Cairn India Ltd., (Formerly Known As Cairn Energy India Private Limited) Rep.by Its Authorised Signatory, Mr.navin Jain, 3[Rd] & 4[Th] Floor, Vipul Plaza, Sunci v. Deputy Director Of Income Tax-I, (International Taxation) Room

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 01.09.2021CORAM THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM W.P.No.12357 of 2013 Cairn India Ltd.,(Formerly Known as Cairn Energy India Private Limited)Rep.by its Authorised Signatory,Mr.Navin Jain,3[rd] & 4[th] Floor, Vipul Plaza,Suncity, Setor-54,Gurgaon – 122 002,Haryana...Petitionervs Deputy Director of Income Tax-I,(International Taxation)Room No.703, IInd Floor,Annexe Building, Aaykar Bhawan,121, Mahatma Gandhi Road,Chennai – 600 034. ..Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to issue a Writ of Certiorari,calling for the records of the respondent in respect of PANNo.AAACC3097L and impugned Notice u/s148 of the Income Tax Act,1961 dated 29.03.2012 and the consequential Order dated05.03.2013 passed by the Respondent disposing off the Objectionsto the initiation of the proceedings u/s 147 of the Act. For Petitioner : Mr.C.S.Agarwal Senior counsel Assisted by Mr.M.V.Swaroop For Respondent : M/s.Hema Muralikrishnan Senior Standing counsel [For Income Tax] The Notice issued under Section 148 of the Income Tax Act,1961 [hereinafter referred to as the 'Act'] dated 29.03.2012 andthe consequential order, disposing the objections filed by thepetitioner in order dated 05.03.2013 are under challenge in the https://hcservices.ecourts.gov.in/hcservices/ present writ petition. 2. The petitioner being a Company incorporated in New SouthWales, Australia was a subsidiary of Cairn Energy PLC based inEdinburgh and is engaged in the business of exploration andproduction of oil and gas in India since 1996. By an order ofthe Bombay High Court dated June 22, 2010 in Company PetitionNo.155 of 2010, the present petitioner took over the business ofCairn Energy India Private Limited and filed the present writpetition. 3. The petitioner company filed its return of income for theAssessment Year 2007-08 on 30.10.2007, declaring a total incomeof Rs.6,58,26,875/-. The deduction was claimed. Tax payable onbook profit under Section 115 JB was computed at Rs.16,60,48,488and tax payable under normal provisions of the Act was computedat Rs.2,75,28,799/-. The petitioner claimed a refund in itsreturn of income on the basis of TDS credits and advance taxpayments. 4. The petitioner states that they have furnished true andadequate disclosure of the income of the petitioner, was filedalong with the audited financial statements, Tax Audit Report asrequired under Section 44AB of the Act, Audit reports in Form3CD regarding tax audit, Form 3 CEB concerning transfer pricingAudit and Form I OBB in respect of claim of 80IB deduction underthe Act. The return of income was processed under Section 143(1)of the Act. The case of the petitioner was selected forscrutiny. The petitioner answered the queries raised by theAssessing authority. The Arm’s length price was determined bythe Transfer Pricing Officer. After completing all theprocedures, the assessment order was passed on 24.02.2011 underSection 143(3) of the Act. Admittedly, the case of thepetitioner is reopened under Section 147 of the Act within aperiod of four years. After completion of the assessmentproceedings, the respondents issued notice under Section 148 ofthe Act for reopening of assessment on the ground that theAssessing Officer has ‘reason to believe’ that income chargeableto tax for the Assessment Year 2007-08 has escaped assessmentwithin the meaning of Section 147 of the Act. The petitionerrequested to furnish reasons. The reasons furnished reasons inproceedings dated 08.10.2012. Thereafter, the petitionersubmitted their objections in detail and the said objectionswere disposed of in vide letter dated 05.03.2013. 5. The learned Senior counsel appearing on behalf of thepetitioner contended that the case of the petitioner thoughfalling within the period of four years, the reopening is madebased on change of opinion and therefore, the conditionstipulated that the Assessing Officer must have ‘reason tobelieve’ is not satisfied and thus, the impugned orders are tobe set aside. 6. The learned Senior counsel elaborately contended that thepetitioners have furnished all the details, books of accounts,at the time of scrutiny proceedings and answered the queriesraised by the Assessing officer. The Assessing Officerelaborately considered all the materials and passed theassessment order on 24.02.2011. While so, the reopening ofassessment is made without any tangible material and based onchange of opinion. 