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TMI Blog2012 (8) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... is the case of change of opinion as the Assessing Officer in the original assessment proceedings had examined and gone into the question of the income earned by the project office from sales made to Delhi Metro Rail Corporation (hereinafter referred to as DMRC). (2) That the assessee had made full and true disclosure of material facts and the bar stipulated in the proviso to Section 147 of the Act applies. (3) The reasons recorded do not specifically record and mention that the assessee had failed to disclose full and true material particulars. (4) There is no escapement of income. (5) Approval granted under Section 151 of Act by the Director of Income Tax (International Taxation) is back dated and was not taken on or before 31st March, 2009. (6) The original assessment order under Section 143(3) of the Act is an agreed assessment and accordingly, the petitioner was taxed at GP rate of 2.75% on the total turnover as mentioned in Annexure P2 of the writ petition. 4. As far as the contention No.5 is concerned, we notice that a Division Bench of this Court vide orders dated 25.11.2010, 28.1.2011 and by our order dated 9.8.2011, we had directed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been awarded a contract by Delhi Metro Rail Corporation (DMRC) for design, manufacture, supply, testing and commissioning of passengers. It was agreed between parties that the obligations and rights under the Contract are separate for each party and no party will be responsible for the acts of other parties. The consideration for the entire work to be carried out by the consortium is a fixed lump sum price of INR 3,110,439,836 and USD 260,997,269 which is apportioned amongst various cost centres (A to J), and further apportioned amongst various milestones. Under the terms of conditions of the said contract, it has been agreed that 15 trains will be supplied to DMRC from overseas entirely manufactured outside of India and remaining 45 trains will be supplied/assembled/manufactured in India in a phased manner as regard upon between the parties. The assessee was appointed as the leader of the consortium and has set up a Project Office (PO) in India for executing the said contract. The Liaison Office (LO) of the assessee is engaged in various activities, details of which has been furnished by the assessee in the course of the assessment proceedings. The assessee filed original retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had a permanent establishment in India in respect of sales made to the DMRC, terms of contract entered into between DMRC and the consortium of which the petitioner-assessee was one of the members, terms on which payment was made from time to time referred to as "milestones" etc. 8. A reading of the reasons recorded which specifically refer to the factual matrix as far as assessment year 2002-03 is concerned shows that the Assessing Officer has recorded that the petitioner was a member of the consortium which was awarded a contract by DMRC for design, manufacture, supply, testing and commissioning of passenger trains. In consideration thereof, the said consortium was entitled to the fixed lumpsum payment of INR 3,110,439,836/- and USD 260,997,269 which was apportioned amongst various cost centres and further amongst milestones. The reasons to believe further record that the assessee had both liaison office and project office in India . It is recorded that the assessee had furnished details of various activities carried on by the liaison office during the course of original assessment proceedings. It is further recorded that the assessee had filed a return disclosing loss of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question of "liaison office/project office" is examined below. 11. Ld. counsel for the petitioner has rightly drawn our attention to the original assessment order under Section 143(3) dated 24.3.2006. The said assessment order is fairly detailed and goes into several aspects including the question of business connection, permanent establishment etc. We are not reproducing lengthy extracts of the said assessment order, but we would like to refer to the discussion in the original assessment order under the heading 'project office DMRC'. The said portion of the assessment order mentions that the assessee consortium was awarded the RS1 contract. It refers to the payment from DMRC to consortium, establishment of project office for smooth execution of contract and administrative matters. It further records that once the contract with DMRC was signed, the liaison office ceased to function and the project office started functioning. It is stated that the project office coordinated with DMRC as well as contractors. The net income of the project office in the original assessment order was to be undertaken separately on actual basis. 12. Thereafter, the Assessing Officer has referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the turnover and determination of profit is considered. The assessee has furnished its ledger of transaction with Indian clients. The assessee also filed the complete ledger of all the trading done by the assessee company in its individual capacity and culled out the figures pertaining to transactions with Indian customers. The completed ledger filed emanated from its audited accounts in respect of its trading activities. The Indian turnover shown there matched up with the ledger submitted separately for the purpose of taxation in India . There is no material available on record from which any adverse reference can be drawn with regard to the turnover for the assessee in India . In view of the above, the turnover shown by the assessee from India is accepted. As regards the profitability of the assessee from the operations carried out in India, the assessee has submitted a very detailed analysis of its global accounts and operations, which can be seen in the submission of the assessee reproduced above. I have considered the above submission of the assessee and looking into the nature of trading business, I tend to agree to the same. Further in the final submission dated 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 23,17,75,386/- was held to be taxable in India . This becomes very clear if we refer to the annexure to the assessment order (annexure P2 for the writ petition) which for the sake of convenience is reproduced below: Particulars Currency Amount Total Turnover of Assessee (including DMRC sales) A JPY 87,356,000,000 Average Exchange Rate used to convert JPY into INR B 1 INR = 2.62701 JPY Total Turnover of Assessee C=A/B INR 33,253,013,882 Amount of DMRC Sales again added by the AO (as voluntarily disclosed by the assessee in Income Tax Return) D INR 1,736,387,775 Total E=C+D INR 34,989,401,658 16. A reading of the said annexure would show that the assessee's total turnover in Japanese Currency Yen (JPY). The Assessing officer converted the Japanese currency to Indian rupees by applying the conversion rate and came to the figure of Rs. 33,253,013,882. Then he included the sales made to the DMRC of Rs. 1,736,387,775/-. After adding these two figures, the Assessing Officer has computed the figure of Rs. 34,989,401,658/-. (We may note here that it is the contention of the petitioner that the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge of opinion. The Supreme Court in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312, has held as under: "On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987 reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer 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, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly applicable as the assessee had disclosed all the materials facts at the time of original assessment. Even if the materials/evidence was not enclosed with the return, full and true details/material was disclosed during the course of the original proceedings. The turnover or sales made to DMRC has not been disputed. The expenses of the project office is not disputed. It is also not disputed that the project office was a permanent establishment. The only issue is what should be the GP rate and whether or not only 50% of the turnover/sales made to DMRC should be attributed to the Indian operations as held by the Assessing Officer in the original assessment proceedings. This is a matter of conclusion to be drawn from the material facts and not a matter relating to furnishing material details and particulars i.e. the primary facts. The conclusion drawn by the Assessing Officer cannot be attributed to the failure of the petitioner to disclose fully and truly all the material facts. No new material fact or particulars have come to the notice/knowledge of the Assessing Officer. Therefore the petitioner had disclosed full and true material facts at the time of original assessment. 23. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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