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TMI Blog2025 (1) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied and adopted, extrapolated and read as being an accurate recordal of facts as they obtained in the AYs in question. As conceded before us by the respondents that the reasons as recorded in support of the formation of opinion that income had escaped assessment had not alluded to any facts specific to AYs 2013-14 to 2017-18. Despite repeated queries respondents failed to draw our attention to any facet or fact pertaining to the AYs in question and which could have been read as demonstrative of an application of mind to the facts that prevailed or obtained in the years in question and thus justified a reassessment action being validly initiated. In fact, as we go through those reasons, it becomes more than apparent that the AO has merely proceeded to adopt and reiterate what was found in the course of the survey undertaken in 2007 and 2019 read alongside the judgment of this Court rendered in GE Energy [ 2019 (1) TMI 542 - DELHI HIGH COURT ] Indisputably, there is no principle akin to that of res judicata which can be recognized to be applicable to taxing disputes. Though this principle is well settled, we deem it appropriate to refer to the following enunciation of the well-set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by GE. It is in the aforesaid backdrop that the petitioners aver that at least up to November 2015 it was not even a constituent of the GE Group. This fact assumes significance in light of the following. 4. As is manifest from a reading of the reasons which appear to have weighed upon the respondents and were communicated to the writ petitioner, a survey under Section 133A (2A) is stated to have been conducted on 06-07 June 2019 on GE T D India Limited and which had taken over the Transmission and Distribution [T D] grid business of the erstwhile Alstom Group. In the course of that survey, the respondents asserted that the nature of activities undertaken by members of the GE Group engaged in T D business would establish they constituted a Fixed Place and Dependent Agent PE. The aforesaid inference was drawn pursuant to various statements which appear to have been recorded in the course of that survey. This becomes apparent from a reading of paragraphs 4.1, 4.2, 4.3, and 4.4 of the reasons provided to the writ petitioners which are extracted hereinbelow: 4.1 The statement of Mr. Sandeep Zanzaria, Executive (Commercial) in GETDIL was recorded during the survey. As described by Sh Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.4 During the survey, a copy of the email records of Sh Zanzaria for the last one year was taken. The primary and principal role of the teams in India in securing of contract /orders in India for foreign companies in the Power and T D (also called Grid business within the group) Sectors is established from the internal communication within the Group as recorded in the emails addressed to Sh Zanzaria. It is noticed that the foreign companies rely predominantly on the teams in India (which are constituted by employees of GETDI L) for all steps in securing of an order and entering into sales/services contacts with Indian customers. From identification of potential customers in India, conveying of requirements of the Indian customers, giving inputs on suitability of the potential deal, drafting or vetting of the bid to participation in negoliat1ons/discussions with the customers, the personnel in India (working under GETDIL) have substantial participation. The email records amply establish this. As a representative example, certain relevant emails extracted from the inbox of Shri Zanzaria in a randomly selected period of one week during the past year are reproduced below. These sele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciding authority for entering into contracts, play a role that is not auxiliary in the entering of the contract. Importantly, the Court cites India's position on the OECD commentary which is as follows: a person has attended or participated in negotiations in a State between an enterprise and a client, can, in certain circumstances, be sufficient, by itself, to conclude that the person has exercised in that State an authority to conclude contracts in the name of the enterprise; and that a person who is authorized to negotiate the essential elements of contract, and not necessarily all the elements, can be said to exercise the authority to conclude contracts. . The Court also relied on a decision of Italian Supreme Court in Ministry of Finance (Tax Office) v. Philip Morris (GmBH), Corte Suprema di Cassazione No.7682/02 of May 25 2002 , which is as follows: the participation of representatives or employees of a resident company in a phase of the conclusion of a contract between a foreign company and another resident entity may fall within the concept of authority to conclude contracts in the name of the foreign company, even in the absence of a formal power of representation. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign companies of the Group that make sales and render services in India. This fact leads to the conclusion that the Indian AE GETDIL, (which share the same main office premises with GEPIL, i.e., the headquarters of both of which are located in Axis House, Sector 128, Jaypee Wish Town, Noida) serve as not only Dependent Agent PE, but also Fixed Place PE of the foreign companies of the Group including Grid Solutions SAS. 6.2 Also, extracts of visitor logs in the main premises (sector 128, Noida) GETDIL were taken during the survey. As the premises of the headquarters of both companies are located in the same building, it was learnt that a single visitors log is maintained for both companies. It was observed that there was a regular movement of foreign personnel of GE Group at the premises of GETDIL. From the submission made in response to summons, it was noted that there were 27 visits of employees of foreign companies of the GE Group in those premises of GETDIL (Sector 128, Noida) during the period January-March 2018 alone. Available information so far indicates that the premises of GETDIL are used as a fixed place at the disposal of foreign companies of the group, from where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further pointed out that the survey of 2007 was not even concerned with the verticals of GE engaged in the T D sector and was restricted to the business undertaken by constituents of GE forming part of its aviation vertical. In any case, Mr. Vohra would contend that the surveys as well as the material gathered in 2007 and 2019 cannot possibly be extrapolated to other years. 9. Mr. Vohra also drew our attention to the fact that the assessment for AY 2013-14 to 2015-16 was completed in accordance with Section 143 (3) of the Act. It was thus submitted that the decision to reopen and the validity thereof would clearly be liable to be tested on the anvil of the Proviso to Section 147 as it stood at the relevant time and which would have enabled the respondents to reopen an assessment only if it were found that the petitioner had failed to make a full and true disclosure. Mr. Vohra drew our attention to the First Proviso to Section 147 as it then existed and which read thus: Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject offices/Liaison office/Godowns and Warehouses and construction or other business sites in India. 4. Please furnish names and complete addresses of all associated enterprises and also supply copy of Form 3CEB regarding international transactions entered into with these during the year under consideration. 5. Furnish details regarding the share holding of your company alongwith the name and address of its Directors. Furnish complete set of the return along with its enclosures for the assessment year 2013-14(for the period 01.04.2012 to 31.03.2013). Please file copy of any Tax Return for the period 01.04.2012 to 31.03.2013 filed abroad. 6. Please give details along with bifurcation of all the streams of revenue accruing/ arising/ receipt either directly or indirectly through/ from India. 7. Please furnish copies of all contracts and agreements operative during the year in respect of your activities in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year or has accrued or arisen during the year may also be provided. 8. Details of invoices raised to the Indian customers and detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income for the year under consideration alongwith complete audited balance sheet, P L account including all the schedules, Form 3CD Form 3CEB. 23. Please give details of TDS in respect of payments made to any sub-contractor and w.r.t. any expenses paid outside India or claimed by the H.O regarding services rendered for projects/business in India. 24. Please furnish copies of bank statements in respect of all the bank accounts maintained by you with any bank or banking institution in India during the period 01.04.2012 to 31.03.2013. 25. Please give details of all the investments made by you or disposed of by you during the year under consideration including those made in purchase or sale of moveable or immoveable assets. The above information may please be furnished before the undersigned in my office at Room No. 409, 4th Floor, Block E-2, MCD Civic Centre, Minto Road, New Delhi on 28.07.2015 at 12.45 PM. A Notice u/s 142(1) of the Income Tax Act, 1961 is enclosed for compliance. Encl:- As above. 11. Mr. Vohra laid special emphasis on queries 3, 4, 6, 7, 8 and 13 thereof and which were duly responded to by the writ petitioners. We deem it apposite to extract the following par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % advance payment during the subject assessment year is already enclosed as Annexure JB for your reference. Further, it has already been submitted in Point 2 above that no incomes have been accrued or arisen to assessee during the relevant assessment year. 5. Please submit the names and addresses of sub-contractors of the assessee, in connection with the India projects with their PAN nos. and details of their subcontracted activity along with copy of contracts. (Question No. 17) It is humbly submitted that the assessee has not engaged any sub-contractor in India during the relevant assessment year. 12. On the basis of those disclosures the AO proceeded to pass an order in the following terms: ASSESSMENT ORDER M/s Alstom Grid OY (Limited) (hereinafter referred to as assessee ) e-filed return of income for the Assessment Year ( AY ) 2013-14 declaring Nil income on 30.09.2013. The case was selected for scrutiny under CASS and notice u/s 143 (2) of the Income Tax Act, 1961 ( the Act ) was issued to the assessee on 04.09.2014. Further, a notice u/s 142(1) of the Act alongwith detailed questionnaire was issued to the assessee on 07.07.2015. In response to various notices and letters, Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there existed no justification for the powers conferred by Section 148 of the Act being invoked especially in light of no incriminating or germane material pertaining to the AYs having been discovered or found. 14. Mr. Bhatia, learned counsel representing the respondents on the other hand argued that the decision of this Court in GE Energy and other connected matters had unequivocally found a consistent business model having been followed by the various Associated Enterprises of the GE Group and had ultimately upheld the finding of a PE being existent. It was his submission that the facts that were discovered during the course of the survey undertaken in 2007 were found to be common to those that came to light post the 2019 survey. In view of the aforesaid, it was contended that the reopening is not liable to be interdicted at this stage. 15. Mr. Bhatia also sought to draw support from our decision in GE Nuovo Pignone Spa v CIT 2024 SCC Online Del 7902 contending that a similar challenge to reopening by a constituent of the GE Group had come to be upheld with the Court refusing to interfere with the reassessment action. 