Delhi High Court Quashes Reassessment Proceedings
GE Grid (Switzerland) GmbH vs. ACIT [W.P.(C) 1294/2022]
Background of the Case
The Appellant, GE Grid (Switzerland) GmbH, a Swiss company that supplies equipment and spare parts to Indian businesses. The company did not file income tax returns in India for the years in consideration, arguing that it had no Permanent Establishment (PE) in the country and therefore no taxable income.
Reopening of Assessment
The respondent, AO had initiated reassessment proceedings based on a survey conducted on 6-7 June 2019 on the Transmission and Distribution Division of GE in India. The survey allegedly revealed that GE had a Permanent Establishment (PE) in India and was earning taxable income. Based on these findings, the tax authorities issued reassessment notices under Section 148 of the Income Tax Act for the assessment years 2013-14 to 2017-18, claiming that income had escaped assessment.
Arguments by the Appellant
The appellant challenged the reassessment, arguing that the tax authorities had no fresh evidence specific to the earlier years and were merely relying on the 2019 survey findings. The appellant contended that the reassessment was invalid as it was based on a mere reappraisal of old facts and lacked any fresh or tangible material specific to the AYs in question. The petitioner also argued that the AO had failed to conduct an independent inquiry or establish a “live link” between the survey findings and the alleged escapement of income.
Court Findings and Decision
The Delhi High Court quashed the reassessment proceedings and held that the AO had failed to establish any fresh tangible material or conduct an independent inquiry to justify the reopening of assessments. The court emphasized that reassessment cannot be based on a mere reappraisal of old facts or extrapolation of findings from a later period. This judgment reinforces the legal principle that reassessment proceedings must be supported by specific and tangible material relevant to the AYs in question.
The court relied on its earlier decision in Grid Solutions OY (Ltd.) v. Assistant Commissioner of Income Tax, where similar reassessment proceedings were quashed. It also referred to the Supreme Court’s ruling in CIT v. Gupta Abhushan (P) Ltd., which held that survey findings from one period cannot be applied to other years without specific evidence.
Delhi High Court Quashes Reassessment Proceedings
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