M/S.sutherland Global Services Private Limited,Rep., By The Authorized Signatory,Mr.lakshminarayananramasamy,Gateway Office Parks, 2[Nd] Floor Building,No.b2 v. The Commissioner Of Income Tax, Chennai-Vi, Income Tax Department

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 31.08.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMANDTHE HONOURABLE MR.JUSTICE SATHI KUMAR SUKUMARA KURUPW.A.NO.2206 OF 2021ANDC.M.P.NOS.13960 & 13975 OF 2021 M/s.Sutherland Global Services Private Limited,Rep., by the Authorized Signatory,Mr.LakshminarayananRamasamy,Gateway Office Parks, 2[nd] Floor Building,No.B2, No.16, GST Road,Perungalathur, Chennai,Tamil Nadu, India - 600 063. ... Appellant/Petitioner -Vs- 1. The Commissioner of Income Tax, Chennai-VI, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 2. The Deputy/Assistant Commissioner of Income Tax, Company Circle IV(4), Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 3. The Income-Tax Officer (OSD-III), Range-VI, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. ... Respondents/Respondents PRAYER:- Appeal under Clause 15 of Letters Patent against the orderdated 29.04.2021 passed in W.P.No.31352 of 2014 and set asidethe same. https://hcservices.ecourts.gov.in/hcservices/ Prayer in W.P.No.31352 of 2014:- Writ Petition filed under Article 226 of the Constitution ofIndia, praying for the issue of a Writ of CertiorarifiedMandamus, to call for the records of the second respondent inPAN:AAECS8093A to quash the impugned Notice dated 26.03.2014issued in terms of Section 148 of the Income Tax Act, 1961 onthe assumption of jurisdiction U/s. 147 of the said Income TaxAct, 1961 for framing re-assessment for the Assessment Year2007-2008 and further direct the second and third respondents todrop the proceedings intiated under 147 of the Act for the saidAssessment Year 2007-2008. JUDGMENT (Delivered by T.S.Sivagnanam, J.) This appeal, by the appellant-assessee, is directed againstthe order dated 29.04.2021, made in W.P.No.31352 of 2014, bywhich the appellant-assessee challenged the reopening of anassessment in terms of Section 148 of the Income Tax Act, 1961(hereinafter referred to as “the Act”) for the assessment year2007-08. 2. It may not be necessary for this Court to refer to thefactual matrix, as the dispute raised by the assessee and soughtto be defended by the Revenue in the writ petition lies in avery narrow campus. 3. The assessee filed its return of income for theassessment year under consideration AY 2007-08 on 26.10.2007.Notice was issued under Section 143(2) of the Act on 18.07.2008followed by an intimation under Section 143(1) of the Act dated23.09.2008. Thereafter, proceedings were dealt with by theTransfer Pricing Officer VI, Chennai, and ultimately, theassessment was completed under Section 143(3) on 15.12.2010.The Assessing Officer, by notice dated 26.03.2014, under Section148 of the Act, proposed to reopen the assessment and directedthe assessee to file its return of income. The assessee thoughinitially filed a letter stating that the return originallyfiled may be taken as return in pursuance to the notice underSection 148, subsequently filed e-return on 16.06.2014.Thereafter, the assessee sought for furnishing reasons for reopening, which were furnished by the Assessing Officer bycommunication dated 11.04.2014. The assessee filed itsobjections stating that the reasons stated are not reasons forreopening, but what the authority appears to do is to review itsearlier decision more particularly when, no fresh tangiblematerial has been pointed out by the Assessing Officer in thereasons to reopen especially when, the reopening is done at thefag end of the sixth year. Apart from that, the assesseespecifically pointed out that the very same issue was subjectmatter of decision for the assessment years 2011-12 and 2012-13wherein the Income Tax Officer, International Taxation-II(2),Chennai vide order dated 30.03.2013, treated the Businessdevelopment commission as subject to tax deduction at source inIndia and the assessee challenged the said order by filing anappeal before the Commissioner of Income Tax (Appeals)-VII,Chennai (for brevity “the CIT(A)”), who by order dated03.02.2014, partly allowed the assessee's appeal. The assesseepointed out that the said order passed by the CIT(A) dated03.02.2014 had become final, as the Revenue did not prefer anyappeal. Apart