TaxTMI 
TaxTMI 
2022 (12) TMI 1571
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....x Act, 1961 (in short 'the Act') framed in the hands of the assessee. 3. For the sake of convenience, the revised grounds 1 to 5 raised by the assessee in this regard are reproduced herein below : 1. On the facts and circumstances of the case CIT(A) erred in upholding the initiation of re-assessment proceedings under Section 148 of the Income-tax Act, 1961 (the "Act"). 2. On the facts and circumstances of the case CIT(A) erred in holding that the AO had reason to believe that income chargeable to tax had escaped assessment and was justified in re-opening of such assessment. 3. On the facts and circumstances of the case CIT(A) erred in not appreciating that the material on the basis of which re-assessment proceedings were initiated did not pertain to the Assessee and/or the assessment year in question. 4. On the facts and circumstances of the case CIT(A) erred in not appreciating that the re-assessment proceedings had been initiated on a change of opinion since the original assessment had been completed under Section 143(3) of the Act and no new material in respect of the Assessee in question had come to the knowledge of the AO warranting initi....
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....pening. We find that notice under section 148 of the Act was issued on the assessee on 31.3.2008. The assessee filed a reply on 29.5.2008 in response to the notice under section 148 of the Act by stating that the return already filed may be treated as a return filed in response to notice under section 148 of the Act. In the said letter, the assessee had duly sought for reasons recorded by the learned Assessing Officer for reopening the assessment. This letter is enclosed in pages 6 and 7 of Paper Book Vol. 1 filed before us. On 20.11.2008, notice under section 142(1) of the Act was issued by the learned Assessing Officer calling for various details. In response to the notice, the assessee filed a reply vide letter dt. 26.11.2008 seeking a short adjournment. In the said letter also the assessee once again reminded the learned Assessing Officer to furnish a copy of the reasons recorded for reopening the assessment. This letter is enclosed in page 43 of Paper Book Vol. I filed before us. Thereafter, the copy of reasons recorded were communicated to the assessee by the learned Assessing Officer on 17.12.2008. The reasons recorded are enclosed in pages 49 to 52 of the Paper Book Vol. 1 ....
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.... the concept of software sourcing from India and is one of the largest customers for the IT service industry of India. 6. With a diverse portfolio products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, electrical and power protection and advanced materials, GE has presence in India. Various operating companies of the group in India are in the field of finance, industries, power systems and infrastructure. 7. On the basis of various facts, information collected during the survey and afterwards, it is clear that various GE group entities are carrying out the business in India. The group has made sales in the energy, transportation, aviation, oil & gas sectors during all these years. The information submitted reveals that the GE group entities have made sales of equipment parts in energy business, transportation business and aviation business. Some of the companies have also rendered services to the customers in India. 8. During the course of survey, it was found that various employees of GE overseas group companies are working in India. Some of thes....
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....who are employed by GE group company and deputed to India as India Head of the specific business like oil & gas, energy, aviation, transportation etc.), with the support and help of employees drawn from GE Indian entities. Such expatriates are responsible and look after the business of GE group as a whole irrespective of any GE group company making sales in India. The bifurcation of sales by various entities is decided by the GE management, as is evidenced by the Reliance order referred above. 12. These expats and their team has at their disposal a fixed place of business in the form of office premises at AIFACS, 1 Rafi Marg. New Delhi. This office premise is taken on lease by GEIOC from AIFACS (All India Fine Arts and Craft Society) and has been under lease from the period prior to 01.04.2000. The information regarding the employees of GE in India prior to the present expats is not given by the GE group, however, there have been the persons working for such sales throughout the period 01.04.2000 to till date. To summarize, the expats deputed in India for undertaking the marketing activities including price negotiation, supervision, administration, sale functions and after....
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....dering of services / supervisory services, such GE group entities will be considered to have the PE as per the other paragraphs of the Article relating to the PE of the respective tax treaties. 15. After having established that various GE group entities were making sales in India with the active involvement of the PE of such entities in India, then considering the provisions of business profit article of the respective tax treaties, the profits of the enterprise are liable to be taxed in India to the extent attributable to the PE. This rule as well as the rules for attribution of such profits are available in the respective tax treaties India has signed with different countries of which such GE group entities are tax resident. 16. Considering the fact that the sales are made to Indian customers on regular basis and such GE group entities are physically present in some form or the other in India and such physical presence has full role in these sales. Therefore, the income accrues or arises to such GE group companies in India. Such income accruing or arising is liable to be taxed in India as per the provisions of Section 5(2) of the Income Tax Act, 1961. 1....
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....ilable, I am of the opinion that assessee has business connection as well as PE in India and income attributed to PE / business connection is taxable in India. 21. On the basis of material collected during or after survey operations and discussed above, I have reason to believe that income chargeable to tax has escaped assessment for AY 2001-02. This belief is formed on the basis of fact that assessee has not furnished return of income although its income earned in India during the previous year was chargeable to income tax. Considering the quantum of sales made, I have reason to believe that income chargeable to tax, which has escaped assessment amounts to or is likely to amount to more than Rs. 1 lakh for the year. 22. In this case, not more than 6 years have elapsed from the end of relevant assessment year (ie AY 2001-02) and income of more than Rs. 1 lakh has escaped assessment, therefore, the Notice u/s 148 rws 147 of the Income Tax Act, 1961 satisfies the time limit for issue of notice as provided in Section 149 of the Income Tax Act, 1961. 4. The assessee filed detailed objections to the reasons recorded vide letter dt. 26.12.2008 making both factual and....
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....loyee(s) of GEIIPL along with the expatriate heads habitually secure orders and conclude contracts on behalf of such non-resident GE group entities and such employees have also participated in the price negotiations. This results into the creation of a dependent agent PE as per the provisions of the tax treaties and business connection as per the provisions of Explanation 2 to Section 9(1)(i) of the Act. 3. That the business of various overseas GE Companies in India is being conducted by the expatriate employees of GE group. 4. That there is also a possibility that in respect of various projects relating to rendering of services/ supervisory services, such GE group entities will be considered to have a PE under other provisions of the respective tax treaties. 5. That the sales are made to Indian customers on regular basis and such GE group entities are physically present in some form or the other in India, the income accrues or arises to GE overseas companies in India. Such income accruing or arising is liable to be taxed in India as per the provisions of Section 5(2) of the Income Tax Act, 1961. 4.2. In the instant case, there is no rational connectio....
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....erials impounded during survey and used the same as if they were part of the reasons recorded. We find that the learned Assessing Officer had not disposed of the objections raised by the assessee for reopening the assessment even in the reassessment order framed on 31.12.2008. 6. The learned Department Representative before us vehemently relied on the written submissions submitted on 6.11.2019. The main crux of the argument of the learned Department Representative is that since all the group entities of GE operating from the same address at Rafi Marg, New Delhi, 22 group cases were taken up for assessment at New Delhi while two group cases i.e. General Electric Company and General Electric International Inc are assessed at Mumbai. Further, the documents and material were common found during survey proceedings, a similar approach was undertaken in the assessment proceedings by all the Assessing Officers while passing the assessment order and identical findings were made in all the cases by holding that :- a) There is a fixed place /agency Permanent Establishment (PE) in India with respect to all the group entities. b) The attribution of income to PE is decided @....
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....ged the validity of reassessment on various counts. The Delhi Tribunal had upheld the validity of reassessment after observing that the objections filed by the assessee for reasons recorded were duly disposed off by the learned Assessing Officer by a separate speaking order dt. 12.11.2008. This is mentioned in page 4 paragraph 3 of the order of Delhi Tribunal. 9. On perusal of the reasons recorded for reassessment in the instant case which are reproduced herein above, the learned Assessing Officer in para 21 had categorically stated that his formation of belief that income of the assessee had escaped assessment was due to the basic fact that the assessee had not furnished Return of Income for the year under consideration. This is factually incorrect as it is evident from paragraph 1 of the reasons recorded by the learned Assessing Officer which clearly records the fact that the assessee had filed the Return of Income for Assessment Year 2001-02 on 29.10.2001 declaring total income of Rs. 3,07,33,066/- and that the assessment was completed under section 143(3) of the Act on 29.01.2004 accepting the Return of Income. Hence it can be safely concluded that reopening is made in the i....
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.... not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. 11. Moreover we find from the reasons recorded by the learned Assessing Officer w....
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....ollowed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters. 9 In fact, to ensure that reopening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within which the Assessing Officer must pass an order on the notice of reopening i.e. within one year from the end of the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh Assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be passed within one year from the end of the financial year in which the order under Section 254 of the Act, ....
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....ned notice. The reasons were supplied to the Petitioner only on 19th March, 2015 and the Petitioner had filed the objections to the same on 25th March, 2015. This passing of the draft Assessment order without having disposed of the objections is in defiance of the Supreme Court's decision in GKN Driveshafts (India) Ltd (supra). Thus, the draft Assessment order dated 30th March, 2015 is not sustainable being without jurisdiction. This for the reason that it has been passed without disposing of the objections filed by the Petitioner to the reasons recorded in support of their impugned notice. Accordingly, we set aside the draft Assessment order dated 30th March, 2015. We are not dealing the validity of the reasons in support of the impugned notice in the present facts as the time limit to pass the Assessment order as provided under 4th Proviso to sub-section(2) of Section 153 of the Act has already expired when the petition was filed." 14. Yet another similar matter came up before the Hon'ble Jurisdictional High Court in the case of Fomento Resorts and Hotels Limited Vs. ACIT in Tax Appeal No. 63 of 2007 dt. 30.08.2019. This decision was rendered in the context of provisio....
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....he Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue. 26. As noted earlier, in view of the aforesaid, there is no necessity to advert to the second substantial question of law, at least, in so far as this Appeal is concerned. The Appeal is, therefore, allowed and the impugned orders dated 26th March, 2004 made by the Assessing Officer, 30th November, 2004 made by the Commissioner (Appeals) and 12th January, 2007 made by the ITAT are set aside on the ground of want of compliance with jurisdictional parameters by the Assessing Officer, and without going into the second substantial question of law framed in this Appeal. Accordingly, we clarify that the second substantial question of law, raised in this Appeal, is not to be treated as decided in this Appeal, one way or the other. 27. The Appeal is allowed in the aforesaid terms. There shall be no order as to costs." 15. The learned Departmental Representative on the hearing held on 7.12.2022 sought time to produce the assessment records and also stated that the learn....