TMI Blog2011 (1) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... sement 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 assessee-company M/s Tractebel Industry Engineering (now known as Tractebel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax. This clearly falls under cl. (c) of Expln. 2 of s. 147 of the IT Act, 1961. Therefore, notice under s. 148 is issued to the assessee for reopening the case. 6. Examination of the said reasons shows that as per the AO, the facts/materials on record reveal/indicate that the petitioner had a PE in India during the previous year 2001-02 relevant to the asst. yr. 2002-03 and therefore, art. 12 of DTAA was not applicable and the entire income was chargeable to tax @ 20 per cent as per s. 9(1)(vii)/44D of the 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PE in India during the period relevant to the asst. yr. 2002-03. The question of PE was not ignored. It was given due consideration. One of the questions, which was considered and decided by the AO, was whether income from the Indian operations of the petitioner was taxable as fee from technical services or if the petitioner had PE as business income. It is clear from the assessment order dt. 24th March, 2005 that the receipts were disclosed by the petitioner as fee from technical services and were 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 artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply. 10. Thus the AO came to the conclusion that the income earned from Indian operations was taxable as fee from technical services and not as business income . In other words, the AO has held that the petitioner assessee did not have PE in India. The decision of the AO may not be correct, but the same cannot be made subject-matter of reopening of assessment under s. 147/148 of the Act. Scope of s. 147/148 of the Act, howsoever wide, does 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 1989 do not bar or prohibit reassessment proceedings on the ground of change of opinion was rejected and not accepted. This decision of Delhi High Court was taken up in appeal and has been affirmed in CIT vs. Kelvinator of India Ltd. (2010) 228 CTR (SC) 488 : (2010) 34 DTR (SC) 49 : (2010) 2 SCC 723 and it has been observed as under : 5. On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs. Jt. CIT (2000) 161 CTR (Guj) 100: (2000) 243 ITR 482(Guj), a judgment of the Gujarat High Court, is misplaced and distinguishable. The said case is prior to the decision of Delhi High Court and the Supreme Court in the case Kelvinator of India Ltd. (supra). The Gujarat High Court has recorded a specific finding that at the time of the original assessment, there was no conscious consideration of material and a mistake was made. It has been observed that 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
