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TMI Blog2012 (8) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration and were duly considered while passing the order dated 31/12/2008 under Section 143 r.w.s. 147. Therefore, the impugned notice u/s 148 is merely on account of change of opinion as no fresh tangible material was available with the AO to issue the impugned notice - Decided in favor of assessee - WRIT PETITION NO.377 OF 2012 - - - Dated:- 1-8-2012 - S.J.VAZIFDAR M.S. SANKLECHA, JJ. Mr. S. E. Dastur, Sr. Counsel along with Mr. Nitesh Joshi and Mr. Atul K. Jasani i/by Mr. Atul K. Jasani for the Appellant. Mr. Tejveer Singh for the Respondents. JUDGMENT (Per M.S. SANKLECHA, J.): By this petition under Article 226 of the Constitution of India the challenge is to the assumption of jurisdiction by the Deputy Director of Income Tax (International Taxation) (hereinafter referred to as Assessing Officer ) under Section 147 to 151 of the Income Tax Act, 1961 (hereinafter referred to as the the Act ). The Assessing officer has assumed jurisdiction by issuing a notice dated 28/3/2011 under Section 148 of the Act seeking to reassess the petitioner's income for assessment year 2004-05 (hereinafter referred to as the impugned notice) and dismissed the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B basis outside India to NPCL. Further, the payments and consideration for the sale of equipment were also received by the petitioner outside India. The petitioner. contended therefore that no income accrued or arose in India in respect of offshore supply contracts to make it taxable in India. 7) Thereafter, the Assessing officer passed an order on 31/12/2008 under Section 143(3) read with Section 147 of the Act reassessing the petitioner to tax for the assessment year 2004-05. It is important to note that the assessment order expressly records the aforesaid facts furnished by the petitioner as well as the petitioner's submission that no income would accrue or arises in India in respect of the Offshore supply contracts inter alia in view of the decision of the Supreme Court in Ishikawajima Harima Heavy Industries Ltd. v. Director of Income Tax reported in 288 ITR Page 408. In respect of the Offshore Service Contract the Assessing officer held that the same would be taxable as fees for technical services and royalty and consequently the benefit of Section 44BBB of the Act as claimed by the petitioner would not be available. 8) The Commissioner of Income Tax (Appeals) by an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us contracts -Offshore Supply contract and Offshore Service Contracts. There were 4 Offshore Supply contracts and 3 offshore Service Contracts. Although the power plant is to be erected in India, the assessee has termed the contract as Offshore Supply and Offshore Services Contract. The work of constructing the project is in India. In the return of income, the assessee had claimed that the receipts on account of 4 Offshore Supply contracts as exempt from taxation in India, In respect of 3 Offshore Service Service Contracts, the assessee has filed its return of income. In respect of 3 offshore Service Contracts,the assessee has paid taxes under Section 44BBB of the I.T.Act. In respect of offshore Supply Contracts, the assessee has not disclosed any income in its return of income. The Dispute Resolution Panel (DRP) in its directions for the A.Y. 2006-07 and 2007-08 has held that : a) Receipts from offshore Services contracts are covered by provisions of section 44BBB of the Income Tax Act. b) Receipts from Offshore Supply contracts are also covered by provisions of section 44BBB of the Income Tax Act. The DRP has further held that Section 44BBB refers to computation of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee had a total receipts amounting to Rs.457,48,10,591/- from the turnkey project being carried out in India. Thus, the income that the assessee is supposed to disclose in its return of income should have been Rs.45,74,81,059/-/- (10% of Rs.4,57,48,10,591/-). Thus receipts of Rs.3167855651/- have not been disclosed in the return of income. As a result, income to the extent of Rs.31.67.85,565/- has escaped assessment within the meaning of section 147 of the Income tax Act, 1961.Such income thus been subjected to relief to which the assessee is not entitled. As the assessee has not disclosed proper income in its return of income therefore, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147.Therefore, notice under section 148 is being issued. 