[aaykarbhavan] Twin conditions for transferring a case; Recording of reasons and communication of same to assessee: ITAT

 IT/ILT : A company having paid tax at time of remittance to non-resident cannot again be asked to pay tax on said amount by invoking section 163

IT/ILT : While taxing an agent under section 163 Assessing Officer can consider only such amount which was received by non-resident either from or through Indian company and not amount which remained unpaid

IT : In matter of transfer of case under section 127 not only reasons are to be recorded prior to transfer of records but also to be communicated to person concerned

IT : It is only Assessing Officer, whose territorial jurisdiction is recognized as correct, who has ultimate jurisdiction to pass either assessment order or reassessment orders

■■■

[2013] 39 taxmann.com 165 (Hyderabad - Trib.)

IN THE ITAT HYDERABAD BENCH 'A'

Deputy Director of Income-tax (International Taxation) -II, Hyderabad

v.

PVP Ventures Ltd.*

CHANDRA POOJARI, ACCOUNTANT MEMBER 
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

IT APPEAL NOS. 1159 TO 1162 (HYD.) OF 2010, 1868 (HYD.) OF 2011 
CO. NOS. 96 & 97 (HYD.) OF 2010 
[ASSESSMENT YEARS 2007-08 AND 2008-09]

JULY  31, 2013 

I. Section 163 of the Income-tax Act, 1961 - Non-resident - Agent of [Obligation of paying tax] - Assessment years 2007-08 and 2008-09 - Assessee, a company incorporated in Mauritius, earned interest income on debentures from PVPVPL, an Indian company - For purpose of assessment, Assessing Officer treated PVPVPL as agent of assessee under section 163 - Whether when PVPVPL had discharged its obligation of paying tax as per authorization at time of remittance itself, it could not again be asked to pay tax on amount remitted - Held, yes - Whether, therefore, order passed by Assessing Officer under section 163 was bad in law - Held, yes [Para 36] [In favour of assessee]

Section 163 of the Income-tax Act, 1961 - Non-resident - Agent of [Unpaid interest] - Assessment year 2008-09 - Assessee, a non-resident company, earned interest on debentures from PVPVPL an Indian company - Assessing Officer treated PVPVPL as assessee's agent under section 163 - Whether while taxing PVPVPL under section 163 Assessing Officer could consider only such amount which was received by assessee from PVPVPL and not amount remained unpaid due to waiver by assessee - Held, yes [Para 42] [In favour of assessee]

II. Section 127 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases [Condition precedent] - Assessment year 2008-09 - Whether in matter of transfer of a case under section 127, it is necessary that authority, which proposed to transfer a case must, wherever it is possible to do so, give assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against proposed transfer - Held, yes - Whether in such case not only reasons are to be recorded prior to transfer of records but also communicated to person concerned; mere recording of reasons without communicating same to concerned person is against provisions of section 127 - Held, yes - Whether unless there is a proper and lawful order transferring case from one Assessing Officer to another Assessing Officer by a competent authority, transfer of case cannot be effected and initiation of any assessment proceedings by other Assessing Officer would be without jurisdiction - Held, yes [Paras 24 and 30] [In favour of assessee]

Section 120, read with section 127, of the Income-tax Act, 1961 - Income-tax authorities - Jurisdiction of [Territorial jurisdiction] - Assessment year 2008-09 - Whether it is only Assessing Officer, whose territorial jurisdiction is recognized as correct, who has ultimate jurisdiction to pass either assessment orders or re-assessment orders - Held, yes - Assessee, a company incorporated in Mauritius, filed e-return declaring interest income on debentures from PVPVPL, a company registered in Hyderabad - Income-tax authorities transferred assessee's case to Assessing Officer, Hyderabad on ground that source of assessee's income was situated at Hyderabad - Assessing Officer, Hyderabad passed assessment order - Facts revealed that PVPVPL had shifted its registered office to Chennai by merger with other company - Whether on facts jurisdiction to assess assessee would be vested with authorities at Chennai and not at Hyderabad and, therefore, order passed by Assessing Officer, Hyderabad was without authority - Held, yes [Para 31] [In favour of assessee]

FACTS-II

 

■		The assessee, a company incorporated under the laws of Mauritius, filed its return through e-filing admitting certain loss.
■		The case was selected for scrutiny and the Assessing Officer, New Delhi issued notice under section 143(2).
■		During assessment proceedings, the assessee challenged the jurisdiction of the Assessing Officer in New Delhi, contending that the only source of income of the company in India for the relevant assessment year was the interest income on the debentures from the erstwhile PVPVPL, the company which was registered and situated at Hyderabad and the assessment of the assessee had already been completed in the hands of the representative assessee (PVPVPL) for the assessment year 2008-09.
■		Based on the objections of the assessee on the jurisdiction issue and the notification of the CBDT dated 28-9-2007, the case was transferred to the Assessing Officer, Hyderabad who passed assessment order under section 143(3).
■		On appeal, the assessee contended that the fact that the assessee objected to the jurisdiction of the officer at Delhi could not, by itself, be taken as a reason to transfer the file to Hyderabad; and that even going by the notification taking effect from 15-6-2012 issued by the Additional Director of Income-tax (International Taxation), Hyderabad, which states the jurisdiction of a non-resident company to belong to the place where the source of income exists, it cannot be said that the revenue authorities at Hyderabad had jurisdiction over the assessee since the payer of interest, namely, PVPVPL, had shifted its registered office to Chennai and also had merged with SSI Ltd. by an order of the Madras High Court. It contended that assuming that the authorities, where the source belongs, have jurisdiction, the jurisdiction could vest if at all only at Chennai and not at Hyderabad.

HELD-II

 

■		In the matter of transfer of a case under section 127, it is necessary that the authority which proposed to transfer a case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable Assessee to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing to the assessee. It is also necessary to mention in the notice the reason for the proposed transfer so that the assessee could make effective representation with reference to the reasons stated. It is not sufficient merely to say in the notice that the transfer is proposed 'to facilitate the assessment'. The reasons cannot be vague and too general in nature but must be specific based on the material facts. It is again not merely sufficient to record reasons in the file but it is also necessary to communicate the same to the affected party. In the instant case, no order has been brought on record to show that indeed there is an order to transfer. The Assessing Officer never intimated to the assessee any reasons for transfer. In fact, no show-cause notice giving reasons for any proposed transfer issued by the relevant CCIT was brought on record by the revenue. No communication of transfer under section 127 has been produced by the revenue authorities. The only plea of the revenue is that there is a notification by the ADIT (International Taxation-II), dated 31-10-2007 bearing No. Additional DIT (International Taxation)/Hyd/Juris/2007-08 through which the ADIT (International Taxation)-II assumed the jurisdiction over the assessee. Even if there is a notification from the ADIT (International Taxation)-II, Hyderabad which confers jurisdiction over the assessee, the fact remains that the issue was pending before the ADIT (International Taxation), Circle 2(1), New Delhi; and that the assessment was already under process by issuing relevant notice for assessment and the assessee filed objection for issue of notice. In spite of this, the ADIT (International Taxation)-II, Hyderabad assumed jurisdiction over the assessee and started proceedings under section 143(3) read with section 144. The ADIT (International Taxation)-II, Hyderabad cannot assume jurisdiction without valid transfer order under section 127 from the ADIT (International Taxation)-II, New Delhi. There should be due procedure of transfer to be followed. The power of transfer, vested in the authorities mentioned in section 127, is a quasi-judicial one. Such a power has to be exercised in a fair and reasonable manner and not in an arbitrary and mechanical way. Passing a reasoned order is one of the requirements of fairness in action. Before transferring a case, notice should be given by the transferring authority to the assessee. Such notice should contain reasons for the proposed transfer. The transferring authority should afford an opportunity of hearing and thereafter pass a speaking order considering the objections raised by the assessee, if any. Thereafter, the order should be communicated by the transferring authority to the assessee disclosing the reasons for such transfer. Unless there is a proper and lawful order transferring the case from one Assessing Officer to another Assessing Officer by a competent authority, transfer of case cannot be effected. Where there was no order of transfer of jurisdiction of a case by a competent authority, it does not lie within the power of Assessing Officer to transfer the case from his jurisdiction to another officer. Once there was no order of transfer by the competent authority in a given case, the initiation of any assessment proceedings by the other Assessing Officer was without jurisdiction. In absence of any transfer order, no Assessing Officer other than the one who has initiated the original proceedings shall have jurisdiction to continue with the proceedings and to reopen the concluded assessment. When the section requires giving of a reasonable opportunity of hearing to an assessee before passing an order of transfer, the same would obviously mean that the assessee will be entitled to make its objections or representations against the proposed order of transfer and such representation and objection cannot be an effective one unless it is known to the assessee for what reasons or on what grounds such proposal is being made. If such reason for proposal of such transfer is not communicated to the assessee, the opportunity of the assessee to represent against such proposal will be entirely illusory and not effective one. A reply by the assessee to the notice wherein no reasons have been given in the notice would not amount to either waiver or estoppel against provision of reasonable opportunity of hearing, the same being mandatory. [Para 24]
■		Thus, not only the reasons are to be recorded prior to the transfer of records, but also to be communicated to the person concerned. Mere recording of reasons without communicating the same to the concerned person is against the provisions of section 127. Further, dispute is about the assuming of jurisdiction by the ADIT (IT)-II, Hyderabad over the case of the assessee. There is nothing placed on record to show that the person who has passed the impugned assessment order is having jurisdiction over the assessee when the assessee's case is pending with the ADIT, New Delhi. The notification dated 28-9-2007 itself cannot confer jurisdiction to the Assessing Officer, Hyderabad, when return of income of the assessee was pending with the Assessing Officer, New Delhi. [Para 30]
■		It is only the Assessing Officer, whose territorial jurisdiction is recognized as correct, has the ultimate jurisdiction to pass either the assessment orders or reassessment orders. This is because the assessee, viz., PVPVPL has shifted its registered office to Chennai by merger with SSI Ltd., by an order of the Madras High Court and thereafter its name changed as PVPVL which has the registered Office at Chennai. The date of PVPVL, coming into existence is the date on which the Madras High Court effected the amalgamation/merger as on 1-10-2007. These facts have been advertised in one issue of an English Daily 'the Hindu Business Line' on 19-2-2008 and another issue of Tamil Daily, viz., 'Dina Malar' on 19-2-2008 and from this date the jurisdiction is to be vested with the authorities in whose jurisdiction the registered office is situated. Then, the jurisdiction would be vested with the authorities at Chennai and not at Hyderabad. Being so, the order passed by the ADIT (International Taxation)-II, Hyderabad is without authority and the same is annulled. [Para 30]

