Case Law Details
FIVES India Engineering & Projects Private Limited Vs ITO (Madras High Court)
Madras High Court held that reopening of assessment under section 148 of the Income Tax Act based on a grossly erroneous factual foundation and also based on mechanically granted approval is untenable in law.
Facts- The petitioner and Fives France under the Assistance Service Agreement between said parties, the petitioner had filed AAR seeking a ruling mainly on the question that whether payments received by Fives France would be subject to withholding tax u/s. 195 of the I-T Act. However, the AAR declined to answer the questions.
Meanwhile, the petitioner had filed its returns of income for the Relevant AYs. Such returns were accepted by the Income Tax authorities. Eventually, on the basis of the judgment of the Supreme Court in Union of India v. Ashish Agarwal, (2023) 1 SCC 617, the respondents issued a communication for each Relevant AY to treat the notice u/s. 148 as a notice u/s. 148A(b) and reply thereto. After requesting for and obtaining copies of the purported sanction letters in respect of reassessment, these writ petitions were filed.
Conclusion- Held that in Chhugamal Rajpal, the Supreme Court concluded that approval under Section 148 should be provided after examining the material on record and not in mechanical fashion. Both on account of the reasons for reopening being based on a grossly erroneous factual foundation and by also taking into account that the petitioner actually withheld and remitted taxes in respect of transactions with Fives France that formed the subject of the application before the AAR, the impugned order under Section 148A(d) of the I-T Act and the notice under Section 148 thereof are vitiated. All that remains is to briefly consider the other ground of challenge.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
