The possession of a tax residency certificate does not automatically grant benefits under a double taxation avoidance agreement, specifically regarding reassessment jurisdiction for non-filing of returns.

JUDGMENT

Rajiv Shakdher, J. (ORAL):

CM No.38194/2022

1. Allowed, subject to just exceptions.

W.P.(C) 12600/2022 & CM No.38193/2022 [Application filed on behalf of the petitioner seeking interim relief]

2. The substantive prayers made in the writ petition read as follows:

"(a) that this Hon'ble Court be pleased to issue a writ of certiorari or writ of mandamus or any other appropriate writ, order or direction in the nature of certiorari/mandamus, under Article 226/227 of the Constitution of India, calling for all the papers and proceedings of Respondent No.1 pertaining to the Impugned Order dated 28 July 2022 and Impugned Notice dated 29 July 2022, and after examining the validity, legality and propriety thereof, to quash and set aside the Impugned Order and Impugned Notice.

(b) Pending the hearing and final disposal of the writ petition, for an order restraining the Respondents, its officers, subordinates, agents from relying upon and/or taking any coercive or other steps in connection with escapement proceedings initiated against the Petitioner in pursuance of the Impugned Notice."

3. Ms Fereshte D. Sethna, who appears on behalf of the petitioner, says that the principal allegation against the petitioner is that the petitioner, which is a foreign company incorporated under the laws of Mauritius, had sold shares worth Rs.1295 crores, of an Indian company going by the name Bharti Infotel Pvt. Ltd, against which TDS was not deducted. 3.1. Ms Sethna goes on to state that the consideration was paid by another entity, namely, Bharti Enterprises (Holding) Pvt. Ltd.

4. The record shows that this transaction occurred in Financial Year (FY) 2015-2016, relatable to Assessment Year (AY) 2016-2017.

5. It is Ms Sethna's submission that no TDS was deducted by the aforementioned Indian company.

6. Ms Sethna also states that the petitioner has, in its possession, a tax residency certificate issued under the laws of Mauritius, and therefore, is entitled to take benefit of the provisions of Article 13 of the Double Taxation Avoidance Agreement [in short, "DTAA"] forged between India and Mauritius.

6.1. Besides this, according to Ms Sethna, the petitioner has registered a loss on the said transaction amounting to Rs.28,73,49,89,247/-.

7. In sum, it is Ms Sethna's contention that notwithstanding the fact that no return was filed by the petitioner, the concerned assessing officer (AO) had no jurisdiction to trigger the impugned proceedings.

8. Mr Sunil Agarwal, who appears on behalf of respondent no.1/revenue, contends, based on the unamended provision of Section 147 of the Income Tax Act, 1961 [in short, "Act"], that since the return was not filed, the concerned AO was within his jurisdiction to commence proceedings under Section 147/148 of the Act.

8.1. In this behalf, Mr Agarwal has drawn our attention to Explanation 2 appended to the unamended Section 147 of the Act.

8.2. In other words, it is Mr Agarwal's contention that this was a case of deemed escapement of income chargeable to tax, as no return was filed by the petitioner.

9. As indicated above by us, there is no dispute that the petitioner/ assessee has not filed its return for AY 2016-2017. Therefore, in our opinion, the objections raised by the petitioner/assessee with regard to the aspects referred to hereinabove, can be dealt with by the AO.

9.1. We have put this aspect to Ms Sethna; Ms Sethna says that while the matter can be remitted to the concerned AO, she/he should deal with the objections which have been articulated in detail in the writ petition.

10. Apart from anything else, it is Ms Sethna's contention that the broad aspects refer