CASES REFERRED TO

 

Vijayasanthi Investments (P.) Ltd. v. Chief CIT [1991] 187 ITR 405/56 Taxman 190 (AP) (para 23), Saptagiri Enterprises v. CIT [1991] 189 ITR 705 (AP) (para 25), Smt. N. Kaasivisalam v. Asstt. CIT [2005] 93 TTJ 537 (Chennai) (para 26), ITO v. Krishnakumar Gupta [2008] 16 DTR 1 (Delhi - Trib.) (para 27), ITO v. Mangilal Nandkishore [1992] 40 ITD 538 (Jaipur) (para 28), Ajantha Industries v. CBDT [1976] 102 ITR 281 (SC) (para 29), CIT v. Giriraj Udyog (P.) Ltd. [2005] 273 ITR 495/[2006] 151 Taxman 75 (All.) (para 33), H.L. Sud, ITO v. Tata Engg. & Locomotive Co. Ltd. [1969] 71 ITR 457 (SC) (para 51), Tata Engg. & Locomotive Co. Ltd. v. ITO [1963] 49 ITR 866 (Bom.) (para 51.2), CIT v.Alfred Herbert (India) (P.) Ltd. [1986] 159 ITR 583/26 Taxman 145 (Cal.) (para 51.3), CIT v. Hukumchand Mohanlal [1967] 64 ITR 341 (MP)(para 51.3).

Ravindra Sai and M.B. Reddy for the Appellant. T. Banu Sekhar and B. Ramakrishnan for the Respondent.

ORDER

 

Chandra Poojari, Accountant Member - ITA Nos. 1159 to 1162/Hyd/ 2010 emanate from the common order passed by the CIT(A)-VI, Hyderabad for A.Ys. 2007-08 and 2008-09 dated 29.6.2010 filed by Revenue. Cross-Objection Nos. 96 and 97/ Hyd/2010 are filed by the assessee against the above common order of the CIT(A).

1.1 ITA No. 1868/Hyd/2011 by the assessee is directed against the order passed by the Asstt. Director of Income-tax (International Taxation)-II i/c, Hyderabad u/s 143(3) read with section 144C of Income-tax Act, 1961 in pursuance of Directions given by the Dispute Resolution Panel (DRP) u/s. 144C(5) r.w.s. 194C(8) of the said Act dated 24.10.2011.

2. First we will take up ITA No. 1868/Hyd/2011 by the assessee. The first ground in this appeal is that the Asstt./ Deputy Director of Income-tax (International Taxation)-II does not have jurisdiction to complete assessment in the hands of the assessee. Brief facts relating to this issue, as narrated in the assessment order, are that the assessee company M/s. Platex Limited (for short Platex) is a company incorporated under the laws of Mauritius, with its registered and corporate office located at 10 Frere Felix de Valois Street. Port Louis, Mauritius and the present address being Rogers House 5, President John Kennedy Street, Port Louis, Mauritius 99999. The company is engaged in the business of providing financial services. The assessee company filed its return of income voluntarily for the A.Y. 2008-09 through e-filing on 7.07.2009 admitting net loss of Rs 4,92,65,714 with PAN AAECP6200E. As the PAN is owned by Deputy Director of Income Tax (International Taxation), Circle-1(1), New Delhi, the return was processed u/s 143(1) of Income-tax Act, 1961 by the DDIT (International Taxation), New Delhi on 12.10.2010. The case has been selected for scrutiny through CASS. Therefore, notice u/s 143(2) of the IT Act 1961 was issued on 20.08.2010 by the DDIT (International Taxation), Circle-1(1), New Delhi. Subsequently the file has been transferred to the ADIT (International Taxation), Circle-2( I). New Delhi.

3. During the course of assessment proceedings, vide letter dated 06.10.2010, it was represented by Sri Prasad V Potluri, Director of Platex Ltd., before the ADIT (International Taxation), Circle-2(1), New Delhi that the only source of income of the company in India for the previous year relevant to the assessment year 2008-09 is the interest income on the debentures from the erstwhile M/s. PVP Ventures Private Ltd (for short PVPVPL) the company which was registered and situated at Hyderabad. The assessee also challenged the jurisdiction of the Assessing Officer in New Delhi stating that the assessment of the assessee has already been completed in the hands of the representative assessee (PVPVPL) for the A.Y. 2008-09 by ADIT (IT)-II. Hyderabad. It was also stated that the Platex had no other sources of income in any other place in India and has no place of business in India. Based on the above letter the file has been received on transfer from New Delhi by the concerned office at Hyderabad on the ground that the jurisdiction over the case vests Hyderabad office since the source of income of the assessee is at Hyderabad.

4. On receipt of the records from Delhi the case has been taken up for scrutiny and questionnaire along with notices u/s 143(2) & 142(I) of the IT Act have been issued. In response to the notices a power of attorney was issued by Mr Prasad V Potluri, Director on behalf of Platex on 06.12.2010 authorising Mr Deepak Nagori as the true and lawful authorized representative of the assessee relating to assessment proceedings of the company for the A.Y. 2008-09. Mr Deepak Nagori is also holding the post of Vice-President (Finance) for M/s. PVPVPL, Corporate office, 8-2-609/K, Avenue-4, Street No I, Road No 10, Banjara Hills, Hyderabad. He appeared from time to time and furnished to some extent the information called for. The information furnished has been verified by the Assessing Officer.

5. As seen from the computation of income filed the assessee admitted Rs 54,14,61,942 as interest receivable on debentures and claimed expenditure of Rs 59,07,27,656 as expenditure incurred by the assessee being the interest payable on loan taken for subscribing the debenture. Thus the assessee claimed a net loss of Rs. 4,92,65,714. The background fact of this case is related to earning of interest income by the foreign company Platex, Mauritius on its investment made in the debentures issued by an Indian company M/s. PVPVPL. M/s. PVPVPL had issued 88,644 fully convertible debentures (FCDs) of Rs. 1,00,000 each in 4 tranches as per 'subscription agreement(s)' dated 11th January, 2007; 21st February, 2007, 5th September, 2007 and 14th September, 2007 to Platex Ltd. These debentures bear interest @ 14.5% per annum on their principal amount, from and including the issue date up to the conversion date, which are required to be paid semi-annually on 15th June/15th December.

Tranches	Date of subscription	Amount (in Rs.)
First	16.01.2007	132,89,00,000
Second	22.03.2007	375,83,00,000
Third & Fourth	14.09.2007	377,72,00,000
	Total	886,44,00,000

6. As per 'subscription agreement(s)' and the terms and conditions of the debentures, the PVP Ventures Ltd. (formerly PVP Ventures (P) Ltd.). is required to pay interest semi-annually on 15^th June & 15^th December @ 14.5% per annum on the principal amount of debentures. This interest become payable to Platex Ltd., Mauritius during the financial years 2006-07 and 2007-08. The details of interest payable to Platex are as follows-

Period	Interest accrued	Interest claimed waived	Interest paid (Rs.)
For FY ending 31.3.2007	5,30,31,148	Nil	5,30,31,148
For FY ending 31.3.2008	103,69,30,339	49,54,68,397	54,14,61,942
		Total	59,44,93,090

7. On account of the above interest payable as per the debenture subscription agreement(s), PVP ventures had made a remittance of Rs. 56,47,68,435 to Platex Ltd., Mauritius in December, 2007 after deducting tax @ 5% on the above accrued interest amounting to Rs. 2,97,24,654. It is undisputed fact that income by way of interest payable by PVP Ventures Ltd to Platex Ltd (a non-resident) is the income deemed to accrue or arise to Platex Ltd. in India as per Section 9(1)(v) of the Act and such income is chargeable to tax in India as per Section 4 read with Section 5(2) (b) of the Act.

8. In the present case, the income by way of interest which is deemed to accrue or arise to the non-resident (Platex Ltd) in India as per section 9(1)(v) is chargeable to tax as the total income of the non-resident (Platex Ltd.) as per sec. 5(2)(b) read with sec. 4 of the Income-tax Act, 1961. Section 115A provides that if the total income of a non-resident consists of 'interest income', the amount of income tax on such interest would be calculated at the rate of 'twenty per cent'. The non-resident is not entitled to claim any expenditure or allowance u/ss 28 to 44C and sec. 57 in computing his or its income referred to in sub-section (1). According to the Assessing Officer, the income by way of interest which is deemed to accrue or arise to M/s. Platex Ltd., Mauritius is chargeable to tax under the provisions of the Act and tax to be deducted at source at the rate of 20% (plus applicable surcharge and education cess) on such interest without deduction for any allowance or expenditure. Since Platex Ltd., is a tax resident of Mauritius, while determining the tax liability, the provisions of DTAA between India and Mauritius would be applied insofar as they are beneficial to the assessee. As per Article 11 of the DTAA dealing with interest the state of source (India) has the right to tax the income by way of interest arising in India to a resident of Mauritius (Platex Ltd.) and such interest would be taxable as per the provisions of Indian Income-tax Act. In view of the above, the Assessing Officer observed that the rate applicable on the interest income in the hands of Platex Limited shall be twenty per cent plus applicable surcharge and education cess.

9. During the course of the assessment proceedings in this case, a detailed questionnaire has been issued to the assessee by ADIT (International Taxation), Circle-2(1), New Delhi on 12.10.2010 seeking information about the foreign company assessee. However, the assessee did not provide point-wise reply to the queries made by the Assessing Officer but responded to the notices by questioning the jurisdiction and to drop the assessment proceeding. Later upon transfer of the case to Hyderabad, on 23.11.2010, the DDIT (International Taxation)-II, Hyderabad issued another questionnaire responding to the each issue/concern raised by the assessee in its earlier letters to the Department and sought reply from the assessee as to why the total interest accrued for the FY relevant to the AY 2008-09 should not be taken as Rs 103,69,30,339 by disallowing the claim that the interest amount of Rs. 49,54,68,397 has been waived and also by disallowing the expenditure claimed by the assessee amounting to Rs. 59,07,27,656. In the same notice the detailed questionnaire (of dated 12.10.2010 issued from New Delhi office) was also referred to and a reply of the assessee was sought on those questions. In order to correctly understand the background of this case and also the claim of the assessee as well as the department's viewpoint. the relevant portion of the notice dated 23.11.2010 is hereby reproduced below:

'Sub: Income Tax Assessment - Your own - AY 08-09 - Information called for - Regarding

Ref: (1) Notice u/s. 143(2) of the IT Act, 1961, dated 20-08-2010, issued by DDIT (IT)-Circle 1(1), New Delhi.

(2) Notice u/s. 142(I), along with letter dated 12.10.2010, issued by Assistant Director Income Tax .(IT), Circle-2(1), New Delhi.

(3) BMR & Associate's letters dated 04.10.2010, 29.10.2010 and 10.11.2010

Please refer to the above.

The case of Platex Limited has been received on transfer from the Asstt. Director of Income Tax. Circle-2(1), (IT) New Delhi on the ground that the jurisdiction over the case vests with the undersigned since the assessee's only source of income in India is the interest income. on the debentures from the erstwhile PVP Ventures Pvt. Ltd., the company which was registered and situated in Hyderabad. It was also stated the scrutiny assessment for the Asst Year 2008-09 is pending and the same is going to be barred by limitation by 31.12.2010.

On verification of the information furnished by you it is noticed that it was mentioned in the letter dated 04.10.2010 that the assessee did not file any tax return in India under the Act, [or the FY relevant to the: A.Y. 2008-09 Since, it does not have any taxable income under the Act. It was also mentioned in the above letter that

".... The assessee had subscribed [or 88,644 14% Fully Convertible Debentures (FCDs) of face value of Rs. 100,000 each issued by erstwhile PVP Private Limited "PVP") (PAN AADCP6654C) having its registered office at #8-2-609/K, Avenue 4 Street No. 1, Road No. 10, Banjara Hills. Hyderabad-500 034.

The assessee had interest income receivable amounting to Rs. 54,14,61,912 during the Financial Year relevant to the A.Y. 2008-09 but had incurred expenditure for Rs. 59,07,27,656 which resulted in a loss of Rs. 4,92,65,714 ..."

However, it was noticed that you have filed the return of income for the Asst. Year 2008-09 through e-filing on 07-07-2009 vide acknowledgment number 71238450070709 with the PAN AAECP6200E. It is also noticed that you have declared loss of Rs. 4,92,65,714 and claimed TDS of Rs. 2,70,73,097 in the return of Income filed for the AY 2008-09 which are the same figures mentioned in your letter. You are therefore requested to clarify as to how you have stated that you have not filed the return of income when the return was actually filed on 07.07.2009.

In your letter dated 29.10.2010 it was stated that "In connection with the above notice. we wish to submit that you have directed the assessee to provide various details for the above-mentioned assessment year. We wish to draw your attention to our letter dated October 4, 2010 wherein we have provided details of the assessment already completed in Hyderabad in respect of the same income of the assessee. The assessment of the assessee has already been completed in the hands of the representative assessee (PVP Ventures Limited) for the A.Y. 2008-09 by the ADIT (International Taxation)-II, Hyderabad under section 144 r.w.s 147 of the Act dated July 6, 2009. The Commissioner (Appeals)-VI, Hyderabad vide order dated June 29, 2010 had adjudicated the matter and held in favour of the assessee that there is no income chargeable to tax under the Act for the A.Y. 2008-09.

The Department has filed the appeals before the Hon'ble Income Tax Appellate Tribunal (ITAT) against the order of the CIT(A). The cases have been posted for hearing on November 18, 2010 before the Hon'ble 'B' Bench of the ITAT Hyderabad.

Further, we had also pointed out that the assessee would not fall within your jurisdiction as per the section 120 of the Act. We had also attached the copy of the notification dated September 28, 2007 in this regard.

In your letter dated 10.11.2010 it was stated that since "the assessment has already been completed for the impugned transaction and it is pending before the ITAT, we request you to drop the proceedings.

In this connection it is to be stated that the assessee M/s. Platex Limited has not filed its return of income for the A.Y. 2008-09 within the time allowed under the Act even though it had earned income in India by way of interest on debentures. Hence, order u/s. 163 of the IT Act has been passed treating M/s. PVP Ventures Limited, treated as an agent of Platex Limited and notice u/s. 148 of the IT Act has been issued. Since, the representative assessee has not filed the return of income in response to the notice u/s. 148 the assessment for the A.Y. 2008-09 has been completed in the hands of the representative assessee (PVP Ventures) u/s. 144 of the IT Act on 06.07.2009.

Subsequent to the completion of the assessment in the hands of the representative assessee on 06.07.2009, M/s. Platex Limited filed its return of income for the Asst. Year 2008-09 on 07-07-2009. Since, you have filed the return of income voluntarily and not in response to any notices issued and the case has been selected for scrutiny through CASS the assessment is bound to be completed and the proceedings cannot be dropped as requested by you.

In view of the facts mentioned above, you are requested to furnish the following information in connection with the finalization of the scrutiny assessment:

(1)		The information called for u/s. 142(1) of the IT Act 1961 vide letter dated 12.10.2010 by the Asstt. Director of Income Tax Circle-2(I) International Taxation New Delhi (copy enclosed for ready reference)
(2)		Hard copy of the return of income filed for the A.Y 2008-09, along with enclosures. Balance Sheet and P&L A/c, with annexures audit reports etc.
(3)		Complete details and nature of expenditure claimed with supporting evidence and justification with regard to the admissibility of claim of the expenditure as per the provisions of the Income Tax Act.
(4)		It is seen that you have shown the interest receipts on debentures at Rs. 54,14,61,942/-However, it is noticed during the assessment proceedings in the hands of Representative assessee (PVP Ventures) that the total interest accrued for the FY relevant to the Assessment Year 2008-09 has been taken at Rs. 103,69,30,339/- by disallowing the claim that the interest amount of Rs. 49,54.68,397 has been waived for the detailed reasons mentioned in the assessment order. In view of the above you are requested to explain as to why the total interest accrued in India should not be taken at Rs. 103,69,30,339 and assessment completed for the detailed reasons mentioned in the assessment order in the hands of the representative assessee as admittedly referred by you.
(5)		Since, the source of income in India is only the interest on debentures and you do not have any other business activity, you are requested to explain as to why the expenditure claimed amounting to Rs. 59,07,27.656 should not be disallowed treating the same not incurred in connection with the purpose of earning interest income in India.
(6)		As seen from the records only a copy of the power of attorney was filed. It is requested that the original may be furnished.

You are requested to furnish the above information by 06-12-2010, on which dale the case is posted for hearing. Notices u/s. 142(1) and 143(2) of the IT Act, 1961, are enclosed for compliance.'

10. In response to the show-cause notice the assessee through its AR filed its reply on 6-12-2010 before the Assessing Officer stating that the current assessment proceeding should be dropped as same income has been already taxed in the hands of representative assessee of Platex which is before the appellate authority. It is also stated by the assessee to have their rights to file material/evidences if required on any validity of the proceedings. On being asked by the Assessing Officer, the AR could not explain what the assessee meant by such validly constituted proceeding. From the reply of the assessee, it is clear that it has not responded to all the issues raised in the aforesaid letter of the Deptt. of dated 23.11.2010, but merely requested the Assessing Officer to drop the proceeding on the stated ground.

11. Once again the Assessing Officer, in order to provide another opportunity to the assessee to give its responses on the issues earlier raised by the Deptt., issued one more letter to the assessee on 10.12.2010 by explaining as to why this proceeding cannot be dropped and also the assessee was requested to give his reason as to why the interest receivable amounting to Rs. 103,69,30,339 should not be treated as income of the assessee for the A.Y. 2008-09. The relevant portion of this letter of the Assessing Officer of dated 10.12.2010 to the assessee is reproduced below:

'Sub: IT Asst. - Your own A.Y. 2008-09 - Information called for - Reg.

Ref: This office reply dated 23.11.2010 and your reply dated 06.12.2010 and 09.12.2010.

Please refer to the above.

In your letter dated 09.12.2010, you have asked for a copy of' the notification or order passed for transferring the files of the company from Delhi to Hyderabad.

With regard to the above it is to be stated that you have filed a letter dated 10.11.2010 before the ADIT, Circle-2(1), International Taxation, New Delhi stating "In furtherance to our earlier submissions dated October 29, 2010 in connection with the above proceedings, we wish to reiterate the fact that Platex's only source of income in India for the Previous Year relevant to the Assessment Year 2008-09 is the interest income on the debentures from the erstwhile PVP ventures Private Limited, the company which was registered and situated in Hyderabad in the state of Andhra Pradesh. Platex had no other source of income in any other place in India and has no place of business in India."

From the above, it is evident that your source of income accruing or arising or deemed to be accruing or arising in Hyderabad. As such, the jurisdiction over the case vests with the Deputy Director of Income Tax-II (International Taxation), Hyderabad. In view of the above the case has been transferred from Delhi to Hyderabad.

It was also stated that "the alleged income if the Company has already been assessed in the hands of PVP Ventures Limited in the capacity of a representative assessee for the A.Y. 2008-09 under section 144 read with section 147 of the Act, vide assessment order dated July 6, 2009 and the Commissioner (Appeals)-VI, Hyderabad vide order dated June 29, 2010 had adjudicated the issue in favour of PVP Ventures Ltd. Presently, the Revenue is in appeal before the Hon'ble Income Tax Appellate Tribunal ("Tribunal'') against that order

Further, since the income in respect of which the return of the Company has been filed by PVP Ventures Limited in a representative capacity has been assessed; there is nothing further to be assessed at this stage Since the revenue is also in appeal before the Tribunal, there cannot be another proceeding in respect of the same income.

We request you to clarify if the Revenue has any other information or understanding in this regard and also provide us with adequate opportunity of being heard.

In this connection, it is stated that, the above contention is not correct. Since, the Platex Ltd., has not filed its return of Income for the A.Y. 2008-09 admitting the interest received from PVP Ventures Ltd., an order u/s. 163 of the IT Act has been passed treating PVP Ventures Ltd., as an agent of Platex Ltd., and notice u/s 148 of the Act has been issued. Since no return has been filed in response to the above notice the assessment has been completed u/s 144 of the IT Act on 06.07.2009. Aggrieved of the above. M/s. PVP Ventures Ltd., filed an appeal before the CIT(A) disputing the order u/s 163 of the IT Act. Thus, the contention of the PVP Ventures Ltd., is that it cannot be treated as an agent of Platex Ltd.

Subsequent to the completion o( the assessment in the case of the representative assessee on 06.07.2009, M/s. Plates Ltd., had filed its return of Income for the A.Y. 2008-09 on 07.07.2009 through e-filing. This return has been processed u/s 143(1) of the IT Act by the DDIT (IT), Circle-1(1), New Delhi since the PAN is owned by him. The case has been selected for scrutiny through CASS and notices u/s 143(2) has been issued. Since, no assessment has been completed in the case of M/s. Platex Ltd., it cannot be said that this income has already been assessed to tax. Further, it is also to be stated that you have filed the return of income admitting loss and claiming refund of TDS. Contrary to the above you are now stating that there cannot be another proceeding in respect to the same income. This argument is not correct. The claim of refund of TDS made through the return of income filed cannot be considered without initiating any proceedings. Once the proceedings are initiated, the income/loss admitted and the claim of refund has to be examined and orders are to be passed. In view of the above, the contention raised by you is not based on facts and is liable to be rejected.

With regard to the taxability of the income accrued to the foreign company Platex Ltd., you are arguing that M/s. PVP Ventures Ltd., should not be treated us an agent of Platex Ltd u/s 163 of the IT Act and at the same time you are arguing that the income should not be assessed in the hands of Platex Ltd. Your contention that the said return has been filed by PVP Ventures in the representative capacity is not based on facts. It can be seen that no return has been filed by the representative assessee in response to the notice u/s. 148 of the IT Act and hence the assessment has been completed u/s 144 of the IT Act. Even before the appellate authorities it was nowhere mentioned that the representative assessee has filed its return. From the above it is evident that your argument is not correct.

In this connection, it is also to be stated that when there is difference of opinion regarding the tax liability between two persons, different assessments can be made in respect of the same income in the hands of both the persons. However, in such case, one assessment will be cancelled after the correct liability is determined and the matter has reached the finality.

In view of the above, you are requested to furnish the information called for vide this office letter dated 23.11.2010. You are also requested to furnish the following:

1.		In the return of income filed you have admitted loss of Rs. 4,92,65,714. However, it is seen from Part A profit and loss account in the return of income that the credits and debits are shown as zero. It is not known as to how the loss has been arrived at when there are neither receipts nor expenditure. You are requested to clarity the same.
2.		You are requested to furnish the audited accounts of the company, the profit and loss account and balance sheet wherein the loss claim has been reflected along with the supporting evidence.
3.		It is seen from the information available on records that an amount of Rs. 54,14,61,942/- has been paid to you by PVP Ventures as debenture interest and the amount of Rs 49,54,68,397 has been claimed as interest waived. Thus, the total interest accrued for the FY ending 31.03.2008 works out to Rs. 103,69,30,339/-.
4.		As per the provisions of Sec. 115A of the IT Act no deduction in respect of any expenditure or allowance is allowable to the assessee under sections 28 to 44C and Sec. 57 in computing its income.

You are requested to explain as to win' the interest amount claimed to have been waived should not he treated as income accrued for the detailed reasons mentioned in the assessment order dared 06.07.2009 in the case of M/s. PVP Ventures Ltd., being the representative assessee of M/s Platex Ltd. You are also requested to explain as to why the interest accrued to you for the Financial year 2007-08 should not be taken as Rs. 103,69,30,339 and assed to tax.

You are requested to furnish the above information by 20.12.2010 since the assessment is going to be barred by limitation by 31.12.2010. You are requested to cooperate with the department by furnishing the complete information. Notices u/s. 143(2) and 142(1) are enclosed for compliance.'

12. In response to the above letters of the AO, the assessee company filed its replies on 14.12.2010 and later on 20.12.2010. The replies of the assessee including certain objections raised by the assessee in its responses before the Assessing Officer are discussed hereunder:

(a)		With reference to the assessee's submission dated 14.12.2010, the assessee in its reply has given point-wise response to the detailed questionnaire of the Deptt. dated 12-10-2010. In this letter dated 14.12.2010 the assessee again stated to have reserved its rights to contend the validity of proceedings/ jurisdiction. During the course of hearing, the AR on being asked to explain if the assessee has doubted the jurisdiction of this office and if so for what reason, he could not give any reasons or arguments if the jurisdiction of this office is invalid. In fact the assessee has not challenged the jurisdiction of this office during the entire course of assessment proceeding in Hyderabad nor it has spelt out any reason, on being asked specifically, challenging the jurisdiction during the course of hearing of the AR. Similarly. during the course of hearing on 14-12-2010, the AR was also asked to explain with reasons if the assessee felt the present proceeding is invalid, but the AR could not give any reason for the same nor gave anything in writing to contest the issue of stated 'valid proceeding' apart from the stated "jurisdiction issue'. This office would have explained to the assessee with adequate reasons if it has raised any of these two issues or both issues during this assessment proceeding, but the assessee has chosen not to raise these two issues, and thus, in a way, has foregone the opportunity.
(b)		The Assessing Officer observed that the assessee has no issue regarding the jurisdiction of the undersigned unlike the proceeding initiated by ADIT (IT), Circle-2(1), New Delhi. The assessee in its reply dated 04.10.2010 addressed to DDIT (IT), Circle-1(1), New Delhi had questioned the jurisdiction over the case on the assessment proceedings for the A.Y. 2008-09. Again, on 29.10.2010, the assessee had pointed out to ADIT (IT)-2(I), New Delhi that the assessee would not fall within his jurisdiction as per sec. 120 of the IT Act in view of the notification dated 28th September, 2007. But no such objections are made by the assessee during this proceeding in Hyderabad, but on the contrary it has responded to the assessment proceeding on a tax return filed by it voluntarily, and submitted the replies to the questionnaire along with the notice u/s 142(I) and 143(2) of the IT Act and to the subsequent notices.
(c)		It is, therefore, the Assessing Officer concluded that the assessee has no objection on the validity of the current assessment proceeding and also the valid jurisdiction of this office over the assessee. Furthermore, due to exhaustion of opportunity any plea of the assessee to raise this issue at a later stage before other authorities would amount to raising fresh issue and shall not be accepted.

13. In view of the objection of the assessee before DDIT (International Taxation), Circle-2(1), New Delhi as mentioned in subsequent letters of the assessee dated 04.10.2010 and 10.11.2010 addressed to DDIT (International Taxation), Circle-2(1), New Delhi the assessee had reiterated its stand on the assessment proceedings for the A.Y. 2008-09 being not within the jurisdiction had pleaded for dropping the proceeding in view of the assessment of the income of the assessee already been completed in the hands of its representative assessee PVP Ventures Ltd., for the A.Y. 2008-09 by ADIT (International Taxation)-II, Hyderabad on 06.07.2009. The assessee made its request before ADIT, New Delhi despite the fact that the representative assessee of Platex Ltd., has challenged the validity of the very order of appointment of representative assessee to PVP Ventures Ltd., u/s 163 of the IT Act for the AY 2007-08 and 2008-09 before the appellate authority. Consequently, based on the objections of the assessee on the jurisdiction issue as per sec. 120 of the IT Act and the notification of the CBDT dated 28^th September, 2007 this case has been transferred to DDIT (International Taxation)-II, Hyderabad.

14. According to the Assessing Officer, in view of the facts narrated by the assessee himself and also due to the fact that the chargeable income to Platex has been paid by erstwhile PVP Ventures Pvt. Ltd located in Hyderabad, and thus the source of income of the assessee is situated at Hyderabad, the jurisdiction of the case vests with DDIT (International Taxation)-II, Hyderabad, accordingly, notice dated 10.12.2010 was issued by the DDIT (International Taxation)-II to the assessee after the receipt of this case from New Delhi. Subsequently other letters under this proceeding were issued from time to time calling for information from assessee. The responses of the assessee have been discussed by the Assessing Officer in his order. The final reply of the assessee dated 20.12.2010 in response to notices of the Assessing Officer dated 23.11.2010 and 10.12.2010 was received on 21.12.2010 from the AR Mr Deepak Nagori by the Assessing Officer. The aforesaid response of the assessee has been on three points, namely —

(a)		On non-applicability of sec. 115A of the IT Act;
(b)		Allowance of expenses incurred by Platex as deduction:
(c)		Allowance of Waiver of Interests

15. The contention of the assessee before the Assessing Officer is discussed below along with the argument of the Department to come to the conclusion about the taxability of the interest income in India.

16. Regarding the jurisdiction, the learned AR submitted that the assessment order of Platex Ltd., clearly mentions that Platex Ltd., has PAN belonging to the DDIT (International Taxation), Central Circle 1(1), New Delhi. It also mentions that the return was e-filed which means that the assessee does not have a choice of where to file the return. The order also mentions that the return was also processed u/s. 143(1) in Delhi and notice u/s. 143(2) was issued in Delhi. The order mentions that the director objected to the jurisdiction of the Assessing Officer at Delhi. Thereafter without assigning any reasons and without issuing the requisite show cause u/s. 127 of the Act, the file apparently has been transferred to Hyderabad and, therefore, it cannot be said that the Officer at Hyderabad validly assumed jurisdiction for the due process of law was not followed as section 127 mandates that when a transfer is made outside the city, locality or place, an opportunity of being heard must be given to the assessee.

17. He also submitted that the fact that the assessee objected to the jurisdiction of the Officer at Delhi cannot by itself be taken as a reason to transfer the file to Hyderabad. Merely because the jurisdiction is not at Delhi according to the assessee, it does not mean that the revenue authorities on their own can decide that the jurisdiction belongs to Hyderabad. Even going by the notification taking effect from 15.06.2012 issued by the Additional Director of Income Tax (International Taxation), Hyderabad, the jurisdiction of a non-resident company which is stated to belong to the place where the source of income exists, it cannot be said that the revenue authorities at Hyderabad have jurisdiction over the assessee since, the payer of interest namely PVP Ventures Pvt. Ltd., had shifted its registered office to Chennai and also had merged with SSI Ltd by an order of the Madras High Court and thereafter had its name changed as PVP Ventures Ltd with registered office at Chennai. Even assuming that the authorities where the source belongs have jurisdiction, the jurisdiction can vest if at all only at Chennai and not at Hyderabad.

18. The learned DR submitted that as per notification dated 31.10.2007 bearing No. Addl. DIT (IT)/Hyd/Juris/2007-08 the notice was issued to the assessee and order was passed u/s. 163 as well as 143(3)/144 of the IT Act, 1961. According to the DR the said notification bestows the jurisdiction over the non-resident foreign company having any source of income originating from the territorial jurisdiction of the ADIT (International Taxation)-II, Hyderabad to the latter. The jurisdictional order dated 31.10.2007 was relevant when the order u/s. 163 was passed and notice u/s. 148 was issued and till the completion of assessment proceedings. He drew our attention to the relevant para of the jurisdictional order dated 31.10.2007 which reads as under:

"OFFICE OF THE ADDL. DIRECTOR OF INCOME TAX

(INTERNATIONAL TAXATION)

631, I.T. TOWERS, AC GUARDS,

HYDERABAD-500004, A.P.

No. Addl. DIT(IT)/Hyd./Juris./2007-08

Dated: 31 October, 2007

NOTIFICATION

In exercise of powers conferred by the Director of Income Tax (International Taxation), Bangalore vide his Notification No. DIT(IT)/Juris./2007-08 dated 25.10.2007 and by the Central Board of Direct Taxes, New Delhi vide their Notification (No. 250/2007 dated 28-09-200'7 (S.O. No. 1680(E)), and all other powers enabling him in this behalf, the Additional Director of Income Tax (International Taxation), Hyderabad directs that the Income tax authorities mentioned in the Schedule enclosed, shall exercise the powers and perform the functions of Assessing Officers in respect of persons or classes of persons/income or classes of income and cases or classes of cases, mentioned in the Schedule. 'This order shall take effect from 1st November, 2007.

Sd/-

(GANGADHAR PANDA)

Addl. Director of Income Tax

(International Taxation)

Hyderabad.

Encl.: Schedule as above."

19. According to the DR, the Assessing Officer duly assumed the power of passing the impugned order as per this notification.

19.1 He submitted that an assessee is expected to file a return of income according to the jurisdiction. He also submitted that filing of return as per jurisdiction is the normal course and provisions of section 127 are invoked when an administrative is taken to change the jurisdiction of an assessee for any reason. The assessee incorrectly filed the return of income in Delhi and represented before the ADIT, New Delhi, that the non-resident M/s. Platex Ltd., Mauritius, has income arising only from Hyderabad. Thus, the ADIT-II, Hyderabad always had the jurisdiction on the non-resident company, M/s. Platex Ltd., Hyderabad and there was no requirement of an order u/s. 127 of the Act. Based on the assessee's stand that income is arising in Hyderabad and since the assessee was also opposing the jurisdiction in Delhi, the files were transferred to the jurisdictional Assessing Officer at Hyderabad. He drew our attention to the assessee's letter dated 10th November, 2010 in reply to notice issue dated 12.12.2010 u/s. 142(1) of the Act issued by Asstt. Director of Income-tax, Circle-2(1), International Taxation, New Delhi. It is further submitted that the assessee on its own took certificate for lower deduction of tax u/s. 195 from the Assessing Officer at Hyderabad. According to the DR, the argument of the assessee that no order u/s. 127 was passed before transfer of the case from Delhi to Hyderabad, is untenable. It is also submitted that for every wrong filing of return in incorrect jurisdiction by assessee, it is not for the Department to pass an order u/s. 127 to transfer the file.

20. We have heard the issue relating to the jurisdiction. The main contention of the assessee's counsel before us is that the order passed by the ADIT (International Taxation)-II, Hyderabad u/s. 143(3) r.w.s. 144C of the Act is having no jurisdiction. It is an admitted fact that the assessee filed return of income for the A.Y. 2008-09 through e-filing on 7.7.2009. The relevant PAN of the assessee is AAECP6200E though it was mentioned by the Assessing Officer in his order as AADCP9954C. The PAN was issued by the DDIT (IT), Circle 1(1), New Delhi. The return was processed u/s. 143(1) of the Act by the DDIT (IT), New Delhi on 12.10.2010. The case was selected for scrutiny and notice u/s. 143(2) was issued on 20.8.2010 by the same DDIT (IT), New Delhi. Later, the file was transferred to ADIT (IT), Circle 2(1), New Delhi.

21. During the course of assessment proceedings, vide letter dated 06.10.2010, it was represented by Sri Prasad V Potluri, Director of Platex Ltd., before the ADIT (IT), Circle-2(1), New Delhi that the only source of income of the company in India for the previous year relevant to the assessment year 2008-09 is the interest income on the debentures from the erstwhile M/s. PVP Ventures Private Ltd (for short PVPVPL) the company which was registered and situated at Hyderabad. The assessee also challenged the jurisdiction of the Assessing Officer in New Delhi stating that the assessment of the assessee has already been completed in the hands of the representative assessee (PVPVPL) for the A.Y. 2008-09 by ADIT (IT)-II. Hyderabad. It was also stated that the Platex had no other sources of income in any other place in India and has no place of business in India. Based on the above letter the file has been received on transfer from New Delhi by the office of the ADIT (IT)-II, Hyderabad on the ground that the jurisdiction over the case vests with the office at Hyderabad since the source of income of the assessee is situated at Hyderabad.

22. On receipt of the records from Delhi the case has been taken up for scrutiny and questionnaire along with notices u/ss 143(2) & 142(I) of the IT Act have been issued. In response to the notices a power of attorney was issued by Mr Prasad V Potluri, Director on behalf of Platex on 06.12.2010 authorising Mr Deepak Nagori as the true and lawful authorized representative of the assessee relating to assessment proceedings of the company for the A.Y. 2008-09. Mr Deepak Nagori is also holding the post of Vice-President (Finance) for M/s. PVPVPL, Corporate office, 8-2-609/K, Avenue-4, Street No I, Road No 10, Banjara Hills, Hyderabad. He appeared before the Assessing Officer from time to time and furnished to some extent the information called for. The information furnished has been verified by the Assessing Officer and case was discussed with the AR of the assessee.

23. Now the question before us is whether the ADIT (International Taxation)-II, Hyderabad is having jurisdiction over the assessee. To decide this issue we would like to take support from the judgment of jurisdictional High Court in the case of Vijayasanthi Investments Pvt. Ltd. v. Chief CIT [1991] 187 ITR 405/56 Taxman 190 (AP) wherein held as under:

'Under Sub-section (1) of section 127 of the Act, the Director-General or chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him to any other Assessing Officer or Assessing Officer also subordinate to him. Under sub-section (2) of section 127, if there no such subordinate officer, officers of superior status are vested with this power.

Under this section, therefore, giving a reasonable opportunity of being heard wherever it is possible to do so and recording of reasons for the transfer are essential. The Supreme Court has held in Ajantha Industries v. CBDT , already referred to, as follows (headnote) :

"The requirement of recording reasons under section 127(1) of the Income-tax Act, 1961, for the transfer of a case from one Income-tax officer to another, is a mandatory direction under the law and non-communication thereof to the assessee is not saved by showing that the reasons exist in the file although not communicated to the assessee. Recording of reasons and disclosure thereof are not a mere idle formality. When law requires reasons to be recorded in a particular order affecting prejudicially the interest of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated."

Non-communication of the reasons in the order passed under section 127(1) was a serious infirmity and the order was invalid.

Therefore, apart from giving a reasonable opportunity of being heard, whenever it is possible to do so, and recording reasons for the transfer, the communication of the reasons is also necessary. Else, the order of transfer is liable to be declared invalid.

In Sagarmal Spinning and Weaving Mills Ltd. v. CBDT [1972] 83 ITR 130, the Madhya Pradesh High Court further observed that the question whether the opportunity given to the affected party is reasonable or not will be a matter for interpretation by the court and not by the authority itself. The learned judges observed further that headnote) :

"Facility of investigation would not be a sufficient reason for transfer of a case; and the mention of that reason in the show-cause notice proposing a transfer of the case would not be in compliance with the requirements of section 127. Nor would the giving of some reason in a return filed before the High Court in the writ proceeding be in compliance with the section."

The above-said decision was again followed by the same High Court in Shivajirao Angre v. CIT . In that case, the show-cause notice issued to the petitioner stated that the Commissioner proposed the transfer as such transfer was considered necessary "for the purpose of detailed and co-ordinated investigation". The petitioner submitted objections but, thereafter, no order was served on the petitioner regarding the transfer. The petitioner received notices from the officers to whom the case was transferred. After referring to the cases referred to above by us, the Madhya Pradesh High Court held that the words used in the notice "did not amount to reasons". No order containing any reasons was also communicated. The writ petition was allowed.

In V.K. Steel Industries (P.) Ltd. v. Asstt. CIT, the impugned order passed by the Chief Commissioner of Income-tax, Hyderabad, stated that the cases pertaining to the petitioner are transferred from the Assistant Commissioner, Circle 4(3), Hyderabad, to the Assistant Commissioner (Investigation Circle 1), Vishakhapatnam. The reason given in the order was said to be "to facilitate detailed and co-ordinated investigation". The order was preceded by a show-cause notice which too stated the same reasons. However, when the writ petitioner was being heard, a copy of the reasons behind the order, as having been reduced to writing, was furnished. The Division Bench then observed (at p. 404) :

"It is evident that these reasons were not communicated to the petitioner. We do not see any justification for withholding the reasons and communicating only the conclusion. Indeed the reasons for transfer must have also been stated in the show-cause notice so as to enable the person concerned to make an effective representation. Since that has not been done, the order of transfer is liable to be quashed and it is accordingly quashed".'

24. From the aforesaid judgment, it is clear that in the matter of transfer of a case u/s. 127 of the Act, it is necessary that the authority which proposed to transfer a case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing to the assessee. It is also necessary to mention in the notice the reason for the proposed transfer so that the assessee could make effective representation with reference to the reasons stated. It is not sufficient merely to say in the notice that the transfer is proposed "to facilitate the assessment". The reasons cannot be vague and too general in nature but must be specific based on the material facts. It is again not merely sufficient to record reasons in the file but it is also necessary to communicate the same to the affected party. From the facts recorded in the earlier para it does not ensure the intimation of the reasons regarding transfer of file to ADIT (International Taxation)-II, (IC) Hyderabad. No order has been brought on record to show that indeed there is an order of transfer. The Assessing Officer never intimated to the assessee any reasons for transfer. In fact, no show-cause notice giving reasons for any proposed transfer was issued by the relevant CCIT was brought on record by Revenue. No communication of transfer u/s. 127 of the Act has been produced by the Revenue authorities. The only plea of the learned DR is that there is a notification by the ADIT (International Taxation)-II dated 31.10.2007 bearing No. Addl. DIT (International Taxation)/Hyd/Juris/2007-08 through which the ADIT (International Taxation)-II assumed the jurisdiction over the assessee. Even if there is a notification from the ADIT (International Taxation)-II, Hyderabad which confers jurisdiction over the assessee, the fact remains that the issue was pending before the ADIT (International Taxation), Circle 2(1), New Delhi and that the assessment was already under process by issuing relevant notice for assessment and the assessee filed objection for issue of notice. In spite of this, the ADIT (International Taxation)-II, Hyderabad assumed jurisdiction over the assessee and started proceedings u/s. 143(3) r.w.s. 144 of the Act. The ADIT (International Taxation)-II, Hyderabad cannot assume jurisdiction without valid transfer order u/s. 127 of the Act from the ADIT (International Taxation)-II, New Delhi. There should be due procedure of transfer to be followed. The power of transfer, vested in the authorities mentioned in section 127, is a quasi-judicial one. Such a power has to be exercised in a fair and reasonable manner and not in an arbitrary and mechanical way. Passing a reasoned order is one of the requirement of fairness in action. Before transferring a case notice should be given by the transferring authority to the assessee. Such notice should contain reasons for the proposed transfer. The transferring authority should afford an opportunity of hearing and thereafter pass a speaking order considering the objections raised by the assessee, if any. Thereafter the order should be communicated by the transferring authority to the assessee disclosing the reasons for such transfer. Unless there is a proper and lawful order transferring the case from one Assessing Officer to another Assessing Officer by a competent authority, transfer of case cannot be effected. Where there was no order of transfer of jurisdiction of a case by a competent authority it does not lie within the power of Assessing Officer to transfer the case from his jurisdiction to another officer. Once there was no order of transfer by the competent authority in a given case, the initiation of any assessment proceedings by the other Assessing Officer were holding without jurisdiction. It may be noticed that in absence of any transfer order no Assessing Officer other than the one who has initiated the original proceedings shall have jurisdiction to continue with the proceedings and to reopen the concluded assessment. When the section requires giving of a reasonable opportunity of hearing to an assessee before passing an order of transfer, the same would obviously mean that the assessee will be entitled to make its objections or representations against the proposed order of transfer and such representation and objection cannot be an effective one unless it is known to the assessee for what reasons or on what grounds such proposal is being made. If such reason for proposal of such transfer is not communicated to the assessee, the opportunity of the assessee to represent against such proposal will be entirely illusory and not effective one. A reply by the assessee to the notice wherein no reasons have been given in the notice would not amount to either waiver or estoppels against provision of reasonable opportunity of hearing, the same being mandatory.

25. In the case of Saptagiri Enterprises v. CIT [1991] 189 ITR 705 (AP) the jurisdictional High Court held that in the absence of communication to the assessee of the special reasons for the transfer of the case, the order of transfer was liable to be quashed. Further, a perusal of the file of the Commissioner did not indicate that the non-communication of specific reasons to the assessee was by reason of any satisfaction having been reached by the Commissioner that it was not possible to communicate the specific reasons or in case such reasons were disclosed, there was every possibility of interfering with the enquiry that had to be taken after the transfer of the case. Therefore, the order of transfer was quashed with a liberty to proceed with the transfer of petitioner's case afresh according to law keeping in view of the legal position declared in the judgment.

26. It was held in the case of Smt. N.Kaasivisalam v. Asstt. CIT [2005] 93 TTJ 537 (Chennai) that the primary condition for assumption of jurisdiction for an assessment is that the Assessing Officer must initially have the jurisdiction to assess the income of the assessee in assessment or reassessment. If the initial officer has no jurisdiction to frame an assessment on a person, then it is not open to such an officer to assume jurisdiction to reopen the assessment. Therefore, in order that the Assessing Officer should claim jurisdiction over the assessee, he must have specific authority or order by which the jurisdiction is conferred on him. In that event alone he could claim that he has jurisdiction to frame an assessment followed by the jurisdiction to proceed with reopening of assessment also. In the instant case, the Assessing Officer did not have the jurisdiction for the reason that the income returned was very low i.e., below Rs. 2 lakhs. Because the precondition for assumption of jurisdiction for reopening of assessment being the possession of jurisdiction to frame an assessment at the initial stage, which in the instant case, especially for the assessment years in question, not being vested with the concerned Assessing Officer, the assumption of jurisdiction to reopen this assessment is beyond his power. Therefore, the action having been initiated without adequate power to act under law or its action following reopening of assessment have also become bad in law, illegal and there is no alternative but to quash the reopening proceedings as well as assessment framed on that basis.

27. In the case of ITO v. Krishnakumar Gupta [2008] 16 DTR 1 (Delhi - (Trib.) held that re-assessment completed by Assessing Officer on the basis of notice u/s. 148 issued by another Assessing Officer who had no jurisdiction over the assessee is not valid; reassessment is invalid and also for the reason that the jurisdiction over the assessee's case was not transferred by any order passed u/s. 127 by any competent authority to the ITO who passed the impugned assessment order.

28. In the case of ITO v. Mangilal Nandkishore [1992] 40 ITD 538 (Jaipur) the Tribunal held that the learned AAC was right in holding that the transfer could only be made u/s. 127(1) of the Act as operative for assessment years in question not u/s. 124(1) of the Act. The provisions of section 124(3)(a of the Act could not assist the Department because it refers to the jurisdiction of an ITO within the limits of the area assigned to him, in respect any person carrying on any business or profession. Therefore, the learned AAC was right in holding that the transfer from one ITO to the other belonging to two different charges of CIT and in spite of objections raised by the assessee, could be made only by the CBDT and is, therefore, bad in law.

29. In the case of Ajantha Industries v. CBDT [1976] 102 ITR 281 wherein the Apex Court held that - we are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee.

30. Thus, not only the reasons are to be recorded prior to the transfer of records but also communicated to the person concerned. Mere recording of reasons without communicating the same to the concerned person is against the provisions of section 127 of the Act. Further, we make it clear that here we are concerned with the assuming of jurisdiction by the ADIT (IT)-II, Hyderabad over the case of the assessee. In our opinion, there is nothing placed on record to show that the person who has passed the impugned assessment order is having jurisdiction over this assessee when the assessee's present case is pending with the ADIT, New Delhi. The notification dated 28.9.2007 itself cannot confer jurisdiction to the Assessing Officer in Hyderabad, when return of income of the assessee was pending with the Assessing Officer, New Delhi. The learned DR taken a plea before us that no specific order is required from the CCIT from whose jurisdiction the case of the assessee is transferred to the jurisdiction of another CCIT in Hyderabad in view of notification dated 28.9.2007; the result of passing an order is with the prior proceedings, if any, made by the Assessing Officer who had no jurisdiction, is invalid or nullity in the eye of law and it is only the Assessing Officer whose territorial jurisdiction so recognised as correct has the ultimate jurisdiction to pass either the assessment orders or reassessment orders. This is because the assessee viz., M/s. PVP Ventures Pvt. Ltd., has shifted its registered office to Chennai by merger with M/s. SSI Ltd., by an order of the Madras High Court vide order in Company Petition No. 69 and 90 of 2008 dated 25.4.2008 and thereafter its name changed as M/s. PVP Ventures Ltd., with the registered office at Chennai. The date of M/s. PVP Ventures Ltd., coming into existence is the date on which the Madras High Court effected the amalgamation/ merger on 01.10.2007. These facts have been advertised in one issue of an English Daily "The Hindu Business Line" on 19.2.2008 and another issue of Tamil Daily viz., "Dina Malar" on 19.2.2008 and from this date the jurisdiction is to be vested with the authorities in whose jurisdiction the registered office situated. Then the jurisdiction would be vested with the authorities at Chennai and not at Hyderabad. Being so, in our opinion, the order passed by the ADIT (International Taxation)-II, Hyderabad is without authority and the same is annulled. Since we have annulled the order of the Assessing Officer dated 24.10.2011 passed u/s. 143(3) r.w.s. 144C of the Act, we refrain ourselves from going into the other grounds raised by the assessee which are only academic in nature. ITA NO. 1868/Hyd/2011 is allowed.

ITA No. 1159/Hyd/2010 - A.Y. 2007-08 - By Revenue:

31. The grounds raised by the Revenue are as follows:

"(a)		The order of the CIT(A) is erroneous both on facts and in law.
(b)		The CIT(A) is not correct in observing that PVP Ventures Pvt. Ltd., discharge its obligation of paying tax as per authorisation at the time of remittance itself and therefore, it cannot again be asked to pay tax on the amount remitted.
(c)		The CIT(A) is not correct in holding that the assessment order passed u/s. 144 is annulled."

32. Brief facts of the case are that M/s. PVP Ventures Pvt. Ltd., came into existence only after 31-03-2007 and thereafter it got amalgamated with SSI Ltd. The said SSI Ltd., changed its name as PVP Ventures Ltd. The Assessing Officer treated PVP Ventures Ltd., as agent of Platex Ltd., u/s 163 of the IT Act. It is also the contention of the Assessing Officer that the certificate u/s 195(2) of the Act issued by the DCIT, Circle 16(3) is not a correct certificate. The Assessing Officer is of the view that even if a certificate was issued, the Indian company remitting; the amount can be treated as an agent within the meaning of sec. 163 of the Act and an assessment can be made against the Indian company. The Assessing Officer is also of the view that he possesses jurisdiction to assess PVP Ventures Ltd., as according to the Assessing Officer the said company filed an application u/s 195(2) of the Act before the Assessing Officer at Hyderabad. Therefore, the Assessing Officer initiated proceedings u/s 163 and passed an order for the Assessment Years 2007-08 and 2008-09 together treating PVP Ventures Ltd., as an agent of Platex Ltd. He also issued notice u/s 148 for the Assessment Years 2007-08 and 2008-09. As the assessee did not comply with the notice issued, he completed the assessment u/s 144 r.w.s. 147 of the IT Act. He determined the total income at Rs. 5,30,31,148/- for the Assessment Year 2007-08 and Rs. 54,14,61,942/- for the Assessment Year 2008-09. The assessee filed appeals contesting the orders passed u/s. 163 and the assessments made u/s 144 r.w.s. 147 of the Act. Since the issues involved are common, a consolidated order is being passed.

33. On appeal, the CIT(A) given a finding in relation to the order u/s. 163 that the order is not validly made, the assessment orders passed for the assessment years 2007-08 and 2008-09 are also not valid. However, the CIT(A) dealt with determination of the total income, in the following paragraphs:

(a)		The first question is with regard to the taxability of the gross interest or net interest. The assessee submitted in the written submissions that the provisions of sec. 44D and sec. 44DA are applicable only for the royalty and technical fees received by the foreign company and not for interest received. He observed from the said sections that the said restriction would not apply to the interest received by a non-resident.
(b)		The CIT(A) also find from the final accounts of the foreign company that it is carrying on business of financing and suffered losses during the previous years under consideration. If the proportionate expenditure by way of financial charges is considered, there will not be any income for the foreign company as the payments are more than the receipts.
(c)		Insofar as the amount remitted by PVP Ventures (P) Ltd., is concerned, the said company discharged its obligation of paying tax as per the authorization at the time of remittance itself. Therefore, it cannot again be asked to pay tax on the amount remitted.
(d)		Insofar as the interest estimated and added by the Assessing Officer for the Assessment Year 2008-09 of Rs. 49,54,68,397 is concerned, the Assessing Officer is not justified in doing so, when the foreign company waived its right to charge interest. The CIT(A) observed that the Indian Company did not debit the said amount to its profit and loss account and the foreign company did not credit the said amount to its profit and loss account. It is not the case of the Assessing Officer that the amount was remitted by the Indian company to the foreign company. In coming to the conclusion he relied on the decision of the Allahabad High Court in the case of CIT v. Giriraj Udyog (P) Ltd.[2005] 273 ITR 495/[2006] 151 Taxman 75.
(e)		The CIT(A) observed that the Assessing Officer also ought to have considered the fact that when he is taxing the agent under sec. 163 of the Act, he can consider only such amount received by the non-resident either from the Indian company or through the Indian Company. The said amount of Rs. 49,54,68,397 was neither paid by the Indian Company nor received by the foreign company.

34. In view of the above, the CIT(A) held that the incomes determined to be assessed treating the Indian company as agent of the non-resident cannot be sustained. As he had held that the Indian company PVP Ventures Ltd., cannot be treated as agent of the foreign company and that the incomes determined by the Assessing Officer cannot be sustained, the assessment orders passed under sec. 144 of the Act for the Assessment years 2007-08 & 2008-09 were annulled by him.

35. For the A.Y. 2007-08 the CIT(A) had given relief on various counts as enumerated above. However, the Revenue raised only one ground as ground No. 2 as under:

"The CIT(A) is not correct in observing that PVP Ventures Pvt. Ltd., discharged its obligation of paying tax as per authorisation at the time of remittance itself and therefore, it cannot again be asked to pay tax on the amount remitted."

36. We have heard both the parties on this issue. Regarding the amount remitted by PVP Ventures (P) Ltd., is concerned, the said Company discharged its obligation of paying tax as per the authorization at the time of remittance itself. Therefore, it cannot again be asked to pay tax on the amount remitted.

36.1 These findings of the CIT(A) are not controverted by the Revenue authorities. Thus, it means that there is existence of valid order passed u/s. 192(2) of the Act by the Assessing Officer and in the presence of that order and remittance of the amount as per this order by the assessee so that the assessee has discharged its obligation of payment of deducted tax and the finding of the CIT(A) is justified. This ground is rejected.

36.2 Further, we are of the opinion that the Department raised only one ground as above, without challenging the other part of the CIT(A). Being so, this ground cannot survive in view of the non-challenging of the other part of the CIT(A). Accordingly, this ground is dismissed as infructuous. In other words, the cumulative effect of the order of the CIT(A) is that the order passed by the Assessing Officer u/s. 163 is bad in law. Being so, there is no merit in this ground raised by the Revenue. The other ground raised by the Department is that the CIT(A) is not correct in holding that the assessment order passed u/s. 144 is annulled. This ground is too general and the DR is not able to demonstrate how this finding is wrong when the order itself cannot stand on its legs, as M/s. PVP Ventures Ltd., cannot be treated as agent of the foreign company and that the income determined by the Assessing Officer cannot be sustained as the order passed u/s. 163 itself is bad in law. Accordingly, we dismiss the appeal in ITA No. 1159/Hyd/2010.

ITA No. 1160/Hyd/2010 - A.Y. 2008-09 - By Revenue:

37. The grounds raised by the Revenue are as follows:

"(a)		The order of the CIT(A) is erroneous both on facts and in law.
(b)		The CIT(A) is not correct in observing that PVP Ventures Pvt. Ltd., discharge its obligation of paying tax as per authorisation at the time of remittance itself and therefore, it cannot again be asked to pay tax on the amount remitted.
(c)		The CIT(A) is not correct in holding that the assessment order passed u/s. 144 is annulled.
(d)		The CIT(A) is not correct in observing that the Assessing Officer is not justified in adding Rs. 49,54,68,397 representing the estimated interest when the foreign company waived its right to charge interest. The CIT(A) ought to have considered the detailed reasoning mentioned in the assessment order for making the addition.
(e)		The CIT(A) is not correct in observing that the Assessing Officer ought to have considered the fact that when he is taxing the agent u/s. 163 he can consider only such amount received by the non-resident either from the Indian Company or through the Indian company."

38. Facts in this assessment year are similar to the assessment year 2007-08. The first effective ground (ground No. (2) is as under:

"The CIT(A) is not correct in observing that PVP Ventures Pvt. Ltd., discharge its obligation of paying tax as per authorisation at the time of remittance itself and therefore, it cannot again be asked to pay tax on the amount remitted."

39. With regard to the above ground the CIT(A) observed that the amalgamated company PVP Ventures Pvt. Ltd., before its amalgamation issued convertible debentures in favour of Platex Ltd., a company registered in Mauritius with its office at 10, Frere Felix de Valois Street, Port Louis, Mauritius. According to the arrangement, the Platex Ltd., invests in the convertible debentures issued by PVP Ventures Pvt. Ltd. and the said debentures carry interest @ 14.5% per annum payable semi-annually on 15^th January and 15^th June of each year. According to the terms and conditions of the issue of the dentures, the debentures shall automatically and mandatorily be converted after three years 11 months from the date of issue into the redeemable preference share capital. According to clause (9) of the scheme of issue of debentures, if any default occurs or is continuing to occur, the debentures are automatically and immediately convertible into redeemable preference shares carrying coupon of 14.5%. According to the terms and conditions of the issue of debentures, the amalgamated company had to make payment of interest on the fully convertible debentures (FCDs). The amount of interest became payable on 15.6.2007 relating to the period ended on 31.3.2007 and an amount of Rs. 5,30,31,148/- related to the F.Y. 2006-2007 relevant for the assessment year 2007-08. At that stage, the PVP Ventures Pvt. Ltd., made an application for remittance of Rs. 5,30,31,148/- to Platex Ltd., Mauritius by deducting tax at 5%. The application was made before the DCIT, Circle 16(3), Hyderabad who was having jurisdiction over PVP Ventures Pvt. Ltd., at the relevant point of time. The said authority authorized the PVP Ventures Pvt. Ltd., to remit the said amount after deducting tax at 5%.

40. Another application was made on 25.7.2007 requesting the DCIT, Circle-16(3) for remitting a sum of Rs. 56,47,68,435/-to Platex Ltd., after deducting tax at 5%. The said authority permitted PVP Ventures Pvt. Ltd. to deduct the tax at source at 5% with regard to the amount remitted to Platex Ltd. Accordingly, PVP Ventures Pvt. Ltd. remitted amounts to Platex Ltd., after deducting tax at 5% of the amount so remitted. The certificates were issued by the appropriate authorities in accordance with the provisions of sec. 195 of the IT. Act.

41. Accordingly, the CIT(A) observed that the PVP Ventures (P) .Ltd., filed an application for authorization to remit the amount after deducting the lesser tax. The application was considered by the appropriate authority and authorization for remittance of the amount after deducting tax at 5% was issued. The Assessing Officer mentioned that such order under sec. 195(2) is not correct and can be cancelled. But the order under sec. 195(2) issued by the Assessing Officer is still existing and is not cancelled by any valid order.

42. As contended by the assessee, the payments were made by PVP Ventures (P) Ltd., to the foreign company and the said company did not exist by the time the proceedings under sec. 163 commenced. The Assessing Officer mentioned clearly that in view of the provisions of sec. 163 (l)(c) of the Act, the PVP Ventures Ltd., is treated as agent. As claimed by the assessee the said clause mentions that "from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or". The said provision makes it very, clear that only when the Indian company remitted the amount the said company can be treated as agent. In the present situation the company PVP Ventures Ltd., did not remit the amount to the foreign company. Therefore, the said clause has no application to the facts of the case. It is not the case of the Assessing Officer that any other clause would apply to the facts of the case. In view of the above, the CIT(A) was of the view that the orders passed u/s. 163 of the IT Act are not proper and cannot be sustained.

43. Regarding the appeals filed by the assessee against the assessment orders passed under sec. 144 r.w.s. 147 of the Act for the assessment years 2007-08 and 2008-09, the CIT(A) observed that as he had held that the order under sec. 163 is not validly made, the assessment orders passed for the assessment years 2007-08 and 2008-09 are also not valid. However, he dealt with the determination of the total income as follows. The first question is with regard to the taxability of the gross interest or net interest. The assessee submitted in the written submissions that the provisions of sec. 44D and sec. 44DA are applicable only for the royalty and technical fees received by the foreign company and not for interest received. He observed from the said sections that the said restriction would not apply to the interest received by a non-resident. He also observed from the final accounts of the foreign company that it is carrying on business of financing and suffered losses during the previous years under consideration. If the proportionate expenditure by way of financial charges are considered, there will not be any income for the foreign company as the payments are more than the receipts.

44. Insofar as the amount remitted by PVP Ventures (P) Ltd., is concerned, the said Company discharged its obligation of paying tax as per the authorization at the time of remittance itself. Therefore, it cannot again be asked to pay tax on the amount remitted.

45. These findings of the CIT(A) are not controverted by the Revenue authorities. Thus, it means that there is existence of valid order passed u/s. 192(2) of the Act by the Assessing Officer and in the presence of that order and remittance of the amount as per this order by the assessee so that the assessee has discharged its obligation of payment of deducted tax and the finding of the CIT(A) is justified. This ground is rejected.

45.1 The next effective ground No. 3, raised by the Department is that the CIT(A) is not correct in holding that the assessment order passed u/s. 144 is annulled. This ground is too general and the DR is not able to demonstrate how this finding is wrong when the order itself cannot stand on its legs, as M/s. PVP Ventures Ltd., cannot be treated as agent of the foreign company and that the income determined by the Assessing Officer cannot be sustained as the order passed u/s. 163 itself is bad in law. This ground is rejected.

46. The next effective grounds 4 and 5 which are as under:

"(4) The CIT(A) is not correct in observing that the Assessing Officer is not justified in adding Rs. 49,54,68,397 representing the estimated interest when the foreign company waived its right to charge interest. The CIT(A) ought to have considered the detailed reasoning mentioned in the assessment order for making the addition.

(5) The CIT(A) is not correct in observing that the Assessing Officer ought to have considered the fact that when he is taxing the agent u/s. 163 he can consider only such amount received by the non-resident either from the Indian Company or through the Indian company."

47. With regard to the above grounds of appeal, the CIT(A) observed that the Assessing Officer also ought to have considered the fact that when he is taxing the agent under section 163 of the Act, he can consider only such amount received by the non-resident either from the Indian company or through the Indian company. The said amount of Rs. 49,54,68,397 was neither paid by the Indian company nor received by the foreign company.

48. There was waiver of interest by Platex Ltd., which is to be paid by PVP Ventures Ltd., and also there was no claim of payment of this interest by PVP Ventures Ltd. Being so, the assessee cannot be asked to deduct the tax on unpaid interest. It is not at all accrued to the Platex Ltd. The following judgments support the claim of the assessee.

"(a)

Giri Raj Udyog Pvt. Ltd. (supra) wherein held that when the assessee company having decided not to charge any interest on advances which were outstanding for more than 6 months before the end of the relevant accounting year and there being no agreed date for payment of interest, the interest did not accrue to the assessee, even though it is maintaining accounts as per the mercantile system."

For same proposition, he relied on the following judgment:

"(a)		CIT v. Balarampur Commercial Enterprises Ltd. [2003] 262 ITR 439/130 Taxman 845 (Cal).
(b)		Pranav Vikas (India) Ltd. v. Asstt. CIT [2009] 116 ITD 141 (Delhi) wherein held that right to receive interest on debentures for the year under consideration was waived by the assessee company. As a result of the said waiver, there was no real income which could be brought to tax in its hands in that year on accrual basis."

49. Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. In the result, ITA Nos. 1159 and 1160/Hyd/2010 are dismissed.

ITA Nos. 1161 & 1162/Hyd/2012 - A.Ys. 2007-08 & 2008-09 By Revenue

50. The common grounds raised by the Revenue are as under:

"(1)		The order of the CIT(A) is erroneous both on facts and in law.
(2)		The CIT(A) erred in observing that the assessing officer appears to be under wrong impression that PVP Ventures Pvt. Ltd, has changed its name to PVP Ventures Ltd when it was clearly mentioned in the order that PVP Ventures Pvt. Ltd was amalgamated with PVP Ventures Ltd.
(3)		The CIT(A) is not correct in placing reliance on the decision of the honourable Supreme Court in the case of H.L. Sud, ITO vs. Tata Engineering and Locomotive Co. Ltd, 71 ITR 457 when the facts of the case are entirely different, from the case on which the reliance is placed
(4)		The CIT(A) ought not to have observed that the assessing officer presumed that PVP Ventures Pvt. Ltd. and PVP Ventures Ltd. are the same companies with different name.
(5)		The CIT(A) is not correct in observing that the company remitting the amount did not exist by the due date for filing the return of income u/s 139(1) ended. In view of the fact that the company which had remitted the amounts was amalgamated with another company and hence the tax liability lies with the resultant company. The observation of the CIT(A) that the order u/s 195(2) issued by the assessing officer is still existing and not cancelled by any valid order. In view of the fact that the order u/s 195(2) has been cancelled vide orders dated 20-05-2009.
(6)		The CIT(A) is not correct in observing that the provisions of section 163(1)(c) has no application to the facts of the case. In view of the fact that PVP Ventures Pvt. Ltd. which had remitted the amounts to Platex Limited was amalgamated with PVP Ventures Ltd., and hence PVP Ventures Ltd., is liable for all the tax matters relating to PVP Ventures Pvt. Ltd.
(7)		The CIT(A) ought not to have held that orders passed u/s. 163 of the IT Act are not proper and cannot be sustained."

51. First we will take up the issues relating to cancellation of order passed by the Assessing Officer u/s. 163 by placing reliance on the judgment of Supreme Court in the case of H.L. Sud, ITO v. Tata Engg. & Locomotive Co. Ltd., [1969] 71 ITR 457 (ground No. 3 in the grounds of appeal).

51.1 The learned DR submitted that the provisions of section 163 were invoked only to make a person responsible and give clarifications on an issue on which tax implications would be there and this is done because the other party (a non-resident) would not normally be available for enquiry. Therefore, in a case, there may be three or four parties who may be made representative assessees for a single assessee depending on transaction which covered three years at the time of making order u/s. 163, the Assessing Officer had proceeded and made a single order for the convenience and not for any other reason. As the party is the same, the transaction is the same, even though the period involved in three years, the assessee was given due opportunity to represent and held before passing of the order. The Assessing Officer has appointed M/s. PVP Ventures Ltd., as representative of the assessee u/s. 163 for the assessment years 2007-08, 2008-09 and 2009-10 which are relevant to FYs 2006-07, 2007-08 and 2008-09, respectively. These are the financial years for which the company M/s. PVP Ventures Ltd. is required pay interest at 14.5% per annum on the principal amount of debentures. According to the DR the Assessing Officer has correctly appointed the company M/s. PVP Ventures Ltd., as the representative of the assessee u/s. 163 of the Act for the above assessment years, though separate orders u/s. 163 have not been passed for each assessment year, the assessment years for which the assessee company has been appointed as representative assessee of the non-resident company, M/s. Platex Ltd., Mauritius have been clearly and specifically mentioned in the order. Therefore, no injury or injustice per se was done to the assessee by passing a consolidated order for all the three assessment years. According to the DR, even otherwise it is curable mistake u/s. 292B of the IT Act and it cannot make the order involved so as to cancel the order by the CIT(A).

51.2 The learned AR submitted that an order u/s. 163 has to be passed with reference to assessment year and cannot be passed generally as has been done in the instant case. He relied on the following judgments:

(a)		Tata Engg. & Locomotive Co. Ltd.v. ITO [1963] 49 ITR 866 (Bom.).
(b)		Tata Engineering & Locomotive Co., Ltd. (supra)

51.3 According to the AR, no order can be made determining the income as an agent in respect of the principal unless there is a valued order passed u/s. 163 of the IT Act. For the purpose, here relied on the judgment of Calcutta High Court in the case of CIT v. Alfred Herbert (India) Pvt. Ltd. [1986] 159 ITR 583/26 Taxman 145. Further he submitted that M/s. PVP Ventures Ltd., cannot be treated as a successor of the PVP Ventures Pvt. Ltd., as there is no provision in the Act to do so and even section 170 of the Income-tax Act permits it only when the predecessor cannot be found. For this proposition, he relied on the judgment of MP High Court in the of CIT v. Hukumchand Mohanlal [1967] 64 ITR 341.

51.3 We have heard both the parties and perused the material on record. This ground relating to passing of common order for three years u/s. 163 by the Assessing Officer would go to the root of the issue As seen from the facts of the case, the Assessing Officer passed only one order dated 13.10.2008 for all the three assessment years i.e., 2007-08, 2008-09 and 2009-10, though he is required to pass independent and separate order for each assessment year by issuing separate notice to the assessee. As the Assessing Officer failed to pass independent orders for each assessment year the CIT(A) is justified in annulling the order passed by the Assessing Officer u/s. 163 of the Act by placing reliance on the judgment of SC in the case of Tata Engg. & Locomotive Co. Ltd. (supra). We confirm the order of the CIT(A) on this count. As we have confirmed cancelling the order passed by the Assessing Officer u/s. 163 by the CIT(A), the other grounds raised by the Revenue in these two appeals become infructuous and liable to be dismissed. In the result, ITA Nos. 1161 and 1162/Hyd/2010 are dismissed.

CO Nos. 96 & 97/Hyd/2010 - for A.Ys. 2007-08 & 2008-09 - By assessee

52. The common grounds raised by the assessee in its cross-objections are as under:

"(a)		The learned CIT(A) has erred in not adjudicating the ground that the learned AO does not have jurisdiction to assess the Respondent as the representative assessee of Platex even though the registered office of the Respondent is in Chennai.
(b)		The learned CIT(A) has erred in not adjudicating the ground challenging the notice issued under section 148 of the Act dated October 31, 2008 as invalid, since the learned Assessing Officer could not have any "reason to believe" that the income of the Platex has escaped assessment.
(c)		The learned CIT(A) has erred in not adjudicating the ground that the learned AO failed to note that section 115A of the Act would not apply in the case of Platex.
(d)		The learned AO is not right in law in passing the impugned order without giving sufficient opportunity to the Respondent Company though there was ample time for completing the assessment.
(e)		Without prejudice to any of the above grounds, the learned AO erred in levying interest under section 234B of the Act, without reducing the tax deductible at source under Chapter XVII 8 of the Act."

53. The crux of the above ground is with regard to reopening of assessment by the Assessing Officer. In these cases notice u/s. 148 dated 31.10.2008 has been issued to the assessee before cancellation of earlier certificate issued u/s. 192 of the Act which was cancelled on 20.5.2009. The certificate issued u/s. 192 is in existence till the date of cancellation i.e., 20.5.2009. Being so, the reopening is bad in law. The Department is not able to show that there is no existence of certificate issued u/s. 192 as on the date of reopening of assessment. Therefore, the notice u/s. 148 cannot be validly issued as the Assessing Officer could not have reasons to believe that income has escaped assessment as on the date of issue of notice u/s. 148 since the certificate issued u/s. 192 was in force on that day which was cancelled on 20.5.2009. The Assessing Officer is not justified in reopening the assessment during the existence of certificate issued u/s. 192, being so reopening is bad in law, we allow the cross-objections filed by the assessee in CO Nos. 96 & 97/Hyd/2010.

54. In the result, Revenue appeals in ITA Nos. 1159 to 1162/Hyd/2010 are dismissed, ITA No. 1868/Hyd/2011 and CO Nos. 96 &97/Hyd/2010 by the assessees are allowed.

VARSHA

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Regards

Prarthana Jalan

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