2017 (12) TMI 251 - HC - Income Tax

Reopening of assessment u/s 148 - Petitioner, being a non-resident company, filed the return of income u/s 44BB(1) - as per revenue income earned by the assessee was covered u/s 9(1)(vi) and not u/s 44BB - Held that - The income of the assessee was to be taxed at the rate of 10% instead 4.23 % of the gross revenue. The objections raised by the petitioner have been duly considered by the respondent no.3. It is not the case of mere change of opinion, as argued by Mr. P.R. Mullick, Advocate for the petitioner. It is a case based on surfacing of tangible evidence . The Assessing Officer has not taken any conscious decision on the facts. The Assessing Officer has not applied his mind whether the petitioner was to be taxed u/s 9(1)(vi) of the Act at all for providing of rental of fishing tools/equipments etc. Section 292(B) of the Act was not applicable in the present case. Moreover, Section 292(B) only provides for the return of income to be invalid by reason of any mistake defect or omission in such return of income. Thus, according to the reasons assigned, there was tangible material for formation of belief by the Assessing Officer to reopen the assessment. It is in these circumstances, the notice u/s 148 of the Act was issued to the petitioner company. The objections raised by the petitioner company to the reasons assigned for reopening of case have been discussed in length by the respondent no.1. The Assessing Officer is required to consider all possible angles of controversy. In the instant case, the tax has escaped assessment on account of failure of assessee to disclose true facts before the authority concerned. Not the change of opinion but the reassessment has been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment. The objections raised by the petitioner company have been specifically dealt with by the respondent no.3. Impugned order passed by the respondent no.3 is detailed and reasoned - Decided in favour of revenue

Summary

Issues:
1. Reopening of assessment under Section 148 of the Income Tax Act based on tangible evidence.
2. Application of Section 9(1)(vi) versus Section 44BB for taxation of income.
3. Interpretation of the concept of "reason to believe" for reopening assessments.
4. Consideration of objections raised by the petitioner against reopening of assessment.

Analysis:

1. The judgment pertains to a company incorporated in the British Virgin Islands engaged in providing services related to mineral oil exploration. The Income Tax department issued a notice under Section 148 of the Income Tax Act based on tangible evidence, not a mere change of opinion, for reopening the assessment. The Assessing Officer did not consider whether the income should be taxed under Section 9(1)(vi) instead of Section 44BB, leading to the reassessment.

2. The petitioner initially filed its return of income under Section 44BB(1) of the Act, applying a 10% profit rate on gross contractual revenues. However, it was providing rental services for fishing tools/equipment to various companies during the assessment year. The notice contended that the income fell under Section 9(1)(vi) rather than Section 44BB, resulting in a different tax rate of 10% instead of 4.23% on gross revenue.

3. The judgment delves into the interpretation of the "reason to believe" provision post the 1989 amendment to Section 147 of the Act. It highlights that a reopening of assessment can only be based on tangible material, not a mere change of opinion. The Assessing Officer must have a live link between the reasons and the belief of income escapement. The judgment cites relevant Supreme Court and circular provisions to support this interpretation.

4. The judgment addresses the objections raised by the petitioner against the reopening of the assessment. It emphasizes that the reassessment was not a result of a change of opinion but was based on tangible material necessitating reassessment. The Assessing Officer duly considered the objections, and the impugned order was detailed, reasoned, and in line with legal precedents cited in the judgment.

In conclusion, the petition was dismissed as the reassessment was deemed valid, considering the tangible material presented and the proper application of the law. The judgment provides a detailed analysis of the legal provisions, interpretations, and precedents relevant to the issues raised in the case.