Samir Kumar Nayak , Balasore v. CIT(IT&TP), Kolkata

ITA 1309/KOL/2019 | 2014-2015
Pronouncement Date: 29-11-2019 | Result: Allowed

Appeal Details

RSA Number 130923514 RSA 2019
Assessee PAN APSPK6683A
Bench Kolkata
Appeal Number ITA 1309/KOL/2019
Duration Of Justice 6 month(s) 1 day(s)
Appellant Samir Kumar Nayak , Balasore
Respondent CIT(IT&TP), Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-11-2019
Last Hearing Date 13-11-2019
First Hearing Date 13-11-2019
Assessment Year 2014-2015
Appeal Filed On 28-05-2019
Judgment Text
1 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( )BEFORE . /AND . # . $ ) [BEFORE SHRI J. SUDHAKAR REDDY AM & SHRI A. T. VAR KEY JM] I.TA NO.1303/KOL/2019 A.Y 2014-15 MAHESH KUMAR C/O IBM INDIA PRIVATE LIMITED GLOBAL PROCESS SERVICES-1A TAX TEAM HR DELIVERY CENTRE D1 4 TH FLOOR MANYATA BUSINESS PARK OUTER RING ROAD NAGAWARA KARNATAKA-560045. (PAN:APSPK6683A) VS. COMMISSIONER OF INCOME TAX (IT&TP) KOLKATA APPELLANT RESPONDENT I.TA NO.1307/KOL/2019 A.Y 2014-15 SMT. LISA DAS BL-353 SECTOR-2 SALT LAKE KOLKATA- 700 091. (PAN: AMQPD7668B) VS. ASSISTANT COMMISSIONER OF INCOME-TAX (IT) CIRCLE-1(2) KOLKATA. APPELLANT RESPONDENT I.TA NOS.1309/KOL/2019 A.Y 2014-15 SAMIR KUMAR NAYAK SALES TAX OFFICE LANE BALASORE ODISHA-756001. (PAN: AFCPN5619M) VS. COMMISSIONER OF INCOME-TAX (IT&TP) KOLKATA. APPELLANT RESPONDENT I.TA NO.1310/KOL/2019 A.Y 2014-15 BALAKALYAN CHOWDARY MARATHU 2/423-C MANGALAMITRA RAJAMPET KADAPA ANDHRA PRADESH-516115 (PAN: ASRPM6979R) VS. COMMISSIONER OF INCOME-TAX (IT&TP) KOLKATA. APPELLANT RESPONDENT I.TA NO.1312/KOL/2019 A.Y 2014-15 BISWAJIT SWAIN 60/4A HARAN BANERJEE LANE KONNAGAR HOOGHLY WEST BENGAL- 712235 (PAN: AYSPS1745C) VS. COMMISSIONER OF INCOME-TAX (IT&TP) KOLKATA. APPELLANT RESPONDENT I.TA NO.1313/KOL/2019 A.Y 2014-15 AZHARUL HAQUE FLAT 6 BUILDING 1 SAYED ISMAIL LANE VS. ASSISTANT COMMISSIONER OF INCOME- TAX (IT) CIRCLE-1(1) KOLKATA. 2 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 PARK STREET KOLKATA-700 016. (PAN: ACKPH1029E) APPELLANT RESPONDENT I.TA NO.1316/KOL/2019 A.Y 2014-15 DIPANJAN BASAK AG-193 TALBAGAN KESTOPUR KOLKATA- 700101. (PAN: ALNPB1981F) VS. ASSISTANT COMMISSIONER OF INCOME- TAX (IT) CIRCLE-1(1) KOLKATA. APPELLANT RESPONDENT ASSESSEE/APPELLANT BY : SHRI NAGESWAR RAO ADVOCAT E RESPONDENT BY : DR. P. K. SRIHARI CIT DR DATE OF HEARING 13.11.2019 DATE OF PRONOUNCEMENT 29 .11.2019 ORDER PER SHRI A.T.VARKEY JM ALL THESE APPEALS PREFERRED BY THE DIFFERENT ASSESS EES ARE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(IT & TP) KOLKATA PASSED U/S. 263 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) ALL DATED 29.03.2019FOR A Y 2014-15. SINCE FACTS ARE IDENTICAL AND GROUNDS ARE COMMON WE DISPOSE OF ALL THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON FACTS PERMEATING IN ALL THE APPEALS A RE THAT ALL THE ASSESSEES ARE THE EMPLOYEES OF IBM INDIA PVT. LTD. (HEREINAFTER REFER RED TO AS IBM) WHO HAVE BEEN SENT TO SWITZERLAND ON COMPANYS FOREIGN ASSIGNMENT. THE UN DISPUTED FACTS ARE THAT THE RESIDENTIAL STATUS OF ALL THE ASSESSEES FOR THE RELEVANT YEAR IS NON-RESIDENT IN TERMS OF SECTION 6 OF THE ACT AND THAT THEY ACTUALLY RENDERED SERVICES OUTSID E INDIA DURING THE PERIOD UNDER CONSIDERATION. THE EMPLOYER VIZ. IBM DEDUCTED TAX AT SOURCE U/S 192 ON THE ENTIRE GROSS SALARY EARNED BY THE ASSESSEES. THE ASSESSEES HOW EVER CLAIMED IN THEIR RESPECTIVE RETURNS OF INCOME THAT THE FOREIGN ASSIGNMENT ALLOWANCE COM PONENT INTER ALIA INCLUDED IN THE GROSS SALARY WAS RECEIVED BY THEM OUTSIDE INDIA AND THAT TOO FOR THE SERVICES RENDERED OUTSIDE INDIA AND THEREFORE FELL OUTSIDE THE AMBIT OF TOTAL INCOME U/S. 5(2) OF THE ACT. IN THE 3 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 ASSESSMENTS COMPLETED U/S 143(3) THE AO ACCEPTED T HE ASSESSEES CLAIM FOR EXCLUSION OF SUCH FOREIGN ASSIGNMENT ALLOWANCE FROM THE AMBIT OF TOTAL INCOME. THIS ACTION OF THE AO HAS BEEN INTERFERED WITH BY THE LD. CIT U/S. 263 OF THE ACT ON THE GROUND THAT AOS ACTION IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. THE LEGAL ISSUE RAISED BY ALL THE ASSESSEES IN THE PRESENT APPEALS IS AGAINST THE A CTION OF THE LD. CIT TO USURP THE REVISIONAL JURISDICTION U/S. 263 OF THE ACT. 3. AT THE OUTSET WHEN THE MATTER WAS BEING HEARD THE LD. COUNSEL FOR THE ASSESSEE SHRI NAGESWAR RAO ADVOCATE POINTED OUT THAT SIMILAR/IDE NTICAL MATTERS PERTAINING TO THE ISSUES OF IBM EMPLOYEES FOREIGN ALLOWANCE HAS ALREADY BEE N HEARD BY THE BENCH COMPRISING OF SHRI A. T. VARKEY AND DR. A. L. SAINI C BENCH IN THE APPEALS PREFERRED BY SHRI BODHISATTVA CHATTOPADHYAY & ORS. VS CIT (IT & TP) [ ITA NO.1314/KOL/2019 & ORS FOR AY 2014-15] AND THAT JUDGMENT IN THOSE APPEALS WERE RESERVED ON 27.09.2019 AND THAT THE JUDGMENT IN THOSE APPEALS ARE EXPECTED AT ANY TIME. AT THAT JUNCTURE WE NOTE THAT THE AUTHOR OF THE JUDGMENT IN THOSE APPEALS IS ONE OF THE MEMB ER OF THIS BENCH C ON THIS DAY OF HEARING [I.E. ON 13.11.2019] AND SINCE WE WERE AWA RE THAT THE ORDER/JUDGMENT OF THOSE APPEALS WERE READY TO BE DELIVERED WE TOOK THESE A PPEALS FOR HEARING IN ORDER TO ASCERTAIN WHETHER THE FACTS AND THE ISSUES DISCUSSED BY THE LD. CIT IN THESE IMPUGNED ORDERS ARE SIMILAR/IDENTICAL TO THAT OF THE APPEALS OF SHRI BO DHISATTVA CHATTOPADHYAY(SUPRA). THOUGH THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD . PR. CIT PASSED U/S. 263 OF THE ACT AND DOES NOT WANT US TO INTERFERE IN THE IMPUGNED O RDER COULD NOT POINT OUT ANY DIFFERENCE IN THE FACTS OR LAW OR ISSUES IN THE APPEALS OF SHR I BODHISATTVA CHATTOPADHYAY(SUPRA). AFTER HEARING WE NOTE THAT THE PRESENT APPEALS ARE SIMILA R/IDENTICAL TO THAT OF THE APPEALS PREFERRED BY SHRI BODHISATTVA CHATTOPADHYAY & ORS. VS. CIT (I T & TP)[ ITA NO. 1314/KOL/2019] WE ALSO NOTE THAT THE IMPUGNED ORDER OF LD. CIT IN THESE APPEALS AND THAT OF ITA NO. 1314/KOL/2019 IS ON THE SAME DATE I.E. 29.03.2019 SIMILARLY WORDED (EXCEPT THE FIGURES) AND BY THE SAME LD. CIT (IT&TP) AND SO WE TREAT THE SE APPEALS AS ALSO HEARD AND THE DECISION IN ITA NO. 1314/KOL/2019 WILL BE FOLLOWED MUTATIS MUTANDIS. FURTHER WE NOTE THAT ON 15.11.2019 WE HAVE PRONOUNCED THE JUDGMENT IN S HRI BODHISATTVA CHATTOPADHYAY & ORS. VS. CIT (IT&TP) WHEREIN WE ALLOWED THE APPEAL S OF THE ASSESSEES AND SINCE AS AFORE STATED THE FACTS BEING SIMILAR AND ISSUES ARE IDEN TICAL THE RESULT OF BODHISATTVA 4 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 CHATTOPADHYAY (SUPRA). SINCE WE NOTE THAT THE FACTS ARE SIMILAR/IDENTICAL AND THE LD. DR COULD NOT POINT OUT ANY DIFFERENCE IN THE FACTS AS DECIDED BY THIS TRIBUNAL IN THE CASE OF DCIT VS. SANDIP MAITY & ORS. IN ITA NO. 1128 416 T O 425/KOL/2017 AS WELL AS THAT PREFERRED BY SHRI BODHISATTVA CHATTOPADHYAY (SUPRA) AND THE DISTINGUISHING POINTS RAISED BY THE LD. CIT IN HIS IMPUGNED ORDER PASSED U/S. 263 O F THE ACT HAS BEEN CONSIDERED IN THE ORDER PASSED ON 15.11.2019 IN THE CASE OF BODHISATT VA CHATTOPADHYAY VS. CIT(IT&TP) KOLKATA IN ITA NO. 1314/KOL/2019 & ORS. FOR AY 2014 -15 WE ARE INCLINED TO FOLLOW THE SAME MUTATIS-MUTATIS AND TAKE NOTE THAT THE TRIBUNA L HAD QUASHED THE IMPUGNED ORDER OF THE LD. CIT BY HOLDING AS UNDER: 2. AT THE OUTSET ITSELF IT WAS BROUGHT TO OUR NOT ICE THAT THE ISSUE INVOLVED IS NO LONGER RES INTEGRA AND THEREFORE AFTER HEARING BOTH THE PART IES WE ARE INCLINED TO DISMISS ALL THE STAY APPLICATIONS FILED BY THE ASSESSEE AND DISPOSE OF A LL THE APPEALS IN ITA NOS. 1304 1306 1308. 1311 1314 & 1315/KOL/2019.THE COMMON FACTS PERMEATING IN ALL THE APPEALS ARE THAT ALL THE ASSESSEES ARE THE EMPLOYEES OF IBM INDIA PVT. LTD. (HEREINAFT ER REFERRED TO AS IBM) WHO HAVE BEEN SENT TO SWITZERLAND ON COMPANYS FOREIGN ASSIGNMENT. THE UN DISPUTED FACTS ARE THAT THE RESIDENTIAL STATUS OF ALL THE ASSESSEES FOR THE RELEVANT YEAR IS NON-RE SIDENT IN TERMS OF SECTION 6 OF THE ACT AND THAT T HEY ACTUALLY RENDERED SERVICES OUTSIDE INDIA DURING THE PERIOD UNDER CONSIDERATION. THE EMPLOYER VIZ. IBM DEDUCTED TAX AT SOURCE U/S 192 ON THE ENTIRE GR OSS SALARY EARNED BY THE ASSESSEES. THE ASSESSEES HOWEVER CLAIMED IN THEIR RESPECTIVE RETU RNS OF INCOME THAT THE FOREIGN ASSIGNMENT ALLOWANCE COMPONENT INTER ALIA INCLUDED IN THE GROS S SALARY WAS RECEIVED BY THEM OUTSIDE INDIA AND THAT TOO FOR THE SERVICES RENDERED OUTSIDE INDIA AN D THEREFORE FELL OUTSIDE THE AMBIT OF TOTAL INCOME U/S. 5(2) OF THE ACT. IN THE ASSESSMENTS COMPLETED U/S 143(3) THE AO ACCEPTED THE ASSESSEES CLAIM FOR EXCLUSION OF SUCH FOREIGN ASSIGNMENT ALLOWANCE FROM THE AMBIT OF TOTAL INCOME. THIS ACTION OF THE AO HAS BEEN INTERFERED WITH BY THE LD. CIT U/S. 263 OF THE ACT ON THE GROUND THAT AOS ACTION IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. TH E LEGAL ISSUE RAISED BY ALL THE ASSESSEES IN THE PRESENT APPEALS IS AGAINST THE ACTION OF THE LD. C IT TO USURP THE REVISIONAL JURISDICTION U/S. 263 OF THE ACT. SINCE THE FACTS AND QUESTIONS OF LAW INVOLVED IN ALL THESE CASES ARE IDENTICAL WE TAKE THE APPEA L OF SHRI BODHISATTVA CHATTOPADHYAY IN ITA NO.1314/KO L/2019 AS THE LEAD CASE THE RESULT OF WHICH WILL BE APPLIED MUTATIS MUTANDIS IN ALL OTHER CASES . 3. BRIEFLY STATED THE FACTS OF THE LEAD CASE IS THA T THE ASSESSEE (SHRI BODHISATTVA CHATTOPADHYAY) WAS SENT BY HIS EMPLOYER IBM ON SHORT TERM ASSIGNM ENT TO SWITZERLAND FOR WHICH HE WAS STATIONED THERE FOR 349 DAYS DURING THE RELEVANT FINANCIAL YE AR 2013-14. SINCE HIS STAY OUTSIDE INDIA FOR THE PURPOSE OF EMPLOYMENT EXCEEDED 182 DAYS DURING THE RELEVANT YEAR HIS RESIDENTIAL STATUS FOR THE YEAR UNDER CONSIDERATION WAS NON-RESIDENT. DURIN G THE YEAR THE ASSESSEE HAD RECEIVED THE FOLLOWING EMOLUMENTS FROM IBM. A) GROSS SALARY RECEIVED IN INDIA - RS.18 65 7 67/- AND B) FOREIGN ALLOWANCES ON ACCOUNT OF THE INTERNATIONAL ASSIGNMENT RECEIVED IN SWITZERLAND - RS.42 97 092/- 4. IT IS NOTED THAT IBM HAD DEDUCTED TAX AT SOURCE (TDS) OF RS.16 94 180/- ON THE ENTIRE EMOLUMENTS PAID TO THE ASSESSEE INCLUDING THE FOREI GN ASSIGNMENT ALLOWANCE U/S. 192(1) OF THE ACT. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASS T. YEAR 2014-15 DECLARING TAXABLE INCOME OF 5 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 RS.17 52 360/- (COMPRISING ONLY OF THE SALARY OF RS .18 65 767/- RECEIVED IN INDIA) AFTER CLAIMING THE DEDUCTION OF RS.1 01 405/- UNDER CHAPTER VIA OF THE ACT. AFTER CLAIMING THE CREDIT OF TAXES DEDUCTED AT SOURCE BY THE EMPLOYER U/S 192 THE ASSESSEE CLA IMED A REFUND OF RS.13 27 800/- IN HIS RETURN OF INCOME. ACCORDING TO THE ASSESSEE THE FOREIGN ASS IGNMENT ALLOWANCE OF RS.42 97 092/- HAD BEEN RECEIVED OUTSIDE INDIA IN CONNECTION WITH THE SERVI CES HE RENDERED OUTSIDE INDIA AND THEREFORE HE DID NOT OFFER IT TO TAX IN THE RETURN OF INCOME FILED I N INDIA SINCE IT DID NOT FORM PART OF HIS TOTAL INC OME CHARGEABLE U/S. 5(2) OF THE ACT. 5. WE NOTE FROM THE DOCUMENTS ON RECORD THAT THE CA SE OF THE ASSESSEE WAS SELECTED FOR COMPLETE SCRUTINY UNDER CASS WHEREIN ONE OF THE PAR AMETERS FOR SELECTION WAS THAT THE INCOME DECLARED UNDER THE HEAD SALARY IN THE RETURN OF I NCOME WAS LOWER THAN THE SALARY REPORTED IN FORM 26AS. IN THE COURSE OF ASSESSMENT THE AO CALLED FOR SEVERAL DETAILS IN HIS NOTICE ISSUED U/S 142(1) DATED 11.11.2016 ALONG WITH WRITE-UPS ON THE ISSUES FOR WHICH THE ASSESSEES CASE WAS SELECTED UNDER CASS. BEFORE THE AO THE ASSESSEE EXPLAINED THE MODA LITIES OF RECEIPT OF FOREIGN ASSIGNMENT ALLOWANCE THROUGH HIS TCC ISSUED BY AXIS BANK WHICH SHOWED THAT THE FOREIGN ASSIGNMENT ALLOWANCE WAS RECEIVED OUTSIDE INDIA. THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM HIS EMPLOYER THAT SUCH ALLOWANCE WAS PAID FOR THE SERVICES RENDE RED OUTSIDE INDIA. ADDITIONALLY THE ASSESSEE FURNISHED THE SWITZERLAND TAX DOCUMENTS FOR 2013 & 2014 EVIDENCING THAT THE FOREIGN ASSIGNMENT ALLOWANCE HAD BEEN TAXED IN SWITZERLAND. TAKING NOT E OF THE REPLIES FURNISHED BY THE ASSESSEE THE AO IN HIS ASSESSMENT ORDER DATED 23.12.2016 HAD ACC EPTED THE RETURN OF INCOME (ROI) FILED BY THE ASSESSEE CLAIMING THE ASSIGNMENT ALLOWANCE RECEIVED BY THE ASSESSEE AT SWITZERLAND AS NOT TAXABLE IN INDIA IN TERMS OF SECTION 5(2) OF THE ACT. THE A O ACCORDINGLY ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.17 61 110/-. SUBSEQUENT TO PASSING O F THE ORDER U/S 143(3)OF THE ACT THE LD. CIT ISSUED SHOW CAUSE NOTICE DT. 13-03-2019 TO THE ASSE SSEE STATING THAT THE TAXABILITY OF THE FOREIGN ASSIGNMENT ALLOWANCE REQUIRED RECONSIDERATION IN VI EW OF THE PROVISIONS OF SECTION 5(2)(B) OF THE ACT WHICH WAS HELD ERRONEOUSLY TO BE NON-TAXABLE BY THE AO IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. 6. IN REPLY THE ASSESSEE FURNISHED HIS OBJECTIONS TO THE SCN. THE LD. CIT HOWEVER DID NOT AGREE WITH THE CONTENTIONS PUT FORTH BY THE ASSESSE E. ACCORDING TO THE CIT THE CONTRACT OF EMPLOYMENT OF THE ASSESSEE WAS WITH IBM WHICH WAS L OCATED IN INDIA AND THEREFORE ANY AND ALL RIGHTS ARISING FROM THE CONTRACT INTER ALIA INCLUDI NG THE RIGHT TO RECEIVE SALARY AROSE ONLY IN INDI A. REFERRING TO THE TERM RECEIVE OR DEEMED TO RECEI VE AS USED IN SECTION 5(2)(B)OF THE ACT THE LD. CIT OBSERVED THAT THE SITUS OF INCOME RECEIVED WO ULD BE THE PLACE OF DELIVERY OF CASH/CHEQUE. ACCORDING TO LD. CIT THE POINT OF RECEIPT IS THE POINT OF PAYMENT. HE OBSERVED THAT THE INCOME WAS RECEIVED BY THE ASSESSEE IN INDIA WHEN THE EMPL OYER TRANSFERRED HIS FOREIGN ASSIGNMENT ALLOWANCE FROM THEIR BANK ACCOUNT HELD IN BANGALORE TO AXIS BANKS NOSTRO ACCOUNT FOR TOP-UP TO THE TRAVEL CURRENCY CARD (TCC) WHICH WAS EARLIER MADE AVAILABLE TO THE ASSESSEE IN INDIA. HE THUS HELD THAT IN REAL TERMS THE INCOME WAS RECEIVED IN INDIA. TO SUPPORT HIS CASE THE LD. CIT FURTHER REFERRED TO THE SALARY STATEMENT OF THE ASSESSEE WH EREIN THE ALLOWANCE WAS DENOMINATED IN INDIAN CURRENCY. THE LD. CIT ALSO EMPHASIZED THAT THE ASSE SSEE HAD NOT OFFERED THE FOREIGN ASSIGNMENT ALLOWANCE IN SWITZERLAND NOR CLAIMED THE BENEFIT OF THE DTAA AND THEREFORE THE ASSESSEE HAD ALLEGEDLY NOT PAID TAXES ON THE FOREIGN ASSIGNMENT ALLOWANCE EITHER IN INDIA OR IN SWITZERLAND. RELYING ON THE DECISION OF THIS TRIBUNAL IN THE CAS E OF TAPAS KR BANDOPADHYAY VS DDIT (159 ITD 309) THE LD. CIT OBSERVED THAT THE INCOME PAID/LOA DED IN TCC WAS ACTUALLY RECEIVED IN INDIA AND HENCE TAXABLE IN TERMS OF SECTION 5(2)(A) OF THE AC T. THE LD CIT IN HIS ORDER U/S. 263 OF THE ACT DATED 29.03.2019 THUS CONCLUDED THE ORDER PASSED BY THE AO U/S. 143(3) OF THE ACT DATED 23.12.2016 FOR AY 2014-15 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SINCE IN HIS OPINION THE ASSESSMENT ORDER WAS PASSED WITHOUT EXAMINING THE L EGAL ISSUES INVOLVED AND INTERPRETATION EXAMINATION OF MATERIAL ON RECORD ETC. AND ACCEPTIN G THE ASSESSEES CLAIM THAT THE INCOME OF RS.42 97 092/- HAD NOT BEEN RECEIVED IN INDIA. INVO KING EXPLANATION (2) OF SECTION 263OF THE ACT THE LD. CIT SET ASIDE THE ASSESSMENT ORDER OF THE A O DIRECTING HIM TO PASS A FRESH ASSESSMENT ORDER AFTER MAKING NECESSARY ENQUIRIES ON ALL THE ISSUES INCLUDING THE POINTS ON WHICH THE ASSESSEE HAS NOT FURNISHED AS DISCUSSED SUPRA AFTER EXAMINING THE V ARIOUS CASE LAWS AND CORRECT INTERPRETATION OF THE 6 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 LAW IN THE FACTS OF THE CASE TO EXAMINE AND DECIDE THE ISSUE OF EXEMPTION FROM TAXATION ON SALARY AMOUNTING TO RS.42 97 092/-. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT THE ASSESSEE IS IN APPEAL BEFORE US. 7. IN THE GROUNDS TAKEN IN THE APPEAL THE ASSESSEE HAS CHALLENGED THE LEGAL VALIDITY OF USURPATION OF REVISIONAL JURISDICTION BY THE LD. CI T U/S 263 OF THE ACT. ACCORDING TO ASSESSEE THE LD. CIT HAS WRONGLY EXERCISED THE REVISIONAL JURISDICTI ON U/S 263OF THE ACT SINCE THE AO'S ORDER ON THIS ISSUE CANNOT BE HELD TO BE ERRONEOUS AS WELL AS PRE JUDICIAL TO THE INTEREST OF THE REVENUE. IT IS THE ASSESSEES CASE THAT THE AO PASSED THE ASSESSMENT O RDER AFTER CONSIDERING THE ISSUE OF TAXABILITY OF FOREIGN ALLOWANCE AND IT WAS ONLY AFTER THE AO EXAM INED THE FACTS AND THE RELEVANT DOCUMENTS THAT THE AO TOOK A PLAUSIBLE VIEW ON THIS ISSUE WHICH I S IN CONSONANCE WITH THIS TRIBUNALS VIEW LAID ON THIS PRECISE ISSUE IN THE CASE OF DCIT VS SUDIPMAIT Y & OTHERS IN ITA NOS. 428 416 & 425/KOL/2017. ACCORDING TO THE ASSESSEE THEREFORE ON THE FACTS OF THE CASE THE AOS ACTION OF ACCEPTING THE ASSESSEES CLAIM FOR EXCLUSION OF FOR EIGN ALLOWANCE FROM THE COMPUTATION OF TOTAL INCOME CANNOT BE SAID TO AN UNSUSTAINABLE VIEW IN L AW AND HENCE THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE WHICH IS A CONDITION PRECEDENT TO USURP/INVOKE THE REVISIONAL JURISDICTION U/S 263 OF THE ACT BY THE LD. CIT. IN THE CIRCUMSTANCES SINCE THE CONDITIONS PRECEDENT TO USURP THE REVISIO NARY JURISDICTION U/S 263OF THE ACT IS CLAIMED TO B E ABSENT IN THE PRESENT CASE THE ASSESSEE HAS CONTEN DED THAT THE IMPUGNED ORDER IS WHOLLY WITHOUT JURISDICTION AND IS THEREFORE BAD IN LAW. 8. HAVING HEARD BOTH THE PARTIES AND ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE LD. CIT INVOKED THE R EVISIONARY JURISDICTION ON THE BROAD ALLEGATION THA T THE AO HAD FAILED TO CONDUCT ENQUIRIES WHICH THE FA CTS OF THE CASE REQUIRED THE AO TO CONDUCT. ACCORDING TO LD. CIT BEFORE PASSING OF THE ASSESSME NT ORDER THERE WAS LACK OF APPLICATION MIND TO THE FACTS AND INCORRECT APPLICATION OF APPLICABLE L EGAL PROVISIONS IN THE FACTS OF THE CASE. AS A RESU LT THE AO PASSED AN ORDER WHICH IN THE OPINION OF LD. CIT WAS UNSUSTAINABLE IN LAW AND THEREFORE LIABLE FOR REVISION U/S 263 OF THE ACT. BEFORE ADJUDICATIN G THE ISSUES ARISING FROM THE IMPUGNED ORDER OF THE LD. CIT WE HAVE TO REMIND OURSELVES AS TO THE SCOP E OF REVISIONAL JURISDICTION U/S. 263 OF THE ACT. FOR THAT LET US TAKE THE GUIDANCE OF JUDICIAL PREC EDENCE LAID DOWN BY THE HON'BLE APEX COURT IN MALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 8 3(SC) WHEREIN THEIR LORDSHIP HAVE HELD THAT TWIN CONDITIONS SHOULD BE SATISFIED BEFORE JURISDIC TION U/S 263 OF THE ACT IS EXERCISED BY THE LD. CIT . THE TWIN CONDITIONS WHICH NEED TO BE SATISFIED ARE THAT (I) THE ORDER OF THE ASSESSING OFFICER MUST BE ERRONEOUS AND(II) AS A CONSEQUENCE OF PASSING AN ER RONEOUS ORDER PREJUDICE IS CAUSED TO THE INTEREST OF THE REVENUE. IN THE FOLLOWING CIRCUMSTANCES THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS I.E. (I) IF THE ASSESSING OFFICER'S ORDER WAS PASSED ON ASSUMPTION OF INCORRECT FACTS; OR ASSUMPTION OF INCORRECT LAW; (II) ASSESSING OFFICER'S ORDER IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE; (I II) IF THE AO'S ORDER IS PASSED BY THE WITHOUT APPLICATION OF MIND; OR (IV) IF THE AO HAS NOT INVESTIGATED TH E ISSUE BEFORE HIM. IN THE CIRCUMSTANCES ENUMERATED A BOVE ONLY THE ORDER PASSED BY THE ASSESSING OFFICER CAN BE TERMED AS ERRONEOUS FOR THE PURPOSE OF S.263 OF THE ACT. COMING NEXT TO THE SECOND LIMB THE AO'S ERRONEOUS ORDER CAN BE REVISED BY TH E LD. CIT ONLY WHEN IT IS SHOWN THAT THE SAID ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. WH EN THIS ASPECT IS EXAMINED ONE HAS TO UNDERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. 'PREJ UDICIAL TO THE INTEREST OF THE REVENUE'' HAS TO BE READ IN CONJUNCTION WITH AN 'ERRONEOUS' ORDER PASSED BY THE ASSESSING OFFICER. THE HONBLE SUPREME COURT HELD THAT FOR INVOKING POWERS CONFERRED BY S.263; T HE CIT SHOULD NOT ONLY SHOW THAT THE AO'S ORDER IS ERRONEOUS AS A RESULT OF ANY OF THE SITUATIONS E NUMERATED ABOVE BUT CIT MUST ALSO FURTHER SHOW THAT AS A RESULT OF AN ERRONEOUS ORDER SOME LOSS I S CAUSED TO THE INTEREST OF THE REVENUE. THEIR LORDSHIP IN THE SAID JUDGMENT HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS FURTHER OBSERVED THAT WHEN THE ASSESSING OFFICER ADOPTS ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE LD. CIT DOES NOT AGREE IT CANNOT BE TREATED AS AN ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY TH E ASSESSING OFFICER IS UNSUSTAINABLE IN LAW . 7 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 9. IN THE GIVEN FACTS OF THE PRESENT CASE WE FIND THAT THE PRIMARY FAULT FOUND BY THE LD. CIT TO INTERFERE WITH THE ORDER OF AO WAS THE ALLEGED NON- EXAMINATION OF THE RELEVANT FACTS CONCERNING TAXABILITY OF THE FOREIGN ASSIGNMENT PAID THROUGH T CC. WE ARE AWARE OF THE FACT THAT THE ASSESSING OFFICER'S ROLE WHILE FRAMING AN ASSESSMENT IS NOT O NLY AS THAT OF AN ADJUDICATOR BUT HE IS ALSO AN INVESTIGATOR. THE AO HAS A DUAL ROLE TO PERFORM I.E . HE IS AN INVESTIGATOR AS WELL AS AN ADJUDICATOR AND THEREFORE IF HE FAILS IN ANY ONE OF THE TWO RO LES AS AFORE-STATED HIS ORDER CAN BE TERMED AS ERRONEOUS. FROM THE ORDER OF THE LD. CIT WE NOTE T HAT HE FIRSTLY FOUND FAULT WITH THE AO'S ROLE OF AN INVESTIGATOR BECAUSE IN HIS SUBJECTIVE OPINION THE AO DID NOT PROPERLY CONDUCT THE INVESTIGATION OF THE RELEVANT FACTS AND LEGAL ASPECTS CONCERNING TAX ABILITY OF FOREIGN ASSIGNMENT ALLOWANCE. WE HOWEVER NOTE THAT THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMENT ON THE CASS PARAMETER OF SALARY INCOME SHOWN IN ITR IS LESS THAN THE SALARY INCOME AS PER FORM 26AS . WE FIND THAT THE ASSESSEES EMPLOYER IBM HAD DEDUCTED ON THE GROSS SALARY INTER ALIA INCLUDING FOREIGN ASSIGNMENT ALLOWANCE AND THE TDS WAS REPORTED IN STATEMENT 26A S IN THE ASSESSEES NAME. IN THE RETURN FURNISHED THE ASSESSEE HOWEVER DID NOT INCLUDE THE SAID ALLOWANCE IN HIS TOTAL INCOME ON THE PLEA THAT IT WAS NOT INCOME EARNED OR ACCRUED IN INDIA A ND THEREFORE NOT FORMING PART OF THE TOTAL INCOME IN TERMS OF SECTION 5(2) READ WITH SECTION 9(1)(II) OF THE ACT. CONSEQUENTLY THEREFORE THERE APPEARED DIFFERENCE BETWEEN THE SALARY INCOME REPORTED IN FO RM 26AS WITH THE SALARY INCOME DECLARED IN THE RETURN OF INCOME. AS A RESULT THE ASSESSEES CASE W AS SELECTED FOR SCRUTINY ASSESSMENT FOR MAKING ENQUIRIES ABOUT SUCH DIFFERENTIAL AMOUNT. WE NOTE T HAT IN THE NOTICE U/S 142(1) OF THE ACT DATED 11.11.2016 THE AO RAISED SPECIFIC QUERY REQUIRING THE ASSESSMENT TO EXPLAIN THE SAID DIFFERENCE AND FURNISH HIS EXPLANATION ALONG WITH SUPPORTING DOCUM ENTS. IN RESPONSE THE LD. AR OF THE ASSESSEE FURNISHED DETAILED REPLIES THROUGH LETTERS DATED 30 .11.2016 05.12.2016&15.12.2016. IN HIS LETTER DATED 30.11.2016 AVAILABLE AT PAGES 54 