INGRAM MICRO (I) EXPORTS PTE LTD., MUMBAI V. ASST. DIT (IT)-3(1), MUMBAI

ITA 2537/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49335 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 23-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALATHI SHRIDHARAN
• Keywords: Reopening of assessment; Search and seizure; Double taxation relief; Document seized; Permanent establishment; Wholly owned subsidiary; Validity of assessment; Reason to believe; Documents seized; Reassessment proceedings
• Section: 143(3); 133A; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO.2537/MUM/2010 (ASSESSMENT YEAR: 2001-02) INGRAM MICRO (INDIA) ACIT (INTERNATINAL TAXATION) 3(1) EXPORTS PTE. LTD. MUMBAI 205, KALLANG BAHRU VS. #04-00 SINGAPORE 339341 PAN - AACCI 1800 M APPELLANT RESPONDENT APPELLANT BY: SHRI J.D. MISTRY/ SHRI NISHANT THAKKAR RESPONDENT BY: SMT. MALATHI SHRIDHARAN O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED CIT(A) X, MUMBAI DATED 26.02.2010. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHIC H WAS FORMERLY KNOWN AS TECHNICAL PACIFIC (INDIA) EXPORTS PTE. LTD . IT IS REGISTERED IN SINGAPORE AND IS A FULLY OWNED SUBSIDIARY OF M/S. T ECHNICAL PACIFIC (INDIA) LTD. (TPIL)/M/S. INGRAM MICRO (INDIA) PVT. LTD. (IM IL). A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) OF THE INCOME TAX ACT, 1961 WAS CONDUCTED IN THE CASE OF TPIL/IMIL ON 06.09.2007. SIMULTANEOUSLY A SURVEY UNDER SECTION 133A WAS ALSO CARRIED OUT AT THE PREMISES O F TPIL/IMIL AT MUMBAI AND BANGALORE. ACCORDING TO THE A.O., THE MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEARCH IN THE CASE OF TIPL/IMIL REVEA LED THAT THE ASSESSEE COMPANY WAS CONDUCTING ITS BUSINESS OPERATIONS IN I NDIA THROUGH TPIL AND IT HAD A PERMANENT ESTABLISHMENT (PE) IN INDIA. SIN CE NO RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE A SSESSEE COMPANY DECLARING INCOME ARISING OUT OF ITS BUSINESS OPERAT IONS ATTRIBUTABLE TO THE ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 2 PE IN INDIA, THE A.O. INITIATED REASSESSMENT PROCEE DINGS BY ISSUING NOTICE UNDER SECTION 148 ON 07.03.2008 AFTER RECORDING THE REASONS. IN RESPONSE TO THE SAID NOTICE, RETURN OF INCOME WAS FILED BY ASSE SSEE ON 12.12.2008 DECLARING TOTAL INCOME AT NIL. IN THE ASSESSMENT CO MPLETED UNDER SECTION 143(3) R.W.S. 147, THE A.O. HELD THAT ASSESSEE COMP ANY HAD A PERMANENT ESTABLISHMENT IN INDIA AND THE INCOME ARISING TO TH E ASSESSEE OUT OF ITS BUSINESS OPERATIONS ATTRIBUTABLE TO THE SAID PE WAS TAXABLE IN INDIA. SINCE ASSESSEE FAILED TO GIVE THE GLOBAL FINANCIAL STATEM ENTS FOR THE YEAR UNDER CONSIDERATION, THE A.O. PROCEEDED TO DETERMINE SUCH INCOME ATTRIBUTABLE TO THE PE IN INDIA ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THIS RECORD, HE FOUND FROM PAGE NO. 81 O F ANNEXURE A-2 THAT REVENUE OF ASSESSEE COMPANY FOR THE YEAR 2001 WERE SHOWN IN SINGAPORE $ AT 1,55,55,946/-. AFTER CONVERTING THE SAID AMOUNT IN INDIAN RUPEES AND APPLYING PRO-RATA, HE DETERMINED THE INCOME OF THE ASSESSEE FOR THE MONTH OF MARCH 2001 AT ` 4,27,78,851/- AND BROUGHT THE SAID AMOUNT TO TAX IN ASSESSEES HANDS IN INDIA IN THE ASSESSMENT COMPLET ED UNDER SECTION 143(3) R.W.S. 147. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3) R.W.S. 147, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS DISPUTING THE AMOUNT BROUGHT TO TAX THEREIN IN ITS HANDS IN INDIA FOR THE YEAR UNDER CONSIDERATION. ON THE PRELIMINARY ISSUE RELATING TO THE VALIDITY OF REASSESSMENT MADE BY THE A.O., IT WAS SUBMITTED ON BEHALF OF ASSESSEE COMPANY BEFORE THE LEARNED CIT(A) THAT IT IS A FULL Y OWNED SUBSIDIARY OF TPIL. IT WAS SUBMITTED THAT ASSESSEE COMPANY IS TAX RESID ENT OF SINGAPORE AND IS THEREFORE ENTITLED TO THE BENEFIT OF DTAA BETWEEN I NDIA AND SINGAPORE. IT WAS SUBMITTED THAT ASSESSEE COMPANY WAS INCORPORATED IN THE MONTH OF FEBRUARY 2001 BUT IT HAD NOT COMMENCED BUSINESS UNT IL SEPTEMBER 2001. IT WAS SUBMITTED THAT NO INCOME THUS WAS EARNED BY THE ASSESSEE COMPANY DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2001-02 A ND THERE WAS THUS NO QUESTION OF ANY ESCAPEMENT OF INCOME FOR THAT YEAR. IT WAS POINTED OUT THAT PROVISIONS OF SECTION 147 COULD BE INVOKED ONLY IN A CASE WHERE THE A.O. HAS REASON TO BELIEVE THAT ASSESSEE HAS EARNED INCOME A ND THAT THE SAID INCOME ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 3 HAS ESCAPED ASSESSMENT. IT WAS CONTENDED THAT IN TH E ABSENCE OF ANY INCOME EARNED BY ASSESSEE COMPANY IN THE PREVIOUS Y EAR RELEVANT TO A.Y. 2001-02, THERE WAS NO QUESTION OF ANY ESCAPEMENT OF ITS INCOME FOR THE YEAR UNDER CONSIDERATION AND REOPENING OF ASSESSMENT BY THE A.O. FOR THAT YEAR WITHOUT ANY BASIS WAS BAD IN LAW. IT WAS CONTENDED THAT THE ASSESSMENT COMPLETED BY THE A.O. UNDER SECTION 143(3) R.W.S. 1 47 IN PURSUANCE OF SUCH REOPENING THUS IS INVALID AND THE SAME SHOULD BE CA NCELLED. RELIANCE IN SUPPORT OF THIS CONTENTION WAS PLACED BY THE ASSESS EE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASES OF ITO VS. LAKSH MUI MEWAL DAS 103 ITR 437 (SC) AND INDIAN OIL CORPORATION VS. ITO 159 ITR 956 (SC). 4. THE LEARNED CIT(A) DID NOT FIND MERIT IN THE SUBMIS SIONS MADE ON BEHALF OF THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 143(3) R.W.S. 147 AND REJECTING THE SAME, HE UPHELD THE VALIDITY OF THE SAID ASSESSMENT FOR THE FOLLOWING R EASONS GIVEN IN PARAGRAPH NO. 2.3 OF HIS IMPUGNED ORDER: - 2.3 I HAVE CONSIDERED THE FACTS AND PERUSED THE MA TERIAL ON RECORD. IT IS SEEN THAT A SEARCH AND SEIZURE OPERAT ION WAS CARRIED OUT IN THE M/S. INGRAM MICRO INDIA P LTD. (IMIL) / M/S. TECH PACIFIC (INDIA) LTD. (TPIL) BEING INDIAN COMPANIES AT THEIR BUSINES S PREMISES SITUATED AT MUMBAI AND BANGALORE. THE APPELLANT I.E . INGRAM MICRO (INDIA) EXPORTS PTE LTD (IMIEL) FORMERLY KNOWN AS T ECH PACIFIC (INDIA) EXPORTS PTE LTD (TPIEPL) IS A SINGAPORE BASED COMPA NY AND IS WHOLLY OWNED SUBSIDIARY OF IMIL HAVING ITS REGISTERED OFFI CE AT BANGALORE. THE SEARCH PROCEEDINGS REVEALED THAT THE APPELLANT HAS BEEN CARRYING ON ITS BUSINESS OPERATION IN INDIAN THROUGH THE IND IAN COMPANIES. THEREFORE, IT WAS HAVING A PE WITHIN THE MEANING OF ARTICLE 5 OF INDIA- SINGAPORE DTAA. THE APPELLANT HAS NOT FILED ANY RET URN OF INCOME UNDER SECTION 139 OF THE ACT. EVEN THOUGH THE SIZED MATERIAL SHOWED THAT THE APPELLANT HAD BEEN CARRYING ON ITS BUSINES S IN INDIA. THEREFORE, THE AO HAD REASON TO BELIEVE THAT THE AP PELLANT WAS EARNING INCOME FROM INDIA BUT IT WAS NOT MAKING THE RETURN OF INCOME, THEREFORE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE EVIDENCES FOUND IN THE FORM OF SEIZED DOCUMENTS, MA TERIAL, DIGITAL FORM, COMPUTER RECORD, E-MAIL ACCOUNT AND INTERNAL CORRESPONDENCE CLEARLY ESTABLISHED THAT THE APPELLANT HAD INCOME C HARGEABLE TO TAX IN INDIA. THEREFORE, THE AO WAS RIGHT FORMING THE BELI EF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. RELIANCE IS PLACED IN THE CASE OF ALANKAR COMMERCIAL PVT. LTD. VS. ACIT & OTH ERS (1999) 244 ITR 32 (SC) WHEREIN THE HON'BLE SUPREME COURT H AD HELD THAT THE INDIAN INCOME-TAX ACT, INTER-ALIA, TAXES INCOME WHICH ACCRUES OR ARISES IN INDIA. IT IS IMMATERIAL WHETHER THE PE TITIONER COMPANY ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 4 HAS ITS HEAD OFFICE IN SIKKIM OR MAY BE CARRYING