from that, the assessee also pointed out thatthere is a circular issued by the Board in Circular No.786,dated 07.02.2000, which was valid and effective for theassessment year 2008-09 wherein, it was advised that no tax isdeductible under Section 195 for commission paid on exports, toa non-resident, who operates from outside India and payment isremitted abroad. Further, it was pointed out that the Income TaxOfficer, International Taxation-II(2) dealt with the same issuefor the assessment year 2008-09 and accepted the stand taken bythe assessee. However, the business development commission isnot subjected to taxes in India. Therefore, the assesseecontended that when the TDS Officer himself has held that thebusiness development commission is not subject to tax in India,a reassessment on the same ground would amount to reviewing theearlier order of assessment. 4. The assessee placed reliance on the decision of thisCourt in M.V.S.Kathirvelu Nadar vs. Commr. of Agrl. I.T. [(1968)68 ITR 786 (Mad.)] wherein, it was held that if one wing of theGovernment takes a particular view on a certain transaction, itdoes not appear proper that the same wing, while dealing withanother branch of its business, should contradict itself andcome to a different conclusion, which causes discomfiture to theassessee. The assessee also raised other grounds to state thatthe reopening of the assessment was not valid in law. Theobjections given by the assessee were disposed of bycommunication dated 07.10.2014. It appears that when the writpetition was heard, the assessee apart from placing reliance onthe orders passed by the CIT(A), International Taxation Officer,relied on the decision in the assessee's own case for theassessment year 2008-09 in T.C.A.No.32 of 2019, dated 23.09.2020 on the very same issue. Though such was the subject made beforethe learned Writ Court, the learned Writ Court came to theconclusion that considering the spirit of Section 147 of theAct, the Court cannot adjudicate into the factual matrix andaccordingly, the writ petition was dismissed directing theappellant to face the assessment proceedings. The reopening ofan assessment, that too, beyond four years, in the case of theassessee at the fag end of the 6[th] year, is a very serious issue.Therefore, the statute provides for a remedy and there can be noreopening of an assessment, unless the requisite factors as laiddown in Sections 147/148 of the Act are complied with. A strictcompliance of the statutory provision is always called upon in areopening proceedings, as it is settled legal position, areopening is not a review of the earlier decision. In theinstant case, since the reopening is beyond the period of fouryears, there should be tangible materials available with theAssessing Officer to do so. 5. We have noted the reasons for reopening and for betterappreciation, we quote the same hereunder:- “Under section 195, any person responsiblefor paying to a non-resident, any sum chargeableto tax in India, which arises through businessconnection in India, under section 9(i)(a) of ITAct, should deduct tax. Thus, as per theprovision of section 9(i) of IT Act, necessarytax has to be deducted on the Businessdevelopment commission paid. The Businessdevelopment commission is in the nature ofTechnical service fees paid to the parententity. As no TDS has been made on the BusinessDevelopment Commission, the same needs to bedisallowed as per section 40(a)(ia). Hence, Ihave reasons to believe that income has escapedassessment within the meaning of section 147 ofthe Income Tax Act.” 6. As mentioned above, the assessee has given an elaborateobjection to the reopening dated 29.04.2014 both on merits aswell as how the assessee's case on the very same issue was dealtwith by the Department for the earlier/subsequent assessmentyears. To say the least, the objection was not even taken noteof by the Assessing Officer while disposing of the objections,vide communication dated 07.10.2014. All that the AssessingOfficer says is as follows:- “As per the provision of section 9(1) ofIncome tax Act, necessary tax has not deducted onthe business development commission paid to https://hcservices.ecourts.gov.in/hcservices/ non-resident. The business development commissionis in the nature of technical services fees paidto the parent entity. The non-deduction of taxin the above payment, raised the liability totax, which is escaped to assessment.” From the above, it is clear that the Assessing Officer didnot deal with the objections given by the appellant. 