|COURT:||Delhi High Court|
|CORAM:||S. Muralidhar J, Vibhu Bakhru J|
|GENRE:||Domestic Tax, International Tax|
|CATCH WORDS:||advance ruling, Assessment|
|DATE:||April 6, 2016 (Date of pronouncement)|
|DATE:||May 17, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 143(2)/ 245R(2): A notice u/s 143(2)(ii) cannot be issued in a routine, casual or mechanical manner but after forming an opinion that it is "necessary or expedient" to do so. A S. 143(2) notice in the standard form is not a bar u/s 245R(2) for admission of an AAR application for advance ruling|
The challenge in the main petition was to an order dated 7th August 2013, passed by the Authority for Advance Rulings (‘AAR’) whereby the Petitioner’s application for determination of the question regarding taxability of its profits arising from offshore supplies was rejected on the ground that the bar under clause (i) below the proviso to Section 245R (2) of the Income Tax Act, 1961 (‘Act’) to the AAR allowing the application stood attracted. It was held that once notice was issued to the Petitioner under Section 143(2) of the Act, it should be construed that the question raised in the application was a question that was ‘pending’ adjudication and therefore the aforementioned bar in terms of clause (i) below the proviso to Section 245 R (2) of the Act could apply. HELD by the High Court:
(i) Under Section 143 (2) (ii) of the Act, an AO can serve on the Assessee a notice requiring him to attend his office and produce any evidence on which the Assessee seeks to rely in support of return if the AO “considers it necessary or expedient to ensure that the Assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner’. Therefore, the scope of the enquiry that an AO can undertake in terms of Section 143 (2) (ii) is a wide ranging one. What is relevant for the present case is that prior to issuance of the notice under Section 143 (2) (ii) the AO has to form an opinion that it is ‘necessary or expedient’ to ensure that an Assessee has not (i) understated the income or (ii) has not computed excessive loss, or (iii) has not underpaid the tax in any manner. The AO is, therefore, not expected to issue a notice under Section 143 (2) (ii) in a routine or casual or mechanical manner.
(ii) Turning to the notice issued in the instant case to the Petitioner under Section 143(2) (ii) of the Act, it is seen that it is in a standard format which merely states that “there are certain points in connection with the return of income on which the AO would like some further information.” In any event the question raised in the applications by the Petitioner before the AAR do not appear to be forming the subject matter of the said notice under Section 143 (2) (ii) of the Act. Consequently, the mere fact that such a notice was issued prior to the filing of the application by the Petitioner before the AAR will not constitute a bar, in terms of clause (i) to the proviso to Section 245-R (2) of the Act, on the AAR entertaining and allowing the application.