THE ADIT (IT) 3(2), MUMBAI V. M/S. BLACK & VEATCH PRICHARD, INC., MUMBAI

ITA 3934/MUM/2007

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4258 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 26-06-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 21-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI .. , ! ' , # !, $ BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ITA NO.3934/MUM/2007 : ASST.YEAR 1999-2000 THE ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(2) MUMBAI. M/S.BLACK & VEATCH PRICHARD, INC. C/O.J.R.BATLIBOI & CO., JALAN MILL COMPOUND 98 GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013. PAN : AACCB6502D. ( %& / // / APPELLANT) ( ( ( ( / VS. ( )*%&/ RESPONDENT) CO NO.223/MUM/2007 : ASST.YEAR 1999-2000 M/S.BLACK & VEATCH PRICHARD, INC. C/O.J.R.BATLIBOI & CO., JALAN MILL COMPOUND 98 GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013. THE ADDITIONAL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(2) MUMBAI. ( )*$ / // / CROSS OBJECTOR) ( ( ( ( / VS. ( )*%&/ RESPONDENT) + + + + , ,, , - - - - / REVENUE BY : SHRI NARENDER KUMAR #( ./ #( ./ #( ./ #( ./ , - , - , - , - / ASSESSEE BY : S/SHRI P.J.PARDIWALLA & NISHANT THAK KER ( , / / / / / DATE OF HEARING : 09.07.2013 012 , / / DATE OF PRONOUNCEMENT : 10.07.2013 !3 !3 !3 !3 / / / / O R D E R PER R.S.SYAL ( AM) : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) ON 17.01.2007 IN RELATION TO THE ASSESSME NT YEAR 1999- 2000. ITA NO.3934/M/2007 & CO 223/M/2007. M/S.BLACK & VEATCH PRICHARD, INC. 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A COMPANY INCORPORATED IN AND TAX RESIDENT OF USA. NO RETURN WAS FILED BY THE ASSESSEE ON THE GROUND THAT ITS INCOME WAS NOT TAXABLE IN INDIA. NOTICE U/S 148 WAS ISSUED ON 31.03.2005 FOR THE FOLLOWING REASONS :- A TAX EVASION PETITION HAS BEEN RECEIVED IN THE OF FICE OF DIT(IT), MUMBAI WHICH WAS FORWARDED TO THE UNDERSIGNED ON 30.3.2005. ON GOING THROUGH THE SAME AND THE RELEVANT MATERIAL ON RECORD, IT IS APPARENT THAT BLACK & VEATCH PRICHARD, INC. USA HAVING ITS ADDRES S AT P.O. BOX 27-105, KANSAS CITY, MO 64180-0105, U.S.A. IN EARNING INCOME FROM INDIA FROM RELIANCE PETROCHEMICALS LTD. BUT IS NOT FILING ITS RETURN OF INCOME IN INDIA. ACCORDINGLY UNDER EXPLANATION 2 TO SECTIO N 147 OF THE I.T.ACT, I HAVE REASON TO BELIEVE THAT THE I NCOME CHARGEABLE TO TAX IN INDIA HAS ESCAPED ASSESSMENT F OR A.Y. 98-99, 99-00, 00-01, 01-02, 02-03 AND 03-04. NOTICE U/S 148 OF I.T.ACT IS, THEREFORE REQUIRED TO BE ISSUED IN THIS CASE. 2. AS PER SECTION 151(2) OF THE I.T.ACT, NO NOTICE U/S 148 MAY BE ISSUED BY AN OFFICER BELOW THE RANK OF J CIT AFTER FOUR YEARS FROM THE END OF ASSESSMENT YEAR. T HE ADDL.DIT, RG. 3 MAY KINDLY APPROVE THE PROPOSAL FOR ISSUE OF NOTICE U/S 148 FOR A.Y. 98-99 AND 99-00. 3. SUBMITTED FOR KIND CONSIDERATION AND APPROVAL. SD/- RAHUL NAVIN. 