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TMI Blog2010 (12) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... uty Director of 2 ITA-1725 to 1727/D/2009 Income Tax, Circle 2(1), International Taxation, New Delhi ('learned Assessing Officer') had no reason to believe that income had escaped assessment. 1.1 The Hon'ble CIT(A) grossly erred in law in stating that as the appellant has opened a Branch Office in India in the following assessment year 2003-2004 (for which the appellant suo-moto filed a return of income), there is sufficient reason for the learned Assessing Officer to believe that income had escaped tax in earlier years. 2. The Hon'ble CIT(A) has erred in upholding passing of assessment order under section 144 of the Act for the subject assessment year. 2.1 That the Hon'ble CIT(A) has grossly erred in law and facts in stating that appellant has failed to avail the opportunity of furnishing details before the Hon'ble CIT(A) when all details, as required by the Hon'ble CIT(A), were duly filed during the course of appellate proceedings. 3. That the Hon'ble CIT(A) has erred in facts and in law in : 3.1 Upholding contention of the learned Assessing Officer that the appellant has a permanent establishment as per Article 5 of the Agreement for Avoidanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me had escaped assessment. This objection is based on this factual position that the assessee company was incorporated in Singapore on 14.8.2001 and thereafter, the assessee company was established in India after RBI approval obtained on 7.9.2002 and hence, the assessee had no presence in India during this year. The second objection of the assessee is that the reasons recorded by the AO for issuance of notice u/s 148 were not provided to the assessee as had been held by the Hon'ble Apex Court in the case of GKN Drive Shafts - 259 ITR 19. The third objection of the assessee is that when 4 ITA-1725 to 1727/D/2009 the reassessment proceedings are initiated u/s 148, the AO cannot pass an assessment order u/s 144 and this is the fourth objection of the assessee that such an order passed by the AO u/s 144 is barred by limitation because the assessment order was passed in the present case on 27.9.2006 whereas the time limit for passing such an order expired on 31.3.2005 i.e. on the expiry of two years from the end of the assessment year i.e. AY 2002-03. Learned DR of the Revenue supported the orders of the authorities below. 5. We have considered the rival submissions, perused the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s Ltd. Only distinction that has to be made is that while recording reasons it is only a reason to believe not a reason to suspect and at the same time and not necessarily computation of income. In view of this, the AO cannot be faulted with for having issue notice u/s 148 on the basis of information which came into his possession while framing the assessment for AY 2003-04. So far as the legality of the issue for assuming jurisdiction u/s 147 is that there should be a reason to believe that income chargeable to tax has escaped assessment. Thus where there is information, after the assessment is made or even where time for filing return has passed, reassessment is unavoidable if the AO acts on the information. However, the information should be definite and not vague and may not be in the nature of change of opinion. On the basis of the information reasons have to be recorded prior to issue of notice. It is important to keep in mind that AO has in compliance to the ratio of Supreme Court decision in case of GKN Driveshaft (India) Ltd. vs. ITO (2003) 215 ITR 19 (SC) issued an order indicating the reasons and attended to the objections raised by the appellant. In short following pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the AO on 3.7.2006 by way of issuing notice u/s 148 and hence, as per the provisions of Section 153(2), the order of assessment/reassessment can be passed upto the expiry of one year from the end of the financial year in which the notice u/s 148 was served. Hence, the reassessment in the present case could have been completed upto 31.3.2008 because the reassessment proceedings were initiated in the FY 2006-07 by way of issuing notice u/s 148 on 3.7.2006. Simply because the AO has mentioned in the assessment order that the assessment order is being passed u/s 144 and he has omitted to mention Section 144/148, it cannot be held that the assessment is time barred because admittedly, the proceedings itself were initiated by issuing notice u/s 148 and therefore, the provisions of Section 153(2) are applicable and not 153(1). This objection is also rejected. 10. Hence, we have seen that all the objections raised by the assessee are not valid and hence, the same are rejected. These grounds of the assessee are rejected. 11. Regarding merit of the case in all the three years, it was submitted by the learned AR of the assessee that as per the appeal effect order passed by the AO, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from group companies (based on appeal effect order it is actual income as reported in financial statements) (refer page 17 and page 18 of paper book) 0 5,216,507 15,588,357 3 Other income (This includes revenue on sale of certain spare parts and subsidy received which is actually reimbursement of certain expenses incurred by branch office) (refer page 3 of paper book) 0 1,845,318 7,377,175 4 Total income 538,731 8,295,127 24,788,267 5 Less : Claim for expenses (refer page 5 of paper book) ** 0 (6,309,531) (20,170,190) 6 Balance income which may be subject to tax 538,731 1,985,596 4,618,078 7 Total income as per return of income*** Not applicable 1,421,810 4,837,180 *The figure is based on appeal effect order passed by learned ADIT for assessment year 2002-2003. **Total expenses claimed above are out of total expenses of ₹ 12,665,590 for assessment year 2003-2004 and ₹ 32,154,525 for assessment year 2004-2005. ***We understand that relief under assessment year 2004-2005 would be restricted to returned income. 13. We find that the AO has made addition of the gross amount of income on account of commission income from group companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,654) 3 Actual expenses in relation to sale of spare parts Cost of spare parts purchased (refer page 16 of paper book) Not Applicable 0 (1,624,519) 4 Balance Indirect expenses (4=1-(2+3) Not Applicable 11,248,458 27,276,352 Allocation of Indirect Expenses 5 Expenses allocated against income earned from group companies excluding reimbursements and revenue from sale of spares (refer page 7 of paper book) Not Applicable 4,521,280 13,844,256 6 Expenses allocated against other Income excluding reimbursements and revenue from sale of spares (refer page 7 of paper book) Not Applicable 371,120 1,447,760 7 Total Expenses Claimed (9=(2+3+5+6) 6,309,531 20,170,190 * Panasonic Industrial Asia Pte Limited came into existence on 14 August 2001 when it was incorporated in Singapore. No return of income was filed by the appellant for this assessment year as it did not have any taxable presence in India. 14. Since it is not possible for us to verify the correctness of this working, we restore this matter back to the file of the AO for this purpose. We set aside the order of CIT(A) on this issue in AY 2003-04 & 2004-05 and direct the AO to allow deduction to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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