16. Having conferred our consideration on the rival su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raymond Woollen Mills Ltd. v ITO 1997 SCC OnLine SC and to the following passages as appearing therein:- 1. The challenge in this case is to the reopening of the assessment of Raymond Woollen Mills Ltd. We have been shown the recorded reasons for reopening under Section 147-A (sic Section 147). The case of the Revenue was that the assessee was charging to its profit and loss account fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included. This resulted in the undervaluation of inventories and an understatement of profits. This information was obtained by the Revenue in a subsequent year's assessment proceeding. 2. Mr Vellapally, learned Senior Counsel appearing on behalf of the appellant, has argued that the Department has made a grievous error in coming to this conclusion. 3. In this case, we do not have to give a final decision as to whether there is a suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India in terms of the Agreement for Avoidance of Double Taxation, is a question of fact, that has to be determined separately for each assessment year. *(2010) 327 ITR 456 (SC). 19. In order to appreciate what the Supreme Court held in National Petroleum, it would be apposite to notice the more elaborate discussion which appears in the judgment of this Court in National Petroleum Con. Co. v. Deputy CIT 2019 SCC OnLine Del 12357 , the relevant parts whereof are extracted hereunder:- 24. The respondents have granted the impugned certificate for deduction at 4 per cent. of the gross receipts. The assessment for the above noted contracts would be undertaken in the future, viz., the assessment years 2019-20 and 2017-18 respectively. As of now, we are not concerned with a regular assessment proceeding but, with determination of rate of tax deduction. On perusal of reasons, it becomes manifest that during the course of enquiry under section 197 of the Act, the petitioner was asked to furnish the details regarding the scope and nature of the aforenoted contracts. The Revenue contends that for the R-series contracts, the petitioner has made contradictory statement regarding commissioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently not to set up an estoppel . [Ref : New Jehangir Vakil Mills Co. Ltd v. CIT (1963) 49 ITR (SC) 137]. It is well settled that in matters of taxation there is no question of res judicata because each year's assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period . [Ref : Installment Supply P. Ltd. v. Union of India [1962] AIR 1962 SC 53 (Constitution Bench)]. 25. The petitioner has argued that the need for consistency and certainty requires that there must exist strong and compelling reasons for a departure from a settled position, which must be spelt out and they are conspicuously absent in the present case. Mr. Balbir Singh has strongly argued that the stand taken by the respondents in the previous year should have been followed and in this regard, he relies upon the decision of the Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC). Besides, Mr. Singh, as quoted earlier has also led considerable emphasis on the decision of this court dated May 9, 2017, wherein this court directed the respondents to issue certificate under section 197 of the Act, accepting the alternat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y against the petitioner. We cannot accept the petitioner's contention that the assessment proceedings for the assessment years 2007-08, 2008-09 and 2009-10 have already determined this question in favour of the petitioner and there is no change in any circumstances. This question would require to be determined and finding of the fact would have to be arrived at, by a careful consideration of terms of contract, determination whereof cannot be undertaken in the proceedings under section 197 of the Act. 20. The interplay between the principle of consistency and the facts of each year of assessment was lucidly explained by our Court in Galileo Nederland BV Vs. Assistant Director of Income Tax (International Taxation) 2014 SCC OnLine Del 4282 as under:- 19. We are aware that each assessment year is separate and distinct and principle of res judicata does not apply to proceedings for subsequent or other years. However, the decision on an issue or question though not binding should be followed and not ignored unless there are good and sufficient reasons to take a different view. Thus, it was/is possible for the Assessing Officer to depart from the finding or a decision in one year as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, such as a period preceding the adoption of new arrangements that modified the way in which business is carried on. 23. It is in the aforesaid backdrop that the observations of the Supreme Court in CIT v Gupta Abhushan (P) Ltd 2008 SCC OnLine Del 1468 also assume significance and where it was unambiguously held that a survey report pertaining to a particular tax period cannot ipso facto be read or countenanced as being relevant and binding for independent assessment years as is evidenced from paragraph 6 of the report which is extracted hereinbelow: 6. The second part of the reasons recorded by the Assessing Officer indicate that during the survey, it was noticed that extensive renovation work in the business premises of the assessee had been undertaken and that the renovation in respect of the ground floor had been completed and that the renovation in respect of the first floor was going on. It is further noted that the assessee had not booked any expenses on account of renovation of the said business premises. On the basis of these facts, the Assessing Officer noted that he was satisfied that investments made in the renovation work had escaped assessment. Here too, we note ..... X X X X Extracts X X X X X X X X Extracts X X X X
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