Synopsys International Old Limited, Bangalore V. DDIT, Bangalore

ITA 569/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63805 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CITI
• Assessee Lawyers: K P KUMAR
• Keywords: Double taxation relief; Initiation of penalty proceedings; Reassessment proceedings
• Section: 143(3); 234B; 147; 27; 148

Judgement Text

PAGE 1 OF 12 ITA NO.5 69/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.569/BANG/2011 (ASST. YEAR 2004-05) M/S SYNOPSYS INTERNATIONAL OLD LIMITED, RMZ INFINITY, TOWER A, 4 TH & 5 TH FLOOR, MUNICIPAL NO.3, OLD MADRAS ROAD,BENNIGANAHALLI, BANGALORE-16. PA NO.AAJCS 6844 A VS THE DEPUTY DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) CIRCLE-11(1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 7.11.2012 DATE OF PRONOUNCEMENT : 10.12.2012 APPELLANT BY : SHRI K P KUMAR, ADVOCATE RESPONDENT BY : SHRI S K AMBASTHA, CIT-I OR DER PER JASON P BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A)-IV, BANGALORE, DATED 25.02.2011 FOR THE ASS ESSMENT YEAR IS 2004-05. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER: 2.1 THE ASSESSEE IS A FOREIGN COMPANY INCORPORATED UNDER THE LAWS OF IRELAND, ENGAGED IN THE BUSINESS OF SALES AND MA RKETING OF SOFTWARE LICENSES IN INDIA AND PROVISION OF ANCILLARY SERVICE S LIKE CONSULTANCY, SUPPORT, TRAINING, INSPECTION AND INSTALLATION. THE RECORD INDICATING THAT THE ASSESSEE PAGE 2 OF 12 ITA NO.5 69/BANG/2011 2 FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 004=05 ON 30/4/2007 DECLARING NIL INCOME PURSUANT TO THE ISSUE OF NOTIC E UNDER SECTION 148 OF THE I T ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY THE ASSESSING OFFICER ON 5/4/2007. THE ASSESSMENT WAS COMPLETED BY AN ORDER UNDER SECTION 143(3) RWS 148 OF THE ACT ON 29/12/2008 IN WHICH THE ASSESSEES TAXABLE INCOME WAS DETERMINED AT RS.10,00,92,722/- ON ACCOUNT OF THE ASSESSING OFFICERS FINDING HAT THE INCOME FROM SOF TWARE SUPPLIED BY THE ASSESSEE WOULD BE CHARGEABLE TO TAX AS ROYALTY. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR THE AS SESSMENT YEAR 2004-05 DATED 29/12/2008, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT(A)-IV, BANGALORE. THE LEARNED CIT(A) DISPOSED OFF THE APPEAL DISMISSING IT EXCEPT TO THE EXTENT OF ADOPTION OF C ORRECT RATE OF TAX OF 10% AS AGAINST 15% ADOPTED BY THE ASSESSING OFFICER. 3.0 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A)-IV , BANGALORE DATED 25/2/2011 FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE IS NOW BEFORE THE TRIBUNAL, IN THE GROUND RAISED, THE ASS ESSEE HAS SUBMITTED AS UNDER:- 1. ASSESSMENT BAD IN LAW AND ON FACTS. - THE LEARNED CIT (APPEALS) ERRED IN NOT HOLDING THAT THE ORDER OF THE DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATI ON), CIRCLE 1(1), BANGALORE IS BAD IN LAW AND ON FACTS. - THE CIT (APPEALS) ERRED IN CONCLUDING THAT THE ASSE SSMENT PROCEEDINGS INITIATED UPON THE APPELLANT WERE VALID. THE CIT ( APPEALS) OUGHT TO HAVE APPRECIATED THAT THE REASSESSMENT PROCEEDINGS INITI ATED UNDER SECTION 148 OF THE ACT BY THE DDIT WAS INVALID AND WITHOUT JURISDICTION 2. ERRONEOUS DEMANDS PAGE 3 OF 12 ITA NO.5 69/BANG/2011 3 THE DDIT ERRED IN A) DETERMINING THE TOTAL INCOME OF THE APPELLANT AT RS .100,092,722. B) LEVYING INCOME TAX OF RS.10,009,272; AND C) LEVYING INTEREST UNDER SECTION 234B OF THE ACT OF R S.4,064,499. 3. ERRONEOUS TREATMENT OF THE RECEIPTS FROM INDIAN CUSTOMERS AS ROYALTY. 3.1 THE DDIT/CIT (APPEALS) ERRED IN HOLDING THAT TH E PAYMENTS RECEIVED BY THE APPELLANT ARE ROYALTY UNDER THE I NCOME TAX ACT, 1961. 3.2 THE DDIT/CIT (APPEALS) ERRED IN NOT HOLDING TH AT THE PAYMENTS RECEIVED BY THE APPELLANT DO NOT QUALIFY AS ROYALT Y UNDER THE DTAA BETWEEN INDIA AND IRELAND. 3.3 THE DDIT/CIT (APPEALS) ERRED IN NOT HOLDING T HAT WHETHER THE PAYMENT RECEIVED BY THE APPELLANT FROM INDIAN PARTI ES WAS IN THE NATURE OF ROYALTY HAD MOST APPROPRIATELY TO BE JUDGED UNDE R CLAUSE (V) OF EXPLN. 2 TO SECTION 9(10(VI) OF THE ACT, WHICH CLAUSE DID NOT APPLY BECAUSE THERE WAS NO RIGHT IN RESPECT OF ANY COPYRIGHT GRAN TED BY THE APPELLANT. 3.4 THE CIT (APPEALS) ERRED IN HOLDING THAT THE PAYMENT RECEIVED BY THE APPELLANT FROM INDIAN PARTIES WAS TOWARDS THE U SE OF PROCESS WITHIN THE MEANING OF CLAUSE (III) OF EXPLANATION 2 TO SEC TION 9(10(VI) OF THE ACT, AND ACCORDINGLY, ARE ROYALTY AS DEFINED IN S ECTION 9(1)(VI) OF THE ACT. 3.5 THE DDIT/CIT (APPEALS) ERRED IN NOT HOLDING THAT AS THE APPELLANT DID NOT GIVE THE RIGHT TO INDIAN CUSTOMERS TO REPRO DUCE AND DISTRIBUTE TO THE PUBLIC THE COPYRIGHTED PROGRAMME, THE PAYMEN TS RECEIVED BY THE APPELLANT COULD NOT BE CONSTRUED AS ROYALTY. 3.6 THE DDIT/CIT (APPEALS) ERRED IN NOT HOLDING THAT, AS THE PAYMENT RECEIVED BY THE APPELLANT FROM INDIAN CUSTOMERS WAS NOT TO BE MEASURED BY REFERENCE TO THE PRODUCTIVITY OR USE OF THE SOFTWARE, IT COULD NOT BE CONSTRUED AS ROYALTY. 3.7 THE DDIT/CIT (APPEALS). ERRED IN HOLDING THAT SOFTWARE IS NOT GOODS. 3.8 THE DDIT/CIT (APPEALS) ERRED IN NOT APPRECIAT ING THE RELIANCE PLACED BY THE APPELLANT ON THE DECISIONS IN THE FOL LOWING CASES : - MOTOROLA INC. VS. DCIT (2005) 95 ITD 269 (DELHI)( SB) - SAMSUNG ELECTORNICS CO. LTD. VS. ITO (2005) 94 IT D 91 9BANG) PAGE 4 OF 12 ITA NO.5 69/BANG/2011 4 - SONATA INFORMATION TECHNOLOGY LTD. VS. ACIT (2006 ) 103 ITD 324 (BANG) - INFRASOFT LTD. VS. ADIT 28 SOT 179 (ITAT-DELHI) - VELANKANI MAURITIUS LTD.VS. DDIT 132 TTJ 124 (ITA T-BANG) - DASSAULT SYSTEMS K.K. 188 TAXMAN 223 (AAR) -DDIT VS. TII TEAM TELECOM INTERNATIONAL LTD (ITA NO.3091/MUM/2007) (MUM. ITAT) - DDIT VS. ALCATEL USA INTERNATIONAL MARKETING INC (MUM) (2010-TII- 123-ITAT-MUM-INTL) - DDIT(INTERNATIONAL TAXATION) VS. RELIANCE INDUSTR IES LTD. (ITA NO.116/MUM/2008) (ITAT, MUMBAI) - HEWLETT-PACKARD (INDIA) (P) LTD. VS. ITO (2006) 5 SOT 660 (ITAT- BANG_ -KANSAI NEROLAC PAINTS LTD. VS. ADDL. DIT (2010) IT A NO.568/MUM/2009 (ITAT, MUMBAI) AND - ADDL. DIRECTOR OF INCOME TAX (INT. TAXATION) VS. TATA COMMUNICATIONS LTD. (2010) ITA NO.1473/MUM/2009 (ITAT, MUM) 3.9 THE CIT (APPEALS) ERRED IN RELYING UPON THE DE CISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT AND OTHERS VS. SAMSUNG ELECTRONICS CO. LTD. AND OTHERS (2009) 227 CTR 335. 3.10 THE CIT (APPEALS) OUGHT TO HAVE FOLLOWED THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN UNION OF INDIA VS. KAMALAKS HMI FINANCE CORPORATION LTD (1991) ELT 433 (SC) AND OUGHT TO HA VE SET ASIDE THE ORDER OF THE DDIT. 4. INTEREST LEVIED UNDER SECTION 234B OF THE ACT. THE DDIT/CIT (APPEALS) ERRED IN LEVYING INTEREST UN DER SECTION 234B OF THE ACT. 5. INTEREST UNDER SECTION 234A OF THE ACT THE APPELLANT PRAYS THAT IT BE GRANTED THE CONSEQUE NTIAL RELIEF INRESPECT OF LEVY OF INTEREST UNDER SECTION 234A OF THE ACT. 6. INITIATION OF PENALTY PROCEEDINGS THE CIT (APPEALS) ERRED IN NOT REACHING A CONCLUSIO N THAT THE INITIATION OF PENALTY PROCEEDINGS BY THE DDIT UNDER SECTION 27 1(1)( C ) WAS NOT JUSTIFIED IN THE CASE OF THE APPELLANT. 7. RELIEF PAGE 5 OF 12 ITA NO.5 69/BANG/2011 5 THE APPELLANT PRAYS THAT THE DDIT BE DIRECTED TO GR ANT ALL SUCH RELIEF ARISING FROM THE PROCEEDING GROUNDS AS ALSO ALL REL IEF CONSEQUENTIAL THERETO. THE APPELLANT CRAVES LEAVE TO ADD OR ALTER, BY DELE TION, SUBSTITUTION, MODIFICATION OR OTHERWISE, THE ABOVE GROUNDS OF APP EAL, EITHER BEFORE OR DURING THE HEARING OF THE APPEAL. 4.0 IN THE GROUND AT SL.NO.1 , THE ASSESSEE HAS CONTENDED THAT THE ORDER OF ASSESSMENT IS BAD IN LAW AS THE RE-ASSESSM ENT PROCEEDINGS INITIATED UNDER SECTION 147 AND PURSUANT TO ISSUE OF NOTICE U NDER SECTION 148 OF THE ACT WERE CARRIED OUT IN VIOLATION OF THE PROCEDURE LAID DOWN BY LAW AND THE JUDICIAL DECISIONS ON THE SUBJECT AND THEREFORE, TH E ORDER OF ASSESSMENT REQUIRED TO BE STRUCK DOWN AS INVALID, NULL AND VOI D AB-INITIO. THE LEARNED AR, AT THE OUTSET, SUBMITTED THAT, THE ASSESSEE HAD BEE N REQUIRED TO FILE THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 PUR SUANT TO THE ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT ON 2/4/2007, WH ICH ADMITTEDLY, IT DID ON 30/4/2007. THE RETURN OF INCOME WAS ENCLOSED WITH A COVERING LETTER DATED 19/4/2007 (FILED ON 30/4/2007) ADDRESSED TO T HE ASSESSING OFFICER WHEREIN THE ASSESSEE HAD