ON BUSINESS ACTIVITIES THERE. THE IMPUGNED NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT HAS BEEN ISSUED IN RELATION TO THE I NCOME WHICH IS STATED TO HAVE ARISEN IN INDIA AND THIS CAN BE DONE EVEN IF THE PETITIONER HAS A COMPANY REGISTERED IN SIKKIM. THE FACT OF THE CASE IS CLEARLY APPLICABLE TO THE INSTANT CASE. THE CASE LAW CITED BY THE ASSESSEE IS DISTINGUISHABLE ON FACTS OF APPELLANTS CASE. ACCORDINGLY, I HOLD THAT THE AO HAS SUFFICIENT REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. MOREOVER, THIS IS NOT A CASE OF RE-ASSESSMENT BUT A CASE OF AN ASSESSMENT O NLY WHERE NO RETURN OF INCOME WAS FILED. THEREFORE, THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT IS PROPER AND JUST AND AS PE R LAW HENCE THE ACTION OF THE AO IS HEREBY UPHELD. ACCORDINGLY, THI S GROUND OF APPEAL IS TREATED AS DISMISSED. 5. THE LEARNED CIT(A) ALSO UPHELD THE DECISION OF THE A.O. THAT THE ASSESSEE COMPANY HAD A PERMANENT ESTABLISHMENT IN I NDIA DURING THE YEAR UNDER CONSIDERATION AND CONFIRMED ADDITION OF ` 4,27,78,851/- MADE BY THE A.O. TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF INCOME ARISING OUT OF ITS BUSINESS OPERATIONS IN INDIA AS ATTRIBUTABLE TO THE SAID PE. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), ASSESSEE HAS PREFE RRED THIS APPEAL BEFORE THE TRIBUNAL. 6. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPEAL IS GENERAL SEEKING NO SPECIFIC DECISION FROM US. GROUND NOS. 2 & 3 INV OLVE A PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 143(3) R.W.S. 147. GROUND NO. 4 CHALLENGES THE ACTI ON OF THE AUTHORITIES BELOW IN HOLDING THAT ASSESSEE COMPANY HAD PERMANEN T ESTABLISHMENT IN INDIA WHEREAS GROUND NO. 5 CHALLENGES THE QUANTIFIC ATION OF INCOME ATTRIBUTABLE TO THE PE IN INDIA AS MADE BY THE A.O. AT ` 4,27,78,581/- AND CONFIRMED BY THE LEARNED CIT(A). GROUND NO. 5 RAISE D BY ASSESSEE IS WITHOUT PREJUDICE TO GROUND NO. 4, WHICH CHALLENGES THE VER Y EXISTENCE OF PE IN INDIA. 7. FIRST WE SHALL TAKE UP GROUND NOS. 2 & 3, WHICH INV OLVE A PRELIMINARY ISSUE RELATING TO THE VALIDITY OF ASSESSMENT MADE B Y THE A.O. UNDER SECTION 143(3) R.W.S. 147 ON THE GROUND THAT INITIATION OF REASSESSMENT PROCEEDINGS ITSELF WAS BAD IN LAW. ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 5 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO BUSINESS WHATSOEVER CARRIED ON BY ASSESSEE COMPANY IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2001-02 AND IN THE ABSENCE OF ANY BUSINESS ACTIVITY CARRIED ON IN THAT YEAR, THERE WAS NO QUESTION OF EARNING O F ANY INCOME BY ASSESSEE IN THAT YEAR AS WELL AS ESCAPEMENT OF SUCH INCOME T O WARRANT REOPENING OF ASSESSMENT. IN ORDER TO SUPPORT AND SUBSTANTIATE HI S CASE THAT THERE WAS NO BUSINESS CARRIED ON BY ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION, THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUG H THE DOCUMENTARY EVIDENCES PLACED IN HIS PAPER BOOK. HE INVITED OUR ATTENTION TO THE COPY OF CERTIFICATE OF INCORPORATION PLACED AT PAGE NO. 1 O F HIS PAPER BOOK TO POINT OUT THAT ASSESSEE COMPANY GOT THE CERTIFICATE OF IN CORPORATION ONLY ON 20 TH FEBRUARY 2001. HE THEN INVITED OUR ATTENTION TO THE COPY OF CERTIFICATE ISSUED BY NATARAJAN & SWAMINATHAN, CERTIFIED PUBLIC ACCOUN TANTS, SINGAPORE CERTIFYING THAT ASSESSEE COMPANY WAS INCORPORATED O N 20 TH FEBRUARY 2001 AND IT WAS NOT ENGAGED IN ANY BUSINESS ACTIVITIES B EFORE 31 ST MARCH 2001 WHICH COMMENCED ONLY IN THE MONTH OF SEPTEMBER 2001 . HE THEN INVITED OUR ATTENTION TO THE COPY OF FIRST INVOICE RAISED B Y THE ASSESSEE COMPANY PLACED ON PAGE NO. 6 OF HIS PAPER BOOK TO POINT OUT THAT THE SAID BILL WAS RAISED ONLY ON 7 TH SEPTEMBER 2001. HE ALSO INVITED OUR ATTENTION TO T HE LETTER ISSUED BY INLAND REVENUE AUTHORITY OF SINGAPORE, PL ACED ON PAGE NO. 4 OF HIS PAPER BOOK TO SHOW THAT ASSESSEE COMPANY GOT GS T REGISTRATION NUMBER W.E.F. 4 TH APRIL 2001. HE THEN INVITED OUR ATTENTION TO THE C OPIES OF GST RETURNS FILED BY ASSESSEE FOR THE MONTHS OF APR IL TO AUGUST 2001 TO SHOW THAT THE PERIOD COVERED BY THE SAID RETURNS WA S FROM 04.04.2001 TO 31.08.2001 AND THE TURNOVER DECLARED THEREIN WAS NI L. HE THEN INVITED OUR ATTENTION TO THE COPY OF GST RETURN FILED FOR THE M ONTH OF SEPTEMBER 2001 PLACED AT PAGE 12 OF HIS PAPER BOOK TO SHOW THAT TH E DECLARATION OF TURNOVER MADE THEREIN FOR THE FIRST TIME BY THE ASSESSEE WAS SUFFICIENT TO SHOW THAT BUSINESS OF ASSESSEE COMPANY HAD COMMENCED IN THE M ONTH OF SEPTEMBER 2001. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ABOVE DOCUMENTARY EVIDENCE IS SUFFICIENT TO SHOW THAT THE RE WAS NEITHER ANY BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE COMPAN Y IN THE YEAR UNDER ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 6 CONSIDERATION NOR WERE THERE ANY SALES EFFECTED BY IT IN THAT YEAR. HE POINTED OUT THAT IN THE ABSENCE OF ANY BUSINESS ACTIVITY OR TURNOVER UP TO 31.03.2001, THERE WAS NO QUESTION OF EARNING OF ANY INCOME BY THE ASSESSEE OR OF ESCAPEMENT OF SUCH INCOME. HE SUBMITTED THAT RELEVANT SEIZED DOCUMENT RELIED UPON BY THE A.O. INDICATED THE FIGU RES OF REVENUE OF ASSESSEE COMPANY FOR THE SUBSEQUENT YEARS AND NOT F OR THE YEAR UNDER CONSIDERATION AND THE REOPENING OF ASSESSMENT BY HI M FOR THE YEAR UNDER CONSIDERATION ON THE BASIS OF SUCH FIGURES, WHICH W ERE PERTAINING TO THE SUBSEQUENT YEAR, WAS NOT JUSTIFIED. IN SUPPORT OF T HIS CONTENTION, HE RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RAMKRISHNA RAMNATH VS. ITO 77 ITR 995 WHEREIN IT WA S HELD THAT INFORMATION RELATING TO SUBSEQUENT YEAR COULD NOT B E THE BASIS FOR REOPENING THE ASSESSMENT FOR THE EARLIER YEAR. HE ALSO RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PRASHANT S . JOSHI/DATTARAM SHRIDHAR BHOSALE VS. ITO 324 ITR 154 WHEREIN IT WAS HELD THAT VALIDITY OF REOPENING IS TO BE JUDGED ON THE BASIS OF REASONS O NLY AND IT IS NOT PERMISSIBLE TO RELY ON SOME EXTERIOR MATERIAL WHICH IS NOT REFERRED TO IN THE REASONS RECORDED TO SUPPLEMENT THE SAID REASONS. RE LYING FURTHER ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF HINDUSTAN LEVER LTD. VS. ACIT 268 ITR 332, HE CONTENDED THAT REASON S SHOULD BE SELF- EXPLANATORY. HE ALSO RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TECHNOCRAFT INDUSTRIES AND OTH ERS VS. ITO 185 ITR 465 TO CONTEND THAT IF THE REASONS ARE VAGUE, REOPENING CANNOT BE HELD TO BE VALID ON THE BASIS OF SUCH VAGUE REASONS. 10. THE LEARNED COUNSEL FOR THE ASSESSEE THEN INVITED O UT ATTENTION TO THE COPY OF REASONS RECORDED BY THE AO PLACED AT PAGE N O. 75 OF HIS PAPER BOOK AND SUBMITTED THAT THERE IS NOTHING IN THE SAID REA SONS TO INDICATE THAT ANY INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION HAD ESCAPED ASSESSMENT. HE SUBMITTED THAT A VAGUE REFERENCE HAS BEEN MADE BY THE A.O. TO THE SEVERAL EVIDENCES FOUND DURING THE COURSE OF SEARCH, BOTH IN THE FORM OF HARD COPIES AND IN DIGITAL ELECTRIC FORM. ACCORD ING TO HIM, THERE IS, HOWEVER, NO REFERENCE TO ANY SPECIFIC DOCUMENT FOUN D DURING THE COURSE OF SEARCH ON THE BASIS OF WHICH REASON TO BELIEVE WAS FORMED THAT INCOME OF ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 7 ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD ESCAP ED ASSESSMENT. HE SUBMITTED THAT IN THE REASSESSMENT, THE A.O. HAS FI NALLY ASSESSED THE INCOME ATTRIBUTABLE TO THE PE OF ASSESSEE COMPANY I N INDIA ON THE BASIS OF YEAR-WISE FIGURES OF REVENUE AND PROFIT GIVEN AT PA GE NO. 8 OF ANNEXURE A-2. HE INVITED OUR ATTENTION TO THE COPY OF THE SAID DO CUMENT ANNEXED TO THE ASSESSMENT ORDER AND POINTED OUT THAT REVENUE IN SI NGAPORE $ AT 1,55,55,946/- WAS INDICATED THEREIN FOR THE YEAR 20 01. HE SUBMITTED THAT A NOTE NO. 3 WAS ALSO GIVEN IN THE SAID DOCUMENT MAKI NG IN CLEAR THAT IN THE YEAR 2001 TWO ENTITIES WERE IN OPERATION VIZ. IPIL S SINGAPORE BRANCH FROM JANUARY TO NOVEMBER AND ASSESSEE COMPANY FROM FEBRU ARY TO DECEMBER. IT WAS ALSO MENTIONED THAT THE FIGURE INDICATED FOR 20 01 WAS A COMBINED FIGURE OF THESE TWO ENTITIES. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PRIOR TO INCORPORATION OF THE ASSESSEE COMPANY IN SINGAPORE, TPIL HAD A BRANCH IN SINGAPORE AND AFTER INCORPORATION OF ASSESSEE COMPA NY AND COMMENCEMENT OF ITS BUSINESS IN THE MONTH OF SEPTEMBER 2001, SIN GAPORE BRANCH WAS CLOSED BY TPIL IN THE MONTH OF NOVEMBER 2001. HE TH EN INVITED OUR ATTENTION TO THE COPY OF P & L ACCOUNT OF TPIL SING APORE BRANCH PLACED AT PAGE NO. 69 OF HIS PAPER BOOK TO POINT OUT THAT THE TOTAL REVENUE OF THE SAID BRANCH FOR THE PERIOD 01.01.2001 TO 30.11.2001 WAS 97,76,904 SINGAPORE $. HE FURTHER POINTED OUT FROM THE DETAILS OF SALES MA DE BY ASSESSEE COMPANY DURING THE PERIOD FROM 7 TH SEPTEMBER 2001 TO 31 ST DECEMBER 2001 PLACED AT PAGE NOS. 16 TO 19 OF HIS PAPER BOOK THAT THE TOTAL REVENUE OF ASSESSEE COMPANY FOR THAT PERIOD SEPTEMBER 2001 TO DECEMBER 2001 WAS 57,79,041 SINGAPORE $. HE SUBMITTED THAT THESE TWO FIGURES AG GREGATING TO SINGAPORE $1,55,55,946 WAS REFLECTED IN THE RELEVANT SEIZED D OCUMENTS AS TOTAL REVENUE FOR THE CALENDAR YEAR 2001. HE SUBMITTED TH AT THESE DETAILS WOULD CLEARLY SHOW THAT THERE WAS NO REVENUE GENERATION B Y ASSESSEE COMPANY FOR THE PERIOD UP TO 31 ST MARCH 2001 AND EVEN THE FIGURE OF SINGAPORE $1,55,55,946/- REFLECTED IN THE RELEVANT SEIZED DOC UMENT AS OF THE YEAR 2001 DID NOT INCLUDE ANY INCOME/REVENUE OF THE ASSESSEE COMPANY PERTAINING TO THE PREVIOUS YEAR RELEVANT TO A.Y. 2001-02. HE POIN TED OUT FROM THE P & L ACCOUNT OF TPIL PLACED AT PAGE NO. 39 OF HIS PAPER BOOK THAT THE ENTIRE ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 8 REVENUE OF SINGAPORE BRANCH FRO THE PERIOD ENDING 3 1 ST MARCH 2001 AS REFLECTED IN THE RELEVANT SEIZED DOCUMENT WAS DULY DECLARED BY THE SAID COMPANY IN ITS RETURN OF INCOME FILED IN INDIA AND THERE WAS NO QUESTION OF ANY ESCAPEMENT OF INCOME FOR THE YEAR UNDER CONSIDE RATION WHICH COULD BE INFERRED ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH, MUCH LESS ESCAPEMENT OF INCOME OF ASSESSEE COMPANY. HE C ONTENDED THAT THERE WAS THUS NO BASIS TO FORM A BELIEF ABOUT ESCAPEMENT OF INCOME OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION A ND THE REOPENING OF ASSESSMENT BY THE A.O. WITHOUT SUCH BASIS WAS BAD I N LAW. 12. THE LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT VOLUMINOUS DOCUMENTS WERE FOUND AND SEIZED DURING THE COURSE O F SEARCH CONDUCTED IN THE CASE OF TPIL AND ON THE BASIS OF THE SAID DOCUM ENTS, ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WS REOPENED BY THE A.O. SH E FILED A PAPER BOOK CONTAINING SOME OF SUCH SEIZED DOCUMENTS WHICH, ACC ORDING TO HER, WERE RELEVANT AND WOULD HAVE BEEN RELIED UPON BY THE A.O . TO FORM A BELIEF ABOUT ESCAPEMENT OF ASSESSEES INCOME. SHE THEN TOOK US T HROUGH THE SAID DOCUMENTS TO POINT OUT THEIR RELEVANCE AND SUFFICIE NCY FOR THE BELIEF ENTERTAINED BY THE A.O. ABOUT ESCAPEMENT OF ASSESSE ES INCOME. SHE SUBMITTED THAT SINCE THE SAID DOCUMENTS WERE SUFFIC IENT TO SHOW THAT ASSESSEE COMPANY HAD A PERMANENT ESTABLISHMENT IN I NDIA, THE NON-FILING OF RETURNS BY ASSESSEE COMPANY DISCLOSING/DECLARING TH E INCOME ARISING FROM SUCH OPERATION AS ATTRIBUTABLE TO PE WAS SUFFICIENT TO SHOW THAT THERE WAS ESCAPEMENT OF SUCH INCOME. SHE CONTENDED THAT THE A .O. THUS HAD A JURISDICTION TO REOPEN ASSESSMENT FOR THE RELEVANT YEAR AND THE QUANTIFICATION OF ESCAPED INCOME IS A DIFFERENT ASP ECT FROM THE JURISDICTIONAL ASPECT. SHE ALSO CONTENDED THAT IF AT ALL THERE WAS NO INCOME EARND BY ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION A S SOUGHT TO BE POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE AS SESSEE IS FREE TO GIVE RELEVANT EVIDENCE AND GET RELIEF AS FAR AS QUANTUM OF ESCAPED INCOME IS CONCERNED. SHE SUBMITTED THAT VALIDITY OF REOPENING ON THIS QUANTIFICATION ASPECT, HOWEVER, CANNOT BE CHALLENGED AND IF THE RE ASONS RECORDED BY THE A.O. ARE CONSIDERED ALONGWITH THE MATERIAL FOUND AN D SEIZED DURING THE COURSE OF SEARCH, THERE WAS SUFFICIENT BASIS FOR TH E AO TO HAVE REASONS TO ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 9 BELIEVE THAT INCOME OF ASSESSEE HAD ESCAPED ASSESSM ENT. SHE CONTENDED THAT THE REOPENING OF ASSESSMENT BY THE A.O. FOR TH E YEAR UNDER CONSIDERATION THUS WAS IN ACCORDANCE WITH LAW AS RI GHTLY HELD BY THE LEARNED CIT(A). AS REGARDS THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, SHE SUBMITTED THAT THE SAME ARE DISTINGUI SHABLE ON FACTS IN AS MUCH AS THERE WAS NO SUCH VOLUMINOUS SEIZED MATERIA L AVAILABLE BEFORE THE A.O. IN THOSE CASES AS WAS AVAILABLE BEFORE THE A.O . IN THE PRESENT CASE, ON THE BASIS OF WHICH HE ENTERTAINED THE BELIEF AND RE OPENED THE ASSESSMENT AFTER DULY RECORDING THE REASONS. 13. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE DOCUMENTS WHICH ARE NOW SOUGHT TO BE RELIED UPO N BY THE LEARNED D.R. TO JUSTIFY REOPENING HAVE NOT BEEN SPECIFICALLY REF ERRED TO BY THE AO IN THE REASONS RECORDED. HE SUBMITTED THAT THERE IS NOTHIN G IN THE SAID REASONS TO SHOW THAT THESE SEIZED DOCUMENTS WERE SPECIFICALLY RELIED UPON BY THE A.O. TO ENTERTAIN THE BELIEF ABOUT ESCAPEMENT OF ASSESSE ES INCOME. HE CONTENDED THAT EVEN IN THESE DOCUMENTS RELIED UPON BY THE LEA RNED D.R., THERE IS NOTHING TO SHOW THAT ANY BUSINESS WAS DONE BY ASSES SEE COMPANY IN INDIA DURING THE PERIOD ENDING 31 ST MARCH 2001 AND ANY INCOME WAS EARNED BY IT IN THAT PERIOD WHICH HAD ESCAPED ASSESSMENT. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS REOPENED BY THE A.O. FOR TH E FOLLOWING REASONS RECORDED BY HIM: - A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT IN THE CASE OF M/S. INGRAM MICRO INDIA PVT. LTD./M/ S. TECH PACIFIC (INDIA) LTD. AT THEIR BUSINESS PREMISES AT GATE NO. 1A, GODREJ INDUSTRIES COMPLEX, PIROJSHAH NAGAR, VIKHROLI (E), MUMBAI 400079 ON 06/07/ 2007. THE BASIC ALLEGATIONS AGAINS T THE GROUP IS THAT INGRAM MICRO INDIA EXPORTS PTE LTD./TECH PA CIFIC INDIA (EXPORTS) PTE. LTD. SINGAPORE BASED COMPANY IS NOT PAYING ANY INCOME TAX IN INDIA THOUGH IT IS HAVING A PERMANENT ESTABLISHMENT IN INDIA THOROUGH INGRAM MICRO INDIA LIMITED/TECH P ACIFIC INDIA LIMITED. ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 10 DURING THE COURSE OF SEARCH, SEVERAL EVIDENCES B OTH IN THE FROM OF HARD COPIES AND IN DIGITAL/ELECTRIC FORM WERE COLLE CTED, WHICH CLEARLY ESTABLISH THAT THE SINGAPORE COMPANY (TPIEPL) WAS O PERATING IN INDIA THROUGH THE INDIAN COMPANY (TPIL) AND CONSEQU ENTLY WITHIN THE PROVISIONS OF INDO-SINGAPORE DTAA, SINGAPORE COMPAN Y IS HAVING PERMANENT ESTABLISHMENT IN INDIA. 15. A PERUSAL OF THE ABOVE REASONS RECORDED BY THE A.O. SHOWS THAT RELIANCE WAS PLACED BY HIM ON THE SEVERAL EVIDENCES FOUND DU RING THE COURSE OF SEARCH, BOTH IN THE FORM OF HARD COPIES AND IN DIGI TAL/ELECTRIC FORM, TO ENTERTAIN THE BELIEF ABOUT ESCAPEMENT OF ASSESSEES INCOME. AS MENTIONED BY THE A.O., THE SAID EVIDENCES CLEARLY ESTABLISHED TH AT ASSESSEE COMPANY WAS OPERATING IN INDIA THROUGH TPIL, WHICH WAS ITS PERM ANENT ESTABLISHMENT IN INDIA. THERE IS, HOWEVER, NO REFERENCE TO ANY SPECI FIC DOCUMENT ON THE BASIS OF WHICH THIS BELIEF WAS ENTERTAINED BY THE A.O. AT THE TIME OF HEARING BEFORE US, THE LEARNED D.R. HAS FILED A PAPER BOOK CONTAIN ING SOME OF THE SEIZED DOCUMENTS AND HAS MADE AN ATTEMPT TO JUSTIFY THE RE OPENING OF ASSESSMENT MADE BY THE A.O. ON THE BASIS OF THE SAID DOCUMENTS . IN RESPONSE TO A QUERY RAISED BY THE BENCH, SHE HAS AGREED THAT THERE IS N OTHING EITHER IN THE REASONS RECORDED BY THE A.O. OR IN THE ASSESSMENT R ECORDS TO SHOW THAT THESE DOCUMENTS NOW FILED BEFORE US WERE SPECIFICALLY REL IED UPON BY THE A.O. FOR REOPENING THE ASSESSMENT. SHE, HOWEVER, HAS CONTEND ED THAT THE ENTIRE SEIZED MATERIAL WAS AVAILABLE BEFORE THE A.O. AT THE TIME OF REOPENING OF ASSESSMENT AND THE SAID DOCUMENTS BEING RELEVANT FOR ENTERTAIN ING THE BELIEF ABOUT ESCAPEMENT OF ASSESSEES INCOME, THE SAME SHOULD HA VE BEEN CERTAINLY RELIED UPON BY THE A.O. 16. A PERUSAL OF THE SEIZED DOCUMENTS FILED BY THE LEAR NED D.R. HOWEVER SHOWS THAT THERE IS NOTHING EVEN IN THE SAID DOCUME NTS TO INDICATE SPECIFICALLY THAT ANY INCOME OF ASSESSEE FOR THE YE AR UNDER CONSIDERATION HAD ESCAPED ASSESSMENT, EXCEPT PAGE NO. 8 OF ANNEXURE A -2 ON WHICH THE A.O. HAS RELIED UPON TO QUANTIFY THE INCOME OF ASSESSEE AT THE ASSESSMENT STAGE. AS HELD BY THE A.O. RELYING OF THE SAID DOCUMENT AN D FURTHER POINTED OUT BY THE LEARNED D.R. AT THE TIME OF HEARING BEFORE US, THE TOTAL REVENUE OF ASSESSEE FOR THE CALENDAR YEAR 2001 WAS SHOWN AT SI NGAPORE $1,55,55,946. HOWEVER, AS EXPLAINED BY THE LEARNED COUNSEL FOR TH E ASSESSEE FROM NOTE NO. ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 11 3 GIVEN IN THE SAID DOCUMENT ITSELF AS WELL AS FROM THE P & L ACCOUNT OF TPIL AND ASSESSEE COMPANY, THE SAID FIGURE WAS A COMBINE D FIGURE OF REVENUE OF SINGAPORE BRANCH OF TPIL FROM JANUARY TO NOVEMBER 2 001 TO THE EXTENT OF SINGAPORE DOLLARS 97,76,904 AND OF ASSESSEE COMPAN Y FROM 7 TH SEPTEMBER TO 31 ST DECEMBER 2001 TO THE EXTENT OF SINGAPORE DOLLARS 5 7,79,041. THE REVENUE OF SINGAPORE BRANCH TO THE EXTENT OF SINGAP ORE $ 97,76,904 WAS DULY DECLARED BY TPIL IN THE RETURN OF INCOME FILED FOR THE RELEVANT YEAR. IN SO FAR AS ASSESSEE COMPANY IS CONCERNED, THERE WAS NO REVE NUE INCLUDED IN THE FIGURE OF SINGAPORE $1,55,55,946 THAT WAS PERTAININ G TO THE YEAR ENDING 31 ST MARCH 2001. AS A MATTER OF FACT, NO REVENUE GENERAT ION FOR THE YEAR ENDING 31 ST MARCH 2001 WAS POSSIBLE IN THE CASE OF ASSESSEE CO MPANY AS IT HAD COMMENCED BUSINESS ONLY ON 7 TH SEPTEMBER 2001 AS ESTABLISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE BASIS OF DO CUMENTARY EVIDENCE IN THE FORM OF CERTIFICATE ISSUED BY CERTIFIED PUBLIC ACCO UNTANT, SINGAPORE, GST REGISTRATION GIVEN BY INLAND REVENUE AUTHORITY OF S INGAPORE, GST RETURNS FILED BY ASSESSEE COMPANY FOR THE RELEVANT PERIOD A ND THE FIRST INVOICE RAISED BY THE ASSESSEE COMPANY ON 7 TH SEPTEMBER 2001. 17. THE LEARNED D.R. HAS CONTENDED THAT THE ASPECT OF Q UANTIFICATION OF INCOME OF THE ASSESSEE WHICH HAS ESCAPED ASSESSMENT IS NOT RELEVANT FOR JUDGING VALIDITY OF REOPENING. IN OUR OPINION, THE ISSUE HERE IS NOT ABOUT QUANTIFICATION OF INCOME OF ASSESSEE FOR THE YEAR U NDER CONSIDERATION. THE REAL ISSUE IS WHETHER THERE WAS ANY ESCAPEMENT OF INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND WHETHER THERE WAS ANY BASIS FOR THE A.O. TO HAVE REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSE SSMENT. AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IF THERE WAS NO INCOME ACTUALLY EARNED BY ASSESSEE FOR THE YEAR UNDER CONS IDERATION, THERE IS NO QUESTION OF ESCAPEMENT OF ANY INCOME FROM ASSESSMEN T GIVING JURISDICTION TO THE A.O. TO REOPEN THE ASSESSMENT. IN THE PRESENT C ASE, THERE WAS NO BASIS FOR THE A.O. TO HAVE REASON TO BELIEVE THAT INCOME OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD ESCAPED ASSESSMENT AND AS E STABLISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ONLY DOCUMENT WHICH WAS RELIED UPON BY THE A.O. SPECIFICALLY AT ASSESSMENT STAGE ALSO C OULD NOT HAVE BEEN THE BASIS FOR THE A.O. TO HAVE REASON TO BELIEVE THAT A NY INCOME OF THE ASSESSEE ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 12 FOR THE PREVIOUS YEAR RELEVANT TO A.Y. 2001-02 HAD ESCAPED ASSESSMENT. AS A MATTER OF FACT, THERE BEING NO BUSINESS CARRIED ON BY THE ASSESSEE COMPANY IN THAT YEAR, THERE WAS NO QUESTION OF EARNING OF INCO ME WHICH COULD BE SAID TO HAVE ESCAPED ASSESSMENT. 18. IN THE CASE OF RAJA BAHADUR MOTILAL P. LTD. VS. IT O 183 ITR 80, THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT EVEN IF IT IS ASSUMED THAT THE ITO HAD IN POSSESSION SOME INFORMATION, IT IS RELEVANT TO ASCERTAIN WHETHER THAT INFORMATION HAD A DIRECT NEXUS OR LIVE LINK WITH TH E FORMATION OF BELIEF THAT THE ASSESSEES INCOME CHARGEABLE TO TAX HAD ESCAPED ASS ESSMENT. IN THE CASE OF TECHNO CRAFT INDUSTRIES AND OTHERS VS. ITO 185 ITR 465, THE HON'BLE BOMBAY HIGH COURT HELD THAT REOPENING BASED ON INFORMATION WHICH IS VAGUE AND INDEFINITE IS NOT VALID. IN THE CASE OF HINDUSTAN L EVER LTD. 268 ITR 332, IT WAS HELD BY THE HON'BLE BOMBAY HIGH COURT THAT REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE A.O. NO SUBSTITUTION O R DELETION IS POSSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENC E CAN BE ALLOWED TO BE DRAWN BASED ON THE REASONS NOT RECORDED. IT WAS HEL D THAT IT IS FOR THE A.O. TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. IT SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. 19. IF THE FACTS OF THE PRESENT CASE ARE CONSIDERED IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THERE WAS NO BASIS FOR THE A.O. TO HAVE REASON TO BELIEVE THA T INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD ESCAPED ASSESS MENT AND IN THE ABSENCE OF SUCH BASIS, THE REOPENING OF ASSESSMENT FOR THE REASONS RECORDED BY HIM WAS BAD IN LAW. WE, THEREFORE, CANCEL THE AS SESSMENT MADE BY THE A.O. UNDER SECTION 143(3) R.W.S. 147 IN PURSUANCE O F SUCH INVALID REOPENING HOLDING THE SAME TO BE BAD IN LAW AND ALLOW THE APP EAL OF THE ASSESSEE ON THIS PRELIMINARY ISSUE. 20. KEEPING IN VIEW OUR DECISION RENDERED ABOVE ON THE PRELIMINARY ISSUE HOLDING THE ASSESSMENT MADE BY THE A.O. TO BE INVAL ID AND CANCELLING THE SAME, THE OTHER GROUNDS RAISED BY ASSESSEE IN THIS APPEAL CHALLENGING THE ITA NO.2537/MUM/2010 INGRAM MICRO (INDIA) EXPORTS PTE LTD. 13 ADDITION MADE THEREIN ON MERITS HAVE BECOME ACADEMI C. WE THEREFORE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON T HE SAID GROUNDS. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2011. SD/- SD/- (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH JUNE 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) X, MUMBAI 4. THE CIT DIT (INTERNATIONAL TAXATION), MUMBAI CITY 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.