIONER OF INCOME TA X, TRANSFER PRICING OFFICER - II (3), NE W DELHI ('LD.TPO). 7. THE LD. AO / LD. TPO AND THE HON'BLE DRP ERRED IN IGNORING THE FACT THAT THE REFERENCE MADE U/S 143(2) OF THE ACT SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO DID NOT RECORD ANY REASONS IN THE DRAFT ASSESSMENT ORDER BASED ON WHICH IT WAS CONCLUDED THAT IT WAS 'NECESSARY OR EXPEDIENT' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE ARM'S LENGTH PRICE ('ALP'), AS IS REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 8. THE LD. AO IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE DRP E RRED BOTH ON FACTS AND IN LAW IN ENHANCING THE APPELLANT'S INCOME BY INR 19,266,487. THE LD. AO / HON'BLE DRP ERRED IN HOLDING THAT THE APPELLANT HAS UNDER BILLED / UNDERCHARGED ITS ASSOCIATED ENTERPRISE ('AE') IN RESPECT OF THE INTERNATIONAL TRANSACTION P ERTAINING TO MARKETING AND SOFTWARE DEVELOPMENT SEGMENT. IN DOING SO, THE HON'BLE DRP HAS GROSSLY ERRED IN AGREEING WITH THE LD. TPO'S ACTION OF; 8.1 NOT APPRECIATING THE FACT THAT THE OPERATING EXPENSES AMOUNTING TO INR 171,965,452 / - , BASED ON WHICH THE DIRECTORATE OF REVENUE INTELLIGENCE ('DRI') HAS COMPUTED THE ALLEGED UNDERCHARGE, PERTAINS TO OTHER SERVICES AND DO NOT ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 4 INCLUDE ANY COST TOWARD MARKETING SERVICES AND SOFTWARE DEVELOPMENT SERVICES; 8.2 ADOPTING AN INCORRECT BASIS OF ALLOCATING THE OPERATI NG EXPENSES PERTAINING TO 'SERVICES SEGMENT' TO MARKETING AND SOFTWARE DEVELOPMENT SEGMENT WHEN NO SUCH ALLOCATION IS WARRANTED; 8.3 SOLELY PLACING RELIANCE ON THE OBSERVATIONS MADE BY THE DRI AND THE STATEMENTS/ INFORMATION OBTAINED FROM THE EMPLOYEES DUR ING THE COURSE OF THE INVESTIGATION AND IN DOING SO, COMPLETELY DISREGARDING THE AUDITED FINANCIAL STATEMENTS AND OTHER FACTUAL DETAILS SUBMITTED BY THE APPELLANT AND IGNORING THE CERTIFICATE FROM AN INDEPENDENT CHARTERED ACCOUNTANT SUBMITTED BY THE APPELL ANT WHILE VOLUNTARY DISCLOSING THE ADDITIONAL INCOME FROM UNDERCHARGES; 8.4 NOT APPRECIATING THE FACT THAT ALL COSTS HAVE BEEN APPROPRIATELY CHARGED BACK WITH A MARK - UP TO THE AE UNDER RESPECTIVE BUSINESS SEGMENTS AND THERE ARE NO FURTHER UNDERCHARGES OVE R AND ABOVE WHAT HAS BEEN VOLUNTARILY DISCLOSED BY THE APPELLANT IN APRIL 2009; AND 8.5 ENHANCING THE INCOME OF THE SOFTWARE DEVELOPMENT SEGMENT BY APPLYING A HIGHER MARK - UP OF 18% IN RESPECT OF THE ALLEGED UNDERCHARGES AS WELL AS THE ADDITIONAL INCOME VO LUNTARILY DISCLOSED BY THE APPELLANT FOR THE SOFTWARE DEVELOPMENT SEGMENT INSTEA D OF A MARK - UP OF 5% APPLICABLE FOR THE SAID SEGMENT AS PER THE TERMS OF THE RESEARCH & DEVELOPMENT AGREEMENT . 8.6 (WITHOUT PREJUDICE TO THE APPELLANT'S CONTENTIONS THAT THERE ARE NO UNDERCHARGES UNDER THE MARKETING AND SOFTWARE DEVELOPMENT SEGMENT), ADOPTING AN ADHOC BASIS OF ATTRIBUTING THE ENTIRE AMOUNT OF ALLEGED UNDERCHARGE TO THE SOFTWARE DEVELOPMENT SEGMENT AND APPLYING A HIGHER MARK - ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 5 UP OF 18% INSTEAD OF A LOWER MARK - UP OF 10% APPLICABLE FOR MARKETING SEGMENT. 8.7 (WITHOUT PREJUDICE TO THE APPELLANT'S CONTENTIONS THAT THERE ARE NO UNDERCHARGES UNDER THE MARKETING AND SOFTWARE DEVELOPMENT SEGMENT), COMMITTING A FACTUAL ERROR OF INR 63,713/ - IN COMPUTING THE TOTAL TP ADJUS TMENT IN RESPECT OF THE SAID SEGMENT. 9 . THE LD. AO / HON'BLE DRP ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CLAIM FOR SET OFF OF LOSSES MADE BY THE APPELLANT FOR INR 55,656,046/ - ARISING ON ACCOUNT OF OVERCHARGES REPORTED BY THE APPELLANT IN THE MAR KETING SEGMENT . 10 . THE LD. AO IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE DRP ERRED BOTH ON FACTS AND IN LAW IN ENHANCING THE APPELLANT'S INCOME BY INR 96,641, 560/ - . THE LD. AO / HON'BLE DRP ERRED IN ALLEGING UNDER BILLING / UNDERCHARGES IN THE WARRANT Y SEGMENT. IN DOING SO, THE HON'BLE DRP HAS GROSSLY ERRED IN AGREEING WITH THE LD. TPO'S ACTION OF: 10.1 SOLELY PLACING RELIANCE ON THE OBSERVATIONS MADE BY THE DRI IN ITS SHOW CAUSE NOTICE AND NOT APPRECIATING THE FACT THAT DRI HAS ADOPTED AN INCORRECT B ASIS FOR COMPUTING THE COST BASE TO BE USED FOR COMPUTING THE AMOUNT OF SPARES TO BE CHARGED BACK TO THE AE UNDER WARRANTY SEGMENT; 10.2 NOT APPRECIATING THE ACCOUNTING POLICY CONSISTENTLY FOLLOWED BY THE APPELLANT FOR COMPUTING THE COSTS OF SPARES ALLOCA BLE TO THE WARRANTY SEGMENT; 10.3 (WITHOUT PREJUDICE TO THE ABOVE GROUNDS), FAILING TO APPRECIATE THAT EVEN WHERE THE BASIS ADOPTED BY DRI IS USED FOR COMPUTING THE COST BASE FOR THE WARRANTY SEGMENT, ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 6 APPROPRIATE DEDUCTION SHOULD BE MADE FOR VALUE OF DEFE CTIVE SPARE PARTS EXPORTED BY THE APPELLANT SO AS TO ARRIVE AT THE CORRECT VALUE OF SPARES CONSUMED FOR WARRANTY. 10.4 (WITHOUT PREJUDICE TO THE ABOVE GROUNDS), NOT ACCEPTING THE FACT THAT IF THE BASIS ADOPTED BY THE DRI FOR COMPUTING THE ALLEGED UNDERCHA RGES IS ADOPTED, THEN THE APPELLANT SHOULD BE ALLOWED TO CLAIM THE DEDUCTION FOR THE SPARE PARTS CONSUMED. 11 THE LD. AO / HON'BLE DRP ERRED BOTH ON FACTS AND IN LAW IN DISALLOWING THE ENTIRE AMOUNT OF EXPENSE RECORDED AS ASIA ESCALATED CHARGES ('AEC') WITH RESPECT TO ESCALATED TECHNICAL SUPPORT PROVIDED BY THE APPELLANT'S AE, ALLEGING THAT THE SAME DO NOT SATISFY THE ARM'S LENGTH PRICE ENVISAGED UNDER SECTION 92CA OF THE ACT. IN DOING SO, THE HON'BLE DRP HAS GROSSLY ERRED IN AGREEING WITH THE LD. TPO'S ACTION OF: 11.1 UNDERTAKING THE FRESH REVIEW OF THE TRANSACTION, WHICH HAS BEEN ANALYZED AND ACCEPTED BY THE LD. TPO'S PREDECESSOR AT THE TIME OF ORIGINAL ASSESSMENT COMPLETED IN THE ASSESSMENT ORDER DATED DECEMBER 20, 2006; 11.2 DISREGARDING TRANSACTION AL NET MARGIN METHOD ( TNMM ) AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE SAID TRANSACTION AND INSTEAD, APPLYING THE COMPARABLE UNCONTROLLED PRICE METHOD ('CUP') IN CONTRAVENTION OF THE PROVISIONS OF RULE 10B OF THE INCOME TAX RULES, 1962 ('THE RUL ES') MERELY BASED ON THE PRESUMPTION THAT THE ALP OF THE SAID INTERNATIONAL TRANSACTION IS 'NIL'; 11.3 DISREGARDING THE ACTUAL EXPENSE OF INR 24,145,433/ - INCURRED BY THE APPELLANT AS AEC AND WHICH WAS DETERMINED AS ALP IN THE TP DOCUMENTATION MAINTAINED BY THE APPELLANT ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 7 IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE RULES; 11.4 FAILING TO ACKNOWLEDGE THE BUSINESS EFFICACY OF THE SUBJECT TRANSACTION AND BENEFITS RECEIVED BY THE APPELLANT FROM THE SAME AND THEREBY, CHALLENGING THE COMMERCIAL WISDOM OF THE APPELLANT IN MAKING SUCH PAYMENTS WHILE PASSING THE ORDER IN CONTRAST WITH THE RELEVANT JUDICIAL PRONOUNCEMENTS IN THIS REGARD; 11.5 DISREGARDING THE DULY EXECUTED INTERCOMPANY AGREEMENT, PROCESS CHART AND THE EXPLANATION SUBMITTED BY THE AP PELLANT EXPLAINING THE NATURE AND PURPOSE OF THE SAID TRANSACTION. 11.6 (WITHOUT PREJUDICE TO ABOVE GROUNDS), DISREGA RDING THE FACT THAT THE SAID AEC HAVE NOT BEEN CHALLENGED BY THE INCOME - TAX AUTHORITIES DURING THE COURSE OF SURVEY PROCEEDINGS UNDER SECT ION 133A OF THE ACT AS IS EVIDENT FROM THE SHOW CAUSE NOTICE DATED OCTOBER 19,2010 . 12 THE LD. AO HAS ERRED IN INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAV ES LEAVE TO ALTER, AMEND OR WITHDRAW ALL OR ANY OBJECTIONS HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE HEARING. 4 . AT THE FIRST INSTANCE, THE LD. COUNSEL FOR THE ASSESSEE ARGUED GROUND NOS. 2 & 3 ONLY , THE CONTENTION OF THE ASSESSEE IN THESE GROUNDS IS THAT THE ASSESSMENT ORDER PASSED BY THE AO IS BARRED BY LIMITATION DUE ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 8 TO NON - ISSUANCE OF NOTICE U/S 143(2) OF THE ACT WITHIN THE PRESCRIBED TIME LIMIT I.E. SEPTEMBER 30, 2012, THEREFORE, IT IS VOID AB - INITI O . 5 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.04.2004 DECLARING AN INCOME OF RS.1,25,07,570/ - AND A BOOK PROFIT U/S 115JB OF THE ACT OF RS.1,35,31,976/ - . SUBSEQUENTLY, THE ASSESSEE FILE D REVISED RETURN OF INCOME ON 30 .11.2004 DECLARING INCOME AT RS.1,21,45,240/ - AND REVISED BOOK PROFIT AT RS.13,76,785/ - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY AS THE INTERNATIONAL TRANSACTIONS EXCEEDED RS.5 CRORES. THE AO FRAMED THE ASSESSMENT VIDE ORDER DATED 27.12.2006 AT A N INCOME OF RS. 16,97,28,254/ - BY MAKING THE VARIOUS ADDITIONS AND WORKED OUT A TOTAL TAX PAYABLE AT RS.7,08,86,516/ - AND THE TAX PAYABLE U/S 115JB OF THE ACT AT RS.10,40,271/ - . THEREAFTER, THE AO ISSUED REASSESSMENT NOTICE U /S 148 OF THE ACT ON 29.03.2011, I N RESPONSE, THE ASSESSEE FILED THE RETURN OF INCOME ON 28.04.2011. THE ASSESSEE ALSO FILED A LETTER DATED 28.04.2011 AND RAISED CERTAIN OBJECTIONS AGAINST ISSUING OF NOTICE U/S 148 R.W.S. 147 OF THE ACT BY STATING THAT THE REASON WHICH LED TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT , HAD NOT BEEN INDICATED IN THE NOTICE U/S 148 OF THE ACT AND THAT NO INCOME OF THE ASSESSEE IN RESPECT OF THE ASSESSMENT YEAR UNDER CONSIDERATION HAD OR COULD BE SAID TO HAVE ESCAPED ASSESSMENT. IT HAS ALSO BEEN STATED THAT THE RETURN OF INCOME PURSUANT TO THE NOTICE U/S 148 OF THE ACT WAS FILED UNDER PROTEST. THE AO ISSUED THE NOTICE U/S 143(2) OF THE ACT ON 17.12.2012. THE ASSESSEE FILED TECHNICAL OBJECTION VIDE ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 9 LETTER DATED 01.03.2013 BEFORE THE AO CHALLE NGING THE JURISDICTION TO REASSESS , ON THE GROUND THAT STATUTORY NOTICE U/S 143(2) OF THE ACT HAD BEEN ISSUED LATE. THE ASSESSEE ALSO RAISED THE SAME OBJECTION BEFORE THE LD. DRP WHO DISMISSED THE SAME BY OBSERVING IN PARA 3.3 OF THE ORDER DATED 26.12.2013 WHICH READ AS UNDER: WE HAVE CONSIDERED THESE GROUNDS VERY CAREFULLY. AS PER PROVISIONS OF SECTION 144C(5), THE DRP SHALL, IN A CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB - SECTION (2), ISSUE SUCH DIRECTIONS AS IT THINKS FIT FOR THE GUIDANCE OF THE AO TO ENABLE HIM TO COMPLETE THE ASSESSMENT. AS PER SECTION 144C(8), THE DRP MAY CONFIRM, REDUCE OR ENHANCE THE VARIATION PROPOSED IN THE DRAFT ORDER. IN OTHER WORDS, THE DRP IS EMPOWERED TO GIVE DIRECTIONS ONLY WITH REFERENCE TO VARIATIONS PROPOSED IN THE DR AFT ASSESSMENT ORDER WITH REFERENCE TO THE RETURNED INCOME. DRP IS NOT EMPOWERED TO ADJUDICATE THE VALIDITY OF ASSESSMENT. THEREFORE, WE FIND OURSELVES UNABLE TO DEAL WITH THESE THREE GROUNDS OF OBJECTIONS, HAVING NO JURISDICTION. 6 . NOW THE ASSESSEE I S IN APPEAL . THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED A SYNOPSIS OF RELEVANT DATES WHICH READ AS UNDER: S. NO PARTICULARS AY 2004 - 05 AY 2005 - 06 1 RE - ASSESSMENT NOTICE U/S 148 29 MARCH 2011 (AT PG22 OF PB) 31 MARCH 2010 (AT PG 39 OF PB) 2 RETURN FILE D IN RESPONSE TO RE - ASSESSMENT NOTICE 28 APRIL 2011 (AT PG 23 - 44 OF PB) 29 APRIL 2010 (AT PG 40 - 60 OF PB) 3 DUE DATE FOR SERVICE OF NOTICE U/S 143(2) [SIX MONTHS FROM END OF THE FINANCIAL YEAR IN WHICH RETURN IS FURNISHED] 30 SEPTEMBER 2012 30 SEPTE MBER 2011 4 ACTUAL DATE OF ISSUE OF NOTICE U/S 143(2) IN INSTANT CASE 17 DECEMBER 201 2 (AT PG 87 OF PB) 17 DECEMBER 2012 (AT PAGE 100 PB) 5 TECHNICAL OBJECTIONS FILED - CHALLENGING JURISDICTION TO RE - ASSESS ON GROUND THAT STATUTORY NOTICE U/S 143(2) H AS BEEN ISSUED LATE 1 MARCH 201 3 , 8 MARCH 201 3 & 11 MARCH 201 3 (AT PG 105 - 117OF PB) 1 MARCH 201 3 , 8 MARCH 201 3 & 11 MARCH 201 3 (AT PG 110 - 122 OF PB) 6 LETTER FILED PURSUANT TO INSPECTION OF FILES CARRIED ON 18 MARCH, 2013 20 MARCH 201 3 (AT PG 118 - 119 OF PB) 20 MARCH 201 3 (AT PG 123 - 124 OF PB) ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 10 7 . ON THE BASIS OF AFORESAID SYNOPSIS , THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 R.W.S. 147 OF THE ACT WAS FILED BY THE ASSESSEE UNDER PROTEST O N 28.04.2011. A REFERENCE WAS MADE TO PAGE NOS. 23 TO 44 OF THE ASSESSEE S PAPER BOOK. IT WAS STATED THAT THE TIME LIMIT FOR SERVICE OF THE NOTICE U/S 143(2) OF THE ACT I.E. SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH RETURN WAS FURNISHED , WAS U P TO 30 TH SEPTEMBER, 2012 BUT THE AO ISSUED NOTICE ON 17 .12.2012 (A REFERENCE WAS MADE TO PAGE NO. 87 OF THE ASSESSEE S PAPER BOOK ) . IT WAS ACCORDINGLY SUBMITTED THAT THE NOTICE ISSUED U/S 143(2) OF THE ACT WAS BARRED BY LIMITATION AND AS SUCH THE ASSESSME NT ORDER PASSED BY THE AO WAS VOID AB - INITIO. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FILED THE TECHNICAL OBJECTIONS CHALLENGING THE JURISDICTION TO RE - ASSESS ON THE GROUND THAT STATUTORY NOTICE U/S 143(2) OF THE ACT HAD BEEN ISSUED LATE (A REFERENCE WA S MADE TO PAGE NOS. 105 TO 117 OF THE ASSESSEE S PAPER BOOK ) . IT WAS STATED THAT THE ASSESSEE INSPECTED THE FILES OF THIS CASE AVAILABLE WITH THE AO ON 18.03.2013 AND INFORMED THE AO VIDE LETTER DATED 20.03.2013 (COPY OF WHICH IS PLACED AT PAGE NOS. 118 & 119 OF THE ASSESSEE S PAPER BOOK). IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE AO SUBSEQUENT TO ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 17.12.2012 WAS BARRED BY LIMITATION AND VOID AB - INITIO. 8 . THE RELIANCE WAS PLACED ON TH E FOLLOWING CASE LAWS: ACIT VS HOTEL BLUE MOON (2010) 321 ITR 362 (SC) ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 11 PR. CIT VS SH. JAI SHIV SHANKAR TRADERS (P) LTD. (2016) 383 ITR 448 (DEL.) INDUS TOWERS LTD. VS DCIT, CIRECLE - 11(1) & ANR. IN W.P.(C) 1560/2014, ORDER DATED 29.05.2017 OF HON BLE DELHI HIGH COURT 9 . IN HIS RIVAL SUBMISSIONS THE LD. CIT DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. HE ALSO FURNISHED COPY OF THE REPORT DATED 28.04.2017 RECEIVED FROM THE ADDL. CIT, RANGE - 19, NEW DELHI WHICH IS PLACED ON RECORD. 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ORIGINAL ASSESSMENT WAS FRAMED BY THE AO U/S 143(3) OF THE ACT VIDE ORDER DATED 27.12.2006 AND THEREA FTER, THE AO ISSUED NOTICE U/S 148 R.W.S 147 OF THE ACT, COPY OF WHICH IS PLACED AT PAGE NO. 22 OF THE ASSESSEE S PAPER BOOK AND READS AS UNDER: REF: AAECS7710C/04 - O5/DCIT(LTU)/2010 - 11 DATED :29 MARCH, 2011 NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT , 1961 TO M/S SUN MICROSYSTEMS INDIA PVT. LTD., 6 TH FLOOR, DIVYASHREE CHAMBERS, OPPOSITE LANGFORD ROAD, BANGALORE - 560 025 WHEREAS I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX IN THE CASE OF M/S SUN MICROSYSTEMS INDIA PVT. LTD. FOR THE ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 12 ASSESSMENT YEAR 2004 - 05 HAVE ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT. I, THEREFORE, PROPOSE TO ASSESS / REASSESS THE INCOME FOR THE SAID ASSESSMENT YEAR AND HEREBY REQUIRE YOU TO DELIVER TO ME A RETURN OF INCOME IN RESPE CT OF WHICH YOU ARE ASSESSABLE IN THE PRESCRIBED FORM FOR THE SAID ASSESSMENT YEAR. THIS NOTICE IS BEING ISSUED AFTER OBTAINING THE N ECESSARY SATISFACTION OF THE JOIN T/ADDL. COMMISSIONER/ COMMISSIONER / CHIEF - COMMISSIONER OF INCOME TAX. (I. SATISH KUMAR) DEPUTY COMMISSIONER OF INCOME - TAX LTU, BANGALORE 11 . IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FURNISHED A LETTER DATED 28.04.2011, COPY OF WHICH IS PLACED AT PAGE NOS. 23 TO 25 WHICH READ AS UNDER: APRIL 28, 2011 THE DEPUTY COMMISSIONER OF INCOME TAX LARGE TAX PAYER UNIT (L TU) JSS TOWERS, 100 FEET RING ROAD BANASHANKARI III STAGE BANGALORE - 560 085 DEAR SIR, SUB: SUN MICROSYSTEMS INDIA PRIVATE LIMITED ('SUN INDIA' OR 'THE COMPAN ) - NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 ( 'ACT ) ( 1) PAN: AAECS7710C (2) MEMBERSHIP NO. : LTU/15/GLT - 4 (3) ASSESSMENT YEAR ('A Y ): 2004 - 05 ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 13 (4) NOTICE ISSUED UNDER SECTION 148 DATED MARCH 29, 2011 (5) CORRIGENDUM NOTICE DATED MARCH 31, 2011 1. WE WRITE WITH R EFERENCE TO YOUR NOTICE DATED MARCH 29, 2011 ISS UED UNDER SECTION 148 OF THE ACT, PURPORTING TO REASSESS OUR INCOME, UNDER SECTION 147 OF THE ACT. THE SAID NOTICE WAS RE CEIVED BY US ON MARCH 31, 2011. WE ALSO REFER TO THE CORRIGENDUM ISSUED BY YOUR GOODSELF WHEREIN THE COMPANY IS DIRECTED TO FILE ITS RE TURN OF INCOME FOR THE SUBJECT ASSESSMENT YEAR BY APRIL 29, 2011. 2. BACKGROUND THE RETURN OF I NCOME FOR THE PREVIOUS YEAR ('PY ) ENDE D MARCH 31, 2004 [RELEVANT TO THE ASSESSMENT YEAR ( AY') 2004 - 05] WAS FILED ON NOVEMBER 1 , 2004 ON THE BASIS OF MANAGEME NT CERTIFIED ACCOUNTS. THE AUDIT OF THE FINANCIAL STATEMENTS WAS SUBSEQUENTLY COMPLETED AND CONSEQUENT TO SOME REVISION IN THE NUMBERS, THE COMPANY HAS FILED A REVISED RETURN OF INCOME ON NOVEMBER 30, 2004. THE TOTAL INCOME OF THE COMPANY FOR THE AFORESA ID YEAR, AS PER THE REVISED RETURN OF INCOME WAS RS. 12,145,240 (COMPUTED BASED ON NET PROFITS AS PER BOOKS - RS 54,823,137). THE ASSESSMENT OF THE SAID RETURN WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ASSESSMENT ORDER DATED DECEMBER 27, 2006. SU BSEQUENT TO THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, DURING THE COURSE OF AN INTERNAL REVIEW OF THE SERVICES RENDERED BY US TO OTHER SUN ASSOCIATES/GROUP ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 14 COMPANIES AND THE RELATED CHARGES/BILLINGS, THE COMPANY NOTICED THAT ON AC COUNT OF INADVERTENCE OR INTERPRET ATIONAL DIVERGENCE, CERTAIN EXPENSES EITHER HAVE NOT BEEN CROSS CHARGED, OR HAVE BEEN OVERCHARGED IN RELATION TO INTER COMPANY SERVICES, IN THE OPERATING EXPENSES AS REPORTED IN THE FINANCIAL STATEMENTS. THIS HAS RESULTED INTO A LOSS OF (RS . 2 5,771,750) AS AGAINST THE TOTAL INCOME AS PER THE REVISED RETURN OF INCOME OF RS. 12,145,240. THE COMPANY VIDE ITS LETTER DATED APRIL 6, 2009, VOLUNTARILY AND FOR THE SAKE OF GOOD ORDER REVISED ITS RETURNED INCOME FROM RS 12,145,240 TO A LOSS OF (RS . 25,771 , 750). 3. RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT: IN CONNECTION WITH THE NOTICE UNDER SECTION 148 OF THE ACT, WE WOULD LIKE TO SUBMIT THE FOLLOWING: AS YOU ARE AWARE, THE ASSESSING OFFICER IS EMPOWERED TO INITIATE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT, IF HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX IN RESPECT OF ANY AY HAS ESCAPED ASSESSMENT. THE REASONS, WHICH LED YOU TO BELIEVE THAT INCOME CHAR GEABLE TO TAX FOR THE AY 2004 - 05 HAS ESCAPED ASSESSMENT, HAVE NOT BEEN IND ICATED IN THE IMPUGNED NOTICE ISSUED UNDER SECTION 148 OF THE ACT PURPORTING TO REASSESS THE INCOME FOR THE SAID AY. WE WOULD LIKE TO HUMBLY SUBMIT THAT, A MERE STATEMENT IN THE IMPUGNED NOTICE, THAT YOU HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT, WOULD NOT AUTOMATICALLY CONFER JURISDICTION. ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 15 WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTED THAT NO INCOME OF SUN INDIA, IN RESPECT OF THE AY 2004 - 05 HAS OR CAN BE SAID TO HAVE ESCAPED ASSESSMENT. IN FACT, SUN INDIA HAD DIS CLOSED THE REVISED INCOME AND THE REVISED COMPUTATION OF INCOME VIDE ITS LETTER DATED APRIL 6, 2009, VOLUNTARILY AND FOR THE SAKE OF GOOD ORDER. THEREFORE, THE PRIMARY CONDITION PRECEDENT FOR ASSUMPTION FOR JURISDICTION UNDER SECTION 147 OF THE ACT NAMELY THE ESCAPEMENT OF INCOME CHARGEABLE TO TAX HAS NOT BEEN SATISFIED. IN VIEW OF THE AFORESAID, WE ARE CONSTRAINED TO STATE THAT NONE OF THE CONDITIONS PRECEDENT FOR THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 READ WITH SECTION 148 OF T HE ACT HAS BEEN SATISFIED AND TH E NOTICE DATED MARCH 31, 2011 AND ALL PROCEEDINGS THERE UNDER WOULD NOT BE IN ACCORDANCE WITH LAW. THE PURPORTED NOTICE ISSUED UNDER SECTION 148 SHOULD BE WITHDRAWN, AND CANCELLED AND ALL PROCEEDINGS INITIATED PURSUANT THERETO IN RESPECT OF THE AY 2004 - 05 SHOULD BE DROPPED UNDER INTIMATION TO THE COMPANY. WITHOUT PREJUDICE TO ANY OF OUR RIGHTS AND CONTENTIONS, WE ARE FILING A RETURN OF INCOME PURSUANT TO YOUR AFORESAID NOTICE UNDER SECTION 148 OF THE ACT, UNDER PROTEST. WITHOUT PREJUDICE, WE WOULD REQUEST YOU TO DISCLOSE THE RECORDED REASONS, WHICH LED YOU TO FORM THE BELIEF THAT INCOME CHARGEABLE TO TAX FOR THE AY 2004 - 05 HAS ESCAPED ASSESSMENT . THANKING YOU, YOURS FAITHFULLY, FOR SUN MICROSYSTEMS INDIA PRIVATE LIMITED SD/ - AUT HORIZED SIGNATORY ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 16 1 2 . THE ASSESSEE FURNISHED THE RETURN OF INCOME UNDER PROTEST WHICH IS EVIDENT FROM THE AFORESAID LETTER , THE COPY OF RETURN FILED ON 28.04.2011, IN RESPONSE TO NOTICE U/S 148 OF T HE ACT IS PLACED AT PAGE NOS. 26 TO 44 OF THE ASSESSEE S P APER BOOK. THE AO ISSUED NOTICE U/S 143(2) OF THE ACT ON 17.12.2012, C OPY OF WHICH IS PLACED AT PAGE NO. 87 OF THE ASSESSEE S PAPER BOOK AND READ S AS UNDER: NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 DATED: 17.12.2012 TO, THE PRINCIPAL OFFIC ER M /S SUN MICROSYSTEMS INDIA PVT. LTD., 3RD FLOOR, A - WING, IFCI TOWER, 61 NEHRU PLACE, NEW DELHI - 110019. SIR/MADAM, THE ASSESSMENT FOR A.Y. 2004 - 05 I N YOUR CASE WAS REOPENED U/S 148 OF THE IT ACT & YOU ARE THEREFORE GIVEN A FRESH OPPORTUNITY TO APPEAR B EFORE UNDERSIGNED. 2. YOU ARE HEREBY REQ UIRED TO ATTEND MY OFFICE ON 21. 12.2012 AT 1100 HOURS EITHER IN PERSON OR BY A REPRESENTATIVE DULY AUTHORIZED IN WRITING IN THIS BEHALF OR PRODUCE OR CAUSE THERE TO BE PRODUCED AT THE SAID TIME ANY DOCUMENTS, ACCOUN TS AND ANY OTHER EVIDENCE ON WHICH YOU MAY REPLY IN SUPPORT OF THE RETURN FILED BY YOU. SD/ - (DAVID Z. CHAWNGTHU) ADDL. COMMISSIONER OF INCOME TAX, RANG E - 13, NE W DELHI ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 17 1 3 . NOW QUESTION ARISES AS TO WHETHER THE SAID NOTICED ISSUED BY THE AO WAS BARRED BY LIMITATION AND AS TO WHERE THE REASSESSMENT FRAMED BY THE AO IN RESPONSE TO THE SAID NOTICE WAS VALID OR VOID. T HE PROVISIONS CONTAINED IN SECTION 143(2) OF THE ACT READ AS UNDER : 143 .. [(2) WHERE A RETURN HAS BEEN FURNISHED UNDER SECTION 139, OR IN RESPONSE TO A NOTICE UNDER SUB - SECTION (1) OF SECTION 142, THE ASSESSING OFFICER OR THE PRESCRIBED INCOME - TAX AUTHORITY, AS THE CASE MAY BE, IF, CONSIDERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMP UTED EXCESSIVE LOSS OR HAS NOT UNDER - PAID THE TAX IN ANY MANNER, SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM, ON A DATE TO BE SPECIFIED THEREIN, EITHER TO ATTEND THE OFFICE OF THE ASSESSING OFFICER OR TO PRODUCE, OR CAUSE TO BE PRODUCED BEFORE THE A SSESSING OFFICER ANY EVIDENCE ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF THE RETURN: PROVIDED THAT NO NOTICE UNDER THIS SUB - SECTION SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED.] 1 4 . FROM THE PROVISO APPENDED TO SUB - SECTION (2) OF SECTION 143 OF THE ACT, IT IS CRYSTAL CLEAR THAT NO NOTICE U/S 143(2) OF THE ACT SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH T HE RETURN IS FURNISHED. THE USE OF THE WORD SHALL IN THE AFORESAID PROVISO MAKE S IT MANDATORY. IN THE PRESENT CASE, THE RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT WAS FILED BY THE ASSESSEE ON 28.04.2011 AND THE FINANCIAL YE AR IN WHICH THE RETURN WAS FURNISHED AND ENDED ON 31.03.2012. THEREFORE, THE NOTICE U/S 143(2) OF ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 18 THE ACT SHOULD HAVE BEEN ISSUED ON OR BEFORE 30.09.2012. HOWEVER, IN THE PRESENT CASE, THE NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY THE AO ON 17.12.2012 WH ICH IS EVIDENT FROM PAGE NO . 87 OF THE ASSESSEE S PAPER BOOK, T HEREFORE, THE SAID NOTICE ISSUED BY THE AO WAS BARRED BY LIMITATION. 1 5 . ON A SIMILAR ISSUE THE HON BL E SUPREME COURT IN THE CASE OF ACIT & ANR. VS HOTEL BLUE MOON (SUPRA) HELD AS UNDER: SECTION 158BC PROVIDES FOR ENQU IRY AND ASSESSMENT. AFTER THE RETURN IS FILED, CLAUSE (B) OF SECTION 158BC PROVIDES THAT THE ASSESSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND 'THE PROVISIONS OF SECTION 142 , SUB - SECTIONS (2) AND (3) OF SECTION 143, SECTION 144 AND SECTION 145 SHALL, SO FAR AS MAY BE, APPLY'. THIS INDICATES THAT THIS CLAUSE ENABLES THE ASSESSING OFFICER, AFTER THE RETURN IS FILED, TO COMPLETE THE ASSESSMENT UNDER SECTION 143(2) BY FOLLOWING T HE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION 143(2)/142. THIS DOES NOT PRO VIDE ACCEPTING THE RETUR N AS PROVIDED UNDER SECTION 143(1) (A): THE OFFICER HAS TO COMPLETE THE ASSESSMENT UNDER SECTION 143(3) ONLY. IF AN ASSESSMENT IS TO BE COMPLETED UNDER SEC TION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SEC TION 143(2) SHOULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF THE BLOCK RETURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRRE GULARITY AND IS NOT CURABLE. THERE FORE, THE REQ UIREMENT OF NOTICE UNDER SECTION 143(2) C ANNOT BE DISPENSED WITH . 16 . SIMILARLY, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS SH. JAI SHIV SHANKAR TRADERS PVT. LTD. (SUPRA) HELD AS UNDER: ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 19 P URSUANT TO A SCRUTINY OF THE RETURN FILED BY THE ASSESSEE, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE INCOME - TAX ACT, 1961 AND ANOTHER NOTICE UNDER SECTION 143(2) REQUIRING FURTHER INFORMATION AND FIXING A DATE FOR THE ASSESSEE TO APPEA R. THE NOTICES WERE NOT SERVED ON THE ASSESSEE. A FURTHER NOTICE UNDER SECTION 142(1) WAS ISSUED WITH A RETURNABLE DATE. ON THE RETURNABLE DATE THE ASSESSEE'S AUTHORISED REPRESENTATIVE GAVE A STATEMENT THAT THE ORIGINAL RETURN FILED SHOULD BE TREATED AS A RETURN FILED PURSUANT TO THE NOTICE UNDER SECTION 148. AN ASSESSMENT ORDER WAS PASSED MAKING AN ADDITION OF A SUM AS UNEXPLAINED CREDITS UNDER SECTION 68. THE COMMISSIONER (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT SUFFICIENT OPPOR TUNITY WAS PROVIDED THROUGH QUESTIONNAIRES TO SUPPORT HIS RETURN BY DOCU MENTARY EVIDENCE AND THAT NON ISSUANCE OF NOTICE UNDER SECTION 143(2) DID NOT INVALIDATE THE REASSESSMENT. THE ASSESSEE' S FURTHER APPEAL WAS ALLOWED BY THE TRIBUNAL HOLDING THAT THE ORDER OF REASSESSMENT WAS UNSUSTAINABLE AS A NOTICE WAS NOT ISSUED BY THE ASSESSING OFFICER BEFORE THE COMPLETION OF REASSESSMENT . IT HAS FURTHER BEEN HELD AS UNDER: THAT THERE WAS NO LEGAL INFIRMITY IN THE ORDER OF THE TRIBUNAL. SUBSEQUENT TO THE STATEMENT OF THE ASSESSEE ON THE RETURNABLE DATE TO TREAT THE ORIGINAL RETURN FILED AS A RETURN FILED PURSUANT TO A NOTICE UNDER SECTION 148, THE ASSESSING OFFICER'S FAILURE TO ISSUE NOTICE UNDER SECTION 143(2) INVALIDATED THE ORDER OF REASSESSMENT. NO QUESTION OF LAW AROSE. 17 . RECENTLY, T HEIR LORDSHIPS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDUS TOWERS LTD. VS DCIT & ANR. (SUPRA) OBSERVED IN PARAS 11 TO 15 AS UNDER: ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 20 11. TWO BROAD SUBMISSIONS HAVE BEEN ADVANCED BY MR. MIHIR JOSHI, LEARNED SENIOR COUNSEL AP PEARING FOR THE PETITIONER: (I) EVEN WHERE PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE SOUGHT TO BE TAKEN WITH REFERENCE TO INTIMATION UNDER SECTION 143(1) OF THE ACT, THERE SHOULD EXIST REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, CERTAIN DISCLOSURES WERE MADE IN THE RETURN OF INCOME (ORIGINAL AS WELL AS REVISED) EXPLAINING THE REASONS FOR REVISING THE RETURN WHEREAS THE FACTUAL DETAILS PERTAINING TO THE TRANSFER OF INFRASTRU CTURE ASSETS ALONG WITH COPIES OF THE ORDERS OF THE HIGH COURT WERE SUBMITTED. THEREFORE, THE ALLEGED FORMATION OF BELIEF BY THE AO OF INCOME HAVING ESCAPED ASSESSMENT IS A MERE CHANGE OF OPINION AND AN AFTERTHOUGHT WITHOUT ANY LEGAL BASIS. THE PROCEEDINGS HAVE BEEN INITIATED ON THE BASIS OF NO MATERIAL AND, THEREFORE, ASSUMPTION OF JURISDICTION WAS PLAINLY UNSUSTAINABLE IN LAW. (II) IN TERMS OF THE PROVISO TO SECTION 153(1), THE TIME LIMIT FOR COMPLETION OF THE ASSESSMENT FOR AY 2009 - 10 WAS 31ST DECEMBER , 2011 (21 MONTHS FROM THE MONTH OF THE AY). FURTHER, THE PROVISO TO SECTION 143(2) OF THE ACT REQUIRES THAT NOTICE FOR ASSESSMENT SHOULD BE ISSUED WITHIN SIX MONTHS FROM THE END OF THE FINANCIAL YEAR ( FY ) IN WHICH THE RETURN WAS FURNISHED BY AN ASSESSEE . IN THE PRESENT CASE, THE ORIGINAL RETURN WAS FILED BY ICTIL ON 25TH SEPTEMBER, 2009 WHILE THE REVISED RETURN WAS FILED ON 31ST MARCH, 2010. THEREFORE, THE AO HAD TIME TILL 30TH SEPTEMBER, 2010 TO ISSUE NOTICES UNDER SECTION 143(2) OF THE ACT. AFTER THE M ERGER SCHEME WAS APPROVED BY THIS COURT AND ICTIL CEASED TO EXIST, NOTICE IN THE MEANWHILE WAS ISSUED ON 22 ND FEBRUARY, 2013 UNDER SECTION 148 OF THE ACT. THE LAST DATE FOR ISSUANCE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS 30TH SEPTEMBER, 2013. H OWEVER, THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ONLY ON 18TH SEPTEMBER, 2014. 12. IT MUST BE MENTIONED HERE THAT ALTHOUGH THIS WAS NOT INITIALLY URGED AS A GROUND, BY CM NO. 574 OF 2015 THE PETITIONER SOUGHT TO AMEND THE WRIT PETITION TO IN CORPORATE THIS AS A GROUND. THIS ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 21 CM WAS ALLOWED BY THE COURT BY ITS ORDER DATED 13TH JANUARY, 2015 AND THE AMENDED WRIT PETITION WAS TAKEN ON RECORD EVEN WHILE CONTINUING THE INTERIM ORDER. 13. IN RESPONSE TO THE ABOVE SUBMISSIONS, MR. DILEEP SHIVPURI, L EARNED SENIOR STANDING COUNSEL FOR THE DEPARTMENT, SUBMITTED THAT AS FAR AS SECOND SUBMISSION IS CONCERNED, THE FACTS SPEAK FOR THEMSELVES. HE HAD NOTHING FURTHER TO ADD BECAUSE THERE WAS NO EXPLANATION FOR THE FAILURE TO ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT PURSUANT TO THE NOTICE UNDER SECTION 148 OF THE ACT BEFORE 30TH SEPTEMBER 2013, THE LAST DATE BY WHICH THE NOTICE OUGHT TO HAVE BEEN ISSUED. 14. THE LAW ON THIS POINT IS FAIRLY WELL SETTLED IN THE DECISIONS IN ACIT V. HOTEL BLUE MOON [2010] 32 1 ITR 362 (SC) REITERATED IN CIT V. MADHYA BHARAT ENERGY CORPORATION [2011] 337 ITR 389 (DEL) AND PRINCIPAL COMMISSIONER OF INCOME TAX V. JAI SHIV SHANKAR TRADERS (P.) LTD. [2016] 383 ITR 448 (DEL). IN THE LAST MENTIONED JUDGMENT, THIS COURT HELD THAT THE DELAY IN ISSUING A NOTICE UNDER SECTION 143(2) OF THE ACT WOULD BE FATAL TO THE RE - ASSESSMENT PROCEEDINGS. 15. FOR THE AFOREMENTIONED REASONS, IT IS HELD THAT AS FAR AS THE SECOND GROUND IS CONCERNED, THE PETITIONER SHOULD SUCCEED. IN THAT VIEW OF THE MA TTER, THE COURT DOES NOT CONSIDER IT NECESSARY TO EXAMINE THE FIRST GROUND OF CHALLENGE. 1 8 . IN THE PRESENT CASE ALSO , IT IS AN ADMITTED FACT THAT THE RETURN WAS FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT ON 28.04.2011 AND AS PER THE PROVISO TO SUB - SECTION (2) TO SECTION 143 OF THE ACT. THE NOTICE WAS REQUIRED TO BE SERVED UPON THE ASSESSEE BEFORE EXPIRY OF 6 MONTHS FROM THE END OF FINANCIAL YEAR ENDING ON 31.03.2012 I.E. ON OR BEFORE 30.09.2012. HOWEVER, THE NOTICE U/S 143( 2) OF THE ACT WAS ISSUED ON 17.12.2012 WHICH WAS BARRED BY LIMITATION. ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 22 THEREFORE, ON THE BASIS OF THE SAID NOTICE, THE RE ASSESSMENT FRAMED WAS VOID AB - INITIO. IT IS ALSO RELEVANT TO POINT OUT THAT THE LD. CIT DR FURNISHED THE SUBMISSION DATED 28.04.2017 RE LATING TO INFORMATION AVAILABLE AS PER RECORD SENT BY ADDL. CIT, RANGE - 19, NEW DELHI, WHICH READ AS UNDER: 1. IN THIS REGARD, IT IS SUBMITTED THAT NOTICE U/S 148 DATED 29/03/201 1 WAS ISSUED TO THE ASSESSEE COMPANY AND WHICH WAS PERSONAL LY RECEIVED ON 31.0 3.2011. IN RESPONSE TO THIS NOTICE, THE ASSESSEE COMPANY HAS REVISED ITS RETURN OF INCOME ON 29.04.2011. IN THE NOTICE, IT WAS CLEARLY MENTIONED OF ESCAPED ASSESSMENT WITHIN THE MEANING OF 147 OF THE INCOME - TAX ACT, 1961 AND THE NOTICE WAS ISSUED AFTER NEC ESSARY SATISFACTION OF COMPETENT AUTHORITY. 2. THE ASSESSING OFFICER MOVED PROPOSAL IN THE PRESCRIBED PROFORMA AFTER RECORDING THE SATISFACTION DATED 23.3.2011. THE ITO (HQ), O/O THE CIT (LTD ) VIDE LETTER DATED 28.03.2011 I NTIMATED THE ASSESSING OFFICER F OR CIT'S APPROVAL. 3. APPROVAL WAS RECEIVED FROM THE OFFICE OF THE CIT (LTU) VIDE LETTER DATED WHICH APPROVAL FOR REFERRI NG THE CASE TO TPQ WAS GRANTED. 4. THEREAFTER, THE CASE WAS REFERRED TO THE TPO VIDE LETTER DATED 23.05.201 THE ACIT (LTU), BANGALORE . 5. NOTICE U/S 143(2) OF THE INCOME - TAX ACT, 1961 WAS ISSUED ON 17.12.2012. THIS NOTICE WAS ISSUED BEFORE THE COMPLETION OF REASSESSMENT WHICH IS WELL WITHIN THE PRESCRIBED LIMIT AS PER PROVISION OF THE INCOME - TAX ACT, 1961 (AY 2004 - 05 AND 2005 - 06). 6. TPO ORDER WAS PASSED ON 23.01.2013 U/S 92CA . 7. THEREAFTER U/S 143(3) R . W.S. 144 WAS PASSED ON 28/03/2013 ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 23 19 . FROM CLAUSE (5) OF THE ABOVE SUBMISSIONS, IT IS CLEAR THAT THE NOTICE U/S 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 17.12.2012 WAS BARRED BY LIMITATION, THE ASSESSEE ALSO RAISED THE OBJECTION S BEFORE THE LD. DRP WHO DID NOT ANSWER WHICH IS EVIDENT FR OM PARA 3.3 OF THE ORDER DATED 2 6.12.2013 PASSED BY THE LD. DRP U/S 144C(5) OF THE ACT WHICH READ AS UNDER: WE HAVE CONSIDERED THESE GROUNDS V ERY CAREFULLY. AS PER PROVISIONS OF SECTION 144C(5), THE DRP SHALL, IN A CASE WHERE ANY OBJECTION IS RECEIVED UNDER SUB - SECTION (2), ISSUE SUCH DIRECTIONS AS IT THINKS FIT FOR THE GUIDANCE OF THE AO TO ENABLE HIM TO COMPLETE THE ASSESSMENT. AS PER SECTION 144C(8), THE DRP MAY CONFIRM, REDUCE OR ENHANCE THE VARIATION PROPOSED IN THE DRAFT ORDER. IN OTHER WORDS, THE DRP IS EMPOWERED TO GIVE DIRECTIONS ONLY WITH REFERENCE TO VARIATIONS PROPOSED IN THE DRAFT ASSESSMENT ORDER WITH REFERENCE TO THE RETURNED INCOM E. DRP IS NOT EMPOWERED TO ADJUDICATE THE VALIDITY OF ASSESSMENT. THEREFORE, WE FIND OURSELVES UNABLE TO DEAL WITH THESE THREE GROUNDS OF OBJECTIONS, HAVING NO JURISDICTION. 20 . WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND THE RATIO LAID DOW N BY THE HON BLE APEX COURT AND HON BLE DELHI HIGH COURT IN THE AFORESAID CASE S, AS DISCUSSED HEREINABOVE , ARE OF THE CONFIRMED VIEW THAT THE ASSESSMENT FRAMED BY THE AO ON THE BASIS OF THE NOTICE DATED 17.12.2012 ISSUED U/S 143(2) OF THE ACT WHICH WAS BAR RED BY LIMITATION, WAS VOID AB - INITIO AND ACCORDINGLY THE SAME IS QUASHED. NO OTHER GROUND WAS ARGUED BY EITHER OF THE PARTIES, THEREFORE, NO FINDING IS GIVEN ON THE REMAINING GROUNDS. ITA NO S. 1587 & 1588 /D EL /201 4 ORACLE INDIA PVT. LTD. 24 2 1 . FOR THE ASSESSMENT YEAR 2005 - 06 IN ITA NO. 1588/DEL/2014, THE FACT S ARE IDENTICAL, THE ONLY DIFFERENCE IS IN THE DATES FOR ISSUING THE NOTICE U/S 148, FILING OF THE RETURN , DUE DATE OF SERVICE OF NOTICE U./S 143(2) OF THE ACT AND THE ACTUAL DATE OF ISSUE OF NOTICE WHICH WERE 31.03.2010, 29.04.2010, 30.09.2011 AND 17.12.2 012 RESPECTIVELY, OTHERWISE ALL THE FACTS ARE IDENTICAL. THEREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER IN RESPECT OF ITA NO. 1587/DEL/2014 FOR THE ASSESSMENT YEAR 2004 - 05 SHALL APPLY MUTATIS MUTANDIS FOR THE ASSESSMENT 2005 - 06. 22 . IN TH E RESULT, THE APPEAL S OF THE ASSESSEE ARE ALLOWED . ( ORDER PRON OUNCED IN THE COURT ON 31 /0 8 /2017 ) SD/ - SD/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT E D: 31 /08 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR
