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TMI Blog2015 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax stating that respondent No.2 had reason to believe that the petitioner's income for the assessment year 2006-07 had escaped assessment within the meaning of Section 147 of the Act. The subsequent order dated 9/12.12.2011 (Annexure P-2) dismissing the Objections is also under challenge. 3. At the petitioner's request the reasons for initiating the proceedings under Section 147 were furnished. The relevant reasons read as under: "The case was finalised under section 143(3) of the Income Tax Act, 1961 vide order dated 20.11.2009 at an income of Rs. 172794009/-. It is noticed from the P & L Account that the assessee is making payment of royalty at Rs. 8741302/- for technology transfer and patent license. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and assessment was made on 20.11.2009. Appended to the financial statements were the Schedules. Schedule 13 expressly referred to "Royalty" of the sum of Rs. 87,41,302/- for the financial year 31.3.2006. Schedule 14 enumerated the significant Accounting Policies and notes to the Accounts. The relevant part thereof reads as under: Royalty "Payment of technical know-how in the form of Royalty for manufacturing of ECUs and Distributors is being accounted for on accrual basis as per the Technology Transfer and Patent License Agreement with Mitsubishi Electric Corporation, Japan." Schedule 14 also referred to expenditure in foreign currency. The "Royalty" was referred to as Expenditure in foreign currency. Item 13 of Schedule 14 referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Annexure P-9) referred to the fact that a Reference has been received by him from the Assessing Officer to determine the arm's length price in respect of the international transactions. One of the transactions related to "Royalty" payment at 5% sales in the sum of Rs. 81 lacs. Thus, even the order of the TPO expressly referred to "Royalty" payment. It cannot, therefore, be said that the TPO was not aware of and had not taken into consideration the "Royalty" payments. 10. Added to this is the fact that a questionnaire dated 30.10.2009 (Anneuxre P-14) had been served by Assessing Officer prior to the assessment order. Items 20 and 24 of the questionnaire read as under: 20. "Details with documentary proof of royalty paid alongwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion which is not permissible. 14. It is sufficient to refer to the judgment of the Supreme Court in Commissioner of Income Tax Vs. Kelvinator of India Ltd.(2010) 320 ITR 561 (SC). The Supreme Court 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 Ist 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated October 31, 1989 (1990 182 ITR (St.) 1, 29), which reads as follows: "7.2 Amendment made by the Amending Act, 1989 to reintroduce the expression 'reason to believe' in section 147.-- A number of representations were received against the omission of the words 'reason to believe' from Section 147 and their substitution by the Rs.opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition that merely because the assessment order does not refer to a particular aspect it necessarily follows that the Assessing Officer had not considered the case while passing the assessment order. In the case before us it is established beyond doubt that the relevant facts were not only disclosed but had been sought and considered at every stage by the Transfer Pricing Officer and by the Assessing Officer.
17. In the circumstances, the writ petition is allowed and the Rule is made absolute in terms of prayer Rs.a'. The notice dated 23/24.3.2011 (Annexure P- 1) and the order dated 9/12.12.2011 (Annexure P-2) are quashed. In view thereof, it is not necessary to grant the other reliefs. There shall be no order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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