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2020 (6) TMI 4 - AT - Income TaxRe-opening of the assessment u/s 147 - Whether royalty was duly disclosed and offered to tax in the return of income filed by American Express (India) Ltd. in the capacity of the representative assessee for the assessee? - HELD THAT - As gone through the reasons as were recorded prior to the assumption of jurisdiction for reassessment. It is seen that the reassessment proceedings were initiated on the basis of the information which was already available with the Department at the time of completion of the original assessment proceedings. It is apparent that no new information or material has been brought on record by the AO to establish or even indicate that any income for the year under consideration has escaped assessment. One of the allegations by the AO has been that the assessee has not offered to tax the royalty of USD to 263,532 received from American Express (India) Pvt. Ltd. towards the right given for use of Global Makers System, Software and application. This allegation is factually incorrect in as much as it is apparent from the records that American Express (Indian) Pvt. Ltd. had filed the return of income in the capacity of the representative assessee for the assessee company on 28th November, 2003 wherein this royalty income had been offered to tax @ 15% under Article-12(3) (a) of the DTAA between India and USA. As seen that a proper discloser was made in this regard in the return of income filed by the assessee in response to the notice issued u/s 142(1) on 16.02.200 - royalty of USD 263,532 was duly disclosed and offered to tax to the return of income filed by the American Express (India) Pvt. Ltd. Company in the capacity of the representative assessee of the assessee company, it cannot be said that any new information had come in the possession of the AO so as to warrant invocation of reassessment jurisdiction on this issue. As contention was duly accepted by the AO during the course of assessment proceedings and thus the re-opening of the concluded assessment on this issue would tantamount to re-visiting the issue without there being any fresh material having been brought on record by the AO. The action of the AO in invoking the jurisdiction u/s 147 would fall outside the purview of the said section. Reasons recorded for initiation of the reassessment proceedings, is that the assessee had set up equipment in the form of mid-range and mainframe computer and network in the USA was payable by American Express (India) Pvt. Ltd. to the assessee company for the relevant period as consideration for the use of computer, server, network etc. which was covered by the definition of royalty both under the Act as well as the DTAA but was not offered to tax. In this regard again it is seen that this observation of the AO is incorrect in as much as the assessee had duly offered the royalty in the return of income filed by the American Express (India) Pvt. Ltd. in the capacity of the representative assessee for the assessee company. Thus, on this count the reassessment has been initiated on an issue which was factually incorrect and was already concluded and would thus not be sustainable. Reassessment proceedings have been initiated on the ground that the assessee had seconded some employees to American Express (India) Pvt. Ltd. which would constitute a fixed place of business of the assessee company. In this regard also, it is seen that the assessee had furnished copies of agreement relating to the second-ment of employees during the course of the original assessment proceedings vide submissions dated 13th March, 2006 and, thus, apparently, this issue also was examined by the AO and it was the view of the AO then that there was no fixed place PE and the return of the assessee was accepted in the original assessment proceedings. This information also was available at the time of the completion of original assessment proceedings and no fresh information came to be in possession of the AO on this issue also. Reassessment proceedings in this case were initiated without there being any fresh material in possession of the AO. There was no tangible material with the AO which could justify the initiation of reassessment proceedings. The aspects recorded by the AO in the reasons to believe were known to the Assessing Officer at the time of original assessment also and apparently the explanations offered by the assessee appear to have been taken into account. AO cannot be permitted to review his earlier assessment order in the garb of reassessment. Also the reassessment jurisdiction cannot be invoked by a mere change of opinion. In the case of Le Passage To India Ltd. 2014 (4) TMI 750 - DELHI HIGH COURT has held that where the reasons to believe do not reveal as to what tangible material the Assessing Officer came to obtain to justify the reassessment notice and where an aspect which was known to the Assessing Officer at the time of the original assessment and the explanations of the assessee appeared to have been taken into account, the assessment cannot be reopened. Reasons recorded nowhere reveal as to what tangible material, the Assessing Officer came to obtain to justify the reassessment notice and, therefore, the reassessment proceedings have been wrongly initiated - on the facts of the case and respectfully following the ratio of the judgment of the Hon ble Apex Court in CIT vs. Kelvinator India Ltd. 2010 (1) TMI 11 - SUPREME COURT and of the Hon ble Delhi High Court in the case of Le Passage To India 2014 (4) TMI 750 - DELHI HIGH COURT we quash the reassessment proceedings - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings. 2. Ad-hoc addition of business income from Customer Focused Sales (CFS) alleging Indian Permanent Establishment (PE) of the appellant. 3. Ad-hoc addition on account of Travellers’ Cheques (TCs) business of the appellant. 4. Addition on amounts already offered in representative assessee return filed by AEIPL for the appellant. 5. Non-grant of credit of tax deducted at source (TDS). 6. Interest under section 234A and 234B. Issue-Wise Detailed Analysis: 1. Validity of Reassessment Proceedings: The assessee challenged the reassessment proceedings on the grounds that they were initiated without any fresh information or material, merely constituting a change of opinion. The Tribunal noted that the reassessment was based on information already available during the original assessment. The Tribunal observed that the royalty income of USD 263,523 was disclosed and offered to tax in the return filed by American Express (India) Pvt. Ltd. as a representative assessee. Similarly, the income from the use of mid-range and mainframe computer and network was also duly offered to tax. The Tribunal concluded that the reassessment proceedings were initiated without any new tangible material, thus constituting an impermissible review rather than reassessment. Citing the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., the Tribunal quashed the reassessment proceedings as they were based on a mere change of opinion. 2. Ad-hoc Addition of Business Income from Customer Focused Sales (CFS) Alleging Indian Permanent Establishment (PE) of the Appellant: The Tribunal noted that the issue of PE and related income had been examined during the original assessment proceedings. The assessee had provided relevant agreements and descriptions of the process undertaken in India, which were accepted by the Assessing Officer. The Tribunal held that reopening the assessment on this issue without fresh material was not justified. 3. Ad-hoc Addition on Account of Travellers’ Cheques (TCs) Business of the Appellant: The Tribunal observed that the attribution of income from the business of travelers' cheques was considered in other years, and no additions were made in subsequent years. The Tribunal found that the reassessment on this issue was also based on information already available and thus not sustainable. 4. Addition on Amounts Already Offered in Representative Assessee Return Filed by AEIPL for the Appellant: The Tribunal acknowledged that the royalty income and other amounts were already offered to tax by American Express (India) Pvt. Ltd. as a representative assessee. The reassessment proceedings on this ground were found to be based on incorrect facts and thus not justified. 5. Non-Grant of Credit of Tax Deducted at Source (TDS): The Tribunal noted that the issue of TDS credit was resolved through a rectification application under section 154, where the credit of ?3,02,44,020 was allowed. Consequently, the related grounds were not pressed by the assessee. 6. Interest Under Section 234A and 234B: The Tribunal did not specifically address the issues of interest under sections 234A and 234B, as the reassessment proceedings were quashed, rendering these grounds academic. Conclusion: The Tribunal quashed the reassessment proceedings due to the absence of new tangible material and the impermissible review of the original assessment. Consequently, the appeal of the assessee was allowed.
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