No Reassessment If Proceedings of Party Based on Which Assessee’s Case Was Reopened Were Quashed | ITAT

Case Details: Citicorp Trustee Company Ltd. v. DCIT - [2023] 155 taxmann.com 412 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Aby T. Varkey, Judicial Member & S. Rifaur Rahman, Accountant Member
  • Anish Thackar, Nikhil Tiwari & Lekh Mehta for the Appellant.
  • Amit Kumar Soni (Sr. DR) for the Respondent.

Facts of the Case

Assessee-company was incorporated in the United Kingdom (UK). During the relevant Assessment Year, the assessee was appointed as a trustee for issuing Foreign Currency Convertible Bonds (FCCBs) of BFL, a company incorporated in India.

AO observed that the assessee had received funds during the year but failed to file the return of income despite having taxable income. Accordingly, he opined that he had “reason to believe” income chargeable to tax had escaped assessment.

The matter was reached before the Mumbai Tribunal.

ITAT Held

The Tribunal held that the AO of the assessee received information from the AO (TDS) of the payer, i.e. BFL, that the interest/redemption premium paid to the assessee was without deducting TDS. Based on this, the AO of the assessee recorded his reason to believe that income chargeable to tax has escaped assessment.

However, it is noted that subsequently, the action of the AO (TDS) of BFL was challenged by the BFL before the CIT(A), who was pleased to delete the direction of the AO (TDS) to deduct the tax at source on the redemption premium. The Tribunal further upheld this.

Thus, the information given by the AO (TDS) of BFL, which was the foundation on which the AO of the assessee reopened the assessment of the assessee, no longer existed as being legally incorrect. Accordingly, the action of AO to reopen the assessment was to be quashed.

List of Cases Reviewed

• • Badarinath v. Government of Tamil Nadu AIR 2000 SC 3243 (para 10) followed.

List of Cases Referred to

• • Dy. CIT v. Bharat Forg Ltd. [IT Appeal No.341 & 461 (Pun.) of 2021, dated 3-1-2023] (para 6)
  • GE India Technology Cen. (P.) Ltd. v. CIT [2010] 7 taxmann.com 18/193 Taxman 234/327 ITR 456 (SC) (para 7)
  • Badarinath v. Government of Tamil Nadu AIR 2000 SC 3243 (para 10).