7. The learned Writ Court did not go into the contention asto whether the case of the assessee that reopening amounts tochange of opinion is correct or not. 8. In our considered view, this is the moot issue, whichrequires to be gone into, when a challenge is made to areopening proceedings under Article 226 of the Constitution ofIndia. This is more so because, the assessee has no remedyunder the Act. 9. The Hon'ble Supreme Court in GKN Driveshafts (India) Ltd.vs. ITO [(2003) 259 ITR 19 (SC)], had directed that the assesseeis entitled to communicate to the reasons based on whichreopening is made. On reasons being furnished, the assessee hasbeen granted liberty to object to the reopening and there is adirection to the Assessing Officer to dispose of the objectionsby passing a speaking order. In the absence of a remedy providedunder the statute, as against such speaking order, the assesseeis entitled to approach this Court under Article 226 of theConstitution of India. Therefore, the learned Writ Court wasrequired to examine as to whether the reopening was within thefour corners of law. 9. The Hon'ble Supreme Court in GKN Driveshafts (India) Ltd.vs. ITO [(2003) 259 ITR 19 (SC)], had directed that the assesseeis entitled to communicate to the reasons based on whichreopening is made. On reasons being furnished, the assessee hasbeen granted liberty to object to the reopening and there is adirection to the Assessing Officer to dispose of the objectionsby passing a speaking order. In the absence of a remedy providedunder the statute, as against such speaking order, the assesseeis entitled to approach this Court under Article 226 of theConstitution of India. Therefore, the learned Writ Court wasrequired to examine as to whether the reopening was within thefour corners of law. 10. In our considered view, this exercise has not been doneby the learned Writ Court. Therefore, the order passed in thewrit petition calls for interference. 11. Mr.A.P.Srinivas, learned Senior Standing Counselappearing for the Revenue submitted that factual issues wereinvolved and if in the opinion of this Court, the orderdisposing of the objections vide communication dated 07.10.2014is non-speaking or has not dealt with all the objections, thenthe matter can be remanded back to the Assessing Officer. Weare not convinced with the said submission for more than onereason. Firstly, the assessee cannot be vexed on the same issuerepeatedly. The Department has taken a stand pursuant to theorders passed by the CIT(A) dated 03.02.2014, which order hasbecome final. Thereafter, the TDS Officer has also grantedrelief. 12. The learned Senior Standing Counsel would vehementlycontend that the learned Writ Court rightly made an observationthat factual issues have to be gone into which cannot beagitated in a writ petition. We partially agree with thesubmission of the learned Senior Standing Counsel, but cannotapply the same to the facts and circumstances of the case onhand and we set out the reasons in support of such conclusion. 13. We are informed by the learned counsel for the assesseethat for the subsequent years, there has been no issues on thesaid point. Furthermore, from the reasons for reopening, we findthat all material has been culled out from the return of incomefiled by the assessee at the first instance viz., on 26.10.2007,which will go to show that there is no fresh tangible materialmuch less, the Assessing Officer also does not refer to any suchmaterial in the reasons for reopening dated 11.04.2014. Thus,we are of the definite view that the reopening is unsustainablein law. 14. Thus, for all the above reasons, the writ appeal isallowed and the reopening proceedings are quashed. No costs.Consequently, connected miscellaneous petitions are closed. Sd/- Assistant Registrar(CS V) //True Copy// Sub Assistant Registrar abr To 1. The Commissioner of Income Tax, Chennai-VI, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 2. The Deputy/Assistant Commissioner of Income Tax, Company Circle IV(4), Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 3. The Income-Tax Officer (OSD-III), Range-VI, Income Tax Department, 121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. NR(CO)PBS/27/09/2021 W.A.NO.2206 OF 2021