TaxTMI 
TaxTMI 
2013 (8) TMI 765
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.... 31st October, 2002, declaring income of Rs. 2,14,07,600/- which was made subject matter of regular assessment order, dated 18th March, 2005, under Section 143(3) of the Act. The assessment order records that the petitioner, a non-resident foreign company incorporated in Korea, was engaged in business of execution of construction contracts. At the time, the petitioner Company had five different contracts or projects in India and, in respect of two projects namely Catalytic Dewaxing Project, Haldia, West Bengal and NH2 Project, Bihar, details of expenses incurred were filed. During the course of assessment proceedings, on 4th February, 2005, the assessee filed revised computation of income, enhancing the declared income by Rs.1,73,51,761. The income was recomputed at Rs.4,36,52,621/-. 3. Before we dwell into the contentions, at this juncture it is necessitated that a clarification should be made. Notice under Section 148 of the Act enclosed with the writ petition is dated 29th March, 2007, whereas along with the affidavit filed on 21st April, 2012, the respondents have enclosed the reassessment notice dated 24th March, 2007. Both notices relate to the assessment year 2002-03. How....
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....sic and detailed Engineering Construction, Installation, Testing Commissioning and total project management to be completed in 18 months. Total amount of project was (US Dollar 11,595,000) Rs.13488.701 Lakhs, which included Rs.605.34 lakh (US Dollar 11,50,000) for Design and detailed Engineering. Out of this (US Dollar 11,50,000) for Engineering Consultancy an amount of Rs.436.53 lakh was offered to tax @ 15% as offshore consultancy by assessee during the AY 2002-03. However the CDU project through which assessee had earned this income is a permanent establishment as per Article 5(3) of DTAA between India Korea. Considering the above, it is evident that income chargeable to tax has escaped assessment." 5. Ms. Nishtha Tiwari, was not the Assessing Officer and had not recorded reasons for reopening before issuing notice. The petitioner contends that no reasons were recorded by the Assessing Officer before the re-opening. The Revenue's contention is that Ms. Nishtha Tiwari had not recorded "reasons to believe" but had merely communicated the reasons recorded earlier, under her signature appendixed on letter dated 28th May, 2007. 6. In these circumstances, the respondents were....
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.... on 18.03.05 at the assessed income of Rs.4,36,52,621/-. The assessee is a non-resident foreign company incorporated in Korea and is engaged in the business of execution of construction contracts. During the assessment year under consideration, the assessee has undertaken the following projects:- NH-I project Haryana, Catalytic Dewaxing Project Kolkata, WH2 Project Bihar, AV2 project & SM Project. LG Engineering & Construction was awarded a contract by Indian Oil Corporation which entails supply, installation & commissioning of catalysis Dewaxing Project in its refinery at Holdia in West Bengal. The assessee was awarded a Turnkey Project (Catalytic Dewaxing Unit) at Haldia Refinery by Indian Oil Corp. in September 2000. The project involved Basic and detailed Engineering Construction, Installation, Testing Commissioning and total project management to be completed in 18 months. Total amount of project was (US Dollar 11,595,000) Rs.13488.701 Lakhs, which included Rs.605.34 lakh (US Dollar 11,50,000) for Design and detailed Engineering. Out of this (US Dollar 11,50,000) for Engineering Consultancy an amount of Rs.436.53 lakh was offered to tax @ 15% as offshore consultanc....
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....nswered as to why approval from Additional Director of Income Tax was required when notice was issued by Deputy Director. From where and how Ms. Nishtha Tiwari come to know/ascertain and had communicated the "reasons to believe" is not stated. 9. Fire in the office of the Additional Director of Income Tax, Range-I, is one aspect but it does not answer why the reasons to believe are not on record of the Assessing Officer. It reflects that the record and file maintenance of the respondents is poor, faulty and not as per the acceptable standard. The original file produced is not page numbered or indexed, which means papers can be removed or added, as per convenience or mischievously. It is time that the respondents take corrective steps to digitize their records and that the physical files are indexed and page numbered. Debate as to the correctness of the reason to believe produced before the court leads to unnecessary challenges and creates doubt. In the present case too, the petitioner has challenged and questioned the stand of the respondents on recording of reasons. 10. Section 151 of the Act requires that no notice under Section 148 of the Act will be issued by the Assessin....
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....were communicated to the petitioner under signature of Ms. Nishtha Tiwari and the present writ petition should be decided on the basis of the said reasons. 12. In view of the specific stand taken by Revenue, we proceed to examine the reasons relied by them. These were also the reasons communicated to the petitioner. Sections 147, 148 and 149 of the Act mandate that reasons must be recorded before issue of notice. It is for the respondents to produce and satisfy the court on the "reasons to believe" recorded before the notice was issued. Recording of reasons has been emphasized and adverted to as the foundation of the jurisdiction of an Assessing Officer who initiates reassessment proceedings. This onus must be discharged by the Assessing Officer, otherwise reassessment proceedings would be quashed. Validity of the reassessment proceedings is tested on the basis of the underlying reasoning stated and recorded for opening of the reassessment. 13. Coming to the merits, we feel that the petitioner is entitled to succeed in the present writ petition if we take the reasons under signatures of Ms. Nishtha Tiwari as the reasons which were recorded by the Assessing Officer before issu....
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....e or income assessed in the original assessment made under Section 143(3) of the Act. 15. The effect of reopening is to partly vacate or set aside the original order of assessment and to substitute it. Escapement of income includes both non-assessment or under-assessment but it is mandated that "Reasons to believe" must necessarily show, indicate and communicate why and for what grounds/ cause any income has escaped assessment. Reasons recorded must be germane, pertinent and disclose prima facie belief that income has escaped assessment. Reasons to believe though subjective to this extent must satisfy this test. Relevancy of reason can be and should be established. When the reasons do not show any nexus or connection with the allegation of underassessment they fall in the realm of suspicion, surmise and conjecture. Reasons to believe must have a rational connection and should be relevant for the formation of a belief regarding escapement of income and should not be extraneous or irrelevant, otherwise they will be considered as invalid since they do not meet the statutory preconditions/prerequisites. The policy of law is that there should be finality in all legal proceedings. Thu....