7. The learned Senior counsel drew the attention of thisCourt with reference to the reasons recorded and elaborated thatthe reasons furnished are change of opinion and the answer forsuch reasons were already placed before the Assessing Officer,who in turn, considered all such materials and passed theassessment order. The learned Senior counsel has elaboratelyargued to establish that the element of ‘reasons to believe’ isabsent and the case of the petitioner is falling under thechange of opinion. 8. In this regard, the following submissions are made: (a) It is at this stage submitted the reasons tobelieve are not plenary but are subject to judicial review. Insupport, the petitioner seeks to rely on the judgment of theHon'ble High Court of Delhi in the case of Asoke Kumar Sen Vs.ITO reported in 132 ITR 707. This judgment has been rendered ona Writ Petition filed by the petitioner, wherein their Lordshipsof the High Court of Delhi held at Page.710 as under: “The words "if the Income-tax Officer has reasonto believe" used in s. 147(a) suggest that the beliefmust be that of an honest and reasonable person basedupon reasonable grounds and that the ITO may act underthis section on direct or circumstantial evidence butnot on mere suspicion, gossip or rumour. The powersunder this section are not plenary. They are subject tojudicial review. The ITO in his affidavit has merelystated his belief but has not set out any material onthe basis of which he formed such belief. there isnothing in the affidavit to suggest that the ITO hadany material before him that would warrant a beliefthat a part of the income of the petitioner had escapedassessment by reason of his failure to make a true andfull disclosure of the material facts. (See ITO v.Madnani Engineering Works Ltd. [1979] 118 ITR 1 SC.)The words "reason to believe" appear in mostmodern statutes. Words such as "reasonable cause tobelieve" or "has reason to believe" are commonly foundwhen a Legislature or law-making authority conferspowers on a minister or official. As Lord Radcliffesaid [1980] 2 WLR 1, 22 (HL) : "However read, they must be intended to serve in somesense as a condition limiting the exercise of anotherwise arbitrary power. (Nakkuda Ali v. Jayaratne[1951] AC 66, 77 (PC)". These words do not make conclusive the officer's ownhonest opinion that he had reasonable cause for theprescribed belief.The grounds on which the officer acted must besufficient to induce in a reasonable person therequired belief before he can validly reopen acompleted assessment under s. 147(a). In England, themajority in Liversidge v. Anderson [1942] AC 206 (HL)held that the belief entertained by the officer was notjusticiable. Lord Atkin dissented. Now, it had beenheld by the House of Lords in the recent tax decisionof IRC v. Rossminster Ltd. [1980] 2 WLR 1, 49 (HL),that Lord Atkin was right and that the majority werewrong. Lord Diplock has said : These words do not make conclusive the officer's ownhonest opinion that he had reasonable cause for theprescribed belief.The grounds on which the officer acted must besufficient to induce in a reasonable person therequired belief before he can validly reopen acompleted assessment under s. 147(a). In England, themajority in Liversidge v. Anderson [1942] AC 206 (HL)held that the belief entertained by the officer was notjusticiable. Lord Atkin dissented. Now, it had beenheld by the House of Lords in the recent tax decisionof IRC v. Rossminster Ltd. [1980] 2 WLR 1, 49 (HL),that Lord Atkin was right and that the majority werewrong. Lord Diplock has said : "..... I think the time has come to acknowledge openlythat the majority of this House in Liversidge v.Anderson were expediently and, at that time, perhaps,excusably, wrong and the dissenting speech of LordAtkin was right." Lord Scarman at p. 104 (of [1980] 1 All ER) said thatthe ghost of Liversidge v. Anderson no longer fluttersin the pages of our books and need no longer haunt thelaw. It was laid to rest by Lord Radcliffe in NakkudaAli v. Jayaratne [1951] AC 66, 75 (HL) and no one hassought to revive it. It is now beyond recall. The Supreme Court in a long line of decisions has heldthat the matter is justiciable. [See ITO v. MadnaniEngineering Works[1979] 118 ITR 1 SC.] (EmphasisSupplied)” (b) It would be seen from the aforesaid judgment that theApex Court in its judgment reported in 118 ITR 1 has held thatexistence of reason to belief on part of the ITO is ajusticiable issue. The same opinion had also been expressed bythe Constitution Bench of the Apex Court in the case of CalcuttaDiscount Co. Ltd., Vs. ITO, reported