AI Drafter 
TaxTMI 
TaxTMI 
2018 (2) TMI 292
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 r.w.s. 144C(13) of the Act. 2. The issue arising in the present bunch of appeals is similar. Accordingly, we proceed to decide the appeals by this consolidated order for the sake of convenience. However, in order to adjudicate the issues, we make reference to the facts and issues in ITA No.436/PUN/2015 and CO No.03/PUN/2017. 3. The Revenue in ITA No.436/PUN/2015 has raised the following grounds of appeal:- 1. On the facts and circumstances of this case, the DRP was not correct in dismissing the re-opening of the assessment as not being in accordance with the provisions of the law and terming the same to be invalid. 2. On the facts and circumstances of this case, the DRP was not correct in holding that the reopening was not based on the fact that there was a reason to believe that the income had escaped assessment since no assessment u/s. 143(3) was completed in the assessment year under consideration. 3. On the facts and circumstances of this case, the DRP was not correct in observing that there was no material on the basis of which the belief is formed since the material for formation of belief was definite and not vague and fanciful. The re-open....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k-I and the reasons recorded for assessment year 2005-06, which are placed in Paper Book-2. He further pointed out that similar issue arose before the Tribunal in the case of sister concern in respect of reopening of assessment in the following cases:- a) DDIT (IT) Vs. Sandvik Australia Pvt. Ltd. in ITA Nos.250 & 251/PUN/2015 along with CO Nos.48 & 49/PUN/2016, order dated 18.08.2017 b) M/s. Sandvik System Development AB Vs. DDIT in ITA No.464/PUN/2015, relating to assessment year 2008-09, order dated 10.11.2017 c) M/s. Sandvik Tooling Sverige AB Vs. DDIT in ITA No.466/PUN/2015, relating to assessment year 2008-09 and in ITA Nos.487 & 488/PUN/2016, order dated 21.12.2017 6. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the order of Assessing Officer. 7. We have heard the rival contentions and perused the record. First, we are taking up the appeal of Revenue in assessment year 2006-07 and Cross Objections filed by the assessee. The Revenue is in appeal against the order of DRP in quashing re-assessment proceedings on the basis that there was no tangible material and hence, no reason to believe for escap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me for the assessment year under consideration had escaped assessment within meaning of provisions of section 147 of the Act. Thereafter, proceedings were reopened by issue of notice under section 148 of the Act. The said reasons were recorded by the Assessing Officer on 26.07.2013. Similar reasons for reopening assessment were recorded for assessment years 2006-07, 2007-08, 2008-09 and 2009-10, all dated 26.07.2013. 8. We find that the assessee had made a declaration in the computation of income filed along with return of income, copy of which is placed at page 13 of Compilation No.1, wherein it was reported as under:- "3. Further, STSA has also received license fees aggregating to Rs. 8,072,285 from SAL. These being payments received for use of a copyrighted article, do not fall within the ambit of royalty under Article 12 of the Tax Treaty. This is a limited user right granted by STSA and doesn‟t involve exploitation of the rights embedded in the copyright. Accordingly, in the absence of permanent establishment of STSA in India, such payments are not considered as taxable in India." 9. The Auditor in the audit report in Form No.3CEB had also repo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raised in the present appeal is applicability of provisions of section 147 of the Act. The said section provides that in cases where there is any escapement of income, which comes to the knowledge of the Assessing Officer, on the basis of some tangible material, then the said proceedings can be reopened in order to assess the escapement of income in the hands of assessee. The assessee had furnished the return of income in time declaring total income at Nil. The Assessing Officer recorded his reasons for reopening the assessment on the ground that it was noticed from the submissions made during the assessment for assessment year 2005-06 that the assessee had received IT support fees of Rs. 1.94 crores and licence fees of Rs. 3,10,396/- from Sandvik Asia Pvt. Ltd. in assessment year 2008-09, but the same were not offered for tax. The reasons mentioned that for assessment year 2005-06, the Assessing Officer had concluded that receipts under the head „IT Support Fees‟ received by the assessee from Sandvik Asia Pvt. Ltd., were in the nature of royalty and fees for technical services and taxable as per Article 12 of DTAA of India and Sweden as well as section 9(1)(vi) & 9(1)(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en if the original assessment was processed under section 143(1) of the Act and order was not passed under section 143(3) of the Act. Reliance of the Assessing Officer on ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) was found to be misplaced, where the case of the Assessing Officer was that the Hon‟ble Supreme Court had decided that in case the return was processed under section 143(1) of the Act, the Assessing Officer is empowered to issue notice under section 148 of the Act. Reliance in this regard was placed on the ratio laid down by the Hon‟ble High Court of Delhi in Orient Craft Ltd. Vs. CIT (supra), hence reopening in the case of three sister concerns was held to be invalid. The Revenue did file an appeal before the Tribunal in this regard and the appeal was dismissed for low tax effect. Similarly, in assessment year 2006-07, same issue was raised and the DRP decided the issue in favour of assessee in the absence of any fresh material and the appeal of Revenue was dismissed for low tax effect. In assessment year 2007-08, though the issue of reopening under section 148 of the Act was decided against the assessee, but since the issue on merits was decided....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee has failed to disclose fully and truly all material facts necessary for assessment, then action under section 147 of the Act can be taken. We find no merit in the plea of the Revenue. 12. Now, coming to the facts of the present case, wherein there is finding in the case of assessee itself though by the DRP that no tangible material was brought in the reasons recorded on the basis of which valid reason to believe could be formed. It may be reiterated herein itself that reasons recorded for assessment years 2005-06 and 2008-09 are same. Though the appeal of assessee before the Tribunal in assessment year 2005-06 was dismissed for low tax effect along with appeal of another sister concern, which was also reopened by the Assessing Officer on identical reasons to believe‟ however, in the case of third entity against which proceedings under section 147 of the Act were recorded, the matter travelled to the Tribunal and the Tribunal in DDIT (IT) Vs. Sandvik Information Technology AB, in ITA No.128/PUN/2014 along with CO No.10/PUN/2015, relating to assessment year 2005-06, order dated 28.12.2016 had considered the re-assessment proceedings on the basis of details ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-à-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under Section 143(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ier, there is no warrant for such an assumption because of the language employed in Section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-à-vis Section 143(1) and Section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under Section 143(3) cannot apply where only an intimation was issued earlier under Section 143(1). It would in effect place an assessee in whose case the return was processed under Section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under Section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....143(1) of the Act, there can be no question of change of opinion. 4. We further find that the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has not dealt with the issue whether before invoking Section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment has been completed by Intimation under Section 143(1) of the Act. The Revenue is trying to infer that because the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has set aside the order of this Court and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143(1) of the Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tual agreement or arrangement Amount paid/received or payable/receivable in the transaction Method used for determining the arm's length price (See section 92C(1) as per books of account as computed by the assessee having regard to the arm's length price (Rs) (Rs) Clause 12(a) Clause 12(b) Clause 12(c) Clause 12(d) 1 Sandvik Asia Limited, Mumbai-Pune Road, Dapodi, Pune-411012 Receipt for IT support services 19,414,642 19,414,642 Refer Note 7 to Appendix C 2 Walter Tools India Private Limited, Mumbai-Pune Road, Dapodi, Pune-411012 Receipt for IT support services 310,396 310,396 Refer Note 7 to Appendix C 16. In view of the above said declarations made by the assessee which has also been considered by the Pune Bench of Tribunal in sister concern of the assessee i.e. Sandvik Information Technology AB, though for assessment year 2005-06, we hold that in the absence of any tangible material establishing escapement of income in the hands of assessee, there is no merit in the exercise of invoking of re-assessment proceedings und....