2014 (7) TMI 683 - AT - Income Tax

Linkedin Profiles to be taken as evidence or not - Determination of permanent establishment (PE) in India - Admissibility of additional evidence Held that - Section 254(1) provides that the Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders therein as it thinks fit - the Tribunal has all the powers vested in it which are vested in the income-tax authorities with reference to section 13 - The basic ingredient for exercising powers under Rule 29 for admission of additional evidence is that Tribunal should come to the conclusion that a particular document would be necessary for consideration to enable it to pas orders or for any other substantial cause - The document can be brought to the notice of Tribunal by either party. At the time of admission of additional evidence the Tribunal is required to examine whether prima facie the evidence is relevant to the facts in issue or not - As per section 3 of the Evidence Act, one fact is set to be relevant to another when the one is connected with the other in any of the ways referred to in the provisions of Evidence Act relating to the relevancy of facts - The fact in issue u/s 3 of the Evidence Act means and includes any fact from which either by itself or in connection with other facts the existence/ non-existence nature or extent of any right, liability or possibility asserted or denied in any suit or proceedings necessarily follows. Establishment of PE - Whether there is PE or not (which is primarily a factual finding to be recorded by Tribunal after due appreciation of facts on record) Held that - In course of survey while recording the statement of Chief Finance Officer Shri Chandan Jain a specific question was put to him to provide the names of employees of GEIPL who were working in the other GE group entities in India for which he answered that he will check and revert back - it cannot be said that AO had not made inquiries regarding the employees of GEIPL who were working for other GE entities - The assessee did not provide this information. Inordinate Delay In Filing Evidence Held that - The assessee cannot be permitted to first scuttle the investigations/ inquiries by not furnishing the necessary information and then claim benefit out of the same. At the end of the day it is the determination of correct taxability of assessee, which should guide the proper course of action. There is no gain saying that pitted against the technicalities and cause of justice, cause of justice should prevail. Whether linkdin profiles is hearsay evidence - Held that - Section 60 of the Evidence Act requires that oral evidence must in all cases what-ever, be direct. It is well settled law that admission though not conclusive is binding and decisive on point unless it is successfully withdrawn or proved to be erroneous - The Linkedin profiles are in the nature of admissions of persons on their job profile. The data is in pubic domain. The strict Rules of Evidence are not applicable to income-tax proceedings. The evidences sought to be filed by Revenue are only supporting in nature and would assist in appreciating the facts in a more judicial manner. - Linkedin profiles filed by the department admitted. - Decided in favor of revenue.

Summary

Issues Involved:
1. Admissibility of additional evidence filed by the department.
2. Validity of reopening under Section 148.
3. Existence of a Permanent Establishment (PE).
4. Attribution of profits.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence:
The department sought to admit additional evidence, including LinkedIn profiles of employees and a whistleblower's writ petition. The proceedings highlighted that the hearing commenced on 28-1-2014 and continued on various dates. The department filed an application for admission of additional documents on 19-2-2014. The assessee objected to this on the grounds that the department had not moved any formal application for admission of additional evidence and argued that LinkedIn profiles were hearsay evidence with no probative value. The Tribunal referred to the decision in Mascon Global Ltd. Vs. ACIT, which allowed the admission of additional evidence even without a formal application if it served substantial justice. The Tribunal concluded that the LinkedIn profiles were relevant and necessary for determining the issue of PE and admitted them, while the whistleblower's writ petition was not admitted due to adverse comments made against the whistleblower by the Hon'ble Delhi High Court.

2. Validity of Reopening Under Section 148:
Ld. CIT(DR) pointed out that a survey under Section 133A was conducted, revealing that GE group was engaged in sales activities in India through expatriate employees working for various GE entities. The income attributable to such PE was taxable in India but was not disclosed in the returns. The assessee had not provided full information on employees, leading to the issuance of notice under Section 148. The Tribunal noted that the assessing officer had recorded a finding that information regarding employees was not provided by the assessee, which was not objected to by the assessee. The Tribunal upheld the validity of reopening under Section 148 as the assessing officer had a prima facie belief of income escapement.

3. Existence of a Permanent Establishment (PE):
The department argued that GE group entities were conducting business in India through a PE, as evidenced by the activities of expatriate employees and the documents found during the survey. The LinkedIn profiles were admitted to substantiate the department's claim that these employees were responsible for sales and business development in India, indicating the existence of a PE. The Tribunal noted that the LinkedIn profiles provided relevant information on the employees' job profiles and responsibilities, which were crucial for determining the existence of a PE. The Tribunal held that the LinkedIn profiles were akin to admissions made by the employees and were not hearsay evidence.

4. Attribution of Profits:
The department contended that the income attributable to the PE in India was taxable but was not disclosed by the assessee. The Tribunal observed that the LinkedIn profiles would assist in appreciating the facts regarding the functions performed by the employees and the attribution of profits. The Tribunal emphasized that the correct determination of taxability should guide the proceedings and admitted the LinkedIn profiles to ensure a judicial determination of the facts.

Conclusion:
The Tribunal admitted the LinkedIn profiles as additional evidence to determine the existence of a PE and the attribution of profits but declined to admit the whistleblower's writ petition. The validity of reopening under Section 148 was upheld, and the Tribunal emphasized the importance of considering all relevant evidence to arrive at a correct factual finding. The appeals were fixed for further hearing on merits.