Whether provisions of Section 147 can be resorted to in order to correct judgemental errors of AOs – NO: HC

THE issue is – Whether provisions of Sec 147 can be invoked to correct the errors of AOs. NO is the verdict.
Facts of the case
Sixteen writ petitions were filed by several assessees of the same group such as M/s. Alcatel-Lucent France (ALF), M/s. Alcatel-Lucent Bell NV (ALB), M/s. Alcatel-Lucent Enterprise (ALE) and M/s. Alcatel-Lucent Canada (ALC). The challenge in all these writ petitions is to the notices issued by the Income-tax Department under Section 148.
ALF submitted that it is a tax resident of France in terms of Article 4 of the Double Taxation Avoidance Agreement (DTAA) entered into between India and France. ALF contended that it was entitled to be governed by the DTAA to the extent that the DTAA was more beneficial to it. ALF stated that it supplied telecommunication equipment (hardware) along with software from outside India to various telecom companies in India. The case of ALF was that it had no Permanent Establishment (PE) in India.
As far as AY 2004-05 was concerned ALF stated that apart from providing services to Alcatel-Lucent India (ALI) on which it had paid tax and for which a return had been filed under the Act, ALF also made equipment supplies to Indian customers in the telecom sector. These sales were made outside India and payment was received outside India and, therefore, no income accrued or arose that was taxable in India. ALF stated that in India, it derived income in the nature of fees for technical services (FTS), royalty and interest, which was offered to tax on gross basis i.e. at the rate of 2.5% in the absence of PE in terms of rates specified under the DTAA.
A survey was conducted in the premises of ALI in New Delhi and Gurgaon on 27th February 2009 under Section 133A of the Act. On the basis of the facts gathered during said survey, a notice under Section 148 of the Act was issued to ALF on 8th October, 2009 (for AYs 2004-05 and 2005-06) and 3rd November, 2009 (for AY 2006-07). In response to the said notices, ALF filed its returns on 29th October, 2009 reiterating the earlier return already filed by it for the said two AYs. Thereafter, further notices were issued by the Revenue to which replies were filed by ALF.
The HC held that,
++ the reasons for reopening the assessment for AY 2004-05 do not made any reference to Section 44DA(1). Although it has been mentioned in the reasons for the other three AYs in question, this was not an issue that arose for the first time based on any tangible material that came to the notice of the AO subsequent to the original assessment orders which were themselves under Section 147 read with Section 143 (3) of the Act. As far as the issue regarding the agreements, this appears to be brought up for the first time at the stage of rejection of the objections. It did not form part of the original reasons for reopening the assessments. Section 147 is not to be casually invoked to suit the convenience of the Revenue and at every stage to correct the errors of AOs which could have easily been avoided had there been a proper discharge of the statutory duty. Once that legal perspective is kept in view, repeatedly invoking Section 147 of the Act on the same materials, only because there is no statutory bar against it, would constitute an abuse of the process of law;
++ the Court would also like to observe that it is extraordinary that Sections 147 and 148 of the Act have been invoked by the Revenue not once but twice in respect of the same Assessee and on the same set of facts and same reasons. The Court had in its order dated 15th May 2012 for AY 2003-04 already held that the reopening of the assessment for these very reasons was bad in law;
++ for the above reasons the Court holds that there was no justification for the Revenue to have invoked the power under Sections 147 and 148 of the Act for the second time in respect of ALF for AYs 2004-05, 2005-06, 2006- 07 and 2008-09. The impugned notices issued and the corresponding orders of the AO rejecting ALF’s objections to the said notices are hereby quashed. The writ petitions of ALF are allowed