TO 55 OF PA PER BOOK THE AR EXPLAINED DURING THE RELEVANT YEAR THE ASSESSEE WAS PHYSICALLY PRESENT OUTSIDE IN DIA FOR MORE THAN 182 DAYS AND THEREFORE HE WAS A NON-RESIDENT UNDER SECTION 6 OF THE ACT. DRAWING ATTENTION TO SECTION 5(2) OF THE ACT HE SUBMITTED THAT THE ASSESSEE BEING A NON-RESIDENT THE INCOME WOULD BE TAXABLE IN INDIA ONLY IF THE INCOME WAS RECEIVED OR DEEMED TO BE RECEIVED OR ACCRUED OR DEE MED TO ACCRUE IN INDIA. THE ASSESSEE SUBMITTED THAT SINCE FOREIGN ASSIGNMENT ALLOWANCE OF RS.42 97 092/- WAS RECEIVED OUTSIDE INDIA FOR RENDERING SERVICES IN SWITZERLAND THE SAME DID NOT FORM PART OF HIS TOTAL INCOME. THE AR OF THE ASSESSEE ALSO FURNISHED COPIES OF THE SWISS TAX DOCUMENT FOR 2013 & 2014 TO SUBSTANTIATE THAT THE ALLOWANCE RECEIVED OUTSIDE INDIA FROM THE EMPLOYER HAD SUFFER ED TAX IN THE COUNTRY WHERE THE SERVICES WERE RENDERED. VIDE LETTER DATED 05.12.2016 [PAGES 52 TO 53 OF PAPER BOOK] THE AR OF THE ASSESSEE FILED COPIES OF HIS BANK STATEMENTS IN INDIA TO SHOW THAT FOREIGN ASSIGNMENT ALLOWANCE WAS NOT RECEIVED BY THE ASSESSEE IN INDIA. THE AR ALSO FURNISHED COP Y OF CERTIFICATE BY THE EMPLOYER CERTIFYING THAT THE FOREIGN ASSIGNMENT ALLOWANCE WAS PAID FOR RENDE RING OF SERVICES IN SWITZERLAND. IN THE LETTER DATED 16.12.2016 [PAGES 52 TO 53 OF PAPER BOOK] TH E A/R OF THE ASSESSEE EXPLAINED THE MODALITY OF PAYMENT OF FOREIGN ASSIGNMENT ALLOWANCE BY IBM AS U NDER: 'WE WOULD LIKE TO SUBMIT BEFORE YOUR GOODSELF THAT THE FOREIGN ASSIGNMENT ALLOWANCE PAID BY IBM INDIA PRIVATE LIMITED EMPLOYER OF THE CAPTIONED ASSESSEE TO THE INTERNATIONAL TRAVEL CARD OUTSIDE INDIA. THE SAID CARD IS DENOMINATED I N FOREIGN CURRENCYONLY AND CAN BE USED ONLY OUTSIDE INDIA. ONCE AN EMPLOYEE IS SENT ON FOR EIGN ASSIGNMENT A TRAVEL CURRENCY CARD IS ISSUED TO THE EMPLOYEE BY AXIS BANK LIMITED. UPON INSTRUCTIONS FROM IBM AXIS BANK PAYS THE AMOU NT OF FOREIGN ASSIGNMENT ALLOWANCE TO THE INTERNATIONAL TRAVEL CARD OF THE EMPLOYEE OUTSI DE INDIA THROUGH ITS NOSTRO ACCOUNT SITUATED OUTSIDE INDIA. A NOSTRO ACCOUNT IS A BANK ACCOUNT H ELD IN A FOREIGN COUNTRY BY A DOMESTIC BANK DENOMINATED IN THE CURRENCY OF THAT COUNTRY. NOSTRO ACCOUNTS ARE USED TO FACILITATE SETTLEMENT OF FOREIGN EXCHANGE AND TRADE TRANSACTIO NS. A NOSTRO ACCOUNT IS ALWAYS MAINTAINED OUTSIDE INDIA AND DENOMINATED IN FOREIGN CURRENCY. 8 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 IN VIEW OF THE SAME SINCE THE FOREIGN ASSIGNMENT A LLOWANCES ARE PAID FROM NOSTRO ACCOUNT SITUATED OUTSIDE INDIA TO THE INTERNATIONAL TRAVEL CARD OUTSIDE INDIA THE SAME IS NOT TAXABLE UNDER SECTION 5(2) OF THE ACT IN CASE OF NON-RESIDE NTS. IN THIS REGARD WE HAVE ALSO ENCLOSED A LETTER ISSUED BY AXIS BANK CONFIRMING THAT THE AMOU NT IS CREDITED TO THE INTERNATIONAL TRAVEL CARD OF THE EMPLOYEES OUTSIDE INDIA THROUGH THE NOS TRO ACCOUNT MAINTAINED OUTSIDE INDIA AS ANNEXURE 1 IN CONNECTION WITH THE SAME WE WOULD LIKE 10 REFER TO THE LETTER FROM AXIS BANKISSUED IN CASE OF AN EMPLOYEE OF IBM INDIA PRIVATE LIMITED ( IBM) MRSUDIPTAMAITY (COPY ENCLOSED AS ANNEXURE 2) WHEREIN AXIS BANK HAS CLARIFIED THE MET HODOLOGY OF TRANSFER OF FUNDS TO THE AXIS TRAVEL CARD OF EMPLOYEES OF IBM FROM ITS NOSTRO ACC OUNT WITH ZURCHERKANTONAL BANK (ZKB) OUTSIDE INDIA. THE LETTER STATES THAT THE FUNDS ARE TRANSFERRED TO THE INTERNATIONAL TRAVEL CARD OF THE EMPLOYEE OUTSIDE INDIA UPON INSTRUCTION OF IBMF ROM THE NOSTRO ACCOUNT MAINTAINED OUTSIDE INDIA. THE MODALITY OF PAYMENT AS CONFIRMED BY AXIS BANK LTD FOR SUDIPTAMAITY IS SAME FOR THE CAPTIONED ASSESSEE. ' 10. FROM THE FOREGOING DISCUSSION IT IS ABUNDANTLY CLEAR THAT PRIOR TO COMPLETION OF THE ASSESSMENT U/S 143(3)OF THE ACT THE AO HAD REQUIRE D THE ASSESSEE TO FURNISH HIS EXPLANATIONS WITH REGARD TO HIS CLAIM FOR EXCLUSION OF FOREIGN ASSIGN MENT ALLOWANCE FROM THE AMBIT OF HIS TAXABLE TOTAL INCOME IN INDIA. IN RESPONSE THE LD. AR OF THE ASSE SSEE HAD FURNISHED BEFORE THE AO THE RELEVANT DOCUMENTARY EVIDENCES AND ALSO SUBSTANTIATED HIS EX PLANATIONS IN SUPPORT OF HIS CONTENTIONS BY PLACING RELIANCE ON THE RELEVANT APPLICABLE LEGAL P ROVISIONS OF THE ACT. THE LD. AR OF THE ASSESSEE HAD ALSO FURNISHED BEFORE THE AO REQUISITE DOCUMENT ARY EVIDENCES WHICH PROVED THE FOREIGN ASSIGNMENT ALLOWANCE WHICH WAS EXCLUDED FROM THE AM BIT OF TOTAL INCOME TAXABLE IN INDIA HAD SUFFERED APPLICABLE TAX IN SWITZERLAND BEING THE CO UNTRY WHERE THE SERVICES WERE ACTUALLY RENDERED. HAVING CONSIDERED THESE EVIDENCES EXPLANATIONS AND APPLICABLE LEGAL PROVISIONS THE AO RECORDED THE SPECIFIC FINDING THAT THE ASSESSEE WAS IN INDIA ONLY FOR 16 DAYS AND THE REST OF THE PERIOD HE WAS IN ASSIGNMENT TO SWITZERLAND AND HAD RECEIVED FOREI GN ASSIGNMENT ALLOWANCE . ALL THESE FACTS AND DOCUMENTS CONSIDERED HARMONIOUSLY GO ON TO SHOW THA T THE AO HAD INDEED CALLED FOR INFORMATION AND DOCUMENTS AND AFTER DUE APPLICATION OF MIND PAS SED THE ASSESSMENT ORDER U/S 143(3) OF THE ACT IN WHICH HE ACCEPTED THE ASSESSEES PLEA FOR EXCLUS ION OF FOREIGN ASSIGNMENT ALLOWANCE WAS NOT CHARGEABLE TO TAX IN INDIA. IN SUCH A SCENARIO THE FINDING RECORDED BY THE LD. CIT THAT THE ACTION OF THE AO IN ALLOWING THE AMOUNT OF RS.42 97 092/- AS EXEMPT FROM TAXATION (I.E. THE FOREIGN ASSIGNMENT ALLOWANCE) IS IN VIOLATION OF THE PROVIS ION OF SEC. 5(2)(A) OF THE ACT WITHOUT ANY ENQUIRY IS FACTUALLY ERRONEOUS. 11. IN ORDER TO UNDERSTAND THE DIFFERENCE BETWEEN ' LACK OF INQUIRY' AND 'INADEQUATE INQUIRY' AND WHEN IT CAN BE TERMED AS ERRONEOUS LET US LOOK AT THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS J.L. MORRISON (I) LTD (366 ITR 5 93) WHEREIN ON SIMILAR FACTS & CIRCUMSTANCES THEIR LORDSHIPS EXPLAINED THE DIFFERENCE BETWEEN TH E TWO AS FOLLOWS:- '14. THE CASE OF THE CIT IN HIS NOTICE DATED 26TH N OVEMBER 2009 UNDER SECTION 263 OF THE ACT READS AS FOLLOWS :-- '1. DURING THE SAID A.Y. YOU HAVE RECEIVED A SUM O F RS.18.00 CRORE FROM M/S. BEIERDORF AG. GERMANY (BDF) AS ONE-TIME SETTLEMENT FOR TERMINATIO N OF CONTRACTS OF PRODUCING AND SELLING OF THE PRODUCTS OF THE LATTER COMPANY IN INDIA AS WELL AS ISSUING A NOC FOR SETTING UP A 100% SUBSIDIARY BY THEM IN INDIA. THE SAID RECEIPT SHOUL D HAVE BEEN CONSIDERED AS INCOME IN THE AMBIT OF EITHER SEC.28 OR SEC.56 IF THE SAME IS CO NSIDERED AS VOLUNTARY PAYMENT ON A GOODWILL 9 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 GESTURE AS POINTED OUT BY YOU. BUT THE SAID RECEIP T HAS BEEN ALLOWED TO BE TRANSFERRED DIRECTLY TO CAPITAL RESERVE ACCOUNT WHILE PASSING THE ASSESS MENT ORDER FOR THE A.Y. 2006-07.' .... 76. HE DREW OUR ATTENTION TO THE NOTICE UNDER SECTI ON 142(1) OF THE ACT AND IN PARTICULAR TO THE ANNEXURE THERETO FROM WHICH IT WOULD APPEAR THAT TH E ASSESSING OFFICER WANTED THE ASSESSEE TO 'FURNISH IN WRITING AND VERIFIED IN THE PRESCRIBED MANNER INFORMATION CALLED FOR AS PER ANNEXURES AND ON THE POINTS OR MATTERS SPECIFIED TH EREIN BEFORE ME AT MY OFFICE AT 18 RABINDRASARANI PODDAR COURT 5TH FLOOR ON 04.02.2 008 AT 11.30 AM.'. THE ANNEXURE TO THE NOTICE UNDER SECTION 142(1) OF THE ACT READS AS FOL LOWS:-- 'REQUISITION U/S 142(1) OF THE IT ACT '61. M/S. J. L. MORISON (INDIA) LTD. - AY 06-07. (1) A WRITE-UP ON RECEIPT OF RS.18 CRORE FROM FOREIGN C O. (2) 77. MR. PODDAR ALSO DREW OUR ATTENTION TO THE REPLY DATED 19TH MARCH 2008 GIVEN BY THE ASSESSEE TO THE NOTICE DATED 21ST JANUARY 2008 UN DER SECTION 142(1) OF THE ACT. HE CONTENDED THAT ALL THE REQUISITE PARTICULARS WERE FURNISHED T OGETHER WITH DOCUMENTS. THEREAFTER THE MATTER WAS HEARD FROM TIME TO TIME BY THE ASSESSING OFFICER AS WOULD APPEAR FROM THE LIST OF DATES SUBMITTED BY MR. NIZAMUDDIN LEARNED ADVOCATE FOR THE APPELLANT. FROM THE LIST OF DATES IT APPEARS THAT ON 21ST JANUARY 2008 NOTICE UNDER SECTION 142(1) WAS ISSUED. ON 4TH FEBRUARY 2008 THE ASSESSEE APPEARED AND FIL ED DETAILS AND PARTICULARS. ON 18TH FEBRUARY 2008 4TH MARCH 2008 19TH MARCH 2008 A ND 26TH MARCH 2008 THE MATTER WAS HEARD. THE ASSESSING OFFICER HAS RECORDED IN THE OR DER SHEET THAT THE CASE WAS DISCUSSED AND THE OFFICIAL DOCUMENTS AND PARTICULARS WERE FILED B Y THE ASSESSEE. 78. MR. PODDAR CONTENDED THAT THE FACT THAT THE ASS ESSING OFFICER HAD ISSUED THE NOTICE UNDER SECTION 142(1) OF THE ACT REQUIRING THE ASSES SEE TO GIVE PARTICULARS AND TO FURNISH DOCUMENTS IN RESPECT OF SEVENTEEN ITEMS INDICATES T HAT THE ASSESSING OFFICER HAD IN FACT APPLIED HIS MIND. WITHOUT APPLICATION OF MIND ACCORDING TO HIM THE AFORESAID NOTICE ITSELF COULD NOT HAVE BEEN ISSUED. THE FACT THAT ALL THE REQUISITE P APERS REQUIRED BY THE ASSESSING OFFICER WERE DULY FURNISHED AND THE MATTER WAS DISCUSSED FROM TI ME TO TIME ON THE VARIOUS DAYS INDICATED ABOVE APPEARING FROM THE ASSESSMENT RECORDS PRODUC ED BY MR. NIZAMUDDIN LEAVE NO SCOPE FOR ANY DOUBT AS REGARDS THE FACT THAT THE ASSESSING OF FICER AFTER SATISFYING HIMSELF PASSED THE ORDER DATED 28TH MARCH 2008. 79. MR. PODDAR ALSO DREW OUR ATTENTION TO THE IMPUG NED JUDGMENT OF THE LEARNED TRIBUNAL WHICH READS AS FOLLOWS:-- 'THEREFORE ON COMBINED READING OF THE ASSESSMENT O RDER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALONG WITH THE ORDER SHEET ENTRIES I T CAN BE SAID THAT THE A.O. HAD CARRIED OUT SUCH ENQUIRY AS THE CIRCUMSTANCES WARRANTED AND PER MITTED BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE AND PASSING ASSESSMENT ORDER ACCORDINGLY. IT WAS AN ENTIRELY DIFFERENT MATTER THAT THE 10 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 COMMISSIONER DID NOT AGREE WITH THE CONCLUSION DERI VED BY THE A.O. FROM THE ENQUIRIES MADE. FAILURE TO CARRY OUT AN ENQUIRY IS ONE THING AND IN SUCH CASES THE COMMISSIONER WOULD BE JUSTIFIED IN SAYING THAT THE MERE FAILURE TO MAKE A NY ENQUIRY WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT IT WOULD NOT BE O PEN TO HIM TO HOLD THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF T HE REVENUE MERELY BECAUSE HE IS OF THE OPINION THAT SOME MORE ENQUIRIES ARE REQUIRED TO BE MADE AND HE COULD NOT AGREE WITH THE CONCLUSION ARRIVED AT BY THE A.O. FROM THE ENQUIRIE S MADE. IT WAS AFTER VERIFYING THE BOOKS OF ACCOUNT AND VARIOUS MATERIALS GATHERED FROM THE ASS ESSEE DURING ASSESSMENT PROCEEDING AND AFTER CONSIDERING THE EXPLANATION OFFERED BY THE AS SESSEE THAT THE A.O. HAD EXERCISED A JUDICIAL DISCRETION IN THE MATTER WHILE COMPLETING THE ASSES SMENT U/S 143(3) OF THE ACT. IN SUCH CIRCUMSTANCES THE VIEW TAKEN BY THE A.O. CANNOT BE SAID TO BE PREJUDICIAL TO THE REVENUE NOR CAN IT BE SAID TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER THE A.O. DID NOT MAKE ANY ELABORATE DISCUSSIONS IN THAT REGARD.' 80. MR. PODDAR CONTENDED THAT NEITHER BEFORE THE TR IBUNAL NOR IN THE PRESENT APPEAL HAS ANY QUESTION HAS BEEN SUGGESTED THAT THE ASSESSMENT ORD ER WAS BAD BECAUSE THE SAME DID NOT DISCLOSE ANY REASONS. THE CONTENTION RAISED AND THE JUDGMENTS CITED BY MR. NIZAMUDDIN AS REGARDS EXERCISE OF POWER U/S. 263 OF THE ACT ARE MISCONCEIVED AND ALSO OUT OF THE CONTEXT. 