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TMI Blog2011 (1) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... t on gross basis without allowing any deduction on account of reimbursement of expenses. In view of the above, deduction of ₹ 18,56,756 claimed on account of reimbursement of expenses was disallowed and added back to the income of the petitioner. 3. The petitioner had filed an appeal but the same was dismissed vide order dt. 1st Dec., 2005. No further appeal was filed and the assessment order became final. 4. The IT Department issued notice under s. 147/148 of the Act dt. 26th March, 2007 for reopening the said assessment for the asst. yr. 2002-03. The petitioner after getting copy of the reasons filed objections but by the impugned order dt. 28th Sept., 2007, the objections have been rejected. It may be noted here that the petitioner had earlier filed Writ Petn. (C) No. 7045 of 2007 and had submitted that the AO was not dealing with the objections raised by the petitioner for reopening of the assessment. It is during the pendency of the said writ petition that the impugned order dt. 28th Sept., 2007 rejecting the objections was passed. 5. The "reasons to believe" are recorded by the AO before issuing notice under s. 147/148 of the Act read as under : "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and the income should not have been taxed @ 10 per cent by treating the same as income from "fee for technical services". 7. The case of the petitioner is that the reasons recorded disclose mere change of opinion and the question whether the petitioner had a PE in India was dealt with and examined before the original assessment order dt. 24th March, 2005 was passed. The case of the Revenue is that this is not the case of change of opinion but the AO had not properly appreciated the legal concept and the term "PE" and in this connection reference is made to the fact that the petitioner had deputed its staff in India for periods of 4 months to 18 months. Reference was made to OECD Commentary on art. 5, para 3 relating to DTAA. 8. There is merit in the contention raised by the petitioner. During the course of the original assessment proceedings, the respondent by letter dt. 4th Oct., 2004 had called upon the petitioner to furnish information and details with regard to their entire nature of business activities in India. The relevant portion of the said letter reads as under : "Please refer to the ongoing assessment proceedings in' your case for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the AO as '"fee from technical services" and were taxed on the gross receipt basis without allowing any deduction on account of reimbursement of expenses at a flat rate of 10 per cent. Addition of ₹ 18,56,756 was made by disallowing all expenses as claimed. The addition was upheld in the appeal. The said income/receipts could not have been taxed as "business income" under art. 7 as well as "fee from technical services" under art. 12 of DTAA. The AO had, therefore, examined and decided the issue whether the petitioner had a PE and could be taxed accordingly or the amount received was taxable as "fee from technical services". Relevant portions of the said articles of DTAA read : "Article 7. Business profit 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a PE situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to (a) the PE; (b) sales in that other State of goods of merc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not confer jurisdiction on the AO to reopen assessment on change of opinion on interpretation of a particular provision. The scope of s. 147/148 of the Act does not permit review of an earlier order on second thoughts suo motu, when there is no new factual material to come to a different conclusion. The aforesaid position has not undergone a change even after ss. 147-148 were amended after 1st April, 1989. In Jindal Photo Films Ltd. vs. Dy. CIT & Anr. (1999) 154 CTR (Del) 355 : (1998) 234 ITR 170 (Del) Delhi High Court had observed as under : "The power to reopen an assessment was conferred by the legislature not with the intention to enable the ITO to reopen the final decision made against the Revenue in respect of questions that directly rose for decision in earlier proceedings. If that were not the legal position it would result' in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods............... Reverting back to the case at hand, it is clear from the reasons placed by the AO on record as also from the statement made in the counter-affidavit that all that the ITO has said is that he was not right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at conscious application of mind to the material and the issue in question is required. Change of opinion necessarily means examination on an earlier occasion. 13. We have quoted above the questionnaire raised and the answers given by the petitioner at the time of original assessment proceedings. It is clear that before the original assessment order dt. 24th March, 2005 was passed, the AO had specifically raised and examined the issue whether the petitioner had PE in India. The contention of the petitioner that they did not have PE in India was accepted. The present case is not one where there was no consideration or examination of the issue at the time of the original assessment proceedings. This is not a case in which there was no application of mind by the AO to the issue in question. Proceedings on record, the questionnaire raised and the answers given at the time of original assessment proceedings show conscious application of mind on the facts and material available before the AO. The present case is one of change of opinion. 14. In view of the aforesaid discussion, the petitioner is entitled to succeed and a writ of certiorari is issued quashing the notice dt. 26th March, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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