AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY INC.,USA vs. ADIT, NEW DELHI

ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER:

This appeal has been preferred by the assessee against the final assessment order dated 28.10.2010 passed u/s 143(3)/144C of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) which has been passed in pursuance to the directions of the Ld. Dispute Resolution Panel (DRP) for Assessment Year 2003-04.

2.0 The brief facts of the case are that the assessee is a company incorporated in the United States of America and having its principal place American Express Travel Related Services Vs. ADIT of business at American Express Tower, World Finance Center, New York, NY 10285, USA. Thus, it is a non-resident company for the purpose of taxation in India as per the records. This company has global and domestic systems software and applications installed on various computing platforms. The company had entered into an agreement with American Express (India) Pvt. Ltd., a company incorporated in India and having a presence in New Delhi and which catered to needs of Japan, Asia Pacific, Austria, New Zealand, EMEA, US and LAC Regions and various other countries and locations.

2.1 The return of income for the year under consideration was filed in the capacity of the representative assessee on 16.02.2006 and assessment was completed under section 143(3) of the Act. Subsequently, the Assessing Officer noticed that there was an agreement under which the assessee company would develop and maintain applications and would also allow the use of systems software and such applications including use of incidental software to American Express (India) Pvt. Ltd. As per the said agreement, a consideration of US Dollars 263, 523 was paid by American Express (India) Pvt. Ltd. to the assessee company. The Assessing Officer American Express Travel Related Services Vs. ADIT was of the opinion that the consideration received as compensation for the use of or the right to use of the systems software and applications software by American Express (India) Pvt. Ltd. was covered by the definition of ‘Royalty’ both as per the provisions of the Act as well as Article-12 of the Double Taxation Avoidance Agreement (DTAA) between Indian and the US.

The Assessing Officer was further of the opinion that this royalty was taxable in India @ 15% of gross amount of India but since this royalty income had not been offered to tax in India by the assessee company, reassessment proceedings were initiated by the Assessing Officer.

2.2 As per records, the statutory notice u/s 148 of the Act was issued on 27.03.2008 and in response to the said notice the assessee filed the return of income on 22.04.2008 declaring the income at Rs. Nil. The assessee asked for copy of reasons for reopening the assessment on 22.04.2008. The notice u/s 142(1) of the Act was issued on 28.05.2008 without supplying the assessee with the copy of reasons. The assessee again requested for copy of reasons which were finally supplied on 22.08.2008. The copy of reasons as supplied by the Department vide letter dated 22.08.2008 are as under:

American Express Travel Related Services Vs. ADIT “The reasons recorded before issuance of notice u/s 148 in the subject case are:

“American Express Travel Related Services Company Inc., USA (hereinafter: “AETRSCO/ company/ assessee”) is a company incorporated in the United States of America and having its principal place of business at American Express Tower, World Financial Centre, New York, NY 10285, USA. an American company and held by American Express Company USA.

AETRSCO has global and domestic systems software and applications installed on various computing platforms. It has entered into an agreement with American Express (India) Pvt. Ltd. (hereinafter: “AEIPL"), a company incorporated in India and having a financial centre in New Delhi catering to the needs of Japan, Asia Pacific, Australia, New Zealand, EMEA, US and LAC Region and various countries/ locations. As per the agreement, AETRSCO would develop and maintain applications and also allowed use of the said systems software and applications and will also allow AEIPL incidental software use. As per the agreement, a consideration of USD 263,523 was paid by AEIPL to AETRSCO.

The consideration received as compensation for the use of or the right to use of the systems software and application software by AEIPL is covered by the definition of royalties both as per the provisions of Income Tax Act, 1961 (“the Act") and Article 12 of the tax treaty between India and USA. The royalties deemed to arise in India, as the payment is by the Indian company. Considering the provisions of Section 9(1)(vi) and provisions of Article 12(2) of the tax treaty between Indierand USA, such royalties are taxable in India @15% of the gross amount of such royalties.

The assessee has filed return of income for A. Y. 2003-04 on 16.02.2006, however, this royalty income is not offered to tax. In the notes attached to the statement of total income, even the facts relating to the receipts of such income is not disclosed.

The assessee was also carrying out the business related to customer focused sales '("CFS“) business through AEIPL. In this service American Express, US provided better to its existing card members. As per the assessee such services were rendered during the period 01.10.2002 to 31.01.2003 and around 90 employees at the Gurgaon facility participated in this service. The process is explained below: 1. Receive card member call 2. Under take steps to verify callers identity American Express Travel Related Services Vs. ADIT

American Express Travel Related Services Vs. ADIT The income relating to CFS services has been taxed in the case of American Express International Inc., an affiliated company of the assessee for A.Y. 2003-04. That company has claimed that no such business belonged to them, however such claim is not substantiated by American Express International Inc. As the AEIPL had the agreement with the assessee only, therefore, the CFS business is also considered to the belonging to the assessee and such income has escaped assessment. This is without prejudice to the finding given in the assessment order of American Express International Inc. In the return of income, the income attributable to such PE is not disclosed.

American Express Travel Related Services Vs. ADIT

American Express Travel Related Services Vs. ADIT The facilities of AEIPL have been set up by the assessee. The top managerial persons and decisions makers of AEIPL are the employees of the assessee, deputed to AEIPL. The assessee has also provided its computers, server, network and software to AEIPL. It can also be said that the AEIPL is acting exclusively for the assessee. The AEIPL is rendering the services directly to the customers of the assessee and accordingly the same are being rendered as per the specifications and requirements of such customers. The AEIPL is also fully economically dependent on the assessee. As mentioned in the agreements, the AEIPL facilities have been set up as per the strict specifications and standards of the assessee and also the rendering of services are subject to instruction of the assessee and the deputed employees of the assessee are comprehensively controlling the business of AEIPL, therefore, the AEIPL is also a dependent agent PE of the assessee. The assessee in the return of income filed has not shown any income, which is attributable to the PE of the assessee, as discussed.

The assessee has not shown the income from various sources mentioned above in the return of income filed for A.Y. 2003-04 on 16.02.2006. The order u/s 143(3) was passed on 31.03.2006.

As discussed in the preceding paragraphs, the assessee had not disclosed fully and truly all material facts and income accruing, arising or deemed to accrue or arise in India to the assessee as per the provisions of Section 5(2) r.w.s. 9 of the Act and relevant provisions of the tax treaty.

Therefore, I have reason to believe that income chargeable to tax has escaped assessment for A.Y.2003-04. Accordingly, it is a fit case for issue of Notice u/s 148 of the Act and such notice is being issued.”

2.3 The original assessment had earlier been complied vide order dated 31.03.2006 u/s 143(3) of the Act wherein the assessment was completed at the income returned by the assessee.

American Express Travel Related Services Vs. ADIT 2.4 The assessee filed objections to the reopening of the assessment vide submissions dated 27.10.2009. In the objections it was submitted by the assessee that the initiation of the reassessment proceedings was bad in law as the reasons indicated that the Assessing Officer was seeking to re- examine the issues already concluded in the original assessment proceedings without any fresh material or information. It was also submitted that the royalty of USD 263, 523 was duly disclosed and offered to tax in the return of income filed by American Express (India) Ltd. in the capacity of the representative assessee for the assessee and, therefore, it was factually incorrect to allege that income had escaped assessment.

2.5 Regarding the second reason for re-opening of the assessment that the assessee had also been carrying out business related to Customers Focused Sales (CFS) business through American Express (India) Pvt. Ltd. and that income from such operations had escaped assessment, it was submitted by the assessee that such observations of the Assessing Officer were incorrect as the activity carried out by American Express (India) Pvt. Ltd. for the assessee company during the assessment year under consideration were limited to providing general call center activities which American Express Travel Related Services Vs. ADIT in any manner did not involve any conclusion or securing of contracts on behalf of the assessee company. It was also submitted that there was no fixed place in India which was held at the disposal of the assessee company and, therefore, it was factually incorrect to allege that American Express (India) Pvt. Ltd. constituted fixed place of business for the assessee company.

2.6 With respect to the third reason that the assessee had set up equipment in the form of mid-range and mainframe computer and network at USA and an amount of USD 3,661,721 was payable by the AEIPL to the assessee company as composition for use of computer, server network, electric mail etc. was covered by the definition of royalties and that since this royalty income was not offered to tax, the income had escaped assessment, it was the assessee’s submissions that this royalty of USD 3,661,721 equivalent to Rs.176,145,689/- was duly disclosed and offered to tax in the return of income filed by the America Express (India) Pvt. Ltd. in the capacity of representative assessee for the assessee company.

2.7 With respect to the fourth reason, as stated in the reasons recorded, that the assessee had seconded some employees to American Express American Express Travel Related Services Vs. ADIT (India) Pvt. Ltd. which continued to be the employees of the assessee and that American Express (India) Pvt. Ltd. was reimbursing the assessee company an amount equal to the compensation and other benefits incurred by the assessee from time to time for the seconded employees which thus constituted a permanent establishment in terms of provisions of Article-5(1) of DTAA between India and USA and since the assessee had not shown any income attributable to the permanent establishment of the assessee, the resultant income had escaped assessment, it was submitted that the agreement relating to the second-ment of the personnel between American Express India Pvt. Ltd. and the assessee were duly furnished during the course of assessment proceedings and that in terms of the said agreement the second-ment of the employees was to be under the direct supervision of American Express (India) Pvt. Ltd. and their reporting was to the management of American Express (India) Pvt. Ltd.. It was also submitted that the actual reimbursement to the employee costs by American Express (India) Pvt. Ltd to the assessee company, though not resulting in any income in the hands of the assessee, was duly offered to American Express Travel Related Services Vs. ADIT tax in the return of income filed by the American Express (India) Pvt. Ltd. in the capacity of representative assessee for the assessee company.

2.8 In a nutshell, the crux of the objections of the assessee against the initiation of reassessment proceedings was that there was absence of reason to believe that income has escaped assessment as well as there was a change of opinion by the Revenue Authorities.

2.9 The order disposing the objections was passed by the Assessing Officer on 25.09.2009 and, thereafter, the draft assessment order was passed on 31.12.2009. The draft assessment order computed ithe ncome of the assessee at Rs.21,28,42,290/- which included proposed addition of Rs.62,15,492/- with respect to CFS business, Rs.50,00,000/- in respect of estimated income from travelers’ cheques with respect to attribution to the permanent establishment and Rs.20,16,26,798/- being incomes of the assessee which had been offered to tax by the American Express (India)

Pvt. Ltd. in the capacity of the representative assessee.

2.10 Aggrieved, the assessee approached the Learned Dispute Resolution Panel-1, New Delhi (DRP). The Ld. DRP vide its directions u/s 144C (5) of the Act confirmed all the additions proposed by the Assessing American Express Travel Related Services Vs. ADIT Officer. The final assessment order, thereafter, was passed on 28.10.2010.

2.11 The assessee is now in appeal before the ITAT and has raised the following grounds of appeal:

“ Based on the facts and circumstances of the case, the appellant, respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 (“Act”) against the order dated 28 October 2010, passed by the Learned Assistant Director of Income- tax (International Taxation) - Circle 1(1) (“Assessing Officer”) in pursuance of the directions issued by the Hon’ble Dispute Resolution Panel - I (”DRP”), Delhi on the following grounds:

1 That on facts and circumstances of the case and in law, the order passed by the Learned Assessing Officer on the directions of the Hon’ble DRP is bad in law in as much as failed to appreciate the facts involved and the law thereon.

Validity of re-assessment proceedings

2.1 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in completing re- assessment proceedings which is without jurisdiction and bad in law as the proceedings are initiated without bringing on records any fresh information and • material to form basis of reasons to believe of income having escaped assessment. merely on a change of opinion viz-a-viz original assessment. •

2.2 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in requiring the American Express Travel Related Services Vs. ADIT appellant to furnish the details not relating to the reasons for initiation of reassessment under section 147 of the Act and thus, making roving enquiries on matters, un-connected with the reasons for opening of the reassessment proceedings. Ad-hoc addition of business income from Customer Focused Sales (“CFS) alleging Indian Permanent Establishment (“PE”) of the appellant 2.3 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in • constituting American Express (India) Private Limited (“AEIPL”) as a fixed place PE of the appellant in India. • constituting AEIPL as a dependent agent PE of the appellant in India • treating the entire amount of revenue so alleged to have arisen in the CFS process as profit. • making an attribution to the extent of 50% of an adhoc amount amounting to INR 6,215,491 to the alleged Indian PE. Adhoc addition on account of Travellers’ Cheques’ (“TCS”) business of the Appellant 2.4 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in • constituting PE of the appellant in India with respect to TCs related transaction on the incorrect allegation of not furnishing the information American Express Travel Related Services Vs. ADIT

• making an ad hoc attribution of INR 5,000,000 to the alleged PE. Addition on amounts already offered in representative assessee return filed by AEIPL for the appellant. 2.5 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in disregarding the fact that the following additions amounting to INR 201,626,798 have already been offered to tax by AEIPL as a representative assessee of the appellant and accordingly making the addition of the same amounts in the hands of the appellant thereby leading to double assessment of the same income: • Consideration received from AEIPL for the use of computer, server network, electronic mail access etc. set up and maintained by the appellant (i.e. Charges for use of CDN/CPU of the appellant). • Consideration received from AEIPL for the use of or right to use of the systems software and application software developed and maintained by the appellant (i.e. Charges for use of GMAX software of the appellant). • Reimbursement of salary expenses actually incurred for the employees seconded by the appellant to AEIPL. Disregarding the advance ruling obtained by the appellant on taxability of CDN/CPU charges etc. (Not Pressed) 2.6 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in disregarding the advance ruling (cited in 238 ITR 296) obtained by the appellant from the Hon’ble Authority of American Express Travel Related Services Vs. ADIT

Advance Ruling on taxability of payments by AEIPL in respect of use of CDN/CPU etc under which the payments were held to be royalty taxable @ 15% under Article 12 of the India US Treaty. (Not Pressed) Non grant of credit of tax deducted at source (“TDS”) 2.7 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in not allowing the corresponding credit of TDS by AEIPL on the aforesaid receipts of INR 201,626,798 added to the income of the appellant (without prejudice to the ground no. 2.6 and without admitting additions so made). (Not Pressed) Interest under section 234A and 234B 2.8 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in levying interest under section 234A of the Act. 2.9 That on the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in charging the interest under section 234B of the Act. 3.1 That on the facts and circumstances of the case and in law, the Hon’ble DRP has erred in alleging that • AElPL’s infrastructure is beneficially owned by the appellant and constitutes the set-up of assets of the appellant in India. • since the reimbursement of costs of AEIPL in setting-up the facility are not included in the cost-base, transfer pricing is adversely affected. • AEIPL promoted the “American Express” brand of the appellant group and has not created any brand identity of its own.

American Express Travel Related Services Vs. ADIT

• the appellant did not submit the details of the income of the appellant from CFS activities without appreciating the fact that such activities were run on trial basis. • AEIPL is a PE of the appellant in respect of TCs business without appreciating the fact that AEIPL did not carry on any TCs business for the appellant. The above grounds of appeal are mutually exclusive & without prejudice to each other. The appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal. The appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.” 2.12 Subsequently, after the passing of the re-assessment order, the assessee company filed rectification application u/s 154 of the Act wherein it was submitted that the tax on other income of Rs.20,16,26,798/- was worked out at Rs.3,02,44,020/- in the body of the assessment order but in the tax computation Form ITNS 150, the aforesaid income had been erroneously taxed at 41.82% which was, thus, an error apparent from the record and was rectifiable. It was also submitted in the rectification application that the tax of Rs.3,02,44,020/- had already been deducted and credited into the account of the Government and that the credit for the said tax deducted at source was claimed by American Express India (Pvt.)

American Express Travel Related Services Vs. ADIT Ltd. in the return of income of the assessee company filed by the American Express (India) Pvt. Ltd. in the capacity of the representative assessee. It was also submitted that in the impugned assessment order this income had again being taxed in the hands of the assessee company but no credit had been granted in respect of the corresponding TDS of Rs.30,24,020/- resulting in tax being levied twice on the same income. The assessee’s application u/s 154 was accepted and order u/s 154/147/144C(1) of the Act was passed on 01.06.2011 in which the credit of Rs.3,02,44,020/- was allowed.

3.0 The Ld. Authorized Representative (AR), at the outset, submitted that in view of the order passed u/s 154 of the Act as aforesaid, ground Nos.2.5, 2.6 & 2.7 were not being pressed. The Ld. Authorized

Representative further submitted that ground Nos.2.1, 2.2, 2.3 and 2.4 only were being pressed.

3.1 The Ld. AR submitted that the reassessment proceedings were without jurisdiction and were bad in law as the proceedings were initiated without brining on record any fresh information or/and material to form basis of reasons to believe of income having escaped assessment. The Ld.

American Express Travel Related Services Vs. ADIT

Authorized Representative argued that it was merely a case of change of opinion vis a vis the original assessment. It was also submitted that the Assessing Officer, while initiating the reassessment proceedings, had made incorrect allegations in as much as the assessee had duly filed the copies of various agreements (which are now part of the Paper Book) in response to the query raised by the Assessing Officer during the course of original assessment proceedings. It was submitted that, therefore, the issues raised had already been examined by the Assessing Officer. It was also submitted that the issue of permanent establishment had also been examined in the original assessment proceedings as was apparent from the various replies filed by the assessee during the course of original assessment proceedings and which was a part of the record. The Ld.

Authorized Representative submitted that para-3 of the draft assessment order sought to tax income from Customer Focused Sales (CFS) although this issue was not part of the reasons recorded by the Assessing Officer before the initiation of the reassessment proceedings and, therefore, the same could not be brought to tax in the reassessment proceedings. The Ld. Authorized Representative also submitted that the attribution of American Express Travel Related Services Vs. ADIT income by the Assessing Officer with respect to customer focused sales and business of travelers cheques was considered in other years also and although the business of customers focused sales was limited only to three months in the assessment year 2003-04, the business of travelers cheques has continued till date. However, no addition has been made on the issue in any subsequent years. The Ld. Authorized Representative also filed a chart indicating and stating that no additions had been made with respect to income attribution in respect of travelers cheques. The Learned Authorized Representative also placed reliance on the judgment of the Hon’ble Delhi High Court in the case of Le Passage To India Tours &

Travels (Pvt.) Ltd. vs. Addl. Commissioner of Income Tax reported in [2015]

58 Taxman.com 144 (Delhi) for the proposition that where the ‘reasons to believe’ nowhere reveled as to what tangible material the Assessing Officer had obtained to justify the reassessment notice, the reassessment was liable to be quashed.

4.0 In response, the Ld. CIT-DR submitted that the reassessment proceedings initiated in the assessee’s case were valid reassessment proceedings which were initiated in accordance with law. It was submitted American Express Travel Related Services Vs. ADIT that if one would go through the reasons recorded for the initiation of reassessment proceedings, it would be seen that they were valid reasons for the assumption of jurisdiction for reassessment. It was submitted that as per the judgment of the Hon’ble Apex Court in Raymond Woolen Mills

Ltd. vs. ITO reported in (1999) 236 ITR 34 (SC) sufficiency of reasons was not necessary. It was also submitted that the assessee had filed the return of income in response to the notice issued u/s 142(1) at Nil income and therefore, the Assessing Officer had no option but to initiate re- assessment proceedings when he felt that income from royalty and CFS business has escaped assessment. It was also submitted that as per the agreement of second-ment of employees between the assessee company and American Express (India) Pvt. Ltd. it was apparent that there was a fixed place PE of the assessee in India. It was also apparent that no compensation was given for assets and risk assumed by the other company and, therefore, attribution was required. The Ld. CIT-DR vehemently argued that the reassessment proceedings were legally correct.

American Express Travel Related Services Vs. ADIT

5.0 We have heard the rival submissions and have also perused the material on record. We have also gone through the reasons as were recorded prior to the assumption of jurisdiction for reassessment. It is seen that the reassessment proceedings were initiated on the basis of the information which was already available with the Department at the time of completion of the original assessment proceedings. It is apparent that no new information or material has been brought on record by the Assessing Officer to establish or even indicate that any income for the year under consideration has escaped assessment. One of the allegations by the Assessing Officer has been that the assessee has not offered to tax the royalty of USD to 263,532 received from American Express (India) Pvt.

Ltd. towards the right given for use of Global Makers System, Software and application. This allegation is factually incorrect in as much as it is apparent from the records that American Express (Indian) Pvt. Ltd. had filed the return of income in the capacity of the representative assessee for the assessee company on 28th November, 2003 wherein this royalty income equivalent to Rs.1,27,11,393/- had been offered to tax @ 15% under Article-12(3) (a) of the DTAA between India and USA. It is also seen American Express Travel Related Services Vs. ADIT that a proper discloser was made in this regard in the return of income filed by the assessee in response to the notice issued u/s 142(1) of the Act on 16.02.2006. Thus, considering the fact that the royalty of USD

263,532 was duly disclosed and offered to tax to the return of income filed by the American Express (India) Pvt. Ltd. Company in the capacity of the representative assessee of the assessee company, it cannot be said that any new information had come in the possession of the Assessing Officer so as to warrant invocation of reassessment jurisdiction on this issue.

5.1 It has been further stated in the reasons recorded that the assessee company has been carrying out business related to customer focused sales (‘CFS’) through American Express (India) Pvt. Ltd. and that the employees of the American Express (India) Pvt. Ltd. were soliciting business on behalf of the assessee company. In this regard it is seen that during the course of original assessment proceedings, the assessee had duly furnished copies of the relevant agreements entered into with American Express (India) Pvt. Ltd. along with the description of process undertaken in India. The assessee had submitted that it did not carry out any credit card business in India and that the assessee did not have American Express Travel Related Services Vs. ADIT any activity that would constitute PE under Article-5 of the DTAA. This contention was duly accepted by the Assessing Officer during the course of assessment proceedings and thus the re-opening of the concluded assessment on this issue would tantamount to re-visiting the issue without there being any fresh material having been brought on record by the Assessing Officer. Thus, on this count also, the action of the Assessing Officer in invoking the jurisdiction u/s 147 of the Act would fall outside the purview of the said section.

5.2 The third reason, as stated in the reasons recorded for initiation of the reassessment proceedings, is that the assessee had set up equipment in the form of mid-range and mainframe computer and network in the USA and amount of USD 3661,721 was payable by American Express (India) Pvt. Ltd. to the assessee company for the relevant period as consideration for the use of computer, server, network etc. which was covered by the definition of royalty both under the Act as well as the DTAA but was not offered to tax. In this regard again it is seen that this observation of the Assessing Officer is incorrect in as much as the assessee had duly offered the royalty of USD 3661,721 American Express Travel Related Services Vs. ADIT equivalent to Rs.17,61,45,689/- in the return of income filed by the American Express (India) Pvt. Ltd. in the capacity of the representative assessee for the assessee company. Thus, on this count the reassessment has been initiated on an issue which was factually incorrect and was already concluded and would thus not be sustainable.

5.3 Fourthly, the reassessment proceedings have been initiated on the ground that the assessee had seconded some employees to American

Express (India) Pvt. Ltd. which would constitute a fixed place of business of the assessee company. In this regard also, it is seen that the assessee had furnished copies of agreement relating to the second-ment of employees during the course of the original assessment proceedings vide submissions dated 13th March, 2006 and, thus, apparently, this issue also was examined by the AO and it was the view of the Assessing

Officer then that there was no fixed place PE and the return of the assessee was accepted in the original assessment proceedings.

Apparently, this information also was available at the time of the completion of original assessment proceedings and no fresh information came to be in possession of the Assessing Officer on this issue also.

American Express Travel Related Services Vs. ADIT

5.4 Thus, on an overall view of the matter, we are of the considered opinion that reassessment proceedings in this case were initiated without there being any fresh material in possession of the Assessing Officer.

Thus, there was no tangible material with the Assessing Officer which could justify the initiation of reassessment proceedings. The aspects recorded by the Assessing Officer in the reasons to believe were known to the Assessing Officer at the time of original assessment also and apparently the explanations offered by the assessee appear to have been taken into account. The Assessing Officer cannot be permitted to review his earlier assessment order in the garb of reassessment. Also the reassessment jurisdiction cannot be invoked by a mere change of opinion.

The Hon’ble Apex Court in the case of CIT vs. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 has held that ‘reasons to believe’ cannot comprehend a mere change of opinion which would only amount to an impermissible review. The Hon’ble Apex Court held that:

“…Therefore, post-1-4-1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words “reason to believe” failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re- American Express Travel Related Services Vs. ADIT open assessments on the basis of “mere change of opinion which cannot be per se reason to re-open.

5.5 Similarly, the Hon’ble Delhi High Court in the case of Le Passage To India Ltd. (supra) has held that where the reasons to believe do not reveal as to what tangible material the Assessing Officer came to obtain to justify the reassessment notice and where an aspect which was known to the Assessing Officer at the time of the original assessment and the explanations of the assessee appeared to have been taken into account, the assessment cannot be reopened. Accordingly, in view of the above cited reasons, we are of the considered opinion that the reasons recorded nowhere reveal as to what tangible material, the Assessing Officer came to obtain to justify the reassessment notice and, therefore, the reassessment proceedings have been wrongly initiated. Accordingly, on the facts of the case and respectfully following the ratio of the judgment of the Hon’ble Apex Court in CIT vs. Kelvinator India Ltd. (supra) and of the Hon’ble Delhi American Express Travel Related Services Vs. ADIT High Court in the case of Le Passage To India (supra), we quash the reassessment proceedings. Accordingly, ground Nos.2.1, 2.2 stand allowed.

5.6 Since, other grounds have become academic by the reason of our quashing the reassessment proceedings, they are not being adjudicated.

6.0 In the final result, the appeal of the assessee stands allowed.

Order pronounced on 28/05/2020.