81. MR. PODDAR CONTENDED THAT THE FINDING OF THE LE ARNED TRIBUNAL THAT THE ORDER DATED 28TH MARCH 2008 WAS NOT PASSED WITHOUT APPLICATION OF M IND HAS NOT BEEN CHALLENGED BEFORE THIS COURT. NO ATTEMPT FAR LESS ANY SERIOUS ATTEMPT WAS MADE ON BEHALF OF THE REVENUE TO DEMONSTRATE THAT THE ORDER PASSED ON 28TH MARCH 20 08 BY THE ASSESSING OFFICER WAS WRONG EITHER ON FACTS OR LAW. THE APPELLANT HAS ALSO NOT BEEN ABLE NOR IN FACT HAS MADE ANY ATTEMPT TO ESTABLISH THAT THE FINDING OF THE LEARNED TRIBUNAL THAT THE ORDER DATED 28TH MARCH 2008 WAS NOT PASSED WITHOUT THE APPLICATION OF MIND IS BASED OTH ERWISE THAN ON EVIDENCE. ON THE CONTRARY THE RECORDS OF ASSESSMENT THE LIST OF DATES PRODUC ED BY MR. NIZAMUDDIN GO TO ESTABLISH THAT THE ASSESSMENT ORDER WAS PASSED AFTER DUE APPLICATION O F MIND. 82. MR. PODDAR CONTENDED THAT THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH REQUIRES THE ASSESSING OFFICER WHILE ACCEPTING THE CLAIM OF THE ASSESSEE TO PASS A REASONED ORDER. THE REASONS ACCORDING TO HIM ARE REQUIRED ONLY WHEN A N ISSUE IS DECIDED AGAINST THE ASSESSEE. HE ALSO DREW OUR ATTENTION TO THE JUDGMENT IN THE CASE OF S.S GADGIL V. LAL & CO. [1964] 53 ITR 231 WHEREIN THE APEX COURT HELD AS FOLLOWS :-- 'A PROCEEDING FOR ASSESSMENT IS NOT A SUIT FOR ADJU DICATION OF A CIVIL DISPUTE. THAT AN INCOME TAX PROCEEDING IS IN THE NATURE OF A JUDICIAL PROCEEDIN G BETWEEN CONTESTING PARTIES IS A MATTER WHICH IS NOT CAPABLE OF EVEN A PLAUSIBLE ARGUMENT. THE INCOME TAX AUTHORITIES WHO HAVE POWER TO ASSESS AND RECOVER TAX ARE NOT ACTING AS JUDGES DECIDING A LITIGATION BETWEEN THE CITIZEN AND THE STATE: THEY ARE ADMINISTRATIVE AUTHORITIES WHOS E PROCEEDINGS ARE REGULATED BY STATUTE BUT WHOSE FUNCTION IS TO ESTIMATE THE INCOME OF THE TAX PAYER AND TO ASSESS HIM TO TAX ON THE BASIS OF THAT ESTIMATE. TAX LEGISLATION NECESSITATES THE SET TING UP OF MACHINERY TO ASCERTAIN THE TAXABLE INCOME AND TO ASSESS TAX ON THE INCOME BUT THAT D OES NOT IMPRESS THE PROCEEDING WITH THE CHARACTER OF AN ACTION BETWEEN THE CITIZEN AND THE STATE.' 83. HE ALSO DREW OUR ATTENTION TO THE JUDGMENT IN T HE CASE OF CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 /71 TAXMAN 585 (BOM.) 'THE INCOME-TAX O FFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN 11 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY THE CLAIM WAS ALLOWED BY THE INCOM E-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFICER CANNOT BE H ELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN T HAT REGARD.' 84. THE AFORESAID VIEWS EXPRESSED BY THE BOMBAY HIG H COURT WAS QUOTED IN THE CASE OF CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 167/[2010] 189 TAX MAN 436 (DELHI). 85. HE ALSO DREW OUR ATTENTION TO A JUDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. V. CIT [2003] 263 ITR 437/ 131 TAXMAN 535 WHEREIN THE FOLLOWING VIEWS WERE EXPRESSED:-- 'THE EXPRESSION 'RECORD' HAS ALSO BEEN DEFINED IN C LAUSE (B) OF THE EXPLANATION SO AS TO INCLUDE ALL RECORDS RELATING TO ANY PROCEEDINGS AVAILABLE A T THE TIME OF EXAMINATION BY THE COMMISSIONER. THUS IT IS NOT ONLY THE ASSESSMENT O RDER BUT THE ENTIRE RECORD WHICH HAS TO BE EXAMINED BEFORE ARRIVING AT A CONCLUSION AS TO WHET HER THE ASSESSING OFFICER HAD EXAMINED ANY ISSUE OR NOT. THE ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTED. THE ASSESSEE ON ITS PART HAD PRODUCED ENOUGH MATERIAL O N RECORD TO SHOW THAT THE MATTER HAD BEEN DISCUSSED IN DETAIL BY THE ASSESSING OFFICER. THE L EAST THAT THE TRIBUNAL COULD HAVE DONE WAS TO REFER TO THE ASSESSMENT RECORD TO VERIFY THE CONTEN TIONS OF THE ASSESSEE. INSTEAD OF DOING THAT THE TRIBUNAL HAS MERELY BEEN SWAYED BY THE FACT THAT TH E ASSESSING OFFICER HAS NOT MENTIONED ANYTHING IN THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER EXAMINES NUMEROUS ISSUES. GENERALLY THE IS SUES WHICH ARE ACCEPTED DO NOT FIND MENTION IN THE ASSESSMENT ORDER AND ONLY SUCH POINTS ARE TA KEN NOTE OF ON WHICH THE ASSESSEE'S EXPLANATIONS ARE REJECTED AND ADDITIONS/DISALLOWANC ES ARE MADE. AS ALREADY OBSERVED WE HAVE EXAMINED THE RECORDS OF THE CASE AND FIND THAT THE ASSESSING OFFICER HAD MADE FULL INQUIRIES BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE QUA THE AMOUNT OF RS.10 LAKHS ON ACCOUNT OF DISCREPANCY IN STOCK. NOT ONLY THIS HE HAS EVEN GO NE A STEP FURTHER AND APPENDED AN OFFICE NOTE WITH THE ASSESSMENT ORDER TO EXPLAIN WHY THE ADDITI ON FOR ALLEGED DISCREPANCY IN STOCK WAS NOT BEING MADE. IN THE ABSENCE OF ANY SUGGESTION BY THE COMMISSIONER AS TO HOW THE INQUIRY WAS NOT PROPER WE ARE UNABLE TO UPHOLD THE ACTION TAKE N BY HIM UNDER SECTION 263 OF THE ACT.' 86. WHETHER THE ASSESSMENT ORDER DATED 28TH MARCH 2008 WAS PASSED WITHOUT APPLICATION OF MIND IS BASICALLY A QUESTION OF FACT. THE LEARNED T RIBUNAL HAS HELD THAT THE ASSESSMENT ORDER WAS NOT PASSED WITHOUT APPLICATION OF MIND. THE REC ORDS OF THE ASSESSMENT INCLUDING THE ORDER SHEETS GO TO SHOW THAT APPROPRIATE ENQUIRY WAS MADE AND THE ASSESSEE WAS HEARD FROM TIME TO TIME. IN DECIDING THE QUESTION COURT HAS TO BEAR IN MIND THE PRESUMPTION IN LAW LAID DOWN IN SECTION 114 CLAUSE - E OF THE EVIDENCE ACT:-- 'THAT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARL Y PERFORMED;' 87. THEREFORE THE COURT HAS TO START WITH THE PRES UMPTION THAT THE ASSESSMENT ORDER DATED 28TH MARCH 2008 WAS REGULARLY PASSED. THERE IS EVIDENCE TO SHOW THAT THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO ANSWER 17 QUESTIONS AND TO FILE DOCUMENTS IN REGARD THERETO. IT IS DIFFICULT TO PROCEED ON THE BASIS THAT THE 17 QUEST IONS RAISED BY HIM DID NOT REQUIRE APPLICATION 12 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 OF MIND. WITHOUT APPLICATION OF MIND THE QUESTIONS RAISED BY HIM IN THE ANNEXURE TO NOTICE UNDER SECTION 142 (1) OF THE ACT COULD NOT HAVE BEE N FORMULATED. 88. THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE T HE RETURN FILED BY THE ASSESSEE IN ORDER TO ASCERTAIN HIS INCOME AND TO LEVY APPROPRIATE TAX ON THAT BASIS. WHEN THE ASSESSING OFFICER WAS SATISFIED THAT THE RETURN FILED BY THE ASSESSEE W AS IN ACCORDANCE WITH LAW HE WAS UNDER NO OBLIGATION TO JUSTIFY AS TO WHY WAS HE SATISFIED. O N THE TOP OF THAT THE ASSESSING OFFICER BY HIS ORDER DATED 28TH MARCH 2008 DID NOT ADVERSELY AFFE CT ANY RIGHT OF THE ASSESSEE NOR WAS ANY CIVIL RIGHT OF THE ASSESSEE PREJUDICED. HE WAS AS S UCH UNDER NO OBLIGATION IN LAW TO GIVE REASONS. 89. THE FACT THAT ALL REQUISITE PAPERS WERE SUMMON ED AND THEREAFTER THE MATTER WAS HEARD FROM TIME TO TIME COUPLED WITH THE FACT THAT THE VIEW TA KEN BY HIM IS NOT SHOWN BY THE REVENUE TO BE ERRONEOUS AND WAS ALSO CONSIDERED BOTH BY THE TRIBU NAL AS ALSO BY US TO BE A POSSIBLE VIEW STRENGTHENS THE PRESUMPTION UNDER CLAUSE (E) OF SEC TION 114 OF THE EVIDENCE ACT. A PRIMA FACIE EVIDENCE ON THE BASIS OF THE AFORESAID PRESUMPTION IS THUS CONVERTED INTO A CONCLUSIVE PROOF OF THE FACT THE ORDER WAS PASSED BY THE ASSESSING OFFI CER AFTER DUE APPLICATION OF MIND. 90. THE JUDGMENTS CITED BY MR. NIZAMUDDIN DO NOT RE ALLY SUPPORT HIS CONTENTION. THE JUDGMENT IN THE CASE OF MEERUT ROLLER FLOUR MILLS (P.) LTD. (SUPRA) DOES NOT APPLY BECAUSE THE HIGH COURT IN THAT CASE WAS SATISFIED THAT THE ASSESSMENT ORDE R WAS PASSED WITHOUT ENQUIRY. 91. THE JUDGMENT OF COCHIN BENCH OF INCOME TAX APPE LLATE TRIBUNAL IN ITA NO. 116 /COCH/ 2012 RELIED UPON BY MR. NIZAMUDDIN IS EVIDENTLY BAS ED ON AN ERRONEOUS IMPRESSION THAT 'THE PROCEEDINGS BEFORE THE ASSESSING OFFICER ARE JUDICI AL PROCEEDINGS'. THIS IMPRESSION WHICH IS PATENTLY CONTRARY TO THE VIEWS EXPRESSED BY APEX CO URT IN THE CASE OF S.S. GADGILL (SUPRA) WAS RESPONSIBLE FOR THE VIEWS TAKEN BY THE TRIBUNAL. WH EN THE PREMISE IS WRONG THE CONCLUSION IS BOUND TO BE WRONG. 92. THE JUDGMENT IN THE CASE OF INFOSYS TECHNOLOGIE S LTD. (SUPRA) IS DISTINGUISHABLE ON FACTS. THE STEP TAKEN BY THE CIT UNDER SECTION 263 IN THAT CASE WAS JUSTIFIED BECAUSE THE INCOME TAX RECORDS PRODUCED BEFORE HIM DID NOT SHOW THAT THE A SSESSING OFFICER HAD CONSIDERED THE DOUBLE TAXATION AVOIDANCE AGREEMENT ON THE BASIS WHEREOF T HE CLAIMS WERE MADE BY THE ASSESSEE. THEREFORE THAT WAS A CLEAR CASE TO SHOW THAT THE A SSESSMENT ORDER WAS PASSED WITHOUT CONSIDERING THE RELEVANT PIECES OF EVIDENCE. 93. THE JUDGMENT IN THE CASE OF ANUSAYABAN. A. DOSH I (SUPRA) DOES NOT APPLY BECAUSE THE HIGH COURT IN THAT CASE WAS DEALING WITH THE NEED ON THE PART OF THE LEARNED TRIBUNAL TO GIVE REASONS IN SUPPORT OF ITS ORDER. 94. THE JUDGMENT IN THE CASE OF HINDUSTHAN TIN WORK S LTD. (SUPRA) ALSO DOES NOT APPLY BECAUSE THERE THE DELHI HIGH COURT WAS DEALING WITH THE DUT Y OF THE LEARNED TRIBUNAL TO DISCLOSE REASONS IN SUPPORT OF ITS APPELLATE ORDER. 95. THE JUDGMENT IN THE CASE OF S.N. MUKHERJEE (SUP RA) IS CLEARLY DISTINGUISHABLE. THE POINT FOR CONSIDERATION IN THAT CASE WAS WHETHER IT WAS INCUM BENT FOR THE CHIEF OF ARMY STAFF WHILE CONFIRMING THE FINDINGS AND THE SENTENCE OF THE GEN ERAL COURT MARTIAL AND FOR THE CENTRAL 13 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 GOVT. WHILE REJECTING THE POST CONFIRMATION PETITIO N OF THE APPELLANT TO RECORD REASONS FOR THE ORDERS PASSED BY THEM. 96. THE FUNCTION OF AN ASSESSING OFFICER IS TO ESTI MATE THE INCOME OF THE ASSESSEE AND TO RECOVER TAX ON THE BASIS OF SUCH ESTIMATE AS LAID DOWN BY T HE APEX COURT IN THE CASE OF S.S GADGIL (SUPRA). THEIR LORDSHIPS OPINED THAT THE INCOME TAX PROCEEDINGS DO NOT PARTAKE THE CHARACTER OF A JUDICIAL PROCEEDING BETWEEN THE STATE AND THE CIT IZEN. THEREFORE THE PRINCIPLES APPLICABLE TO A PROCEEDING BEFORE A JUDICIAL OR A QUASI-JUDICIAL AU THORITY WHERE THERE ARE TWO CONTESTING PARTIES CANNOT BE MADE APPLICABLE TO THE PROCEEDINGS BEFORE AN ASSESSING OFFICER. 97. MR. NIZAMUDDIN CONTENDED THE JUDGMENTS CITED BY MR. PODDAR INDICATE THAT THE ASSESSING OFFICER IS NOT REQUIRED TO WRITE AN ELABORATE JUDGM ENT. HE CONTENDED THAT THE ASSESSING OFFICER MAY NOT HAVE ANY SUCH OBLIGATION BUT IT CANNOT BE S AID ACCORDING TO HIM THAT THE ASSESSING OFFICER IS UNDER NO OBLIGATION TO RECORD ANYTHING I N HIS ASSESSMENT ORDER. IT IS NOT IN THE FIRST PLACE A FACT THAT HE HAS NOT RECORDED ANYTHING. FRO M THE ASSESSMENT ORDER THE FOLLOWING FACTS AND CIRCUMSTANCES APPEAR:-- 'RETURN WAS FILED ON 29/11/06 SHOWING TOTAL INCOME OF RS.3 80 66 940/-. IN RESPONSE TO NOTICES U/S. 143(2) AND 142(1) OF THE I. T. ACT 1961 SRI P. R. KOTHARI A/R APPEARED FROM TIME TO TIME AND EXPLAINED THE RETURN. NECESSARY DETAILS AND PAR TICULARS WERE FILED. THE BUSINESS OF THE ASSESSEE IS MANUFACTURING AND TRADING OF COSMETICS AND DENTAL CARE PRODUCTS AS IN EARLIER YEARS. IN VIEW OF ABOVE TOTAL INCOME IS COMPUTED IS UNDER: ' 98. UNLESS THE AFORESAID RECITAL IS FACTUALLY INCOR RECT OR THE COMPUTATION IS LEGALLY WRONG IT IS NOT POSSIBLE TO HOLD THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT APPLICATION OF MIND. ON THE TOP OF THAT WHEN THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE THERE WAS NO OCCASION FOR HIM TO MAKE ANY DISCUSSION IN HIS ORDE R. 99. IF THE ASSESSING OFFICER CANNOT BE SHOWN TO HAV E VIOLATED ANY FORM PRESCRIBED FOR WRITING AN ASSESSMENT ORDER IT WOULD NOT BE CORRECT TO HOLD T HAT HE ACTED ILLEGALLY OR WITHOUT APPLYING HIS MIND. THE THIRD QUESTION IS FOR THE REASONS DISCUS SED ABOVE ANSWERED IN THE NEGATIVE.' 12. WE NOTE THAT THE SHEET ANCHOR ON WHICH THE LD. CIT HAS FOUND FAULT WITH THE AO'S ORDER IN THE PRESENT CASE IS THE LACK OF ENQUIRY ON THE PART OF THE AO IN NOT ENQUIRING INTO THE NATURE OF FORE IGN ASSIGNMENT ALLOWANCE AND ITS TAXABILITY IN TERMS OF SECTION 5(2) OF THE ACT. IN THIS CONTEXT WE FIND T HAT THERE IS A CLEAR DISTINCTION BETWEEN 'LACK OF ENQUI RY' AND 'INADEQUATE ENQUIRY'. IF THERE IS AN ENQUIR Y EVEN IF INADEQUATE THAT WOULD NOT BY ITSELF GIVE O CCASION TO THE LD. CIT TO INTERDICT AND INTERFERE B Y EXERCISING HIS REVISIONAL JURISDICTION MERELY BECAU SE HE IS OF THE OPINION THAT SOME MORE ENQUIRIES SHOULD HAVE BEEN CONDUCTED IN THE MATTER. IN A CASE WHERE THE LD. CIT FINDS THAT THE ENQUIRY CONDUCTED BY THE AO IS NOT IN ACCORDANCE WITH HIS SUBJECTIVE STANDARDS THEN THE LD. CIT SHOULD HIMSELF CONDUCT THE INVESTIGATION AND THEREAFTER RECORD A CLEAR FIN DING IN HIS ORDER U/S. 263 THAT THE VIEW FOLLOWED O R ACTED UPON BY THE AO IN HIS ORDER WAS UNSUSTAINABLE IN LAW AND THEREFORE THE ORDER OF THE AO WAS ERRONEOUS. IN ADDITION THE LD. CIT SHOULD ALSO PRI MA FACIE SHOW THAT THE ERRONEOUS ORDER CAUSED PREJUDICE TO THE REVENUE AND THEREBY TWIN CONDITION S PRESCRIBED BY SECTION 263 ARE SATISFIED. IF EVEN ONE CONDITION IS NOT SATISFIED THEN IT IS OPEN FOR THE LD. CIT TO USURP THE REVISIONARY JURISDICTION U/S 263 OF THE ACT. 14 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 13. IN THE GIVEN FACTS OF THE PRESENT CASE AS NOTE D EARLIER THE AO HAD MADE DUE ENQUIRIES INTO THE NATURE AND MODE OF RECEIPT OF FOREIGN ASSIGNMEN T ALLOWANCE AS ALSO ABOUT ITS TAXABILITY IN INDIA. THE AO HAD ALSO OBTAINED DECLARATION FROM THE EMPLO YER TO THE EFFECT THAT THE ALLOWANCE IN QUESTION WAS PAID IN RELATION TO SERVICES RENDERED IN SWITZE RLAND. THE AO HAD ALSO OBTAINED REQUISITE DOCUMENTARY EVIDENCE IN SUPPORT OF FACT THAT THE AP PLICABLE TAXES ON SUCH ALLOWANCE WAS PAID IN SWITZERLAND. AFTER EXAMINING THE SPECIFIC DETAILS F URNISHED BY THE ASSESSEE THE AO DID NOT FIND ANY FAULT WITH THE CLAIM OF THE ASSESSEE THAT THE FOREI GN ASSIGNMENT ALLOWANCE WAS NOT TAXABLE IN INDIA. O N THESE FACTS WE ARE THEREFORE OF THE FIRM VIEW THAT NOT ONLY DID THE AO ENQUIRE INTO THE ISSUE OF TAXABILITY OF FOREIGN ASSIGNMENT ALLOWANCE BUT HAD CONSCIOUSLY APPLIED HIS MIND TO THE FACTS MADE AVAILABLE BEFORE HIM AND ADOPTED THE VIEW PERMISSIB LE IN LAW. FOR THESE REASONS WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT ORDER DID NOT S UFFER FROM THE ERROR OF NON-ENQUIRY OR NON- APPLICATION OF MIND OR ASSUMPTION OF WRONG FACTS. 14. IN THE IMPUGNED ORDER THE LD. CIT PLACED EMPHAS IS ON THE FACT THAT THE ALLOWANCE IN QUESTION WAS RECEIVED BY THE ASSESSEE FROM AN ENTITY ESTABLI SHED IN INDIA. HE FURTHER EMPHASIZED ON THE FACT THAT THE ASSESSEES EMPLOYMENT CONTRACT WAS WITH IN DIAN COMPANY AND THE CONTRACT OF THE EMPLOYMENT WHICH GAVE RISE TO THE PAYMENT IN QUESTION WAS EXEC UTED IN INDIA. ACCORDINGLY THE ASSESSEES RIGHT TO RECEIVE REMUNERATION INTER ALIA INCLUDING FOREIGN A SSIGNMENT ALLOWANCE HAD ACCRUED IN INDIA AND CONSEQUENTLY THEREFORE THE ASSESSEE WAS LIABLE TO P AY TAX ON SUCH ALLOWANCE IN INDIA. THE LD. CIT FURTHER OBSERVED THAT THE ALLOWANCE IN QUESTION WAS COMPUTED IN INR DENOMINATION WHICH CLEARLY SHOWED THAT THE PAYMENT WAS INTENDED TO BE MADE IN INDIA. THE LD. CIT ALSO FOUND THAT THE PAYMENT OF THE ALLOWANCE WAS MADE FROM THE EMPLOYERS DEUSTCHE BANK ACCOUNT WHICH WAS LOCATED IN INDIA. IN HIS OPINION THE POINT OF PAYMENT WAS THE POINT OF RECEIPT AND CONSEQUENTLY THEREFORE THE INCOME WAS DEEMED TO BE RECEIVED AT THE PLACE WHERE THE PA YMENT ORIGINATED. ACCORDING TO THE LD. CIT THE PAYMENT OF ALLOWANCE FROM DEUSTCHE BANK BANGALORE TO AXIS BANKS NOSTRO A/C OUTSIDE INDIA AND THEREAFTER TO TCC OF THE ASSESSEE HAPPENED ON THE E XPRESS DIRECTION OF THE ASSESSEE AND THEREFORE THE PAYMENT WAS ACTUALLY EFFECTED IN INDIA. FOR THE FOR EGOING REASONS THEREFORE THE LD. CIT CONCLUDED THAT THE FOREIGN ASSIGNMENT ALLOWANCE WAS TAXABLE IN IND IA AND IN PASSING THE ASSESSMENT ORDER THE AO HAD NOT CONSIDERED THESE MATERIAL FACTS. 15. AFTER DUE CONSIDERATION OF THE FACTS AND MATERI AL ON RECORD AS ALSO APPLICABLE LEGAL PROVISIONS WE HOWEVER DO NOT FIND SUBSTANCE IN THE REASONS ADDUCED BY THE LD. CIT IN HIS ORDER JUSTIFYING HIS INTERFERENCE UNDER SECTION 263 OF TH E ACT. IT MAY BE TRUE THAT THE ALLOWANCE IN QUESTIO N WAS RECEIVED BY THE ASSESSEE PURSUANT TO HIS EMPLOY MENT CONTRACT WITH A COMPANY WHICH WAS TAX RESIDENT IN INDIA. IT MAY ALSO BE TRUE THAT THE CON TRACT OF EMPLOYMENT WAS EXECUTED IN INDIA. HOWEVER FOR SUCH FACT ALONE IT CANNOT BE HELD THAT ASSESSEE S RIGHT TO RECEIVE THE ENTIRE REMUNERATION ACCRUED OR DEEMED TO ACCRUE IN INDIA. ADMITTEDLY THE ASSESSEE WOULD NOT HAVE BEEN ENTITLED TO RECEIVE THE ALLOWANCE IN QUESTION IF THE SERVICES WERE RENDERED OR PERFORMED BY THE ASSESSEE IN INDIA. THE ESSENTIAL PRE-REQUISITE FOR RECEIVING THE FOREIGN A SSIGNMENT ALLOWANCE WAS THAT THE ASSESSEE WAS REQUIRED TO RENDER HIS SERVICES IN A FOREIGN COUNTR Y VIZ. SWITZERLAND IN THIS CASE. IN OTHER WORDS I T WAS ONLY IN THE EVENT THAT THE ASSESSEE LEFT THE PLACE WHERE HIS EMPLOYMENT CONTRACT WAS SIGNED AND HE MIGRATED TO A FOREIGN COUNTRY FOR RENDERING SERVICE S THAT SUCH FOREIGN ASSIGNMENT ALLOWANCE WAS RECEIVABLE BY HIM. IT IS NOT IN DISPUTE THAT THE AM OUNT IN QUESTION WAS RECEIVED BY THE ASSESSEE IN CONNECTION WITH THE SERVICES WHICH THE ASSESSEE ACT UALLY RENDERED TO HIS EMPLOYER OUTSIDE INDIA. IN TH E CIRCUMSTANCES THEREFORE BEFORE THE SAID FOREIGN ASS IGNMENT ALLOWANCE WAS BROUGHT WITHIN THE TAXING NET IT WAS NECESSARY FOR THE AUTHORITIES BELOW TO DEMONSTRATE THAT THE INCOME CHARGEABLE UNDER THE SALARY ACCRUED OR DEEMED TO ACCRUE IN INDIA AS DEF INED IN SECTION 9(1)(II) OF THE ACT WHICH READ AS FOLLOWS: 9. (1) THE FOLLOWING INCOMES SHALL BE DEEMED TO AC CRUE OR ARISE IN INDIA : (II) INCOME WHICH FALLS UNDER THE HEAD 'SALARIES' IF IT IS EARNED IN INDIA. 15 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 EXPLANATION.FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT THE INCOME OF THE NATURE REFERRED TO IN THIS CLAUSE PAYABLE FOR (A) SERVICE RENDERED IN INDIA; AND (B) THE REST PERIOD OR LEAVE PERIOD WHICH IS PRECED ED AND SUCCEEDED BY SERVICES RENDERED IN INDIA AND FORMS PART OF THE SERVICE CONTRACT OF EMPLOYMEN T SHALL BE REGARDED AS INCOME EARNED IN INDIA 16. FROM THE FOREGOING PROVISION IT IS QUITE EVIDEN T THAT THE INCOME UNDER THE HEAD SALARIES IS DEEMED TO BE EARNED IN INDIA ONLY IF SUCH INCOME IS PAID FOR SERVICES RENDERED IN INDIA. IN OTHER WORD S RENDERING OF SERVICES TO THE EMPLOYER IN INDIA IS S INE QUA NON FOR INVOKING DEEMING PROVISIONS OF SECTION 9(1)(II) OF THE ACT. IN THE PRESENT CASE IT IS NOT DENIED BY THE LD. CIT THAT FOR THE RELEVANT ASSESSMENT YEAR THE STATUS OF THE ASSESSEE WAS NON- RESIDENT BECAUSE HIS PHYSICAL STAY IN INDIA WAS LES S THAN 182 DAYS. HE ALSO DID NOT DENY THE FACT THAT T HE SERVICES WERE RENDERED BY THE ASSESSEE IN SWITZERLAND AND FOR WHICH THE IMPUGNED ALLOWANCE WA S RECEIVED. ONCE THESE ARE THE ADMITTED FACTS THEN THE SAME CLEARLY TAKES THE ASSESSEES CASE OUT SIDE THE AMBIT OF SECTION 9(1)(II) OF THE ACT AND THEREBY THE SAID ALLOWANCE WAS NOT INCLUDIBLE IN TH E TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSES OF TAX IN INDIA. 17. WE ALSO DO NOT SEE ANY MERIT IN THE LD. CITS FINDING THAT THE ASSESSEE HAD RECEIVED THE IMPUGNED SUM IN INDIA. ACCORDING TO LD. CIT THE PO INT OF PAYMENT WAS THE POINT OF RECEIPT AS WELL AND THEREFORE SINCE THE PAYMENT ORIGINATED FROM THE EMPLOYERS BANK ACCOUNT IN INDIA WITH DEUTSCHE BANK THE INCOME WAS RECEIVED BY THE ASSESSEE IN IN DIA AND THEREFORE LIABLE FOR TAX IN INDIA UNDER SECTION 5(2)(B) OF THE ACT. WE HAVE NO HESITATION I N HOLDING THAT THIS INTERPRETATION OF THE FACTS AND LEGAL POSITION BY THE LD. CIT IS PATENTLY WRONG. GO ING BY THE LD. CITS CONCLUSION IN CASE OF EVERY INTERNATIONAL TRANSACTION WHERE THE PAYMENT MADE TO NON-RESIDENT ORIGINATES FROM A BANK SITUATED IN INDIA THE INCOME OF THE NON-RESIDENT SHALL BE DEEM ED TO BE RECEIVED IN INDIA AND THEREFORE LIABLE TO TAX IN INDIA IN TERMS OF SECTION 5(2) OF THE ACT. A CCORDINGLY EVEN WHERE THE ASSESSEES MAKE PAYMENTS FOR IMPORT OF GOODS AND FOR WHICH THE PAYM ENT IS MADE BY THE INDIAN IMPORTER FROM HIS INDIAN BANK ACCOUNT THE FOREIGN SUPPLIER OF THE GO ODS SHALL BE LIABLE TO BE TAXED IN INDIA SINCE THE POINT OF PAYMENT AS WELL AS RECEIPT IS IN INDIA AND THEREFORE THE INCOME IS RECEIVED IN INDIA. SUC H PROPOSITION IS DEVOID OF ANY MERIT. 18. IT IS ALSO NOTED THAT THE LD. CIT WAS FACTUALLY INCORRECT IN CONCLUDING THAT THE PAYMENT OF FOREIGN ASSIGNMENT ALLOWANCE WAS FIRST RECEIVED BY THE ASSESSEE IN INDIA AND THEREAFTER REMITTED TO HI S TCC AT HIS EXPRESS DIRECTIONS. WE NOTE THAT THERE N O MATERIAL OR EVIDENCE WAS BROUGHT ON RECORD BY THE LD. CIT TO SUPPORT THIS CONCLUSION. AS NOTED IN THE EARLIER PARA THE MODUS OPERANDI FOR RECEIVING THE SAID ALLOWANCE THROUGH TCC WAS AS FOLLOWS: A) WHEN AN EMPLOYEE OF IBM INDIA PRIVATE LIMITED IS SENT ON INTERNATIONAL ASSIGNMENT AXIS BANK UPON INSTRUCTION FROM IBM ISSUES A TRAVEL CURRENCY CARD (TCC) TO AN EMPLOYEE WHO IS SENT TO A FOREIGN ASSIGNMENT. B) IBM MAINTAINS AN EXCHANGE EARNERS FOREIGN CURREN CY (EEFC) ACCOUNT WITH DEUTSCHE BANK BANGALORE. C) FROM THE EEFC ACCOUNT OF DEUTSCHE BANK FUNDS AR E TRANSFERRED TO THE NOSTRO ACCOUNT OF AXIS BANK MAINTAINED OUTSIDE INDIA. D) UPON INSTRUCTION FROM IBM THE FUNDS ARE THEN TR ANSFERRED FROM THE NOSTRO ACCOUNT OF AXIS BANK MAINTAINED OUTSIDE INDIA TO THE AXIS TCC OF THE RES PECTIVE EMPLOYEE. 16 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 19. FROM THE FOREGOING IT IS EVIDENT THAT THE FUND S WERE TRANSFERRED OUTSIDE INDIA TO THE FOREIGN CURRENCY DENOMINATED ACCOUNT OF THE EMPLOYER AT THE EXPRESS DIRECTION OF THE EMPLOYER AND EVEN THE PAYMENT TOWARDS TCC WAS MADE ON THE INSTRUCTIONS OF THE EMPLOYER. WE THEREFORE DO NOT FIND ANY MERIT IN THE LD. CITS FINDING THAT THE IMPUGNED AL LOWANCE WAS FIRST RECEIVED BY THE ASSESSEE IN INDIA AND THEREAFTER AT HIS INSTANCE THE AMOUNTS WERE REM ITTED OUTSIDE INDIA IN THE FORM OF TCC. 20. ANOTHER ISSUE WHICH WEIGHED ON THE LD. CITS MI ND WAS THAT THE IMPUGNED ALLOWANCE DID NOT SUFFER ANY TAX IN THE COUNTRY OF RESIDENCE I.E. SWITZERLAND AND THEREFORE IT WAS A CASE OF DOUBLE NON-TAXATION WHICH COULD NOT BE PERMITTED IN LAW. I N THE FIRST INSTANCE WE DO NOT FIND MUCH FORCE IN THIS PLANK OF THE LD. CITS REASONING. THE QUESTION FOR DETERMINATION BY THE LD. CIT WAS WHETHER IN LAW THE AMOUNT RECEIVED BY THE ASSESSEE FOR RENDERI NG SERVICES OUTSIDE INDIA WAS LEGALLY CHARGEABLE TO TAX IN INDIA. FOR DECIDING THIS QUESTION IT WAS WHOLLY IMMATERIAL WHETHER OR NOT SUCH INCOME SUFFERED TAX IN THE COUNTRY OF RESIDENCE I.E. SWITZ ERLAND. DOUBLE TAXATION OF INCOME IS NOT ALIEN PHENOMENON IN CROSS BORDER TRANSACTIONS. IN THE CIR CUMSTANCES IN DECIDING THE ISSUE OF TAXABILITY OF THE PARTICULAR RECEIPT IN INDIA IT WAS WHOLLY IRRE LEVANT WHETHER OR NOT SUCH RECEIPT SUFFERED TAX IN THE OTHER JURISDICTION. WE THEREFORE HOLD THAT THIS GRO UND ON WHICH THE LD. CIT CONSIDERED THE AOS ORDER TO BE ERRONEOUS IS LEGALLY NOT TENABLE. EVEN ON FACTS WE FIND THAT BEFORE THE AO THE ASSESSEE HAD SUFFICIENTLY DEMONSTRATED THAT THE FOREIGN ASSI GNMENT ALLOWANCE HAD SUFFERED APPROPRIATE TAX IN SWITZERLAND. THE ASSESSEE HAD FURNISHED BEFORE THE AO THE COPIES OF THE SWITZERLAND TAX DOCUMENTS FOR THE YEAR 2013 AND 2014 AS ANNEXURE 6 & 7 TO HIS LETTER DATED 30.11.2016 WHICH IS FOUND PLACED AT PAGES 79 TO 80 OF THE PAPER BOOK. THE ANNEXURE 6 & 7 REFERRED IN THIS LETTER BY ASSESSEE TO AO REVEALS THAT ASSESSEE HAD BEEN SUBJECTED TO TAX DED UCTION FROM 01.01.2013 TO 31.12.2013 AND FOR 01.01.2014 TO 02.05.2014 @ 16.58% AND 12.68% RESPEC TIVELY. IN LIGHT OF THESE DOCUMENTARY EVIDENCES THEREFORE THE LD. CITS FINDING THAT THE FOREIGN ASSIGNMENT ALLOWANCE IN QUESTION DID NOT SUFFER ANY TAX IN SWITZERLAND AND THEREFORE THE CAS E OF ASSESSEE IS DISTINGUISHABLE WITH THAT OF SHRI SUDIPTAMAITY DECIDED BY THIS TRIBUNAL REPORTED IN ( 2018) 172 ITD 94 (KOL) SINCE THE ASSESSEE HAS NOT SHOWN HIS FOREIGN ASSIGNMENT ALLOWANCE WAS SUBJ ECTED TO TAX IN SWITZERLAND IS THEREFORE PER SE WRONG. 21. IN THE IMPUGNED ORDER THE LD. CIT RELYING ON TH E DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TAPAS KUMAR BANDYOPADHYAY ( SUPRA) HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM HIS INDIAN EMPLOYER WHICH HE HAD RECE IVED IN INDIA WAS CHARGEABLE TO TAX IN TERMS OF SECTION 5(2) OF THE ACT. ACCORDING TO LD. CIT THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT REPORTED IN 397 ITR 406 OVERTURNING THE DECISION O F THE TRIBUNAL IN THAT CASE WAS OF NO HELP TO THE ASSESSEE BECAUSE THE HONBLE HIGH COURT HAD REVERSE D THE DECISION OF THE TRIBUNAL KEEPING IN VIEW THE CONCESSION GRANTED BY THE BOARD TO THE SPECIFIC CLASS OF ASSESSEES BEING SEA-FARERS. SINCE THE ASSESSEE IN THE PRESENT CASE WAS NOT A SEAFARER IT WAS THE LD. CITS STAND THAT THE BENEFIT OF THE CBDT CIRCULAR NO.13 OF 2017 AS WELL AS THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT WAS OF NO HELP TO THE ASSESSEE. AFTER DUE CONSIDERATION OF TH E FACTS AND MATERIAL ON RECORD WE ARE UNABLE TO AGREE WITH THE LD. CITS SUCH CONTENTION. IN THE FI RST INSTANCE WE FIND THAT THE FACTS OF THE CASE ARE MATERIALLY DIFFERENT FROM THE FACTS INVOLVED IN THE CASE OF TAPAS KUMAR BANDYOPADHYAY (SUPRA). IN THAT CASE THE ASSESSEE A MARINE ENGINEER WAS RENDER ING HIS SERVICES IN INTERNATIONAL WATERS AND HIS SALARY FROM THE EMPLOYER WAS ADMITTEDLY DEPOSITED I N HIS BANK ACCOUNT MAINTAINED IN INDIA. FURTHER SUCH SALARY DID NOT SUFFER ANY TAX IN ANY OTHER COU NTRY. ON THESE FACTS THE TRIBUNAL HELD THAT THE INCOME WAS CHARGEABLE TO TAX IN INDIA SINCE THE SAL ARY WAS DEPOSITED IN BANK ACCOUNT MAINTAINED IN INDIA. IN THE PRESENT CASE HOWEVER AS NOTED IN THE PRECEDING PARAGRAPHS NO MONEY WAS FOUND DEPOSITED IN ASSESSEES ACCOUNT MAINTAINED IN INDIA AND THE FOREIGN ASSIGNMENT ALLOWANCE RECEIVED FOR SERVICES RENDERED IN SWITZERLAND THE DUE TAXES WERE PAID IN THAT COUNTRY. MOREOVER SECTION 9(1)(II) MAKES IT ABUNDANTLY CLEAR THAT INCOME CHAR GEABLE UNDER THE HEAD SALARY CONSTITUTES INCOME DEEMED TO ACCRUE IN INDIA ONLY IF THE SERVICES ARE RENDERED IN INDIA. SINCE IN THE PRESENT CASE ADMITTEDLY NO SERVICES WERE RENDERED IN INDIA FOR W HICH THE FOREIGN ASSIGNMENT ALLOWANCE WAS RECEIVED BY THE ASSESSEE THE SAME WAS NOT CHARGEAB LE TO TAX IN INDIA EVEN IN TERMS OF THE DEEMING PROVISIONS OF SECTION 9(1)(II) OF THE ACT. 17 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 22. WE NOTE THAT IN THE IMPUGNED ORDER THE LD. CIT HAS NOT MADE ANY DISCUSSION WITH REGARD TO APPLICATION OF SECTION 9(1)(II) WHICH WAS THE MOST APPROPRIATE LEGAL PROVISION IN DECIDING WHETHER THE FOREIGN ASSIGNMENT ALLOWANCE RECEIVED FOR RENDE RING OF SERVICES OUTSIDE INDIA WAS TAXABLE IN INDIA OR NOT. WE NOTE THAT THE LD. CIT DISCUSSED SE VERAL REASONS FOR HOLDING THE AMOUNT TO BE TAXABLE IN INDIA BUT SURPRISINGLY HIS ORDER IS CONSPICUOUSL Y SILENT ABOUT THE APPLICABILITY OF SECTION 9(1)(II ) OF THE ACT ACCORDING TO WHICH THE INCOME COULD BE MADE LIABLE TO TAX IF AND ONLY IF THE INCOME WAS RECEIVED FOR SERVICES RENDERED IN INDIA. WE NOTE TH AT THIS SPECIFIC ISSUE WAS ADJUDICATED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SH RI SUDIPTAMAITY (SUPRA) WHICH INVOLVED IDENTICAL FACTS. IN THE DECIDED CASE THE TRIBUNAL HAS NOTED THE FOLLOWING FACTS: 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AS SESSEE WAS AN EMPLOYEE IN IBM INDIA PRIVATE LIMITED AND DURING THE FINANCIAL YEAR 2012-13 WAS S ENT ON SHORT TERM ASSIGNMENT TO SWITZERLAND. HE HAD STATIONED IN SWITZERLAND FOR 3 31 DAYS DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY HIS RESIDENTIAL STATUS FOR THE YEAR UNDER CONSIDERATION WOULD BE NON-RESIDENT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED THE FOLLOWING EMOLUMENTS FROM IBM :- A) GROSS SALARY RECEIVED IN INDIA RS 6 77 128/- AND B) FOREIGN ALLOWANCES ON ACCOUNT OF THE INTERNATION AL ASSIGNMENT RECEIVED IN SWITZERLAND RS 51 84 489/- IBM HAD EFFECTED TDS OF RS 16 04 063/- ON THE ENTIR E EMOLUMENTS PAID TO THE ASSESSEE INCLUDING THE FOREIGN ALLOWANCES PAID TO THE ASSESS EE U/S 192(1) OF THE ACT. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASST YEAR 2013-14 DECL ARING TAXABLE INCOME OF RS 5 73 320/- (BEING THE SALARY RECEIVED IN INDIA ALONE) AFTER CL AIMING DEDUCTION OF RS 1 01 405/- UNDER CHAPTER VIA OF THE ACT AND CLAIMED A REFUND OF RS 1 5 58 060/- IN HIS RETURN OF INCOME. 4.1. DURING THE FINANCIAL YEAR 2012-13 THE ASSESSE E HAD RECEIVED RS 51 84 489/- OUTSIDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA . THE ASSESSEE PLEADED THAT THE ENTIRE FOREIGN ALLOWANCE OF RS 51 84 489/- WAS NOT OFFERED TO TAX IN INDIA AS T HE SAME WAS RECEIVED BY THE ASSESSEE OUTSIDE INDIA FOR THE SERVICES RENDERED OUTSIDE INDIA WHICH DOES NOT FORM PART OF THE TOTAL INCOME U/S 5(2) OF THE ACT. THE ASSESSEE HOWEVER OFFERED THE ENTIRE SALARY RECEIVED IN INDIA OF RS 6 77 128/- TO TAX IN INDIA. IN THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSEE SUBMITTED A LETTER DATED 24.9.2015 WITH REGARD TO EXEMPTION CLA IMED BY HIM TOWARDS FOREIGN ASSIGNMENT ALLOWANCE WHICH WAS PAID BY CREDITING THE ASSESSEE S TRAVEL CURRENCY CARD (TCC) . THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM IBM INDI A PRIVATE LIMITED STATING THAT THE ASSESSEE HAD RECEIVED RS 51 84 489/- OUTSIDE INDIA FOR RENDE RING SERVICES IN SWITZERLAND. IN THE SAID CERTIFICATE IT WAS ALSO MENTIONED BY IBM THAT TAXE S TO THE TUNE OF RS 16 04 063/- WAS DEDUCTED AT SOURCE INCLUDING ON THE PORTION OF FOREIGN ASSIG NMENT ALLOWANCE BECAUSE THE RESIDENTIAL STATUS AS WELL AS THE TAX RESIDENCY OF THE ASSESSEE WAS NOT KNOWN. 23. WITH REFERENCE TO THE FOREGOING FACTS THE ISSU E FOR ADJUDICATION BEFORE THE TRIBUNAL WAS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING TH E ADDITION MADE OF RS.51 84 489/- WHICH WAS BROUGHT TO TAX BY THE AO BY APPLYING THE PROVISIONS OF SECTION 5(2) OF THE ACT. SO WE NOTE THAT THIS ISSUE ON SIMILAR FACTS AND APPLICABLE PROVISIONS O F LAW WAS ADJUDICATED IN RESPECT OF AN ASSESSEE WH O WAS WORKING WITH THE SAME COMPANY IBM AS THAT OF TH E ASSESSEE IN THIS CASE; AND THE AO HAD TAXED THE FOREIGN ASSIGNMENT ALLOWANCE BY INVOKING PROVIS IONS OF SECTION 5(2) OF THE ACT WHICH WAS DELETED BY THE LD. CIT(A). THIS ACTION OF THE LD. C IT(A) WAS CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL AND THE TRIBUNAL UPHOLDING THE ACTION OF T HE LD. CIT(A) HELD AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE G ONE THROUGH THE FOLLOWING DOCUMENTS ENCLOSED IN THE PAPER BOOK OF THE ASSESSEE:- 18 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 A) COPY OF PASSPORT FOR THE RELEVANT PERIOD ENCLO SED IN PAGES 124 TO 128 OF PAPER BOOK. B) CERTIFICATE ISSUED BY IBM INDIA PRIVATE LIMITED EXPLAINING THE ENTIRE FACTS OF PAYMENTS TO ASSESSEE INCLUDING THE DETAILS OF DEDUCTION OF TAX AT SOURCE THEREON TOGETHER WITH ITS PURPOSE ENCLOSED IN PAGE 129 OF PAPER BOOK. C) STATEMENT OF ACCOUNT OF AXIS BANK TCC FOR THE PE RIOD 30.11.1999 TO 14.12.2015 ENCLOSED IN APGES 130 TO 145 OF PAPER BOOK. D) LIST OF VARIOUS NOSTRO ACCOUNTS HELD BY AXIS BAN K IN VARIOUS COUNTRIES OUT OF THIS LIST THE RELEVANT NOSTRO ACCOUNT FROM WHERE PAYMENTS WERE MA DE TO ASSESSEE HEREIN IS ZURCHERKANTONAL BANK (ZKB) FROM ACCOUNT NUMBER 0700-00037.370 ENC LOSED IN PAGE 146 OF PAPER BOOK. E) SAMPLE INSTRUCTIONS GIVEN BY IBM INDIA PRIVATE L IMITED AUTHORIZING THE AXIS BANK BANGALORE TO LOAD CURRENCIES TO THE TCC OF ASSESSEE - ENCLOS ED IN PAGES 147 TO 148 OF PAPER BOOK. 7.1. FROM THE FACTS NARRATED ABOVE AND ON HEARING T HE LEARNED COUNSELS OF ASSESSEE AS WELL AS FOR THE REVENUE WE FIND THAT:- A) THE ASSESSEE IS A NON-RESIDENT INDIVIDUAL AND HA D RENDERED SERVICES OUTSIDE INDIA FOR WHICH HE HAS RECEIVED FOREIGN ASSIGNMENT ALLOWANCE. B) IBM MAINTAINS MONEY IN FOREIGN CURRENCY IN ITS E EFC ACCOUNT MAINTAINED WITH DEUTSCHE BANK BANGALORE. C) IBM INSTRUCTS AXIS BANK TO ISSUE TRAVEL CURRENCY CARD TO ITS EMPLOYEES WHO ARE SENT ON FOREIGN ASSIGNMENT WHICH IS LOOSELY CALLED AXIS TC C. D) AXIS BANK HAS MAINTAINED A NOSTRO ACCOUNT WITH I TS CORRESPONDENT BANKER (ZUERCHERKANTONAL BANK ZURICH). E) IBM TRANSFERS FUNDS FROM ITS EEFC ACCOUNT FROM D EUTSCHE BANK TO THE NOSTRO ACCOUNT OF AXIS BANK (I.EZUERCHERKANTONAL BANK) FOR THE PURPOSE OF LOADING / RELOADING THE AXIS TCC ISSUED TO THE ASSESSEE WHO IS SENT ON FOREIGN ASSIGNMENT. F) THE EMPLOYEE WHO IS SENT ON FOREIGN ASSIGNMENT U SES THE SAID FUNDS OUTSIDE INDIA OUT OF MONIES TOPPED UP OR CREDITED IN HIS AXIS TCC. HENCE IT C OULD BE SAFELY CONCLUDED THAT THE FIRST POINT OF RECEIPT FOR THE ASSESSEE HAPPENS OUTSIDE INDIA. TH IS MONEY IS USED BY HIM FOR HIS SUSTENANCE IN SWITZERLAND. BOTH THE ACCRUAL AND RECEIPT OF INCOME HAPPENS OUTSIDE INDIA. HENCE THE SAME IS OUTSIDE THE AMBIT OF TAX AS PER THE PROVISIONS OF S ECTION 5(2) OF THE ACT. THE SERVICES OF THE ASSESSEE ARE ALSO UTILIZED ONLY OUTSIDE INDIA. G) THIS FOREIGN ASSIGNMENT ALLOWANCE IS DULY SUBJEC TED TO TAX IN THE COUNTRY OF SWITZERLAND AND THE ASSESSEE HAD DULY PAID THE SAID TAX TO THE SWIS S GOVERNMENT. H) THE ASSESSEE HAD PAID TAXES IN INDIA IN RESPECT OF SALARY RECEIVED BY HIM IN INDIA WHICH IS NOT IN DISPUTE. 7.2. WE FIND THAT THE LD DR HAD ARGUED THAT THE FOR EIGN ASSIGNMENT ALLOWANCE GIVEN TO THE ASSESSEE IS NOTHING BUT SALARY AND THAT THE SAME I S FIRST DEPOSITED IN INDIA AND THEREAFTER IT GETS LOADED INTO THE TCC BY AXIS BANK AS INSTRUCTED BY I BM. IN THIS REGARD WE FIND FROM THE ACCOUNT STATEMENT OF TCC ENCLOSED IN PAGES 130 TO 145 OF P APER BOOK FOR THE PERIOD 30.11.1999 TO 14.12.2015 THAT THE ASSESSEE IS SENT OUTSIDE INDI A WITH A TCC CONTAINING ZERO BALANCE AND THE SAME IS LOADED/RELOADED PERIODICALLY AS PER THE REQ UIREMENT . THIS LOADING OR RELOADING OF FUNDS 19 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 IN TCC HAPPENS WHEN THE ASSESSEE WAS RENDERING SERV ICES OUTSIDE INDIA AND WAS STAYING OUTSIDE INDIA. HENCE THE FUNDS GET DEPOSITED / LOADED / RE LOADED IN TCC FOR THE FIRST TIME OUTSIDE INDIA. THEREAFTER THE ASSESSEE WITHDRAWS THE MONIES FOR HI S SUSTENANCE OUTSIDE INDIA . HENCE THE FIRST POINT OF RECEIPT OF THESE FUNDS LOADED / RELOADED I N TCC FOR THE ASSESSEE IS OUTSIDE INDIA. WE FIND THAT THIS SUBMISSION OF THE LD DR IS FACTUALLY INCO RRECT AND IS NOT BORNE OUT FROM THE FACTS NARRATED ABOVE. 7.3. WE FIND THAT THE ASSESSEES CASE SQUARELY FALL S UNDER THE PROVISIONS OF EXPLANATION TO SECTION 5(2) OF THE ACT WHICH ARE REPRODUCED FOR THE SAKE O F CONVENIENCE AS UNDER:- EXPLANATION 1 INCOME ACCRUING OR ARISING OUTSIDE INIA SHALL NOT BE DEEMED TO BE RECEIVED IN INDIA WITHIN THE MEANING OF THIS SECTION BY REASON ONLY OF THE FACT THAT IT IS TAKEN INTO ACCOUNT IN A BALANCE SHEET PREPARED IN INDIA. EXPLANATION 2 FOR THE REMOVAL OF DOUBTS IT IS HE RBY DECLARED THAT INCOME WHICH HAS BEEN INCLUDED IN THE TOTAL INCOME OF A PERSON ON THE BAS IS THAT IT HAS ACCRUED OR ARISEN OR IS DEEMED TO HAVE ACCRUED OR ARISEN TO HIM SHALL NOT AGAIN BE SO INCLUDED ON THE BASIS THAT IT IS RECEIVED OR DEEMED TO BE RECEIVED BY HIM IN INDIA. 7.4. WE FIND THAT THE RELIANCE PLACED BY THE LD AR ON THE CO-ORDINATE BENCH DECISION OF JAIPUR TRIBUNAL IN THE CASE OF ADIT (INTERNATIONAL TAXATIO N) VS SRI KARTIK VYAS IN ITA NO. 375/JP/2012 DATED 31.12.2014 IS DIRECTLY ON THIS POINT WHICH WA S RENDERED IN THE CONTEXT OF AN IBM EMPLOYEE UNDER SIMILAR CIRCUMSTANCES. IT WAS HELD AS UNDER :- 5. AT THE OUTSET THE LEARNED AR FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE APPELLANT IS AN EMPLO YEE OF IBM INDIA PVT. LTD. WAS SENT ON AN INTERNATIONAL ASSIGNMENT TO NETHERLANDS DURING THE PREVIOUS YEAR 2007-08. THE APPELLANT RECEIVED FOREIGN ALLOWANCES OF RS. 17 27 360/- OUTS IDE INDIA FOR THE SERVICES RENDERED IN NETHERLANDS. AS THE APPELLANT QUALIFIED AS A NON-R ESIDENT DURING THE RELEVANT ASSESSMENT YEAR AND FOREIGN ALLOWANCES RECEIVED BY THE APPELLANT IS NOT LIABLE TO TAX U/S 5(2) OF THE ACT. THE APPELLANT HAD DISCLOSED TOTAL INCOME OF RS. 3 27 91 0/- EXCLUDING THE FOREIGN ALLOWANCES AND AGAINST THIS INCOME THE TAX OF RS. 48 790/- WAS PA ID BY THE APPELLANT. THE EMPLOYER DEDUCTED TDS WRONGLY AT RS. 6 36 484.65 AND APPELLANT ALSO P AID SELF ASSESSMENT TAX AT RS. 4 653/- ON ACCOUNT OF HIS INTEREST INCOME FROM BANK DEPOSITS. THEREFORE THE APPELLANT HAD CLAIMED REFUND OF RS. 5 92 305/- BY FILING THE RETURN. THE LEARNED AS SESSING OFFICER SUBMITTED THAT THE AMOUNT OF RS. 17 27 360/- WAS RECEIVED BY THE APPELLANT IN NETHER LANDS FROM HIS EMPLOYMENT ON ACCOUNT OF FOREIGN ALLOWANCES FOR WHICH HE PRODUCED CERTIFICA TE FROM THE EMPLOYER. THE EMPLOYER WAS NON- RESIDENT DURING THE YEAR AND PROVISIONS OF SECTION 6(1) OF THE ACT IS APPLICABLE. THEREFORE FOREIGN ALLOWANCES RECEIVED BY HIM OUTSIDE THE INDIA FOR SE RVICES RENDERED OUTSIDE INDIA ARE NOT LIABLE TO BE TAXED IN INDIA U/S 5(2) OF THE ACT. HE ALSO RELI ED ON THE VARIOUS CASE LAWS WHICH WERE RELIED UPON BEFORE THE LEARNED CIT(A) THEREFORE HE PRAYE D TO CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT WAS NON-RESIDENT DURING THE YEAR UNDE R CONSIDERATION AND ALLOWANCES WERE RECEIVED BY HIM IN NETHERLANDS. THE EMPLOYER WRONGL Y DEDUCTED TDS THE APPELLANT HAD CLAIMED REFUND ON IT. THE INDIAN INCOME HAS BEEN CONSIDERED BY THE APPELLANT AS TAXABLE BUT THE ALLOWANCES PAID OUTSIDE THE INDIA ARE NOT TAXABLE U /S 5(2) OF THE ACT IN THE CASE OF NON-RESIDENT. THE CASE LAW RELIED UPON BY THE LEARNED CIT(A) ARE SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE THEREFORE WE CONFIRM THE ORDER OF THE LE ARNED CIT(A). 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 7.5. WE FIND THAT THE LD DR PLACED RELIANCE ON THE CO-ORDINATE BENCH DECISION OF CHENNAI TRIBUNAL IN THE CASE OF SRI BALAMUTHUKADIRESAN VS I TO IN ITA NO. 353/MDS/2016 DATED 20 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 29.4.2016 IN SUPPORT OF HIS CONTENTIONS. WE FIND T HAT THE SAID DECISION IN PARA 9.1. OF THE ORDER HAD CONSIDERED THE DECISION OF JAIPUR TRIBUNAL IN T HE CASE OF ADIT(INTERNATIONAL TAXATION) VS SRI KARTHIK VYAS IN ITA NO. 375/JP/2012 DATED 31.12.201 4 AND OBSERVED THAT THE JAIPUR TRIBUNAL DECISION IS FACTUALLY DISTINGUISHABLE WITH THE FACT S BEFORE THE CHENNAI TRIBUNAL. HENCE THE RELIANCE PLACED ON THE DECISION OF CHENNAI TRIBUNAL SUPRA DOES NOT COME TO THE RESCUE OF THE ASSESSEE HEREIN. 7.6. WE ALSO FIND THAT THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF DIT (INTERNATIONAL TAXATION) VS PRAHLADVIJENDRA RAO REPORTED IN 198 TA XMAN 551 (KAR) AND HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS AVTAR SINGH WADHWAN REP ORTED IN 247 ITR 260 (BOM) HAD HELD THAT IN THE CASE OF A NON-RESIDENT WHEN SERVICES ARE RENDE RED OUTSIDE INDIA THE ACCRUAL OF INCOME THEREON HAPPENS OUTSIDE INDIA AND HENCE THE SAME CA NNOT BE BROUGHT TO TAX IN INDIA AS PER SECTION 5(2) OF THE ACT. AS STATED ABOVE WE FIN D THAT THE ASSESSEE WAS ABLE TO GET CONTROL OVER THE FUNDS IN HIS TCC FOR THE FIRST TIME ONLY IN SWI TZERLAND AND NOT IN INDIA AND FIRST POINT OF RECEIPT ALSO HAPPENS ONLY IN SWITZERLAND. HENCE IT COULD BE SAFELY CONCLUDED THAT BOTH ACCRUAL AND RECEIPT OF FUNDS HAPPENS OUTSIDE INDIA THEREBY MAKING THE SAID RECEIPT TO STAY OUTSIDE THE AMBIT OF TAXABILITY U/S 5(2) OF THE ACT. 7.7. WE ALSO FIND THAT IDENTICAL CLAIM OF EXEMPTION OF THE ASSESSEE WAS ALLOWED BY THE LD AO FOR THE ASST YEAR 2014-15 U/S 143(3) OF THE ACT DATED 1 0.12.2016 AFTER DETAILED EXAMINATION OF THE SAME AND BY GIVING PROPER FINDINGS IN THE ASSESSMEN T ORDER VIDE PARA 5.02 AND 5.03. 7.8. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND BY RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDE NTS RELIED UPON HEREINABOVE WE HOLD THAT THE LD CITA HAD RIGHTLY DELETED THE ADDITION MADE ON ACCOU NT OF DISALLOWANCE OF CLAIM OF EXEMPTION IN RESPECT OF FOREIGN ASSIGNMENT ALLOWANCE RECEIVED BY THE ASSESSEE OUTSIDE INDIA. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA IN T HIS REGARD. ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 24. FROM THE AFORESAID DECISION RENDERED BY THE COO RDINATE BENCH OF THIS TRIBUNAL DATED 11.07.2018 WE FIND THAT THE ISSUE INVOLVED BEFORE US IS NO LONGER RES INTEGRA. WE NOTE THAT THE CLAIM OF THE ASSESSEE IN THE PRESENT CASE FOR EXCLUSION O F FOREIGN ASSIGNMENT ALLOWANCE WHICH WAS ACCEPTED BY THE AO WAS IN CONSONANCE WITH THE VIEW OF LD. C IT(A) IN SHRI SUDIPTAMAITYS CASE (SUPRA) WHICH HAS BEEN UPHELD BY THE TRIBUNAL. IN LIGHT OF THE DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL WITH WHICH WE ARE IN AGREEMENT WE HOLD THAT THE ACTION OF THE AO CANNOT BE HELD TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS HE LD BY THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA). 25. WE NOTE THAT IN THE IMPUGNED ORDER THE LD. CIT HAS FORTIFIED HIS USURPATION OF REVISIONARY JURISDICTION U/S 263 OF THE ACT BY RELYING ON THE AMENDMENT TO SECTION 263 WHEREBY SECOND EXPLANATION TO SUB-SECTION (1) OF SEC. 263 OF THE A CT WAS INSERTED WITH EFFECT FROM 01.06.2015. THE SAID AMENDMENT INSERTED THE WORDS IN THE OPINION OF PRINCIPAL COMMISSIONER OR COMMISS IONER . ACCORDING TO LD. CIT AFTER THIS AMENDMENT WAS BROU GHT INTO STATUTE THE ORDER PASSED BY THE AO CAN BE DEEMED TO BE ERRONEOUS INSOFAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE IF IN THE OPINION OF T HE PR. CIT OR CIT THE ORDER HAS BEEN PASSED WITHOUT M AKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. ACCORDING TO US HOWEVER THE INSERTION OF THE AMENDMENT WHICH HAS BROUGHT IN THE WORD IN THE OPINION OF PRINCIPAL COMMISSIONER OR COMMISS IONER CANNOT BE READ IN ISOLATION. AND IT HAS TO BE KEPT IN MIND THAT EXPLANATION CANNOT OVER-RIDE THE SUBSTANTIVE PROVISION OF THE LAW WHICH THE EXPLANATION ONLY TRIES TO EXPLAIN/CLARIFY. BEFORE WE ADVERT FURTHER LET US LOOK AT SECTION 26 3 OF THE ACT WHICH IS REPRODUCED AS UNDER:- 263. (1) THE PRINCIPAL COMMISSIONER OR] COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE HE MAY AFTER GIVING THE ASS ESSEE AN 21 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION 1.]FOR THE REMOVAL OF DOUBTS IT IS H EREBY DECLARED THAT FOR THE PURPOSES OF THIS SUB- SECTION (A) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1S T DAY OF JUNE 1988] BY THE ASSESSING OFFICER SHALL INCLUDE (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER] OR THE INCOME-TAX OFFICER ON THE BASI S OF THE DIRECTIONS ISSUED BY THE [JOINT] COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE [JOINT] COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICE R CONFERRED ON OR ASSIGNED TO HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BO ARD OR BY THE [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR [PRINCIPAL D IRECTOR GENERAL OR] DIRECTOR GENERAL OR [PRINCIPAL COMMISSIONER OR] COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) 'RECORD' [SHALL INCLUDE AND SHALL BE DEEMED A LWAYS TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTI ON AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTEROF ANY APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE 1988] THE POWERS OF THE [PRINCIPAL COMMISSIONER OR] COMMISSIO NER UNDER THIS SUB -SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SU CH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.] [EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION I T IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS I N SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF T HE REVENUE IF IN THE OPINION OF THE PRINCIPAL COMMIS SIONER OR COMMISSIONER (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHO UT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WIT H ANY ORDER DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE W ITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON.] [(2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVI SED WAS PASSED.] (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2) AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HA S BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF T HE APPELLATE TRIBUNAL [NATIONAL TAX TRIBUNAL ] THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2) THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS S TAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED.' 26. A READING OF SECTION 263 OF THE ACT AND THE EXP LANATIONS AS WELL AS THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2015 W.E.F. 01.06. 