Solar Turbines International Co., Singapore V. ADIT, New Delhi

ITA 5186/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6536 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-02-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA
• Keywords: Reopening of assessment; Depreciation; Double taxation relief; Services rendered outside India; Permanent establishment; Advance ruling; Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO. 5186/DEL/2012 (ASSESSMENT YEAR 2004-05) APPELLANT BY : SH. GIRISH DAVE, ADV. RESPONDENT BY : SH. ANUJ ARORA, CIT DR DATE OF HEARING : 13.02.2017 DATE OF PRONOUNCEMENT: 16.03.2017 ORDER PER BEENA A. PILLAI, JM: 1. THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 01.08.2012 PASSED BY LD. DIT (INTERNATI ONAL TAXATION), DEHRADUN UNDER SECTION 148, READ WITH 14 3 (3) READ WITH 144C (13) OF THE ACT, ON THE FOLLOWING GR OUNDS OF APPEAL: GROUND NO. L: ERRED IN RE-OPENING THE ASSESSMENT UNDER SECTION 147 A. THE LEARNED ASSISTANT DIRECTOR OF INCOME-TAX ('A DIT') ERRED IN RE-OPENING THE ASSESSMENT FOR AY 2004-05 UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 ('THE SOLAR TURBINESS INTERNATIONAL CO. 14, TRACTOR ROAD SINGAPORE GIR/PAN: VS. A CIT, INTERNATIONAL TAXATION, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 2 OF 17 ACT') ON THE GROUND THAT INCOME OF THE APPELLANT HA S ESCAPED ASSESSMENT. B. THE LEARNED ADIT ERRED IN RE-OPENING THE ASSESSMENT UNDER SECTION 147 PROVIDING REASONS RECORDED IN WRITING THAT THERE IS FAILURE ON PART O F THE APPELLANT ' IN OFFERING THE INCOME FROM START-UP AN D COMMISSIONING SERVICES UNDER SECTION 44BB OF THE ACT AND NOT CONSIDERING THE SAME AS FEES FOR TECHNICAL SERVICES UNDER SECTION 9(1 )(VII). THE LEARNED ADIT SUBSEQUENTLY ACCEPTED THE APPELLANT'S CONTENTION ON TAXABILITY OF START-UP AND COMMISSIONING SERVICES B UT ERRED IN ASSESSING THE RECEIPTS ON ACCOUNT OF OVERH AUL AND REPAIR SERVICES UNDER SECTION 44BBOFTHEACT. C. THE LEARNED ADIT ERRED IN REOPENING THE ASSESSME NT WITHOUT TAKING COGNIZANCE OF THE FACT THAT THERE IS NO NEXUS BETWEEN REASONS RECORDED IN WRITING FOR RE- OPENING THE ASSESSMENT AND THE CONCLUSION DRAWN DURING THE COURSE AND COMPLETION OF THE ASSESSMENT. THE LEARNED ADIT HAS THEREBY ERRED IN EXERCISING HI S POWERS BEYOND JURISDICTION. D. THE LEARNED ADIT ERRED IN CONSIDERING THE ERRONE OUS OBSERVATION OF THE HONOURABLE DISPUTE RESOLUTION PANEL ('DRP 1 ) THAT THE RE-OPENING OF ASSESSMENT IS VALID IN LAW AS THE LEARNED ADIT ISSUED NOTICE UNDE R SECTION 148 OF THE ACT ON THE GROUND THAT INCOME FR OM OVERHAULING WAS NOT DISCLOSED IN THE ORIGINAL RETUR N OF INCOME. THE LEARNED AO ERRED IN NOT APPRECIATING TH E FACT THAT THE ASSESSMENT WAS NOT RE-OPENED ON THE ABOVE GROUNDS BUT ON INCOME FROM STARTUP AND COMMISSIONING. E. THE LEARNED ADIT ERRED IN EXERCISING HIS POWERS BEYOND JURISDICTION BY CARRYING OUT THE ASSESSMENT ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 3 OF 17 UNDER SECTION 147 DESPITE THE FACT THAT NO NOTICE A ND REASONS RECORDED IN WRITING WERE ISSUED STATING INCOME ON ACCOUNT OF RECEIPTS FROM OVERHAUL AND REP AIR SERVICES HAVE ESCAPED ASSESSMENT. F. THE LEARNED ADIT ERRED IN NOT APPRECIATING THE FACT THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATIN G TO THE COMPLETION OF THE ASSESSMENT. GROUND NO.2: ERROR IN TREATING RECEIPTS FROM REPAIR AND OVERHAULING SERVICES RENDERED OUTSIDE INDIA AS TAXABLE UNDER DEEMING PROVISIONS OF SECTION 44BB OF THE ACT A. THE LEARNED ADIT ERRED IN CONTENDING THAT THE RECEIPTS FROM OVERHAUL AND REPAIR SERVICES ARE TAXA BLE UNDER SECTION 44BB OF THE ACT. B. THE LEARNED ADIT ERRED IN CONTENDING THAT THE ASSESSEE HAS A 'PERMANENT ESTABLISHMENT' ('PE') IN INDIA ON THE GROUND THAT THE INCOME FROM START-UP A ND COMMISSIONING SERVICES ARE OFFERED TO TAX UNDER SECTION 44BB OF THE ACT AND THAT THE APPELLANT HAS FILED THE RETURN OF INCOME IN INDIA. C. THE LEARNED ADIT ERRED IN CONCLUDING THAT THE SERVICES PERTAINING TO REPAIR AND OVERHAULING OF IN COME ARE PART OF THE COMPOSITE CONTRACT FOR INSTALLATION AND COMMISSIONING SERVICES. D. THE LEARNED ADIT FAILED TO APPRECIATE THE FACT T HAT THE APPELLANT HAD ENTERED INTO SEPARATE CONTRACTS F OR START-UP AND COMMISSIONING SERVICES AND REPAIR AND OVERHAULING SERVICES AND THAT THERE IS NO RELATION BETWEEN THE SAID CONTRACTS, ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 4 OF 17 E. THE LEARNED ADIT ERRED IN NOT APPRECIATING THE F ACT THAT THE REPAIR AND OVERHAULING SERVICES WERE RENDERED OUTSIDE INDIA AND THE PAYMENT FOR THE SAME WAS RECEIVED OUTSIDE INDIA AND THEREBY NOT TAXABLE IN INDIA UNDER ARTICLE 12 OF INDIA US TAX TREATY. F. THE LEARNED ADIT ERRED IN NOT FOLLOWING THE FIND ING OF THE HONBLE AUTHORITY OF ADVANCE RULING ('AAR') IN APPELLANT'S OWN CASE WHICH CLEARLY HELD THAT THE CONTRACT IN CONNECTION WITH OVERHAUL AND REPAIR SERVICES IS NOT PART OF COMPOSITE CONTRACT. GROUND NO.3: ERROR IN LEVYING ADDITIONAL INTEREST A. THE LEARNED ADIT ERRED IN LEVYING ADDITIONAL INTEREST UNDER SECTION 234B AND UNDER SECTION 220(2 ) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND MODIFY THE ABOVE GROUNDS DURING THE COURSE OF THE APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RAISED AT THE TIME OF HEARING, IT IS PRAYED THAT TH E ORDER OF THE LEARNED ADIT BE SET ASIDE. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: AASSESSEE IS A NON-RESIDENT, HAVING A PE IN INDIA. IT IS INTO MANUFACTURING OF INDUSTRIAL GAS TURBINES. GAS TURBINE ENGINES, GAS COMPRESSORS AND GAS TURBINE POWERED COMPRESSORS SETS, MECHANICAL DRIVE PACKAGES AND GEN ERATOR SETS. THE PRODUCTS FROM THE ASSESSEE PLAY AN IMPORT ANT ROLE IN THE DEVELOPMENT OF OIL, NATURAL GAS AND POWER GE NERATION PROJECTS AROUND THE WORLD. ASSESSEE ALSO PROVIDES A FTER SALES SERVICES AND SUPPORT TO CUSTOMERS ACROSS GLOBE. DUR ING THE ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 5 OF 17 YEAR UNDER CONSIDERATION ASSESSEE HAD FILED ITS RET URN OF INCOME ON 30.10.2004 DECLARING A TOTAL INCOME OF RS.1,36,42,000/-. THE CASE WAS PROCESSED UNDER SECT ION 143(1) ON 19.03.2007 AND A DEMAND OF RS.16,25,858/- WAS DETERMINED. SUBSEQUENTLY THE CASE WAS REOPENED BY I SSUE OF NOTICE UNDER SECTION 148 OF THE ACT ON 28.03.2011, WHICH READS AS UNDER: NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 OFFICE OF THE ASST, DIRECTOR OF INCOME TAX. INTERNATIONAL TAXATION, DEHRADUN DATED 20.03.2011 TO M/S SOLAR TURBINE INTERNATIONAL CO. WHEREAS I HAVE REASON TO BELIEVE THAT YOUR INCOME IN RESPECT OF WHICH YOU ARE ASSESSABLE/CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 2004-2005 HAS ESCAPED/ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME-TAX ACT 196L. I, THEREFORE, PROPOSE TO ASSESS/REASSESS/RE COMPLETE THE INCOME ACESS/DEPRECIATION ALLOWANC E FOR THE SAID ASSESSMENT YEAR AN HEREBY REQUIRED YOU TO DELIVER TO ME WITHIN 30 DAYS FROM THE DATE OF SERVICE OF THIS NOTICE, A RETURN IN THE PRESCRIBED FORM ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 6 OF 17 OF YOUR INCOME/THE INCOME OF IN RESPECT OF WHICH YO U ARE ASSESSABLE FOR THE SAID ASSESSMENT YEAR. THIS NOTICE IS BEING ISSUED AFTER OBTAINING THE NECESSARY SATISFACTION OF THE DIT-II, INCOME TAX, N EW DELHI/DGIT, INTL. TAX, NEW DELHI. SD/- (SMITA SINGH) ASST. DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION, DEHRADUN . 3. THE ASSESSEE FILED E-RETURN ON 11.05.2011 IN RESPON SE TO NOTICE UNDER SECTION 148 AND REQUESTED FOR REASONS RECORDED FOR REOPENING WHICH WAS PROVIDED TO THE ASSESSEE ON 25.07.2011, WHICH READS AS UNDER: OFFICE OF THE ASSTT. DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION DEHRADUN F. NO. ASSTTDIR/ENTI. TAX/DDN/2011-12/227 DATED: 25.07.2011 TO M/S SOLAR TURBINES INTERNATIONAL CO, 14, TRACTOR ROAD, SINGAPORE. SIR, SUB: ASSESSMENT PROCEEDINGS U/S 148 (A,Y. 2004-05) PLEASE REFER TO YOUR LETTER DATED 27.04.2011 ON THE ABOVE SUBJECT. ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 7 OF 17 AS REQUESTED BY YOU, REASONS FOR INITIATING PROCEED ING U/S 148 OF THE I.T. ACT IS ENCLOSED HEREWITH. YOU ARE ALSO REQUEST ED TO FILE YOU SUBMISSIONS IN THIS REGARD, IF ANY. DATE FIXED FOR COMPLIANCE IS 08.08.2011. ENCL: AS ABOVE YOURS FAITHFULLY, SD/- (MAYANK KUMAR), ASSTT. DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION, DEHRADUN 1. NAME OF ASSESSEE : SOLAR TURBINES INTERNATIO NAL CO. 2. ADDRESS : 14-TRACTOR ROAD, SINGAPORE 3. PAN/GIR NO. : AAJCS3585J 4. ASSESSMENT YEAR : 2004-05 5. WHETHER R/NR/NOR : NON RESIDENT REASONS FOR INITIATING PROCEEDING U/S 148 THE ASSESSEE NRC HAS FILED RETURN OF INCOME ON 30.10.2004 AT THE INCOME OF RS. 13642000/-. WHILE F ILING THE RETURN OF INCOME THE ASSESSEE HAS OFFERED THE RE VENUES OF RS. 1470616/- EARNED ON ACCOUNT OF STARTUP AND COMMISSIONING OF TURBINES SUPPLIED U/S 44BB(L) OF I. T. ACT AND THE REVENUES OF RS. 12I71384/- FROM TROUBLESHOOT ING SERVICES HAVE BEEN OFFERED U/S USA AS FEE FOR TECHNIC AL SERVICES. ASSESSMENT U/S I43(1) HAS BEEN COMPLETED O N 19.03.2007 ON RETURNED INCOME. DURING THE YEAR THE ASSESSEE ENTERED INTO CONTRACT WITH THE FOLLOWING: 1. ENGINEERS INDIA LTD. 2. BHARAT HEAVY ELECTRICALS LTD. 3. CAIRN ENERGY INDIA PTY LTD. 4. ONGC 5. BG EXPLORATION & PRODUCTION LTD. 6. BELL CERAMICS LTD, THERE IS FAILURE ON PART OF THE ASSESSEE IN NOT TRE ATING THE START UP AND COMMISSIONING OF .TURBINES AS TECHNICAL ACTIVITY AND WRONGLY TAXING SAID RECEIPTS AT LOWER RA TE U/S 44BB, WHEN SUCH RECEIPTS ARE CLEARLY IN THE NATURE OF FEES FOR TECHNICAL SERVICES TAXABLE U/S 9(L)(VII). FURTH ER, IT IS ALSO OBSERVED BY THE HON'BLE HIGH COURT OF UTTRAKHA ND IN THE CASE OF CIT VS M/S. ROLLS ROYCE PVT. LTD. [2007- TII-03- ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 8 OF 17 HC-UKHAND-INTL] THAT FEE FOR TECHNICAL SERVICES CAN NOT BE TAXED U/S 44BB OF THE INCOME-TAX ACT, 1961. THE HON 'BLE HIGH COURT OF UTTRAKHAND VIDE ITS ORDER IN INCOME TAX APPEAL NO. 239 OF 2001 IN THE CASE OF ONGC AS AGENT OF M/S FORAMER FRANCE DEHRADUN, HAS HELD ON 15-12-2005 THAT SERVICES WHICH ARE TECHNICAL IN NATURE ARE NOT COVERED U/S 44BB(1) OF IT ACT. FURTHER THE HON'BLE FINANCE MINISTER WHILE INTRODUCI NG FINANCE BILL 2010 HAS CLARIFIED IN THE EXPLANATORY N OTE TO FINANCE BILL THAT 'COMBINED EFFECT OF THE PROVISIONS OF SECTION 44BB, 44DA AND 115A IS THAT IF THE INCOME OF A NON-RESIDENT IS IN THE NATURE OF FEE FOR TECHNICAL S ERVICES, IT SHALL BE TAXABLE UNDER THE PROVISIONS OF EITHER SECT ION 44DA OR SECTION 115A IRRESPECTIVE OF THE BUSINESS T O WHICH IT RELATES. SECTION 44BB APPLIES ONLY IN A CASE WHE RE CONSIDERATION IS FOR SERVICES AND OTHER FACILITIES RE LATING TO EXPLORATION ACTIVITY WHICH ARE NOT IN THE NATURE OF TECHNICAL SERVICES. THERE IS FAILURE ON THE PART OF THE ASSES SEE THUS IN TAXING THE U/S 44BB WHEN THEY ARE TAXABLE AS FTS U/S 9(I)(VII) AS THEY ARE CLEARLY NOT ELIGIBLE FOR BENE FIT OF SECTION 44BB. THE DECISIONS IN CASE OF FORAMER FRANCE COUPLED WITH INTENTION OF LEGISLATURE FROM THE FINANCE BILL PROVIDE ENOUGH TANGIBLE MATERIAL FOR FORMATION OF BELIEF BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. IN VIEW OF THIS REVENUE OF RS. 1470616/- EARNED DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF START UP AND COMMISSIONIN G SERVICES SHOULD BE BROUGHT TO TAX @ 20% TAKING IT AS FEE FOR TECHNICAL SERVICES U/S 9(I)(VII). HENCE, I HAVE REA SONS TO BELIEVED THAT THE INCOME OF RS. 1470616/- HAS ESCAPE D ASSESSMENT FOR THE YEAR CONSIDERATION. 4. ADMITTEDLY, THE NOTICE OF REOPENING HAS BEEN ISSUE D BEYOND A PERIOD OF 4 YEARS. AT THIS JUNCTURE, LD. C OUNSEL FOR ASSESSEE SUBMITS THAT GROUND NO.1 RAISED BY THE ASS ESSEE PERTAINS TO, LEGALITY OF REASSESSMENT PROCEEDINGS. ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 9 OF 17 GROUND NO. 1: 5. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAS REOPENED THE ASSESSMENT BY RELYING UPON THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN THE C ASE OF ONGC AS AN AGENT OF M/S. FORMER & FRANCE, WHEREIN IT HAS BEEN HELD THAT THE SERVICES WHICH ARE TECHNICAL IN NATURE ARE NOT COVERED UNDER SECTION 44 BB (1) OF THE ACT. HE SUBMITTED THAT DECISION OF HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF FORMER & FRANCE (SUPRA) , WAS DECIDED ON 15.12.2005. IT WAS CONTESTED BEFORE LD. AO THAT DECISION IN THE CA SE OF FORMER & FRANCE (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THAT ASSESSEE HAD CORRECTLY ASSESS ED THE INCOME UNDER SECTION 44 BB OF THE ACT. 6. IN THE MEANTIME DRP FOR ASSESSMENT YEAR 2005-06 I N ASSESSEES OWN CASE ISSUED DIRECTIONS, HOLDING THAT INCOME FROM START-UP AND COMMISSIONING SERVICE ARE NOT TAX ABLE AS FEES FOR TECHNICAL SERVICES UNDER ARTICLE 12(2) DTAA BUT WOULD BE TAXABLE UNDER SECTION 44 BB OF THE ACT. LD . COUNSEL HAS REFERRED TO AND RELIED UPON THE ORDER OF DRP FO R ASSESSMENT YEAR 2005-06, PASSED ON 01.09.2011, PLAC ED AT PAGE 116 TO 126 OF THE PAPER BOOK. 7. IT HAS BEEN SUBMITTED BY LD. COUNSEL THAT ASSESSEE FILED OBJECTIONS BEFORE LD. AO ON 03.11.2011 AND PLACED T HE DECISION OF DRP FOR ASSESSMENT YEAR 2005-06 ON RECO RD. WHILE COMPLETING THE ASSESSMENT ORDER ASSESSING OFF ICER ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 10 OF 17 MADE ADDITION IN RESPECT OF INCOME FROM REPAIR AND OVERHAULING, EARNED BY ASSESSEE AS FEES FROM TECHN ICAL SERVICES UNDER SECTION 115 A READ WITH SECTION 9(1) (VII) OF THE ACT AND DROPPED THE ISSUE OF START UP AND COMMISSIO NING FOR WHICH THE NOTICE OF REOPENING WAS ISSUED U/S 148 OF THE ACT. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT, LD. AO REO PENED ASSESSMENT ON THE GROUND THAT INCOME EARNED BY ASSE SSEE FROM START-UP AND COMMISSIONING SHOULD BE CONSIDERE D UNDER SECTION 44 DA READ WITH 115A OF THE ACT. BUT AT THE TIME OF FRAMING DRAFT REASSESSMENT ORDER, ASSESSING OFFICER ACCEPTED THE INCOME OFFERED BY ASSESSEE FROM START- UP AND COMMISSIONING UNDER SECTION 44 BB, HOWEVER, MADE AD DITION IN RESPECT OF INCOME FROM REPAIR AND OVERHAULING UN DER SECTION 115A READ WITH SECTION 9(1) (VII) OF THE AC T AS FEES FOR TECHNICAL SERVICES. 8. HE SUBMITTED THAT THE SCHEME UNDER REASSESSMENT PROCEEDINGS DOES NOT ALLOW ASSESSING OFFICER TO MAK E ADDITION ON SOME OTHER GROUNDS FOR WHICH THE NOTICE OF REOPE NING HAS NOT BEEN ISSUED. LD. COUNSEL PLACED RELIANCE UPON V ARIOUS JUDGMENTS OF THE JURISDICTIONAL HIGH COURT AS WELL AS COORDINATE BENCHES OF THIS TRIBUNAL IN RESPECT OF T HIS PREPOSITION, WHICH ARE AS UNDER: ORIENTAL BANK OF COMMERCE VERSUS ACIT (2015) 228 TAXMANN 25; (DEL) RANBAXY LABORATORIES LTD VERSUS CIT (2011) 336 ITR 136;(DEL) CHEIL INDIA (P.) LTD VERSUS ACIT (2012) 146 TTJ 17, (DEL) ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 11 OF 17 AND MANY MORE THAT HAS BEEN PLACED IN THE PAPER BOO K OF CASE LAWS. 9. ON THE CONTRARY, LD. DR SUBMITTED IN HIS WRITTEN SUBMISSIONS FILED BEFORE US TODAY AT THE TIME OF HE ARING AND THEREAFTER DURING THE COURSE OF DAY THAT NO ASSESSM ENT UNDER SECTION 143(3) OF THE ACT HAS BEEN CARRIED OUT PRIO R TO THE ISSUANCE OF NOTICE UNDER SECTION 147. THEREFORE, TH ERE CANNOT BE ANY OCCASION FOR ANY REGULARITY AS THE ENTIRE AS SESSMENT IS OPEN TO ASSESSING OFFICER TO MAKE ADDITION ON ANY I SSUE. HE PLACED RELIANCE ON EXPLANATION 3 TO SEC., 147 OF TH E ACT. HE ARGUED THAT THE NOTICE ISSUED FOR REOPENING CANNOT BE HELD INVALID BECAUSE THE ASSESSING OFFICER HAD REASONS T O BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BASED ON WHICH H E HAD ADDRESSED BROADLY IN THE REASONS RECORDED AS WELL A S IN THE DRAFT ASSESSMENT ORDER PASSED BY HIM. LD. DR SUBMIT TED THAT THE REOPENING OF ASSESSMENT WAS BASED ON THE DECISI ON OF HONBLE UTTRAKHAND HIGH COURT IN THE CASE OF FORAME E & FRANCE(SUPRA). HE PLACED RELIANCE ON THE DECISION O F THIS TRIBUNAL IN CASE OF ACIT VS. CENTRAS WAREHOUSING CO PR., REPORTED IN (2012) 144 TTJ 764. LD. DR FURTHER SUBM ITTED THAT HONBLE SUPREME COURT REVERSED THE DECISION OF FORMAR FRANCE (SUPRA) IN THE YEAR 2015 IN CASE OF ONGC REP ORTED IN (2015)59 TAXMANN.COM1. HE EMPHASIZED THAT LD. AO HA D INITIATED REASSESSMENT PROCEEDINGS MUCH BEFORE THE DECISION OF HONBLE SUPREME COURT AND THEREFORE WAS VALID. H OWEVER, LD. AO HAS SIMPLY RELIED UPON THE DIRECTIONS OF DRP PASSED ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 12 OF 17 FOR ASSESSMENT YEAR 2005-06. LD. DR PLACED RELIANCE UPON THE DRAFT ASSESSMENT ORDER PASSED. 10. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH T HE SIDES IN THE LIGHT OF THE RECORDS AND THE JUDICIAL PROCEEDINGS PLACED BEFORE US. 11. THERE IS NO DOUBT THAT THE REOPENING HAS BEEN DONE BY ASSESSING OFFICER BEYOND 4 YEARS. ON PERUSAL OF THE REASONS RECORDED (HEREINABOVE REPRODUCED), IT IS CLEAR THAT ASSESSING OFFICER HAD REASONS TO BELIEVE THAT INCOME RECEIVED BY ASSESSEE FROM START-UP AND COMMISSIONING HAS ESCAPE D ASSESSMENT AS THE SAME ACCORDING TO HIM SHOULD HAVE BEEN TAXED AS FTS UNDER SECTION 44DA READ WITH 115 A OF THE ACT. FURTHER ON PERUSAL OF THE ASSESSMENT ORDER IT IS OB SERVED THAT LD. AO HAD MADE DETAILED ANALYSIS OF THE ISSUE , AND THEN ACCEPTED THE INCOME FROM SETUP AND COMMISSIONI NG, AS DISCLOSED BY THE ASSESSEE, UNDER SECTION 44 BB OF T HE ACT. HE PROCEEDED TO MAKE ADDITION IN RESPECT OF INCOME EAR NED BY THE ASSESSEE FROM REPAIRS AND OVERHAULING AS FTS UN DER SECTION 115A READ WITH SECTION 9(1)(VII) OF THE ACT WHICH WAS NOT AT ALL THE SUBJECT MATTER IN THE REASONS RECORD ED FOR REOPENING. IN FACT ASSESSING OFFICER DROPPED THE GR OUND WHICH FORMED THE BASIS OF REOPENING. IN THE DRAFT ASSESSM ENT ORDER THE ASSESSING OFFICER HAS RECORDED HIS VIEWS IN RES PECT OF THE RECEIPTS ON ACCOUNT OF START-UP AND COMMISSIONING S ERVICES AS UNDER: ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 13 OF 17 THE RECEIPTS ON ACCOUNT OF START-UP AND COMMISSIONING SERVICES, WHICH HAS BEEN OFFERED TO T AX UNDER SECTION 44 BB BY ASSESSEE IN RETURN OF INCOME FILED, IS CONSIDERED TO BE TAXABLE UNDER SECTION 44 BB IN VIEW OF THE DIRECTIONS OF LD. DRP IN THE CASE OF THE ASSESSEE FOR AY 2005-2006. IN VIEW OF THE ABOVE INCOME OF THE ASSESSEE COMPAN Y IS COMPUTED (IN RS) HEREUNDER AS:- THE DECISIONS RELIED UPON BY LD. DR ARE DISTINGUISH ABLE TO THE FACTS BEFORE US. IN THE DECISION OF THIS TRI BUNAL IN CASE OF ACIT VS. CENTRAL WAREHOUSING CORPN(SUPRA), THE R EASON FOR REASSESSMENT WAS SUPPORTED BY THE DECISION OF HONB LE SUPREME COURT WHICH HAD ATTAINED FINALITY. FURTHER IN THE DECISION OF HONBLE SUPREME COURT I N CASE OF RAYMOND WOOLEN MILLS VS. ITO REPORTED IN 23 6 ITR 34, THE ISSUE BEFORE THE HONBLE COURT WAS ONLY TO SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH DEPARTMENT COULD REOPEN THE CASE. IN OUR CONSIDERE D VIEW CROSS RECEIPTS FORM TROUBLE SHOOTING SERVICES AS SHOWN BY THE ASSESSEE 1,22,35,773/- RECEIPTS FROM REPAIR AND OVERHAULING SERVICE AS DISCUSSED ABOVE. 26, 70,47, 533/- TOTAL (TAXABLE AS FTS@20% +SC) 27, 92,83, 306/- INCOME FROM STARTUP AND COMMISSIONING SERVICES UNDER SECTION 44BB(10% OF RS. 1,45,34,288/-) 14,53429/- TOTAL INCOME 28,07, 16,7 35/- TOTAL INCOME ROUNDED OFF 28,07,16,740/- ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 14 OF 17 THE PRINCIPLE APPLIED BY HONBLE SUPREME COURT SUPP ORTS CONTENTIONS OF ASSESSEE. IN THE CASE OF ASSESSEE BE FORE US REASON FOR WHICH THE ASSESSMENT HAS BEEN REOPENED W AS EVENTUALLY DROPPED BY LD. AO HIMSELF AND HE MADE AD DITIONS ON DIFFERENT ISSUES, WITHOUT THERE BEING SUFFICIENT MATERIAL IN HAND, NO REASONS WERE RECORDED IN RESPECT OF THE AD DITIONS MADE AND NO NEW NOTICE WAS ISSUED TO ASSESSEE ON TH AT ISSUE. 12. HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. VS. CIT (SUPRA) HAS OBSERVED AS UNDER: EVIDENTLY, THEREFORE, WHAT PARLIAMENT INTENDED BY THE USE OF WORDS AND ALSO IS THAT THE ASSESSING OFFIC ER, UPON THE FORMATION OF REASON TO BELIEVE UNDER SECTI ON 147 AND THE ISSUANCE OF NOTICE UNDER SECTION 148 (2 ) MUST ASSESS OR REASSESS: (I). SUCH INCOME; AND AL SO (II) ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. THE WORDS SUCH INCOMEREFERRED TO THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND IN RESPECT OF WHICH THE ASSESSING OFFICER HAS FORMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT. HENCE, THE LANGUAGE WHICH HAS BEEN USED BY PARLIAMENT IS INDICATIVE OF THE POSITI ON THAT THE ASSESSMENT OR REASSESSMENT MUST BE IN ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 15 OF 17 RESPECT OF THE INCOME IN RESPECT OF WHICH HE HAS FO RMED A REASON TO BELIEVE THAT IT HAS ESCAPED ASSESSMENT AND ALSO IN RESPECT OF ANY OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY DURING THE COURSE OF THE PROCEEDINGS AS HAVING ESCAPED ASSESSMENT. IF THE INCOME, THE ESCAPEMENT OF WHICH WAS THE BASIS OF TH E FORMATION OF THE REASON TO BELIEVE IS NOT ASSESSED OR REASSESSED, IT WOULD NOT BE OPEN TO THE ASSESSING OFFICER TO INDEPENDENTLY ASSESS ONLY THAT INCOME WH ICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION AS HAVING ESCAPED ASSESSMENT. IF UPON ISSUANCE OF NOTICE UNDER SECTIO N 148 (2), ASSESSING OFFICER ACCEPTS THE OBJECTION OF THE ASSESSEE AND DOES NOT ASSESS OR REASSESS THE INCOME WHICH WAS THE BASIS OF THE NOTICE, IT WOULD NOT BE OPEN TO HIM TO ASSESS INCOME UNDER SOME OTHER ISSUE INDEPENDENTLY. PARLIAMENT WHEN IT ENACTED THE PROVISIONS OF SECTION 147 W.E.F. 01/04/1989 CLEARLY STIPULATED THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME WHICH HE HAD REASON TO BELIEVE HAD ESCAPED ASSESSMENT AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH CAME TO HIS NOTICE DURING T HE PROCEEDINGS. IN THE ABSENCE OF THE ASSESSMENT OR REASSESSMENT THE FORMER, HE CANNOT INDEPENDENTLY ASSESS THE LATTER. ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 16 OF 17 SECTION 147 HAS THIS EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS THE INCOME (SUCH INCOME) WH ICH ESCAPED ASSESSMENT AND WHICH WAS THE BASIS OF THE FORMATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REASSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING THE COURSE OF THE PROCEEDINGS. HOWEVER IF AF TER ISSUING A NOTICE UNDER SECTION 148, HE ACCEPTED THE CONTENTION OF THE ASSESSEE AND HOLDS THAT THE INCOM E WHICH HE HAS INITIALLY FORMED A REASON TO BELIEVE T HAT ESCAPED ASSESSMENT, HAS AS A MATTER OF FACT NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM INDEPENDENTLY TO ASSESS SOME OTHER INCOME. IF HE INTENDS TO DO SO A FRESH NOTICE UNDER SECTION 148 W OULD BE NECESSARY, LEGALITY OF WHICH WOULD BE TESTED IN THE EVENT OF A CHALLENGE BY THE ASSESSEE. 13. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE DELHI HIGH COURT IN THE CASE OF ORIENTAL BANK OF COMMERCE VERSUS ACIT (SUPRA). FROM THE ABOVE DISCUSSION AND RESPECTFULLY FOLLOWI NG THE RATIO LAID DOWN BY HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD., VS. CIT (SUPRA) AND ORIENTAL BANK OF COMMERCE VS. ACIT (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT IF NO ADDITION HAS BEEN MADE IN RESPECT OF THE REASONS RECORDED FOR REOPENING THIS ASSESSMENT, IT WAS NOT OPEN FOR LD. AO TO MAKE ADDITION ON SOME OTHER GROUND WITHOU T ISSUING A FRESH NOTICE UNDER SECTION 148. ACCORDING LY THE ITA NO. 5186/DEL/2012 (AY2004-05) PAGE 17 OF 17 NOTICE DATED 28.03.2011 CANNOT BE SUSTAINED IN THE EYES OF LAW AND IS QUASHED. 14. AS WE HAVE DECIDED THE APPEAL ON GROUND NO. 1 BEIN G LEGAL ISSUE, AND HAS QUASHED THE ASSESSMENT PROCEED INGS, WE DO NOT FIND IT NECESSARY TO DECIDE THE APPEAL ON ME RITS. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2017. SD/- SD/- ( N.K. SAINI ) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 16.03.2017 @M!T