M/s. Sandvik Tooling Sverige AB., Pune V. Deputy Commissioner of Income-tax,

ITA 488/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6908 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 22-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Assessee Lawyers: DANESH BAFNA
• Keywords: Reopening of assessment; Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Tangible material; Tax effect; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 201(1); 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / ITA NO. 46 6 /P U N/20 15 / ASSESSMENT YEAR : 2008 - 09 M/S. SANDVIK TOOLING SVERIGE AB, C/O SANDVIK ASIA PVT. LTD., MUMBAI - PUNE ROAD, DAPODI, PUNE 411012 . / APPELLANT PAN: AA KCS4689N VS. THE DY. DIRECTOR OF INC OME TAX (INTERNATIONAL TAXATION) - II, PUNE . / RESPONDENT . / ITA NO S . 487 & 488 /P U N/20 16 / ASSESSMENT YEAR S : 2007 - 08 & 2009 - 10 M/S. SANDVIK TOOLING SVERIGE AB, C/O SANDVIK ASIA PVT. LTD., MUMBAI - PUNE ROAD, DAP ODI, PUNE 411012 . / APPELLANT PAN: AAKCS4689N VS. THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) - CIRCLE 2, PUNE . / RESPONDENT / APPELLANT BY : SHRI DANESH BAFNA / RESPO NDENT BY : MS. NIRUPAMA KOTRU, CIT / DATE OF HEARING : 1 9 . 1 2 . 201 7 / DATE OF PRONOUNCEMENT: 21 . 1 2 . 201 7 2 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB / ORDER PER SUSHMA CHOWLA, JM: TH IS BUNCH OF THREE APPEAL S FILED BY THE ASSESSEE ARE AGAINST SEPARA TE ORDER S OF D C IT (IT) - II / DCIT(IT), CIRCLE 2 , PUNE, DATED 30.03.2015, 27.01.2016 & 29.01.2016 RELATING TO ASSESSMENT YEAR S 20 0 8 - 0 9 , 2007 - 08 & 2009 - 10, RESPECTIVELY PASSED UNDER SECTION 144C(1) R.W.S 143(3) R.W.S. 147 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THIS BUNCH OF APPEALS RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, IN ORDER TO ADJUDICATE THE ISSUES, REFERENCE IS BEING MA DE TO THE FACTS AND ISSUES IN ITA NO.466/PUN/2015, RELATING TO ASSESSMENT YEAR 2008 - 09. 3. THE ASSESSEE IN ITA NO.466/PUN/2015, RELATING TO ASSESSMENT YEAR 2008 - 09 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. GROUND 1: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED DISPUTE RESOLUTION PANEL ('LD.DRP') ERRED IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER ('LD AO') IN REOPENING THE ASSESSMENT PROCEEDINGS WITHOUT ANY 'REASON TO BELIEVE' AS REQUIRED BY THE PROVISIONS OF SECT ION 147. IT IS PRAYED THAT THE REOPENING INITIATED ARE INVALID AND VOID AND HENCE BE QUASHED. 2. GROUND 2: WITHOUT PREJUDICE TO GROUND 1 ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. DRP ERRED IN UPHOLDING THE ACTION OF LD. AO O F TAXING RECEIPTS FOR IT SUPPORT SERVICES PROVIDED TO ITS INDIAN AFFILIATES AMOUNTING TO RS.8,072,286 AS ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND SWEDEN ('TAX TREATY BETWEEN INDIA AND SWEDEN'). 3 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB I T IS PRAYED THAT THE ADDITION MADE BY THE LD. AO AND CONFIRMED BY THE LD. DRP BE DELETED. 3. GROUND 3: WITHOUT PREJUDICE TO GROUND 1 , ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. DRP HAS ERRED IN UPHOLDING THE ACTION OF LD. AO OF TAXIN G RECEIPTS FOR IT SUPPORT SERVICES PROVIDED TO ITS INDIAN AFFILIATES AMOUNTING TO RS.8,072,286 AS FEES FOR TECHNICAL SERVICES (FTS) WITHIN THE MEANING OF ARTICLE 12 OF THE TAX TREATY BETWEEN INDIA AND SWEDEN READ WITH THE PROTOCOL THERETO. IT IS PRAYED TH AT THE ADDITION MADE BY THE LD. AO AND CONFIRMED BY THE LD. DRP BE DELETED. 4. THE FIRST ISSUE RAISED IN THE BUNCH OF APPEALS IS AGAINST REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT TH E OUTSET POINTED OUT THAT THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT IN THE ABSENCE OF ANY TANGIBLE MATERIAL. HE FURTHER STATED THAT THE DISPUTE RESOLUTION PANEL (DRP) IN ASSESSMENT YEAR 2006 - 07 IN THE ABSENCE OF ANY TANGIBLE MATERIAL HAD HELD THAT THE REOPENING OF ASSESSMENT WAS BAD IN LAW BUT BECAUSE OF LOW TAX EFFECT, NO APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL. HE FURTHER POINTED OUT THAT PROCEEDINGS FOR ASSESSMENT YEAR 2008 - 09 WERE TAKEN FIRST AN D HENCE, THE ORDER OF AUTHORITIES BELOW IS ELABORATE. HOWEVER, HE STATED THAT FOR ALL THE YEARS I.E. STARTING FROM ASSESSMENT YEARS 2006 - 07 TO 2009 - 10, REASONS WERE RECORDED ON THE SAME DATE I.E. 26.07.2013 AND THE PROCEEDINGS WERE INITIATED UNDER SECTION 147 OF THE ACT. IN ASSESSMENT YEAR 2008 - 09, THE DRP HAD RELIED ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (2007) 291 ITR 500 (SC) TO UPH O LD RE - ASSESSMENT PROCEEDINGS. SIMILARLY, RE - ASSESSMENT P ROCEEDINGS WERE UPHELD IN ASSESSMENT YEARS 2007 - 08 AND 2009 - 10. HE FURTHER POINTED OUT THAT IDENTICAL REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT IN THE CASE OF SANDVIK 4 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB SYSTEMS DEVELOPMENT AB, FOR ASSESSMENT YEAR 2008 - 09. HE REFERRED TO THE COPY O F REASONS RECORDED FOR REOPENING OF ASSESSMENT DATED 26.07.2013 IN THE SAID CASE, WHICH ARE PLACED IN COMPILATION NO. II AT PAGES 1 TO 3. HE ALSO REFERRED TO THE COMPUTATION OF INCOME WHERE THE DECLARATION IN RESPECT OF RECEIPTS FROM SANDVIK ASIA LTD. TOWA RDS IT SUPPORT SERVICES WERE DECLARED IN THE NOTE NO.3 AND IT WAS REPORTED THAT THE SAME DO NOT FALL WITHIN AMBIT OF ROYALTY / FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF ARTICLE 12 OF THE TAX TREATY READ WITH PROTOCOL THERETO. HE ALSO REFERRED TO A NNEXURE TO THE AUDIT REPORT IN THIS REGARD. HE FURTHER REFERRED TO THE ORDER OF TRIBUNAL IN ITA NO.464/PUN/2015, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 10.11.2017 AND POINTED OUT THAT THE ISSUE WAS CONSIDERED AT LENGTH BY THE TRIBUNAL AND RELYIN G ON EARLIER ORDER OF TRIBUNAL IN THE CASE OF DDIT VS. SANDVIK INFORMATION TECHNOLOGY AB IN ITA NO.128/PUN/2014 ALONG WITH CO NO.10/PUN/2015, RELATING TO ASSESSMENT YEAR 2005 - 06, ORDER DATED 28.12.2016 , HAD HELD THAT IN THE ABSENCE OF ANY NEW INFORMATION O R TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME, EVEN IN PROCEEDINGS WHICH WERE COMPLETED UNDER SECTION 143(1) OF THE ACT, HELD THAT THERE WAS NO MERIT IN INVOKING OF RE - ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE REASONS RECORDED FOR REOPENING OF ASSESSMENT IN THE CASE OF SANDVIK INFORMATION TECHNOLOGY AB, RELATING TO ASSESSMENT YEAR 2005 - 06 ALONG WITH COMPUTATION OF INCOME AND THE ANN EXURE TO FORM NO.3CEB, PLACED IN COMPILATION NO.II AT PAGES 24 AND 25 ALONG WITH COPY OF ORDER OF TRIBUNAL DATED 28.12.2016 IN ITA NO.128/PUN/2014, PLACED IN COMPILATION NO.II AT PAGES 28 TO 45. FURTHER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE REFERRED TO REASONS RECORDED FOR REOPENING OF ASSESSMENT DATED 26.07.2013 IN THE CASE OF SAN DVIK AUSTRALIA PTY LTD., RELATING TO ASSESSMENT YEAR 2008 - 09 ALONG WITH NOTE FILED IN THE COMPUTATION OF INCOME AND RELEVANT ANNEXURE TO FORM NO.3CEB, WHICH ARE ATTACHED AT PAGES 5 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 46 TO 51 OF COMPILATION NO.II AND ALSO THE ORDER OF TRIBUNAL DATED 18.08.2017 IN ITA NOS.250 & 251/PUN/2015, RELATING TO ASSESSMENT YEAR 2008 - 09, PLACED AT PAGES 52 TO 62 OF COMPILATION NO.II AND POINTED OUT THAT THE ISSUE IS SQUARELY CO VERED IN FAVOUR OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRING THE COMPILATION NO.I TOOK US THROUGH THE REASONS RECORDED FOR EACH OF THE YEAR STARTING FROM ASSESSMENT YEAR 2006 - 07 IN THE CASE OF ASSESSEE AND POINTED OUT THAT SIMILAR REASONS WERE RECORDED FOR EACH OF THE YEAR EXCEPT FOR THE AMOUNT RECEIVED AS LICENSE FEES FROM SANDVIK ASIA LTD., WHICH VARIED IN EACH OF THE YEAR. THE COPY OF SAID REASONS FOR ASSESSMENT YEAR 2006 - 07 ARE PLACED AT PAGES 1 TO 3 OF THE COMPILATION NO.I, THEREAFTER, FOR EACH OF THE YEARS ARE ALSO PLACED IN THE SAID COMPILATION NO.I. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO NOTE IN THE COMPUTATION OF TOTAL INCOME AND THE RELEVANT ANNEXURE TO FORM NO.3CEB. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE WAS AGAINST INITIATION OF RE - ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT AND GROUNDS OF APPEAL NO.2 AD 3 WERE ON MERITS OF THE ISSUE WHICH WOULD BECOME ACADEMIC IN CASE THE GROUND OF APPEAL NO.1 IS DECIDED IN FAVOUR OF ASSESSEE. HE FURTHER POINTED OUT THAT THE ISSUES RAISED IN ASSESSMENT YEARS 2007 - 08 AND 2009 - 10 WERE SIMILAR AND IDENTICAL TO THE ISSUES IN ASSESSMENT YEAR 2008 - 09. 6. THE LE ARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF DRP/ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST APPLICABIL ITY OF PROVISIONS OF SECTION 147 OF THE ACT. THE SAID SECTION LAYS DOWN THE PROPOSITION THAT IN CASE WHERE THERE IS ANY ESCAPEMENT OF INCOME, WHICH COMES TO THE KNOWLEDGE OF THE ASSESSING 6 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB OFFICER ON THE BASIS OF SOME TANGIBLE MATERIAL, THEN THE SAID PROCE EDINGS COULD BE REOPENED IN ORDER TO ASSESS THE ESCAPEMENT OF INCOME IN THE HANDS OF ASSESSEE. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETURN OF INCOME IN TIME DECLARING TOTAL INCOME AT NIL. THE ASSESSING OFFICER UNDER THE PROVISI ONS OF SECTION 147 OF THE ACT, RECORDED REASONS FOR REOPENING ASSESSMENT ON THE GROUND THAT IT WAS NOTICED FROM FORM NO.3CEB OF SANDVIK ASIA LTD. FOR ASSESSMENT YEAR 2008 - 09 THAT THE ASSESSEE HAD RECEIVED RS.80,72,286/ - AS IT SUPPORT SERVICES AND THE SAME WAS NOT OFFERED TO TAX. THE ASSESSING OFFICER FURTHER HELD THAT THE SAID RECEIPTS PAID TO THE ASSESSEE WERE IN THE NATURE OF ROYALTY AND FEES FOR TECHNICAL SERVICES AND TAXABLE IN INDIA AS PER ARTICLE 12 OF DTAA OF INDIA AND SWEDEN AS WELL AS SECTION 9(1) (VI) AND 9(1)(VII) OF THE ACT. REFERENCE WAS MADE TO SEVERAL DECISIONS IN THIS REGARD BY THE ASSESSING OFFICER AND IN VIEW THEREOF, IT WAS RECORDED BY THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAD ESCAPED ASSESSMENT WITHIN MEANING OF PROVISIONS OF SECTION 147 OF THE ACT. THEREAFTER, PROCEEDINGS WERE REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. THE SAID REASONS WERE RECORDED BY THE ASSESSING OFFICER ON 26.07.2013. SIMILAR REASONS FOR REOPENING ASSESSMENT WERE RECORDED FOR ASSESSMENT YEARS 2006 - 07, 2007 - 08 , 2008 - 09 AND 2009 - 10, ALL DATED 26.07.2013. 8. WE FIND THAT THE ASSESSEE HAD MADE A DECLARATION IN THE COMPUTATION OF INCOME FILED ALONG WITH RETURN OF INCOME, COPY OF WHICH IS PLA CED AT PAGE 13 OF COMPILATION NO.1, WHEREIN IT WAS REPORTED AS UNDER: - 3. FURTHER, STSA HAS ALSO RECEIVED LICENSE FEES AGGREGATING TO RS.8,072,285 FROM SAL. THESE BEING PAYMENTS RECEIVED FOR USE OF A COPYRIGHTED ARTICLE, DO NOT FALL WITHIN THE AMBIT OF R OYALTY UNDER ARTICLE 12 OF THE TAX TREATY . THIS IS A LIMITED USER RIGHT GRANTED BY STSA AND DOESNT INVOLVE EXPLOITATION OF THE RIGHTS EMBEDDED IN THE COPYRIGHT. ACCORDINGLY, IN THE ABSENCE OF PERMANENT ESTABLISHMENT OF STSA IN INDIA, SUCH PAYMENTS ARE N OT CONSIDERED AS TAXABLE IN INDIA. 7 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 9. THE AUDITOR IN THE AUDIT REPORT IN FORM NO.3CEB HAD ALSO REPORTED IN RESPECT OF SAID RECEIPTS WHICH IS PLACED AT PAGE 14 OF COMPILATION NO.I, WHICH READ AS UNDER: - SR. NO. NAME AND ADDRESS OF THE ASSOCIATED ENTERPR ISE WITH WHOM THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO DESCRIPTION OF SUCH MUTUAL AGREEMENT OR ARRANGEMENT AMOUNT PAID/RECEIVED OR PAYABLE / RECEIVABLE IN THE TRANSACTION - METHOD USED FOR DETERMINING THE ARM'S LENGTH PRICE (SEE SECTION 92C(1) AS PER BOOKS OF ACCOUNT AS COMPUTED BY THE ASSESSEE HAVING REGARD TO THE ARM'S LENGTH PRICE (RS) (RS) CLAUSE 12(A) CLAUSE 12(B) CLAUSE 12(C) CLAUSE 12(D) 1 SANDVIK ASIA LIMITED MUMBAI PUNE ROAD, DAPODI, PUNE - 411012 RECEIPT FOR IT SUPPORT SERVICES 8,072,286 8,072,286 REFER NOTE 6 TO APPENDIX D 10. THE NOTES TO THIS EFFECT WAS ALSO GIVEN IN FORM NO.3CEB. THE ORIGINAL ASSESSMENT IN THE CASE WAS COMPLETED BY ISSUE OF INTIMATION UNDER SECTION 143(1) OF THE ACT. THE GRIEVANCE OF THE DEPARTMENT IN THIS REGARD IS THAT IN THE ABSENCE OF ANY ASSESSMENT BEING COMPLETED UNDER SECTION 143(3) OF THE ACT, SINCE NO ENQUIRY WAS MADE BY THE ASSESSING OFFICER AND THE INCOME HA D ESCAPED ASSESSMENT, HENCE RE - ASSESSMENT PROCEEDINGS WERE CORREC TLY INITIATED IN THE HANDS OF ASSESSEE. HOWEVER, ON THE OTHER HAND, THE CASE OF ASSESSEE BEFORE US IS THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL WHICH HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER FOR RECORDING REASONS FOR REOPENING ASSESSMENT OF E SCAPEMENT OF INCOME, THEN IN SUCH CIRCUMSTANCES, RE - ASSESSMENT PROCEEDINGS WERE NOT APPROPRIATE. 11. WE FIND THAT SIMILAR ISSUE OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT ON THE BASIS OF SIMILAR REASONS RECORDED FOR REOPENING ASSESSMENT ALL D ATED 8 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 26.07.2013 FOR DIFFERENT YEARS AROSE BEFORE THE TRIBUNAL IN THE CASE OF SANDVIK SYSTEMS DEVELOPMENT AB FOR ASSESSMENT YEAR 2008 - 09 AND ALSO IN THE CASE OF SANDVIK INFORMATION TECHNOLOGY AB, RELATING TO ASSESSMENT YEAR 2005 - 06 AND FURTHER IN THE CASE O F SANDVIK AUSTRALIA PTY LTD., RELATING TO ASSESSMENT YEAR 2008 - 09. THE TRIBUNAL IN THE CASE OF SANDVIK SYSTEM DEVELOPMENT AB, IN ITA NO.464/PUN/2015, RELATING TO ASSESSMENT YEAR 2008 - 09, VIDE ORDER DATED 10.11.2017 HAD HELD AS UNDER: - 9. WE HAVE HEARD TH E RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IN THE PRESENT APPEAL IS APPLICABILITY OF PROVISIONS OF SECTION 147 OF THE ACT. THE SAID SECTION PROVIDES THAT IN CASES WHERE THERE IS ANY ESCAPEMENT OF INCOME, WHICH COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER, ON THE BASIS OF SOME TANGIBLE MATERIAL, THEN THE SAID PROCEEDINGS CAN BE REOPENED IN ORDER TO ASSESS THE ESCAPEMENT OF INCOME IN THE HANDS OF ASSESSEE. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME IN TIME DECLARING TOTAL INCOME A T NIL. THE ASSESSING OFFICER RECORDED HIS REASONS FOR REOPENING THE ASSESSMENT ON THE GROUND THAT IT WAS NOTICED FROM THE SUBMISSIONS MADE DURING THE ASSESSMENT FOR ASSESSMENT YEAR 2005 - 06 THAT THE ASSESSEE HAD RECEIVED IT SUPPORT FEES OF RS.1.94 CRORES A ND LICENCE FEES OF RS.3,10,396/ - FROM SANDVIK ASIA PVT. LTD. IN ASSESSMENT YEAR 2008 - 09, BUT THE SAME WERE NOT OFFERED FOR TAX. THE REASONS MENTIONED THAT FOR ASSESSMENT YEAR 2005 - 06, THE ASSESSING OFFICER HAD CONCLUDED THAT RECEIPTS UNDER THE HEAD IT SU PPORT FEES RECEIVED BY THE ASSESSEE FROM SANDVIK ASIA PVT. LTD., WERE IN THE NATURE OF ROYALTY AND FEES FOR TECHNICAL SERVICES AND TAXABLE AS PER ARTICLE 12 OF DTAA OF INDIA AND SWEDEN AS WELL AS SECTION 9(1)(VI) & 9(1)(VII) OF THE ACT. THE ASSESSING OFF ICER FURTHER HOLDS THAT ON EXAMINATION OF NATURE OF PAYMENTS MADE TO THE ASSESSEE AS PER AGREEMENT DATED 01.04.2002, IT COULD BE CONCLUDED THAT THE PAYMENTS RECEIVED BY THE ASSESSEE CONSTITUTE ROYALTY AND FEES FOR TECHNICAL SERVICES, AS PER SECTIONS OF THE ACT AS WELL AS ARTICLE 12 OF THE DTAA BETWEEN INDIA AND SWEDEN. REFERENCE WAS MADE TO SEVERAL DECISIONS IN THIS REGARD AND ALSO TO THE ORDER UNDER SECTION 201(1) AND 201(1A) OF THE ACT IN THE CASE OF SANDVIK ASIA PVT. LTD. FOR ASSESSMENT YEAR 2008 - 09, WH EREIN THE ASSESSING OFFICER HELD THAT THE PAYMENTS RECEIVED CONSTITUTE ROYALTY AND FEES FOR TECHNICAL SERVICES. AFTER RECORDING AFORESAID REASONS FOR REOPENING THE ASSESSMENT, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE FILED LETTER STATING THAT EARLIER RETURN OF INCOME MAY BE TREATED AS FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT. THEREAFTER, THE ASSESSEE SOUGHT REASONS FOR REOPENING THE ASSESSMENT AND FILED OBJECTIONS. THE OBJECTIONS FILED BY THE ASS ESSEE WERE REJECTED BY THE ASSESSING OFFICER AS THERE WAS NO ASSESSMENT UNDER SECTION 143(3)/147 OF THE ACT AND THE ASSESSING OFFICER WAS SATISFIED THAT THERE WAS ESCAPEMENT OF INCOME ON THE BASIS OF TANGIBLE MATERIAL BEFORE HIM, THEN IT WAS FIT CASE FOR R EOPENING THE ASSESSMENT. THE DRP ALSO UPHELD THE ACTION OF ASSESSING OFFICER, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA). 10. THE ASSESSEE IS IN APPEAL AGAINST THE SAID EXERCIS E OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 147 OF THE ACT. THE FIRST PLEA WHICH HAS BEEN RAISED BY THE ASSESSEE IS THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL FOR REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME, THE ACTION ADOPTED BY T HE ASSESSING OFFICER WAS WITHOUT ANY BASIS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN ASSESSMENT YEAR 2005 - 06 SAME TANGIBLE MATERIAL WAS AVAILABLE WITH THE ASSESSING OFFICER AND THE RE - ASSESSMENT PROCEEDINGS WERE 9 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB REOPENED. HOWEVER, THE DRP HELD THAT THERE WAS NO MATERIAL BROUGHT IN THE REASONS RECORDED ON THE BASIS OF WHICH VALID REASONS TO BELIEVE COULD BE FORMED. THE DRP HELD THAT IT WAS CASE OF RE - APPRAISAL OF EXISTING FACTS. IT WAS FURTHER HELD BY THE DRP THAT REOPEN ING OF ASSESSMENT WITHOUT NEW MATERIAL WAS NOT PERMISSIBLE EVEN IF THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND ORDER WAS NOT PASSED UNDER SECTION 143(3) OF THE ACT. RELIANCE OF THE ASSESSING OFFICER ON ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA) WAS FOUND TO BE MISPLACED, WHERE THE CASE OF THE ASSESSING OFFICER WAS THAT THE HONBLE SUPREME COURT HAD DECIDED THAT IN CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, THE ASSESSING OFFICER IS EMPOWERED TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN ORIENT CRAFT LTD. VS. CIT (SUPRA), HENCE REOPENING IN THE CASE OF THREE SISTER CONCERNS WAS HELD TO BE INVALID. THE REVENUE DID FILE AN APPEAL BEFORE THE TRIBUNAL IN THIS REGARD AND THE APPEAL WAS DISMISSED FOR LOW TAX EFFECT. SIMILARLY, IN ASSESSMENT YEAR 2006 - 07, SAME ISSUE WAS RAISED AND THE DRP DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN THE ABSENCE OF ANY FRESH MA TERIAL AND THE APPEAL OF REVENUE WAS DISMISSED FOR LOW TAX EFFECT. IN ASSESSMENT YEAR 2007 - 08, THOUGH THE ISSUE OF REOPENING UNDER SECTION 148 OF THE ACT WAS DECIDED AGAINST THE ASSESSEE, BUT SINCE THE ISSUE ON MERITS WAS DECIDED IN FAVOUR OF ASSESSEE, NO APPEAL WAS FILED BY THE ASSESSEE OR THE REVENUE. 11. NOW, COMING TO THE APPEAL IN ASSESSMENT YEAR 2008 - 09. THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING ASSESSMENT ON THE BASIS OF REASONS RECORDED IN ASSESSMENT YEAR 2005 - 06. THE ASSESSING OFFICE R VERY CATEGORICALLY STATES THAT INFORMATION CAME TO HIS KNOWLEDGE DURING PROCEEDINGS IN ASSESSMENT YEAR 2005 - 06 THAT THE ASSESSEE HAD RECEIVED IT SUPPORT FEES AND LICENCE FEES, WHICH HAS NOT BEEN OFFERED TO TAX. THE QUESTION WHICH ARISES BEFORE US IS WHE THER ANY TANGIBLE MATERIAL IS AVAILABLE WITH THE ASSESSING OFFICER TO COME TO FINDING OF ESCAPEMENT OF INCOME. THE SECOND ASPECT OF THE ISSUE IS IN CASE NO ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT, WHERE THERE IS ESCAPEMENT OF INCOME, PROCEEDINGS CAN BE REOPENED UNDER SECTION 147/148 OF THE ACT KEEPING THE SPIRIT OF PROVISIONS WHICH ARE APPLIED IN THE PRESENT CASE. THE FIRST AND FOREMOST FOR INVOKING THE SAID PROVISIONS IS THE REASON TO BELIEVE OF ESCAPEMENT OF INCOME AND SUCH REASO N TO BELIEVE HAS TO BE BASED ON TANGIBLE MATERIAL OR OTHERWISE THERE HAS TO BE LIVE LINK BETWEEN THE REASON TO BELIEVE AND ESCAPEMENT OF INCOME THEN ONLY THE PROCEEDINGS UNDER SECTION 147 OF THE ACT CAN BE INITIATED. THE PROVISO UNDER SECTION 147 OF THE ACT PROVIDES THAT WHERE ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS BEEN MADE, THEN NO ACTION UNDER THE MAIN SECTION WOULD BE TAKEN AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, UNLESS ESCAPEMENT OF INCOME IS BY REASON OF FAILURE ON THE PART OF ASSESSEE TO MAKE RETURN UNDER SECTION 139 OF THE ACT OR IN RESPONSE TO NOTICE UNDER SECTION 142(1) OF THE ACT OR 148 OF THE ACT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT ASSESSMENT YEAR. UNDOUBTEDLY, P ROVISO IS APPLICABLE IN CASE OF NON - FULFILMENT OF CERTAIN CONDITIONS LAID DOWN BUT BEFORE APPLYING THE PROVISIONS PROVIDED IN THE PROVISO TO THE SECTION, THE PROVISIONS OF MAIN SECTION HAVE TO BE SEEN, WHICH CLEARLY PROVIDES THAT THERE HAS TO BE REASON TO BELIEVE OF ESCAPEMENT OF INCOME AND THEN ONLY PROVISIONS OF SECTION 147 OF THE ACT CAN BE TRIGGERED. THERE IS NO MERIT IN THE REASONING OF THE REVENUE THAT WHERE NO ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS BEEN COMPLETED AND THE ASSESSMENT IS ONLY C OMPLETED UNDER SECTION 143(1) OF THE ACT AND SINCE THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THEN ACTION UNDER SECTION 147 OF THE ACT CAN BE TAKEN. WE FIND NO MERIT IN THE PLEA OF THE REVENUE. 12. NOW, COMING TO THE FACTS OF THE PRESENT CASE, WHEREIN THERE IS FINDING IN THE CASE OF ASSESSEE ITSELF THOUGH BY THE DRP THAT NO TANGIBLE MATERIAL WAS BROUGHT IN THE REASONS RECORDED ON THE BASIS OF WHICH VALID REASON TO BELIEVE COULD BE FORMED. IT MAY BE REITERATED HEREIN ITSELF THAT REASONS RECORDED FOR ASSESSMENT YEARS 2005 - 06 AND 2008 - 09 ARE SAME. THOUGH THE APPEAL OF ASSESSEE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2005 - 06 WAS DISMISSED FOR LOW TAX EFFECT ALONG WITH APPEAL OF 10 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB ANOTHER SISTER CONCERN, WH ICH WAS ALSO REOPENED BY THE ASSESSING OFFICER ON IDENTICAL REASONS TO BELIEVE HOWEVER, IN THE CASE OF THIRD ENTITY AGAINST WHICH PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE RECORDED, THE MATTER TRAVELLED TO THE TRIBUNAL AND THE TRIBUNAL IN DDIT (IT) VS . SANDVIK INFORMATION TECHNOLOGY AB, IN ITA NO.128/PUN/2014 ALONG WITH CO NO.10/PUN/2015, RELATING TO ASSESSMENT YEAR 2005 - 06, ORDER DATED 28.12.2016 HAD CONSIDERED THE RE - ASSESSMENT PROCEEDINGS ON THE BASIS OF DETAILS FURNISHED BY SANDVIK ASIA PVT. LTD., ONE OF THE GROUP CONCERNS. AS PER INFORMATION, PAYMENTS WERE MADE ON ACCOUNT OF IT SUPPORT SERVICES WHICH INFORMATION WAS TREATED AS TANGIBLE MATERIAL BY THE ASSESSING OFFICER AND PROCEEDINGS WERE INITIATED UNDER SECTION 147/148 OF THE ACT. THE CASE OF R EVENUE BEFORE THE TRIBUNAL WAS THAT THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME OF ASSESSEE HAD ESCAPED ASSESSMENT. THE CASE OF ASSESSEE WAS THAT THE SAID INFORMATION DERIVED FROM ALLEGED TANGIBLE MATERIAL FOR RE - ASSESSMENT PROCEEDINGS WERE AL READY FURNISHED BY THE ASSESSEE IN FORM NO.3CEB FILED ALONG WITH RETURN OF INCOME. THE SAID INFORMATION IS REPRODUCED AT PAGE 9 OF THE ORDER OF TRIBUNAL DATED 28.12.2016. THE TRIBUNAL HELD THAT THE ASSESSING OFFICER CAN HAVE BELIEF FOR REOPENING ASSESSME NT IF THERE IS ANY TANGIBLE MATERIAL IN HIS POSSESSION. THE TRIBUNAL FURTHER HELD THAT IN THE SAID CASE, THE ASSESSING OFFICER HAD NO NEW INFORMATION OR TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. THE RELEVANT FINDING S OF THE TRIBUNAL ARE AS UNDER: - 16. IN SO FAR CONTENTIONS OF THE DEPARTMENT THAT THE ASSESSING OFFICER DID NOT GET OPPORTUNITY TO APPLY HIS MIND ON THE DOCUMENTS FURNISHED BY ASSESSEE AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(1), WE DO NOT FIND A NY FORCE IN THE SAID CONTENTIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA) HAS HELD THAT EXPRESSION, REASON TO BELIEVE DOES NOT HAVE DIFFERENT MEANING, WHERE ASSESSMENTS ARE FRAMED U/S.143(1) AND WHERE ASSESSMENT IS C OMPLETED U/S.143(3) OF THE ACT. THE RELEVANT EXTRACT OF THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER : 13. HAVING REGARD TO THE JUDICIAL INTERPRETATION PLACED UPON THE EXPRESSION REASON TO BELIEVE, AND THE CONTINUED USE OF THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT HAS BEEN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WORDS REASON TO BELIEVE HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINC TION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WORDS REASON TO BELIEVE VIS - - VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL - FLEDGED S CRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY 11 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION REASON TO BELIEVE IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER SECTION 143(1) MA Y WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 13. THE TRIBUNAL ALSO TOOK NOTE OF THE CONTENTION OF THE DEPARTMENT THAT WHERE THE ORIGINAL ASSESSM ENT WAS COMPLETED UNDER SECTION 143(1) OF THE ACT, THEN THE ASSESSING OFFICER DOES NOT GET OPPORTUNITY TO APPLY THE MIND AND RELIED UPON THE HONBLE BOMBAY HIGH COURT IN KHUBCHANDANI HEALTHPARKS (P.) LTD. VS. ITO REPORTED IN 68 TAXMANN.COM 91 (BOM.), WHICH WAS ALSO IN RELATION TO ASSESSMENT BEING COMPLETED BY ISSUE OF INTIMATION UNDER SECTION 143(1) OF THE ACT AND THEREAFTER, ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT. THE HONBLE BOMBAY HIGH COURT ALSO CONSIDERED THE RATIO LAID DOWN BY THE APEX COURT IN ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA). THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER: - 16. IN SO FAR CONTENTIONS OF THE DEPARTMENT THAT THE ASSESSING OFFICER DID NOT GET OPPORTUNITY TO APPLY HIS MIND ON THE DOC UMENTS FURNISHED BY ASSESSEE AS THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(1), WE DO NOT FIND ANY FORCE IN THE SAID CONTENTIONS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA) HAS HELD THAT EXPRESSION, REASON TO BELIEVE DOES NOT HAVE DIFFERENT MEANING, WHERE ASSESSMENTS ARE FRAMED U/S.143(1) ANDWHERE ASSESSMENT IS COMPLETED U/S.143(3) OF THE ACT. THE RELEVANT EXTRACT OF THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER: 13. HAVING REGARD TO THE JUDICIAL INTERPRETATIO N PLACED UPON THE EXPRESSION REASON TO BELIEVE, AND THE CONTINUED USE OF THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT HAS BEEN UNDERSTOOD BY THE COURTS. THE ASSUMPTI ON OF THE REVENUE THAT SOMEHOW THE WORDS REASON TO BELIEVE HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, THERE IS NO WAR RANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFORE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS W HILE INTERPRETING THE WORDS REASON TO BELIEVE VIS - - VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABLE TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSIO N WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTIO N 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL - FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACC EPTING THE RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A 12 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB DISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION REASON TO BELIEVE IN CASES WHERE ASSESSMENTS WERE FRAMED EARLIER U NDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. 17. T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) HAS REITERATED THAT NOTICE ISSUED U/S.148 WOULD BE WITHOUT JURISDICTION FOR ABSENCE OF REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT EVEN IN CASE WHERE A SSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S.143(1) OF THE ACT. THE HONBLE HIGH COURT WHILE HOLDING SO, CONSIDERED THE DECISIONS RENDERED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. REPORTED AS 291 ITR 500 AND CIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. (SUPRA). THE RELEVANT EXTRACT OF THE JUDGMENT RENDERED IN THE CASE OF KHUBCHANDANI HEALTHPARKS (P) LTD. VS. ITO (SUPRA) READS AS UNDER : 3. ON HEARING THE PARTIES, WE FIND THAT THE APEX COURT IN ASSISTANT COMMISSIONER OF INCOME TAX VS. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500, HAD AN OCCASION TO DEAL WITH IDENTICAL FACTS, NAMELY REOPENING NOTICES ISSUED UNDER SECTION 148 OF THE ACT WHERE ASSESSMENT IS COMPLETED EARLIER BY INTIMATION UN DER SECTION 143(1) OF THE ACT. IN THE ABOVE CASE, THE APEX COURT HELD THAT A NOTICE FOR - REOPENING AN ASSESSMENT UNDER SECTION 148 OF THE ACT COULD ONLY BE JUSTIFIED IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. THIS DECISION OF THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) HAS NOT BEEN DISTURBED BY THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA). IN FACT, THE SUPREME COURT IN ZUARI ESTATE DEVELOPMENT AND IN VESTMENT CO. LTD. (SUPRA) MAKES A SPECIFIC REFERENCE TO ITS DECISION IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) TO HOLD THAT WHERE THE ASSESSMENT HAS BEEN COMPLETED BY INTIMATION UNDER SECTION 143(1) OF THE ACT, THERE CAN BE NO QUESTION OF CHANGE OF O PINION. 4. WE FURTHER FIND THAT THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) HAS NOT DEALT WITH THE ISSUE WHETHER BEFORE INVOKING SECTION 148 OF THE ACT, THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT, WHERE THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED BY INTIMATION UNDER SECTION 143(1) OF THE ACT. THE REVENUE IS TRYING TO INFER THAT BECAUSE THE APEX COURT IN ZUARI ESTATE DEVELOPMENT AND INVESTMENT CO. LTD. (SUPRA) HAS SET ASIDE THE ORDER OF THIS COURT AND RESTORED THE ISSUE TO BE DECIDED ON MERITS BY THE TRIBUNAL, IT MUST BE INFERRED THAT THE APEX COURT HAD COME TO THE CONCLUSION THAT REASON TO BELIEVE WAS NOT NECESSARY FOR ISSUING REASSESSMENT NOTICES WHERE THE REGULAR AS SESSMENT WAS COMPLETED UNDER SECTION 143(1) OF THE ACT. AS RIGHTLY POINTED OUT BY MR. PARDIWALLA, IT CAN EQUALLY BE INFERRED THAT THE APEX COURT IN THE ABOVE CASE HAD COME TO THE CONCLUSION THAT THERE IS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND CONSEQUENTLY RESTORED THE ISSUE TO THE TRIBUNAL TO DECIDE THE REASSESSMENT PROCEEDINGS ON MERITS. 18. THUS, IN VIEW OF THE FACTS OF THE PRESENT CASE AND THE CASE LAWS DISCUSSED ABOVE WE HOLD THAT THE ASSESSING OFFICER HAD NO TANGIBLE MATERIAL TO JUS TIFY HIS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S.147 ARE WITHOUT JURISDICTION AND HENCE, ARE NOT SUSTAINABLE. ACCORDINGLY GROUND NO.1 TO 3 RAISED BY DEPARTMENT IN APPEAL AR E DISMISSED. 13 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 14. IN THE FACTS OF THE PRESENT CASE ALSO THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME, COPY OF WHICH IS PLACED AT PAGE 2 OF THE PAPER BOOK, HAD IN THE NOTE GIVEN A DECLARATION IN RESPECT OF SUCH RECEIPTS AND HAD POINTED OUT THAT THE SAME DO NOT FALL WITHIN AMBIT OF ROYALTY OR FEES FOR TECHNICAL SERVICES. THE RELEVANT NOTE READS AS UNDER: - NOTE: 1 . SANDVIK SYSTEMS DEVELOPMENT AB (SSDAD) IS A NON - RESIDENT COMPANY INCORPORATED IN SWEDEN. SSDAB DOES NOT HAVE ANY OFFICE (OR ANY OTHER EST ABLISHMENT) IN INDIA. IT IS A TAX RESIDENT OF SWEDEN UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND SWEDEN (TAX TREATY). 2 . SSDAB PROVIDES IT SUPPORT SERVICES TO SANDVIK AB GROUP COMPANIES ALL OVER THE WORLD, INCLUDING SANDVIK ASIA LIMITE D (SAL) AND WALTER TOOLS INDIA PRIVATE LIMITED (WALTER INDIA) IN INDIA. 3 . DURING THE YEAR ENDED 31 MARCH 2008, SSDAB HAS CHARGED RS.19,414,642 TO SAL AND RS 310,396 TO WALTER INDIA TOWARDS THE AFORESAID IT SUPPORT SERVICES. THE RECEIPTS TOWARDS SUCH IT SUPPORT SERVICES RENDERED BY SSDAB DO NOT FALL WITHIN THE AMBIT OF ROYALTIES OR FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF ARTICLE 12 OF THE TAX TREATY READ WITH THE PROTOCOL THERETO. 15. FURTHER IN FORM NO.3CEB, AUDITED REPORT, THE ASSESSEE IN C LAUSE 12 APPENDIX B HAS GIVEN DECLARATION IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES, WHICH IS AS UNDER: - PARTICULARS IN RESPECT OF MUTUAL AGREEMENT OR ARRANGEMENT: INTERNATIONAL TRANSACTIONS WITH AN ASSOCIATED ENTERPRISE OR E NTERPRISES BY WAY OF MUTUAL AGREEMENT OR ARRANGEMENT FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BENEFIT. SR.NO. NAME AND ADDRESS OF THE ASSOCIATED ENTERPRISE WITH WHO M THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO DESCRIPTION OF SUCH MUTUAL AGREEMENT OR ARRANGEMENT AMOUNT PAID/RECEIVED OR PAYABLE/RECEIVABLE IN THE TRANSACTION METHOD USED FOR DETERMINING THE ARM'S LENGTH PRICE (SEE SECTION 92C(1) AS PER BOOKS OF ACCOUNT AS COMPUTED BY THE ASSESSEE HAVING REGARD TO THE ARM'S LENGTH PRICE (RS) (RS) CLAUSE 12(A) CLAUSE 12(B) CLAUSE 12(C) CLAUSE 12(D) 1 SANDVIK ASIA LIMITED, MUMBAI - PUNE ROAD, DAPODI, PUNE - 411012 RECEIPT FOR IT SUPPORT SERVICES 19, 414,642 19,414,642 REFER NOTE 7 TO APPENDIX C 14 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 2 WALTER TOOLS INDIA PRIVATE LIMITED, MUMBAI - PUNE ROAD, DAPODI, PUNE - 411012 RECEIPT FOR IT SUPPORT SERVICES 310,396 310,396 REFER NOTE 7 TO APPENDIX C 16. IN VIEW OF THE ABOVE SAID DECLARATIONS MADE BY THE A SSESSEE WHICH HAS ALSO BEEN CONSIDERED BY THE PUNE BENCH OF TRIBUNAL IN SISTER CONCERN OF THE ASSESSEE I.E. SANDVIK INFORMATION TECHNOLOGY AB, THOUGH FOR ASSESSMENT YEAR 2005 - 06, WE HOLD THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL ESTABLISHING ESCAPEMENT OF INCOME IN THE HANDS OF ASSESSEE, THERE IS NO MERIT IN THE EXERCISE OF INVOKING OF RE - ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE REASON TO BELIEVE ESCAPEMENT OF INCOME SHOULD HAVE A LIVE LINK. THERE IS NO MERIT IN THE STAND OF AUTHORITIES BELOW THAT IN THE PRESENT CASE, WHERE THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(1) OF THE ACT, THEN THE ASSESSING OFFICER HAD NO ACTION TO LOOK AT OR TO CONSIDER THE SAME. UNDER THE PROVISIONS OF THE ACT, IT IS INCUMBENT UPON THE ASSESSING OFFICE R TO COME TO FINDING ON THE BASIS OF TANGIBLE MATERIAL TO ESTABLISH HIS CASE OF REASON TO BELIEVE OF ESCAPEMENT OF INCOME; IN THE ABSENCE OF WHICH, RE - ASSESSMENT PROCEEDINGS ARE INVALID AND BAD IN LAW. ACCORDINGLY, WE HOLD SO AND CANCEL THE SAME. THE CON SEQUENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT ALSO DOES NOT STAND. THUS, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALLOWED AND THE BALANCE GROUNDS OF APPEAL BECOME ACADEMIC IN NATURE. 12. WE FIND THAT ISSUE RAISED IN THE PRES ENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL AND FOLLOWING THE SAME PARITY OF REASONING AS IN THE CASE OF SISTER CONCERN OF THE ASSESSEE, WE HOLD THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL ESTABLISHING ESCAPEMENT OF INCOME IN THE HANDS OF ASS ESSEE, THE ASSESSING OFFICER HAS ERRED IN EXERCISE OF JURISDICTION UNDER SECTION 147 OF THE ACT BY REOPENING ASSESSMENT AFTER RECORDING REASONS. THE REASONS TO BELIEVE OF ESCAPEMENT OF INCOME SHOULD HAVE A LIVE LINK WITH THE TANGIBLE MATERIAL AND EVEN IF THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(1) OF THE ACT, THE REQUIREMENT IS FOR THE ASSESSING OFFICER TO COME TO A FINDING ON THE BASIS OF TANGIBLE MATERIAL TO ESTABLISH HIS CASE OF REASON TO BELIEVE OF ESCAPEMENT OF INCOME ; IN THE ABSENCE OF WHICH , RE - ASSESSMENT PROCEEDINGS ARE BOTH INVALID AND BAD IN LAW. ACCORDINGLY, WE HOLD SO AND CANCEL THE RE - ASSESSMENT PROCEEDINGS INITIATED IN THE CASE OF ASSESSEE, THE CONSEQUENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DOES NOT STAND. THUS, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALLOWED AND BALANCE GROUNDS OF APPEAL BECOME ACADEMIC IN NATURE. 15 ITA NO. 46 6 /P U N/201 5 ITA NOS.487 & 488/PUN/2016 M/S. SANDVIK TOOLING SVERIGE AB 1 3 . THE FACTS AND ISSUES IN ITA NOS.487/PUN/2016 & 488/PUN/2016 ARE SIMILAR TO THE FACTS AND ISSUES IN ITA NO.466/PUN/2015 AND OUR DECISION IN ITA NO.466/PUN/2015 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.487/PUN/2016 & 488/PUN/2016. 14. IN THE RESULT, ALL THE APPEAL S OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 21 ST DAY OF DECE MBER , 201 7 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 21 ST DECE MBER , 201 7 . GCVSR / COPY OF THE O RDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DRP, PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR B , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE