TaxTMI 
TaxTMI 
2012 (8) TMI 461
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....referred to as the impugned order). 2) The petitioner is a joint stock company incorporated under the laws of Russain Federation. An agreement dated 20/11/1988 and a supplementary agreement dated 20/6/1998 were entered into between the then Union of Soviet Socialistic Republic and the Republic of India for co-operation in the construction of a nuclear power station at Kudankulam, Tamil Nadu. Consequent to above, the Nuclear Power Corporation of India Limited (NCPL) and the petitioner entered into an agreement dated 20/7/1998 for setting up the power station. 3) In the course of executing the contract NPCL and the petitioner entered into three Offshore Service Contracts dated 17/12/2001, 28/3/2002 and 02/11/2002; and four Offshore Supply Contracts dated 12/2/2002, 23/8/2002, 23/8/2002 and 7/10/2003. 4) On 31/3/2006, the petitioner filed its return of income for assessment year 2004-05 declaring a total income of Rs.14.6 crores. In its return the petitioner offered for tax the amount received on account of the offshore service contracts by applying Section 44BBB of the Act. In so far as the offshore supply contracts were concerned, the petitioner did not offer the same to tax beca....
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....espect of the offshore service contracts. However, he upheld the order of the Assessing Officer to the extent that it held that the service part of the offshore supply contract would be taxable in India. 9) Against the order dated 30/11/2009 of the Commissioner of Income Tax (Appeals), the Assessing officer as well as the petitioner have filed appeals before the Income Tax Appellate Tribunal which are pending. 10) On 29/3/2011, the Assessing Officer issued the impugned notice seeking once again to reopen the assessment for the assessment year 2004-05 on the ground that he had reason to believe that the income chargeable to tax had escaped assessment for the assessment year 2004-05. Along with the impugned notice the reasons for reopening the assessment were furnished to the petitioner. The reasons for reopening the assessment as provided to the petitioner read as under:- "The return of income disclosing a total income of Rs.14,06,95,494 was furnished on 31st march,2006.The return was processed on 28/3/2007.The case was not selected for scrutiny assessment and no notice u/s 143(20 was issued. Subsequently, a notice u/s.148 dated 7/1/2008 was issued to the assessee. The order u/s.....
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.... are approved by the Central Government. The fact that this contract has been awarded on a turnkey basis to the assessee is evident from the contract dated 20/11/1998. It is seen that the provisions of section 44BBB clearly indicates that sum payable for erection and construction of power plant is to be included in the amount for applying 10% of profit margin. In the case of power plaint being constructed on turnkey basis as envisaged in section 44BBB includes construction, erection and commissioning and these as such include equipment plant and machinery which are installed for setting up the power plant so as to make it a turnkey project .Accordingly, the sum payable for offshore supply should also be included for purposes of computing the profit @ 10%. Accordingly, in order to compute the income u/s.44BBB, the revenue from all the contracts entered into by the assessee with Government of India or Indian Entity like Nuclear Power Corporation are to be included and, therefore, the profit rate of 10% as envisaged in section 44BBB is to be applied. The details of payment received by the assessee in respect of all the 7 contracts are as under: Contract No. Contract Name Amount in....
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....rther, during the reassessment proceedings consequent to the notice dated 7/1/2008 under Section 148 of the Act, the Assessing officer had examined the issue with regard to taxability of the payments received under the four offshore supply contracts in detail and did not bring the same to tax as he was satisfied that in respect thereof no income arose in India. Consequently, action regarding reopening of the assessment for the assessment year 2004-05 is merely based on a change of opinion and therefore, is completely without jurisdiction. 12) On 20/10/2011, the Assessing officer by the impugned order rejected the petitioner's objection to the reopening of assessment for the assessment year 2004-05. The relevant portion of the order is as under: "2. By this order, I propose to dispose the objections raised by the assessee in terms of the principles laid down by the Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (2003) 259 ITR 19. 3. The objections filed by the assessee against the reasons recorded have been gone through properly. The contentions of the assessee cannot be accepted for the following reasons: (I) The Re-assessment was made under s. 143(3) r.w....
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.... has escaped assessment viewed in that angle power to reopen assessment is much wider under the amended provision and can be exercised even after assessee has disclosed fully and truly all the material facts. There must be relevant material before the AO on the basis of which he may form a belief. It may be said that information must be something more that a rumour or gossip or hunch. There must be some material which can be regarded as information, on the basis of which the AO can have reason to believe that action under s. 147 is called for. Information means the communication or reception of knowledge or intelligence. It includes knowledge obtained from investigation, study or insurrection. Reasons which may weigh with the AO may be the result of his own investigation and may come from any source that he considers reliable. Formation of his belief is not a judicial decision but is an administrative decision." The principle that emerges from the above judgment is that if the AO has some information based upon which he has reason to believe that the income has escaped assessment for any assessment year under the provisions of the Act, he/she can reopen the case u/s 147 of the Act....
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.... the impugned notice is a non speaking order. The impugned order does not deal with the various objections raised by the petitioner. 14) As against the above Mr. Tejveer Singh Counsel appearing for the respondent submits as under: a) The objections raised by the petitioner to the reopening of the assessment by the impugned notice are not tenable and the same had had been appropriately disposed of by impugned order. Therefore, he submits that the impugned notice is not without jurisdiction ; and b) The Court should not issue a writ in the present proceeding to stop the respondents from reassessing the petitioner for the assessment year 2004-05.During the course of reassessment proceeding the petitioner can submit on merits that no tax is at all payable under the offshore supply contracts and the same would be considered and disposed of on merits. In view of the above, it is his submission that the present writ petition should not be entertained. 15) In cases such as this, where the assessment is sought to be opened after the expiry of 4 years from the end of the relevant assessment year the respondent revenue must not only have reason to believe that income chargeable to....
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....d notice. 18) The Apex Court in the matter of CIT v. Kelvinator India Limited reported in 320 ITR 561 has observed as under:- "However, one needs to give a schematic interpretation to the words "reasons to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-conditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of"change of opinion" as an in built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a life link with the formation of the be....