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TMI Blog2013 (7) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a contract for supply of equipment worth US$ 103 million. He has however failed to establish even prima-fade as to how income arising out of this Offshore Equipment Supply Contract is taxable in the hands of appellant. He has mentioned about appellant having filed a recovery suit for the insurance claim. The AO has not reached to any prima-facie conclusion that there is an escapement of income in respect of the supply of equipment as per the Offshore Equipment Supply Contract - AO did not have any reason to believe for issue notice u/s.148 – Appellant failed to bring any discussion on record as to how he had reason to believe before issuing notice u/s.148. There is no discussion on the material leading to the issue of notice. There is no mention of any error of judgment in the regular assessment passed - Decided against the Revenue. In regard to profit from sale of equipment – Held that:- The ground become infructuous in view of decision, holding the assessment proceedings to be bad in law u/s 148 – Decided against the Revenue. - ITA No. 3930/Mum/2006, ITA No. 3897/Mum/2006, ITA No. 746/Mum/2007 - - - Dated:- 19-7-2013 - Shri R. S. Syal And Shri Vivek Varma,JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings in the instant year, as the AO was under the belief, that the Offshore Contract for USD 103 million was signed between Lanco Kondapalli Power Projects Ltd and Hanjung. Since the claim was made by the assessee, therefore, the assessee had not disclosed the portion of USD 102 million in its return. He, therefore, reopened the proceedings to bring to tax USD 51.5 million in the current assessment year. According to the AO, therefore, offshore contract was taxable in India and passed the impugned assessment order. 5. Before the revenue authorities, it was argued that there was no sufficient reason to believe to initiate reassessment proceedings. It was also argued that in 2001-02, i.e. immediate subsequent year, when the issue of insurance claim cropped up, the AO did not make any addition in respect of the Offshore Contract, after having taking into consideration the evidence and documents place before him. It was also pointed out that entire facts with regard to signing of the agreement was already before the AO, who took into consideration, and only then had framed the regular assessment. In the sense, the AO had only changed his opinion, without bringing home any evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his reasons to believe that the recovery suit of insurance was filed on behalf of the assessee even though the Offshore Supply Contract of US$ 103 million was with a different person. 3.8 As mentioned above, the Offshore Equipment Supply Contract was between KPCL and Hanjung. On the other hand, Onshore Civil and construction Services Contract was between KPCL and the appellant company. Para-9 of the Onshore Civil and Construction Services Contract provides for the insurance and it reads as under: "9.0 INSURANCE 9.1 The Contractor shall provide or arrange its own cost and (in the joint names of the Owner and the Contractor upto the Taking Over of a Part and in the name of the Owner thereafter) comprehensive insurance to the Project. The insurance shall commence from commencement of Work under the Contract and shall be effective upto the Taking Over of the Combined Cycle Plant. The insurance policies shall also provide for maintenance cover upto the Taking Over of the Combined Cycle Plant. Such insurance will include, the following: 1. Material Damage Insurance including Material Transit Insurance (also known as Construction All Risk Insurance) 2. Marine Advance Loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that a barge carrying Gas Turbine (GT) and Gas Turbine Generator (GTG) had capsized and sunk Into the waters and became a total loss. Since these two items were insured, the appellant made a claim on the Insurance Company for the recovery of claim. The matter had not been settled. A Civil Suit was filed by the appellant in the City Civil Court at Secunderabad. - While detailing the suit the appellant has mentioned in para-5 of the Suit is as under: "5. MAIN SUPPLY CONTRACT Under the terms of contract dated 15t February 1998 ('Supply Contract") between Plaintiff and LKPL, Plaintiff agreed to supply equipment, materials and design for the construction of LKPL's combined cycle power plant at Kondapalli IDA, Andhra Pradesh in India (the "Kondapalli Project'9. The value of this Supply Contract was about USD 103 million" 3.11 Before reading too much into para-5, it is necessary to understand the brief reference to the parties involved in relation to the subject matter of suit as innumerated in para-4 of the suit: "4. A brief reference to the parties involved in relation to the subject matter of this suit is as follows: a. Lanco Kondapalli Power Pvt. Limited (formerly a pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting up the power project as per the Onshore Contract. The AO in the course of assessment for AY 2001-02 had examined the Onshore Contract, Offshore Contract, Civil Suit filed for the recovery of insurance claimed and other relevant papers filed by the appellant. No adverse findings were accorded in the assessment of A.Y.2001-02. While issuing notice u/s.148, AO has recorded reasons u/s.147. He has only mentioned that there is a contract for supply of equipment worth US$ 103 million. He has however failed to establish even prima-fade as to how income arising out of this Offshore Equipment Supply Contract is taxable in the hands of appellant. He has mentioned about appellant having filed a recovery suit for the insurance claim. The AO has not reached to any prima-facie conclusion that there is an escapement of income in respect of the supply of equipment as per the Offshore Equipment Supply Contract. I am therefore of the opinion 'that the AO did not have any reason to believe for issue notice u/s.148. 3.12 While dealing with the objection raised by the appellant, AO has dealt that issue in para- 10 of his order. The AO has simply referred to the judgments in 5 cases but has faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided in favour of the assessee in ITA No. 4327/Mum/2008 and 4326/Mum/2008, in its own case, wherein the ITAT recorded the finding that the assessee had received the remittance as reimbursement of expenses, which could not be treated as income of the assessee. As in that order, in the instant case as well, the AO or the DR has not been able to controvert their fact. 20. Respectfully following the decision of the coordinate Bench we set- aside the order of the CIT(A) on this issue and direct the AO to delete the addition of Rs. 57,44,649/- 21. The appeal, thus, filed by the assessee is allowed. ITA No. 746/Mum/2007, Appeal filed by the department : 22. The appeal, filed by the department, pertains to assessment year 2003-04, wherein, the following grounds have been raised. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the remittance received from the Head Office of Rs. 1,32,11,506/- is not taxable as income of the assessee and accordingly in deleting the addition. 23. Identical ground was raised by the assessee in ITA No. 3897/Mum/2006, wherein, we have deleted the addition, following the decision in assessee ow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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