REQUESTED HIM TO PROVIDE T HE REASONS FOR INITIATING THE PROCEEDINGS UNDER SECTION 148/147 OF THE ACT (A T PAGE 8 OF THE PAPER BOOK FILED BY THE LEARNED AR ON 11/10/2012). IT WAS SUBMITTED BY THE LEARNED AR THAT THE REASONS FOR INITIATING PROCEEDI NGS UNDER SECTION 147/148 OF THE ACT SOUGHT FOR BY THE ASSESSEE WERE N EVER MADE AVAILABLE TO IT BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSM ENT PROCEEDINGS WHICH, IT IS ARGUED WAS AGAINST THE SETTLED POSITION OF LA W ON THE SUBJECT. THE LEARNED AR POINTED OUT THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT WERE FINALLY MADE AVAILABLE TO THE ASSESSEE ONLY ON 28/1/2010 BY T HE LEARNED CIT(A) IN PAGE 6 OF 12 ITA NO.5 69/BANG/2011 6 THE COURSE OF APPELLATE PROCEEDINGS, AS CAN BE SEEN FROM THE NARRATION IN PARAS 3.2 AND 3.3 OF THE LEARNED CIT(A)S ORDER. T HE LEARNED AR ARGUED VEHEMENTLY THAT ON BEING ASKED FOR THE REASONS RECOR DED FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT, IT WA S OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO COMMUNICATE THE SAME TO THE ASSESSEE; BUT WHICH WAS NOT DONE. THIS, IT WAS SUBMITTED, WAS IN VIOLATION OF THE DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF GKN DRIVES HAFTS (INDIA) LTD. V ITO (259 ITR 19) (SC) AND OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF ALLANA COLD STORAGE LTD. V ITO (287 ITR 1) (BOM.) W HICH MANDATED THAT THE ASSESSING OFFICER WAS BOUND TO FURNISH THE REASONS SOUGHT WITHIN A REASONABLE TIME, WHICH HE DID NOT DO. IN SUPPORT O F THE PROPOSITION THAT FAILURE ON THE PART OF THE ASSESSING OFFICER TO FUR NISH THE REASONS FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS WOULD RENDER THE RESULTANT ORDER OF ASSESSMENT BAD IN LAW, VOID AB-INITIO AND LIABLE TO BE QUASHED, THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS:- (I) ACIT V K V VENKATASWAMY REDDY OF THE ITAT, BANGALORE IN ITA NOS.797, 807, 798 & 808/BANG/2009 DATED 21/5/2010 WHEREIN THE TRIBUNAL, FOLLOWING THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA) LTD. V ITO (SUPRA) AND OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ALLANA COLD STORAGE LTD. V ITO (287 ITR 1) (BOM.), HELD THAT THE ORDERS OF ASSESSMENT HAVE NO LEGAL SANCTITY AS THEY ARE NOT PASSED IN CONFORMITY WITH THE RULING OF THE COURTS (SUPRA) AND QUASHED THEM. PAGE 7 OF 12 ITA NO.5 69/BANG/2011 7 (II) TATA INTERNATIONAL LIMITED V DCIT (ITA NOS.3359 TO 3361/MUM/2009 DATED 29/6/2012 OF ITAT, MUMBAI). (III) CIT V VIDESH SANCHAR NIGAM LTD. (ITA NO.4235 OF 2010 DT.20/7/2011). 4.1 PER CONTRA, THE LEARNED DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE REQUEST F OR COPY OF REASONS RECORDED FOR INITIATION OF 147 PROCEEDINGS VIDE LET TER DT.19/4/2007, ADDRESSED TO THE ASSESSING OFFICER WAS FOR FILING O F THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05. NO SEPARATE APPLI CATION WAS MADE BY THE ASSESSEE TO THE ASSESSING OFFICER, FOR OBTAINING TH E REASONS. IT WAS FURTHER SUBMITTED THAT AS THE REASONS WERE PROVIDED TO THE ASSESSEE BY THE LEARNED CIT(A) THAT WOULD SUFFICE AS COMPLIANCE WIT H THE REQUIREMENTS OF LAW AND PROCEDURE AS LAID DOWN BY THE COURTS AND THE REFORE, PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT AND THE RESULTANT ORDER OF ASSESSMENT UNDER SECTION 143(3) RWS 148 OF THE ACT DATED 29/12/2008 WERE VALID IN LAW. IN SUPPORT OF THIS PROPOSITION, THE LEARNED DR PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NESTLE INDIA LTD. V DCIT REPORTED IN (2004) 189 CTR (DEL.) 70. 4.1.1 WE HAVE HEARD THE RIVAL CONTENTION, PERUSED AND CAREFULLY CONSIDERED THE RELEVANT MATERIAL ON RECORD AND THE JUDICIAL DECISIONS CITED. WE HAD ALSO CALLED FOR AND PERUSED THE RECORDS OF A SSESSMENT FOR THE ASSESSMENT YEAR 2004-05 TO SEE FOR OURSELVES THE POS ITION THEREIN WITH RESPECT TO THE SUBJECT OF PROCEEDINGS INITIATED UND ER SECTION 147/148 OF THE ACT. THOUGH THE ARGUMENTS ON MERITS WERE ALSO MADE, HOWEVER, AT THIS STAGE, WE WILL CONFINE OURSELVES TO THE ISSUE OF TH E VALIDITY OF THE INITIATION PAGE 8 OF 12 ITA NO.5 69/BANG/2011 8 OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT AND THE RESULTANT ORDER OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05. 4.1.2 AS PER THE RECORDS OF ASSESSMENT WE FIND THA T THE THEN ASSESSING OFFICER HAD RECORDED IN WRITING THE REASO NS FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. IT I S ALSO A MATTER OF RECORD THAT THE ASSESSEES LETTER DATED 19/4/2007, FOR FIL ING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 IN RESPONSE TO NOTIC E UNDER SECTION 148 DT.2/4/2007, CONTAINED A SPECIFIC REQUEST TO THE AS SESSING OFFICER TO BE PROVIDED WITH THE REASONS FOR INITIATING THE PROCEE DINGS UNDER SECTION 147/148 OF THE ACT (COPY ON PAGE 8 OF ASSESSEES PAP ER BOOK FILED ON 11/10/2012). THE ASSESSEES LETTER DATED 19/4/2007 FORMS A PART OF THE RECORD OF ASSESSMENT WITH THE ASSESSING OFFICER. I T IS CLEAR FROM A PERUSAL OF PARAS 3.2 AND 3.3 OF THE LEARNED CIT(A)S ORDER THAT REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT WERE NEVER PROVIDED TO THE ASSESSEE BY THE A SSESSING OFFICER DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS WHICH CULMINATED IN THE ORDER OF ASSESSMENT ON 29/12/2008, ALMOST ONE YEAR A ND EIGHT MONTHS AFTER THE REQUEST FOR THE SAME WAS MADE BY THE ASSESSEE ON 19/4/2007. IN PARA 3.2 OF HIS ORDER, THE LEARNED CIT(A) STATES THAT TH E REASONS RECORDED FOR INITIATION WERE GIVEN TO THE ASSESSEE ON 28/1/2010 ONLY. THIS ESTABLISHES THE FACT THAT THE ASSESSEE WAS NEVER GIVEN THE REAS ONS FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT BY THE ASSESSING OFFICER DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS BUT ON LY DURING APPELLATE PROCEEDINGS ALMOST 33 MONTHS AFTER THE ASSESSEE MAD E THE REQUEST FOR THE SAME BY LETTER DATED 19/4/2007. PAGE 9 OF 12 ITA NO.5 69/BANG/2011 9 4.1.3 AS HELD BY THE HONBLE APEX COURT IN THE CAS E OF GKN DRIVESHAFTS (INDIA) LTD. V ITO (259 ITR 19) (2003) THAT ON BEING REQUESTED BY THE ASSESSEE, THE ASSESSING OFFICER IS BOUND TO F URNISH THE REASONS RECORDED FOR INITIATION OF PROCEEDINGS UNDER SECTIO N 147 OF THE ACT WITHIN A REASONABLE PERIOD OF TIME SO THAT THE ASSESSEE COUL D FILE ITS OBJECTIONS THERETO AND THE ASSESSING OFFICER WAS TO DISPOSE OF F THE SAME BY PASSING A SPEAKING ORDER THEREON. EVEN AS PER THE RULES OF N ATURAL JUSTICE, THE ASSESSEE IS ENTITLED TO KNOW THE REASONS ON THE BAS IS OF WHICH THE ASSESSING OFFICER HAS FORMED AN OPINION THAT INCOME ASSESSABL E TO TAX HAS ESCAPED ASSESSMENT. THE FURNISHING OF REASONS TO THE ASSES SEE IS TO ENABLE/FACILITATE IT TO PRESENT ITS DEFENCE AND OBJ ECTIONS TO THE INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. WE A RE OF THE CONSIDERED OPINION THAT THERE WAS NO JUSTIFIABLE REASON FOR TH E ASSESSING OFFICER TO DEPRIVE OF THE ASSESSEE OF THE RECORDED REASONS BY H IM FOR INITIATING PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. 4.1.4 IN THE DECISION CITED BY THE LEARNED AR IN CI T V VIDESH SANCHAR NIGAM LTD. (ITA NO.4235 OF 2010 DT.20/7/201 1), THE BOMBAY HIGH COURT HAS HELD THAT RE-ASSESSMENT PROCEEDINGS WERE INVALID FOR THE REASON THAT THE REASONS RECORDED FOR REOPENING OF THE ASSE SSMENT WERE NOT FURNISHED DESPITE REQUESTS BY THE ASSESSEE TILL THE COMPLETION OF THE ASSESSMENT AND WERE FURNISHED ONLY AFTER COMPLETION OF THE ASSESSMENT. FROM THIS DECISION IT IS CLEAR THAT THE REASONS REC ORDED FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT ARE RE QUIRED TO BE FURNISHED BY THE ASSESSING OFFICER TO THE ASSESSEE WITHIN A RE ASONABLE PERIOD IN ORDER FOR THE ASSESSEE TO RAISE ITS OBJECTIONS AT THE PRE LIMINARY STAGE OF PAGE 10 OF 12 ITA NO. 569/BANG/2011 10 PROCEEDINGS. IF THE REASONS ARE NOT FURNISHED TO T HE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THEN THE SUBSEQUENT FURNISH ING OF THE REASONS AFTER COMPLETION OF ASSESSMENT PROCEEDINGS WOULD SE RVE NO PURPOSE AND WOULD AMOUNT TO THE ASSESSEE BEING DENIED ITS RIGHT TO RAISE OBJECTIONS TO THE VALIDITY OF PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT. IN THE LIGHT OF THE FINDINGS OF THEIR LORDSHIPS IN THI S CASE, IT IS CLEAR THAT THE COMPLETION OF ASSESSMENT/RE-ASSESSMENT WITHOUT FURN ISHING THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IS NOT SUSTAINABLE IN LA W AS IT IS INCUMBENT ON THE ASSESSING OFFICER TO SUPPLY THEM WITHIN REASONABLE T IME AS HELD BY THE HONBLE APEX COURT IN THE CASE OF GKN DRIVESHAFTS ( INDIA) LTD. V ITO (SUPRA). THE SUBSEQUENT FURNISHING OF REASONS I.E. AFTER COMPLETION OF ASSESSMENT WOULD NOT MAKE GOOD THE DEFECT/INVALIDIT Y WITH WHICH THE INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IS TAINTED. SIMILAR VIEW HAS BEEN HELD BY COORDINATE BENCHES OF THE ITAT IN THE CASE OF (I) ACIT V K V VENKATASWAMY REDDY OF THE ITAT, BANGAL ORE IN ITA NOS.797, 807, 798 & 808/BANG/2009 DATED 21/5/2010 AND (II) T ATA INTERNATIONAL LIMITED V DCIT BY THE ITAT, MUMBAI IN ITA NOS.3359 T O 3361/MUM/2009 DATED 29/6/2012. 4.1.5 FROM THE DECISION IN PARAS 4.1.1 TO 4.1.4 OF THIS ORDER (SUPRA), IT IS CLEAR THAT THE SETTLED PROPOSITION OF LAW, AS LA ID DOWN BY THE HONBLE APEX COURT, HONBLE HIGH COURT OF MUMBAI AND AS FOLLOWED BY THE TWO DECISIONS OF THE COORDINATE BENCHES OF THE TRIBUNAL (ALL CITED S UPRA), IS THAT THE REASONS AS RECORDED BY THE ASSESSING OFFICER ARE REQUIRED TO BE FURNISHED TO THE PAGE 11 OF 12 ITA NO. 569/BANG/2011 11 ASSESSEE WITHIN REASONABLE TIME OF THEIR BEING RECO RDED AND CERTAINLY PRIOR TO THE COMPLETION OF ASSESSMENT. IN THE INSTANT CAS E, THE UNDISPUTABLE FACTS ON RECORD ESTABLISH BEYOND DOUBT THAT THE REASONS RE CORDED FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT WERE N EVER FURNISHED TO THE ASSESSEE BY THE ASSESSING OFFICER BEFORE COMPLETION OF THE ASSESSMENT PROCEEDINGS ON 29/12/2008, 20 MONTHS AFTER THE REQU EST WAS MADE BY THE ASSESSEE BY LETTER DATED 19/4/2007. THE SUBSEQUENT FURNISHING OF THE REASONS RECORDED TO THE ASSESSEE BY THE LEARNED CIT( A) BY LETTER DATED 28/1/2010 DOES NOT ACHIEVE ANY PURPOSE OR MITIGATE T HE ILLEGALITY OF THE ACTION OF DEPRIVING THE ASSESSEE ITS RIGHT TO RAISE OBJECTIONS AGAINST THE INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE ORDER OF ASSESSMENT PA SSED UNDER SECTION 143(3) RWS 148 OF THE ACT DATED 29/12/2008 FOR THE ASSESSMENT YEAR 2004-05 WITHOUT THE ASSESSING OFFICER FURNISHING TH E RECORDED REASONS FOR INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO THE ASSESSEE WITHIN REASONABLE TIME AND PRIOR TO THE COMPLETION OF THE ASSESSMENT PROCEEDINGS, RENDERS THIS ORDER OF ASSESSMENT INVAL ID AND UNSUSTAINABLE IN LAW. 5. SINCE WE HAVE QUASHED THE ORDER OF ASSESSMENT D ATED 29/12/2008 FOR THE ASSESSMENT YEAR 2004-05 AS BEING INVALID AND UNSUSTAINABLE IN LAW, WE THEREFORE DO NOT PROPOSE T O GO INTO THE MERITS OF THE ISSUES RAISED IN THIS APPEAL. PAGE 12 OF 12 ITA NO. 569/BANG/2011 12 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF DECEMBER, 2012 SD/- SD/- (N V VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.