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TMI Blog2012 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... f the relevant assessment year (i.e., 2003- 04), is barred by limitation - in favour of assessee. - W.P.(C) 7959/2010 - - - Dated:- 29-8-2012 - MR JUSTICE BADAR DURREZ AHMED, MR JUSTICE SIDDHARTH MRIDUL, JJ. For the Petitioner : Mr Percy Pardiwala, Sr Advocate with Mr Nishant Thakkar, Mr Salil Kapoor and Mr Ankit Gupta For the Respondent : Mr Sanjeev Sabharwal with Mr Puneet Gupta and Mr Gyatri Verma JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1. This writ petition has been filed seeking quashing of the notice dated 30.03.2010 purportedly issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as the said Act ) as also the order dated 27.10.2010 passed by the Assessing Officer on the objections preferred on behalf of the petitioner. 2. We may point out, at the outset, that this is the second occasion on which a notice under Section 148 of the said Act has been issued by the Assessing Officer to the petitioner in respect of the assessment year 2003-04. It is also an admitted position that the notice dated 30.03.2010 has been issued beyond the period of four years from the end of the assessment year 2003-04 and, therefore, the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as liable to pay income tax on the royalty that it received. Consequently, the Assessing Officer issued a notice under Section 148 of the said Act on 29.03.2007. The reasons for the issuance of the said notice under Section 148 of the said Act were also provided to the petitioner. In the said reasons dated 29.03.2007, it was, inter alia, alleged that the petitioner had full-fledged research and development centres in India. It was also alleged that many of the technological developments were undertaken at these development centres located in India and the products were patented by the petitioner and were exploited commercially worldwide including in India. On the basis of this, it was the revenue s case that the petitioner was earning royalties from patenting the technological innovations in the field of communication technology and that the petitioner was conducting its core business of research and development from the centres located in India. It was, therefore, contended on behalf of the revenue that the locations in India constituted the business connection as well as the permanent establishment of the petitioner in India. 5. The said notice under Section 148 dated 29.03.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order dated 31.12.2007 this much is evident that the submissions made by the petitioner with regard to the petitioner not having any permanent establishment in India was accepted and it is for this reason that the lower rate of 15% was employed and not the higher rate of 20%. It is another matter that the petitioner had filed an appeal against the said assessment order which has also culminated in the order of the Commissioner of Income Tax (Appeals), whereby the same rate of 15% has been employed. The learned counsel for the petitioner states that now the matter is pending in appeal before the Income Tax Appellate Tribunal. 8. The matter rested there for some time, that is, till 30.03.2010, when the Assessing Officer, once again, issued a notice under Section 148 of the said Act. The purported reasons for issuing the notice under Section 148 were as under:- Reasons for the belief that income has been under assessed in the case of M/s Qualcomm Inc for A.Y 2003-04 The assessee, M/s Qualcomm is a foreign company engaged in the design, development, manufacture marketing licensing of digital wireless telecommunications products and services based on its code division multi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and facts- Reassessment proceedings barred by limitation The assessment was reopened by your kind office under section 147 of the Act vide notice dated March 30, 2010 after the expiry of four years from the end of the relevant AY i.e. AY 2003-04. In accordance with the proviso to section 147 of the Act, QCOM vide its letter of May 3, 2010 had challenged the validity of the 148 notice stating that the notice is barred by limitation. Accordingly, QCOM requested your good self to drop the reassessment proceedings. However, in the reasons recorded for reopening the assessment, your good office has wrongly alleged that QCOM has not disclosed fully and truly all material facts pertaining to the existence of PE and business connection in India. At the outset, we wish to submit that a reference to the reasons show that it is not explained by your good self as to how the true and full particulars were not disclosed in as much as the reason pertain to the same record and not to any new material / information which has come subsequently to the notice of your kind office. With due respect, we submit that the above cited allegation of non disclosure of facts is without any basis and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued in Financial Year 2009-10 for AY 2003-04 which is within the prescribed time frame of 6 years. Hence, it is factually incorrect to say that the notice is barred by limitation. (c) The assessee has objected that the reopening proceeding initiated is based- on the audit objection. To this, it must be pointed out that reasons were recorded before issuing the notice u/s 148 after application of mind by the AO. The copy of these reasons recorded was provided to the assessee on request. A perusal of the reasons would show that there is no mention of any audit objection. Hence, it is factually incorrect to say that the initiation of the proceedings is based on audit objection. This objection, of the assessee also deserves to be rejected. 4. Accordingly, the objections of the assessee stand disposed off. The assessee is directed to co-operate in the assessment proceedings and submit the details / information as called for vide notice u/s 142 issued along with the questionnaire (attached). 11. It is clear that in the order dated 27.10.2010 there is no finding, even prima facie, that the petitioner had failed to disclose fully and truly all material facts with regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the lower tax rate of 15% and not the higher tax rate of 20%, which might have been the case, if the petitioner had a permanent establishment in India. 14. It is well settled that re-opening of assessments cannot be done merely on the basis of change of opinion. It is also a settled position in law that unless and until the conditions stipulated in the proviso to Section 147 are fully satisfied, such re-opening cannot be done beyond the period of four years from the end of the relevant assessment year. In the present case, we find that not only is there a change of opinion but also the re-opening is barred by limitation inasmuch as the condition that the escapement of income must have resulted from the failure on the part of the petitioner to fully and truly disclose all material facts, has not been satisfied. The impugned order dated 27.10.2010 merely glosses over the objections raised by the petitioner with regard to limitation. As we have already observed above, there is no finding in the order dated 27.10.2010 that there was a failure on the part of the petitioner to fully and truly disclose all material facts particularly in connection with the issue of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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