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2015 (4) TMI 845

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..... Korea having a P.E. In India to which payments have been made. Thus there is a nexus between the reasons recorded and the belief that income had escaped assessment because of fully and truly information having not been furnished by the assessee. The Assessing Officer has given valid reasons to believe that income had escaped assessment. No illegality in the notice issued under Section 148 - Decided against assessee. - Writ Tax No. - 177 of 2014, Writ Tax No. - 126 of 2015 - - - Dated:- 22-4-2015 - Hon'ble Arun Tandon And Hon'ble Dr. Satish Chandra,JJ. For the Petitioner : Gaurav Mahajan, Amit Mahajan For the Respondent : C.S.C., It, Ashok Kumar, B. Agarwal ORDER Petitioner-L.G.Electronics India (P) Ltd., a Company, incorporated under the Companies Act has filed this writ petition for quashing of the notice dated 28.03.2013 issued by the Assistant Commissioner of Income Tax, NOIDA for the Assessment Year 2006-07 under Section 148 of the Income Tax Act, 1961 (herein after referred to as the 'Act, 1961') wherein it has been stated that the officer has reasons to believe that the income chargeable to tax at the hands of the assessee for the y .....

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..... roceedings beyond a period of four years as provided for under proviso to Section 147 of the Act, 1961 without stating that any income has escaped assessment on account of any failure on the part of the assessee to disclose complete and full facts/concealment of facts is bad. Shri S.Ganesh, Senior Advocate assisted by Shri Deepak Chopra, Advocate submitted before us that there is no allegation by the first respondent that the petitioner has failed to disclose truly and fully material facts relating to the assessment, hence this ground for initiation of re-assessment proceeding was bad. For the purpose he has placed reliance upon the judgements in the case of Wel Inter-trade India vs. ITO reported in 308 ITR 22, CIT vs. SIL Investments reported in 339 ITR, 166, Haryana Acrylic vs. CIT reported in 308 ITR 38 and DTDC vs. ACIT reported in 324 ITR 234. Counsel for the petitioner also contended that at the time of assessment the petitioner assessee had furnished all the particulars in the balance-sheet along with the original return. Assessment was made considering these details. Mere change of opinion cannot be the basis for re-opening of a complete assessment and does not confer ju .....

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..... 25(3) of the India-Korea Double Taxation Avoidance Agreement (herein after referred to as the DTAA) and with reference to the judgment of the Apex Court in the case of Azadi Bachao Andolan reported in 263 ITR, 707 (S.C.) submits that the DTAA prevails and supersedes the provisions of Section 40(a) (i) of the Act, 1961. He submits that since the impugned notice is founded entirely on the provisions of Section 40(a) (i), the re-assessment proceedings are untenable and misconceived. Counsel for the department however disputes the correctness of the pleas raised by the petitioner assessee. It is pointed out that on 10.06.2010 a survey operation was carried out at the business premises of the Company leading to the impounding of certain vital documents. The reasons for the statements of Visiting Heads of Divisions of the Korean Company, other expatriates the employees of the Indian Company were recorded and it is transpired that the non-resident Company was carrying on business operations through permanent establishment in India. What logically followed was that the non-resident Company namely the Korean Company and other associated entities were chargeable to tax in India in r .....

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..... ur years is essentially a question of fact which has to be adjudicated in the background of the material available on record in each case. He submits that material fact is not mere disclosure of payment made but also the fact that it was chargeable to tax as income in the hands of the payee. He explains that no part of the accounts submitted by the assessee or the tax report filed, makes any mention of the fact as to whether such payments as detailed in the reasons dated 28.02.2014 were chargeable to tax or not. It is submitted that the disclosure in the accounts/tax audit report was not full and true as from the evidence collected through survey operation it had been clearly brought out that the payee Company had a taxable presence in India and its income was chargeable to tax. Counsel for the department clarifies that sufficient reasons have been recorded for arriving at a satisfaction that the Korean Company to whom the payments have been made had a permanent establishment in India and chargeable to tax which information has not been disclosed nor forms part of the records of the assessment proceedings. Consequently, the initiation of proceedings of reassessment is legally .....

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..... 78 ITR, 466. 8. Furthermore, bearing these principles in mind in this particular case whether there has been such non-disclosure of primary facts which has caused escapement of income in the assessment was basically a question of fact. At the very outset we may record that the legal principle which flows from the various judgements cited by the counsel for the parties in the matter of reopening of the assessment beyond a period of four years is that there should be two conditions satisfied simultaneously before issuance of notice of re-opening namely : (a) The Assessing Officer has reasons to believe that the income, profits or gain chargeable to income tax have been un-addressed and; (b) he must have reasons to believe that such under assessment has occurred by reasons of either omission or failure on the part of the assessee to return his income or omission or failure on the part of the assessee to disclose fully or truly material facts necessary for his assessment that year. Facts material necessary for re-assessment will differ from case to case. Judged in the aforesaid legal background, we find that in Annexure-H of the report of the Chartered Accountant of the pe .....

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..... Purchase of Finished Goods ₹ 2,003,499,385 Purchase of Fixed Assets ₹ 29,153,894 Royalty Payment ₹ 1,007,153,457 Export Sales Commission ₹ 99,157,209 Design Development Fees ₹ 221,357,954 Service Charges ₹ 1,207,325 It is in respect of items mentioned at serial no. 2 i.e. payments made to L.G. Electronics, Korea, there is no disclosure with regards to non-resident company having P.E. In India as has been found after survey and as affirmed up to the High Court. We are satisfied that because of non-disclosure of the fact qua the L.G. Electronics, Korea having a P.E. In India, there has not been fully and truly complete disclosure of the material facts which could have led the Assessing Officer to examine as to whether tax was payable on the remittance to the non-resident Indian Company or not. In our opinion in the reasons disclosed for initiating the re-assessment proceedings in the facts of the case, .....

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