Director of Income Tax (IT) I, Mumbai Versus Doosan Heavy Industries & Construction Co.
Reopening of assessment - reasons to believe - Held that:- A notice of reopening, the Assessing Officer does not have to “establish” that any income has escaped assessment. He must simply be shown to have formed an opinion, which, in turn, is supported by reasons. The reasons themselves must be based on some material. A minimum requirement one would expect in the face of this scheme of things is that the material used by the Assessing Officer for forming his opinion must have some bearing or nexus with escapement of income. If not, the reopening notice would be clearly without jurisdiction.
In the present case, the material used by the Assessing Officer for purportedly forming this opinion is the description of the assessee of itself as “a supplier” of the equipment in an EPC contract, which inter alia required it to take offshore delivery of the equipment from a foreign vendor and supply and install the same onshore. Mere description as a “supplier” in a suit by the assessee against the insurance company claiming an insurance claim for loss of equipment, when the assessee insured the equipment jointly with the purchaser, can possibly have no connection with the escapement of any income arising out of sale of the equipment. Since that was the only material used by the Assessing Officer for issuance of the reopening notice, the notice is without any legal basis or justification. The authorities below were clearly, therefore, right in setting aside the notice.
One more fact to be noted is that for the Assessment Year 1999-2000 and 2002-03, a coordinate bench of the Tribunal had taken a view that the Respondent Assessee has not sold any equipment. In these circumstances, the order of the coordinate bench for Assessment Years 1999-2000 and 2002-2003 also supports the Respondent's contention that they were not suppliers of the equipment and no income assessable to tax has escaped assessment. It's obligation was to insure the goods/equipment during transit done by it either on its own or through a subcontractor.
Article referred: Tax Management India.com
Reopening of assessment - reasons to believe - Held that:- A notice of reopening, the Assessing Officer does not have to “establish” that any income has escaped assessment. He must simply be shown to have formed an opinion, which, in turn, is supported by reasons. The reasons themselves must be based on some material. A minimum requirement one would expect in the face of this scheme of things is that the material used by the Assessing Officer for forming his opinion must have some bearing or nexus with escapement of income. If not, the reopening notice would be clearly without jurisdiction.
In the present case, the material used by the Assessing Officer for purportedly forming this opinion is the description of the assessee of itself as “a supplier” of the equipment in an EPC contract, which inter alia required it to take offshore delivery of the equipment from a foreign vendor and supply and install the same onshore. Mere description as a “supplier” in a suit by the assessee against the insurance company claiming an insurance claim for loss of equipment, when the assessee insured the equipment jointly with the purchaser, can possibly have no connection with the escapement of any income arising out of sale of the equipment. Since that was the only material used by the Assessing Officer for issuance of the reopening notice, the notice is without any legal basis or justification. The authorities below were clearly, therefore, right in setting aside the notice.
One more fact to be noted is that for the Assessment Year 1999-2000 and 2002-03, a coordinate bench of the Tribunal had taken a view that the Respondent Assessee has not sold any equipment. In these circumstances, the order of the coordinate bench for Assessment Years 1999-2000 and 2002-2003 also supports the Respondent's contention that they were not suppliers of the equipment and no income assessable to tax has escaped assessment. It's obligation was to insure the goods/equipment during transit done by it either on its own or through a subcontractor.
Article referred: Tax Management India.com
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