2015 BY INSERTING EXPLANATION 2 WE NOTE THAT EXPL ANATION 22 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 -2 IS A DEEMING PROVISION AND THE WELL SETTLED POS ITION OF LAW IS THAT WHILE CONSTRUING A DEEMING PROVISION IT HAS TO BE STRICTLY INTERPRETED AND T HAT THE LEGAL FICTIONS SHOULD NOT BE STRETCHED BEYO ND THE PURPOSE FOR WHICH THEY WERE ENACTED AND SHOULD NOT EXTEND THAT LEGITIMATE FIELD (RAYMOND VS. STATE OF CHATTISGARH AIR 20-07 SC 2854) AND IT SHOU LD BE KEPT IN MIND THAT DEEMING PROVISION SHOULD BE IN RESPECT OF FACTS FROM WHICH LEGAL CON SEQUENCES WILL FOLLOW. HOWEVER A LEGAL CONSEQUENCE CANNOT BE DEEMED [DCM VS. STATE OF RAJASTHAN (1996) 2 SCC 449. AIR 1996 SC 2930 (3 JUDGES OF HONBLE SUPREME COURT) AND SAME VIEW R EITERATED IN STATE OF KARNATAKA VS. STATE OF TAMIL NADU (2017) 3 SCC 362. SO WHEN WE LOOK AT EXP LANATION-2 WE NOTE THAT DEEMING FICTION OF LAW THAT THE ORDER OF THE ASSESSING OFFICER IS DEEM ED TO BE ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ONLY IF IN THE OPINION OF T HE LD. CIT WHICH NECESSARILY HAS TO BE A FINDING O F FACT IN THE FOLLOWING FOUR EVENTS. THEN LEGAL CONSE QUENCE FOLLOWS IF NOT IT DOES NOT. SO THE CIT HA S TO MAKE A FINDING OF FACT IN THE FOLLOWING: (A) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OF FICER IS WITHOUT INQUIRY OR VERIFICATION (B) THE ASSESSING OFFICER ALLOWED A CLAIM WITHOUT E NQUIRY (C) THE ASSESSING OFFICER PASSED THE ORDER NOT IN A CCORDANCE WITH ANY ORDER DIRECTIONS OR INSTRUCTION S ISSUE BY THE CBDT U/S 119 OF THE ACT (D) THEASSESSING OFFICER PASSED THE ORDER NOT IN AC CORDANCE TO THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT OR THE HONBLE SUPREME COURT WHICH IS P REJUDICIAL TO THE ASSESSEE WHICH IS RENDERED EITHE R IN THE ASSESSEES CASE OR ANY OTHER PERSON. 27. SO THE AMENDMENT BROUGHT BY THE FINANCE ACT 2 015 BY WAY OF INSERTION OF EXPLANATION-2 CAN COME TO THE AID OF THE LD. PR. CIT OR LD. CIT O NLY WHEN ANY OF THE FOUR CONDITIONS IS SATISFIED AN D THERE IS A CLEAR FINDING OF FACT TO THAT EFFECT IS RECORDED BY THE LD. CIT THEN ONLY THE LEGAL CONSEQUENCE THAT AOS ORDER IS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE REVENUE CAN BE DEEMED OR ELSE IT CANNOT BE DEEMED. THEN IN THAT CASE ONLY THE ASS ESSMENT ORDER FRAMED BY THE ASSESSING OFFICER CAN BE DEEMED TO BE ERRONEOUS INSOFAR AS PREJUDICIA L TO THE INTEREST OF THE REVENUE NOT OTHERWISE. TO SAY IT DIFFERENTLY THE OPINION OF LD. PR. CIT OR CIT CANNOT BE READ IN ISOLATION AND IT HAS TO BE READ WITH THE FOUR CONDITIONS STIPULATED UNDER EXPL ANATION-2 AS (A) TO (D) AND HAS TO BE READ ALONG WITH IT. AND ONLY IN THE EVENT THAT ANY ONE OF THE SITUATION IS SATISFIED AND THERE IS A FINDING OF FA CT BY THE LD. CIT TO THAT EFFECT IN HIS SEC. 263 ORDER T HEN ONLY THE DEEMING PROVISION OF EXPLANATION-2 CAN BE PRESSED INTO SERVICE FOR RENDERING AN ASSESSMENT ORDER AS ERRONEOUS INSOFAR AS PREJUDICIAL TO THE REVENUE WHICH IS THE JURISDICTIONAL FACT & LAW REQ UIRED FOR THE LD. PR. CIT/CIT TO INVOKE REVISIONAL JURISDICTION U/S 263 OF THE ACT. 28. COMING TO THE EXPRESSION IN EXPLANATION -2 IN THE OPINION OF THE LD. CIT IT CANNOT BE AN ARBITRARY OPINION BEREFT OF FACTS OR LAW BY THE LD CIT. IT MUST BE THE CONSIDERED OPINION OF THE CIT WHICH IS BASED ON THE CORRECT FACTS AND IN ACCORDAN CE TO WELL ESTABLISHED PRINCIPLES OF LAW. THE AFORESAID CLAUSE ONLY PROVIDES FOR SITUATION WHERE INQUIRIES OR VERIFICATIONS SHOULD BE MADE BY REASONABLE AND PRUDENT OFFICER IN THE CONTEXT OF TH E CASE. SUCH CLAUSE CANNOT BE READ TO AUTHORIZE OR GIVE UNFETTERED POWERS TO THE COMMISSIONER TO REVIS E EACH AND EVERY ASSESSMENT ORDER. THE APPLICABILITY OF THE CLAUSE IS THUS ESSENTIALLY CON TEXTUAL. IT HAS TO BE THE OPINION OF A PRUDENT PER SON INSTRUCTED IN LAW. THE HONBLE SUPREME COURT IN MAN EKA GANDHI VS. UNION OF INDIA REPORTED IN 1978 AIR (SC) 597 HAS LAID DOWN THE LAW THAT A PUB LIC AUTHORITY SHOULD DISCHARGE HIS DUTIES IN A FAIR JUST AND REASONABLE MANNER AND THE PRINCIPL E OF DUE PROCESS OF LAW WAS RECOGNIZED BY THE HONBLE SUPREME COURT. THEREFORE THE OPINION OF TH E LD. CIT HAS TO BE IN CONSONANCE WITH THAT OF THE WELL SETTLED JUDICIAL PRINCIPLES AND CANNOT BE ARBITRARILY MADE DISCARDING THE JUDICIAL PRECEDENT ON THE SUBJECT. THE OPINION OF THE LD. PR. CIT HAS TO BE REASONABLE AND THAT OF A PRUDENT PERSON INSTRUCTED IN LAW. MOREOVER IT HAS TO BE KEPT IN M IND THAT AN EXPLANATION TO SUBSTANTIVE SECTION SHOULD BE READ AS TO HARMONIZE WITH AND CLEAR UP AN Y AMBIGUITY IN THE MAIN SECTION AND SHOULD NOT BE SO CONSTRUED AS TO WIDEN THE AMBIT OF THE SECTIO N AS HELD BY THE HONBLE SUPREME COURT IN BIHTA 23 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 COOPERATIVE DEVELOPMENT CANE MARKETING UNION LTD. V S. BANK OF BIHAR AIR 1967 SC 389 AND M/S. OBLUM ELECTRICAL INDUSTRIES PVT. LTD. HYDERAB AD VS. COLLECTOR OF CUSTOMS BOMBAY - AIR 1997 SC 3467 AT PAGE 3471 AND ALSO SEE JUSTICE G. P . SINGH PRINCIPAL OF STATUTORY INTERPRETATION 234 LEXUS 2016. IT HAS TO BE KEPT IN MIND THAT WHI LE THE COMMISSIONER IS EXERCISING HIS REVISIONAL JURISDICTION OVER THE ASSESSMENT ORDER HE HAS TO E XERCISE HIS POWER IN AN OBJECTIVE MANNER AND NOT ARBITRARILY OR SUBJECTIVELY SINCE HE IS DISCHARGING QUASI-JUDICIAL POWERS VESTED IN HIM WHILE DOING SO . THUS ACCORDING TO US EXPLANATION (2) INSERTED BY T HE PARLIAMENT U/S. 263 CANNOT OVERRIDE THE MAIN SECTION I.E. SEC. 263(1) OF THE ACT. THE LD. CIT C AN EXERCISE HIS REVISIONAL JURISDICTION IN THE EVEN T THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUD ICIAL TO THE INTEREST OF THE REVENUE AS DISCUSSED ABOVE AND NOT OTHERWISE. 29. AS WE DISCUSSED ABOVE THE OPINION OF THE LD. CIT BASED ON THE DEEMING PROVISION OF EXPLANATION 2 TO SEC. 263 OF THE ACT SHOULD BE ON T HE BEDROCK OF THE FINDING OF FACT THAT AOS ORDER FALLS IN THE INFIRMITIES/CONDITION STIPULATED UNDER THE EXPLANATION 2(A) TO (D) AND THEN ONLY THE OPINION OF THE LD. CIT SHOULD PREVAIL AND NOT THAT OF ANY OTHER PERSON. THEREFORE WHEN THE ISSUE OF ASSUMPTION OF JURISDICTION OF THE LD.CIT IS TESTED ON THE BACK-DROP OF THE JUDICIAL PRECEDENT OF THE SUBJECT WE NOTE THAT THE AO HAD CALLED FOR DOCUMEN TS FROM THE ASSESSEE VIDE NOTICE ISSUED U/S. 142(1) DATED 11.11.2016 AND HAS PASSED THE ORDER ON 23.12.2016 AFTER PERUSAL OF REPLIES OF ASSESSEE AS DISCUSSED. THE AO HAD ACKNOWLEDGED TO HAVE RECE IVED THE SAME IN THE ASSESSMENT ORDER ITSELF BY RECORDING A SPECIFIC FINDING IN THE ASSESSMENT ORDE R THAT THE ASSESSEE HAD RECEIVED FOREIGN ASSIGNMENT ALLOWANCE. SO THE ISSUE OF FOREIGN ASS IGNMENT ALLOWANCE TO THE TUNE OF RS.42 97 092/- WHICH IS THE BONE OF CONTENTION IN THIS CASE WAS IN DEED CONSIDERED AND EXAMINED BY THE AO. WE ALSO NOTE THAT THE ASSESSEE HAD ALSO FURNISHED BEFO RE THE AO REQUISITE DOCUMENTARY EVIDENCES WHICH PROVED THE FOREIGN ASSIGNMENT ALLOWANCE WHICH WAS E XCLUDED FROM THE AMBIT OF TOTAL INCOME TAXABLE IN INDIA HAD SUFFERED APPLICABLE TAX IN SWITZERLAN D BEING THE COUNTRY WHERE THE SERVICES WERE ACTUALLY RENDERED. HAVING CONSIDERED THESE EVIDENCE S EXPLANATIONS AND APPLICABLE LEGAL PROVISIONS THE AO RECORDED THE SPECIFIC FINDING THAT THE ASSESSEE WAS IN INDIA ONLY FOR 16 DAYS AND THE REST OF THE PERIOD HE WAS IN ASSIGNMENT TO SWITZERLAND AND HAD RECEIVED FOREIGN ASSIGNMENT ALLOWANCE . IN SUCH A SCENARIO THE FINDING RECORDED BY THE AO CA NNOT BE TERMED AS A CASE OF NO-ENQUIRY AT ALL IN RESPECT OF FOREIGN ASSIGNMENT ALLOWANCE OF THE ASSE SSEE. THEREFORE THE LD. CITS VIEW THAT THE ACTION OF THE AO IN ALLOWING THE AMOUNT OF RS.42 97 092/- AS EXEMPT FROM TAXATION IS IN VIOLATION OF THE PROVISION OF SEC. 5(2) OF THE ACT WITHOUT ANY E NQUIRY IS FACTUALLY INCORRECT. WE NOTE THAT THIS ISSUE WAS CONSIDERED BY THE AO AND AFTER ENQUIRY HE HAS TAKEN A VIEW TO ALLOW THE CLAIM OF THE ASSESSEE THAT THIS FOREIGN ASSIGNMENT ALLOWANCE IS NOT TAXABLE IN INDIA. WE THEREFORE HOLD THAT THE AOS VIEW CANNOT BE HELD TO BE ERRONEOUS FOR WANT O F ENQUIRY. 30. WE FURTHER FIND THAT WHEN CONFRONTED WITH THE R EASONS SET OUT IN THE SCN THE ASSESSEE HAD LED BEFORE THE LD. CIT SUFFICIENT DOCUMENTARY EVIDE NCE WHICH PROVED THAT THE SCN HAD PROCEEDED ON ASSUMPTION OF INCORRECT FACTS AND WRONG INTERPRETAT ION OF APPLICABLE LEGAL PROVISIONS. IT WAS ALSO ESTABLISHED BEFORE THE LD. CIT THAT BEFORE COMPLETI ON OF ASSESSMENT THE AO HAD INDEED MADE ENQUIRIES INTO THE FOREIGN ASSIGNMENT ALLOWANCE AND AFTER BEING SATISFIED ABOUT ITS NON-TAXABILITY TH E ORDER U/S 143(3) OF THE ACT WAS PASSED. ON RECEIPT OF THESE OBJECTIONS THOUGH THE LD. CIT DID NOT AGREE WITH THE SUBMISSIONS WE FIND THAT ULTIMATEL Y THE REASONS ON WHICH THE LD. CIT PROCEEDED TO PASS THE ORDER DID NOT CONTAIN ANY SUBSTANTIVE LEGA L OR FACTUAL MATERIAL BY WHICH HE WAS ABLE TO PROVE THAT THE SAID EXPLANATIONS SUFFERED FROM ANY INFIRM ITY. INSTEAD WE NOTE THAT THE LD. CIT ULTIMATELY MERELY SET ASIDE THE ASSESSMENT ORDER DIRECTING AO TO PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW WHICH IN OUR OPINION WAS NOTHING BUT GIVING THE AO SECOND INNINGS WITHOUT ESTABLISHING THAT THE AO'S ORDER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. OUR FINDINGS IN THIS REGARD FIND SUPPORT IN THE FOLLOWING JUDGMENTS: - DIT VS JYOTI FOUNDATION REPORTED IN 357 IT R 388 (DEL) - ITO VS DG HOUSING PROJECTS LTD REPORTED IN 343 ITR 329 - CIT VS ASHISH RAJPAL REPORTED IN 320 ITR 6 74 (DEL) - CIT VS SUNBEAM AUTO LTD REPORTED IN 332 IT R 167 (DEL) 24 ITA NOS.1303 1307 1309 1310 1312 1313&1316/KOL/2 019 AYS- 2014-15 - CIT VS R.K.CONSTRUCTION CO. REPORTED IN 31 3 ITR 65 (GUJ) 31. IN THE LIGHT OF THE ABOVE WE ARE OF THE FIRM V IEW THAT NOT ONLY DID THE AO ENQUIRE INTO THE ISSUE OF TAXABILITY OF FOREIGN ASSIGNMENT ALLOWANCE RECEIVED BY THE ASSESSEE BUT HAD CONSCIOUSLY APPLIED HIS MIND TO THE FACTS MADE AVAILABLE BEFORE HIM AND ADOPTED THE PERMISSIBLE VIEW IN LAW. FOR THESE REASONS WE ARE OF THE CONSIDERED VIEW THAT T HE ASSESSMENT ORDER IS NOT THE RESULT OF NON- ENQUIRY OR NON-APPLICATION OF MIND OR ASSUMPTION OF WRONG FACTS. WE ARE ALSO OF THE CONSIDERED OPINION THAT WHILE PASSING THE ASSESSMENT ORDER THE AO HAD FOLLOWED THE PERMISSIBLE VIEW IN LAW WHICH CANNOT BE SAID TO BE 'UNSUSTAINABLE IN LAW'. IN THE CIRCUMSTANCES THEREFORE THE JURISDICTIONAL FACTS FOR USURPING THE JURISDICTION U/S 263 OF THE ACT BEING ABSENT WE HOLD THAT THE ACTION OF LD. C IT WAS WITHOUT JURISDICTION AND ALL SUBSEQUENT ACTIONS ARE 'NULL' IN THE EYES OF LAW. WE THEREFORE QUASH THE ORDER IMPUGNED BEFORE US. SINCE ALL THE APPEALS ITSELF HAS BEEN DECIDED THEREFORE THE STAY APPLICATIONS BECOME INFRUCTUOUS AND STANDS DISMISSE D. 32. IN THE RESULT ALL THE SIX APPEALS OF THE ASSES SEES ARE ALLOWED AND THE STAY APPLICATIONS ARE DISMISSED. 4. IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN BODHISATTVA CHATTOPADHYAY VS. CIT (IT&TP) IN ITA NO.1314/KOL/2019 & ORS. DATED 15.11. 2019 WE QUASH THE IMPUGNED ORDERS OF LD. CIT PASSED U/S. 263 OF THE ACT. ALL THE APPEALS OF THE ASSESSEES ARE ALLOWED. 5. IN THE RESULT ALL THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH NOVEM BER 2019. SD/- (J. SUDHAKAR REDDY) SD/- (ABY. T. VARKEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29TH NOVEMBER 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 1. SHRI MAHESH KUMAR 2. SM. LISA DAS 3.SHRI SAMIR KUMAR NAYAK 4. SHRI BALAKALYAN CHOWDARY MARATHUS 5. SHR I BISWAJIT SWAIN 6. SHRI AZHARUL HAQUE 7. SHRI DIPANJAN BASAK. 2 RESPONDENT ACIT(IT) CIR-1(1) & 1(2) KOLKATA ACIT (IT&TP) KOLKATA 3. 4. CIT (IT&TP) KOLKATA. DR ITAT KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY BY ORDER ASSISTANT REGISTRAR