STANDARD CHARTERED GRINDLAYS PVT. LTD. vs. DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE 2(2), NEW DELHI & ORS.

The learned counsel for the petitioner submitted that the notice under Section 148 of the said Act was issued beyond four years from the end of the relevant assessment year. As such, the conditions stipulated in the first proviso to Section 147 of the said Act would be relevant. The said proviso requires as of condition precedent that there should, inter alia, be a failure on the part of the assessee to fully and truly disclose all material particulars necessary for his assessment.

The learned counsel submitted that there has been a full and true disclosure of all the material particulars. She drew our attention to the purported reasons behind the issuance of Section 148 notice. The reasons recorded were as under:- “The income of assessment of M/S Standard Chartered Grindlays ltd. for the assessment year 2006-07 was completed after detailed scrutiny in December 2008 at an income of Rs. 6,16,54,229/- .the above assessed income included interest income from investment and interest on interest tax refunds. During the course of perusal of records ,it is revealed that tax had been computed on the entire income at the rate of 15 percent instead of 40% plus surcharge .The mistake resulted in short levy of tax of Rs.

With regard to the above recorded reasons, the learned counsel for the petitioner pointed out that the same does not even allege that the petitioner/assessee has not made a full and true disclosure of the material particulars. All that is referred to is that there is a mistake which resulted in the short levy of tax of Rs. 2,00,08,155/- on account of the tax rate being taken as 15% instead of 40% plus surcharge.

The learned counsel for the petitioner further submitted that in any event, the entire issue was considered during the original assessment proceedings which culminated in the assessment order under Section 143(3) of the said Act dated 1st December, 2008. The learned counsel drew our attention to the computation of income filed along with the return by the assessee, copy of which is found at pages 47 to 49. On examining the said computation of income, we note that the petitioner had categorically stated that tax was payable under the India-Australia Double Tax Avoidance Treaty

The learned counsel for the petitioner further pointed out that in the order sheet entry in the proceedings before the Assessing Officer on 28th November, 2008 it is recorded as under:-

This was responded to by the assessee by a letter dated 1st December, 2008 wherein inter alia the following explanation was given:-

As the assessee is a tax resident of Australia, the provisions of the Indo-Australian DTAT would be applicable to the extent they are more beneficial to the assessee. Accordingly as per the provisions of Article 11(2) of the Indo-Australian DTAT a tax rate @ 15% would be applicable to the interest income.”

Consequent upon the above explanation, the assessment order was framed by the Assessing Officer on 1st December, 2008. In the said assessment order, it has been clearly recorded as under:- “The return of income was filed on 26/10/2006 declaring total income at Rs. 6,16,54,229/-. The return was processed

We have heard the counsel for the parties and are of the view that the writ petition has to be allowed. First of all, the reasons recorded do not even allege that there has been any failure on the part of the assessee to make a full and true disclosure of the particulars necessary for making the assessment. Secondly, there is, in fact, no non-disclosure inasmuch as the petitioner had made it clear in the computation of income that the rate of tax applicable was 15% in view of the Article 11(2) of the India-Australia Double Tax Avoidance Treaty. As per the said Article, the rate of tax more beneficial to the assessee would have to be applied. The said rate of 15%

It is clear from this that the Assessing Officer has considered this aspect of the matter and such consideration could not have been done unless and until the petitioner/assessee had made the full and true disclosure of the material particulars.

We may also point out that in respect of the assessment years 2005-06 and 2007-08. Similar notices under Section 148 were issued. The petitioner had filed writ petitions being WP(C) Nos. 3785/2014 and 3788/2014 in respect of them. However, during the pendency of the writ petitions, the Revenue had withdrawn the notices under Section 148 in respect of those assessment years and this was recorded in the order of this Court disposing of those petitions on 23rd January, 2014.

The learned counsel for the respondents states that notice impugned in this petition has not been withdrawn because the Revenue‟s audit objections are still alive. Be that as it may, the notice is without jurisdiction and therefore, the same stands quashed.

The proceedings pursuant to the said notice under Section 148 dated 28th March, 2013 also stand quashed.

The writ petition is allowed as above. There shall be no order as to costs.