3. ASSESSMENT WAS COMPLETED ON 20.03.2006 BY COMPUT ING TOTAL INCOME AS UNDER:- ITA NO.3934/M/2007 & CO 223/M/2007. M/S.BLACK & VEATCH PRICHARD, INC. 3 INCOME FROM BUSINESS AND PROFESSIONS: (I) ROYALTY/FEES FOR TECHNICAL (INCLUDED) SERVICES (AS PER STATEMENT) ` 1,93,02,773 (II) CONSIDERATION RECEIVED FROM BECHTEL FRANCE UNDER THE OFFSHORE ENGINEERING TECHNICAL SERVICES CONTRACT (AS DISCUSSED ABOVE) US$ 4.98 MILLION = INR (49,80,000 X 42.28) ` 21,05,54,400 ----------------- GROSS TOTAL INCOME ` 22,98,57,173 ----------------- TOTAL TAXABLE INCOME ` 22,98,57,170 ========== 4. THE ASSESSEE INTER ALIA CHALLENGED THE INITIATION OF REASSESSMENT BEFORE THE LEARNED CIT(A). SUCH GROUND WAS REJECTED BY NOTICING THAT THE A.O. WAS RIGHT IN FORMING REASON TO BELIEVE THA T THE ASSESSEE RECEIVED PAYMENT IN CONNECTION WITH TURNKEY CONTRAC T WITH RPL FOR CONSTRUCTION ON THE BASIS OF TAX EVASION PETITION. THE LEARNED CIT(A) FURTHER NOTICED THAT THE NAME OF RELIANCE PETROCHE MICALS LIMITED WAS WRONGLY MENTIONED IN THE REASONS RECORDED BY TH E A.O. AS AGAINST THE CORRECT NAME OF RELIANCE PETROLEUM LIM ITED IN THE TAX EVASION PETITION. 5. THE ASSESSEE HAS CHALLENGED THE REASSESSMENT IN ITS CROSS OBJECTION. THE LEARNED AR SUBMITTED THAT THE ASSESS ING OFFICER REOPENED THE ASSESSMENT ON ACCOUNT OF ESCAPEMENT O F CERTAIN INCOME EARNED BY THE ASSESSEE FROM INDIA IN RELIANCE PETRO LEUM LIMITED, BUT NO ADDITION WAS MADE ON THAT SCORE. SINCE NO ADDITI ON WAS MADE BY ITA NO.3934/M/2007 & CO 223/M/2007. M/S.BLACK & VEATCH PRICHARD, INC. 4 THE ASSESSING OFFICER IN THE ORDER PASSED U/S 147 O N ACCOUNT OF THE ALLEGED INCOME FROM INDIA FROM RELIANCE PETROCHEMIC ALS LIMITED, THE LEARNED AR SUBMITTED THAT THE ENTIRE REASSESSMENT O RDER WAS TO BE QUASHED. PER CONTRA, THE LEARNED DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THOUGH THERE IS NO ADDITION FOR INCO ME FROM RELIANCE PETROCHEMICALS LIMITED, BUT THERE WAS SOME TRIPARTI TE AGREEMENT BETWEEN THE ASSESSEE AND BECHTEL FRANCE AND THE RE FERENCE TO THE ADDITION OF ` 2.105 CRORE MADE BY THE A.O. SHOULD BE LINKED WITH SUCH REASONS RECORDED. TO COUNTER THIS SUBMISSION, THE L D. AR STATED THAT THERE WAS NO SUCH TRIPARTITE AGREEMENT RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS ABUNDANTLY CLEAR THAT THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS BY RECOR DING THE REASONS ABOUT THE ESCAPEMENT OF INCOME FROM RELIANCE PETROC HEMICALS LIMITED. IT IS PATENT FROM THE ABOVE EXTRACTED COM PUTATION OF TOTAL INCOME MADE BY THE ASSESSING OFFICER THAT NO ADDITI ON HAS BEEN MADE ON ACCOUNT OF ANY INCOME FROM RELIANCE PETROCH EMICALS LIMITED. EVEN THE LEARNED CIT(A)S POINT OF VIEW TH AT THE CORRECT NAME SHOULD BE CONSIDERED AS RELIANCE PETROLEUM LIM ITED INSTEAD OF RELIANCE PETROCHEMICALS LIMITED DOES NOT CHANGE THE POSITION AS NO ADDITION HAS BEEN MADE EVEN ON ACCOUNT OF ANY INCOM E EARNED BY THE ASSESSEE FROM RELIANCE PETROLEUM LIMITED. ITA NO.3934/M/2007 & CO 223/M/2007. M/S.BLACK & VEATCH PRICHARD, INC. 5 7. THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. JET AIRWAYS (I) LTD. [(2011) 331 ITR 236 (BOM.)] HAS HELD THAT THE A.O. MAY ASSESSEE OR REASSESS IN RESPECT OF ANY ISS UE WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEE DINGS THOUGH THE REASONS FOR SUCH ISSUE WERE NOT INCLUDED IN THE NOT ICE; HOWEVER IF AFTER ISSUING A NOTICE U/S 148 THE A.O. ACCEPTS THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOME WHICH HE HAS INI TIALLY FORMED A REASON TO BELIEVE HAD ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, THEN IT IS NOT OPEN TO HIM INDE PENDENTLY ASSESS SOME OTHER INCOME. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. SHRI RAM SINGH [(2008) 306 ITR 343 (RAJ.)] HAS ALSO TAKEN SIMILAR VIEW. FROM THE ABOVE DISCUSSION, IT IS CLEA R THAT MAKING OF AN ADDITION ON A SUBJECT WHICH FORMED REASONS FOR NOTI CE U/S 148 IS SINE QUA NON TO FURTHER PROCEED WITH THE MATTER AND MAKING ANY OTHER ADDITIONS ON ACCOUNT OF AN INCOME WHICH EARLIER ESC APED ASSESSMENT BUT COMES TO HIS NOTICE DURING THE COURSE OF SUC H PROCEEDINGS. UNLESS THE ADDITION FORMING THE BEDROCK OF THE REAS ONS IS MADE, THE ASSESSING OFFICER CANNOT PROCEED WITH THE ASSESSMEN T TO MAKE ANY OTHER ADDITION. 8. ADVERTING TO THE FACTS OF THE INSTANT CAS E IT IS OBSERVED THAT THE REASSESSMENT WAS INITIATED BY RECORDING REASONS, WH ICH HAVE BEEN REPRODUCED ABOVE TALKING OF ESCAPEMENT OF INCOME EA RNED BY THE ASSESSEE FROM RELIANCE PETROCHEMICALS LIMITED. NO A DDITION ON THAT SCORE CAME TO BE MADE BY THE ASSESSING OFFICER. IN THAT VIEW OF THE MATTER AND RESPECTFULLY FOLLOWING THE AFORE-NOTED T WO PRECEDENTS, WE ITA NO.3934/M/2007 & CO 223/M/2007. M/S.BLACK & VEATCH PRICHARD, INC. 6 ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OF FICER LACKED JURISDICTION TO DEAL WITH ANY OTHER ISSUE AND MAKIN G FURTHER ADDITIONS ACCORDINGLY. THE ASSESSMENT ORDER IS, THEREFORE, SE T ASIDE. 9. IN VIEW OF OUR DECISION ON THE ABOVE LEGAL ISSUE , THERE IS NO NEED TO DEAL WITH THE MERITS OF ADDITIONS WHICH HAV E BEEN ASSAILED BY THE ASSESSEE AND THE REVENUE IN THEIR RESPECTIVE AP PEALS. 10. IN THE RESULT, THE ASSESSEES CROSS OBJECTION I S PARTLY ALLOWED ON THE ABOVE LEGAL ISSUE AND THE REVENUES APPEAL IS D ISMISSED. ORDER PRONOUNCED ON THIS 10 TH DAY OF JULY, 2013. !3 , 012 4!(5 1 , 6 SD/- SD/- (VIVEK VARMA) (R.S.SYAL) # ! # ! # ! # ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 4!( DATED : 10 TH JULY, 2013. DEVDAS* !3 , )#/7' 8'2/ !3 , )#/7' 8'2/ !3 , )#/7' 8'2/ !3 , )#/7' 8'2// COPY OF THE ORDER FORWARDED TO : 1. %& / THE APPELLANT 2. )*%& / THE RESPONDENT. 3. 9 () / THE CIT, MUMBAI. 4. 9 / CIT(A)-XXXI, MUMBAI 5. '<6 )#/#( , , / DR, ITAT, MUMBAI 6. 6= > / GUARD FILE. !3( !3( !3( !3( / BY ORDER, *'/ )#/ //TRUE COPY// ? ? ? ?/ // /@ + @ + @ + @ + ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI