M/s M.Ct..M. Corporation Private Limited, CHENNAI v. ACIT, CHENNAI

CO 166/CHNY/2009 | 1999-2000
Pronouncement Date: 28-07-2011 | Result: Dismissed

Appeal Details

RSA Number 16621723 RSA 2009
Assessee PAN AAACM4530C
Bench Chennai
Appeal Number CO 166/CHNY/2009
Duration Of Justice 1 year(s) 9 month(s) 19 day(s)
Appellant M/s M.Ct..M. Corporation Private Limited, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 28-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-07-2011
Assessment Year 1999-2000
Appeal Filed On 09-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 1426/MDS/2009 ASSESSMENT YEAR : 1999-2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-IV(1) CHENNAI. V. M/S. M.CT.M. CORPORATION PVT. LTD. 761 ANNA SALAI CHENNAI-600 002. (PAN : AAACM4530C) (APPELLANT) (RESPONDENT) A N D C.O. NO. 166/MDS/2009 (IN ITA NO. 1426/MDS/2009) ASSESSMENT YEAR : 1999-2000 M/S. M.CT.M. CORPORATION PVT. LTD. V. THE ASSISTANT COMMISSIONER 761 ANNA SALAI OF INCOME TAX CHENNAI-600 002. COMPANY CIRCLE-IV(1) CHENNAI. (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI P.B. SEKARAN CIT(DR) SHRI SHAJI P. JACOB SR. DR & SMT. C.CHANDRAKANTA AO ASSESSEE BY : SHRI R. RAJASEKARAN CA SHRI S. NAGARAJAN CA & SHRI S. THIAGARAJAN CA I.T.A. NO. 1426 & CO 166/MDS/2009 2 O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : ITA NO. 1426/MDS/2009 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-V CHENNAI IN ITA NO. 1 52/2005-06 DATED 28-11-2008 FOR THE ASSESSMENT YEAR 1999-2000. C.O. NO. 166/MD S/2009 IS A CROSS OBJECTION FILED BY THE ASSESSEE IN THE REVENUES APPEAL. 2. SHRI P.B. SEKARAN LEARNED CIT-DR SHRI SHAJI P. JACOB LEARNED SR. DR AND SMT. C. CHANDRALEKHA ASSISTANT COMMISSIONER OF INC OME-TAX CENTRAL RANGE P COIMBATORE REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R. RAJASEKARAN FCA REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT INTE REST RECEIPTS FROM INVESTMENT ACTIVITY OF THE ASSESSEE IS TAXABLE UNDER THE HEAD INCOME FROM BUSINESS AND NOT INCOME FROM OTHE R SOURCES. 2.2 HAVING REGARD TO THE FACT THAT THE HON'BLE TRIBUNAL IN THE CASE OF KANKHAI INVESTMENTS AND TRADING CO. P. LTD. V. A CIT(116 ITD 492) FOLLOWING THE RATIO OF THE APEX COURT IN THE CAS E OF NARAIN SWADESHI WVG. MILLS V. CEPT (26 ITR 765) HAD LAID DOWN T HAT TO SATISFY AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE ENGAGED IN THE BUSINESS OF HOLDING INVESTMENTS THE ASSESSEE MUST HAVE CARR IED ON SOME REAL I.T.A. NO. 1426 & CO 166/MDS/2009 3 SUBSTANTIAL AND SYSTEMATIC OR ORGANIZED COURSE O F ACTIVITY OR CONDUCT WITH A SET PURPOSE AND THE MOA OF THE AS SESSEE IS NOT SUFFICIENT TO SATISFY THE SAID TEST THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 3.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT CHARG ING OF INTEREST U/S 234B ( ` 2.64 CRORES) OF THE ACT WAS NOT CORRECT IN THE FAC TS OF THE ASSESSEES CASE. 3.2 IN VIEW OF THE DECISION OF THE HON'BLE APEX CO URT IN THE CASE OF CIT V. ANJUM M.H. GHASWALA (252 ITR 1) AND OF THE HON'BL E DELHI TRIBUNAL IN THE CASE OF ASHWANI DHINGRA V. ADDL. CIT (119 ITD 88) THE LEARNED CIT(A) OUGHT TO HAVE NOTED THE SETTLED POSITION O F LAW THAT CHARGING OF INTEREST U/S.234B IS MANDATORY. 4.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT NO IN TEREST U/S 234D WOULD BE CHARGEABLE PRIOR TO A-Y 2004-05. 4.2 HAVING REGARD TO THE DECISION OF THE BANGALORE BENCH OF THE HON'BLE ITAT IN THE CASE OF SIGMA ALDRICH FOREIGN HOLDING COMPANY V. ACIT (104 ITD 95) AND OF THE AHMEDABAD BENCH OF THE HO N'BLE TRIBUNAL IN THE CASE OF JC IT V. SARDAR SAROVAR NARMADA NIGAM LTD. (93 ITD 321) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE LEVY OF INTEREST U/S 234D OF THE I.T.ACT. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LEARN ED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. IN THE CROSS OBJECTION FILED BY THE ASSESSEE TH E ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : I.T.A. NO. 1426 & CO 166/MDS/2009 4 1. TH E ORDER OF THE COMMISSIONER OF INCOME TA X (APPEAL S ) IN SO FA R AS I T RE L A T ES TO THE CO NFIRMATION OF THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF IN C OM E TA X C OM P A NY CIR CLE IV(L) IS AGAINST T HE PROVISION S OF LAW AND C O N T R ARY TO THE FACTS AND C IRCUM S TAN CES OF TH E CASE. 2. THE L E ARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN HOLDING THAT TH E A SSESS M E N T WA S VA LI DLY REO P E NE D UNDE R S E C T ION 1 4 7 OF THE INCOME TA X A C T 1961 . TH E L E ARN ED C OMMISSIONER OF INCOME TA X ( APP E AL S) S H O UL D HAV E F O U N D THA T TH E AS S E SSI N G OFF ICE R D ID N OT HAVE JURISDICTION TO REO P EN TH E A SSESS M E NT PRO CE EDING S . 3. T HE L EARNED C O MM ISS I O N ER OF IN C OM E TA X ( APPEA L S ) ER R ED I N HOLD I NG THA T THE B RANCH OF T H E C OM PA NY SI TUAT E D I N M ALA YSIA DO ES N O T C O N S TITUT E A P E RMAN E NT E S TABL ISHMENT IN TERMS OF PR O VI S I O N S O F ARTI C L E 5 OF TH E DTAA BET W EEN IND I A AND MALAYSIA. HE S HOULD HAV E FO UN D TH AT THE S A I D C LAU SE 5 OF THE DTAA CLEARLY SPECIFIES A BRANCH TO BE A PERMANENT E S TABLI S HM E NT . IN COM I NG T O HI S CO N CLUSIO N T HAT THE RESPONDENT DID NO T HAVE A PERM AN E N T EST ABLI SHMENT I N MA L AYSIA THE L EARNED COMM I SSIO N E R OF IN CO M E TA X ( A P P E A LS) H A S MISDIREC T ED HIMSE L F TO THE T ES T FISCA L DO MI C IL E A S ENU ME RATED IN ARTICLE 4 OF THE DTAA B ET WE EN I NDIA A ND MA LA YS I A INS T E AD O F CO RR EC TLY I NT E RPRETING TH E EX ISTENC E OF PERMANENT E S TAB L I S HM E N T IN T E R MS OF A RTICLE 5 OF THE S A ID D T AA . 4. HAV I N G H IMSE LF FO UN D THAT SEC TI ON 5(1 ) ( C) O F T H E I NCOME T A X A C T 19 61 C A N N OT OPERATE IN VIEW OF TH E RE L E VANT PROVI S IONS OF THE ACT THE CIRCULAR AND TH E SE TTLED LAW AND BA SED O N TH E CO N CE P T OF TR E ATY O V E R R IDE REITE R AT E D BY THE HON ' BLE APE X COURT THE LEARNED I.T.A. NO. 1426 & CO 166/MDS/2009 5 COM M I SSIONER OF IN COME TA X ( A P P E A LS) S H O U L D HAV E APP R E C IAT E D THAT THERE I S N O JU RI SDICTION T O S UBJ ECT THE OVERSE A S INCO ME O F THE MALAY S IAN B R ANCH OF THE RESPONDENT ON THE FACTS AND CIR C UM S TA NCE OF T H E C A SE . 5. TH E L EAR N E D COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN HOLDING THAT TH E P RO VI S I ONS OF TH E DTAA B E T WEE N I ND I A A N D MAL A Y S IA ARE NOT APPLI C ABLE TO TH E IN CO M E E AR NED BY THE COMPANY. 6. T H E LEARNE D CO M MI SSIO N ER OF I N C OM E TA X (APP E ALS ) E RRED IN HOL D ING T HA T THE INCOME BY WAY OF I NT E RES T AND DIVID E ND E ARN ED BY THE COMPAN Y O N VA RIO U S I N VES TM E NT S I S TO BE ASSESSED AS INCOME F R OM O TH E R S O U RCES AND NOT A S IN C OME F R OM B US IN ES S CON TRA RY T O THE FA CTS AN D C IRC U MS TAN C ES OF T HE C A SE. 7. THE LEARNED C O M MISS I ONER OF INCO M E TA X ( A P P E A LS) CONTRARY T O T H E CORRECT PO S ITION THAT CLAUS E 6 O F AR TICLE 7 O F TH E DTAA BE T WEEN IND IA AN D M ALAYSIA IS PAR T OF A RT I C L E 7 WHI C H DEA L S WITH ON L Y B U SINESS PROF I TS E R RED IN TAKING A NOVE L AND INCO R REC T V I EW THAT IN C OME S BY WAY O F D I VIDEND S AND INTEREST WOU L D NOT BE COM P O N E NT S O F B U S I NESS PROFITS BECAUS E OF TH E S O C ALLED QUALIFICATION C ONTAINED I N THE PRO V ISIO N O F C LAU SE 6 OF A R T ICLE 7 O F TH E SAID D T AA . 8. WI THOUT P R EJUD I CE T H E L E A RNED C O MM ISS I O N ER OF I NCOME-TA X ( A PPEA L S) OUGHT T O HAV E APP R ECI A TED THA T C L A U SE 6 OF A RTICLE 7 O F TH E DT AA B E T WEEN I ND IA AND MALAYS I A W H IC H RE MAINS THE SAME S IN CE T HE CO M MENCEME NT OF TH E DT AA ONL Y E NABL ES TH E A LL OCATION OF BU S IN ESS PR O FIT S TO THE OTHER A RTICLES CO N T A INED I.T.A. NO. 1426 & CO 166/MDS/2009 6 TH EREIN A N D D OES NOT MAKE THE S AID TREAT Y IT S E L F I N O P ER AT I V E S O A S TO PROVIDE AN OMN I BUS ROUTE T O THE O T HER T REA T IES OUTSID E THE INDO MA L AY S IAN T RE A T Y. 9 THE L E ARNED COMMISSIO N ER OF INCOME TA X ( A PPEA L S) ERR E D I N WR O NGLY L A C ING RE L I AN CE ON ART I CL E 23 OF THE D T AA BETWEEN INDIA AND MAL A YSIA IN C OMING TO A CON C LU S ION THAT TH E IN COME OF TH E PE R M A N E NT ESTABL I S HM E NT O F THE RE S PONDENT IN S O FA R A S IT RE LAT ES TO INT ERES T AND D I V I D E ND A RE T A X AB L E IN INDIA. 10. TH E L E ARNED COMMISSION E R OF INCOME TA X ( A P P EALS) ER R ED IN NOT ALLOWING TH E E X PENSES THAT WER E IN C URRED FOR THE PURPOSE OF E A RNING ITS OVERSE A S INCOME BY TH E R E SPOND E N T T HR O UGH IT S PERMANENT ESTABLISHMENT I N MALA Y S I A . 11. TH E LEARNED COMM I S S IO N ER O F INCO M E TA X ( A PPEALS) ERRED IN NOT ALLOWING TH E E X P E N S E S I NCU R R E D W I THIN INDIA BY THE RESPONDEN T WHICH WERE INCURRED FOR TH E PURPO SE OF E A R N I NG S IT S COME I N THE NORMAL COUR S E OF ITS B U SINESS. 12. THE L EARNED COMMISS I ONER OF INCOME TA X ( A PPEALS) ERRED I N NOT FOL L OWING TH E D ECIS I O N OF T H E JURI S D IC TIONAL IT A T IN THE R ES P O NDENT ' OWN CA SE FOR TH E ASS E SSMENT Y E AR 1998 - 99 W H EREIN TH E H O N ' BL E IT A T HAD HELD TH A T THE I NCOME ATTRIBUTABLE TO TH E P ERMAN E NT E S TABLI S H MENT OF T H E R E SPONDENT IN MALAYSIA IS NOT TA X ABLE IN I NDIA. 13. THE RE S PONDENT CRAVE S LEAV E TO ADDI T IO NAL GROUNDS. 14. FOR THESE REASONS AND FOR ANY OTHER REASONS THAT MA Y BE ADDUCED AT TH E TIM E OF HEA RI NG I T I S P R AY E D THAT THE O RDE R O F TH E LEARNED COMM IS SI O N ER OF IN CO M E TA X ( APP EA L S) MAY B E SE T A S IDE TO THE E X TENT I T I S PREJUDICIAL TO THE INTERESTS OF THE RESPONDENT I.T.A. NO. 1426 & CO 166/MDS/2009 7 AND R EN D E R J U S T ICE. 5. THE ASSESSEE HAS CHALLENGED THE RE-OPENING OF TH E ASSESSMENT WHICH GOES TO THE ROOT OF THE APPEAL. THE CROSS OBJECTION WAS HEARD FIRST IN REGARD TO THE ISSUE OF RE-OPENING. IT WAS SUBMITTED BY THE LEARNED AUT HORISED REPRESENTATIVE THAT THE ASSESSEE HAS BEEN SERVED WITH A NOTICE U/S 148 OF T HE INCOME-TAX ACT 1961 (THE ACT FOR SHORT) DATED 26.03.2003 WHEREAS THE REASON S HAVE BEEN RECORDED ON 26- 03-2004. IT WAS THE SUBMISSION THAT THE NOTICE U/S. 148 DATED 26-03-2003 WAS SERVED ON THE ASSESSEE ON 31.03.2004. IT WAS THE S UBMISSION THAT THE TRIBUNAL HAD BEEN PLEASED TO ALLOW THE ASSESSEE INSPECTION OF TH E RECORDS OF THE REVENUE IN THE ASSESSEES OWN CASE ON 25-01-2010 AND THE RECORDS W ERE VERIFIED BY THE LEARNED AUTHORISED REPRESENTATIVE ON 24.04.2010. COPIES OF THE ORDER SHEET HAD ALSO BEEN TAKEN AS ALSO THE NOTICE U/S. 148 OF THE ACT AS WER E AVAILABLE IN THE RECORDS OF THE REVENUE AS ALSO THE COPY OF THE ACKNOWLEDGEMENT OF SERVICE OF THE NOTICE. IT WAS THE SUBMISSION THAT THE RECORDS OF THE REVENUE SHOW ED THAT THE NOTICE U/S 148 AS WAS AVAILABLE IN THE FILE OF THE REVENUE WAS DATED 26-03-2003 WHICH WAS SUBSEQUENTLY CORRECTED TO 26-03-2004. IT WAS THE F URTHER SUBMISSION THAT IN THE ORDER SHEET ABOVE THE LINE THE REASONS RECORDED FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT THE WORDS NOTICE U/S 148 PREPARED AND PUT UP HAD BEEN STRUCK OFF WITH WHITENER. THE LEARNED AUTHORISED REPRESENTATI VE FURTHER DREW OUR ATTENTION TO PAGE 15 OF THE ASSESSEES PAPER BOOK I WHICH IS CO PY OF NOTICE SAID TO HAVE BEEN I.T.A. NO. 1426 & CO 166/MDS/2009 8 RECEIVED BY THE ASSESSEE DATED 26-03-2003 ON WHICH IT HAS BEEN MENTIONED THAT THE SAME HAS BEEN RECEIVED ON 31-03-2004. THE SAID NOTICE IS SIGNED BY SMT. C. CHANDRAKANTA ASST. COMMISSIONER OF INCOME TAX COM PANY CIRCLE-IV(1) CHENNAI- 34. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 12 OF THE PAPER BOOK-I FILED BY THE ASSESSEE WHICH WAS CO PY OF THE ORDER SHEET RECORDING WHERE THE WHITENER HAS BEEN APPLIED. THE SAME WAS VERIFIABLE WITH THE ORIGINAL PRODUCED BY THE REVENUE AND IT WAS ALSO ACCEPTED BY THE LEARNED CIT-DR THAT THE WORDS WERE NOTICE U/S 148 PREPARED AND PUT UP WHI CH HAD BEEN ERASED USING WHITENER. THE LEARNED AUTHORISED REPRESENTATIVE FU RTHER DREW OUR ATTENTION AT PAGE 9 OF THE PAPER BOOK I FILED BY THE ASSESSEE WHICH W AS THE COPY OF THE NOTICE ISSUED U/S 148 TAKEN FROM THE FILE OF THE REVENUE. IT WAS THE SUBMISSION THAT IN THE SAID NOTICE THE YEAR 03 HAS BEEN ALTERED TO 04. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD FILED A WRIT PETITION BEFORE THE HIG H COURT ON THIS ISSUE AND AFTER CONSIDERING THE COUNTER AFFIDAVIT AS ALSO THE NOTIC E OF SATISFACTION RECORDED BY THE ASSESSING OFFICER THE HON'BLE HIGH COURT DISMISSED THE WRIT PETITION GIVING OPPORTUNITY TO THE ASSESSEE TO RAISE ALL THE ISSUES IN THE APPEAL. IT WAS THE SUBMISSION THAT THE NOTICE HAD BEEN TAMPERED WITH I NSOFAR AS THE NOTICE WAS ACTUALLY DATED 26-03-2003 AND WHEN THE NOTICE WAS I SSUED NO REASONS HAD BEEN RECORDED. HOWEVER THE LINE ISSUING THE NOTICE HAD BEEN STRUCK OFF WITH WHITENER AND THE REASONS HAD BEEN RECORDED. IT WAS THE SUBM ISSION THAT WHEN THE ASSESSEE HAD ASKED FOR THE COPY OF THE REASONS RECORDS THE ASSESSING OFFICER HAD GIVEN THE I.T.A. NO. 1426 & CO 166/MDS/2009 9 ASSESSEE A TYPED COPY OF THE REASONS RECORDED AND N OT THE COPY OF THE ORDER SHEET WHERE THE REASONS HAD BEEN RECORDED. IT WAS FAIRLY AGREED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE REASONS AS RECOR DED IN THE ORDER SHEET AND THE COPY AS GIVEN TO THE ASSESSEE WERE IN VERBATIM IDENTICAL. THUS IT WAS THE SUBMISSION BY THE LEARNED AUTHORISED REPRESENTATIVE THAT ON EIGHT GROUNDS THE RE- OPENING WAS INVALID VIZ. I) AS NO REASONS HAD BEEN RECORDED BEFORE THE ISSU ANCE OF NOTICE U/S 148 OF THE ACT THE RE-OPENING WAS BAD. IT WAS T HE SUBMISSION THAT THE NOTICE WAS DATED 26-03-2003 AND THE REASONS H AD BEEN RECORDED SUBSEQUENT TO 26.03.2003. II) THE NOTICE WAS NOT PRECEDED BY THE REASONS AS PER SECTION 148(2). III) THE CORRECTION OF THE DATE 26-03-2003 TO 26-0 3-2004 MADE THE NOTES INVALID. IV) THE LEARNED AUTHORISED REPRESENTATIVE ALSO DRE W OUR ATTENTION TO PAGE 1 OF THE ORDER OF THE LEARNED CIT(A) TO SHOW THAT THE LEARNED CIT(A) HAD ALSO RECOGNIZED THAT THE NOTICE WAS DA TED 26-03-2003 AND THE REVENUE HAD NOT FILED ANY RECTIFICATION A PPLICATION BEFORE THE LEARNED CIT(A) TO RECTIFY THE SAME IFIT WAS G ENUINELY A MISTAKE. IT WAS THE SUBMISSION THAT THE ORDER SHEET HAD BE EN DOCTORED. V) IT WAS THE FURTHER SUBMISSION THAT THE NOTICE U /S. 148 DATED 26-03- I.T.A. NO. 1426 & CO 166/MDS/2009 10 2004 HAD NOT BEEN SERVED ON THE ASSESSEE AND IT W AS ONLY A NOTICE U/S 148 DATED 26-03-2003 WHICH HAS BEEN SERVED ON THE ASSESSEE. VI) IT WAS THE FURTHER SUBMISSION THAT ASSUMING TH AT SUCH A NOTICE HAD BEEN SERVED THERE WOULD BE TWO NOTICES U/S 148 W HICH CANNOT EXIST AT THE SAME TIME. VII) THE LEARNED AUTHORISED REPRESENTATIVE DREW OU R ATTENTION TO THE REASONS RECORDED WHICH IS AS FOLLOWS : REASONS RECORDED FOR REOPENING THE ASSESSMENT U/S. 147 OF THE INCOME TAX ACT 1961 M.CT.M.CORPRATION PVT. LTD. A.Y.1999-2 000 G.I.NO.MC-8 THE ASSESSEE FILED RETURN OF INCOME FOR A.Y.1999- 2000 ON 10/12/1999 DECLARING A BUSINESS LOSS OF RS.1 21 706/-. FROM T HE BALANCE SHEET AND P&L ACCOUNT AS ON 31/3/1999 IT IS NOTICED THAT THE ASS ESSEE INVESTED RS.18 CRORES IN GLOBAL MARKET THROUGH GOLDMAN SACH A NEW YORK BASE D COMPANY RS.17.1 CRORES IN WGIL AND RS.24.9 LAKHS AS DEPOSIT IN DRESDNER BA NK. IN THE RETURN OF INCOME THE ASSESSEE DECLARED THE INVESTMENTS MENTIONED ABO VE AS ATTRIBUTABLE TO MALAYSIAN BRANCH AND CLAIMED RELIEF IN RESPECT OF T HE PROFITS DERIVED FROM ITS PERMANENT ESTABLISHMENT (BRANCH OFFICE) AT MALAYSIA UNDER THE PROVISIONS OF DTAA BETWEEN INDIA AND MALAYSIA. SUCH PROFITS COMPRISE MAINLY OF : INCOME FROM INVESTMENTS - RS. 1 75 71 427/- DIFFERENCE IN EXCHANGE - RS. 1 37 21 867/- INTEREST ON FIXED DEPOSITS - RS. 10 67 235/- I.T.A. NO. 1426 & CO 166/MDS/2009 11 IT HAS TO BE NOTED THAT THE INVESTMENTS REPRESENTS INVESTMENT OF THE SALE PROCEEDS OF KARAINAGAR ESTATE IN MALAYSIA IN F.Y.1997-98. TH IS INVESTMENT HAS BEEN MADE THROUGH A CONCERN NAMED GOLDMAN SACHS (REFERRED TO AS GS) A NEW YORK BASED COMPANY HAVING A GLOBAL PRESENCE AND NO PRESENCE IN MALAYSIA. THE RELIEF UNDER DTAA IS NOT AVAILABLE TO THE ASSESSEE IN VIEW OF TH E FOLLOWING: (I) IT IS GATHERED THAT GS IS A NEW YORK BASED COMPANY. IT ACCEPTS FUNDS IN THE PORTFOLIO MANAGEMENT SCHEME FROM HIGH NET WO RTH INDIVIDUALS /CONCERNS AND INVESTS THEM IN VARIOUS FORMS LIKE SH ARES BONDS CURRENCIES PRECIOUS METALS ETC. ALL OVER THE WORL D AFTER CAREFUL STUDY OF POTENTIAL TO MAXIMIZE RETURNS FOR ITS INVESTORS. GS IS A WORLD LEADING GLOBAL INVESTMENT BANKING SECURITIES AND I NVESTMENT MANAGEMENT FIRM. AS THE FUNDS WERE HANDED OVER TO GS AND INVESTED IN GLOBAL MARKET THE INCOME CAN NOT BE SA ID TO BE DERIVED FROM NOR ATTRIBUTABLE TO THE PE IN MALAYSIA. (II) THE ABOVE INCOME CAN BE CLASSIFIED AS INCOME FROM OTHER SOURCES AS THIS REPRESENTS INVESTMENT MADE OUT OF SURPLUS F UNDS. MOREOVER APART FROM THE INVESTMENT MADE THROUGH GS & WGIL T HERE IS NO OTHER ACTIVITY THAT WOULD ENTAIL CLASSIFICATION OF ASSESSEES ACTIVITY AS SOMETHING IN THE NATURE OF BUSINESS. IN O RDER THAT AN ACTIVITY IS CLASSIFIED AS BUSINESS IT SHOULD HAVE BEEN CARRI ED ON IN A CONTINUOUS AND ORGANIZED MANNER. MOREOVER THE DECISIONS RELATING TO THE MODEL OF INVESTMENT OF THE SALE PROCEEDS ARE THE PREROGATIVE OF GS AND THE ASSESSEE DOES NOT HAVE ANY SAY IN IT. UNDER THE DTAA RELIE F IS AVAILABLE ONLY FOR BUSINESS PROFITS HAVING PE AT MALAYSIA AND NOT FOR I NCOME FROM OTHER SOURCES. (III) MOREOVER AN INVESTMENT HAS BEEN CARRIED ON THROUGH GS AND WGIL AS AN AGENT WHO IS AT TOTAL FREEDOM TO DECIDE THE MODE OF I.T.A. NO. 1426 & CO 166/MDS/2009 12 INVESTMENT. CLAUSE 6 OF ARTICLE 5 OF DTAA MAKES IT CLEAR THAT THE ASSESSEE SHALL NOT BE DEEMED TO HAVE A PERMANENT ES TABLISHMENT IN THE OTHER CONTRACTING STATE MERELY BECAUSE OF THE F ACT THAT THE BUSINESS IN THAT OTHER CONTRACTING STATE IS CARRIED ON THROUGH A BROKER GENERAL COMMISSION AGENT OR ANY OTHER AGENT OF AN I NDEPENDENT STATUS WHERE SUCH PERSONS ARE ACTING IN THE ORDINAR Y COURSE OF THEIR BUSINESS. IN THIS CASE GS IS ONE SUCH AGENT ON WHO M THE DECISIONS RELATING TO INVESTMENT OF ASSESSEES SURPLUS FUND W ERE VESTED GS NEITHER HAD IN ITS PRESENCE IN MALAYSIA NOR RECEIVE D FUNDS IN MALAYSIA NOR INVESTED SUCH FUNDS IN MALAYSIA. GS DID NOT HAV E ANY CONNECTION WHATSOEVER WITH MALAYSIA. HENCE NOTWITHSTANDING T HE ARGUMENT IN POINT (II) ABOVE THE CLAIM OF RELIEF UNDER THE DTA A IS NOT AVAILABLE TO THE ASSESSEE AS THE ASSESSEE CAN NOT BE SAID TO BE HAVING A PERMANENT ESTABLISHMENT IN MALAYSIA. (IV) AS PER SEC.3 OF THE I.T. ACT MALAYSIA INCOMES IN R ESPECT OF AN OFFSHORE BUSINESS ACTIVITY CARRIED ON BY AN OFFSHOR E COMPANY IS NOT CHARGEABLE TO TAX. SECONDLY FROM THE SCHEDULE 8 O F BALANCE SHEET IT IS NOTICED THAT PROVISION FOR TAXATION IS NIL. THI S IMPLIES THAT THE ASSESSEE IS NOT LIABLE/CHARGEABLE TO TAX AT MALAYSI A ON INCOME EARNED THROUGH GS & WGIL ON INVESTMENT MADE OUTSIDE MALAYS IA. DTAA IS AVAILABLE ONLY IF THE INCOME IS LIABLE/CHARGEABLE T O TAX IN THE OTHER CONTRACTING STATE. SINCE INCOME IS NOT CHARGEABLE TO TAX AT MALAYSIA NO RELIEF IS AVAILABLE ON THE INCOME EARNED THROUGH GS & WGIL UNDER DTAA. (V) MOREOVER THE DECISION OF MADRAS HIGH COURT RENDERE D IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SRM FIRM 208 ITR 40 0 IS NOT APPLICABLE TO THE FACTS OF THE CASE. THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. R.M.MUTHAIAH I.T.A. NO. 1426 & CO 166/MDS/2009 13 202 ITR 508 AND CBDT CIRCULAR NO.333 DT.2.4.92 (137 ITR 1) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSEE COMPANY GOT DEMERGED DURING THE A.Y.2 000-2001 AS A RESULT OF WHICH THE INVESTMENT (MADE THROUGH GS) GOT TRANSFER RED TO ONE OF THE RESULTING COMPANIES NAMELY M/S. M.CT. M.GLOBAL INVESTMENTS P VT LTD. (GLOBAL). GLOBAL ALSO CLAIMED RELIEF IN RESPECT OF THE INCOME (EARNED THR OUGH GS) CLAIMED TO HAVE BEEN EARNED THROUGH THE PERMANENT ESTABLISHMENT IN MALAY SIA FOR THE A.Y.2000-01. DURING THE COURSE OF ASSESSMENT IT WAS FOUND THAT G LOBAL WAS NOT ELIGIBLE FOR THE RELIEF IN VIEW OF THE FOLLOWING FINDINGS: A. FUNDS WERE INVESTED OUTSIDE MALAYSIA IN GLOBAL M ARKET BY GS. B. THE CONTROL AND MANAGEMENT WITH RESPECT TO THE TRAN SACTION WITH GS WAS IN CHENNAI AND THE BRANCH AT MALAYSIA DID NOT HAVE ANY SAY IN THE MATTER OF INVESTMENT CARRIED OUT THROUGH GS. ONLY THE DIRECT ORS AT CHENNAI WERE AUTHORIZED AND EMPOWERED TO EXECUTE THE TRADING AUT HORIZATION ESTABLISH AND MAINTAIN ACCOUNTS WITH GS. THE BRANCH AT MALAY SIA WAS NOT SO AUTHORIZED. THE INCOME WAS NEITHER DERIVED FROM MA LAYSIA NOR ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT IN MALAYSIA. C. GS REMITS THE MONEY FROM NEW YORK AND NOT FROM MALA YSIA. D. DTAA RELIEF IS AVAILABLE ONLY IF THE INCOME IS LIAB LE CHARGEABLE TO TAX IN THE OTHER CONTRACTING STATE. BUT IN THE PRESENT CASE THE INCOME EARNED THROUGH GS IS NOT LIABLE/CHARGEABLE TO TAX IN MALAYSIA. TH US NO RELIEF IS AVAILABLE ON THIS INCOME UNDER THE DTAA. THE DIRECTOR OF THE ASSESSEE COMPANY AND THE SUCCEE DING COMPANY (GLOBAL) ARE THE SAME AND THE ACTIVITY CARRIED ON RELATING T O INVESTMENT OF SALE PROCEEDS OF KARAINAGAR ESTATE THROUGH GS IS THE SAME . THUS THE FINDING IN GLOBAL ARE APPLICABLE TO THE ASSESSEES CLAIM OF RE LIEF ALSO AND THE DTAA I.T.A. NO. 1426 & CO 166/MDS/2009 14 RELIEF IS NOT AVAILABLE TO THE ASSESSEE. EXCHANGE D IFFERENCE AMOUNTING TO RS.1 37 21 867/- WILL NOT BE ELIGIBLE FOR DTAA REL IEF. SIMILARLY INTEREST ON FIXED DEPOSITS AMOUNTING TO RS.10 67 253/- ON INVE STMENT MADE THROUGH GS & WGIL IS ALSO REQUIRED TO BE TAXED AS INCOME F ROM OTHER SOURCES IN WHICH CASE THIS INCOME WILL ALSO NOT GET DTAA RELI EF. THUS BY CLAIMING DTAA RELIEF FOR WHICH IT IS NOT E LIGIBLE THE ASSESSEE HAS UNDERSTATED THE INCOME. THUS I HAVE REASONS TO BEL IEVE THAT TAXABLE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTIO N 147 OF THE INCOME TAX ACT 1961. PUT UP NOTICE U/S.148. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER WA S OF THE VIEW THAT THE INCOME OF THE ASSESSEE WAS NOT CHARGEABLE TO TAX IN MALAYS IA AND CONSEQUENTLY NO RELIEF WAS AVAILABLE TO THE ASSESSEE AND THE INCOME EARNED THROUGH GS & WGIL UNDER THE DTAA. IT WAS THE SUBMISSION THAT THIS VIEW WAS ERRONEOUS IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F UNION OF INDIA AND ANOTHER V. AZADI BACHAO ANDOLAN AND ANOTHER REPORTED IN 26 3 ITR 706 AT PAGES 741 AND 744 AND AS THE VIEW OF THE ASSESSING OFFICER WAS ER RONEOUS IN LAW THE RE-OPENING WAS BAD IN LAW. VIII) IT WAS THE FURTHER SUBMISSION THAT THE SATIS FACTION HAD BEEN RECORDED IN THE CASE OF M/S. M.CT.M. GLOBAL INVESTMENTS P. L TD. FOR THE PURPOSE OF RE- OPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2000 -01 AND ON THE BASIS OF THE SAME REASONS THE REASONS HAVE BEEN RECORDED IN THE ASSESSEES CASE. IT WAS THE SUBMISSION THAT THE SATISFACTION RECORDED IN THE AS SESSEES CASE WAS A BORROWED I.T.A. NO. 1426 & CO 166/MDS/2009 15 SATISFACTION FROM THE FILE OF M/S. M. CT.M. GLOBAL INVESTMENTS P. LTD. FOR THE ASSESSMENT YEAR 2000-01 AND CONSEQUENTLY THE RE-OPE NING COULD NOT BE SUSTAINED. 6. IT WAS THUS SUBMITTED THAT THE LEARNED CIT(A) HA D ERRONEOUSLY UPHELD THE RE-OPENING OF THE ASSESSMENT INSOFAR AS IN PAGE 9 P ARA 11 OF THE ORDER OF THE LEARNED CIT(A) THE LEARNED CIT(A) HAD COME TO A CO NCLUSION A CONCLUSION THAT THE FINAL DETERMINATION OF THE FACTS AND THE LEGAL PRONOUNCEMENTS ON THE SAME CANNOT BE TREATED AS A PRE-CONDITION FOR THE ASSESS ING AUTHORITY TO ENTERTAIN A REASON TO BELIEVE. IT WAS THE SUBMISSION THAT TH E REASON THAT THE AMOUNT WAS NOT TAXABLE IN MALAYSIA WAS NOT TENABLE IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN REFERRED TO SUPRA. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) HAD ALSO RELIED UPON THE DECISION IN THE CASE OF M/S. M.CT.M. GLOBAL INVESTMENTS P. LTD. FOR THE ASSESSMENT YEAR 2000-01 WHEREIN THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN ITA NO. 659/MDS/05 DATED 19-12-2007 HAD HELD THAT THE RE-OPENING WAS V ALID ON THE REASONS RECORDED. IT WAS THE SUBMISSION THAT THIS VIEW OF THE LEARNED CIT(A) WAS BAD IN LAW INSOFAR AS THE CO-ORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. IN ITA NOS. 956 957 958 & 959/ MDS/2009 DATED 31-05-2011 ON IDENTICAL FACTS AS IN THE ASSESSEES CASE HAD H ELD THAT THE RE-OPENING WAS BAD IN LAW. IT WAS THE SUBMISSION THAT THE REASONS FOR RE-OPENING IN THE CASE OF M/S. M.CT.M. GLOBAL INVESTMENTS P. LTD. DIFFERED FROM TH AT OF M/S. SIVAGAMI HOLDINGS I.T.A. NO. 1426 & CO 166/MDS/2009 16 PVT. LTD. AND THAT THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. IS LIABLE TO BE APPLIED TO THE FACTS OF THE PRESENT CASE. IT WAS THE SUBMISSION THAT THE ASSESS EE M/S. M.CT.M. CORPORATION OWNED AN ESTATE IN MALAYSIA AND HAD ALSO OWNED PROP ERTY IN CHENNAI INDIA. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS ALSO DERIV ING RENTAL INCOME AND INTEREST INCOME FROM BANKS. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS REGISTERED AS A NON-BANKING FINANCE COMPANY. IT WAS THE SUBMISSION THAT ON 01.04.1999 THE COMPANY I.E. M/S. M.CT.M. CORPORATION P. LTD. DEME RGED ITSELF INTO TWO COMPANIES BEING M/S. SIVAGAMI HOLDINGS PVT. LTD. A ND M/S. M. CT .M. GLOBAL INVESTMENTS PVT. LTD. THE ASSESSEE HAD SOLD ITS AS SETS IN MALAYSIA DURING 1998 AND THE SALE PROCEEDS HAD BEEN USED FOR MAKING INVE STMENTS IN THE GLOBAL MARKET THROUGH M/S. GOLDMAN SACHS A NEW YORK BASED COMPANY AS ALSO IN WGIL. IT HAD ALSO MAINTAINED A DEPOSIT IN DRESDNER BANK. IT WAS THE SUBMISSION THAT ON THE DEMERGER M/S. SIVAGAMI HOLDINGS PVT. LTD. WAS PUT INTO POSSESSION OF THE BALANCE PROPERTIES IN MALAYSIA AND PART OF THE INVE STMENTS HELD THROUGH M/S. GOLDMAN SACHS AND WGIL. M/S. M.CT.M. GLOBAL INVEST MENTS WAS GIVEN THE IMMOVABLE PROPERTY IN CHENNAI INDIA AND THE BALANC E OF THE INVESTMENTS MADE THROUGH M/S. GOLDMAN SACHS AND WGIL. THE LEARNED A UTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE DECISION OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. REFERRED TO SUPRA PARTICULARLY AT PAGE 24 PARA 34 TO SUBMIT THAT IN THE CASE OF M/S. M.C T.M. GLOBAL INVESTMENTS PVT. I.T.A. NO. 1426 & CO 166/MDS/2009 17 LTD. THE TRIBUNAL HAD HELD THAT IT DID NOT HAVE PER MANENT ESTABLISHMENT IN MALAYSIA AND THEREFORE THE MALAYSIAN INCOME FORMED PART OF ITS GLOBAL INCOME LIABLE FOR TAX IN INDIA. IT WAS THE FURTHER SUBMIS SION THAT IN THE SAID ORDER THE TRIBUNAL HAD RECOGNIZED THAT THOUGH M/S. SIVAGAMI H OLDINGS PVT. LTD. AND M/S. M. CT. M. GLOBAL INVESTMENTS PVT. LTD. WERE BORN OUT O F THE DEMERGER PROCESS OF THE ASSESSEE COMPANY BUT FOR THE PURPOSE OF INCOME TAX SUCH LEGACY WAS NOT THE ONLY CRUCIAL POINT TO BE CONSIDERED. FURTHER THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO PAGE 28 PARA 38 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. TO SHOW THAT IT WAS NOT THAT CONTROL AND MANAGEMENT OF THE MALAYSIAN BRANCH OF M/S. M.CT .M. GLOBAL INVESTMENTS WERE CARRIED OUT IN INDIA WAS NOT THE ONLY CONDITI ON WHICH WAS LIABLE TO BE CONSIDERED FOR DECIDING WHETHER THERE WAS A PERMANE NT ESTABLISHMENT OR NOT IN MALAYSIA. THE LEARNED AUTHORISED REPRESENTATIVE DR EW OUR ATTENTION TO PAGE 40 PARA 52 OF THE ORDER OF THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. TO SUPPORT HIS CONTENTI ON THAT AS THE REASONS RECORDED WERE ERRONEOUS THE RE-OPENING OF THE ASSESSMENT WA S VOID AB INITIO. IT WAS THE SUBMISSION THAT WHEN THE LAW ITSELF HAS BEEN WRONGL Y STATED BY THE ASSESSING OFFICER THEN THE REASONINGS BECOME ERRONEOUS AND C ONSEQUENTLY THE NOTICE UNDER SECTION 148 BECOMES INVALID IN LAW. HE FURTHER DRE W OUR ATTENTION TO PAGE 153 OF THE ASSESSEES PAPER BOOK-IV WHICH IS THE COPY OF T HE ASSESSMENT ORDER OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 1997-98 WH EREIN THE ASSESSING OFFICER I.T.A. NO. 1426 & CO 166/MDS/2009 18 HAD RECORDED THAT THE ASSESSEE CARRIED ON THE BUSIN ESS THROUGH A PERMANENT ESTABLISHMENT IN MALAYSIA. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 157 OF THE PAPER BOOK IV WHI CH IS THE COPY OF THE PROCEEDINGS OF THE DEPUTY COMMISSIONER OF INCOME-TA X COMPANY CIRCLE-IV(1) CHENNAI IN THE CASE OF THE ASSESSEE FOR THE ASSESSM ENT YEAR 1998-99 WHEREIN IT HAS BEEN ACCEPTED THAT DURING THE YEAR THE ASSESSEE HAD A PERMANENT ESTABLISHMENT IN MALAYSIA. THE LEARNED AUTHORISED R EPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 25 OF PAPER BOOK-IV WHICH IS THE COPY OF THE ASSESSMENT ORDER WHICH IS THE SUBJECT MATTER OF THE APPEAL FOR THE A SSESSMENT YEAR 1999-2000 IN THE CASE OF THE ASSESSEE WHEREIN IT HAS BEEN RECOR DED AS FOLLOWS : (V) THE CASE LAWS OF M/S. VR.SR.M. FIRM & OTHERS ( 208 ITR 400) AND CIT V. VS. R.M. MUTHIAH (202 ITR 508) ON WHICH THE ASSESSEE RELIES HEAVILY IN SUPPORT OF ITS CLAIM ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. BOTH THE ABOVE CASES RELATE TO PERMANENT ESTABLISHM ENT IN MALAYSIA AND THE FINDING OF THE HIGH COURT WAS THAT THERE WAS NO SEPARATE ESTABLISHMENT IN INDIA. IN THE PRESENT C ASE THE INVESTMENT IN STOCKS SECURITIES AND FOREIGN EXCHAN GE WERE DONE THROUGH M/S. GOLDMAN SACHS WHO HAVE NO BRANCH IN MA LAYSIA. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THA T THE ASSESSEES BRANCH IN MALAYSIA HAD ANY DISCRETION TO INVEST WITHDRAW DEAL WITH THE INVESTMENT OR ISSUE DIRECTI ONS TO THE CONCERN M/S. GOLDMAN SACHS ON ANY OF THE ABOVE ACT IVITIES. ONLY THE DIRECTORS IN INDIA EXERCISED THESE POWERS. THE FACT THAT THE ASSESSEE HAS A PERMANENT ESTABLISHMENT IS NOT D ISPUTED. I.T.A. NO. 1426 & CO 166/MDS/2009 19 FOR THESE REASONS THE DECISION OF THE MADRAS HIGH C OURT IN THE CASE OF CIT VS. VR. SR.M. FIRM & OTHERS (208 ITR 40 0) AND THE DECISION OF THE KARNATAKA HIGH COURT CIT V. R.M. MU THIA (202 ITR 508) AND THE CBDT CIRCULAR NO.333 DATED 2.4.92 (137 ITR 1) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT C ASE. IT WAS THE SUBMISSION THAT EVEN HERE THE ASSESSING OFFICER HAS ACCEPTED THAT THE ASSESSEE HAS A PERMANENT ESTABLISHMENT IN MALAYSIA. IT WAS THE SUBMISSION THAT ONCE THE PERMANENT ESTABLISHMENT HAS BEEN ESTABLISH ED THEN SUCH PERMANENT ESTABLISHMENT CANNOT DISAPPEAR OR BE SHIFTED. IT W AS THE SUBMISSION THAT THE ASSESSEE HAD A PERMANENT ESTABLISHMENT IN MALAYSIA RIGHT FROM 1930. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 799 OF THE PAPER BOOK-IV WHICH IS THE COPY OF THE POWER OF AT TORNEY GIVEN BY THE ASSESSEE COMPANY TO ONE SHRI R.M. SOMASUNDARAM. THIS POWER OF ATTORNEY IS DATED 18- 01-1993. IT WAS THE SUBMISSION THAT SHRI R.M. SOMA SUNDARAM WAS MANAGING THE PERMANENT ESTABLISHMENT IN MALAYSIA AND HE WAS A CI TIZEN OF MALAYSIA. THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTIO N TO PAGE 164 OF THE PAPER BOOK-IV WHICH IS THE EXTRACT OF ARTICLE 5 OF THE DT AA BETWEEN THE GOVT. OF INDIA AND THE GOVT. OF MALAYSIA. IT WAS THE SUBMISSION T HAT THE TREATY DEED TALK OF THE CONTROL FOR THE PURPOSE OF PERMANENT ESTABLISHMENT. IT WAS THE SUBMISSION THAT THE PHYSICAL DOMICLE WAS ONE OF THE DECIDING FACTOR S FOR THE PERMANENT ESTABLISHMENT IN VIEW OF THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF CIT V. P.V.A.L. KULANDAGAN CHETTIAR REPORTED IN 267 ITR 654. ON A QUERY FROM I.T.A. NO. 1426 & CO 166/MDS/2009 20 THE BENCH IT WAS SUBMITTED THAT THE MALAYSIAN BRANC H FUNCTIONED WITH SHRI R.M. SOMASUNDARAM AND TWO OTHER STAFF AND THE CHENNAI OF FICE FUNCTIONED WITH 5 STAFF. IT WAS ALSO THE SUBMISSION THAT NO FUNDS FOR THE PU RPOSE OF INVESTMENT THROUGH M/S. GOLDMAN SACHS AND WGIL WENT OUT OF INDIA. IT WAS THE SUBMISSION THAT IT WAS THE SALE PROCEEDS OF THE ESTATE IN MALAYSIA SOL D IN 1998 WHICH WAS INVESTED OUTSIDE INDIA. IT WAS THE SUBMISSION THAT THE SITU S OF THE CAPITAL WAS ALSO AN IMPORTANT ISSUE. ON A QUERY OF THE BENCH AS TO THE HISTORY OF THE GROUP IT WAS SUBMITTED THAT THE DIRECTORS OF THE ASSESSEE COMPAN Y WERE THE FAMILY GROUP WHO ARE THE PROMOTERS OF IOB. IN 1930S SOME FUNDS WERE MOVED TO MALAYSIA TO BUY AN ESTATE THERE. AS THERE WAS A THREAT OF ACQUISIT ION OF ASSETS BELONGING TO NON- MALAYSIAN THE ASSESSEE COMPANY HAD SOLD THE ESTATE AND THE PROCEEDS HAD BEEN USED FOR MAKING THE INVESTMENT THROUGH GS AND WGIL. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER DREW OUR ATTENTION TO PAGE 1 65 OF THE PAPER BOOK WHICH WAS ARTICLE 5.5 OF THE DTAA BETWEEN GOVT. OF INDIA AND GOVT. OF MALAYSIA WHEREIN AS PER SUB-CLAUSE (A) THE PERSON IN MALAYS IA HAD THE AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE ENTERPRISE AND THE ACTIVITY OF THE POWER OF ATTORNEY HOLDER WAS NOT LIMITED TO THE PURCHASE OF GOODS AND MERCHANDISE FOR THE ASSESSEE. IT WAS THUS THE SUBMISSION THAT THE RE-O PENING ITSELF WAS INVALID AND EVEN ON MERITS THE ASSESSEES PERMANENT ESTABLISHME NT WAS IN MALAYSIA AND CONSEQUENTLY IN VIEW OF THE DECISION OF THE CO-ORDI NATE BENCH OF THIS TRIBUNAL IN I.T.A. NO. 1426 & CO 166/MDS/2009 21 THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. REFER RED TO SUPRA THE RE-OPENING AS ALSO THE ASSESSMENT WERE LIABLE TO BE QUASHED. 7. IN REPLY THE LEARNED DR SUBMITTED THAT THE ASSE SSING OFFICER WHO HAD ISSUED THE NOTICE BEING SMT. C. CHANDRAKANTA HAD F ILED HER SUBMISSION IN REGARD TO THE SHOW CAUSE NOTICE UNDER SECTION 148 WHICH IS REPRODUCED AS UNDER : OFFICE O F THE JOI N T COMMISSIO NE R O F IN CO ME TAX CEN TRAL RANGE 67 - A R ACE COU R S E R OAD COIMBATOR E Q ) E PABX 0422 - 2 225090 OFF I CE : 0422- 222 0 7 08 F A X : 222 11 7 4 BEF OR E TH E H ON ' BLE INCOM E TA X APPELLETE TRIBUNAL ' B ' B E N C H C H E NN AI ACIT CO MP A N Y C IRCL E - IV ( 1 ) V S M. CT . M . C ORP O R A TI O N P VT L TD . C H EN N A I IN I.T.A. NO. 1426/MDS/09 AND CO 166/MDS/09 SUBMISSION I C . C H A NDR A K A NTA AG ED 3 9 DAU G H TER OF SHRI D .C. M O H A N PR ESE N T L Y WO R K IN G A S JOI N T CO M M I SSIO N E R OF IN CO M E TAX CE NTRAL RAN GE C OIMB ATO R E S UBM IT AS U ND ER : - I H E LD TH E C HAR GE OF C OMP A N Y C IR C LE - IV ( 1 ) CH E NN A I AS A DD ITIO N A L C H AR G E O N L Y FOR T H E PER I O D 23 .10 .2 003 TO 11 . 08 . 2004 A ND DEFINIT E LY NOT IN TH E M O N TH OF MARC H 2003 . DURI N G T H I S P E RI O D M Y S UB S T A NTI VE C H A R GE WAS CO MPAN Y C IR C L E - I V ( 4 ) C H E NN AI. TH E RE - ASSES S M E N T PRO C EE DIN GS IN TH E CA SE OF M I S M. C T . M. G L O B A L I N V ESTME N T S PVT LTD (ASSE S S M E NT YEA R 2 000 - 01 ) W HICH CAME INT O E X I S T E NCE AF T E R I.T.A. NO. 1426 & CO 166/MDS/2009 22 THE D E RM ER G ER OF M I S M . C T . M . CO RPOR A TION P V T L TD WA S PENDI N G FOR DI S PO SA L . T HI S CA SE OF M I S M . C T . M . G L O B AL IN VES TM E NT S P VT L TD (ASSESS M E N T YEAR 2 0 00 - 0 1 ) WAS R E - OP E NED B Y M Y PR E DECE SS OR A N D T H E N O TI CE U L S 148 WAS I SS UED B Y HIM . AFTE R NUM EROU S H E A RIN G AND DETA IL E D V E RI FICATIO N OF FACTS I DOCUMENT S TH E CAS E W A S F INALI ZE D A N D A SSESS M E N T O RD ER I N T H E CASE OF M / S M . C T . M . G L OBAL INVESTME N T S PVT L TD ( ASSESS M ENT Y E AR 2000 - 01 ) W A S PASSED B Y ME ON 26 . 03 . 20 0 4 TAX IN G TH E M A LA YS I A N IN CO M E A ND R AI S IN G A D E MAND OF R S. 4 . 1 7 C R ORE. PE N A LT Y PR OCEE DIN GS U L S 27 1 ( 1 ) (C) WAS A L SO I NITI A T E D . I T WAS N OT ICED TH A T N A TURE OF I N VES TMENT FACT AND C IRCUM S TANC E S OF T H E A SS E S SEE ' S CASE (M I S M . CT . M . C O RPO RATI O N PVT L TD) W A S S IMILA R TO TH E C A SE OF M I S M . C T . M. G L O B AL IN VE S T M E N TS P V T L TD . IN FAC T M I S M . C T . M. G L O B A L IN VEST M E NT S P V T LTD CAM E INTO EX I S TE N CE CO N SEQ U E N T TO T H E D E M ERGE R OF M I S M. CT . M. CO RP O R ATION P V T L T D WITH EFFECT F R O M 0 1 . 0 4 . 1 999. O N THE S TR E N GTH OF FACT O F THE C AS E AND BA SE D O N T H E FIN DIN G IN T H E CASE OF M I S M. CT . M . G LOB A L INV ES TMENT S P V T L TD B E LI EF WAS FOR M ED T H AT I N COM E H A D ESCA P E D ASSESS M E N T IN TH E A SSESS E E ' S CA SE . AFTE R DUL Y R ECO RDIN G T H E R E A S ON S FOR R E OPE NIN G O N 2 6 .03.2 004 TH E C LERK W A S DIR E CT E D T O PUT UP T H E N O TI CE U L S 148 IN T H E CA S E OF M I S M. CT . M . CO RP O R A TI O N P V T L TD (A S SES S MENT YE AR 1 9 99- 2 000 ) . T H E N O TI CE U L S ] 48 WA S PUT U P B Y TH E T AX ASS I S T A NT I CLERK ON 2 6 . 03 .2 004 (AS P E R TH E O RD ER S HEET N O T IN G) AND W AS S I G N ED B Y M E ON 26. 0 3 . 2 004. T H E NOTIC E WAS D I S P ATC H E D ON 3] . 0 3.2 004 A ND WA S SE R VED O N T H E A SSESSEE O N 3 1 . 03 .2004 WHICH WAS WE LL W I T HIN TH E DU E DATE . 11. 12. T H E H A ND W R IT IN G OF T H E C L ERK W H O H A D W R I TTE N I N T H E O RD E R S H EE T PU T TI N G UP T H E N O T I CE O N 26 . 03 . 2 004 WA S TH E S AM E A S TH A T OF T H E NOTICE U L S 148 SE R VE D O N T H E ASSESSEE . HOWEV ER IN A D V E RT E NTL Y TH E DAT E M E NTIONED IN TH E N OTIC E W A S 2 6.0 3 . 2 00 3 IN S T EA D OF 26 . 03 . 2 004 . T HI S MI S T A K E W A S N O TI CE D A N D CORR E CT E D A S 2 6 . 0 3 .2 0 04. H O WEVE R PR O B A BL Y T H E CA RBO N PA P E R IMPR E SS I O N M A Y N O T H A V E FA LL E N IN THE N O TIC E S E R VE D O N T H E ASSE SS EE . NOW T H E A SSESS E E I S H A RPIN G O N TH E F ACT T H AT N OT I C E D AT E D 2 6 . 03 . 2 00 3 ( S I G N E D B Y M E) WAS O NL Y S E R VE D O N H I M A ND W A S DI F F E RE N T F R O M TH E N O T ICE D A T E D 2 6 . 0 3 . 2004 W H I C H WAS O N R E C O RD . IT I S S UBMITTED THAT I W A S NOT T H E OF FI C E R IN CHAR G E OF CO MP A N Y CIR C L E - I V ( I ) C H E NNAI I N T H E M O NTH O F M A R C H 2 00 3 . I JOIN E D THI S PO S T O N L Y O N 2 3 .10 .2 00 3 . HE ~ I CO ULD N O T H AVE S I G N E D T H E N O TIC E O N 2 6 . 03. 2 00 3 . ON L Y O N E N O TI CE I N THI S CASE U / S 148 WAS I SS U E D O N 2 6 . 03 . 2004 . T H E O RD E R S HEET E NTR Y P R O VES THI S P O INT . T HI S N O TI CE WA S S I G N E D B Y M E A N D WAS DI S P A T C H E D O N 3 1 . 0 3 . 2 004 . T H E O RD E R S H EE T E N TR Y A N D T H E DI S P A T C H C L E RK INI T I A L S O N T H E N OTI C E O N REC O RD P R OVES THI S P O INT . O NL Y T HI S N OTI C E WAS SE R VE D O N T H E ASS ES S EE O N 3 1 . 0 3 . 2004 . ' TH E T E A R O FF ACK NOW L E DG E M E N T SL IP ' ( W HI C H I S O N R E CO RD ) I S T H E ACKNOW L E D GE M E N T G IVE N B Y T H E ASSE SS EE FO R I.T.A. NO. 1426 & CO 166/MDS/2009 23 H AV I N G R E C E I V E D T H E N O TIC E C L E A RL Y M E NT IO N S TH E F A C T TH A T NOT I CE U L S 148 D A T E D 2 6 . . 0 3 . 9 4 FO R TH E A . Y . 99 - 2 K WA S R E C E I VE D B Y TH E AS S E SSE E F ROM TH E N O T I CE S E R VE R OF T H E D E PARTM E N T O N 3 1 . 03. 2 004. T H E S C A NN E D CO P Y I S RE P RO DU C E D A S UND E R: / ' J 'C ' ) ~~ TVI I 01 ' 1 ' 'C LC.HOWI F OCO\ ; M R N T BU P ~ ! - ~ N . ... ~~ ~ ' O L _ _ ' A TN ~O - .- Y 1 ~ / C. I I I 'I L L T H E ASSESS EE H A S A L S O N O T DI S PUT E D TH E FAC T T H AT T H E N O T I C E U L S 148 WA S S ERV E D O N 3 1 . 04 . 2 004 A ND I S A V ER Y R E L E V A NT A N D I MPORT A N T FA CT I N TH E G I V E N C I RCU M S T A N CE S . I - IE NC E IT I S PRO VE D B EY O ND D O UBT T H A T T H E N O TICE U / S 148 WAS I S S U E D O N L Y O N 2 6.0 3 . 20 0 4 A N D WA S SE R VE D O N 3 1 . 03. 2 0 04 . BON A F ID E C L ERI CA L MI S TAK E IN TH E DAT E M E N T I O N E D I N TH E N OT I CE S E R VE D O N T H E A SSESSE E ( W HI C H I S S U PP O SE D TO BE O NL Y A C O P Y) I S WE LL COV E R E D U L S 292 B OF TH E IN CO M E TAX AC T 19 61 . T H E LE A RN E D A UT HO RI ZE D REPRE SE NTATI VE HAD AL SO S UBMITT E D B E FO R E T H E H ON ' BL E I T A T T H A T W HIT E N E R W A S U S ED IN THE ORD E R S H E ET WHICH PRO VE S T H A T N O TIC E U / S 148 WAS I SS U E D O N 26 . 0 3.2 00 3 . IN TH IS R EG ARD IT I S S UBMITT E D THAT MI S TAK E B Y T H E C L E RK WAS C O MMITT E D IN P UTTIN G UP THE NOTICE BEFORE TH E RECORDIN G OF TH E R EA S ON S. T HI S MI S T A K E WA S R E CT IF I E D. PRO PER R E A S ON S WE RE RECORDED AND THERE A FTER TH E C LERK WA S DIR ECT E D T O P U T UP T H E N OTICE. NO TICE U / S 1 48 WAS PUT UP ON 26 . 03.2004 S I G N E D B Y M E O N 26 .0 3.2 0 04 A ND R ECE I VE D B Y T H E ASSE SS EE ON 31 . 03 . 2 004 . US IN G W HIT E N E R TO CO RR EC T MI S T A K ES I S N O T PR O HIB IT E D UND ER A N Y LAW I RULE S . HE R E I T I S IMPORT A NT TO BRING TO Y OUR KIND NOTIC E THAT TH E A S S E SSEE I S IN T H E I.T.A. NO. 1426 & CO 166/MDS/2009 24 H A BIT O F BL A MIN G TH E D E PARTM E NT O F TAMPERIN G WITH RECORD S A ND QUE S TIONIN G T H E VA LIDIT Y OF R EO PE NIN G TH E ASS ESS M E N T S . IN TH E CA SE OF M I S M . C T . M . G L O B A L IN VES T M E N T S P V T LT D (ASSESS M E N T Y EA R 2000 - 0 1 ) ( R EO P E N E D B Y M Y PRED ECE SS OR A ND CO M P L ETE D B Y M E) T H E ASSESSEE AL L EGE D T H A T REA S ON S R ECO RD E D W A S A T VA RI A NC E W ITH TH E F A C T S (GRO UND N O.4). T H E H O N ' B L E I T AT ' B ' BE NCH C A LLED FOR THE RECORD IN S PECTED THE SA M E A N D V ID E OR D ER I . T . A . N O. 659 / MD S / 05 DATED 19 . 12 . 2007 PARA 4 (PAGE NO. 10 11 & 1 2) H E L D T H A T TH E R E WAS N O VA RIA N C E OF TH E R EAS ON R E CORDED WITH TH E FACT AND HELD THAT R E - O P E NIN G W A S VA LI D . O N M E RI T T H E CA S E WA S D E CID E D IN FA V OUR OF TH E DEPARTM E NT . IN TH E P R ESE NT CASE O F M I S M . C T . M . C O RP O R A TION P V T L TD ( R E OP E N E D B Y M E AND C O MPL E T E D B Y M Y S U C C ESSO R ) I T I S D I S T UR B IN G T O N OTE TH A T THE ASSES SEE MAKE S S IMILAR KIND OF A LL E GA TI O N AGA IN ST T H E D E P AR T M E NT . T H IS ONLY S HOW S THE ADVERSE ATTITUDE O F TH E ASSE SSEE A N D THE W IL D I M A G I N A TI O N OF T H E ASSE S S E E T O PRESUME THAT A S E T OF O FF IC E R S IN C O LLU S I O N W I T H T H E I R S T AFF A R E T A MP E R IN G W ITH RECO R D S . T H E CO N C E A LMENT P E N A LT Y U / S 27 1 ( 1 ) ( C ) OF T H E IN CO M E TAX ACT 1 96 1 WAS D R O PP E D I N TH E CASE O F M I S M . C T . M . G LOBAL IN V E S TM E NT S P V T L TD (ASSESS M E N T Y EA R 2 0 00-0 1 ) WHICH O NL Y GOE S TO S H O W TH E JU S T AND F AIR A TTITUD E OF TH E D E P A RT M E N T IN T H ESE C A SES IN C O NTR A S T T O TH E B E HA V I O UR AND IMAG I NATI O N OF T H E A S S ESSE E . T H E LEA R N E D AUT H O R IZE D R E PR ESE NT A TI VE F URTH E R S UBM IT T E D T H AT TH E R EASO N S FOR REO P E NIN G CA NN OT B E IMP O R TE D F ROM AN O TH E R CA SE . IN THI S REGA RD S I T I S S UB MI TT E D T H AT T H E C O MP A N Y G OT D E MER GE D A ND THE NATURE OF INVESTMENT FACT S A ND CIR C UM S T A N C ES OF TH E C ASE TH E P A RENT CO MPAN Y A ND S UCCEEDIN G COMPAN Y WER E THE SA M E. A P A R T F R O M T HI S TH E R E WE RE O TH E R R EA S O N S A S M E NTION E D IN THE R E CORD E D REA S ON S O N TH E S TR E N G TH OF W HI C H B E LI EF WAS F O R M E D TH AT TH E IN CO M E H A D ES CAP E D A S S E S S M E NT . NOW C O MIN G T O T H E M E RIT S OF TH E CA S E : T H E INT E R ES T IN CO M E A N D DI V ID E ND IN C O M E E A RN E D THROU G H INVESTMENT S IN GS AND WGIL I S TAX A BLE IN INDI A IN T H E H A ND S OF TH E ASS E S SE E O N A C CO UNT O F FOLLOWIN G R E ASON S . 1. T H E I N CO M E I S A SS E S S ABL E UNDER TH E H EA D I N COM E F ROM OT H E R SO URC ES A ND N O T B U S IN E SS IN CO M E A S P E R P A R A 10.1 T O 1 0. 8 O F TH E ASSESS M E NT O R D ER . ( T HI S POINT O F V I EW IS UPH E LD B Y TH E HON ' BL E I T A T IN T H E CASE OF M I S M . C T . M . G L O B A L INV E STMENT S PVT LTD VID E O RDER IN I . T . A . N O . 65 9 / MD S / 0 5 D A T E D 1 9 . 1 2.2 00 7 ( PAGE 30 LINE 3 ) . CO N CE PT O F P E RM A NENT ES T A BLI S HM E NT IS A PPLI CA BL E O N L Y FO R BU S IN E SS IN CO M E A ND N OT I N C OM E F R O M OTH E R S O URC ES . A S I T I S IN CO M E FRO M O TH E R SO URC ES CO N C E PT OF P E RM A N E NT E S T A BLI S HM E NT I S N O T APP L I CAB L E. A R TI C L E 7 OF D T A A D EA L S W ITH BU S IN E SS PR O FIT AND I S NOT A PPLI CA BL E H ERE . PR ES UMIN G TH A T TH E CO N C E P T OF P E RM A N E N T ES TABLI S HM E NT I S A PP LI CA BL E TH E N A QU E S TION I.T.A. NO. 1426 & CO 166/MDS/2009 25 AR I SES W H E TH E R THE P E RMAN E NT ES T A BLI S HM E N T I S TH E R E I N M A L AYS IA OR N OT . NO P E RM A N E NT E STAB L I S HM E NT I S TH E R E I N M A L AYS I A F O R TH E FO LL OW IN G R E AS O N S: ( PLEA SE R E FER TO PAR A 9 O F P A G E 5 A ND P ARA 1 1 . 1 T O 11 . 7 O F PA G E 8 & 9 OF TH E A SS E SS MENT ORD E R . ) I . O NL Y DIR E CTO R S A R E A UTHORI ZE D T O D EA L W ITH GS . II. O NL Y D IR EC T O R S A R E A UTH O RI ZE D S I G N A T O RI E S FOR TR A DIN G A UTH O RI ZAT I O N OF G S . I I I. C O NT RO L A ND M A N AGE M E NT IS A T C H E NNAI B Y T H E DIR E CT O R S . I V . R E MI T T A N CE OF MON EY I S TO C H E NN AI FROM NE W Y ORK A N D N OT T O O R F R O M M A L AYS IA . T H I S PO INT OF V I EW I S UPH E LD B Y HON ' BL E I TAT IN TH E C ASE OF M I S M . CT . M . G L O B A L I N VES T M E NT S P V T L TD ( P AGE 28 ) . LAS T L Y D T A A I S AP PLI CA BL E O NL Y I F I NC O M E I S C H A R GEA BL E TO T AX IN T WO C O UN TR I E S. A S P E R MA LA Y S I A N I NC O M E T A X A C T ( C H AR G IN G SECT I O N 3 & 3 B ) I NCO M E F R OM IN VES TM E NT IN GS A ND W G IL I S NOT CHAR GE D T O T AX AT M A L AYS I A. IT I S N O T A CA S E WH E RE INCOM E I S CHAR GE D TO TAX A ND EXE MPTI ON I D E DU C TION I S C L A IM E D. THI S INCOM E I S PRIM A R I L Y N OT CH A R G E D T O T AX A T M A L AYS I A A S I T N E ITH E R AC C RU E D DERI V E D O R I S R ECE I V E D IN MA L A YS I A . D T A A I S H E NC E N OT A PPLIC A BL E A ND PRECI SE L Y F O R THI S R E A S ON HO N ' B L E S UPR E M E CO U RT D EC I S I O N I N TH E E A S E OF AZA DI B AE HO A A ND O L A N I S N O T A P PLI CA BL E. ( P L EA SE REFE R TO PA R A 1 2 T O 1 2 . 8 IN P A GE 9 1 0 & 1 1 OF A SSESS M E N T O R D E R IN T H E EA SE O F M I S M . CT . M . CO RP O R A TI O N P V T L TD ) . A S DTAA I S N O T A PPLI CA BLE TH E QU E STION OF P E RMAN E NT E S T A BLI S HM E NT D O E S N O T A RI S E A ND TH E IN CO M E I S ASSESS ED TO T AX IN INDI A . SD/- (C. C H A N D R AKANTA ) JOIN T CO MMI S S I O N ER OF I N C O M E T AX CE NTR A LRAN G E CO IM B A T O R E 8. IT WAS THE SUBMISSION THAT THE ORIGINAL NOTICE U NDER SECTION 148 OF THE ACT DATED 26-03-2003 HAD NOT BEEN PRODUCED BEFORE THE T RIBUNAL. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE ON BEHALF OF THE ASSESSEE THAT THE SAID NOTICE WAS SUBJECT-MATTER OF WRIT PETITION AND THE ORIGINAL HAD BEEN FILED BEFORE THE HON'BLE HIGH COURT. IT WAS SUBMITTED BY THE LE ARNED DR THAT SMT. C. CHANDRAKANTA WAS HOLDING CHARGE AS ASSISTANT COMMIS SIONER OF INCOME-TAX COMPANY CIRCLE-IV(4) AND VIDE AN ORDER DATED 23-10- 2003 SHE WAS GIVEN ADDITIONAL CHARGE AS THE ASSISTANT COMMISSIONER OF INCOME-TAX COMPANY CIRCLE- I.T.A. NO. 1426 & CO 166/MDS/2009 26 IV(1). HE PLACED BEFORE US THE COPY OF THE OFFICE ORDER WHEREIN SMT. C. CHANDRAKANTA HAD BEEN GRANTED THE ADDITIONAL CHARGE ON 23-10-2003. IT WAS THE SUBMISSION THAT THE NOTICE SAID TO HAVE BEEN ISSUED ON 26-03-2003 THE XEROX COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK WA S SIGNED BY SMT. C. CHANDRAKANTA. IT WAS THE SUBMISSION THAT SUCH NOTI CE COULD NOT HAVE BEEN SIGNED ON 26-03-2003 AS SMT. C. CHANDRAKANTA DID NO T HOLD CHARGE OF COMPANY CIRCLE-IV(1) ON THE SAID DATE. IT WAS THE SUBMISSI ON THAT THE RECORDING IN THE ORDER SHEET HAD BEEN DONE BY THE OFFICE STAFF AS AL SO THE NOTICE HAD BEEN FILLED UP BY THE OFFICE STAFF. AS THE OFFICE STAFF HAD WRITT EN PUT UP THE NOTICE U/S. 148 AND AS IT WAS NOTICED THAT THE REASONS HAD NOT BEEN REC ORDED THE SAME WAS STRUCK DOWN BY THE ASSESSING OFFICER SMT. C. CHANDRAKANTA RECORDED THE REASONS AND THE NOTICE ISSUED. WHILE WRITING THE NOTICE U/S. 1 48 THE DATE HAD ERRONEOUSLY BEEN PUT BY THE OFFICE STAFF AS 26-3-2003 AND THI S ERROR WAS CORRECTED BY THE ASSESSING OFFICER BY OVER-WRITING THE 3 BY 4. IT WAS THE SUBMISSION THAT IF THE ORIGINAL WAS SEEN THE CARBON IMPRESSION MAY BE REC OGNIZED. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSING OFFICER DERIVED NO SP ECIFIC BENEFIT BY MAKING THE DATE 26-3-2004. IT WAS THE SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 153 LIMITATION FOR COMPLETION OF THE ASSESSMENT STARTED FROM THE DATE OF SERVICE OF THE NOTICE AND NOT FROM THE DATE OF NOTICE. IT WAS THE SUBMISSION THAT THE ACKNOWLEDGEMENT FOR THE SERVICE OF THE NOTICE ALSO CLEARLY SHOWED THE NOTICE TO BE DATED 26-03-2004. IT WAS THE SUBMISSION THAT TH E ALLEGATION OF TAMPERING WITH I.T.A. NO. 1426 & CO 166/MDS/2009 27 THE NOTICE BY THE ASSESSING OFFICER WAS IN BAD TAST E. IT WAS THE SUBMISSION THAT NO NOTICE UNDER SECTION 26-03-2003 HAS EVER BEEN SE RVED ON THE ASSESSEE. IT WAS THE FURTHER SUBMISSION THAT THE REASONS RECORDE D ARE NOT BORROWED REASONS. IT WAS THE SUBMISSION THAT THE ASSESSMENT IN THE CA SE OF M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. WAS COMPLETED ON 26-03-2004 F OR THE ASSESSMENT YEAR 2000-01 AND IT WAS THERE THAT THE ASSESSING OFFICER HAD RECOGNIZED THAT IN THE CASE OF THE ASSESSEE THE SAME SITUATION AROSE ON AC COUNT OF THE FACT THAT M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. WAS FORMED BY THE DEMERGER OF THE ASSESSEE COMPANY. IT WAS THE SUBMISSION THAT THE FACTS FOUN D IN THE CASE OF M/S. M.CT.M. GLOBAL INVESTMENTS PVT LTD. WERE IDENTICAL TO THE F ACTS AS FOUND IN THE CASE OF THE ASSESSEE AND CONSEQUENTLY THE REASONS FOR RE-OPENIN G WERE RECORDED AND NOTICE WAS ISSUED TO THE ASSESSEE. IT WAS THE SUBMISSION THAT THE INVESTMENT FOUND IN THE CASE OF M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LT D. WAS THE CARRY FORWARD OF THE INVESTMENTS MADE BY THE ASSESSEE COMPANY AND TH E REFERENCE TO M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. AND THE REASON S RECORDED FOR THE ASSESSEE COMPANY WERE ONLY A PASSING REFERENCE. IT WAS THE FURTHER SUBMISSION THAT IN THE ORDER OF THE ITAT IN THE CASE OF M/S. SIVAGAMI HOLD INGS PVT LTD. IT WAS CATEGORICALLY FOUND THAT THERE WAS A PERMANENT ESTA BLISHMENT IN MALAYSIA IN VIEW OF THE FACT THAT M/S. SIVAGAMI HOLDINGS PVT. LTD. H ELD PROPERTY IN MALAYSIA AND WAS CONTROLLED IN MALAYSIA. IT WAS THE SUBMISSION THAT THE ASSESSEE COMPANY HAD BOTH PROPERTIES IN INDIA AS ALSO IN MALAYSIA AND TH E CONTROL OVER THE PROPERTIES I.T.A. NO. 1426 & CO 166/MDS/2009 28 WERE FROM INDIA. IT WAS THE SUBMISSION THAT ON THE FACTS OF THE CASE THE DECISION IN THE CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. WAS RELEVANT ONLY TO THE SAID ASSESSEE AND THE SAID DECISION CANNOT BE APPLIED TO THE ASSESSEES CASE AUTOMATICALLY. FURTHER THE LEARNED DR DREW OUR ATT ENTION TO PAGE 28 PARA 38 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. SIVAG AMI HOLDINGS PVT. LTD. TO SUBMIT THAT THE QUESTION OF PERMANENT ESTABLISHMENT WAS NOT AN ISSUE IN THE SAID CASE. IT WAS THE FURTHER SUBMISSION THAT FOR THE PURPOSE OF ASSESSMENT FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99 THE ASSESSING OFFICER HAVING RECORDED THAT THERE WAS A PERMANENT ESTABLISHMENT IN MALAYSI A WOULD NOT HELP THE ASSESSEE INSOFAR AS FOR THE ASSESSMENT YEAR 1999-20 00 NO EVIDENCE HAS BEEN SHOWN THAT THERE WAS A PERMANENT ESTABLISHMENT IN MA LAYSIA OR THAT THE PERMANENT ESTABLISHMENT HAD DONE ANY ACT IN MALAYSI A NOR WAS SHOWN THAT THE BUSINESS OF THE ASSESSEE COMPANY WHOLLY OR PARTLY C ARRIED ON THROUGH THE PERMANENT ESTABLISHMENT IN MALAYSIA. IT WAS THE SU BMISSION THAT THE POWER OF ATTORNEY GIVEN TO SHRI SOMASUNDARAM WAS IN 1993 AND NOTHING WAS SHOWN TO SHOW THAT THE POWER OF ATTORNEY HAD DONE ANY ACTIVI TY DURING THE ASSESSMENT YEAR 1999-2000. IT WAS THE SUBMISSION THAT THE PER MANENT ESTABLISHMENT HAD TO BE PROVED YEAR AFTER YEAR. JUST BECAUSE THERE WAS A PERMANENT ESTABLISHMENT IN ONE YEAR CANNOT MEAN THAT THE SAID PERMANENT ESTABLI SHMENT EXISTED YEAR AFTER YEAR. IT DEPENDED ON THE FACTS OF EACH YEAR. IT W AS THE SUBMISSION THAT NO EVIDENCE WAS PRODUCED BEFORE THE ASSESSING OFFICER OR THE LEARNED CIT(A) OR THE I.T.A. NO. 1426 & CO 166/MDS/2009 29 ITAT TO SHOW THAT THERE WAS PERMANENT ESTABLISHMENT IN MALAYSIA DURING THE ASSESSMENT YEAR 1999-2000. IN FACT THE ASSESSEE WA S SHOWN AS A RESIDENT INDIAN AND CONSEQUENTLY ITS APPLICABLE INCOME WAS ASSESSAB LE IN INDIA. EVEN IF THE POWER OF ATTORNEY WAS TO BE SHOWN AS A PERMANENT EST ABLISHMENT HE SHOULD BE SHOWN TO HAVE EXERCISED CONTROL OVER THE BUSINESS A CTIVITIES OF THE ASSESSEE COMPANY IN MALAYSIA WHICH HAS NOT BEEN DONE. THE L EARNED DR DREW OUR ATTENTION TO THE ASSESSMENT ORDER WHEREIN THE ASSES SING OFFICER HAD CATEGORICALLY GIVEN A FINDING THAT THE INCOME OF THE ASSESSEE WAS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE DECISION REL ATING TO INVESTMENTS WAS TAKEN BY THE DIRECTORS IN THE BOARD MEETING HELD IN THE ASSESSEE COMPANYS HEAD OFFICE AT CHENNAI AND SHRI R.M. SOMASUNDARAM WAS AU THORIZED BY THE BOARD OF DIRECTORS TO OPERATE THE BANK ACCOUNT ONLY JOINTLY WITH EITHER OF THE DIRECTORS AND NOT INDEPENDENTLY. 9. ON 11-07-2011 AT THE TIME OF HEARING THE LEARNED AUTHORISED REPRESENTATIVE PLACED BEFORE US THE COPY OF THE ORIGINAL NOTICE U/ S. 148 OF THE ACT DATED 26-03- 2003. IT WAS THE SUBMISSION THAT THE SAID NOTICE D ID NOT HAVE ANY CARBON COPY MARKINGS. IT WAS THE SUBMISSION THAT SUBMISSION TH AT THE ASSESSING OFFICER HAS MENTIONED THAT THERE IS NO NOTICE DATED 26-03-2003 AND THE NOTICE IS A NOTICE U/S. 148 DATED 26-03-2004. IT WAS THE SUBMISSION THAT A S PER THE ASSESSEE THERE WAS NO NOTICE DATED 26-03-2004. IT WAS THUS THE SUBMIS SION THAT (I) THE NOTICE SERVED ON THE ASSESSEE BEING A NOTICE DATED 26-03-2 003 AND AS THE REASONS I.T.A. NO. 1426 & CO 166/MDS/2009 30 RECORDED FOR THE ISSUANCE OF NOTICE WAS NOT BEFORE THE ISSUANCE OF THE NOTICE U/S 148 DATED 26-03-2003 THE NOTICE WAS LIABLE TO BE H ELD AS INVALID (II) THE ASSESSEE HAVING NOT BEEN SERVED WITH THE NOTICE U/S 148 DATE D 26-03-2004 THE ASSESSMENT DONE AS A CONSEQUENCE OF THE NOTICE DATE D 26-03-2004 AS WAS AVAILABLE WITH THE REVENUE WAS LIABLE TO BE ANNULLE D AND (III) ASSUMING THAT THE NOTICES DATED 26-03-2003 AND 26-03-2004 DID EXIST T OGETHER THE NOTICE DATED 26- 03-2004 WOULD BE AN INVALID NOTICE INSOFAR AS NO TW O NOTICES U/S. 148 CAN EXIST TOGETHER. IT WAS THE FURTHER SUBMISSION THAT THE A SSESSEE CO-OPERATED AND PARTICIPATED IN THE ASSESSMENT PROCEEDINGS ONLY IN PURSUANCE OF THE NOTICE DATED 26-03-2003 AND IT WAS ONLY WHEN THE ASSESSEE WAS GR ANTED THE OPPORTUNITY TO VERIFY THE RECORDS THAT THE ASSESSEE HAD COME TO KN OW OF THE NON-RECORDING OF THE REASONS BEFORE THE ISSUANCE OF THE NOTICE U/S.1 48 DATED 26-03-2003. IT WAS THE SUBMISSION THAT THERE WAS NO REASON FOR PREPOND ERANCE OF PROBABILITY IN THE LIGHT OF THE GROUND REALITY THAT THE NOTICE U/S 148 WAS DATED 26-03-2003 FOR WHICH THE REASONS HAVE BEEN RECORDED SUBSEQUENTLY AND THE NOTICE SERVED ON 31-03- 2004. IT WAS THE SUBMISSION THAT THE RECORDING OF THE DATE OF THE NOTICE WAS NOT A MISTAKE WHICH IS CLERICAL OR INADVERTENT. THIS I S BECAUSE AS PER THE PROVISIONS OF SEC. 148(2) BEFORE THE ISSUANCE OF THE NOTICE THE ASSESSING OFFICER IS BOUND TO RECORD REASONS WHICH HAS NOT BEEN DONE AND AS THE N OTICE U/S. 148 WAS A STATUTORY NOTICE ANY MISTAKE OR ERROR ALLEGEDLY IN THE NOTICE CANNOT BE PROTECTED BY THE PROVISIONS OF SECTION 292B OF THE ACT. IT W AS THE SUBMISSION THAT THE I.T.A. NO. 1426 & CO 166/MDS/2009 31 INFIRMITY IN THE INITIATION CANNOT BE CURED FOR WHI CH PROPOSITION THE LEARNED AUTHORISED REPRESENTATIVE RELIED ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF P.V. DOSHI V. CIT REPORTED IN 113 ITR 22 . IT WAS THE SUBMISSION THAT THE LEARNED DR HAVING SHOWN THAT THE ASSESSING OFFI CER DID NOT HOLD CHARGE OF THE OFFICE WHEN THE NOTICE U/S. 148 WAS ISSUED PROVED T HAT THE NOTICE WHICH WAS SIGNED BY THE ASSESSING OFFICER WAS WITHOUT LEGAL S ANCTION OR AUTHORITY. IT WAS THE FURTHER SUBMISSION THAT AS PER THE PROVISIONS O F SEC. 148(1) NO REASSESSMENT SHALL BE DONE UNTIL AND UNLESS A NOTICE U/S.148 IS SERVED ON THE ASSESSEE. IT WAS THE SUBMISSION THAT NO NOTICE DATED 26-03-2004 WAS SERVED ON THE ASSESSEE. IT WAS THE SUBMISSION THAT IN THE ACKNOWLEDGMENT THOUG H IT IS MENTIONED THAT IT IS A NOTICE DATED 26-03-2004 IN FACT WHAT WAS SERVED W AS AN ENVELOPE. IT WAS THE SUBMISSION THAT NO NOTICE U/S 148 DATED 26-03-2004 HAVING BEEN SERVED THE ASSESSMENT WAS LIABLE TO BE ANNULLED. 10. IN REPLY THE LEARNED DR SUBMITTED THAT THE ORD ER SHEET ENTRY WHICH HAS BEEN STRUCK DOWN USING WHITENER IS AN UNSIGNED ENTR Y. IT WAS RE-ITERATED THAT THE ENTRY WAS A MISTAKE WHICH WAS CORRECTED. IT WAS TH E SUBMISSION THAT THE ASSESSEES CLAIM THAT NO NOTICE DATED 26-03-2004 WA S SERVED ON THE ASSESSEE STANDS DISLODGED IN VIEW OF THE ACKNOWLEDGEMENT COP Y WHICH SHOWS OTHERWISE. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEES ALLE GATION THAT THE ASSESSING OFFICER SIGNED THE NOTICE U/S.148 ON 26-03-2003 IS A SERIOUS ALLEGATION WHICH WOULD HAVE TO BE SUPPORTED BY AN AFFIDAVIT AS THE S AME HAS ALREADY BEEN I.T.A. NO. 1426 & CO 166/MDS/2009 32 COUNTERED BY AN AFFIDAVIT BY THE ASSESSING OFFICER. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD ACCEPTED THAT THE NOTICE WAS ORIGINALLY DATED 26-03-2003 WHICH WAS A MISTAKE AND THE SAME WAS CORRECTED TO 2 6-03-2004 AND THE NOTICE ISSUED AS A NOTICE U/S.148 DATED 26-03-2004 AS IS A LSO ACKNOWLEDGED AND THERE IS NO NOTICE DATED 26-03-2003 ON RECORD OR ACTED UPON. IT WAS THE FURTHER SUBMISSION THAT ON 26-03-2003 THE ASSESSING OFFICER IN-CHARGE OF THE OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME-TAX COMPANY CIRCL EIV(1) CHENNAI WAS ONE SHRI M. MATHIVANAN. THE LEARNED DR PLACED BEFORE U S A COPY OF THE ASSESSMENT ORDER BY THE SAID SHRI M. MATHIVANAN ON 26-03-2003 IN THE CASE OF M/S. MATHI LEATHERS PVT. LTD. TO SUBSTANTIATE HIS CLAIM. IT W AS ALSO THE SUBMISSION THAT THE CHARTERED ACCOUNTANT OF THE ASSESSEE WHO WAS ONE OF THE REPRESENTATIVES OF THE ASSESSEE BEFORE THE TRIBUNAL HAD ALSO APPEARED BEFO RE THE SAID SHRI M. MATHIVANAN IN MARCH 2003. 11. IT WAS FURTHER SUBMITTED BY THE LEARNED DR ON M ERITS THAT AS PER THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS DATED 10-0 7-1997 WHICH TOOK PLACE IN MADRAS THE PERSONS PRESENT WERE SHRI M.CT.MUTHIAH AND SHRI M.CT. PETHACHI AND IT WAS DECIDED IN THE SAID BOARD MEETING THAT AN AC COUNT BE OPENED WITH GOLDMAN SACHS NEW YORK. IT WAS THE FURTHER SUBMIS SION THAT AS PER THE MINUTES ONLY SHRI M.CT.MUTHIAH AND SHRI M.CT. PETHACHI ALON G WITH THE SAID SHRI SOMASUNDARAM THE POWER OF ATTORNEY HOLDER WERE AUT HORIZED TO OPERATE THAT ACCOUNT WITH M/S. GOLDMAN SACHS. IT WAS THE FURTHE R SUBMISSION THAT AS PER THE I.T.A. NO. 1426 & CO 166/MDS/2009 33 BOARD MEETING VERBAL INSTRUCTIONS GIVEN BY THE DIRE CTORS WOULD ALSO BE CONFIRMED IN WRITING BY THE MADRAS OFFICE. IT WAS THE FURTHE R SUBMISSION THAT IN THE BOARD MEETING OF THE DIRECTORS ON 06-12-1997 AT MADRAS AP PROVED FOR THE UTILIZATION OF THE FUNDS AVAILABLE WITH THE COMPANY OUTSIDE INDIA AND IN VIEW OF THE FAX DATED 01-12-1997 TO M/S. GOLDMAN SACHS SINGAPORE AS ALSO THE FAX SENT BY MR. M. CT. PETHACHI ON 05-12-1997 TO M/S. GOLDMAN SACHS THE F UNDS LYING WITH THE ASSESSEE COMPANY WAS TRANSFERRED TO A NEW ACCOUNT OPENED IN THE COMPANYS NAME IN SINGAPORE. THE BOARD FURTHER APPROVED THE WITHDRAW AL AND CONFIRMED THE INSTRUCTIONS ISSUED BY SHRI M.CT. MUTHIAH AND SHRI M.CT. PETHACHI TO M/S. GOLDMAN SACHS. IT WAS THE FURTHER SUBMISSION THAT IN THE B OARD MEETING DATED 06-12-1997 IN SUPERSESSION OF EARLIER RESOLUTIONS PASSED IT WA S RESOLVED THAT THE ACCOUNT WITH UNION BANK OF SWITZERLAND SINGAPURE WAS TO BE OPER ATED BY SHRI M.CT. PETHACHI OR SHRI P. CHIDAMBARAM. THE LEARNED DR PLACED BEFO RE THE MINUTES OF THE MEETING REFERRED TO ABOVE. HE ALSO DREW OUR ATTENT ION TO THE CORPORATE ACCOUNT AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S. GOL DMAN SACHS & CO. WHICH WAS SIGNED BY SHRI M.CT.MUTHIAH AND THE ADDRESS OF THE CORPORATION WAS GIVEN AS MADRAS. IT WAS THE SUBMISSION THAT THE CONTROL AND MANAGEMENT OF THE FOREIGN FUNDS HELD BY THE INDIAN COMPANY BEING THE ASSESSE E HEREIN WAS DONE BY THE DIRECTORS SITTING IN INDIA AND CONSEQUENTLY THERE W AS NO PERMANENT ESTABLISHMENT OF THE ASSESSEE COMPANY IN MALAYSIA. IT WAS THE SU BMISSION THAT M/S GOLDMAN SACHS DID NOT HAVE AN OFFICE OR PERMANENT ESTABLISHM ENT IN MALAYSIA. THE I.T.A. NO. 1426 & CO 166/MDS/2009 34 LEARNED DR FURTHER DREW OUR ATTENTION TO PAGE 168 O F THE ASSESSEES PAPER BOOK- IV WHICH WAS ARTICLE 12 OF THE DTAA TO SUPPORT HIS SUBMISSION THAT THE INTEREST DERIVED BY THE RESIDENT OF ONE CONTRACTING STATE FR OM THE OTHER CONTRACTING STATE MAY BE TAXED IN THE OTHER CONTRACTING STATE EXCEPT WHEN THE INTEREST IS DERIVED FROM THE CONTRACTING STATE IF THE PAYER IS A GOVERN MENT STATE GOVERNMENT A POLITICAL SUB-DIVISION LOCAL AUTHORITY OR A RESIDE NT OF THAT CONTRACTING STATE IT WAS THE FURTHER SUBMISSION THAT M/S. GOLDMAN SACHS WAS NOT FALLING IN ANY OF THE SAID CLAUSES AND WAS NOT A RESIDENT OF MALAYSIA NOR HAD A PERMANENT ESTABLISHMENT IN MALAYSIA. IT WAS THE FURTHER SUBMISSION THAT THE B USINESS INCOME WAS REFERRED TO IN ARTICLE 7 OF THE DTAA AND NONE OF THE INCOMES FE LL WITHIN THE TERM BUSINESS INCOME AS MENTIONED IN ARTICLE 7. IT WAS THE SUBM ISSION THAT IN ANY CASE THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT IN M ALAYSIA. IT WAS THE FURTHER SUBMISSION THAT PERMANENT ESTABLISHMENT IS DEFINED I N ARTICLE 5 OF THE DTAA. IT WAS THE SUBMISSION THAT THE POWER OF ATTORNEY WAS I SSUED IN 1993 TO SHRI R.M. SOMASUNDARAM. AFTER THE SALE OF THE ESTATE IN MALA YSIA THE CONTROL OF THE FUNDS WAS DONE FROM INDIA AND SHRI R.M. SOMASUNDARAM HAD NO ADMINISTRATIVE CONTROL OVER THE FUNDS. IT WAS THE SUBMISSION THAT NOTHING WAS SHOWN TO POINT OUT THAT SHRI R.M. SOMASUNDARAM DID ANY ACT USING HIS POWER OF ATTORNEY IN REGARD TO THE ADMINISTRATION OR FINANCIAL MATTERS OF THE ASSESSEE COMPANY IN MALAYSIA. IT WAS THE SUBMISSION THAT THE CONTROL AND MANAGEMENT BEIN G IN INDIA IT CANNOT BE SAID THAT THE ASSESSEE HAD ANY PERMANENT ESTABLISHMENT IN MALAYSIA AND CONSEQUENTLY I.T.A. NO. 1426 & CO 166/MDS/2009 35 THE INCOME OF THE ASSESSEE COMPANY WAS LIABLE TO BE ASSESSED IN INDIA. FOR THIS PROPOSITION HE RELIED UPON THE DECISION OF THE CAL CUTTA HIGH COURT IN THE CASE OF BANK OF CHINA REPORTED IN 154 ITR 617. IT WAS THE FURTHER SUBMISSION THAT DOWNLOADING OF THE INFORMATION THE LIAISON OFFICES DID NOT CREATE A PERMANENT ESTABLISHMENT. IT WAS THE SUBMISSION THAT IN SIMILA R MANNER HAVING A POWER OF ATTORNEY IN MALAYSIA WHO DID NOT DO ANY ADMINISTRAT IVE FUNCTIONS OR FINANCIAL FUNCTIONS FOR THE COMPANY OR ON BEHALF OF THE COMPA NY IN MALAYSIA IT CANNOT BE SAID THAT THERE WAS A PERMANENT ESTABLISHMENT OF THE ASSESSEE COMPANY IN MALAYSIA. FOR THIS PROPOSITION HE RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF U.A.E. EXCHANGE CENTRE LTD. V. UNION O F INDIA AND ANOTHER REPORTED IN 313 ITR 94. IT WAS THE FURTHER SUBMIS SION THAT IN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. P.V.A.L . KULANDAGAN CHETTIAR REPORTED IN 267 ITR 654 WHICH HAS BEEN REFERRED TO AN RELIED UPON BY THE ASSESSEE THE FACTS WERE DIFFERENT INSOFAR AS IN TH E SAID CASE THE ASSESSEE THEREIN WAS A FIRM OWNING IMMOVABLE PROPERTIES IN MALAYSIA AND THE INCOME WAS EARNED FROM THE ESTATES. IT WAS THE SUBMISSION THAT IN TH E SAID CASE THE ESTATE WAS SOLD AND CAPITAL GAINS WAS SOUGHT TO BE ASSESSED. IT WA S THE SUBMISSION THAT THE HON'BLE SUPREME COURT HAD CATEGORICALLY HELD THAT I N THE APPEALS THE ISSUE WAS IN REGARD TO THE INCOME ARISING FROM THE IMMOVABLE PRO PERTY AND THE HON'BLE SUPREME COURT HAD PROCEEDED ON THE PRESUMPTION THAT THE FISCAL CONNECTION ARISES IN RELATION TO TAXATION EITHER BY REASON OF RESIDENCE OF THE ASSESSEE OR BY I.T.A. NO. 1426 & CO 166/MDS/2009 36 REASON OF THE LOCATION OF THE IMMOVABLE PROPERTY WH ICH IS THE SOURCE OF INCOME. IT WAS FURTHER SUBMITTED THAT THE HON'BLE SUPREME C OURT HAD HELD THAT WHERE THE PERSON IS A RESIDENT IN BOTH THE CONTRACTING STATES FISCAL DOMICILE WILL HAVE TO BE DETERMINED WITH REFERENCE TO THE FACT THAT IF THE C ONTRACTING STATE WITH WHICH HIS PERSONAL AND ECONOMIC RELATIONS ARE CLOSER HE SHAL L BE DEEMED TO BE A RESIDENT OF THE CONTRACTING STATE IN WHICH HE HAS AN HABITUA L ABODE. IT WAS THE SUBMISSION THAT IN THE PRESENT CASE THE ASSESSEE COMPANY DID N OT HOLD ANY IMMOVABLE PROPERTY IN MALAYSIA DURING THE RELEVANT PERIOD. T HE ASSESSEE COMPANY HELD IMMOVABLE PROPERTIES IN INDIA. THE SOURCE OF THE I NVESTMENT IN THE ESTATES IN MALAYSIA WAS MONEY TRANSFERRED FROM INDIA LONG AGO. ON THE SALE OF THE ESTATE IN MALAYSIA THE FUNDS HAD BEEN MOVED TO M/S. GOLDMAN S ACHS IN SINGAPORE AND M/S. GOLDMAN SACHS ALSO DID NOT HAVE A PERMANENT ESTABLIS HMENT IN MALAYSIA. THE ADMINISTRATIVE AND FINANCIAL CONTROLS OF THE MONIES WERE DONE FROM INDIA. THE REGISTERED OFFICE OF THE ASSESSEE COMPANY IS IN IND IA. THE DIRECTORS OF THE ASSESSEE COMPANY ARE IN INDIA. THE BOARD MEETINGS HAD BEEN DONE IN INDIA WHERE DECISIONS IN REGARD TO THE UTILIZATION OF THE FUNDS HAD ALSO BEEN DONE IN INDIA. IT WAS THE SUBMISSION THAT THE INCOME OF TH E ASSESSEE WAS LIABLE TO BE TAXED IN INDIA. IT WAS THE SUBMISSION THAT THIS WA S EXACTLY WHAT WAS DECIDED BY THE TRIBUNAL IN THE CASE OF M/S. M.CT.M. GLOBEL INV ESTMENTS PRIVATE LTD. IN ITA NO. 659/MDS/05 DATED 19-12-2007 AND CONSEQUENTLY THE SA ID DECISION WAS LIABLE TO BE I.T.A. NO. 1426 & CO 166/MDS/2009 37 FOLLOWED AND NOT THE DECISION OF THE TRIBUNAL IN TH E CASE OF M/S. SIVAGAMI HOLDINGS PVT. LTD. IN ITA NOS. 956 TO 959/MDS/2009 DATED 31-05-2011. 12. THE LEARNED DR FURTHER PLACED BEFORE US THE ORI GINAL OF THE NOTICE SERVERS DIARY WHEREIN IT IS NOTED THAT WHAT WAS SERVED ON T HE ASSESSEE ON 3ASSESSEE1-03- 2004 WAS A NOTICE U/S. 148 DATED 26-03-2004. IN RE GARD TO THE REVENUES APPEAL THE REVENUE SUBMITTED THAT THE INCOME OF THE ASSESS EE WAS LIABLE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUSINESS. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT INTEREST UNDER SECTION 234B OF THE ACT WAS NOT LEVIABLE. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. REVATHY EQUIPMENT LTD. REPORTED I N 298 ITR 67. IT WAS THE SUBMISSION THAT EVEN IN THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF REVATHY EQUIPMENT LTD. THE HON'BLE HIGH COUR T HAD HELD THAT THE LEVY OF INTEREST U/S. 234B IS MANDATORY. IT WAS THE SUBMIS SION THAT THE PROVISIONS OF SEC.234B DID NOT CONTAIN ANY PROVISION FOR LOOKING INTO THE BONA FIDES OF AN ASSESSEE. IT WAS THE SUBMISSION THAT IF ADVANCE TA X WAS NOT PAID THEN INTEREST U/S 234B WAS MANDATORY. IT WAS THE SUBMISSION THAT THE HON'BLE SUPREME COURT IN THE CASE OF ANJUM M.H. GHASWALA AND OTHERS REPOR TED IN 252 ITR 1 ALSO CLEARLY HELD THAT THE INTEREST UNDER SEC. 234B WAS MANDATOR Y. IT WAS THE FURTHER SUBMISSION THAT EXPLANATION 1 TO SEC. 234B DID NOT G IVE ROOM FOR ANY CLAIM OF BONA FIDES. I.T.A. NO. 1426 & CO 166/MDS/2009 38 13. IN REGARD TO THE LEVY OF INTEREST UNDER SECTION 234D OF THE ACT IT WAS THE SUBMISSION BY THE LEARNED DR THAT AS THE ASSESSMENT HAD BEEN COMPLETED AFTER THE INTRODUCTION OF THE PROVISIONS OF SECTION 234D THE SAME WAS LEVIABLE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 14. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT AFTER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ANJUM M.H. GHASWALA AND OTHERS THE HON'BLE SUPREME COURT IN THE CASE OF CI T V. INSILCO LTD. REPORTED IN 278 ITR 1 HAD SENT BACK THE ISSUE OF LE VY OF INTEREST U/S 234B TO THE HIGH COURT TO DECIDE WHETHER BONA FIDES COULD BE CONSIDERED. IT WAS THE SUBMISSION THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANJUM M. H. GHASWALA AND OTHERS ONLY SAID THAT THE SETTLE MENT COMMISSION DID NOT HAVE THE POWER TO WAIVE INTEREST U/S. 234B. IT WAS THE SUBMISSION THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ANJUM M.H. GHASWALA AND OTHERS DID NOT OVERRIDE THE DECISION IN THE CASE OF CIT V. RANCHI CLUB LTD. REPORTED IN 247 ITR 209. THE LEARNED AUTHORISED R EPRESENTATIVE FURTHER DREW OUR ATTENTION TO THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ESTATE OF LATE K.N.K. INTHERA IN ITA NO. 958/MDS/20 01 DATED ASSESSEE12-08-2003 WHEREIN THE TRIBUNAL HAD HELD THAT WHILE LEVYING TH E INTEREST UNDER SECTION234B THE ASSESSING OFFICER HAS TO ESTABLISH THAT ALL THE INGREDIENTS FOR THE LEVY OF INTEREST UNDER SECTION 234B WERE PRESENT WHEN PASSI NG THE ASSESSMENT ORDER. IT WAS THE SUBMISSION THAT AS THE ASSESSMENT ORDER DID NOT GIVE ANY FACTUAL FINDING I.T.A. NO. 1426 & CO 166/MDS/2009 39 IN REGARD TO THE LEVY OF INTEREST U/S 234B NO INTE REST WAS LEVIABLE. IT WAS THE SUBMISSION THAT IN THE ORIGINAL ORDER U/S 143(1) NO INTEREST WAS LEVIED AND CONSEQUENTLY THE SAME COULD NOT BE LEVIED IN THE RE -ASSESSMENT PROCEEDINGS. THE LEARNED AUTHORISED REPRESENTATIVE RELIED ON THE DECISION IN THE CASE OF REVATHY EQUIPMENT LTD. TO SUBMIT THAT THE JURISDICTI ONAL HIGH COURT HAD HELD THAT BONA FIDES WERE TO BE TAKEN INTO CONSIDERATION BEFORE THE LEV Y OF INTEREST UNDER SECTION 234B. IT WAS THE SUBMISSION THAT THE ASSES SEE WAS HITHERTO NEVER LIABLE TO TAX ON ITS INCOME FROM ITS MALAYSIAN PE AND CONS EQUENTLY THE ASSESSEE COULD NEVER HAVE THE TAX LIABILITY ON ACCOUNT OF THE SAID INCOME AND THIS SHOWED THE BONA FIDES OF THE ASSESSEE. IT WAS THE SUBMISSION THAT THE O RDER OF THE LEARNED CIT(A) IN REGARD TO THE LEVY OF INTEREST U/S 234B W AS LIABLE TO BE DELETED. 15. IN REGARD TO THE LEVY OF INTEREST UNDER SECTION 234D IT WAS THE SUBMISSION THAT IN VIEW OF THE DECISION OF THE MADRAS HIGH COU RT IN THE CASE OF AYYAPPAN TEXTILES LTD. M/S. VARADHALAKSHMI MILLS LTD. AND S ITALAKSHMI MILLS LTD. V. CIT REPORTED IN 241 ITR 545 NO INTEREST UNDER SECTION 234D COULD BE LEVIED PRIOR TO THE ASSESSMENT YEAR 2004-05 AND IN THE PRESENT CASE THE ASSESSMENT YEAR INVOLVED WAS 1999-2000 AND CONSEQUENTLY NO INTEREST U/S 234D WAS LEVIABLE. 16. IN REGARD TO THE MERITS DECIDED BY THE LEARNED CIT(A) IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) ON MERITS WAS MISDIRECTED PERVERSE AND WORSE THAN THE ASSESSMENT ORDER AND THE SAME WAS L IABLE TO BE REVERSED. IT WAS THE SUBMISSION THAT IF THE ASSESSEE HAD PE IN MALAYS IA AND CONSEQUENTLY THE I.T.A. NO. 1426 & CO 166/MDS/2009 40 INCOME OF THE ASSESSEE AS ARISING TO THE PE IN MALAY SIA WAS NOT LIABLE TO TAX IN INDIA. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. HER E IT MAY SPECIFICALLY MENTIONED THAT ALONG WITH THE ORAL ARGUMENTS PLACED BY BOTH SIDES BOTH THE ASSESSEE AND THE REVENUE HAVE ALSO FILED WRITTEN SU BMISSION WHICH FOR THE PURPOSE OF COMPLETENESS OF THIS ORDER ARE EXTRACTED HEREIN BELOW : BY THE ASSESSEE BEFORE THE HONBLE ITAT B BENCH CHENNAI M.CT.M.CORPORATION PVT LTD. 761 ANNA SALAI CHENNAI-600 002 CROSS OBJECTOR SUB: FORWARDING OF SUPPLEMENTARY WRITTEN SUBMISSION S ON JURISDICTION REG. REF: 1. C.O.NO.166/CHNY/2009 IN ITA NO.1426/CHNY/20 09 A.Y.1999-2000 2. ASSESSEES PETITION DT. 22-1-2010 FOR I NSPECTION OF RECORDS AND OBTAINING OF COPIES ALLOWED BY THE HONBLE BENCH ON 25-1-2010 3. INSPECTION DONE AND COPIES OBTAINED ON 2 142010 4. PRELIMINARY WRITTEN SUBMISSIONS ON JURIS DICTION ON THE BASIS OF INSPECTION OF RECORD DT. 6-5-2010 FILED ON 10-6-2010 5. HEARING ON 20-6-2011 SUPPLEMENTARY WRITTEN SUBMISSIONS ON JURISDICTION 1.00 THESE SUBMISSIONS MAY BE READ AS PART AND PAR CEL OF THE ASSESSEES PETITION DT. 22-1-2010 AND THE PRELIMINARY WRITTEN SUBMISSIONS DT. 6-5-201 0 CITED SUPRA. I.T.A. NO. 1426 & CO 166/MDS/2009 41 1.01 AT THE OUTSET CERTAIN ADMITTED AND UNASSAILABLE FA CTS NEED A MENTION BEFORE MAKING FURTHER SUBMISSIONS. A NOTICE DT. 26-3-2003 U/S 148 OF THE ACT WAS SERVED ON THE ASSESSEE ON 31-3-2004 (KIND REFERENCE IS INVITED TO PAGE 67 OF THE PAPER BOOK/ANNEXE III APPENDED TO THE PRELIMINA RY WRITTEN SUBMISSIONS DT. 6-5-2010). IT IS IN RESPONSE TO THIS NOTICE TH AT THE ASSESSEE PARTICIPATED IN THE REASSESSMENT PROCEEDINGS AND EXTENDED UTMOST CO-OPERATION TO THE DEPARTMENT NOTWITHSTANDING THE CHALLENGE MADE BY T HE ASSESSEE TO THE SAID NOTICE BY WAY OF A WRIT PETITION BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. IN FACT IT WAS THIS NOTICE U/S 148 DT. 26-3-2003 T HAT WAS THE SUBJECT MATTER OF THE WRIT PETITION THOUGH THE SAID PETITION WAS DISMISSED PRIMARILY ON ACCOUNT OF THE AVAILABILITY OF ALTERNATIVE REMEDY F OR THE ASSESSEE BY WAY OF APPEALS. THE ONLY NOTICE THAT WAS SERVED ON THE AS SESSEE WAS THE ONE DATED 26-3-2003. THIS IS ALSO CLEAR FROM THE FINDI NG OF THE LEARNED CIT(APPEALS)-V; SUBSEQUENTLY THE ASSESSMENT WAS R EOPENED BY ISSUE OF NOTICE UNDER SECTION 148 ON 26-3-2003 (KIND REFER ENCE IS INVITED TO THE SECOND PARAGRAPH ON PAGE 5 OF THE PAPER BOOK). THE DEPARTMENT HAS APPARENTLY ACCEPTED THIS POSITION AS TO THE FACTUM OF DATE OF ISSUE OF NOTICE AS 26.3.2003 AS CAN BE UNDERSTOOD FROM THE FACT T HAT NO OBJECTION ON THIS VITAL POINT HAS BEEN TAKEN BY WAY OF AN APPEAL BEFO RE THE HONBLE ITAT. IT IS NOTEWORTHY THAT NO MENTION OF THE DATE OF ISSUE OF NOTICE U/S 148 OF THE ACT OR THE DATE OF RECORDING OF REASONS WAS ANYWHERE FO UND: (I) IN THE ASSESSING I.T.A. NO. 1426 & CO 166/MDS/2009 42 OFFICERS LETTER DT. 22-7-2004 FURNISHING THE REASO NS RECORDED (II) IN HIS SPEAKING ORDER DT. 10-12-2004 AND (III) EVEN IN HIS ENTIRE ORDER U/S 143(3) RWS 147 DT. 29-3-2005. HOWEVER THERE IS NO DISPUT E REGARDING THE DATE OF SERVICE VIZ. 31-3-2004. 1.02 AS STATED IN THE PRELIMINARY WRITTEN SUBMISSIONS DT . 6-5-2010 THE ASSESSEE AVERRED INTER ALIA IN THE WRITTEN PETITION FILED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT THAT THE SERVICE OF THE N OTICE ISSUED ON 28-3-2003 WAS DELIBERATELY WITHHELD BY THE DEPARTMENT UPTO 3 1-3-2004 WITH A VIEW TO EXTEND THE LIMITATION FOR ASSESSMENT IN TERMS OF SU B-SECTION (2) OF SECTION 153. HOWEVER IN THE COUNTER AFFIDAVIT FILED BY TH E DEPARTMENT(ENCLOSED AS ANNEXURE TO THE ASSESSEES PETITION DT. 22-1-2010 B EFORE THIS HONBLE BENCH) ON PARAGRAPH I THEREIN THE LEARNED ASSES SING OFFICER HAS AFFIRMED AS FOLLOWS: THE NOTICE U/S 148 WAS IS SUED ON 26-3-2004 SERVED ON 31-3-04 THE DATE OF SATISFACTI ON NOTE OF THE ASSESSING OFFICER BEFORE ISSUING THE NOTICE U/S 148 IS ALSO 26-3-2004 AND NOT 26-3-2003 AS MENTIONED BY THE PETITIONER. HENCE THE PETITIONERS SUBMISSION WITH R EFERENCE TO THE EXPIRY OF ONE YEAR ARE FACTUALLY INCORRE CT AND MAY BE REJECTED 1.03 FROM WHAT HAS BEEN EXTRACTED ABOVE IT IS A MPLY CLEAR THAT AS PER THE DEPARTMENTS VERSION THE REASON FOR REOPENING WAS RECORDED AND THE IMPUGNED I.T.A. NO. 1426 & CO 166/MDS/2009 43 NOTICE WAS ISSUED ON THE SAME DATE VIZ. 26-3-2004 WHILE THE NOTICE ISSUED TO THE ASSESSEE IS DATED 26-3-2003 AND NOT 26-3-2004 AS AL LEGED BY THE DEPARTMENT. ON THE FACTUAL ASPECT VIZ. THAT THE NOTICE U/S 148 IS SUED TO THE ASSESSEE IS ONLY DT. 26- 3-2003 THE COUNTER AFFIDAVIT IS SILENT NOR ANY MIS TAKE ON ITS PART IS ADMITTED THEREIN BY THE DEPARTMENT. IT IS UNDER THESE CIRCUMSTANCES THAT THE ASSESSEE HAD TO APPROACH THIS HONBLE BENCH FOR A DIRECTION TO THE DEPARTMENT FOR INSPECTION AND FOR OBTAINING COPIES OF THE RELEVANT ORDER SHEETS. IT IS RESPECTFULLY SUBMITTED THAT IF THE RIGHT OF INSPECTION WAS NOT GRACEFULLY ALLOWED BY THE HONBLE BENCH THE WHOLE ISSUE GOING TO THE ROOT OF THE MATTER CONCERNING JU RISDICTION WOULD HAVE GONE UNNOTICED. 2.00 POSSIBLE INFERENCES/INTERPRETATION ON THE ORDER SHEET S INSPECTED: A) KIND ATTENTION OF THE HONBLE BENCH IS DRAWN TO PAGE NO.2 TOP OF THE ORDER SHEET WHERE AN ENTRY HAS BEEN EFFACED WITH WHITENER CORREC TING FLUID) . AS FOR THE PORTION EFFACED WITH WHITENER THOUGH THE DA TE ON THE LEFT SIDE OF THE ENTRY IS NOT CLEARLY VISIBLE THE OTHER WORDS LIKE : NOTICE U/S 148 PREPARED AND PUT UP ARE DISCERNIBLE OF COURSE WITH SOME DIFFICULTY. B) THIS EFFACED ENTRY ON TOP OF PAGE 2 IS NOT PRECEDED BY ANY ENTRY MUCH LESS ANY REASON RECORDED. C) THIS EFFACED ENTRY CLEARLY INDICATES THE EXISTEN CE OF THE NOTICE DT. 26-3-2003 I.T.A. NO. 1426 & CO 166/MDS/2009 44 ISSUED TO AND SERVED ON THE ASSESSEE ON 31-3-2004. THIS FACT OF NOTICE U/S 148 DT. 26-3-2003 IS ALSO CORROBORATED BY THE NOTICE ACTUAL LY RECEIVED BY THE ASSESSEE (C/F PAGE 67 OF THE PAPER BOOK/ANNEXE III APPENDED TO THE PRELIMINARY WRITTEN SUBMISSIONS DT. 6-5-2010). D) A REFERENCE TO PAGE 4 OF ANNEXE I TO THE PRELIMINA RY WRITTEN SUBMISSIONS DT. 6- 5-2010 WHICH IS THE DEPARTMENTS COPY OF THE NOTIC E U/S 148 CLEARLY REVEALS THAT THE DATE OF NOTICE IS ALTERED AS 26.3.04 INSTEAD O F 26-3-03 AS ORIGINALLY WRITTEN. THIS ALSO LENDS CORROBORATION TO THE REAL FACT THAT THE NOTICE WAS ACTUALLY ISSUED ON 26-3-03 CONSIDERING THIS TOGETHER WITH THE ENTRY E FFACED ON TOP OF PAGE 2 OF THE ORDER SHEET. E) FROM WHAT HAVE BEEN STATED ABOVE THE FOLLOWING POSITIONS EMERGE: I) THERE WAS NO REASON RECORDED PRIOR TO THE ISSUE OF NOTICE U/S 148 DT. 26-3-2003 SERVED ON THE ASSESSEE ON 31-3-2004; II) FROM THE ASSERTION IN THE COUNTER AFFIDAVIT FILED B Y THE DEPARTMENT AND THE CORRECTION MADE IN THE DEPARTMENTS COPY OF NOTICE U/S 148 CONSIDERED WITH THE OTHER ENTRIES IN T HE ORDER SHEET THERE WAS ONE MORE NOTICE U/S 148 DT. 26-3-2004 ABOUT THE EXISTENCE O F WHICH THE ASSESSEE WAS UNAWARE THE SAME HAVING NOT BEEN SERVED ON IT . III) THE SIMULTANEOUS EFFACING OF THE ENTRY WITH WHITENE R ON TOP PAGE 2 OF THE I.T.A. NO. 1426 & CO 166/MDS/2009 45 ORDER SHEET WITH CORRESPONDING CORRECTION IN THE DE PARTMENTS COPY OF NOTICE U/S 148 ARE NOT INADVERTENT BUT INTENTIONAL AND HENCE THE SUBSEQUENT ENTRIES IN THE ORDER SHEET SUGGESTING SOME PROCEEDINGS ARISIN G OUT OF THE ALLEGED NOTICE U/S 148 DT. 26-3-04 IN TH E ASSESSEES OWN CASE AND STILL UNKNOWN TO THE ASSESSEE HAVE NO LEGS TO STAND ON. 3.00 WRITTEN SUBMISSIONS BACKED BY SETTLED LAW : 1. AS NO REASONS HAVE BEEN RECORDED PRIOR TO THE I SSUE OF NOTICE U/S 148 DATED 26- 3-2003 WHICH WAS SERVED ON THE ASSESSEE ON 31-3-200 4 CONTRARY TO THE MANDATORY PROVISIONS OF SECTION 148(2) OF THE ACT THE ENTIRE REASSESSMENT PROCEEDINGS ARE LIABLE TO BE CANCELLED IN LIMINE: (A) SECTION 148(2) OF THE ACT READS AS FOLLOWS: THE ASSESSING OFFICER SHALL BEFORE I SSUING ANY NOTICE UNDER THIS SECTION RECORD HIS REA SONS FOR DOING SO. (B) LAW IS SETTLED THAT JURISDICTIONAL ISSUES HAVE TO B E DECIDED FIRST AND IF ONLY JURISDICTION EXISTS MERITS ARE TO BE GONE INTO: CASE LAW : I) RAHULKUMAR BAJAJ VS ITO (1999) ITD 1 (N AG)(SB); II) DEEPCHAND KOTHARI VS CIT (1998) 171 ITR 381 385 (RAJ); III) CIT VS WILH WILHELMSEN TIMES LTD. (1980) 126 ITR 31 8 (CAL); IV) P.K.DIVEKAR VS CIT (1985) 151 ITR 11 (BOM); I.T.A. NO. 1426 & CO 166/MDS/2009 46 (C ) ONLY THE REASONS RECORDED CAN BE LOOKED A T FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED U/S 148/NO OTHER REASON OTHER THAN TH AT RECORDED CAN BE SEEN: I) IAC & ANOTHER VS IBM WORLD TRADE CORPORATION (1995) 216 ITR 811 (BOM); II) CIT VS S.R.CONSTRUCTION (2002) 257 ITR 502 507 (MP ); III) SURAT CITY GYMKHANA VS DCIT (2002) 254 ITR 733 (GUJ ); IV) JAMNALAL KABRA VS ITO (1968) 69 ITR 461 (ALL); V) HINDUSTAN LEVER LTD. S ACIT (2004) 268 ITR 332 (BO M); VI) ACIT VS CHAMPDANY INDUSTRIES LTD. (2005) 95 ITD 169 (KOL) (PARA 10); VII) ITO VS SATYA NARAYAN PARWAL (2005) 96 ITD 362 (JP); VIII) CIT VS AGARWALLA BROTHERS (1991) 189 ITR 786(PAT); IX) C.M.RAJGHARAIA VS ITO (1975) 98 ITR 486 (PAT); X) H.A.NANJI & CO. VS ITO (1979) 120 ITR 593 (CAL); XI) EAST COAST COMMERCIAL CO LTD. VS ITO (1981) 128 ITR 326 (CAL); XII) ITO VS ELECTRO STEEL CASTINGS LTD. (2003) 264 ITR 41 0 (CAL); - SLP DISMISSED IN ELECTRO STEEL CASTINGS LTD. VS CIT (2004) 266 ITR 104 (SC); (D) RECORDING OF REASONS U/S 148 (2) BEFORE ISSUE O F NOTICE U/S 148 IS MANDATORY & PRE-REQUISITE FOR ASSUMPTION OF JURISDICTION IF NO REASON IS RECORDED THE REOPENING IS AB INITIO VOID AND BAD: CASE LAW : I)FULLER INDIA LTD VS. JCIT(2004) 269 ITR 365(MAD ); I.T.A. NO. 1426 & CO 166/MDS/2009 47 II)CIT VS. SHIV RATAN SONI(DECD)(20 05) 279 ITR 261(RAJ); III)CIT VS. RAJINDRA ROSIN AND TURPE NTINE INDUSTRIES(2008) 305 ITR 161( P& H ); IV) SURAT CITY GYMKHANA VS ACIT (2001) 76 ITD 327 336 (AHD); V) CHANDAN METAL PRODUCTS (P) LTD. VS DCIT (2002) 81 ITD 366 (PUNE); VI) JOHRILAL (HUF) VS CIT (1973) 88 ITR 439 (SC); VII) MALHAR RAO TATYA SAHEB HOLDAR V S ITO (1995) 54 ITD 562 (IND); VIII)RAHUL STEEL FORGINGS (P) LT D. VS ACIT (1998) 66 ITD 408 (IND); IX) JAMNALAL KABRA VS ITO (196 8) 69 ITR 461 (ALL); X) CIT VS T.R.RAJAKUMARI (197 4) 96 ITR 78 (MAD); XI) L.MADANLAL (ALUMINIUM) P L TD. VS ITO & OTHERS (1978) 115 ITR 293 (KAR); XII) S.P.DIVEKAR & A.P.DIVEKAR VS CIT (1986) 157 ITR 629 (BOM); XIII) CIT VS SUKH LAL ICE COLD STORAGE CO (1992) 196 ITR 562 563 (ALL); XIV) CIT VS KERALA STATE CASHE W DEVELOPMENT CORPORATION (1992) 198 ITR 520 (KER); XV) NARANG BROTHERS VS CIT (1 988) 173 ITR 409 415 (PAT); XVI) UOI VS RAI SINGH DEB SING H BIST & ANOTHER (1973) 88 ITR 200 (SC); I.T.A. NO. 1426 & CO 166/MDS/2009 48 XVII) EAST COMMERCIAL CO LTD. V S ITO (1981) 128 ITR 326 (CAL); XVIII) CIT VS THAKURLAL (1981) 1 32 ITR 398 (MP); XIX) CHHUGAVURAL RAJPAL VS S. P.CHALIHA (1971) 79 ITR 603 (SC); XX) CIT VS KURBAN HUSSAIN IB RAHAMJI MITHIBORWALA (1971) 82 ITR 821 (SC); XXI) CIT VS AGARWALA BROS (19 91) 189 ITR 786 (PAT); XXII) H.C.L.LTD. VS CIT (1993 ) 199 ITR 291 (DEL); XXIII) MORARJEE GOCULDAS SPINN ING & WEAVING CO LTD. VS P.N.BANSAL(1994)208 ITR 471 (BOM); XXIV)HOTEL APPOLO VS ITO (199 5) 213 ITR 762 (GUJ); XXV)GOVIND BALLABH PARIKH V S ITO (1995) 214 ITR 519 523 (RAJ); (E) NOTINGS OF THE ASSESSING OFFICER DO NOT A MOUNT TO RECORDING OF REASONS IN LAW: CASE LAW : I) BALDEV SINGH GIANI VS CIT (2001) 248 ITR 266 (P&H); II) CIT VS KERALA STATE CA SHEW DEVELOPMENT CORPORATION (1992) 198 ITR 520 (KER) (148 NOTICE PUT UP ) III) CIT VS THAKURAL (1981) 132 ITR 398 (MP); IV) VIJAYALAKSHMI OIL IND USTRIES VS ITO (1985) 155 ITR 748 (KAR). I.T.A. NO. 1426 & CO 166/MDS/2009 49 4.00 RECORD TINKERED WITH - CANCELLATION OF REASSESSMEN T IS JUSTIFIED ON THIS SCOREALONE AND ALSO: ALREADY IT HAS BEEN ESTABLISHED T HAT THE RECORD MAINTAINED BY THE LEARNED ASSESSING OFFICER HAS BEEN TINKERED WITH FI RST ON TOP OF PAGE 2 OF THE ORDER SHEET (EFFACING OF THE ORIGINAL ENTRY WITH WHITENER ) AND SECONDLY IN THE DEPARTMENTS COPY OF NOTICE U/S 148 THE YEAR IS AL TERED AS 04 INSTEAD OF THE ORIGINAL ENTRY 03. THE NOTICE U/S 148 SERVED ON THE ASSESSEE IS DATED 26-3-03 IN RESPONSE TO WHICH THE ASSESSEE PARTICIPATED IN THE REASSESSMENT PROCEEDINGS. THE ALTERATIONS IN THE ORDER SHEET AND THE DEPARTMENTS COPY OF THE NOTICE WERE PROBABLY MADE TO BE IN TANDEM WITH THE REVENUE PLEA BEFORE THE HONBLE HIGH COURT THAT THE REASONS WERE RECORDED/NOTICE WAS ISS UED ONLY ON 26-3-2004 AND NOT ON 26-3-2003. BE THAT AS IT MAY THE ALTERATIONS I N RECORD THEMSELVES WOULD UNSUIT THE REOPENING OF ASSESSMENT AND WOULD JUSTIFY THE C ANCELLATION OF THE REASSESSMENT PROCEEDINGS. 5.00 EXISTENCE OF TWO NOTICES RE-ASSESSMENT PROCEEDINGS ARE LIABLE TO BE CANCELLED A) AS HAS BEEN STATED ALREADY A NOTICE U/S 148 D ATED 26-3-2003 WAS SERVED ON THE ASSESSEE ON 31-3-2004. EVEN THE LEARNED CIT (A PPEALS) FOUND: SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDE R SECTION 148 ON 26-3-2003 (C/F PARA 2 ON PAGE 5 OF THE PAPER BOOK). THE ASS ESSEE HAS NOT RECEIVED ANY I.T.A. NO. 1426 & CO 166/MDS/2009 50 OTHER NOTICE MUCH LESS THE ONE DATED 26-3-2004. H OWEVER THERE ARE ENTRIES ON PAGES 2 TO 4 OF THE ORDER SHEET SHOWING COMPUTER TY PED REASONS RECORDED AND NOTICE U/S 148 PREPARED & PUT UP ON 26-3-04 WHIC H ACCORD WITH THE REVENUE PLEA IN THEIR COUNTER AFFIDAVIT BEFORE THE HONBLE JURISDICTIONAL HIGH COURT : THE NOTICE U/S 148 WAS IS SUED ON 26-3-2004 AND SERVED ON 31-3-04 THE DATE OF SA TISFACTION NOTE OF THE ASSESSING OFFICER BEFORE ISSUING TH E NOTICE U/S 148 IS ALSO 26-3-2004 AND NOT 26-3-2003 AS MENT IONED BY THE PETITIONER. HENCE THE PETITIONERS S UBMISSION WITH REFERENCE TO THE EXPIRY OF ONE YEAR ARE FA CTUALLY INCORRECT AND MAY BE REJECTED. (B) AS PER THE ASSESSEE AND THE LEARNED CIT (APPEA LS) THE NOTICE U/S 148 WAS ISSUED ON 26-3-2003 WHILE AS PER THE ORDER SHEETS (EVEN OVERLOOKING THE EFFACED ENTRY ON TOP OF PAGE 2 OF THE ORDER SHEET AND THE C ORRECTION IN THE DEPARTMENTS COPY OF NOTICE U/S 148) AND THE ASSERTION OF THE DE PARTMENT IN THE COURT PROCEEDINGS THE NOTICE WAS ISSUED ON 26-3-2004. A S SUCH TWO NOTICES ONE DATED 26-3-2003 AND ANOTHER DATED 26-3-2004 APPEAR TO SURFACE. INTERESTINGLY THERE IS NO DISPUTE REGARDING THE DATE OF SERVICE O F THE NOTICE U/S 148 VIZ. 31-3- 2004. I.T.A. NO. 1426 & CO 166/MDS/2009 51 (C ) A SECOND INITIATION OF REASSESSMENT PROCEEDING S DURING THE PENDENCY OF AN EARLIER INITIATION IS BAD AND INVALID IN LAW: WHERE REASSESSMENT PROCEEDINGS ARE SET IN MOTION BY ISSUANCE OF A NOTICE AND THE SAME PENDING NO SECOND NOTICE FOR REASSESSMENT CAN BE ISSUED. CASELAW : I) COMMERCIAL ART PRESS VS CIT (19768) 115 ITR 8 76 (ALL); II) A.S.S.P.& CO. VS CIT (1988) 17 2 ITR 274 (MAD); III) CIT VS P.KRISHNANKUTTY MENON (1 990) 181 ITR 237 241 (KER) IV)COMMUNIDADO OF CHICALIM VS ITO ( 2001) 247 ITR 271(SC) 6.00 THE ALLEGED NOTICE U/S 148 DATED 26-3-2004 WAS NOT SERVED ON THE ASSESSEE IN VIOLATION OF SECTION 148(1) OF THE ACT RE- ASSESSMENT IS BAD IN LAW: A) IT HAS ALREADY BEEN POINTED OUT THAT NO SUCH N OTICE U/S 148 DATED 26-3-2004 WAS SERVED ON THE ASSESSEE WHICH IS CONTRARY TO THE MANDATORY PROVISIONS OF SECTION 148(1) OF THE ACT. IT MAY BE RECALLED THAT AS PER THE DEPARTMENT THE NOTICE U/S 148 WAS ISSUED ON 26-3-2004. HENCE THE REASSE SSMENT PROCEEDINGS ARE LIABLE TO BE CANCELLED. B) IF NO NOTICE IS ISSUED OR THE NOTICE ISSUED IS F OUND TO BE DEFECTIVE FOR ANY REASON THE ENTIRE PROCEEDINGS ARE ILLEGAL AND VOID: CASELAW : I.T.A. NO. 1426 & CO 166/MDS/2009 52 I) Y.NARAYANA CHETTY VS ITO (1959) 35 ITR 388 (SC); II) R.K.DAS & CO. VS CIT (1956) 30 ITR 439 (CAL); III) RAMA DEVI AGARWALLA VS CIT (1979) 117 ITR 256 (CAL) ; IV) RAWATMAL HARAKCHAND VS CIT (1981) 129 ITR 346 (CAL) ; V) MADANLAL AGARWAL VS CIT (1983) 144 VI) P.V.DOSHI VS CIT (1978) 113 ITR 22 (GUJ); VII) JAYANTHI TALKIES DISTRIBUTORS VS CIT (1979) 120 ITR 576 (MAD); VIII) NYALCHAND MALUKCHAND DAGLI VS CIT (1966) 62 ITR 102 (GUJ); IX) B.K.GOOYEE VS CIT (1966) 62 ITR 109 (CAL); X) CIT VS THAYABALLI MULLA JEEVAJI KAPASI (1963) 47 IT R 184 (KER); XI) VIJAYAKUMAR JAIN VS CIT (1975) 99 ITR 349 (PUNJ); XII) RAMASWAMI MUDALIAR KUDUMBA DHARMA TRUST VS AGRL ITO (1983) 139 ITR 990 (MAD); C) PROPER SERVICE OF NOTICE ALONE IS THE FOUNDATI ON OF JURISDICTION: IN VIEW OF EFFACING OF ENTRY ON TOP OF PAGE 2 OF TH E ORDER SHEET AND THE ALTERATION OF THE YEAR IN THE DEPARTMENTS COPY OF NOTICE U/S 148 MERE ACKNOWLEDGEMENT SLIP PARTICULARLY IN THE FACE OF T HE ACTUAL NOTICE WITH THE ASSESSEE AND THE LEARNED CIT(A)S FINDINGS CANNOT B E AVAILED BY THE DEPARTMENT. IN VIEW OF THE TINKERING WITH THE RECO RD THE PRESUMPTION AND PROTECTION OF BONAFIDE ACTION CANNOT ALSO BE AVAILE D BY THE DEPARTMENT. I.T.A. NO. 1426 & CO 166/MDS/2009 53 MOREOVER LAW IS SETTLED AS BELOW THAT PROPER SERV ICE OF NOTICE ALONE IS THE FOUNDATION OF JURISDICTION: I) C.N.NATARAJ VS FIFTH ITO (1965) 56 ITR 250 (MYS); II) LAKSHMIBAI VS ITO (1972) 86 ITR 804 (MYS); III) KIND REFERENCE IS INVITED TO THE CASES REFERRED TO IN PARA 6.00 (B) ABOVE; THE REASON STATED INPARAGRAPH (IV) OF THE RECORDED REASONS IS BASED ON AN ERRONEOUS VIEW OF LAW; LAW IS SETTLED THAT THE REASON TO BELIEVE MUST BE T ENABLE IN LAW [BAWA ABHAI SINGH VS DCIT (2002) 253 ITR 83 92 (DEL)] AND THE REASON MUST BE ACKNOWLEDGED AND RECONISED BY LAW [ASSAM CO LTD. VS UOI (2005) 275 ITR 609 626 (GAUHATI)]. CONTRARY TO SETTLED LAW IT HAS BEEN STATED: DTAA RELIEF IS AVAILABLE ONLY IF THE INCOME IS LIABLE/CHARGEABLE TO TAX IN THE OTHER CON TRACTING STATE. SINCE INCOME IS NOT CHARGEABLE TO TAX AT MALAYSIA NO RELIEF IS AVA ILABLE ON THE INCOME EARNED THROUGH GS AND WGIL UNDER THE DTAA. THIS REASON IS BASED ON AN ERRONEOUS VIEW OF LAW AS PER THE FOLLOWING SETTLED LAW: I) UOI VS AZADI BACHAO ANDOLAN (2003) 263 ITR 706 (SC); I) IN OUR VIEW THE CONTENTIONS OF THE RESPONDENT S PROCEEDS ON THE FALLACIOUS PROMISE THAT LIABILITY TO TAXATION IS TH E SAME AS PAYMENT OF TAX. LIABILITY TO TAX IS A LEGAL SITUATION; PAYMENT OF TAX IS A FISCAL F ACT . I.T.A. NO. 1426 & CO 166/MDS/2009 54 (PAG E 741 EMPHASIS SUPPLIED) II) IT IS THEREFORE NOT POSSIBLE FOR US TO ACCEPT THE CONTENTIONS SO STRENUOUSLY URGED ON BEHALF OF THE RESPONDEN TS THAT AVOIDANCE OF DOUBLE TAXATION CAN ARISE ONLY WHEN TAX IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES (PAGE 744 EMPHASIS SUPPLIED) II) EMMERICH JAEGAR VS CIT (2005) 274 ITR 125 ( GUJ); (HONBLE APEX COURT DECISION IN AZAD I BACHAO ANDOLAN (SUPRA) FOLLOWED] III) ADITVS GREEEN EMIRATE SHIPPING & TRAVELS (20 06) 100 ITD 203 (MUMBAI): (HONBLE APEX COURT DECISION IN AZADI BACHA O ANDOLAN (SUPRA) FOLLOWED IT IS THUS CLEAR THAT TAX ABILITY IN ONE COUNTRY IS NOT THE SINE QUA NON FOR AVAILING RELIEF UNDER THE TREATY FROM TAXABILI TY IN ANOTHER COUNTRY (PAR A 8 PAGE 213 EMPHASIS SUPPLIED) IV) MEERA BHATIA VS ITO (2010) 38 SOT 95 (MUMBAI): [DECISION IN ADIT VS GREEEN EMIRATE SHIPPI NG & TRAVELS) SUPRA FOLLOWED] IF THE REASON FOR REOPENING IS BASED ON AN ERRONEOUS VIEW OF LAW THE REOPENING IS BAD IN LAW: CASELAW : I) DESAI BROTHERS VS DCIT (1999) 240 ITR 121 126 & 127 (GUJ); II) N.R.K.RAM KUMAR RAJA VS ITO (2001)249 ITR 385 389 & 390 I.T.A. NO. 1426 & CO 166/MDS/2009 55 (MAD); III) CIT VS RAM KRISHNA TEKR IWAL (2005) 274 ITR 266 267 (ALL); IV) SIEMENS INFORMATION SYST EMS LTD. VS ACIT & OTHERS (2007) 293 ITR 548 551 552 (BOM); V) BHARAT CO-OPT BANK (MUMB AI) LTD. VS UOI (2002) 122 TAXMAN 264 (BOM); VI) FARRUKHABAD GRAMIN BANK VS ITO (2005) 273 ITR 113 (ALL); VII) ITO VS PROJECT INDIA (20 07) 109 ITD 87 (INDORE); CONCLUDING SUBMISSIONS ON THIS POINT : THE ABOVE REASON GIVEN BY THE LEARNED ASSESS ING OFFICER FOR REOPENING IS PURELY ONE OF LAW APPARENTLY BASED UPON THE THEN VI EW OF THE DEPARTMENT PROMPTED BY A RULING OF THE AUTHORITY FOR ADVANCE R ULING IN CYRIL EUGENE PEREIRA IN RE (1999) 239 ITR 650 (AAR) WHERE IT WAS HELD THAT WHEN AN INCOME WHICH IS NOT TAXED IN THE COUNTRY WHICH IS ENTITLED TO TAX THE S AME THE OTHER COUNTRY CAN TAX IT OVERRULING ITS OWN EARLIER RULING IN MOHSINALLY ALI MOHAMMED RAFIK IN RE (1995) 213 ITR 317 (AAR). THE HONBLE APEX COURT IN UOI VS AZ ADI BACHAO ANDOLAN (2003) 263 ITR 706 (SC) AT PAGE 744 SPECIFICALLY REFERRED TO THE LATER RULING AND FOUND THE VIEW UNACCEPTABLE IN VIEW OF THE CONCEPT OF TREATY OVERRIDE IRRESPECTIVE OF THE FACT WHETHER OR NOT SUCH INCOME IS TAXABLE IN THE OTHER COUNTRY WHICH IS ENTITLED TO TAX THE SAME. THE VERY BASIS FOR ASSUMPTION OF JURISD ICTION IS HIS WRONG VIEW OF LAW I.T.A. NO. 1426 & CO 166/MDS/2009 56 CONTRARY TO THE ABOVE APEX COURT DECISION APART FR OM BOARD CIRCULAR NOS.333 DT. 2- 4-1982 NO.734 DATED 24-1-1996 AND OTHER PRECEDENT S. SINCE THIS REASON IS CONTRARY TO THE HONBLE APEX COURT DECISION REOPEN ING IS BAD IN LAW ON THIS SCORE AS WELL. ANOTHER REASON FOR REOPENING IS BASED ON BO RROWED SATISFACTION WHICH IS BAD IN LAW: IN PARAGRAPH (V) OF THE REASON RECORDED THE LEARNED ASSESSING OFFICER HAS BORROWED SATISFACTION FROM ANOTHER CASE I.E. M.CT.M .GLOBAL INVESTMENTS PVT LTD. FOR A.Y.2000-01. THIS REASON BASED ON BORROWED SATI SFACTION WEIGHED HEAVILY WITH THE LEARNED ASSESSING OFFICER/CIT (APPEALS) AS A RE FERENCE TO THE ASSESSMENT AND THE FIRST APPELLATE ORDERS WOULD READILY REVEAL. A DOPTING THE DECISION IN SOME OTHER CASE WITHOUT AFFORDING OPPORTUNITY (N.S CHOODAMANI VS CIT (1959) 35 ITR 676 (KER)] OR IMPORTING FACTS AND CIRCUMSTANCES NOT ON RECORD (KISHENLAL ROOPCHAND & CO VS CIT (1976) 104 ITR 422 (MAD)] ARE INSUPPORTA BLE IN LAW. LAW IS ALSO SETTLED THAT IF THE REOPENING IS BASED ON BORROWED SATISFAC TION THE SAME IS BAD IN LAW (SHREE RAJASTHAN SYNTEX LTD. VS ACIT (2005) 93 ITD 78 (JODH) APPROVED IN CIT VS SHREE RAJASTHAN SYNTEX LTD. (2009) 313 ITR 231 (RAJ )]. THE DECISION OF THE HONBLE ITAT D BENCH CHENNAI DT.31.5.2011 UPHOLDING THE POINT THAT RE- OPENING CANNOT BE DONE BY BORROWING SATISFACTION FR OM SOME OTHER CASE IS HEREWITH ENCLOSED. I.T.A. NO. 1426 & CO 166/MDS/2009 57 IT IS NOT A LITTLE REMARKABLE AND NOT A M ERE COINCIDENCE THAT THE REASSESSMENT ORDER OF THE SAID MCTM GLOBAL INVESTMENTS PVT LTD. FOR AY 2000- 2001 WAS PASSED ON THE SAME DATE VIZ. 26.3.2004 BY THE SAME OFFICER TO IMPORT THE FACTS OF THAT CASE INTO THE CASE ON HAND AND TO AVAIL BORROWED SATISFACTION TO SOMEHOW REOPEN THIS CASE.A COPY OF THE ORDER IN THE OTHERCASE IS HEREWITH ENCLOSED.THIS ALSO CORROBORATES TO THE FACT THAT TH E RECORD OF THE ASSESSEE HAS BEEN TAMPERED WITH TO CONSIDER FACTS NOT FORMING PART OF THE RECORD OF THE ASSESSEE. ASSESSEES CASE COVERED FROM A.Y.1993-94 T O 1998-99 [REF: HONBLE ITAT DECISIONS FOUND ON PAGES 86 93 OF THE PAPE R BOOK] IT IS NOTEWORTHY THAT EVEN THE ASSESSMENT O RDERS FOR A.Y.1993-94 TO 1998-99 WERE PROTECTIVE ORDERS IN VIEW OF THE NON-ACCEPTANCE BY THE DEPARTMENT OF THE DECISION IN V.RM.SR.M.FIRM VS CIT (1994) 208 ITR 400 (MAD) WH ICH WAS IN FAVOUR OF THE ASSESSEE AGAINST WHICH SLP WAS TAKEN BY REVE NUE BEFORE THE HONBLE APEX COURT. THE SAID DECISION WAS APPROVED IN CIT VS PVAL KULANDAGAN CHETTIAR (2004) 267 ITR 654 (SC) - REVENUES REVIEW PETITIO N DISMISSED (2008) 300 ITR 5 (SC). UPTO THE PRECEDING ASSESSMENT YEAR I.E. A.Y .1998-99 THE ISSUE ON MERITS STANDS COVERED IN FAVOUR OF THE ASSESSEE.OVERLOOKING THE HONBLE ITAT DECISION AMOUNTS TO JUDICIAL INDISCIPLINE. IT IS ALSO OPPOS ED TO THE PRINCIPLE OF CONSISTENCY. I.T.A. NO. 1426 & CO 166/MDS/2009 58 ALTERATIONS IN ORDER SHEET ARE ALSO CONTRARY TO THE DOCTRINE OF FAIR PLAY: AS PER THE DECISION IN J.T.(INDIA) EXPORTS & ANOTHER VS UOI & ANOTHER (2003) 262 ITR 269 274 (DEL) (FB) JUSTICE SHOULD NOT ONLY B E DONE BUT SHOULD MANIFESTLY BE SEEN TO BE DONE. IT IS RESPECTFULLY SUBMITTED THA T THE ALTERATIONS IN THE ORDER SHEET ARE ALSO CONTRARY TO THE DOCTRINE OF FAIR PLAY. IT IS SETTLED LAW THAT INFIRMITY IN INITIATION CANNOT BE CURED (P.V.DOSHI VS CIT(1978 ) 113 ITR 22 (GUJ) AND THAT IF INITIATION IS BAD WHATEVER FOLLOWS IS ALSO BAD (R AWATMAL HARAKCHAND VS CIT (1981) 129 ITR 346 (CAL)]. ADVERTING TO THE ABOVE IT IS APPOSITE TO RESPECTFULLY QUOTE THE FOLLOWING OBSERVATIONS MADE IN CIT VS SIMON CARVES LTD. (1976) 105 ITR 212 (SC): THE TAXING AUTHORITIES EXERCIS E QUASI JUDICIAL POWERS AND IN DOING SO THEY MUST ACT IN A FAIR AND NOT IN A PARTISAN MANNER. ALTHOUGH IT IS PART OF THEIR DUTY TO ENSURE THA T NO TAX WHICH IS LEGITIMATELY DUE FROM AN ASSESSEE SHOULD REMAIN UNRECO VERED THEY MUST ALSO AT THE SAME TIME NOT ACT IN A MANNER AS MIGHT INDICATE THAT S CALES ARE WEIGHTED AGAINST THE ASSESSEE. WE ARE WHOLLY UNABLE TO S UBSCRIBE TO THE VIEW THAT UNLESS THOSE AUTHORIIES EXERCISE THE POWER IN A MANNER MOST BENEFICIAL TO THE REVENUE AND CONSEQUENTLY MOST A DVERSE TO THE ASSESSEE THEY SHOULD BE DEEMED NOT TO H AVE EXERCISED IT IN A PROPER AND JUDICIOUS MANNER I.T.A. NO. 1426 & CO 166/MDS/2009 59 (PAGE 218) THE UNJUST RE-OPENING IS VIOLA TIVE OF THE RULE OF FINALITY: AS STATED ALREADY THE POSITION IS THAT FOR SEVERAL DECADES THE ISSUE ON MERITS STANDS COVERED IN FAVOUR OF THE ASSESSEE.THE DEPARTMENT C ANNOT UNSETTLE THE SETTLED POSITION. THE UNJUST RE-OPENING IS VIOL ATIVE OF THE RULE OF FINALITY.IT IS APT APPROPRIATE AND APPOSITE TO EXTRACT THE FOLLOWING R ULING OF THE HONBLE APEX COURT IN PARSHURAM POTTERY WORKS CO LTD VS ITO(1977)106 ITR 1 (SC): WE HAVE TO BEAR IN MIND THAT T HE POLICY OF THE LAW IS THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS TH AT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THE LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROV ERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. PRAYER: IN VIEW OF THE ABOVE SUBMISSIONS IT IS IMPLORED THAT THE HONBLE BENCH MAY BE PLEASED TO QUASH THE ILLEGAL NOTICES U/S 148 AND CANCEL THE REASSESSMENT ORDER UNDER APPEAL AND THEREBY RENDER JUSTICE. CHENNAI 20.6.2011 (R. RAJASEKARAN) AUTHORISED REPRESENTATIVE I.T.A. NO. 1426 & CO 166/MDS/2009 60 BEFORE THE HONBLE ITAT B BENCH CHENNAI M.CT.M.CORPORATION PVT LTD. 761 ANNA SALAI CHENNAI-600 002 CROSS OBJECTOR SUB: PRAYER FOR CALLING FOR DEPARTMENTAL RECORDS BY THE HONBLE BENCH PARTICULARLY RELATING TO THE REOPENING PROCEEDINGS FOR A.Y.1999-00 AND ALLOWING INSPECTION AND OBTAINING CERTIFIED COPIES T HEREOF REG. REF: C.O.NO.166/CHNY/2009 IN ITA NO.1426/CHNY/2009 (CROSS OBJECTIONS OF THE ASSESSEE AND THE REVENUE APPEAL RESP ECTIVELY) FOR A.Y.1999-2000 ADJOURNED HEARING ON 25-1-2010 VIDE GROUND NO.2 OF THE GROUNDS OF CROSS-OBJECTION S (KIND REFERENCE IS INVITED TO PAGE 2 OF THE PAPER BOOK) THE ABOVE CROSS OBJE CTOR HAS QUESTIONED THE VALIDITY AND JURISDICTIONAL ASPECTS OF REOPENING WHICH GO T O THE ROOT OF THE MATTER. WE ARE ADVISED AND SUBMIT AS FOLLOWS: 1. LAW IS SETTLED THAT JURISDICTIONAL ISSUES HAVE TO B E DECIDED FIRST AND IF ONLY JURISDICTION EXISTS MERITS ARE TO BE GONE INTO: I) RAHULKUMAR BAJAJ VS ITO (1999) 69 ITD 1 (NAG) (SB); II) DEEPCHAND KOTHARI VS CIT (1998) 171 ITR 381 385 ( RAJ); III) CIT VS WILH WILHELMSEN LINES LTD. (1980) 126 ITR 3 18 (CAL); IV) P.K.DIVEKAR VS CIT (1985) 151 ITR 11 (BOM) 151 ITR 11 (BOM); 2. IT IS ADMITTED THAT THE REASONS RECORDED WERE FURNI SHED ON REQUEST AND THE OBJECTIONS RAISED WERE REJECTED BY A SPEAKING ORDER BY THE LEARNED ASSESSING OFFICER. HOWEVER FOR THE FOLLOWING REAS ONS AND FOR THE ULTIMATE I.T.A. NO. 1426 & CO 166/MDS/2009 61 ADVANCEMENT OF JUSTICE THERE IS NO OTHER WAY THAN TO APPROACH THE HONBLE BENCH BY WAY OF THIS HUMBLE PETITION : A) AT THE OUTSET A REFERENCE TO THE FOLLOWIN G CHART WILL READILY REVEAL THAT THOUGH AS PER SETTLED LAW REOPENING IS A SERIOUS MATTER AND IS HEDGED WITH SEVERAL CONDITIONS THERE HAVE BE EN CASUAL MECHANICAL AND REPETITIVE REOPENINGS AS A MATTER OF ROUTINE FOR VARIOUS ASSESSMENT YEARS IN THIS CASE: C H A R T S.NO. ASSESSMENT YEAR 143(1)(A) DATE NOTICE U/S 148 DATE DATE OF ORDER U/S 143(3) RWS 147 1. 1993-94 25-2-1994 7-3-2000 27-3-2002 2. 1994-95 31-3-1995 7-3-2000 27-3-2002 3. 1995-96 14-3-1996 31-1-2000 27-3-2002 4. 1996-97 21-12-1998 3-1-2000 27-3-2002 5. 1998-99 21-7-2000 9-2-2001 27-3-2002 B ) THE NOTICE U/S 148 OF THE ACT IS DATED 26-3-2003 (REF: PAGE 67 OF THE PAPER BOOK) WHICH FACT IS ALSO CONFIRMED BY THE LEARNED CIT(A)-V (PARA 2 ON PAGE 5 OF THE PAPER BOOK). THE SAID NOTICE U/S 148 DATED 26-3-2003 WAS SERVED I.T.A. NO. 1426 & CO 166/MDS/2009 62 ON THE ASSESSEE ON 31-3-2004 WHICH FACT IS MENTIONED IN THE STATEMENT OF FACTS FILED BEFORE THE LEARNED CIT(A) (PARA 3 ON PA GE 39 OF THE PAPER BOOK). THE REASONS FOR REOPENING MUST HAVE IN LAW BEEN RECORDED ON OR PRIOR TO 26-3-2003 . THUS THE ACTUAL DATE OF RECORDING OF REASONS GA INS MUCH SIGNIFICANCE HAVING REGARD ALSO TO THE FACT THAT IT HAS TAKEN MORE THAN 1 YEAR TO SERVE THE NOTICE ON THE ASSESSEE IN A LOCAL ADDRESS THAT TOO IN A CASE INVOLVING VERY HIGH STAKES. C) AS CAN BE SEEN FROM THE CHART SUPRA ASSESSMENTS FO R A.Y.1993-94 TO 1996-97 & 1998-99 WERE REOPENED ASSESSMENTS AND EXC EPTIONALLY THE ASSESSMENT FOR A.Y.1997-98 WAS A SCRUTINY ASSES SMENT. AGAIN REOPENING WAS DONE FOR THE ASSESSMENT YEAR UNDER AP PEAL VIZ. AY 1999-2000. IT IS INTERESTING TO NOTE THAT ALL THE ASSESSMENTS FROM A.Y.1993-94 TO 1998-99 (PLEASE SEE PAGES 140 143 145 148 150 & 151 & 155 OF THE PAPER BOOK) WERE PROTECTIVE ASSES SMENTS TO KEEP ISSUE ALIVE AND THE TWO REASONS GIVEN THEREIN BOTH INSUPPORTABLE IN LAW ARE AS FOLLOWS:- I) EVEN IF THE ENTERPRISE CARRIES ON BUSINESS THROUGH A PERMANENT ESTABLISHMENT TAX MAY BE IMPOSED IN THE OTHER CONTRACTING STATES ON THE INCOME ATTRIBUTABLE ON THE INCOME ATTRIBUTABLE TO THE PERMANENT ESTABLISHE DE I.T.A. NO. 1426 & CO 166/MDS/2009 63 SUBJECT TO SEC.2(A) OF THE ARTICLE 22 OF THE DTA AGEEMENT. II) THOUGH THE DECISION OF THE HONBLE MADRAS HIGH COURT IS IN FAVOUR OF THE ASSESSEE THE MATTER HAS NOT REACHED FINALITY BECAUSE OF THE SLP ADMITTED BY THE SUP REME COURT. HENCE THE INCOME OF THE ASSESSEE FROM MALAYSIA IS ADDED TO THE TOTAL INCOME OF THE ASS ESSEE AS A MATTER OF ABUNDANT CAUTION AND ALSO TO KEEP THE ISSUE ALIVE. D) THE ONLY GROUND TAKEN IN HE REVENUE APPEALS FOR A.Y .1993-94 TO 1998-99 AS CAN BE SEEN ON PAGES 96 99 102 105 108 & 111 OF THE PAPER BOOK IS AGAIN AS FOLLOWS: IT IS SUBMITTED THAT THE DECISION OF THE MADRAS HI GH COURT IN THE CASE OF V.RM.S.RM.FIRM REPORTED IN 208 ITR 400 RELIED ON BY THE CIT (A) IN DECIDIN G THE ISSUE IN FAVOUR OF THE ASSESSEE HAS NOT BECOME FIN AL AND APPEL IS PENDING BEFORE THE SUPREME COURT VID E CIVIL APPEAL NO.5751 OF 97 I.T.A. NO. 1426 & CO 166/MDS/2009 64 E) IT IS SUBMITTED THAT THE ORDERS GIVING EFFECT TO TH E ORDERS OF THE LEARNED CIT(A) FOR AY 1997-98 & 1998-99 (PAGES 153 & 157 RESPECTIVELY OF THE PAPER BOOK) WERE RESPECTIVELY M ADE ON 27-3-2002 AND 30-9-2002. THEREIN A CATEGORICAL FINDING AS P ER THE APPELLATE DIRECTIONS AFTER DUE VERIFICATION & EXAMINATION WAS GIVEN THAT THE ASSESSEE CARRIES ON BUSINESS THROUGH THE PE IN MALAY SIA AND INCOME FROM MALAYSIA IS EXEMPT AS PER THE ABOVE DECISION O F THE MADRAS HIGH COURT. F) IT IS NOT A LITTLE REMARKABLE THAT IN THE CASE OF T HIS ASSESSEE THE APPELLATE ORDERS OF THE LEARNED CIT(A) (PAGES 1 12 TO 138 OF THE PAPER BOOK) AND THE HONBLE ITAT (PAGES 86 T O 93 OF THE PAPER BOOK) WERE IN FAVOUR OF THE ASSESSEE. IN OTHER WORDS FROM AY 1993-94 TO 1998-99 THE ISSUE STOOD C OVERED IN FAVOUR OF THE ASSESSEE. G) A WRIT PETITION WAS FILED BY THE ASSESSEE BEFORE TH E HONBLE MADRAS HIGH COURT. IN THE COUNTER AFFIDAVIT FILED BY THE LEARNED ASSESSING OFFICER IN THE ABOVE-SAID PROCEEDINGS A COPY OF WH ICH IS HEREWITH ENCLOSED AS ANNEXURE-I VIDE PARAGRAPH 17 I ON PAGE 11 IT IS AFFIRMED BY THE LEARNED ASSESSING OFFICER AS FOLLOW S: I.T.A. NO. 1426 & CO 166/MDS/2009 65 THE NOTICE U/S 148 WAS ISSUED ON 26-3-2 004 SERVED ON 31-3-04 THE DATE OF SATISFACTION NOTE OF THE ASSESSING OFFICER BEFORE ISSUING THE NOTICE U/S 1 48 IS ALSO 26-3-2004 AND NOT 26-3-2003 AS MENTIONED BY THE PETITIONER. HENCE THE PETITIONERS SUBMISSION WITH REFERENCE TO THE EXPIRY OF ONE YEAR ARE FACTUALLY INCORRECT AND MAY BE REJECTED. 3. THE NOTICE U/S 148 OF THE ACT RECEIVED BY US I S DATED 26-3-2003 (REF: PAGE 67 OF THE PAPER BOOK) WHILE THE LEARNED ASSESSING OFFICER ASSERTED THAT THE DATE WAS 26-3-2004. WE HAVE NOT RECEIVED ANY NOTICE DT. 26-3-2004. AS STATED ALREADY THE LEARN ED CIT(A) HAS ALSO STATED IN HIS ORDER THAT THE NOTICE U/S 148 DT. 26- 3-2003 WAS SERVED ON THE ASSESSEE ON 31-3-2004. OUR W RIT PETITION WAS DISMISSED WHEREIN AS EXTRACTED IN PARAGRAPH 3 OF THE ORDER O F THE LEARNED CIT(A) (PAGE 6 OF THE PAPER BOOK) THE HIGH COURT N OTED: IF THE ASSESSEE IS OF THE VIEW THAT E VEN THE REOPENING IS NOT IN ACCORDANCE WITH LAW THAT CAN VERY WELL BE AGI TATED BY WAY OF AN APPEAL AGAINST THE ORDER TO BE PASSED ON TH E REOPENING OF THE ASSESSMENT. THERE IS NO EXTRAORDINARY OR SPECIAL REASON FOR THE APPELLANT TO APPROACH THIS COURT B Y WAY OF WRIT PETITION I.T.A. NO. 1426 & CO 166/MDS/2009 66 IN THE ABOVE CIRCUMSTANCES WE ARE LEFT WITH NO OTH ER ALTERNATIVE THAN TO APPROACH THE HONBLE BENCH WHICH IS THE FINAL CO URT OF FACTS. FOR BETTER AND PROPER PRESENTATION OF OUR CASE BOTH O N JURISDICTION AND ON MERITS IT IS JUST AND NECESSARY THAT THE HONB LE BENCH MAY BE PLEASED TO CALL FOR ASSESSMENT AND OTHER RECORDS P ARTICULARLY RELATING TO REOPENING OF ASSESSMENT FOR A.Y.1999-00 AND AFFO RD INSPECTION TO THE ASSESSEE AND OBTAINING OF CERTIFIED COPIES OF O RDER SHEET ON PAYMENT OF PRESCRIBED FEES. HENCE IT IS IMPLO RED THAT THE HONBLE BENCH MAY BE PLEASED TO CALL FOR THE ABOVE RECORDS AND AFFORD INSPECTION AND GRANT CERTIFIED COPY OF ORDER SHEET S TO THE ASSESSEES REPRESENTATIVE AND THEREBY RENDER JUSTICE. ENC L: ANNEXE I FOR M.CT.M.CORPORATION PVT LTD. CHENNAI 22-1-2010 D I R E C T O R I.T.A. NO. 1426 & CO 166/MDS/2009 67 I.T.A. NO. 1426 & CO 166/MDS/2009 68 I.T.A. NO. 1426 & CO 166/MDS/2009 69 I.T.A. NO. 1426 & CO 166/MDS/2009 70 I.T.A. NO. 1426 & CO 166/MDS/2009 71 I.T.A. NO. 1426 & CO 166/MDS/2009 72 I.T.A. NO. 1426 & CO 166/MDS/2009 73 I.T.A. NO. 1426 & CO 166/MDS/2009 74 I.T.A. NO. 1426 & CO 166/MDS/2009 75 I.T.A. NO. 1426 & CO 166/MDS/2009 76 BEFORE THE HONBLE ITAT B BENCH CHENNAI M.CT.M.CORPORATION PVT LTD. 761 ANNA SALAI CHENNAI-600 002 CROSS OBJECTOR SUB : FORWARDING OF PRELIMINARY WRITTEN SUBMISSIONS ON JURISDICTION ON THE BASIS OF INSPECTION OF RECORD - HUMBLE PRAYER FOR PERUSAL OF THE ORIGINAL RECORD BY THE HONBLE BE NCH REG. REF : 1. C.O.NO.166/CHNY/2009 IN ITA NO.1426/CHNY/2009 A.Y.1999- 2000 2. ASSESSSEES PETITION DT. 22-1- 2010 FOR INSPECTION OF RECORDS AND OBTAINING OF COPIES ALLOWED BY THE HON BLE BENCH ON 25-1-2010 3. INSPECTION DONE AND COPIES OBT AINED ON 21-4-2010 4. HEARING POSTED ON 6-5-2010 --------------------------------------------------- --------------------------------------------------- ---- 1.00 THE HONBLE BENCH WAS PLEASED TO ALLOW ON 25-1- 2010 THE ASSESSEES PETITION DT. 22-1-2010 FOR INSPECTION OF THE ORDER SHEET AND ASSESSMENT RECORDS AND FOR OBTAINING XEROX COPIES. PURSUANT TO THE ABOVE DIRECTION OF THE HONBLE BENCH ON THE SUBSEQUENTHEARING ON 21-4-2010 THE LEARNED DR FAIRLY ALLOWED THE AR TO INSPECT THE RECORD. HE ALSO FIRST GAVE THE AR THE XEROX COPY OF THE REASON RECORDED (3 PAGES) THE DEPARTMENTSCOPY OF THE NOTICE U/S 1 48 (1 PAGE) AND THE COPY OF ACKNOWLEDGEMENT OF SERVICE (1 PAGE) WHICH ARE ENCL OSED HEREWITH AS ANNEXE I . HOWEVER AFTER INSPECTION OF RECORD CONTAINING ORI GINAL ORDER SHEETS AT THE REQUEST OF AR THE LEARNED DR ALSO GAVE XEROX COPY OF PAGE 1 TO 4 OF THE ORDER SHEET IN ENTIRETY WHICH IS ENCLOSED HEREWITH AS ANNEXE II. THE CO-OPERATION EXTENDED BY THE LEARNED DR NEEDS A SPECIAL MENTION. 2.00 THE MYTH MYSTERY & CONTROVERSY SURROUNDING THE IMPUGNED NOTICE U/S 148: FOR THE A.Y.1999-2000 A NOTICE DT. 26-3-2003 U/S 1 48 OF THE ACT WAS SERVEDON THE ASSESSEE ON 31-3-2004. A COPY OF THE SAID NOTICE I S ENCLOSED HEREWITH AS ANNEXE I.T.A. NO. 1426 & CO 166/MDS/2009 77 III. AT THE REQUEST OF THE ASSESSEE MADE ON 15-4-04 THE LEARNED ASSESSING OFFICER FURNISHED THE REASONS VIDE LETTER DT. 22-7-2004 (FO UND ON PAGES 68-70 OF THE PAPER BOOK). THE ASSESSEE FILED OBJECTIONS TO THE REASON S RECORDED VIDE LETTER DT. 3-8- 2004 (FOUND ON PAGES 71-73 OF THE PAPER BOOK); TH ROUGH A SPEAKING ORDER DT. 10- 12-2004 (FOUND ON PAGES 74-78 OF THE PAPER BOOK) THE LEARNED ASSESSING OFFICER REJECTED THE ASSESSEES OBJECTIONS. THE LEARNED AS SESSING OFFICER PASSED THE ORDER U/S 143(3) R.W.S147 DT. 29-3-2005 (FOUND ON PAGE S 24 36 OF THE PAPER BOOK). IT IS NOTEWORTHY THAT NO MENTION OF THE DATE OF ISS UE OF NOTICE U/S 148 OF THE ACT OR THE DATE OF RECORDING OF REASONS WAS AN YWHERE FOUND: (I) IN THE LEARNED ASSESSING OFFICERS LETTER DT. 22-7-200 4 FURNISHING THE REASONS RECORDED (II) IN HIS SPEAKING ORDER DT. 10 -12-2004 AND (III) EVEN IN THE ENTIRE ORDER U/S 143(3) RWS 147 DT. 29-3-200 5. 2.01 THE ASSESSEE AVERRED INTER ALIA IN THE WRIT PET ITION FILED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT THAT THE SERVICE OF THE NOTICE ISSUED ON 28-3-2003 WAS DELIBERATELY WITHHELD BY THE DEPARTMENT UPTO 31 -3-2004 WITH A VIEW TO EXTEND THE LIMITATION FOR ASSESSMENT IN TERMS OF SUB-SECTI ON (2) OF SECTION 153. 2.02 HOWEVER IN THE COUNTER AFFIDAVIT FILED BY THE DE PARTMENT (ENCLOSED AS ANNEXURE TO THE ASSESSEES PETITION DT. 22-1-2010) ON PARAGRAPH I THEREIN THE LEARNED ASSESSING HAS STATED AS FOLLOWS: THE NOTICE U/S 148 WAS ISSUED ON 26-3-2004 SERVED ON 31-3-04 THE DATE OF SATISFACTION NOTE OF THE A SSESSING OFFICER BEFORE ISSUING THE NOTICE U/S 148 IS ALSO 26- 3-2004 AND NOT 26-3-2003 AS MENTIONED BV THE PETITIONER. HENCE THE PE TITIONERS I.T.A. NO. 1426 & CO 166/MDS/2009 78 SUBMISSION WITH REFERENCE TO THE EXPIRY OF ONE YEAR ARE FACTUALLY INCORRECT AND MAY BE REJECTED. 2.03 THE HONBLE HIGH COURT ULTIMATELY DISMISSED THE ASSESSE ES WRIT PETITION BY OBSERVING INTER ALIA AS FOLLOWS: IF THE ASSESSEE IS OF THE VIEW THAT EVEN THE REOP ENING IS NOT IN ACCORDANCE WITH LAW THAT CAN VERY WELL BE AGITATED BY WAY OF AN APPEAL AGAINST THE ORDER TO BE PASSED ON THE REOPENING OF THE ASSESSMENT. THERE IS NO EXTRAORDINARY OR SPECIAL REASON FOR THE APPELLANT TO APPROACH THIS COURT BY WAY OF WRIT PETITION 2.04 FROM WHAT HAS BEEN EXTRACTED IN PARAGRAPH 2.02 SUPR A IT IS AMPLY CLEAR THAT AS PER THE DEPARTMENTS VERSION THE REASON FOR REOP ENING WAS RECORDED AND THE IMPUGNED NOTICE WAS ISSUED ON THE SAME DATE VI Z. 26-3-2004 WHILE THE NOTICE ISSUED TO THE ASSESSEE IS DATED 26-3-20 03 AND NOT 26-3-2004 AS ALLEGED BY THE DEPARTMENT. ON THE FACTUAL ASPECT V IZ. THAT IT IS DATED 26-3- 2003 THE COUNTER AFFIDAVIT IS SILENT NOR ANY MISTA KE ON ITS PART ADMITTED BY THE DEPARTMENT THEREIN. AS ALREADY STATED IN PARAG RAPH 2.00 SUPRA THE LETTER OF THE LEARNED ASSESSING OFFICER DT. 22-7-20 04 PROVIDING THE ASSESSEE THE REASONS RECORDED THE SPEAKING ORDER DT. 10-12- 2004 AND EVEN THE ORDER DT. 29-3-2005 KEEP A GUARDED SILENCE IN THIS REGARD . THUS EVEN ON A VITAL ISSUE GOING TO THE ROOT OF THE MATTER CONCERNING TH E VERY ASSUMPTION OF JURISDICTION TO REOPEN THE ASSESSMENT AND TO PASS A N ORDER THE ASSESSEE I.T.A. NO. 1426 & CO 166/MDS/2009 79 WAS KEPT IN SUSPENSE AND THE MATTER REMAINED A MYST ERY. WHILE THERE IS NO DISPUTE AS TO THE DATE OF SERVICE OF THE IMPUGNED N OTICE THE LEARNED CIT (APPEALS) HAS GIVEN THE FINDING: SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 ON26 -3-2003. THE ASSESSEE COMPANY IN RESPONSE TO THE SAID NOTICE SO UGHT THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. (C/F PARA 2 ON PAGE 5 OF THE PAPER BOOK). IN VIEW OF THE ABOVE CIRCUMSTANCES THE PETITION FOR INSPECTION/COPIES WAS MADE AND THE HONBLE BENC H WAS PLEASED TO ORDER THE SAME AND THE DIRECTION WAS ALSO COMPLIED WITH BY THE DEPARTMENT. 3.00 OBSERVATIONS OF THE AUTHORISED REPRESENTATIVE ON THE INSPECTION OF RECORD: (INSPECTION DONE AND COPIES OBTAINED ON 24-1-2010) ON DOCUMENTS ENCLOSED IN ANNEXE I: (A) ON ORDER SHEET PAGES 2 4: THE FIRST THREE PAGES THE LAST PAGE BEING PROBABL Y ATTESTED AS FOUND FROM THE XEROX COPY GIVEN ARE ACTUALLY PAGES 2 TO 4 OF THE ORDER SHEET. THEY CONTAIN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT U/S 1 47 OF THE INCOME-TAX ACT 1961. THEY APPEAR TO BE COMPUTER TYPED. THEY LOOK INNOCUOUS AS NO CORRECTION/EFFACING IS DISCERNIBLE THEREFROM. I.T.A. NO. 1426 & CO 166/MDS/2009 80 (B) ON PAGE 4 OF ANNEXE I: THIS IS THE COPY OF THE NOTICE U/S 148 KEPT IN TH E FILE OF THE DEPARTMENT . THE DATE IS ALTERED AS 26-3-04 FROM 26-3-03 . THIS ALTERATION IS VISIBLE. ( C ) ON PAGE 5 OF ANNEXE I THIS IS THE ACKNOWLEDGEMENT OF SERVICE OF NOT ICE. AS STATED ALREADY THIS IS NOT RELEVANT AS THERE IS NO DISPUTE R EGARDING THE DATE OF SERVICE VIZ. 31-3-2004. II ON DOCUMENTS ENCLOSED AS ANNEXE II I) THESE ARE THE FOUR PAGES OF THE ORDER SHEET COPY F URNISHED AS PER THE REQUEST OF THE AR WHEREIN ENTRIES FROM 20-01-02 TO 30-7-2004 ARE MADE. II) KIND ATTENTION OF THE HONBLE BENCH IS DRAWN TO TOP PAGE NO.2 OF THE ORDER SHEET. AN ENTRY HAS BEEN EFFACED WITH WHITE NER (CORRECTION FLUID). III) AS FOR THE PORTION EFFACED WITH WHITENER THOUGH TH E DATE ON THE LEFT SIDE OF THE ENTRY IS NOT CLEARLY VISIBLE THE OTHER WORDS LIKE NOTICE U/S 148 PREPARED AND PUT UP ARE DIMLY DISC ERNIBLE OF COURSE WITH SOME DIFFICULTY TO THE NAKED EYES. I.T.A. NO. 1426 & CO 166/MDS/2009 81 IV) LONG AND SHORT THERE ARE TWO TO SAY THE LEAST DISCREPANCIES IN THE RECORD MAINTAINED BY A QUASI-JUDICIAL AUTHOR ITY ONE IN THE COPY OF THE NOTICE U/S 148 WHEREIN THE YEAR IS ALTERED (ANNEXE I) AND THE OTHERIN THE TOP OF PAGE 2 OF THE ORDER SHEET WHEREIN EFFACING AN ENTRY HAS BEEN DONE (ANNEXE II) 4.00 FACTUAL FINDING ON THE RECORD BY THIS HONBLE BE NCH WHICH IS THE FINAL COURT OF FACTS IS NECESSARY FOR ADVANCEMENT OF JUSTICE. THIS ASPECT OF THE MATTER GOES TO THE ROOT OF JURISDICTION. LAW IS SETTLED THAT IN REASSESSMENT PROCEEDINGS THE ONUS IS ON THE DEPARTMENT. IN THIS APPEAL THE J URISDICTION TO REOPEN ITSELF HAS BEEN QUESTIONED BY THE APPELLANT. THE RECORD EVE N WITHOUT ANY FORENSIC EXAMINATION DOES NOT PRIMA FACIE APPEAR TO BE IMP ECCABLE AND IN ANY VIEW IS NOT RECONCILABLE WITH THE COUNTER AFFIDAVIT FILED BY TH E DEPARTMENT. THE DEPARTMENT OWES AN EXPLANATION TO THE HONBLE BENCH ON THE R ECORD MAINTAINED BY IT. WITHOUT SUCH EXPLANATION THE ASSESSEE CAN NOT HAST EN TO ADVANCE ITS OWN INFERENCES AND ARGUMENTS AT THIS POINT OF TIME. IN THE LIGHT OF THE ABOVE IT IS IMPLORED THAT THE HONBLE BENCH MAY BE PLEASED TO PERUSE THE DOCUMENTS CONCERNED RECORD ITS OWN FIND INGS THEREON ENABLE THE DEPARTMENT TO OFFER ITS EXPLANATIONS AND THEREBY RE NDER JUSTICE. CHENNAI 65--2010 (R.RAJASEKARAN) AUTHORISED REPRESENTATIVE ENCL: ANNEXE I II & III I.T.A. NO. 1426 & CO 166/MDS/2009 82 BEFORE THE HONBLE ITAT B BENCH CHENNAI M.CT.M.CORPORATION PVT.LTD. 761 ANNA SALAI CHENNAI 600 002 CROSS OBJECTOR SUB: FORWARDING OF REPLY SUBMISSIONS TO THE WRITTEN SUBMISSION OF THE LEARNED AO DATED 30.6.2011 FILED ON 4.7.11 AND TO THE ARGUMENT S OF THE LEARNED DR ON 4.7.11. REF: 1) C.O.NO. 166 / CHNY/ 2009 IN ITA NO. 1426 / CHNY/ 2009- A.Y. 1999- 2000 2) ASSESSEES PETITION DT. 22.-1-2010 FOR INSPE CTION OF RECORDS AND OBTAINING COPIES ALLOWED BY THE HONBLE BENC H ON 25-1-2010 SINCE NUMBERED AS PAPER BOOK NO. 2 PER DIRECTIONS OF THE HONBLE BENCH 3) INSPECTION DONE AND COPIES OBTAINED ON 21-4-2 010 4) PRELIMINARY WRITTEN SUBMISSIONS ON JURISDICTI ON ON THE BASIS OF INSPECTION OF RECORD DT.6-5-2010 FILED ON 10-6-2010 SINCE NUMBERED AS PAPER BOOK NO.1 PER DIRECTIONS OF THE HON BLE BENCH. 5) RESPONDENTS PAPER BOOK IN THE DEPARTMENTAL AP PEAL FILED ON 25.1.2010 (SINCE NUMBERED AS PAPER BOOK NO.3 PER DIRECTIONS OF THE HONBLE BENCH 6) CROSS- OBJECTORS PAPER BOOK FILED ON 25.1.201 0 (SINCE NUMBERED AS PAPER BOOK NO. 4 PER DIRECTIONS OF THE HONB LE BENCH) 7) SUPPLEMENTARY WRITTEN SUBMISSIONS ON JURISDIC TION DATED 20.6.2011 FILED ON 20.6.2011ALONG WITH THE COPIES OF T HE HONBLE ITAT ORDER IN SIVAGAMI HOLDINGS PRIVATE LIMITED AND THE OR DER OF M.CT.M.GLOBAL INVESTMENTS PVT. LTD. FOR 2000-01 WHILE ADV ANCING ORAL ARGUMENTS. 8) ORAL ARGUMENT OF THE AR ON JURISDICTION AND M ERITS ON 4-7-2011 AFTER FILING RECONCILIATION STATEMENT AS DIRECTED BY THE HONBLE BENCH - THE LEARNED DR FILING THE WRITTEN SUBMISSIONS OF THE LEARNED AO DATED 30.6.11 AND ARGUING ON JURISDICTION AND MERI TS. 9) HEARING REPOSTED ON 11-7-2011 FOR ASSESSEES REPLY SUBMISSIONS. I) REPLY SUBMISSION TO THE LEARNED AOS WRITTEN SUBMISSION DATED 30.6.2011 A) ON JURISDICTION I.T.A. NO. 1426 & CO 166/MDS/2009 83 THE LEARNED AOS CONTENTIONS: 1. THE FIRST CONTENTION OF THE LEARNED AO IN PARAGRAPH 2 OF PAGE 1 AND IN PARAGRAPH 2 OF PAGE 2 IS THAT SHE HELD ADDITIONAL C HARGE IN COMPANY CIRCLE IV (1) ONLY FOR THE PERIOD FROM 23.10.2003 TO 11.8. 2004. EVIDENCE HAS BEEN LET IN TO THIS EFFECT. HENCE IT IS STATED THAT SHE COULD NOT HAVE SIGNED THE NOTICE UNDER SECTION 148 OF THE ACT ON 26.3.2003. ASSESSEES REPLY SUBMISSIONS: ON THE ABOVE POINT THE REPLY SUBMISSIONS ARE AS FO LLOWS: A. WHILE THERE CAN BE NO DISPUTE ABOUT THE PERIOD OF H ER HOLDING ADDITIONAL CHARGE THE CONTENTION THAT SHE COULD NO T HAVE SIGNED THE NOTICE UNDER SECTION 148 DATED 26.3.2003 PURELY RES TS ON PROBABILITY AND RUNS COUNTER TO THE REALITY IN THE FACE OF THE ORIGINAL NOTICE DATED 26.3.2003 SIGNED BY THE SAME OFFICER AND SERVED ON THE ASSESSEE ON 31.3.2004 WHICH IS PRODUCED FOR PERUSAL. THIS VITA L EVIDENCE LET IN BY THE ASSESSEE WEAKENS THE PROBABILITY THEORY ADVANCE D BY THE REVENUE. B. THE LEARNED CIT (APPEALS) HAS ALSO GIVEN A CLEAR AN D CATEGORICAL FINDING: SUBSEQUENTLY THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 ON 26.3.2003. (KIND REFERENCE IS INVITED TO PARA 2 ON PAGE 5 OF THE PAPER BOOK NO.4) THE DEPART MENT HAS APPARENTLY ACCEPTED THE POSITION AS TO THE FACTUM O F THE DATE OF ISSUE OF NOTICE VIZ. 26.3.2003 SINCE NO RECTIFICATION PE TITION BEFORE THE LEARNED CIT (A) / APPEAL BEFORE THE HONBLE ITAT WA S FILED ON THIS VITAL MATTER GOING INTO THE ROOTS OF JURISDICTION THOUGH SOME MISTAKES ARE ADMITTED BY THE REVENUE AT THIS STAGE AFTER SEV ERAL SUBMISSIONS OF THE ASSESSEE. IT IS NOBODYS CONTENTION THAT ANY AL TERATION/ CORRECTION WAS DONE BY THE ASSESSEE IN THE NOTICE DATED 26.3.2 003 RECEIVED BY IT ON 31.3.2004. C. WHILE AS PER SETTLED LAW REOPENING IS A SERIOUS MAT TER SIGNING OF A STATUTORY NOTICE WHEN THE LEARNED AO HAD NO SEISIN IS ALL THE MORE SERIOUS AND AB INITIO VOID. THIS CERTAINLY IS ALSO INDICATIVE OF NON- APPLICATION OF MIND ON THE PART OF THE LEARNED AO WHICH IS BAD IN LAW ALBEIT FOR THE ATTRIBUTION OF THE MISTAKE TO THE CL ERK. THE IMPUGNED I.T.A. NO. 1426 & CO 166/MDS/2009 84 NOTICE ISSUED ON THE 26.3.2003 AND SERVED ON THE AS SESSEE ON THE 31.3.2004 IS EX-FACIE DEFECTIVE AND SUFFERS FROM IN CURABLE INFIRMITY. D. LAW IS SETTLED THAT INFIRMITY IN INITIATION CANNOT BE CURED [VIDE P.V.DOSHI VS. CIT (1978) 113 ITR 22 (GUJ)] AND THAT IF INITIATION IS BAD WHATEVER FOLLOWS IS ALSO BAD [VIDE RAWATMAL HA RAKCHAND VS. CIT (1981) 129 ITR 346 (CAL)] 2. THE LEARNED AOS CONTENTIONS: IT IS STATED THAT IN PARAGRAPH 2 ON PAGE 1 OF THE L EARNED AOS SUBMISSIONS: AFTER DULY RECORDING THE REASONS FOR REOPENING ON 2 6.3.2004 THE CLERK WAS DIRECTED TO PUT UP THE NOTICE U/S 148 IN THE CASE O F M.CT.M.CORPORATION PVT.LTD. (ASSESSMENT YEAR 1999-2000) (EMPHASIS SUPPLIED) AGAIN IN PARAGRAPH 1 OF PAGE 3 IT IS STATED: THE LEARNED AUTORIZED REPRESENTATIVE HAD ALSO SUB MITTED BEFORE THE HONBLE ITAT THAT WHITENER WAS USED IN THE ORDER SH EET WHICH PROVES THAT NOTICE U/S 148 WAS ISSUED ON 26.03.2003. IN THIS RE GARD IT IS SUBMITTED THAT MISTAKE BY THE CLERK COMMITTED IN PUTTING UP THE NO TICE BEFORE THE RECORDING OF THE REASONS. THIS MISTAKE WAS RECTIFIED. PROPER REASONS WERE RECORDED AND THEREAFTER THE CLERK WAS DIRECTED TO PUT UP THE NOT ICE. NOTICE U/S148 WAS PUT UP ON 26.03.2004 SIGNED BY ME ON 26.03.04 AND RECE IVED BY THE ASSESSEE ON 31.03.2004. USING WHITENER TO CORRECT MISTAKES I S NOT PROHIBITED UNDER ANY LAW/ RULES. (EMPHASIS SUPPLIED) ASSESSEES REPLY SUBMISSIONS: I. THE LEARNED AOS CONTENTIONS IN PARAGRAPH 2 ON PAGE 1 ARE CONTRARY AND DIAMETRICALLY OPPOSITE TO THOSE CONTAINED IN PA RAGRAPH 1 ON PAGE 3. IF THE FORMER CONTENTION IS CORRECT THE ALLEGED MISTAKE ON THE PART OF THE CLERK WOULD NOT AND NEED NOT HAVE ARISEN. PU TTING UP NOTICE BEFORE RECORDING OF REASON AS EVEN ADMITTED BY THE LEARNED AO IS LIKE PUTTING THE CART BEFORE THE HORSE AND THIS IS SUFFICIENT TO UNSUIT THE REOPENING OF ASSESSMENT BY ISSUE OF NOTICE STAT ED TO HAVE BEEN DATED 26.3.2004. THIS IS VIOLATIVE OF THE MANDATORY PROVISIONS OF SECTION 148 (2) OF THE ACT AND AS SUCH THIS INFIRM ITY IN INITIATION CANNOT BE CURED AS PER SETTLED LAW. II. THE ASSESSEE HAS ACTUALLY AND FACTUALLY RECEIVED TH E NOTICE U/S. 148 DATED 26.3.2003 ON 31.3.2004 AS PROVED BY THE ORIGI NAL NOTICE I.T.A. NO. 1426 & CO 166/MDS/2009 85 RECEIVED BY IT WHICH IS SUBMITTED FOR PERUSAL OF T HE HONBLE BENCH AND THE LEARNED DR. THE ASSESSEE HAS NOT RECEIVED A NY OTHER NOTICE MUCH LESS THE ONE STATED TO HAVE BEEN ISSUED ON 26. 3.2004. III. THE FACT THAT THE ORIGINAL NOTICE RECEIVED BY THE A SSESSEE IS DATED 26.3.2003 IS PROVED BY THE PRODUCTION OF THE SAID N OTICE FOR PERUSAL. THE LEARNED CIT (A) HAS ALSO GIVEN A FACTUAL FINDIN G THAT THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SE CTION 148 ON 26.3.2003. IT IS NOT POSSIBLE FOR THE ASSESSEE TO L ET IN ANY FURTHER EVIDENCE TO PROVE THAT THE NOTICE UNDER SECTION 148 WAS ISSUED ON 26.3.2003 IN THE CIRCUMSTANCES. THIS POINT HAS TO BE VIEWED FROM THE FACT THAT THE CORRECTION OF THE YEAR OF NOTICE FROM 2003 AS 2004 WAS DONE BY THE DEPARTMENT ONLY. WHEN THE ASSESSEE PROV ES THAT THE NOTICE SIGNED BY THE LEARNED AO IS DATED 26.3.2003 THE CORRECT INFERENCE IS THAT IT IS ISSUED ON THE 26.3.2003. HO WEVER THE DEPARTMENT BASED ON ITS OWN RECORDS AFTER CORRECT ION MAINTAINS THAT THE SAME IS ISSUED ON 26.3.2004 AND NOT 26.3.2003. HENCE THERE IS A DOUBT WHETHER THE STATUTORY NOTICE BY WHICH THE LEA RNED AO ASSUMED JURISDICTION TO REOPEN THE ASSESSMENT IS DATED 26.3 .2003 OR 26.3.2004 AT THE THRESHOLD STAGE ITSELF THEREBY LEADING TO D OUBTFUL VALIDITY OF THE VERY REOPENING PROCEEDINGS ITSELF. ON THIS SCORE AL SO THE REOPENING IS BAD IN LAW AND THE NOTICE AND THE REASSESSMENT ORDE R ARE LIABLE TO BE QUASHED INLIMINE. 3. THE CONTENTION OF THE LEARNED AO ON PARA 2 OF PAGE 2 THAT THE ACKNOWLEDGEMENT WAS OBTAINED BY THE DEPARTMENT ASSESSEES REPLY SUBMISSIONS: A. THE NOTICE UNDER SECTION 148 DATED 26.3.2003 WAS RE CEIVED IN A CLOSED COVER BY THE STENO- SECRETARY ON 31.3.2004. THE COMPANY DOES NOT HAVE THE PRACTICE OF AFFIXING THE USUAL RU BBER STAMP MAINTAINED BY SOME GOVERNMENT DEPARTMENTS STATING: RECEIVED A SEALED COVER- CONTENTS NOT KNOWN WHILE ACKNOWLEDG ING RECEIPT OF CLOSED COVERS. THE FACT THAT A SEPARATE ACKNOWLEDGE MENT SLIP WAS PREPARED AND HER SIGNATURE WAS OBTAINED ITSELF SHOW S THAT THE NOTICE DATED 26.3.2003 WAS RECEIVED ON 31 3 2004 IN A CLOS ED COVER CONSISTENT WITH THE ESTABLISHED DEPARTMENTAL PRACTI CE AS OTHERWISE THE I.T.A. NO. 1426 & CO 166/MDS/2009 86 ACKNOWLEDGEMENT WOULD HAVE BEEN RECEIVED IN THE COP Y OF THE DEPARTMENT ITSELF. B. IN ANY AND EVERY VIEW OF THE MATTER THE MERE ACKNOW LEDGEMENT SLIP CANNOT ADVANCE THE CASE OF THE DEPARTMENT IN THE LI GHT OF THE FOLLOWING FACTS AND CIRCUMSTANCES OF THE CASE: IT IS CLEAR FROM THE ORIGINAL NOTICE DATED 26.3.200 3 UNDER SECTION 148 OF THE ACT WHICH IS NOW PRODUCED FOR PERUSAL OF TH E HONBLE BENCH AND THE LEARNED DR THAT: I. THERE IS NO ALTERATION/CORRECTION WHATSOEVER MADE IN THE NOTICE UNDER SECTION 148 DATED 26.3.2003; RATHER IT IS NOBODYS CONTENTION THAT THAT THE ASSESSEE MADE ANY CORRECTI ON; II. FROM THE ENDORSEMENTS MADE BY THE STENO/ SECRETARY IN THE NOTICE ITSELF IT IS FOUND THAT THE SAID NOTICE DAT ED 26.3.2003 WAS RECEIVED ON 31.3.2004AND THAT A COPY OF THE SAM E WAS SENT MR.CT.M ( I.E MR.CT.MALAYANDI) WHO WAS IN CHA RGE OF THE TAX MATTERS AND WHO CO-ORDINATED WITH THE AUDITORS. NO FURTHER PROOF IS NECESSARY OR POSSIBLE ON THIS POINT AS THE NOTICE SPEAKS FOR ITSELF; III. THE ONLY NOTICE RECEIVED BY THE ASSESSEE WAS DATED 26.3.2003 IN PURSUANCE OF WHICH THE ASSESSEE PARTICIPATED IN THE REASSESSMENT PROCEEDINGS WHICH IS ALSO CORROBORATE D BY THE AFFIDAVIT FILED IN THE WRIT PROCEEDINGS INITIATED B Y THE ASSESSEE; IV. THE ASSESSEE IS NEITHER ACTUALLY AWARE OF ANY SUC H NOTICE UNDER SECTION 148 DATED 26.3.2004 ISSUED BY THE DEP ARTMENT ON THE OTHER HAND IT IS ONLY THE DEPARTMENT WHICH BROUGHT UP A NEW CASE THAT THE NOTICE UNDER SECTION 148WAS ISS UED ON 26.3.2004 AND NOT ON 26.3.2003 FOR THE FIRST TIME IN ITS COUNTER AFFIDAVIT DATED DAY OF FEBRUARY2005 (VIDE PARA 1 ON PAGE 11 OF THE SAID COUNTER AFFIDAVIT APPENDED AS ANNEXE 1 IN PAPER BOOK NO.2); V. THE PORTION OF THE ORDER SHEET EFFACED WITH WHITENE R (THOUGH USING WHITENER IS NOT PROHIBITED BY ANY LAW / RULES IN THE VIEW OF THE DEPARTMENT) CLEARLY INDICATES THE ACTUAL EXI STENCE OF THE NOTICE UNDER SECTION 148 DATED 26.3.2003 FURTHER DEMONSTRATED BY THE ORIGINAL NOTICE RECEIVED BY THE ASSESSEE; VI. WHEN THE ALTERATION OF THE YEAR OF ISSUE IN THE NOT ICE UNDER SECTION 148 ITSELF WAS ADMITTEDLY DONE BY THE DEPAR TMENT I.T.A. NO. 1426 & CO 166/MDS/2009 87 MERE ACKNOWLEDGEMENT IN A PRINTED FORM IN THE POSS ESSION OF THE DEPARTMENT CANNOT ESTABLISH THE DATE OF ISSUE AS 26.3.2004. AN ACKNOWLEDGEMENT CANNOT PARTAKE THE RO LE OF A NOTICE IN LAW. BY NOTICE JURISDICTION TO REOPEN THE ASSESSMENT IS ASSUMED WHEREAS ACKNOWLEDGEMENT OF SERVICE OF NOTIC E CONFERS JURISDICTION TO MAKE REASSESSMENT; VII. THE ACKNOWLEDGEMENT IS ALSO NOT FREE FROM CONFUSION IN THAT AS PER THE ASSESSEE THE NOTICE DATED 26.3.2003 WAS RECEIVED ON 31.3.2004 WHEREAS AS PER THE DEPARTMENT THE NOT ICE DATED 26.3.2004 AFTER CORRECTIONS FROM ITS END WAS SERV ED ON THE ASSESSEE ON 31.3.2004. THE ACKNOWLEDGEMENT IN THE CIRCUMSTANCES WOULD APPEAR TO BE OF DOUBTFUL VALIDI TY. THUS THERE IS A BONAFIDE DOUBT AND DISPUTE WITH REGARD T O BOTH THE DATE OF NOTICE AND WHICH NOTICE WAS SERVED LEADING TO A DOUBTFUL VALIDITY OF THE ENTIRE PROCEEDINGS FROM TH E START TO THE END AND HENCE THE REOPENING PROCEEDINGS ARE DEVOID OF JURISDICTION AND INSUPPORTABLE IN LAW; VIII. SINCE THE NOTICE UNDER SECTION 148 STATED TO HAVE B EEN ISSUED ON 26.3.2004 HAS NOT BEEN SERVED ON THE ASSESSEE T HE REASSESSMENT SHOULD FAIL; IX. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS EVEN AS SUMING THAT THE VERSIONS OF BOTH THE DEPARTMENT AND THE AS SESSEE ARE TRUE AS TO THE EXISTENCE OF TWO DIFFERENT NOTICES THE SAME IS BAD IN LAW. 4. THE CONTENTION OF THE LEARNED AO ON PARA 1 OF PAGE 2 ON THE MISTAKE IN THE DATE OF NOTICE DUE TO THE CARBON PAPER IMPRESSION . ACCORDING TO THE LEARNED AO THERE WAS AN INADVERTENT MISTAKE IN THE DATE OF THE NOTICE ISSUED UNDER SECTION 148 WHICH WAS ORIGINALLY WRITTEN AS 26.3.2 003 INSTEAD OF 26.3.2004 AND HOWEVER PROBABLY THE CARBON PAPER IMPRESSION MA Y NOT HAVE FALLEN IN THE NOTICE SERVED ON THE ASSESSEE ASSESSEES REPLY SUBMISSIONS: THE ORIGINAL NOTICE UNDER SECTION 148 DATED 26.3.2 003 RECEIVED BY THE ASSESSEE ON 31.3.2004 WHICH IS SEPARATELY WRITTEN RULES OUT THE CARBON I.T.A. NO. 1426 & CO 166/MDS/2009 88 PAPER PROBABILITY RAISED BY THE LEARNED AO. THAT AP ART THOUGH THE HANDWRITING IN THE NOTICE(S) APPEARS TO BE OF THE S AME PERSON THERE ARE SEVERAL DIFFERENCES IN FILLING UP THE DETAILS THER EIN WHICH ALSO SUGGESTS THAT THE TWO NOTICES CANNOT BE CARBON COPIES OF THE OTHE R. EVEN AT A CURSORY GLANCE THE FOLLOWING DIFFERENCES TO CITE A FEW A RE READILY DISCERNIBLE TO A NAKED EYE WITHOUT ANY FORENSIC EXAMINATION: A. P.A.NO. ON THE TOP LEFT: THE WORDINGS MC- 8 IS WORD ED IN TWO DIFFERENT PLACES IN THE TWO NOTICES. BESIDES THE WO RDS M C AND 8 ARE ALL DIFFERENT IN THE TWO NOTICES. THE S LASH APPEARING AFTER 8 IS APPEARING IN TWO DIFFERENT PLACES IN T HE TWO NOTICES. FURTHER THE NUMBERS 99-00 ARE DIFFERENTLY SPACED AN D ARE OF UNEQUAL SIZES IN THE TWO NOTICES. B. OFFICE OF THE ..: THE SPACING BETWEEN ACIT FOLLOWE D BY A / IS DIFFERENT IN BOTH THE NOTICES. C. TO: IN THE ADDRESS COLUMN IN THE FIRST LINE THE GAP BETWEEN PVT. AND LTD. IS DIFFERENT IN BOTH THE NOTICES BESIDES THE GAP BETWEEN ANNA AND SALAI IN THE SECOND LINE WHICH B ESIDES SLIGHT VARIATION IN THE STYLE OF WRITING ALSO SHOWS A DIFFERENCE IN THE SPACE BETWEEN THE TWO WORDS IN THE TWO NOTICES. IN THE THIRD LINE THE LETTER C IN THE WORD CHENNAI IS ALI GNED TOWARDS THE LEFT OF ANNA IN THE SECOND LINE IN ONE OF THE N OTICES AND TOWARDS THE RIGHT IN THE OTHER NOTICE. THE NUMERAL 2 AFTER CHENNAI IN THE THIRD LINE OF THE ADDRESS COLUMN AL SO IS VERY PRONOUNCED IN ITS DIFFERENCE. D. DATE: THE NUMERAL 26 APPEARS VERY DIFFERENT IN THE TWO NOTICES. BESIDES THE SLASH AFTER 3 IS CONFINED BETW EEN THE DOTTED LINES IN THE PREVIOUS COLUMN AND THE DOTTED LINES IN THE DATE COLUMN IN ONE NOTICE WHEREAS THE SLASH IS GOI NG BELOW THE DOTTED LINE IN THE DATE COLUMN IN THE OTHER NOT ICE. E. IN THE SECOND LINE OF THE PRINTED VERSION STARTING WITH WHEREAS. AFTER THE PRINTED NUMERAL 19 THE NUMER ALS 99- 00 APPEARING THEREAFTER APPEARS VERY DIFFERENT IN THE TWO NOTICES. 5. THE CONTENTION OF THE LEARNED AO IN THE LAST PARA O F PAGE 2 THAT IT IS PROVED BEYOND DOUBT THAT THE NOTICE UNDER SECTION148 WAS ISSUED ONLY ON I.T.A. NO. 1426 & CO 166/MDS/2009 89 26.3.2004 AND WAS SERVED 31.3.2004 AND THE BONAFIDE CLERICAL MISTAKE IN THE DATE MENTIONED IN THE NOTICE SERVED ON THE ASSESSEE WHICH IS SUPPOSED TO BE ONLY A COPY IS WELL COVERED UNDER SECTION 292 B OF THE ACT; ASSESSEES REPLY SUBMISSIONS: A. THE ASSESSEE HAS ONLY ADMITTED THAT THE NOTICE DATE D 26.3.2003 WAS RECEIVED ON 31.3.2004 AS A MATTER OF FACT. THAT DOE S NOT MEAN THAT THE ASSESSEE HAS ADMITTED THAT THE NOTICE U/S 148 W AS ISSUED ONLY ON 26.3.2004 AND THE DEPARTMENT IS PUT TO STRICT PROOF TO ESTABLISH THAT THE NOTICE WAS ISSUED ONLY ON 26.3.2004 B. THE NOTICE DATED 26.3.2003 SERVED ON THE ASSESSEE I S NOT A CARBON COPY AND THEREFORE THERE MAY NOT BE ANY BONAFIDE CL ERICAL MISTAKE IN THE NOTICE AND AS SUCH THE PROTECTION PROVIDED BY S ECTION 292B OF THE ACT CANNOT BE AVAILED IN THE FACTS AND CIRCUMSTANCE S OF THE CASE. 6. IN PARA 2 OF PAGE 3 LEARNED AO HAS DRAWN TO THE ATT ENTION OF THE HONBLE BENCH OF WHAT IS IN HER OPINION THE ADVERSE ATTITUD E AND THE WILD IMAGINATION OF THE ASSESSEE TO PRESUME THAT A SET OF OFFICERS I N COLLUSION WITH THE STAFF ARE TAMPERING WITH THE RECORDS WHICH IS SOUGHT TO BE BUTTRESSED BY THE APPEAL IN THE CASE OF M.CT.M.GLOBAL INVESTMENTS FOR THE ASSESSMENT YEAR 2000-01 WHICH HAS BEEN CONFIRMED BY THE HONBLE IT AT. ASSESSEES REPLY SUBMISSIONS: IT IS SUBMITTED THAT IN THE CASE OF M.CT.M.GLOBAL I NVESTMENTS ON RECEIPT OF THE NOTICE ISSUED UNDER SECTION 148 THEY HAD REQUE STED FOR THE REASONS RECORDED FOR REOPENING THE ASSESSMENT PROCEEDINGS. IN RESPONSE TO THIS REQUEST THE LEARNED AO HAD ISSUED A LETTER TO TH E ASSESSEE ASKING FOR THEIR OBJECTIONS TO ASSESS THE INCOME IN MALAYSIA IN TERM S OF THE PROVISIONS OF ARTICLE 22 AND 23 OF THE INDO- MALAYSIAN TREATY. TO THIS THE ASSESSEE HAD SUBMITTED THEIR OBJECTIONS AND TILL THE DATE OF COM PLETION OF THE ASSESSMENT NOTWITHSTANDING THE OBJECTIONS OF THE ASSESSEE THE LEARNED AO HAD NOT DISPOSED OFF THE OBJECTIONS IN LINE WITH THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS. THE ASSESSEE KEPT ON INSISTING THAT THE LEARNED AO PROVIDES A SPEAKING ORDER TO OVERCOME TH EIR OBJECTIONS TO TAKE UP THE CASE FOR REASSESSMENT. IN THE MEANWHILE A F RESH RECORD OF REASONS WAS FURNISHED JUST A WEEK BEFORE THE COMPLETION OF THE ASSESSMENT TO THE EFFECT THAT THE PROVISIONS OF THE DTAA WERE NOT APP LICABLE TO THE COMPANY. I.T.A. NO. 1426 & CO 166/MDS/2009 90 THESE REASONS AS OBSERVED BY THAT COMPANY WERE DIF FERENT FROM THE EARLIER RECORD/ SHOW CAUSE NOTICE PROVIDED BY THE LEARNED A O. THE ASSESSEE IN THAT CASE IN THE LIGHT OF THE TWO DIAMETRICALLY OPPOSITE VIEWS OF THE LEARNED AO TOOK A REASONABLE VIEW THA T THE REASONS RECORDED WERE AT VARIANCE WITH THE FACTS. THIS VIEW WAS HOW EVER NOT ACCEPTED BY THE HONBLE ITAT. AGAINST THE ORDER OF THE HONBLE ITAT THE ASSESSEE M.CT.M.GLOBAL INVESTMENTS HAD FILED AN APPEAL BEFOR E THE HONBLE HIGH COURT OF JUDICATURE AT MADRAS AND THE SAME IS PENDING. BE THAT AS IT MAY A REFERENCE TO THAT EPISODE HERE IS OUT OF CONTEXT P ARTICULARLY WHEN DEFECTS COMMITTED IN THE REOPENING PROCESS IN THIS CASE ARE ADMITTED IN THE WRITTEN SUBMISSIONS OF THE LEARNED AO DATED 30.6.2011. 7. THE CONTENTION OF THE LEARNED AO IN PARA 4 OF PAGE 3 THAT THE FACTS AND CIRCUMSTANCES OF THIS ASSESSEE AND ITS SUCCEEDING C OMPANY WERE THE SAME AND THERE WERE OTHER REASONS AS MENTIONED IN THE RE CORDED REASONS ON THE STRENGTH OF WHICH BELIEF WAS FORMED THAT INCOME HAD ESCAPED ASSESSMENT: ASSESSEES REPLY SUBMISSIONS: AS STATED EARLIER THE ASSESSMENT ORDERS IN THE CASE OF M.CT.M. GLOBAL FOR AY 2000-01 AND TH IS ASSESSEE FOR THE AY 1999-2000 WERE VERBATIM THE SAME IN MOST PARTS INC LUDING THE OTHER REASONS REFERRED TO. IT IS A MATTER ON RECORD THAT THE SAID M.CT.M GLOBAL CAME INTO EXISTENCE CONSEQUENT ON THE DEMERGER OF T HE ASSESSEE COMPANY AND ALL THE ASSETS INCLUDING THE INVESTMENTS WERE V ESTED WITH THE RESULTANT COMPANIES. BUT IN ANY VIEW OF THE MATTER REOPENING OF ASSESSMENT ON BORROWED SATISFACTION BY IMPORTING FACTS NOT APPARE NT ON RECORDS OF THE ASSESSEE COMPANY CANNOT BE SUSTAINED AS PER SETTLED LAW. ON THIS POINT PARA 34 OF THE ORDER OF THE HONBLE ITAT IN THE CAS E OF SIVAGAMI HOLDINGS PRIVATE LIMITED MUST BE TAKEN AS A CORRECT PRECEDE NT. B) ON MERITS 8. IN PARA 1 ON PAGE 3 OF THE WRITTEN SUBMISSIONS THE LEARNED AO BY ADVERTING TO PARA 10.1 TO 10.8 OF THE ASSESSMENT OR DER HAS CONTENDED THAT THE INTEREST AND DIVIDEND INCOMES ARE ASSESSABLE AS INCOME FROM OTHER SOURCES. AND THAT THIS POINT OF VIEW IS FORTIFIED BY THE ORDER OF THE HONBLE ITAT IN THE CASE OF M.CT.M.GLOBAL INVESTMENTS PVT. LTD. VIDE ORDER IN I.T.A NO.659/ MDS/ 05 DATED 19.12.2007. I.T.A. NO. 1426 & CO 166/MDS/2009 91 THE ASSESSEES SUBMISSIONS : I. WHILE ARGUING ON MERITS THE A.R. POINTED OUT THAT THE OPERATION OF SECTION 5 (1) ( C ) OF THE ACT IS OUSTED BY SECTION 90 THAT THE CONCEPT OF TREATY OVERRIDE IS PRONOUNCED BY CIRCULAR NO. 3 33 DATED 2.4.1982 AND THE LAW SETTLED BY THE HONBLE HIGH COURT(S) / APEX COURT. THE ATTENTION OF THE HONBLE BENCH WAS ALSO DRAWN TO TH E CIRCULAR WITH JUDICIAL ANALYSIS (VIDE PAGES 180 AND 181 OF PAPER BOOK NO.4) AND THE DECISION OF THE HONBLE MADRAS SPECIAL BENCH ( PAGE S 182 TO 185 OF THE PAPER BOOK NO.4).THE SAID MADRAS SPECIAL BENCH DECISION WAS APPROVED IN CIT V/S. R.M.MUTHIAH (1993) 202 ITR 508 ( KAR) AND IN CIT V/S. VR.S.R.M.FIRM (1994) 208 ITR 400 (MADRAS) WHICH WERE AFFIRMED IN CIT V/S. P.V.A.L KULANDAGAN CHETTIYAR ( 2004) 267 ITR 654 (SC) REVENUES REVIEW PETITION DISMISSED IN (200 8) 300 ITR 5 (SC). FURTHER THE RELEVANT PROVISIONS OF THE INDO-MALAYSI AN TREATY (VIDE PAGES 161 TO 179 OF THE PAPER BOOK NO.4) WERE ALSO READ OUT. THEN THE ATTENTION OF THE HONBLE BENCH WAS DRAWN TO THE FACTUAL FINDINGS OF THE LEARNED AO AS TO THE EXISTENCE OF THE PE FOR AY 1997-98 (PAGE 153 OF PAPER BOOK NO.4) AY 1998-99 (PAGE 157 OF THE PAPER BOOK NO.4) AND AY 1999-2000 (PAGE 26 OF PAPER BOOK NO.4) . IT WAS THEN STRESSED BY DRAWING ATTENTION TO ARTICLE 7 (PAGE 16 6 OF PAPER BOOK NO.4) THAT THE TAX JURISDICTION TO ASSESS THE PROFI TS ATTRIBUTABLE TO THE PE WILL LIE IN THE CONTRACTING STATE IN WHICH THE PE IS SITUATED BY CITING THE CONCEPT OF FISCAL DOMICILE AS ENUNCIATED BY THE HONBLE APEX COURT IN KULANDAGAN CHETTYARS CASE CITED SUPRA. II. COMING TO THE STAND OF THE LEARNED AO THAT THE INCO MES AND THE PROFITS ATTRIBUTABLE TO THE PE IN MALAYSIA WHICH IS REGISTERED AS A COMPANY UNDER THE MALAYSIAN LAWS AND WHICH IS SUBJE CT TO THE INCOME TAX / COMPANY LAW PROVISIONS IN MALAYSIA OU GHT TO BE TAXED IN INDIA UNDER THE HEAD INCOME FROM OTHER SOURCES IT IS SUBMITTED THAT IN VIEW OF THE CIRCULAR THE SPECIFIC PROVISIO NS OF THE INDO- MALAYSIAN TREATY PARTICULARLY ARTICLE 22 DEALING W ITH ELIMINATION OF DOUBLE TAXATION ( PAGE 174 OF PAPER BOOK NO.4) THE QUESTION OF TAX JURISDICTION IN INDIA BY APPLYING THE PROVISIONS OF THE INDIAN INCOME TAX ACT 1961 DOES NOT APPLY. I.T.A. NO. 1426 & CO 166/MDS/2009 92 III. IT IS A MISDIRECTION TO APPLY THE PROVISIONS OF THE INDIAN INCOME TAX ACT TO THE NATURE OF INCOME COVERED BY THE DTAA WIT H MALAYSIA. THE ARGUMENT BY THE AR THAT REOPENING CANNOT BE BASED O N BORROWED SATISFACTION WILL APPLY EQUALLY ON MERITS AS WELL. EACH CASE RESTS ON ITS OWN FACTS AND IMPORTING THE FACTS OF ONE CASE INTO THE OTHER PARTICULARLY WHEN THE FACTS ARE NOT APPARENT ON THE RECORDS OF THIS ASSESSEE IS IMPERMISSIBLE IN LAW. IV. MOST PART OF THE ORDER IN THIS CASE HAS BEEN SIMPLY BORROWED FROM THE ASSESSMENT ORDER DATED 26 TH MARCH2004 IN THE CASE OF M.CT.M. GLOBAL INVESTMENTS PVT. LTD. FOR AY 2000-2001- NO T ONLY FROM PARAS 10.1 TO 10.8 STRESSED IN THE WRITTEN SUBMISSIONS OF THE LEARNED AO. FROM THIS IT IS CLEAR THAT THE SAID M.CT.M. GLOBAL S ORDER FORMED A COMPLETE BASIS FOR FRAMING THE ORDER IN THE ASSESSE E CASE BY SIMPLY IMPORTING THE FACTS OF THE OTHER CASE IN AN AUTOMAT IC MANNER EVEN ON MERITS. 9. AS FOR PARA 2 OF PAGE 4 OF THE LEARNED AOS WRITTEN SUBMISSION IT MAY AT THE OUTSET BE RESPECTFULLY SUBMITTED THAT THE CONT ENTIONS IN THIS PARAGRAPH AMOUNTS TO TOTAL MISDIRECTION. THE LEARNED AOS SUB MISSION IS OBLIVIOUS OF THE RELEVANT PROVISIONS OF THE INDO-MALAYSIAN TREAT Y. THE EXISTENCE OR OTHERWISE OF A PE HAS TO BE TESTED ONLY ON THE BASI S OF ARTICLE 5 OF THE TREATY AND NOT WITH REFERENCE TO THE PROVISIONS OF THE INDIAN INCOME TAX ACT. WHILE THE CONCEPT OF PERMANENT ESTABLISHMENT ( PE) IS APPLICABLE ONLY FOR BUSINESS PROFITS ATTRIBUTABLE TO THE PE THE TESTS F OR THE EXISTENCE OR OTHERWISE OF A PE ARE LAID DOWN IN ARTICLE 5 OF THE TREATY AND THE SAME CANNOT BE TESTED AGAINST THE PROVISIONS OF INDIAN I NCOME TAX ACT. HAVING FOUND IN THE REASSESSMENT ORDER UNDER APPEAL THAT THE FACT THAT THE ASSESSEE HAS A PERMANENT ESTABLISHMENT IS NOT DISPU TED ( PAGE 36 OF THE PAPER BOOK NO.4) IT IS ERRONEOUS TO CONTEND THAT THERE IS NO PERMANE NT ESTABLISHMENT BY APPLYING THE HEADS OF INCOME STIPU LATED IN THE INCOME TAX ACT1961. THE MERE ASSERTION IN THE NATURE OF IPSE DIXIT THAT ARTICLE 7 OF THE DTAA WHICH DEALS WITH BUSINESS PROFITS IS NOT APPL ICABLE HERE HAS TO BE REJECTED IN LIMINE. THIS IS MORE SO WHEN REGARD IS HAD TO THE DEEMING F ICTION EMBEDDED IN ARTICLE 7.2 OF THE INDO-MALAYSIAN TREA TY (PAGE 177 OF PAPER I.T.A. NO. 1426 & CO 166/MDS/2009 93 BOOK NO.4) WHEREIN THE PE IS DEEMED TO BE DEALING W HOLLY INDEPENDENTLY WITH THE ENTERPRISE OF WHICH IT IS A PE 10. REGARDING PARA 3 OF PAGE 4 OF THE LEARNED AOS WRIT TEN SUBMISSION KIND REFERENCE IS DRAWN TO ANNEXE-I APPENDED TO THESE SUB MISSIONS WHEREIN SOME OF THE PARAGRAPHS BETWEEN 11.1 TO 11.7 RELIED ON BY THE LEARNED AO ARE FOUND ADOPTED FROM THE ORDER IN THE CASE OF GLO BAL AND HENCE THE SAME CANNOT ADVANCE THE CASE OF THE DEPARTMENT PARTICUL ARLY WITH REFERENCE TO THE EXISTENCE OF THE PERMANENT ESTABLISHMENT. THE O THER POINTS RELATING TO DIRECTORS AUTHORIZATIONS CONTROL AND MANAGEMENT R EMAINING AT CHENNAI AND REMITTANCE OF MONEY TO CHENNAI FROM NEW YORK ARE AL L NOT GERMANE TO THE ISSUE RELATING TO PERMANENT ESTABLISHMENT WHICH IS CLEARLY DEALT WITH UNDER ARTICLE 5 OF THE INDO-MALAYSIAN TREATY. CONTROL AND MANAGEMENT IS NOT AT ALL A RELEVANT FACTOR IN THE INTERPRETATION OR APPLICAT ION OF ANY DTAA PARTICULARLY WITH REFERENCE TO THE DETERMINATION OF THE EXISTENC E OR OTHERWISE OF A PE. TO DRIVE HOME THE POINT ABUNDANTLY CLEAR CERTAIN PROV ISIONS OF THE INDO- MALAYSIAN TREATY AND RELEVANT SETTLED LAW ARE CITED . TO START WITH ARTICLE 5.7 OF THE INDO- MALAYSIAN T REATY (PAGE 165 OF THE PAPER BOOK NO.4) MAY BE CITED ACCORDING TO WHICH CONTROLLING OR BEING CONTROLLED BY A COMPANY IS NOT AT ALL A RELEVANT FA CTOR FOR DETERMINATION OF THE EXISTENCE OR OTHERWISE OF A PE. OTHER REFERENCES SUCH AS ARTICLE 23.2 AND 23.3 (PAGE 176 OF THE PAPER BOOK NO.4) ALSO SUPPORT THE VIEW THAT CONTROL AND MANAGEMENT IS NOT A DECISIVE FACTOR PARTICULAR LY IN THE DETERMINATION OF THE EXISTENCE OF A PE. ADVERTING TO ARTICLE 4.3 OF T HE INDO- MALAYSIAN TREATY (PAGE 163 OF THE PAPER BOOK NO.4) IT IS EMPHASIZED THAT THE FISCAL DOMICILE IS DETERMINED ONLY WITH REFERENCE TO PLACE OF EFFEC TIVE MANAGEMENT WHICH IS TOTALLY DIFFERENT FROM THE THEORY OF CONTROL AN D MANAGEMENT WHICH IS TOTALLY ALIEN TO ANY TREATY PROVISIONS FOR THAT MA TTER. WHEN ARTICLE 5 OF THE INDO- MALAYSIAN TREATY DEFINES WHAT IS PE AND WHAT IS NOT DEEMED TO BE A PE ANY OTHER EXERCISE DRAWING INFERENCES FROM ANY O THER LAW IS IMPERMISSIBLE. THE SIMPLE QUESTION IS WHETHER A PE S TOOD CONSTITUTED IN THIS CASE IN TERMS OF THE RELEVANT PROVISIONS OF THE TRE ATY ABOUT WHICH THERE ARE FACTUAL CONCURRENT FINDINGS IN THE ASSESSMENT ORDER S INCLUDING THE ONE RELATING TO THE ASSESSMENT YEAR UNDER APPEAL. REMITTANCE OF MONEY FROM CHENNAI TO NEW YORK AND NO T TO OR FROM MALAYSIA IS HIGHLIGHTED BY THE LEARNED AO TO CONCLUDE THAT T HERE IS NO PE IN MALAYSIA WHICH FACTOR IT IS RESPECTFULLY SUBMITTED IS NEIT HER RELEVANT NOR GERMANE FOR SUCH A CONCLUSION IN A MANNER KNOWN TO INDO- MALAYS IAN TREATY. THE I.T.A. NO. 1426 & CO 166/MDS/2009 94 REMITTANCES HAVE BEEN MADE WITHIN THE FRAME WORK OF LAW ADHERING TO THE RELEVANT RBI REGULATIONS AND AS SUCH THE POINT STRE SSED BY THE LEARNED AO REGARDING THE NON-EXISTENCE OF A PE IN MALAYSIA IS NOT AT ALL TENABLE. 11. ON PARA 4 OF PAGE 4 OF THE LEARNED AOS WRITTEN SUB MISSION: TO ESTABLISH THAT ALL THE POINTS RAISED BY THE LEAR NED AO ON MERITS AS CONTAINED IN PARAGRAPH 4 ON PAGE 4 OF THE WRITTEN S UBMISSIONS FILED ON 11.7.2011 ARE CONTRARY TO THE PROVISIONS OF THE IND O- MALAYSIAN TREATY AND THE SETTLED LAW A LINE BY LINE ANALYSIS OF THE SAM E HAS BECOME IMPERATIVE. LINE BY LINE ANALYSIS OF THE LEARNED AOS CONTENTIO NS: A) LASTLY DTAA IS APPLICABLE ONLY IF INCOME IS CHARGE ABLE TO TAX IN TWO COUNTRIES. ASSESSEES SUBMISSION IN REPLY: I. THIS VIEW IS BASED ON A RULING OF THE AUTHORITY OF ADVANCE RULING IN CYRIL EUGENE PEREIRA IN RE (1999) 239 ITR 650 (AAR) WHIC H HELD ON PAGE 659 OF ITS DECISION AS FOLLOWS: THIS MATTER CAN BE VIEWED FROM THE ANGLE OF THE TAX PAYER. LIABILITY TO PAY TAX BOTH IN INDIA AND THE FOREI GN COUNTRY ENTITLES A TAX PAYER TO CLAIM RELIEF UN DER THE RULES LAID DOWN IN THE DOUBLE TAXATION AVOIDANCE AGREEM ENT. IF THE TAX PAYER PAYS TAX OR IS LIABLE TO PAY TAX UNDER THE LAWS IN FORCE IN ONE COUNTRY ALONE HE CANNOT CLAIM ANY RELIEF FROM A NON- EXISTENT BURDEN OF DOUBLE TAXATION UNDER DTAA. T HE DTAA IS MEANT ONLY FOR THE BENEFIT OF TAX PAYERS WHO ARE LIABLE TO TAX TWICE ON THE SAME INCOME (PAG E 659 EMPHASIS SUPPLIED) II. THE ABOVE DECISION OF THE AAR WAS REJECTED BY THE H ONBLE APEX COURT IN UOI V/S. AZADI BACHAO ANDOLAN (2003) 263 ITR 706 (S C) WITH THE REMARK : HAVING PERUSED THE ORDER OF THE ADVANCE RULING A UTHORITY WE ARE NOT PERSUADED. ON THE OTHER HAND THE HONBLE APEX COUR T LAID DOWN THE CORRECT PROPOSITION AS FOLLOWS: A) IN OUR VIEW THE CONTENTION OF THE RESPONDENTS PROC EEDS ON THE FALLACIOUS PREMISE THAT LIABILITY TO TAXATION IS TH E SAME AS PAYMENT OF I.T.A. NO. 1426 & CO 166/MDS/2009 95 TAX. LIABILITY TO TAX IS A LEGAL SITUATION; PAYMENT OF TAX IS A FISCAL FACT. (PAGE 741- EMPHASIS SUPPLIED) B) IT IS THEREFORE NOT POSSIBLE FOR US TO ACCEPT THE CONTENTIONS SO STRENUOUSLY URGED ON BEHALF OF THE RESPONDENTS THAT AVOIDANCE OF DOUBLE TAXATION CAN ARISE ONLY TAX IS ACTUALLY PAID IN ONE OF THE CONTRACTING STATES. (PAGE 744 EMPHASIS SUPPLIED) OTHER DECISIONS IN ASSESSEES FAVOUR: 1. EMMERICH JAEGAR VS CIT (2005) 274 ITR 125 (GUJ) (APE X COURT DECISION IN AZADI BACHAO ANDOLAN FOLLOWED: 2. ADIT V/S. GREEN EMIRATE SHIPPING & TRAVELS (2006) 100 ITD 203 (MUMBAI) (APEX COURT DECISION IN AZADI BACHAO ANDOL AN FOLLOWED): IT IS THUS CLEAR THAT TAXABILITY IN ONE COUNTR Y IS NOT THE SINE QUA NON FOR AVAILING RELIEF UNDER THE TRE ATY UNDER TAXABILITY IN ANOTHER COUNTRY. (PARA 8- PAGE 213 EMPHASIS SUPPLIED) 3. MEERA BHATIA VS. ITO 2010 38 SOT 95 (MUMBAI): (DECI SION IN 100 ITD 203 (MUMBAI) CITED ABOVE FOLLOWED. B) AS PER MALAYSIAN INCOME TAX ACT (CHARGING SECTION 3 & 3B) INCOME FROM INVESTMENT IN GS AND WGIL IS NOT CHARGED TO TAX AT MALAYSIA. IT IS NOT A CASE WHERE INCOME IS CHARGED TO TAX AND EXEMPTIONS/ DEDUCTION IS CLAIMED. THIS INCOME IS PRIMARILY NOT CHARGED TO TA X AT MALAYSIA AS IT NEITHER ACCRUED DERIVED OR IS RECEIVED IN MALAYSIA. DTAA IS HENCE NOT APPLICABLE AND PRECISELY FOR THIS REASON HONBLE S UPREME COURT DECISION IN THE CASE OF AZADI BACHAO ANDOLAN IS NOT APPLICAB LE. (PLEASE REFER TO PARA 12 TO 12.8 IN PAGE 9 10 &11OF ASSESSMENT ORDE R IN THE CASE OF M.CT.M.CORPORATION PVT. LTD.) I.T.A. NO. 1426 & CO 166/MDS/2009 96 ASSESSEES SUBMISSION IN REPLY: WITH REGARD TO THE ABOVE CONTENTIONS OF THE LEARNED AO THE FOLLOWING REPLY SUBMISSIONS ARE MADE. I. THERE SEEMS TO BE A CLEAR CONFUSION ON THE PART OF THE LEARNED AO SINCE THE DISTINCTION BETWEEN THE AVOIDANCE OF DOUB LE TAXATION AND RELIEF AGAINST DOUBLE TAXATION HAS BEEN LOST SIGHT OF. THE HONBLE APEX COURT WHILE INTERPRETING SECTION 49A OF THE E RSTWHILE IT ACT AND ARTICLE 4 OF THE INDO-PAKISTAN TREATY NOTICED T HE DISTINCTION BETWEEN THE TWO IN CIT VS. CAREW AND CO. LTD (1979 ) 120 ITR 540 (SC) AT PAGE 548 IN THE FOLLOWING WORDS: BEFORE PARTING WITH THIS CASE IT IS APPROPRIATE T O POINT OUT THAT A DISTINCTION EXISTS BETWEEN THE AVOIDANCE OF DOUBLE TAXATION AND RELIEF AGAINST DOUBLE TAXATION. THAT DISTINCTION IS EVIDENCED BY TWO CLAUSES OF SECTION 49A OF THE INDIAN INCOME TAX ACT . ONE IMPORTANT FEATURE DISTINGUISHING THE TWO CONCEPTS L IES IN THIS THAT IN CASE OF OF AVOIDANCE OF DOUBLE TAXATION THE ASSE SSEE DOES NOT HAVE TO PAY TAX FIRST AND THEN APPLY FOR RELIEF IN THE FORM OF REFUND AS HE WOULD BE OBLIGED TO DO UNDER A PROVISION FOR RELIEF AGAINST DOUBLE TAXATION. THE RESPECTIVE SCHEMES EMBODYING T HE TWO CONCEPTS DIFFER IN SOME DEGREE FROM EACH OTHER AND THAT NEEDS TO BE BORNE IN MIND WHEN STATUTORY PROVISIONS ARE REFE RRED TO AND CASES ARE CITED BEFORE THE COURT ON A POINT INVOLVI NG DOUBLE TAXATION. (EMPHASIS SUPPLIED) NOTES: THIS DISTINCTION BETWEEN AVOIDANCE OF DOUBL E TAXATION AND RELIEF AGAINST DOUBLE TAXATION IS ALSO MADE CLEA R IN SECTION 90 (1) (A) (I) AND (II) AND (B) OF THE INCOME TAX ACT 1961 A S WELL. MOREOVER THIS CONCEPT IS ALSOEXPLAINED IN THE DECISIONS OF R.M.M UTHIAH (1993) 202 ITR 508 (KAR) AND C.I.T. VS. VR.S.R.M. FIRM (1994) 208 ITR 400 (MAD).THE CORRESPONDING PROVISIONS RELATING TO AVO IDANCE AND RELIEF ARE CONTAINED IN ARTICLES 22.1 AND 22 2 RESPECTIVE LY IN THE INDO- MALAYSIAN TREATY (C/F PAGE 174 OF THE PAPER BOOK N O. 4) I.T.A. NO. 1426 & CO 166/MDS/2009 97 II. THE ONLY DISTINCTION AS REGARDS OVERSEAS INCOME BE TWEEN SECTION 5 (1) (C ) OF THE INDIAN INCOME TAX ACT AND SECTION 3 OF THE MALAYSIAN INCOME TAX ACT IS THAT THE CHARGE IS ON A CCRUAL BASIS IN THE FORMER WHILE IT IS ON RECEIPT BASIS IN THE LATT ER. AS SUCH IN SO FAR AS THE MALAYSIAN INCOME TAX ACT COVERS THE INC OME ACCRUED DERIVED OR RECEIVED DTAA IS APPLICABLE AND WAS APP LIED CONSECUTIVELY IN ALL ASSESSMENT YEARS UPTO AND INCL USIVE OF AY 1998-99 IN THE ASSESSEES OWN CASE. IT IS INCORRECT TO OVERLOOK THAT BOTH DTAA AND SECTION 90 ARE BENEVOLENT PROVISIONS IN FAVOUR OF THE ASSEESEE. THAT APART AS STRESSED EARLIER THE O PERATION OF SECTION 5 (1) (C ) IS OUSTED BY THE CONCEPT OF TREA TY OVERRIDE PROVIDED BY SECTION 90 THE BOARD CIRCULAR THE SET TLED LAW AND THE ARTICLE 22.1 OF THE INDO- MALAYSIAN TREATY. AS SUCH THE OVERSEAS INCOME EARNED BY THE MALAYSIAN BRANCH CANNOT BE BRO UGHT TO TAX UNDER THE PROVISIONS OF THE INDIAN INCOME TAX ACT PARTICULARLY WHEN THEY ARE PROFITS ATTRIBUTABLE TO THE PE IN TERM S OF ARTICLES 7.1 AND 7.2 OF THE TREATY (C/F. PAGE 177 OF PAPER BOOK NO.4) III. THE CASUAL REMARK THAT THE HONBLE APEX COURTS DEC ISION IN AZADI BACHAO ANDOLAN IS NOT APPLICABLE IS UNTENABLE AND I S AS A RESULT OF MISREADING OF THE SAID DECISION WHEREIN EVEN THE C ONCEPT OF TREATY SHOPPING IS AFFIRMED. C) AS DTAA IS NOT APPLICABLE THE QUESTION OF PERM ANENT ESTABLISHMENT DOES NOT ARISE AND THE INCOME IS ASSESSED IN INDIA . ASSESSEES REPLY SUBMISSIONS: WITH REGARD TO THE ABOVE CONTENTIONS OF THE LEARNED AO THE FOLLOWING REPLY SUBMISSIONS ARE MADE. I. THE DTAA WAS APPLIED FOR THE LAST SEVERAL YEARS AND SECTION 90 IS A BENEVOLENT PROVISION IN FAVOUR OF THE ASSES SEE. THE BENEFIT CONFERRED BY THE TREATY READ WITH SECTION 9 0 CANNOT BE DENIED DEPENDING UPON THE CHANGE IN MOODS OF THE ASSESSING OFFICER II. IT IS ERRONEOUS TO STATE THAT THERE WAS NO PE DE HORS ARTICLE 5 OF THE INDO- MALAYSIAN TREATY. ALL THE EXTRANEOUS REASONS I.T.A. NO. 1426 & CO 166/MDS/2009 98 TO DENY THE PE HAVE BEEN REBUTTED WHILE DEALING WITH PARAGRAPH 3 OF PAGE 4 SUPRA OF THE WRITTEN SUBMISSI ONS OF THE LEARNED AO DATED 30.6.2011. III. IN ANY AND EVERY VIEW OF THE MATTER THE QUESTION O F SUBJECTING THE INCOME TO THE INDIAN INCOME TAX IN T ERMS OF SUCCESSION 5 (1) (C ) DOES NOT ARISE AND IS INSUPPO RTABLE IN LAW. IV. IN THE EARLIER PARAGRAPH IT WAS STATED ON IRRELEVA NT CONSIDERATIONS THAT THE CONCEPT OF PE IS NOT APPLICA BLE. IN THIS PARAGRAPH EVEN THE APPLICABILITY OF THE DTAA I S QUESTIONED AGAIN ON IRRELEVANT CONSIDERATIONS. II) ASSESSEES REPLY SUBMISSIONS TO THE ARGUMENTS OF THE LEARNED DR ON 4-7- 2011: A) ON JURISDICTION: 1. THE LEARNED DR POINTED OUT THAT THE ASSESSEE WAS YE T TO SHOW EVIDENCE OF ORIGINAL COPY OF THE NOTICE WHICH IS A LLEGED TO CONTAIN THE DATE OF ISSUE OF NOTICE AS 26.3.2003 AS REQUIR ED UNDER THE EVIDENCE ACT. HE ALSO STRESSED THAT NO EVIDENCE WAS LET IN BY THE ASSESSEE TO PROVE THAT THE ALLEGED NOTICE DATED 26. 3.2003 WAS EVER SERVED ON THE ASSESSEE. THE LEARNED DR MAINTAI NED THAT THE DATE OF ISSUE OF NOTICE U/S. 148 WAS ONLY 26.3.2004 AND NOT 26.3.2003 AS ALLEGED BY THE ASSESSEE. IN THIS REGA RD HE READ OVER THE LEARNED AOS SUBMISSIONS DATED 30.6.2011 AND ST RESSED THAT TAKING INTO CONSIDERATION THE PREPONDERANCE OF PROB ABILITIES SINCE THE LEARNED AO WAS NOT THE OFFICER IN CHARGE ON 26. 3.2003 SHE COULD NOT HAVE SIGNED THE NOTICE DATED 26.3.2003. I N THIS REGARD HE CITED THE DECISION IN 333 ITR 182 (KER) AND POIN TED OUT THAT ORDER SHEET SHOULD FORM THE BASIS OF THE ASSESSMENT PROCEEDINGS AND EVEN ABSENCE OF SIGNATURE OF THE ASSESSING OFFI CER WOULD NOT INVALIDATE THE PROCEEDINGS. I.T.A. NO. 1426 & CO 166/MDS/2009 99 ASSESSEES REPLY SUBMISSIONS: I. THE ORIGINAL NOTICE DATED 26.3.2003UNDER THE HAND A ND SEAL OF THE LEARNED AO AND RECEIVED BY THE ASSESSEE ON 31.3.2004 IS PRODUCED FOR PERUSAL OF THE HONBLE BE NCH AND THE LEARNED DR. THIS DOCUMENT SHOWS THAT THE LEARNE D AO HAS ACTUALLY SIGNED THE NOTICE WHICH RULES OUT INVO KING PROBABILITY THEORY. II. IN THE DECISION CITED BY THE LEARNED DR [ CIT VS. T.O.ABHRAHAM & CO. (2011) 333 ITR 182 (KER)] IT WA S HELD THAT THE FACT THAT THE FIRST COPY OF THE ASSESSMENT ORDER SENT TO THE ASSESSEE ON MAY 30 1997 ALONG WITH A S IGNED VALID NOTICE OF DEMAND ISSUED UNDER SECTION 156 OF THE ACT DID NOT CONTAIN THE SIGNATURE DID NOT INVALIDATE T HE ASSESSMENT WHICH WAS VALIDLY COMPLETED ON MAY 2719 97 WITHIN THE PERIOD OF LIMITATION PROVIDED UNDER SECT ION 158BE OF THE ACT AND THE WHOLE PURPOSE OF SECTION 292B IS NOT TO DEFEAT ON TECHNICALITIES THE OBJECT OF THE STATUTE THAT IS TO ASSESS AND COLLECT THE TAX LEGITIMATELY DUE UNDER T HE ACT. SINCE THE ASSESSEES CHALLENGE IS NOT BASED ON TECH NICAL DEFECTS IT IS RESPECTFULLY SUBMITTED THAT THIS DEC ISION IS QUOTED OUT OF CONTEXT. 2. THE LEARNED DR LEAD THROUGH PAGES 1 AND 2 OF THE RE CORDED REASONS ON THE BASIS OF WHICH THE ASSESSMENT WAS RE OPENED. INTER ALIA HE ARGUED THAT BORROWED SATISFACTION WAS NOT A BAR ON THE REOPENING OF ASSESSMENTS BY CITING THE DECISION IN 242 ITR 176 (MAD). I.T.A. NO. 1426 & CO 166/MDS/2009 100 ASSESSEES REPLY SUBMISSION: I. AS THE LEARNED DR REITERATED THE SUBMISSIONS OF THE LEARNED AO AS CONTAINED IN HER SUBMISSIONS DATED 30.6.2011 ON MERITS WHICH ARE REPLIED SEPARATELY H EREIN TO AVOID REPETITION THE ASSESSEES REPLY ON THEM I S AVOIDED. II. IT IS SUBMITTED THAT IN CGT VS. SUSHEELA SHANMUGASUNDARAM (2000) 242 ITR 176 (MAD) THE ISSUE WAS NOT ON WHETHER BORROWED SATISFACTION WAS A BAR ON REOPENING. THE ISSUE IN THAT CASE WAS WHETHER THE L ETTER OF THE WEALTH TAX OFFICER TO THE GIFT TAX OFFICER W OULD CONSTITUTE INFORMATION FOR THE PURPOSE OF REOPENING THE ASSESSMENT U/S. 16(1) (B) OF THE GIFT TAX ACT. MORE OVER THE INFORMATION GIVEN WAS WITH REFERENCE TO THE SAM E PROPERTY FOR THE SAME ASSESSMENT YEAR. HENCE THIS DECISION CANNOT ADVANCE THE CASE OF THE DEPARTMENT ON THE LINES SUGGESTED BY THE LEARNED DR. B) ON MERITS: 1. AFTER REFERRING TO PARAGRAPH 3 OF PAGE 3 OF THE ORD ER OF THE HONBLE ITAT IN THE CASE OF SIVAGAMI HOLDINGS PRIVA TE LIMITED (SHPL FOR SHORT ) RELIED ON BY THE ASSESSE E BY STATING THAT THE FACTS ARE NOT IDENTICAL IN THE ASS ESSEES CASE SINCE NO OTHER PROPERTY WAS ACQUIRED BY THE ASSESSE E HEREIN: ASSESSEES REPLY SUBMISSIONS: SINCE THE ASSESSEE COMPANY ITSELF WAS DEMERGED IN THE SUBSEQUENT YEAR INTO TWO COMPANIES NAMELY SHPL AND M..CT.M. GLOBAL INVESTMENTS PRIVATE LTD. THE QUESTION OF THE ASSESS EE COMPANY ACQUIRING ANY FURTHER PROPERTY THEREAFTER D OES NOT ARISE. 2. THE LEARNED DR LEAD THE HONBLE MEMBERS THROUGH PAG ES 16 AND 17 OF THE HONBLE ITAT ORDER IN THE CASE OF SHPL I.T.A. NO. 1426 & CO 166/MDS/2009 101 AND MAINTAINED THAT THE FACTS OF SHPL SHOULD NOT BE INFERRED INTO THE FACTS OF THE ASSESSEE HEREIN IN PRETTY MUCH THE SAME WAY AS THE HONBLE ITAT HAS DECIDED I N THE CASE OF SHPL. ASSESSEES REPLY SUBMISSIONS: THE CLEAR DISTINCTION BETWEEN IMPORTING THE FACTS OF SOME OTHER ASSESSEE WHICH ARE NOT APPARENT ON THE RECORD OF THE ASSESSEE AND APPLICATION OF THE RATIO BASED ON THE SIMILARITY OF FACTS WHICH CAN BE CITED AS A PRECEDENT HAS BEEN LOST SIGHT OF BY THE LEARNED DR OVERLOOKING THE FACT THAT THE FACTS OF M.CT.M.GLOBAL WERE IMPORTED ONTO THE CASE OF THE AS SESSEE HEREIN WHICH CEASED TO BE IN EXISTENCE CONSEQUENT ON DEMERGER. 3. THE LEARNED DR THEN LEAD THROUGH PARA 38 ON PAGE 28 OF THE ORDER OF THE HONBLE ITAT IN THE CASE OF SHPL T O ARGUE THAT IN THE CASE OF SHPL PE WAS NOT REALLY THE SUBJ ECT MATTER OF APPEAL WHEREAS IN THIS CASE THE EXISTENC E OF PE WAS NOT ESTABLISHED FOR THIS YEAR. ACCORDING TO THE LEARNED DR THE EXISTENCE OF PE WOULD HAVE TO BE DETERMINED E VERY YEAR AND EXISTENCE OF PE IN EARLIER YEARS DOES NOT AUTOMATICALLY EXTEND ITS EXISTENCE TO THE SUBSEQUEN T YEAR ASSESSEES REPLY SUBMISSIONS: WHAT CONSTITUTES OR WHAT DOES NOT CONSTITUTE A PE HAS TO BE DECIDED ONLY IN TERMS OF ARTICLE 5 OF THE INDO MALAYSIAN TREATY AND NOT BY CONSIDERING EXTRANEOUS AND IRRELEVANT FACTORS SUCH AS CONTROL AND MANAGEMENT. A PE HAS BEEN JUDICIALLY AN ALYZED AND INTERPRETED IN CIT VS. VISAKHAPATNAM PORT TRUST (1983) 144 ITR 146 (AP) AS PER WHICH :THE WORDS PERMANENT ESTABLISHMENT POSTULATE THE EXISTENCE OF A SUBSTANT IAL ELEMENT OF AN ENDURING OR PERMANENT NATURE OF A FOR EIGN ENTERPRISE IN ANOTHER COUNTRY WHICH CAN BE ATTRIBU TED TO A FIXED PLACE OF BUSINESS IN THAT COUNTRY. IT SHOULD BE OF SUCH A NATURE THAT IT WOULD AMOUNT TO A VIRTUAL PROJECTI ON OF THE FOREIGN ENTERPRISE OF ONE COUNTRY INTO THE SOIL OF ANOTHER I.T.A. NO. 1426 & CO 166/MDS/2009 102 COUNTRY. (VIDE PAGE 162). IT MAY BE ADDED THAT THE SAID DECISION OF THE HONBLE AP HIGH COURT WAS RELIED ON AND FOLLOWED IN INTEGRATED CONTAINER FEEDER SERVICE V/S . JCIT (2005) 96 ITD 371 (MUM). MOREOVER THE FACT THAT TH E ASSESSEE HAS A PERMANENT ESTABLISHMENT IS NOT AT AL L DISPUTED EVEN BY THE LEARNED AO FOR THE ASSESSMENT YEAR UNDER APPEAL (C/F PAGE 26 OF THE PAPER BOOK NO.4) I T IS A MATTER ON RECORD THAT THE ASSESSEE COMPANY HAD BEEN CARRYING ON ITS BUSINESS OPERATIONS FOR SEVERAL DEC ADES FROM THIS FIXED PLACE OF BUSINESS AT MALAYSIA. EVEN THE I NCLUSIVE DEFINITION OF PERMANENT ESTABLISHMENT CONTAINED IN SECTION 92F (IIIA) OF THE INCOME TAX ACT1961 DOES NOT STIP ULATE THAT THE EXISTENCE OF A PERMANENT ESTABLISHMENT NEED TO BE PROVED OR DEMONSTRATED ON A YEAR TO YEAR BASIS. SUC H AN UNWARRANTED CONDITION STIPULATED BY THE LEARNED DR IS SOMETHING NOT TO BE FOUND IN THE INDO- MALAYSIAN TR EATY AS WELL. SO LONG AS THE BUSINESS OF THE ENTERPRISE IS W HOLLY OR PARTLY CARRIED ON FROM A FIXED PLACE OF BUSINESS TH E EXISTENCE OF A PE CANNOT BE DISPUTED ON ASSUMED COND ITIONS FOUND NEITHER IN THE INDO- MALAYSIAN TREATY NOR THE INDIAN INCOME TAX ACT. LONG AND SHORT ONCE A PE ALWAYS A P E SO LONG AS THE BUSINESS OF THE ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON THROUGH A FIXED PLACE OF BUSINESS AND TH E CRITERIA LAID DOWN IN ARTICLE 5 OF THE DTAA ARE COMPLIED WIT H. IT IS OF UTMOST IMPORTANCE IN THIS CONTEXT TO NOTE THAT THE BRANCH OF THE ASSESSEE COMPANY IN MALAYSIA HAS BEEN REGISTERE D AS A COMPANY IN MALAYSIA AND HAD BEEN COMPLYING WITH ALL STATUTORY REQUIREMENTS INCLUDING INCOME TAX/ COMPA NY LAW FORMALITIES. 4. THE LEARNED DR THEN ARGUED THAT IN THE ABSENCE OF A PE (WHICH IN HIS OPINION IS NOT EXISTENT THIS YEAR) THE GLOBAL INCOME OF THE APPELLANT WOULD BE LIABLE TO TAX IN I NDIA: ASSESSEES REPLY SUBMISSIONS: INCOMES IN THE NATURE OF RENT DIVIDEND INTEREST ETC. AS PART OF BUSINE SS OR OTHERWISE CAN BE EARNED. THE COMPREHENSIVE INDO- I.T.A. NO. 1426 & CO 166/MDS/2009 103 MALAYSIAN TREATY TAKES CARE OF SUCH INCOMES EITHER THROUGH BUSINESS OR OTHERWISE. WHEN INTEREST DIVIDENDS AND RENTS ARE PROFITS ATTRIBUTABLE TO A PE ARTICLE 7 OF THE T REATY TAKES CARE OF THE TREATMENT OF INCOMES AS BUSINESS PROFIT S. EVEN SUCH PERSONS WHO DO NOT HAVE A PE CAN ALSO AVAIL TH E BENEFIT OF THE TREATY PROVISIONS INCORPORATED IN TH E TREATY TO COVER CASES OR RENT (ARTICLE 6) DIVIDENDS (ARTI CLE 11) AND INTEREST (ARTICLE 12). THEREFORE THE ASSUMPTION ON THE PART OF THE LEARNED DR THAT IN THE ABSENCE OF THE PE T HE GLOBAL INCOME WOULD BE LIABLE TO TAX IN INDIA IS TO TALLY UNFOUNDED AND UNTENABLE. THE ELIMINATION OF DOUBLE TAXATION AS PROVIDED IN ARTICLE 22 OF THE INDO- MA LAYSIAN TREATY (PAGE 174 OF THE PAPER BOOK NO.4) TAKES CARE OF BOTH THESE SITUATIONS NAMELY BUSINESS PROFITS THRO UGH PE OR OTHERWISE. 5. THE LEARNED DR THEN REFERRED TO THE DECISION IN 274 ITR 117 (MAD) TO CONTEND THAT THE INCOMES OF THE ASSESS EE WERE LIABLE TO TAX AS INCOME FROM OTHER SOURCES ASSESSEES REPLY SUBMISSION: IN THE DECISION OF CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD. (2005) 274 ITR 117 (MAD) THE ONLY QUESTION WAS WHETHER THE REN TAL INCOME FROM PROPERTIES WAS ASSESSABLE AS INCOME FRO M BUSINESS OR FROM HOUSE PROPERTY. THIS IS A DECISION UNDER THE INCOME TAX ACT 1961 THE SECTIONS CONSIDERED BE ING 22 AND 28 OF THE ACT. WHEN THE OPERATION OF SECTION 5 (1 ) (C ) OF THE ACT IS OUSTED BY SECTION 90 THE BOARD CIRCU LAR THE SETTLED LAW AND THE DTAA THERE IS NO WARRANT TO IM PORT THE PROVISIONS OF THE INDIAN INCOME TAX ACT AT ALL. AND HENCE THE CASE RELIED ON BY THE LEARNED DR WILL NOT ADVAN CE THE CASE OF THE REVENUE. 6. THE LEARNED DR THEN REFERRED TO THE BOARD RESOLUTIO NS OF THE ASSESSEE COMPANY TO INDICATE THAT THE CONTROL A ND MANAGEMENT OF THE AFFAIRS OF THE COMPANY WAS ONLY I N INDIA AND NOT IN MALAYSIA: I.T.A. NO. 1426 & CO 166/MDS/2009 104 ASSESSEES REPLY SUBMISSIONS: IT IS A REQUIREMENT UNDER SECTION 372 OF THE INDIAN COMPANIES ACT FOR A LL COMPANIES TO PASS BOARD RESOLUTIONS TO MAKE INVESTM ENTS. THE COMPANY WITH A VIEW TO COMPLYING WITH SUCH PROVISIONS HAD PASSED THE NECESSARY RESOLUTIONS ACCORDINGLY. NO ADVERSE INFERENCE WHATSOEVER COULD BE DRAWN ON THE ASPECT OF PASSING SUCH BOARD RESOLUTIO NS RELATING TO SUCH INVESTMENTS. FURTHER CONTROL AND MANAGEMENT IS NOT AT ALL A RELEVANT FACTOR IN THE INTERPRETATION OR APPLICATION OF ANY DTAA. ADVERTIN G TO ARTICLE 4.3 OF THE INDO- MALAYSIAN TREATY (PAGE 163 OF THE PAPER BOOK NO.4) IT IS EMPHASIZED THAT THE FISCAL DOMICILE IS DETERMINED ONLY WITH REFERENCE TO PLACE OF EFFEC TIVE MANAGEMENT WHICH IS TOTALLY DIFFERENT FROM THE TH EORY OF CONTROL AND MANAGEMENT WHICH IS TOTALLY ALIEN TO ANY TREATY PROVISIONS FOR THAT MATTER. CHENNAI 11.07.11 (AUTHORISED REPRESENTATIVE) BY THE REVENUE I.T.A. NO. 1426 & CO 166/MDS/2009 105 I.T.A. NO. 1426 & CO 166/MDS/2009 106 I.T.A. NO. 1426 & CO 166/MDS/2009 107 I.T.A. NO. 1426 & CO 166/MDS/2009 108 I.T.A. NO. 1426 & CO 166/MDS/2009 109 I.T.A. NO. 1426 & CO 166/MDS/2009 110 I.T.A. NO. 1426 & CO 166/MDS/2009 111 I.T.A. NO. 1426 & CO 166/MDS/2009 112 I.T.A. NO. 1426 & CO 166/MDS/2009 113 I.T.A. NO. 1426 & CO 166/MDS/2009 114 I.T.A. NO. 1426 & CO 166/MDS/2009 115 I.T.A. NO. 1426 & CO 166/MDS/2009 116 I.T.A. NO. 1426 & CO 166/MDS/2009 117 I.T.A. NO. 1426 & CO 166/MDS/2009 118 I.T.A. NO. 1426 & CO 166/MDS/2009 119 I.T.A. NO. 1426 & CO 166/MDS/2009 120 I.T.A. NO. 1426 & CO 166/MDS/2009 121 I.T.A. NO. 1426 & CO 166/MDS/2009 122 I.T.A. NO. 1426 & CO 166/MDS/2009 123 I.T.A. NO. 1426 & CO 166/MDS/2009 124 I.T.A. NO. 1426 & CO 166/MDS/2009 125 I.T.A. NO. 1426 & CO 166/MDS/2009 126 I.T.A. NO. 1426 & CO 166/MDS/2009 127 I.T.A. NO. 1426 & CO 166/MDS/2009 128 I.T.A. NO. 1426 & CO 166/MDS/2009 129 I.T.A. NO. 1426 & CO 166/MDS/2009 130 I.T.A. NO. 1426 & CO 166/MDS/2009 131 I.T.A. NO. 1426 & CO 166/MDS/2009 132 18. IT WAS MADE CLEAR AND ACCEPTED BY BOTH THE SIDE S AT THE BENCH THAT EVEN THOUGH VARIOUS CITATIONS HAVE BEEN QUOTED IN THE WR ITTEN SUBMISSIONS ONLY SUCH CITATIONS WHICH ARE SPECIFICALLY DISCUSSED IN THE O RAL ARGUMENTS WOULD BE CONSIDERED. THE FACTS THAT EMANATE OUT OF THE PRES ENT APPEAL CLEARLY SHOW THAT THE ASSESSEE IS RELYING UPON A NOTICE UNDER SEC.148 DATED 26-03-2003 AS THE NOTICE ON THE BASIS OF WHICH THE ASSESSMENT HAS BEE N RE-OPENED. THE REVENUE IS CONTENDING THAT THERE IS NO NOTICE U/S. 148 DATED 2 6-03-2003 AND THE NOTICE U/S. 148 FOR THE RELEVANT ASSESSMENT YEAR IS A NOTICE DA TED 26-03-2004. THE REVENUE HAS SUPPORTED ITS CONTENTION BY PRODUCING THE ORIGI NAL COPY OF THE SEC. 148 NOTICE DATED 26-03-2004 WHICH WE MUST MENTION HERE IS ORIG INALLY WRITTEN AS 26-3-03 AND THE 03 HAS BEEN OVER-WRITTEN AS 04 (PAGE 70 OF THIS ORDER). THE REVENUE HAS ALSO PRODUCED THE ACKNOWLEDGEMENT OBTAINED BY T HE NOTICE SERVER TO SHOW THAT THE NOTICE THAT WAS SERVED ON THE ASSESSEE WAS 26-03-2004 (PAGE 71 OF THIS ORDER). THE REVENUE HAS ALSO PRODUCED THE NOTICE S ERVERS REGISTER WHICH ALSO RECORDS THAT THE NOTICE WHICH WAS SENT THROUGH THE NOTICE SERVER FOR SERVICE ON THE ASSESSEE WAS A NOTICE U/S 148 DATED 26-03-2004 (PAGES 115 & 116 OF THIS ORDER). THE REVENUE HAS ALSO PLACED THE ORDER OF T HE CHIEF COMMISSIONER OF INCOME TAX CHENNAI-I CHENNAI DATED 23-10-2003 WHE REBY SMT. C. CHANDRAKANTA THE OFFICER WHO HAS SIGNED THE NOTICE U/S. 148 HAS BEEN GIVEN THE ADDITIONAL CHARGE OF THE COMPANY CIRCLE-IV(1) CHEN NAI (PAGES 111 & 112 OF THIS I.T.A. NO. 1426 & CO 166/MDS/2009 133 ORDER). THE REVENUE HAS ALSO PLACED BEFORE US A C OPY OF AN ASSESSMENT ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX SHRI M. MATHIVANAN ON 26- 03-2003 WHEN HE WAS HOLDING CHARGE OF THE COMPANY C IRCLE-IV(1) CHENNAI (PAGE 114 OF THIS ORDER). ALL THESE EVIDENCES WHICH HAVE BEEN PRODUCED BY THE REVENUE HAVE BEEN EXTRACTED ABOVE AND MADE PART OF THIS ORD ER. AS AGAINST THESE EVIDENCES PRODUCED BY THE REVENUE THE ASSESSEES ON LY CONTENTION IS THAT THE ASSESSEE HAS BEEN SERVED WITH A NOTICE U/S. 148 DAT ED 26-03-2003 FOR WHICH THE ASSESSEE HAS PRODUCED THE ORIGINAL WHICH HAS BEEN S ERVED UPON IT. THE SUBMISSION OF THE ASSESSEE IS THAT IN THE ORDER SHE ET RECORDING BEFORE THE REASONS RECORDED THERE IS A LINE STRUCK OFF WHICH READS AS NOTICE U/S. 148 PREPARED AND PUT UP (PAGE 73 OF THIS ORDER). THIS NOTING IT I S NOTICED IS STRUCK OFF WITH THE WHITENER. THE NOTING IS ALSO AN UNSIGNED NOTING. T HE SAID NOTICE DATED 26-03- 2003 WHICH IS BEING RELIED UPON BY THE ASSESSEE IS ALSO SIGNED BY THE SAME ASSESSING OFFICER BEING SMT. C. CHANDRAKANTA AS THE ASSISTANT COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-IV(1) CHENNAI. THE FAC TS CLEARLY SHOW THAT SMT. C. CHANDRAKANTA WAS NOT THE ASSESSING OFFICER WHO HAD JURISDICTION OVER THE ASSESSEE NOR WAS SHE HOLDING CHARGE OVER COMPANY CI RCLE-IV(1) CHENNAI ON 26- 03-2003. HERE WE MAY SPECIFICALLY MENTION THAT TH E NOTICE U/S 148 DATED 26-03- 2003 PRODUCED BY THE ASSESSEE BEFORE US IS AN ORIGI NAL NOTICE AND IT IS NOT A CARBON COPY. WE MAY SPECIFICALLY MENTION HERE THAT IT HAS BEEN CATEGORICALLY ADMITTED THAT THE COPY OF THE NOTICE SENT TO THE AS SESSEE WOULD NORMALLY BE A I.T.A. NO. 1426 & CO 166/MDS/2009 134 CARBON COPY WHEREAS THE COPY OF THE SEC. 148 NOTICE PRODUCED BY THE REVENUE WHICH ADMITTEDLY CONTAINS A CORRECTION IN THE DATE FROM 03 TO 04 IS ALSO AN ORIGINAL. THE ASSESSEE IS UNABLE TO PRODUCE ANY EV IDENCE BEFORE US EVEN THOUGH THE APPEAL WAS HEARD ON A NUMBER OF DATES TO SHOW A S TO HOW THE NOTICE DATED 26-03-2003 WAS SERVED ON THE ASSESSEE. IN FACT TH E ACKNOWLEDGEMENT OF DELIVERY WHICH IS UNDISPUTED BY THE ASSESSEE CATEGO RICALLY ADMIT OF A NOTICE U/S 148 DATED 26-03-2004 HAVING BEEN SERVED ON THE ASSE SSEE. WE MAY ALSO MENTION HERE THAT WHEN A NOTICE IS ALLEGED NOT SERV ED ON AN ASSESSEE OR A PARTICULAR FACT IS DISPUTED BY AN ASSESSEE THE NOR MAL COURSE OPEN TO THE ASSESSEE TO FILE A SWORN AFFIDAVIT. EVEN THOUGH THE REVENUE HAD SPECIFICALLY RAISED THE ISSUE THAT NO AFFIDAVIT HAS BEEN FILED THE FACT TH AT NO AFFIDAVIT HAS BEEN FILED BY THE ASSESSEE ALLEGING THE NON-SERVICE OF A NOTICE U /S 148 DATED 26-03-2004 REMAINS. IN THESE CIRCUMSTANCES ON THE BASIS OF T HE FACTS AS AVAILABLE AND THE EVIDENCES AS PRODUCED BY THE REVENUE WE HAVE NO OTH ER ALTERNATIVE BUT TO COME TO THE CONCLUSION THAT A NOTICE U/S 148 DATED 26-03 -2004 HAS BEEN SERVED ON THE ASSESSEE AND THE ASSESSMENT IS AS A CONSEQUENCE OF THE NOTICE U/S. 148 DATED 26-03-2004 SERVED ON THE ASSESSEE ON 31-03-2004. H OW AND FROM WHERE THE ASSESSEE CAME INTO POSSESSION OF THE NOTICE U/S. 14 8 DATED 26-03-2003 REMAINS A MYSTERY. IN ANY CASE THE SAID NOTICE IS NOT SHOWN TO HAVE BEEN SERVED ON THE ASSESSEE NOR ARE THERE ANY RECORDS TO SHOW THAT SUC H A NOTICE IN ORIGINAL WAS SENT TO THE ASSESSEE. SUCH A NOTICE DATED 26-03-2003 SI GNED BY SMT. C. CHANDRAKANTA I.T.A. NO. 1426 & CO 166/MDS/2009 135 COULD ALSO NEVER HAVE BEEN ISSUED INSOFAR AS SMT. C . CHANDRAKANTA WAS NOT HAVING ANY CHARGE OVER COMPANY CIRCLE-IV(1) AS ON 2 6-03-2003. INTERESTINGLY WE MAY ALSO MENTION HERE THAT WHEN THE NOTICE U/S. 148 WAS SERVED ON 31-03- 2004 THE ASSESSEE HAD WRITTEN A LETTER DATED 15-04 -2004 (PAGE 121 OF THIS ORDER) TO THE ASSESSING OFFICER ASKING FOR THE REASONS REC ORDED FOR THE ISSUANCE OF THE NOTICE AND IN THE SAID LETTER THOUGH THE NOTICE U/S . 148 IS REFERRED TO THE DATE OF THE SAID NOTICE IS CONSPICUOUS BY ITS ABSENCE. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE REVENUE HAS NOT ISSUED TWO NOTICES U/ S. 148 ONE DATED 26-03-2003 AS CLAIMED BY THE ASSESSEE AND ANOTHER DATED 26-03- 2004 AND IT IS ONLY ONE NOTICE WHICH HAS BEEN ISSUED AND SERVED ON THE ASSE SSEE WHICH IS A NOTICE U/S. 148 DATED 26-03-2004 SERVED ON 31-03-2004. WE MAY ALSO MENTION HERE THAT UNDER THE GENERAL CLAUSES ACT THE RECORDS OF THE GO VERNMENT ARE DEEMED TO BE SACROSANCT UNTIL AND UNLESS PREJUDICED OR PERVERSIT Y IS SPECIFICALLY PROVED. HERE THE NOTICE U/S. 148 DATED 26-03-2004 ISSUED BY THE ASSESSING OFFICER AND SERVED ON THE ASSESSEE ON 31-03-2004 IS SUPPORTED NOT JUST BY THE NOTICE AS FOUND IN THE ASSESSMENT FOLDER BUT ALSO BY THE INDEPENDENT RECOR D OF THE NOTICE SERVER THE INDEPENDENT RECORD OF THE ACKNOWLEDGEMENT OF SERVIC E OF THE NOTICE THROUGH THE NOTICE SERVER. 19. COMING TO THE NEXT ARGUMENT OF THE ASSESSEE THA T THE REASONS RECORDED ARE INVALID INSOFAR AS IT IS A BORROWED SATISFACTION FR OM THE FILE OF M.CT.M. GLOBAL INVESTMENTS PVT. LTD. IT IS NOTICED THAT THERE IS NO CONCEPT OF BORROWED I.T.A. NO. 1426 & CO 166/MDS/2009 136 SATISFACTION UNDER THE ACT. IN FACT THE ASSESSING OFFICER HAS REFERRED TO THE SPLITTING OF THE ASSESSEE INTO M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. AND M/S. SIVAGAMI HOLDINGS PVT. LTD. IT IS ONLY WHEN THE ASS ESSING OFFICER DID THE ASSESSMENT OF M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. THAT THE ASSESSING OFFICER CAME TO RECOGNIZE THAT THE FACTS IN THE CAS E OF M/S. M.CT.M. GLOBAL INVESTMENTS PVT. LTD. WERE SIMILAR TO THE FACTS IN THE CASE OF THE ASSESSEE COMPANY AND CONSEQUENTLY HAD RECORDED THE REASONS I N DETAIL FOR THE PURPOSE OF RE-OPENING. WE MAY SPECIFICALLY MENTION HERE THAT FOR THE PURPOSE OF RE-OPENING ALL THAT IS REQUIRED IS RECORDING OF REASONS. THE FINAL ASCERTAINMENT OF THE QUANTUM OR ESTABLISHMENT OF INCOME AND THE SOURCE F OR THE ESCAPED INCOME ETC. NEED NOT BE CONCLUSIVELY PROVED IN THE REASONS RECO RDED. A BONA FIDE ACT DONE BY THE ASSESSING OFFICER WHICH HAS LEGAL SUSTAINABILIT Y WOULD VERY MUCH BE ADEQUATE FOR RE-OPENING OF THE ASSESSMENT. IN THE PRESENT C ASE IT IS NOTICED THAT THE REASONS RECORDED ARE CLEAR CATEGORICAL AND ARE SUP PORTED BY THE EVIDENCES FROM THE RECORDS OF THE ASSESSEE ITSELF. IN THE CIRCUMS TANCES WE ARE OF THE VIEW THAT THE RE-OPENING OF THE ASSESSMENT IS VALID. HERE WE MAY ALSO MENTION THAT ADMITTEDLY THE RETURN FILED BY THE ASSESSEE ORIGINA LLY WAS PROCESSED U/S. 143(1) AND IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN 291 ITR 500 ALSO THE RE-OPENING IS LIABLE TO BE UPH ELD AND WE DO SO. I.T.A. NO. 1426 & CO 166/MDS/2009 137 20. COMING TO THE MERITS ADMITTEDLY THE ASSESSEE C OMPANY HAD PURCHASED AN ESTATE IN MALAYSIA SOMETIME IN 1930S. THE FUNDS FO R THE PURCHASE OF THE ESTATE WERE DRAWN FROM INDIA. THE SAID ESTATE WAS SOLD AN D DURING THE RELEVANT ASSESSMENT YEAR UNDER APPEAL FUNDS HAD BEEN INVESTE D IN THE GLOBAL MARKET THROUGH M/S. GOLDMAN SACHS WGIL AND DRESDNER BANK. THE ASSESSEE DID RECEIVE INCOME FROM THE INVESTMENTS MADE. THE ASSESSEE HAS CLAIMED THAT THE INCOME GENERATED FROM THE INVESTMENT OF THE SALE PROCEEDS OF THE ESTATE IN MALAYSIA IS NOT LIABLE TO TAX IN INDIA AS IT IS THE BUSINESS IN COME OF THE ASSESSEE IN MALAYSIA. THE SUBMISSION OF THE ASSESSEE IS THAT THE ASSESSEE HAD A PERMANENT ESTABLISHMENT IN MALAYSIA AND THE INCOME OF THE PERM ANENT ESTABLISHMENT IN MALAYSIA IN VIEW OF THE DTAA BETWEEN INDIA AND MALA YSIA IS NOT TAXABLE IN INDIA. FOR SUPPORTING ITS CASE THAT IT HAD A PERMANENT ESTA BLISHMENT IN MALAYSIA THE ASSESSEE HAS PRODUCED THE CERTIFICATE OF REGISTRATI ON OF A FOREIGN COMPANY IN MALAYSIA WHICH WAS ISSUED ON 19-12-1975 AS ALSO A P OWER OF ATTORNEY GIVEN TO ONE SHRI R.M. SOMASUNDARAM TO ACT AS THE POWER OF A TTORNEY IN MALAYSIA. THE REVENUE ON THE OTHER SIDE HAS PLACED BEFORE US THE COPIES OF THE MINUTES OF THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY PASSED I N CHENNAI ON 10-07-1997 AND 16-12-1997 (PAGES 122 TO 128 OF THIS ORDER) AS ALSO THE COPY OF THE CORPORATE AGREEMENT BETWEEN THE ASSESSEE AND M/S. G OLDMAN SACHS ENTERED INTO ON 23-07-1997 (PAGES 129 TO 131 OF THIS ORDER). I.T.A. NO. 1426 & CO 166/MDS/2009 138 21. THUS WHAT IS EVIDENT FROM THE FACTS IS THAT THE DECISIONS IN REGARD TO THE MOVEMENT OF THE FUNDS THE MODE AND MODUS OPERANDI OF THE INVESTMENTS HAVE BEEN TAKEN IN CHENNAI IN THE BOARD MEETING OF THE B OARD OF DIRECTORS. INTERESTINGLY IN NONE OF THE BOARD MEETINGS THE SA ID SHRI R.M.SOMASUNDARAM WHO IS THE POWER OF ATTORNEY AND WHO HAS BEEN GRANT ED THE POWER OF ATTORNEY IN 1993 WAS PRESENT. THUS IT BECOMES CLEAR THAT THE SI TUS OF THE SEED CAPITAL BEING THE INVESTMENT IN THE ESTATE WAS SOURCED FROM INDIA IN 1930S THE ESTATE WAS SOLD IN 1997-98 AND THE FUNDS WERE UTILIZED FOR MAKING T HE INVESTMENT WITH M/S. GOLDMAN SACHS WGIL AND DRESDNER BANK. THE DECISION TO MAKE THE INVESTMENT WITH M/S. GOLDMAN SACHS WGIL AND DRESDNER BANK WAS TAKEN IN INDIA. THE SIGNATORIES FOR OPENING THE ACCOUNT WITH M/S. GOLDM AN SACHS AND OTHERS ARE BY THE DIRECTORS IN INDIA AND SHRI R.M. SOMASUNDARAM C OULD ONLY JOINTLY OPERATE THE ACCOUNTS WITH THE SIGNATURE OF EITHER ONE OF THE TW O DIRECTORS SPECIFIED. THE APPLICATION FORM IN THE CASE OF M/S. GOLDMAN SACHS WHICH HAS BEEN PLACED BEFORE US ALSO CLEARLY SHOWS THAT THE PRINCIPAL EXECUTIVE OFFICE ADDRESS AS ALSO THE REGISTERED OFFICE ADDRESS TO BE IN INDIA. THE FACT THAT THE FORM DOES RECOGNIZE A PRINCIPAL EXECUTIVE OFFICE AND A SEPARATE REGISTERE D OFFICE SHOW THAT M/S. GOLDMAN SACHS DID RECOGNIZE THAT THERE COULD BE INVESTMENTS FROM A COMPANY OR AN INDIVIDUAL WHO IS PERMANENTLY RESIDING IN ONE COUNT RY BUT HAS A PERMANENT ESTABLISHMENT IN ANOTHER COUNTRY AND THE FACT THAT I N THE PRESENT CASE BOTH THE ADDRESSES HAVE BEEN GIVEN AS CHENNAI ADDRESS IN IND IA CATEGORICALLY SHOWS THAT I.T.A. NO. 1426 & CO 166/MDS/2009 139 THE ADMINISTRATIVE CONTROL OVER THE FUNDS WAS ALSO DONE FROM INDIA ITSELF. THIS VIEW OF OURS GETS SUPPORT FROM THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. P.V.A.L. KULANDAGAN CHE TTIAR REFERRED TO SUPRA. HERE WE MAY ALSO SPECIFICALLY MENTION THAT IN THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF P.V.A.L. KULANDAGAN CHETTIAR T HE HON'BLE SUPREME COURT HAD PROCEEDED ON THE BASIS THAT THE FISCAL CONNECTION A RISES IN RELATION TO TAXATION EITHER BY REASON OF RESIDENCE OF THE ASSESSEE OR BY REASON OF THE LOCATION OF THE IMMOVABLE PROPERTY WHICH IS THE SOURCE OF INCOME. THE HON'BLE SUPREME COURT FURTHER WENT ON TO HOLD THAT WHERE THE PERSON IS A RESIDENT IN BOTH THE CONTRACTING STATES FISCAL DOMICILE WILL HAVE TO BE DETERMINED WITH REFERENCE TO THE FACT THAT IF THE CONTRACTING STATE WITH WHICH HIS P ERSONAL AND ECONOMIC RELATIONS ARE CLOSER HE SHALL BE DEEMED TO BE A RESIDENT OF THE CONTRACTING STATE IN WHICH HE HAS AN HABITUAL ABODE AND THAT IT IMPLIES THAT T AX LIABILITY ARISES IN RESPECT OF A PERSON RESIDING IN BOTH THE CONTRACTING STATES HAS TO BE DETERMINED WITH REFERENCE TO HIS CLOSE PERSONAL AND ECONOMIC RELATI ONS WITH ONE OR THE OTHER. WHEN THIS PRINCIPLE IS APPLIED THE ASSESSEES PERS ONAL AND ECONOMIC RELATIONS ARE CONTROLLED FROM INDIA AS IS EVIDENT FROM THE BOARD MEETINGS HELD IN INDIA AND THE ASSESSEE DID NOT HAVE ANY PERSONAL OR ECONOMIC RELA TIONS IN MALAYSIA AFTER THE SALE OF THE ESTATE IN MALAYSIA. THUS IT BECOMES CL EAR THAT THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT IN MALAYSIA DURING TH E RELEVANT ASSESSMENT YEAR INSOFAR AS THE ESTATE ITSELF HAD BEEN SOLD AND THE FUNDS HAD BEEN MOVED OUT OF I.T.A. NO. 1426 & CO 166/MDS/2009 140 MALAYSIA FOR INVESTMENTS THROUGH FUND MANAGERS WHO DID NOT HAVE A PERMANENT ESTABLISHMENT IN MALAYSIA ALSO. 22. NEXT WOULD COME THE QUESTION AS TO WHETHER THE INCOME RECEIVED BY THE ASSESSEE IS BUSINESS INCOME OR INCOME FROM OTHE R SOURCES. HERE ONE SHOULD UNDERSTAND THAT BUSINESS IS A SYSTEMATIC AND CONTIN UOUS ACTIVITY. IN THE PRESENT CASE THE ASSESSEE HAS HANDED OVER ITS FUNDS TO THE FUND MANAGER AND NOTHING MORE HAS BEEN DONE. THE DECISION IN REGARD TO THE APPLICATION OF THE FUNDS OR THE INVESTMENT OF THE FUNDS IS LEFT WITH THE FUND MANAG ER. IT IS NOT AVAILABLE WITH THE ASSESSEE ITS DIRECTORS NOR WITH ITS POWER OF ATTOR NEY HOLDER IN MALAYSIA. AS IT IS NOT A SYSTEMATIC AND CONTINUOUS ACTIVITY THE INCOM E RECEIVED BY THE ASSESSEE FROM THE INVESTMENTS OF ITS FUNDS WOULD FALL INTO T HE RESIDUAL CLAUSE OF INCOME FROM OTHER SOURCES. 23. IN THE REVENUES APPEAL THE REVENUE HAS CHALL ENGED THE ACTION OF THE LEARNED CIT(A) ALLEGING THAT THE LEARNED CIT(A) HAS HELD THAT THE INCOME OF THE ASSESSEE IS BUSINESS INCOME AND IT SHOULD BE ASSESS ED AS INCOME FROM OTHER SOURCES. HOWEVER A PERUSAL OF PARA 37 OF THE ORD ER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT THE LEARNED CIT(A) HAS CATEGORICALLY HEL D THAT THE FOREIGN INCOME EARNED BY THE ASSESSEE COMPANY FROM ITS INVESTMENTS OF THE SALE PROCEEDS OF THE ESTATES IN MALAYSIA IN M/S. GOLDMAN SACHS SGIL AND DRESDNER BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. CONSEQU ENTLY WE ARE OF THE VIEW I.T.A. NO. 1426 & CO 166/MDS/2009 141 THAT THE GROUNDS 2.1 AND 2.2 OF THE REVENUES APPEA L ARE MISCONCEIVED AND LIABLE TO BE DISMISSED AND WE DO SO. 24. IN REGARD TO THE ISSUE OF THE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT IT IS NOTICED THAT THE ASSESSEE IS CLAIMING TH AT IT HAD A BONA FIDE BELIEF THAT ITS INCOME WAS NOT TAXABLE IN INDIA AND CONSEQUENTLY IT WAS NOT LIABLE TO PAY ADVANCE TAX UNDER SECTION 234B. THE DECISION RELIED UPON B Y THE LEARNED AUTHORISED REPRESENTATIVE MORE SPECIFICALLY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RANCHI CLUB LTD. REFERRED TO SUPRA WOULD NO MORE BE A LAW ON THE ISSUE INSOFAR AS THE PROVISIONS OF SECTION 234B HAS BEEN AMENDED WITH RETROSPECTIVE EFFECT FROM 1.4.1989 BY THE FINANCE ACT 2001. TRU E IN THE CASE OF ANJUM M.H. GHASWALA & OTHERS REFERRED TO SUPRA THE HON'BLE S UPREME COURT DID HOLD THAT THE SETTLEMENT COMMISSION DID NOT HAVE THE POWERS T O WAIVE INTEREST UNDER SEC. 234B AND IN THE CASE OF INSILCO REFERRED TO SUPRA THE HON'BLE SUPREME COURT HAD RESTORED THE ISSUE TO THE FILE OF THE HON'BLE HIGH COURT FOR RE-ADJUDICATION. IN THE CASE OF INSILCO LTD. REFERRED TO SUPRA THE HON'BL E SUPREME COURT HAD RESTORED THE ISSUE TO THE FILE OF THE HON'BLE HIGH COURT TO DECIDE THE LEGAL ISSUE AS TO WHETHER THE DECISION IN THE CASE OF ANJUM M.H. GHAS WALA & OTHERS HAD ANY IMPACT ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RANCHI CLUB LTD. HERE IT IS KEPT IN MIND THAT AFTER THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF RANCHI CLUB LTD. THE PROVISIONS OF SECTION 234B HAD BEEN AMENDED WHEREBY ANNULLING THE EFFECT OF THE DECISI ON OF THE HON'BLE SUPREME I.T.A. NO. 1426 & CO 166/MDS/2009 142 COURT IN THE CASE OF RANCHI CLUB LTD. REFERRED TO SUPRA. FURTHER THE DECISION IN THE CASE OF REVATHI EQUIPMENT REFERRED TO SUPRA WO ULD NOT COME TO THE RESCUE OF THE ASSESSEE INSOFAR AS THE HON'BLE JURISDICTION AL HIGH COURT OF MADRAS HAD IN THE SAID CASE ACCEPTED THE FINDING OF THE TRIBUNAL THAT TILL THE FINANCE BILL WAS PASSED BY BOTH THE HOUSES OF PARLIAMENT RECEIVING THE ASSENT OF THE HON'BLE PRESIDENT OF INDIA ON 11-05-2001 THE ASSESSEE COU LD NOT HAVE VISUALIZED THAT THE INDIVIDUAL LIABILITY WOULD BE FASTENED ON HIM. IN THE SAID CASE IT WAS ON ACCOUNT OF THE FACT THAT THE THERE WAS A CHANGE IN THE LAW AND THAT CHANGE WAS NOT CONTEMPLATED BY THE ASSESSEE THAT THE INTEREST UNDE R SECTION 234B WAS NOT LEVIABLE AND THE BONA FIDES WAS ACCEPTED. IN FACT FOR THE PURPOSE OF WAIVING INTEREST U/S 234B THE CBDT HAS SPECIFICALLY ISSUED A CIRCULAR AUTHORIZING THE CHIEF COMMISSIONERS OF INCOME TAX UNDER SECTION 119(2)(B) OF THE ACT AND IN THE SAID CIRCULAR ONE OF THE CONDITIONS FOR WAIVER OF INTERE ST IS THE SUBSEQUENT AMENDMENT TO THE LAW. THAT IS NOT THE CASE IN THE PRESENT AP PEAL. THE LAW HAS NOT UNDERGONE ANY AMENDMENT. IN THE PRESENT CASE THE A SSESSEE KNEW THAT IT HAS GOT INCOME FROM ITS INVESTMENTS. THE ASSESSEE KNEW THAT ITS INVESTMENT DECISIONS WERE BEING TAKEN IN INDIA. A PERUSAL OF THE PROVISIONS OF SECTION 234B ALSO CLEARLY SHOWS THAT THE WORD USED IS SHALL AN D NOT MAY. THEREFORE IT IS NOT INCUMBENT UPON THE ASSESSING OFFICER TO CONSIDE R THE BONA FIDES OF AN ASSESSEE OR TO GRANT AN ASSESSEE AN OPPORTUNITY BEF ORE THE LEVY OF INTEREST UNDER SECTION 234B. THE LEVY OF INTEREST U/S 234B IS COM PENSATORY IN NATURE AND I.T.A. NO. 1426 & CO 166/MDS/2009 143 THEREFORE CONSEQUENTIAL AND DOES NOT PROVIDE FOR AN Y ROOM FOR CONSIDERING THE BONA FIDES OR OPPORTUNITY. IN THE CIRCUMSTANCES THE FINDING OF THE LEARNED CIT(A) IN DELETING THE LEVY OF INTEREST U/S 234B STANDS RE VERSED. CONSEQUENTLY GROUNDS 3.1 AND 3.2 OF THE REVENUES APPEAL STANDS ALLOWED. 25. IN REGARD TO LEVY OF INTEREST U/S 234D OF THE ACT IT IS NOTICED THAT THE ASSESSMENT YEAR INVOLVED IS 1999-2000. IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AYYASPPAN TEXTILES LTD. VARADHALAKSHMI MILLS LTD. AND SITALAKSHMI MILLS LTD. V. CIT REPOR TED IN 241 ITR 545 WE ARE OF THE VIEW THAT NO INTEREST UNDER SECTION 234D WOULD BE C HARGEABLE PRIOR TO THE ASSESSMENT YEAR 2004-05. CONSEQUENTLY GROUNDS 4. 1 AND 4.2 STANDS DISMISSED. 26. AS WE HAVE ALREADY HELD THAT THE ISSUE OF NOTI CE U/S. 148 IS VALID GROUNDS 2 OF THE ASSESSEES APPEAL STANDS DISMISSED . 27. AS WE HAVE HELD THAT THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT IN MALAYSIA AND THE FOREIGN INCOME OF THE ASSESSEE IS LIABLE TO TAX IN INDIA GROUNDS NOS. 3 TO 9 STAND DISMISSED. 28. NO SUBMISSIONS IN REGARD TO GROUNDS 10 11 AND 12 HAVE BEEN PLACED. CONSEQUENTLY THE SAME ARE DISMISSED. 29. GROUNDS 1 13 AND 14 ARE GENERAL IN NATURE AND DO NOT CALL FOR ANY ADJUDICATION. I.T.A. NO. 1426 & CO 166/MDS/2009 144 30. IN THE RESULT THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 31. THE ORDER WAS PRONOUNCED IN THE COURT ON 28/07 /2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 28 TH JULY 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE