Facts of the Case

The petitioner, GE Grid (Switzerland) GmbH, a company incorporated in Switzerland, filed a batch of writ petitions challenging reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961 for Assessment Years 2013–14 to 2017–18. The reassessment notices were issued between 17.03.2021 and 31.03.2021 under the old reassessment regime.

The Assessing Officer alleged that the petitioner, though a non-resident, was deriving income from supply of equipment and spares to Indian entities without filing returns in India, claiming absence of a Permanent Establishment. The reasons for reopening were founded exclusively on findings recorded during a survey conducted on 06–07 June 2019 at GE T&D India Limited, formerly part of the Alstom Group, wherein it was concluded that foreign group entities had a Dependent Agent PE and Fixed Place PE in India.

Based on the survey material and statements recorded therein, the Assessing Officer formed an opinion that income attributable to the petitioner’s alleged PE had escaped assessment in the relevant years.

Issues Involved

Whether reassessment proceedings could be validly initiated for multiple assessment years solely on the basis of findings of a subsequent survey, without any independent inquiry or material specific to the assessment years in question, and whether existence of a Permanent Establishment could be presumed across years without year-wise examination.

Petitioner’s Arguments

The petitioner contended that reassessment was initiated mechanically by extrapolating findings of a 2019 survey to earlier assessment years without any examination of facts prevailing in those years. It was argued that Permanent Establishment is a fact-dependent determination which must be assessed independently for each assessment year.

Reliance was placed on the Delhi High Court’s earlier judgment in Grid Solutions OY (Ltd.) vs. Assistant Commissioner of Income Tax (International Taxation), where reassessment proceedings initiated on identical survey material were quashed.

Respondents’ Arguments

The Revenue argued that survey findings conclusively established existence of a Dependent Agent PE and Fixed Place PE in India and that, in absence of evidence to the contrary, it was reasonable to assume that the business model and facts remained unchanged in earlier years. Reliance was placed on the decision of the Supreme Court in Raymond Woollen Mills Ltd. to submit that sufficiency of material could not be examined at the stage of reopening.

Court Order / Findings

The Delhi High Court held that the reassessment action was unsustainable. The Court observed that the reasons recorded for reopening did not refer to any material specific to Assessment Years 2013–14 to 2017–18 and were based entirely on the survey conducted in June 2019.

The Court reiterated that while the principle of res judicata does not apply to income-tax proceedings, existence of a Permanent Establishment is a disputed question of fact that must be determined independently for each assessment year based on the scope, extent, nature and duration of activities in that year.

The Court relied extensively on its earlier judgment in Grid Solutions OY, as well as Supreme Court decisions including National Petroleum Construction Co. and CIT vs. Gupta Abhushan (P) Ltd., to hold that survey findings pertaining to a later year cannot be blindly extrapolated to earlier years. The Court found that the Assessing Officer failed to conduct any independent inquiry or record any prima facie finding that facts in the impugned years were identical to those found during the survey.

Important Clarification

The Court clarified that while consistency is desirable in tax administration, it cannot override the statutory requirement of year-wise determination of taxable events. Survey findings for a particular period cannot, by themselves, constitute “reason to believe” for reopening assessments of earlier years unless supported by material specific to those years.

Final Outcome

The writ petitions were allowed. The Delhi High Court quashed the reassessment orders dated 31.12.2021 passed under Section 148 for Assessment Years 2013–14 to 2017–18, holding that the reassessment proceedings were initiated without independent application of mind and were based solely on impermissible extrapolation of survey findings. The matters were decided in favour of GE Grid (Switzerland) GmbH and against the Revenue.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770016766_GEGRIDSWITZERLANDGMBHVsASSISTANTCOMMISSIONEROFINCOMETAXINTERNATIONALTAXATIONCIRCLE131ANR..pdf

 

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