11) On 26/4/2011, the petitioner objected to the reopening of the assessment. The petitioner pointed out that in this case the condition precedent for issuing the impugned notice (as issued after more than 4 years from the end of the relevant assessment year) is that not only must there be a reasonable belief that income has escaped assessment but there must also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this Section or re-compute the loss of the depreciation allowance or any other allowance, as the case may be, the assessment year concerned/ In the above Section, the main term is 'reason to believe' and the same has been interpreted by numerous judicial authorities. 3.1.2. The principles behind all the judgments (related to this phrase and referred by the assessee in its objections) is that the AO should not use genral and irrational material to come at the conclusion that income has escaped assessment and that is all that was taken into consideration by the AO while recording reasons for re-opening the case in hand. In the present case, reasons recorded for re-opening are sufficient to prove that there are material facts a reasonable grounds on which one can have 'reason to believe' for reopening the case, as income chargeable to tax has escaped assessment. 3.1.3. In the case of 'Bawa Abhai Singh V/s. DCIT (2001) 1 17 Taxman 12', Delhi High Court elaborated on this issue. Relevant portion of this order reads as below: The only condition for action is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act, 1961. 13 Mr. S.E. Dastur, Senior Counsel in support of the petition submits as under: a) The impugned notice is without jurisdiction as the conditions precedent for issuing the same have not been satisfied. Though the assessment is sought to be reopened is more than 4-years from the end of the relevant assessment year. It is not alleged in the impugned notice that there was a failure on the part of the petitioner to fully and truly disclose all material facts relevant for assessment. b) There was no reasonable belief on the part of the respondent to conclude that income has escaped assessment. This is so, as all facts with regard to the offshore supply contracts were examined by him during the reassessment proceedings and the same were not brought to tax. Therefore, the impugned notice issued now is mainly on account of a change of opinion and not on any tangible material. c) On merits, no part of the petitioner's income arising out of offshore supply contract had escaped assessment as equipments were not only sold and supplied outside India but the consideration for the same was also received by the petitioner outside India. Consequently, no part of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31/12/2008 under Section 143 read with Section 147 of the Act. In fact, the petitioner's objection on the aforesaid ground has not been dealt with in the impugned order dated 20/10/2011. 16) Besides the above, our Court in the matter of Hindustan Lever Limited v. R.B. Wadkar reported in 268 ITR Page 332 has set aside a notice u/s.148 of the Act seeking to reopen an assessment inter alia on the ground that the reasons recorded by the Assessing Officer nowhere states that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year . On the aforesaid ground itself the assumption of jurisdiction by the Assessing officer is illegal. 17) On merits also the impugned notice is without jurisdiction for the reason that the same has been issued merely on account of a change of opinion as all facts with regard to petitioner's offshore supply contracts were considered and dealt with in the reassessment proceeding leading to the order dated 31/12/2008. In fact the petitioner's submission that amounts received under the four offshore supply contracts were not taxable in view of the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute resolution panel directions for the assessment year 2006-07 and 2007-08 wherein direction dated 13/8/2008 states that receipts from offshore supply contracts are also to be considered while applying Section 44BBB of the Act in respect of suppli contracts. However, this direction by the Dispute Resolution Panel is its view/opinion on the facts considered during the reassessment proceeding leading to the order of the Assessing officer dated 31/12/2008. Further, the opinion of the Dispute Resolution Panel dated 13/8/2008 was available to the Assessing officer when he passed the order dated 31/12/2008 under Section 143(3) read with Section 147 of the Act on reassessment proceedings. Therefore, there is no tangible material for the Assessing Officer to form a reasonable belief that income has escaped assessment. All facts were considered while passing the order dated 31/12/2008 under Section 143(3) read with Section 147 of the Act as is evident from the fact that in the order dated 31/12/2008 subjects the service portion of the four offshore supply contracts to tax. 20) As held by this Court in the matter of Bhavesh Developers v. Assessing officer reported in 329 ITR 249 that a po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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