in 41 ITR 191. (c) The petitioner also seeks to rely on the judgment ofApex Court in the case of ITO Vs. Lakhmani Mewal Das, reportedin 103 ITR 437 at Pg.448, it has been held as under:“As stated earlier, the reasons for the formationof the belief must have a rational connection with orrelevant bearing on the formation of the belief.Rational connection postulates that there must be a direct nexus or live link between the material coming tothe notice of the Income-tax Officer and the formationof his belief that there has been escapement of theincome of the assessee from assessment in the particularyear because of his failure to disclose fully and trulyall material facts. It is no doubt true that the courtcannot go into the sufficiency or adequacy of thematerial and substitute its own opinion for that of theIncome-tax Officer on the point as to whether actionshould be initiated for reopening assessment. At thesame time we have to bear in mind that it is not any andevery material, howsoever vague and indefinite ordistant, remote and far- fetched, which would warrantthe formation of the belief relating to escapement ofthe income of the assessee from assessment. The factthat the words "definite information" which were therein section 34 of the Act of 1922 at one time before itsamendment in 1948 are not there in section 147 of theAct of 1961 would not lead to the conclusion that actioncannot be taken for reopening assessment even if theinformation is wholly vague, indefinite, far-fetched andremote. The reason for the formation of the belief mustbe held in good faith and should not be a mere pretence.(Emphasis supplied)” In the long line of decisions of the Apex Court, it has beenheld that the power u/s 147 of the Act are not plenary and aresubject to the judicial review. (d) The petitioner thus prays that if the reasons recordedare perused for the sake of convenience which are extractedhereinabove, it would be seen that; In the long line of decisions of the Apex Court, it has beenheld that the power u/s 147 of the Act are not plenary and aresubject to the judicial review. (d) The petitioner thus prays that if the reasons recordedare perused for the sake of convenience which are extractedhereinabove, it would be seen that; (i) The petitioner has disclosed the complete facts in thereturn of income/books of account/assessment proceedings andthere is no allegation that the petitioner had failed todisclose fully and truly all material facts. Infact, admittedly,reasons to believe has been formed on the basis of the return ofincome/existing material, without any fresh tangible material. (ii) It is a case where the AO while framing assessment hadconsidered all such material facts which are the basis forinitiating the proceedings u/s 147 of the Act. It thus amountsto review as per the judgment of the Apex Court in the case ofACIT Vs. ICICI Securities Primary Dealership ltd., reported in348 ITR 299 at Pg.301. (iii) That no fresh material had surfaced from the date ofcompletion of assessment till the proceedings were initiated. (iv) It is a case of mere change of opinion and there hasbeen otherwise no escapement of any income. The submission isthat the initiation of proceedings are without jurisdiction andas such deserves to be quashed. (v) That no reasons had been recorded before initiating theproceedings u/s 147 of the Act. (vi) To justify the reopening of the assessment, onlyreasons recorded has to be looked into. (e) Scope of provisions of Section 147 of the Income TaxAct: The petitioner, at the outset, submitted that the ApexCourt in its judgment in the case of Calcutta Discount Co. Ltd.,Vs. ITO reported in 41 ITR 191, examined the scope of provisionsof Section 34 of the Act and held at Pg.199 as under: “To confer jurisdiction under this section toissue notice in respect of assessments beyond theperiod of four years, but within a period of eightyears, from the end of the relevant year two conditionshave therefore to be satisfied. The first is that theIncome-tax Officer must have reason to believe thatincome, profits or gains chargeable to income- tax havebeen under-assessed. The second is that he must havealso reason to believe that such " under assessment "has occurred by reason of either (i) omission orfailure on the part of an assessee to make a return ofhis income under s. 22, or (ii) omission or failure onthe part of an assessee to disclose fully and truly allmaterial facts necessary for his assessment for thatyear. Both these conditions are conditions precedent tobe satisfied before the Income-tax Officer could havejurisdiction to issue a notice for the assessment orre-assessment beyond the period of four years butwithin the period of eight years, from the end of theyear in question.(Emphasis supplied)” (f) It is the submission of the petitioner that if theaforesaid tests as laid down by the Hon'ble Supreme Court (whichholds good till date) when is applied, would show that theassumption of jurisdiction by the respondent to issue the noticeand initiate the proceedings is outside the scope of theprovisions of Section 147 of the Act. It had been held as abovethat before assuming jurisdiction both the conditions are to besatisfied namely:(i) there had to be omission or failure todisclose fully and truly all material facts; and (ii) that theAO is having a reason to believe. In the instant case both theconditions are not satisfied. Indeed even the reasons had notbeen recorded and also there had been no failure to disclosefully and truly all material facts. Without prejudice, even thereasons recorded and supplied to the petitioner shows that suchreasons are merely based on change of opinion. The petitionerfurther submitted that in the said judgment of Calcutta DiscountCo., Ltd., (Supra) at Pg.202-203, the Hon'ble Apex Court hasheld as under:“The only nondisclosure mentioned in the report isthat the company had failed to disclose " the true intention behind the sale of the shares ". Mr.Choudhury contends that this is not an omission todisclose a material fact within the meaning of s. 34.The question whether sales of certain shares were byway of changing the investments or by way of trading inshares has to be decided on a consideration ofdifferent circumstances, including the frequency of thesales, the nature of the shares sold, the pricereceived as compared with the cost price, and severalother relevant facts. It is the duty of the assessee todisclose all the facts which have a bearing on thequestion; but whether the assessee had the intention tomake a business profit as distinguished from theintention to change the form of the investments isreally an inference to be drawn by the assessingauthority from the material facts taken in conjunctionwith the surrounding circumstances. The law does notrequire the assessee to state the conclusion that couldreasonable drawn from the primary facts. The questionof the assessee's intention is an inferential fact andso the assessee's omission to state his " trueintentions behind the sale of shares " cannot by itselfbe considered to be a failure or omission to discloseany material fact within the meaning of s. 34. Indeed,an assessee whose contention is that the shares weresold to change the form of investment and not with theintention of making a business profit cannot beexpected to say that his true intention was other thanwhat he contended it to be.. Dealing with this questionthe learned Chief Justice has said:- " The expression that the Respondent had failed todisclose " the true intention behind the sale of shares" may lack directness, but that deficiency of languageis not sufficient to enable the Respondent to contend,in view of the circumstances alleged, that no failureto disclose facts was being complained of. On the factsas stated by the Income-tax Officer, it is clear thatthere had been a failure to disclose the fact that theRespondent was a dealer in shares and what the Income-tax Officer meant by the language used by him was thatthe Respondent had not disclosed that the sale ofshares had been of the nature of a trading sale, madein pursuance of an intention to make a business profit,and not of the nature of a change of investment, madein pursuance of an intention to put certain capitalassets into another form. If that be so, it is equallyclear that the Income-tax Officer who, by the way, wasa successor to the officers who had made the originalassessments, was not merely changing his opinion as to facts previously known, but was taking notice of a newfact." (Emphasis supplied) facts previously known, but was taking notice of a newfact." (Emphasis supplied) The petitioner submitted that Section 34 of Income Tax Act,1922, which is pari-materia to section 147 of the Income Tax Actonly provides special jurisdiction. In the Income Tax Act, thereis no concept of any other assessment other than the assessmentor reassessment and that too on specified pre-requisite ofSection 147 of the Act. (g) Change of opinion: It is submitted that in the case ofthe petitioner, a notice u/s 148 of the Act has been issued bythe respondent on reviewing the assessment record on account ofreason that petitioner had debited a sum of Rs.14,91,73,063/-towards the payment of loan guarantee fee and on the said sum,no tax had been deducted at source and thus, he was of the viewthat provisions of Section 40(a) of the Act, the said guaranteefees was not allowable. It is submitted that the issue ofallowability of the loan guarantee fee was specifically examinedduring the course of the assessment. It is further submitted thein the notice dated 19.07.2010 issued u/s 142(1) of the Act wasissued, when the respondent raised a following query: “(h) Particulars of loan guarantee fee withparticulars of guarantor, copy of agreement andamount.” (h) In respect of the aforesaid query, the petitioner filedits reply on 10.08.2010, wherein it was submitted as under: “Cairn Energy India Private Limited [“CEIPL”] andCairn Enerty Plc[“CEPLC”] has entered into a GuaranteeFee agreement on 1[st] April 2005 in terms of which CEPLChas guaranteed the loan facility of US$ 48 mn extendedto CEIPL by Royal Bank of Scotland Plc. Further CEIPL and CEPLC have entered into anotheragreement on 27 June 2006 in terms of which CEPLC hasguaranteed the revolving credit facility of upto US$ 425mn extended to CEIPL by a syndicate of banks being theRoyal Bank of Scotland Plc, IFC, ABN Amro NV, BarclaysBank Plc, Citibank NA, HSBC Bank Plc, ICICI Bank UKLimited, SocieteGenerale, Sumitomo Mitsui Finance DublinLtd., Standard Chartered Bank and the Bank of Scotland. During the year under assessment the assesseecompany has paid Rs.149,173,063/- to CEPLC as guaranteefee charged @ 1.5% of the loan facility guaranteed asper the Guarantee Fee Agreement. This fee is paid in lieu of the risk undertaken by CEPLC in providing theguarantee on behalf of CEIPL. Detail of Guarantee Fee working along with copy ofagreement is enclosed as Annexure – 10.” (i) It would therefore be seen that the petitioner hasgiven complete details in respect of loan guarantee fee and alsosubmitted the agreement as well as the working of the GuaranteeFee. Thereafter, another notice was issued on 26.11.2010,wherein the following query was raised: “d) Bank loan and Guarantee Fee; Please state howthe bank loan has been utilized. Reference is alsoinvited to the terms of bank guarantee fee. As per theterms, “Plc shall invoice CEIPL before 25[th] day ofApril succeeding the last month of the Financial year(March) in respect of the Fee for the entire financialyear or as mutually agreed. Payment of the undisputedportion of invoices submitted by Plc in accordanceherewith shall be made by CEIPL to Plc within 30 daysof the receipt of the invoice by CEIPL” With reference to the above and the paymentdetails as per Annexure 10 to your reply, pleasefurther elaborate, (i) Whether there as any disputed portion (ii) Satisfaction of 'accrual principle in respectof the claim of the expenditure' In this notice, query was also raised regardingthe TDS compliance.” (j) In response to the aforesaid query, the petitionerfiled its reply on 07.12.2010, wherein it was submitted asunder: With reference to the above and the paymentdetails as per Annexure 10 to your reply, pleasefurther elaborate, (i) Whether there as any disputed portion (ii) Satisfaction of 'accrual principle in respectof the claim of the expenditure' In this notice, query was also raised regardingthe TDS compliance.” (j) In response to the aforesaid query, the petitionerfiled its reply on 07.12.2010, wherein it was submitted asunder: “The Company has accrued guarantee fee amount inbooks of accounts amounting to INR 149,173,063 based onthe agreement entered into with its parent companyCairn Enerty Plc. The same has also been claimed asallowable expenditure under the provisions of Section37(1) of the Act. TOP has considered this to be atarm's length in his order dated October 25 2010(Annexure-2). As per section 92CA (4), Assessingofficer has to compute the total income in conformitywith the arm's length price determined by TPO “On receipt of the order under Sub-Section (3),the assessing officer shall proceed to compute the total income of the assessee under sub-section (4) ofsection 92 in conformity with the arm's length price asso determined by the Transfer Pricing Officer” Without prejudice to above, we submit as below:- a) As per the Point 2 “Compensation and Invoicing”of the 'Guarantee Fees Agreement' entered into by theassessee “2.1 As consideration for the loan facilityguaranteed, CEIPL shall pay to PLC in accordance withthe schedule attached hereto”. As per the attachedschedule, the consideration payable is 1.5% of the loanamount as guarantee fee (refer page 5 of Guaranteeagreement filed with your office as an annexure toletter dated 10[th] Aug 2010). b) The point 2.2 deals only with the invoicingwhich is nothing but procedural (c) There is no disputed portion In lieu of above, the assessee company has rightlyclaimed the guarantee fees as allowable expenditureunder section 37(1) of the Act.” (k) The petitioner also filed the reply on 22.12.2010 inrespect of the TDS compliance. It would therefore be seen thatissue of loan guarantee fee was examined in detail after dueenquiry by the respondent in the original assessmentproceedings, and it is only after being satisfied, expenditurein respect of loan guarantee fee was allowed. (l) It is therefore submitted that reopening of theassessment to examine the same issue is nothing but the changeof opinion. The petitioner further submitted that though astatutory amendment had been made in section 148 of the IncomeTax Act w.e.f.01.04.1989, however, the Apex Court in 320 ITR561, while affirming the judgment of Delhi High Court in thecase of CIT Vs. Kelvinator of India Ltd., reported in 256 ITR 1(FB) held as under: “On going through the changes, quoted above, madeto Section 147 of the Act, we find that, prior to theDirect Tax Laws (Amendment) Act, 1987, reopening couldbe done under the above two conditions and fulfilmentof the said conditions alone conferred jurisdiction onthe assessing officer to make a back assessment, butin Section 147 of the Act (with effect from 1-4-1989),they are given a go-by and only one condition hasremained viz. that where the assessing officer hasreason to believe that income has escaped assessment, “On going through the changes, quoted above, madeto Section 147 of the Act, we find that, prior to theDirect Tax Laws (Amendment) Act, 1987, reopening couldbe done under the above two conditions and fulfilmentof the said conditions alone conferred jurisdiction onthe assessing officer to make a back assessment, butin Section 147 of the Act (with effect from 1-4-1989),they are given a go-by and only one condition hasremained viz. that where the assessing officer hasreason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment.Therefore, post-1-4-1989, power to reopen is muchwider. However, one needs to give a schematicinterpretation to the words “reason to believe”failing which, we are afraid, Section 147 would givearbitrary powers to the assessing officer to reopenassessments on the basis of “mere change of opinion”,which cannot be per se reason to reopen. We must alsokeep in mind the conceptual difference between powerto review and power to reassess. The assessing officerhas no power to review; he has the power to reassess.But reassessment has to be based on fulfilment ofcertain precondition and if the concept of “change ofopinion” is removed, as contended on behalf of theDepartment, then, in the garb of reopening theassessment, review would take place. One must treatthe concept of “change of opinion” as an in-built testto check abuse of power by the assessing officer.Hence, after 1-4-1989, the assessing officer has powerto reopen, provided there is “tangible material” tocome to the conclusion that there is escapement ofincome from assessment. Reasons must have a live linkwith the formation of the belief. Our view getssupport from the changes made to Section 147 of theAct, as quoted hereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament not only deleted thewords “reason to believe” but also inserted the word“opinion” in Section 147 of the Act. However, onreceipt of representations from the companies againstomission of the words “reason to believe”, Parliamentreintroduced the said expression and deleted the word“opinion” on the ground that it would vest arbitrarypowers in the assessing officer. We quote hereinbelowthe relevant portion of Circular No. 549 dated 31-10-1989, which reads as follows: “7.2. Amendment made by the Amending Act, 1989,to reintroduce the expression ‘reason to believe’ inSection 147.—A number of representations were receivedagainst the omission of the words ‘reason to believe’from Section 147 and their substitution by the‘opinion’ of the Assessing Officer. It was pointed outthat the meaning of the expression, ‘reason tobelieve’ had been explained in a number of courtrulings in the past and was well settled and itsomission from Section 147 would give arbitrary powersto the Assessing Officer to reopen past assessments onmere change of opinion. To allay these fears, theAmending Act, 1989, has again amended Section 147 toreintroduce the expression ‘has reason to believe’ in the place of the words ‘for reasons to be recorded byhim in writing, is of the opinion’. Other provisionsof the new Section 147, however, remain the same.” (emphasis supplied) (m) The petitioner however adds that the Division Bench ofHigh Court of Delhi in its judgment reported in 256 ITR 1 hadheld as under: “We, however, may hasten to add that if “reason tobelieve” of the Assessing Officer is founded on aninformation which might have been received by theAssessing Officer after the completion of assessment,it may be a sound foundation for exercising the powerunder section 147 read with section 148 of the Act. the place of the words ‘for reasons to be recorded byhim in writing, is of the opinion’. Other provisionsof the new Section 147, however, remain the same.” (emphasis supplied) (m) The petitioner however adds that the Division Bench ofHigh Court of Delhi in its judgment reported in 256 ITR 1 hadheld as under: “We, however, may hasten to add that if “reason tobelieve” of the Assessing Officer is founded on aninformation which might have been received by theAssessing Officer after the completion of assessment,it may be a sound foundation for exercising the powerunder section 147 read with section 148 of the Act. We are unable to agree with the submission of Mr.Jolly to the effect that the impugned order ofreassessment cannot be faulted as the same was based oninformation derived from the tax audit report. The taxaudit report had already been submitted by theassessee. It is one thing to say that the AssessingOfficer had received information from an audit reportwhich was not before the Income-tax Officer, but it isanother thing to say that such information can bederived by the material which had been supplied by theassessee himself. We also cannot accept the submissionof Mr. Jolly to the effect that only because in theassessment order, detailed reasons have not beenrecorded an analysis of the materials on the record byitself may justify the Assessing Officer to initiate aproceeding under section 147 of the Act. The saidsubmission is fallacious. An order of assessment can bepassed either in terms of sub-section (1) of section143 or sub-section (3) of section 143. When a regularorder of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raisedthat such an order has been passed on application ofmind. It is well known that a presumption can also beraised to the effect that in terms of clause (e) ofsection 114 of the Indian Evidence Act judicial andofficial acts have been regularly performed. If it beheld that an order which has been passed purportedlywithout application of mind would itself conferjurisdiction upon the Assessing Officer to reopen theproceeding without anything further, the same wouldamount to giving a premium to an authority exercisingquasi-judicial function to take benefit of its ownwrong.”(Emphasis supplied) (n) The petitioner submitted that recently the Apex Court in the case of ITO Vs. Techspan India Pvt limited, reported in 404ITR 10, in para 12 has held that there would be a change ofopinion when either specifically or by necessary implication are-look is being made. In the instant case this is where therespondent has attempted to. “Before interfering with the proposed reopening ofthe assessment on the ground that the same is basedonly on a change in opinion, the court ought to verifywhether the assessment earlier made has eitherexpressly or by necessary implication expressed anopinion on a matter which is the basis of the allegedescapement of income that was taxable. If theassessment order is non-speaking, cryptic orperfunctory in nature, it may be difficult to attributeto the assessing officer any opinion on the questionsthat are raised in the proposed reassessmentproceedings. Every attempt to bring to tax, income thathas escaped assessment, cannot be absorbed by judicialintervention on an assumed change of opinion even incases where the order of assessment does not addressitself to a given aspect sought to be examined in thereassessment proceedings”.(Emphasis supplied) (o) The Apex Court in its judgment in the case of ACIT Vs.ICICI Securities Primary Dealership Ltd., reported in 348 ITR299 at Pg.301 has while upholding the judgment of Bombay HighCourt which reads as under: (o) The Apex Court in its judgment in the case of ACIT Vs.ICICI Securities Primary Dealership Ltd., reported in 348 ITR299 at Pg.301 has while upholding the judgment of Bombay HighCourt which reads as under: “In the facts of the present case, there isnothing new which has come to the notice of theRevenue. The accounts had been furnished by thepetitioner when called upon. Thereafter the assessmentwas completed under Section 143(3) of the Income TaxAct. Now, on a mere relook, the officer has come to theconclusion that the income has escaped assessment andhe is of course justified in his analysis. In our view,this is not something which is permissible under theproviso to Section 147 of the Income Tax Act whichspeaks about a failure on the part of the assessee tomake a proper return. In the present case, no such caseis made out on the record. In the circumstances, weallow this petition in terms of Prayer (a) and quashand set aside the notice dated 27-3-2006 directingreopening of the assessment for the year 1999-2000. It thus held as under:“Leave granted.We have heard learned counsel on both sides.The assessee had disclosed full details in the return of income in the matter of its dealing in stocksand shares. According to the assessee, the lossincurred was a business loss, whereas, according to theRevenue, the loss incurred was a speculative loss.Rejection of the objections of the assessee to the re-opening of the assessment by the assessing officer videhis order dated 23-6-2006, is clearly a change ofopinion. In the circumstances, we are of the view thatthe order re-opening the assessment was notmaintainable.” (Emphasis supplied) (p) It is submitted that it is settled law that if an orderof the assessment has been framed and AO during the assessmentproceedings issued questionnaire/queries and same was replied bythe assessee though the same was not explicitly recorded in theorder of the assessment, reopening of the assessment will amountto change of opinion: 1.CIT vs. Eicher Ltd., 294 ITR 310 HC Del 2. Satnam Overseas Limited and Anr.Vs. ACIT 329 ITR 237 HCDel 3. Munjal Showa Ltd., Vs. DCIT W.P.(C).4753/2011 HC Del 14 May 2012 4.Tulsi Developers Vs. DCIT 246 CTR 106 HC Guj 5. Mrs.Parveen P.Bharucha Vs. The Deputy Commissioner ofIncome Tax (W.P.No.10437 of 2011) HC Bom 27[th] June 2012 6. General Motors India Pvt., Ltd.Vs. DCIT (Special CivilApplication No.1773 of 2012) dated 23.08.2012 HC Guj 7.CIT Vs. Usha International Limited. 348 ITR 485 FB (Del) (q) That even if for the sake of an arguments, it is assumedthat there was insufficient enquiry or there was any error thentoo, the same would not clothe the respondent to assumejurisdiction to initiate proceedings u/s.147 of the Act. It hasbeen held in the following judicial pronouncement that anyremissness, error or mistake does not clothe the respondent toassume jurisdiction u/s.147 of the Act more particularly in thecase wherein the proceedings have been initiated beyond a periodof four years from the end of the assessment year. i. CIT Vs. BhanjiLavji 79 ITR 582 (SC) ii. Mohini Bai M.Sarda Vs. First ITO 190 ITR 541(Karnataka)iii. Fenner India Limited. Vs. DCIT 241 ITR 672(Mad) iv. CIT Vs.Indian Sugar&General Industries 303 ITR 155 (Delhi) v. Gordon Woodroffe & Co.Ltd., Vs. ITO 51 ITR 12(Mad)vi. Gemini Leather Store.Vs.Income-Tax officer 100ITR 1 (SC)vii. Parashuram Pottery Works Co., Ltd.Vs.ITO 106 ITR 1 (SC)viii. Techman Buildwell (P) Ltd., Vs. Assistant Commissioner of Income -Tax 370 ITR 771 (Delhi)ix. Indian And Eastern Newspaper Society, Vs. Commissionerof Income Tax, New Delhi – 119 ITR 996 (SC)x. Chemicals and Fibres of India Limited vs. M.K.N.Pillaiand another 146 ITR 280 (Bom)xi. Addl.Commissioner of Incometax Vs. Ganeshilal Lal Chand154 ITR 274 (Rajasthan) xii. ITO Vs. Sirpur Papers Mills Ltd., 113 ITR 393 (AP) ii. Mohini Bai M.Sarda Vs. First ITO 190 ITR 541(Karnataka)iii. Fenner India Limited. Vs. DCIT 241 ITR 672(Mad) iv. CIT Vs.Indian Sugar&General Industries 303 ITR 155 (Delhi) v. Gordon Woodroffe & Co.Ltd., Vs. ITO 51 ITR 12(Mad)vi. Gemini Leather Store.Vs.Income-Tax officer 100ITR 1 (SC)vii. Parashuram Pottery Works Co., Ltd.Vs.ITO 106 ITR 1 (SC)viii. Techman Buildwell (P) Ltd., Vs. Assistant Commissioner of Income -Tax 370 ITR 771 (Delhi)ix. Indian And Eastern Newspaper Society, Vs. Commissionerof Income Tax, New Delhi – 119 ITR 996 (SC)x. Chemicals and Fibres of India Limited vs. M.K.N.Pillaiand another 146 ITR 280 (Bom)xi. Addl.Commissioner of Incometax Vs. Ganeshilal Lal Chand154 ITR 274 (Rajasthan) xii. ITO Vs. Sirpur Papers Mills Ltd., 113 ITR 393 (AP) (r) It is significant to be noted that their Lordshipsconsidered in its judgment that where a petitioner hadchallenged the initiation of proceedings u/s 148 of the Act andfiled objections, the Assessing Officer was required bylaw toconsider such objections, to enable the Court to examine whetherit is a case of change of opinion or otherwise. It is submittedthat if the aforesaid principles of law as laid down iscomplied, it is evident that an order on objection deserves tobe examined by the Court before expressing its discretion underArticle 226 of Constitution of India. (s) There is no liability to deduct tax on loan guaranteefee as such, section 40(a)(i) is inapplicable: It is to besubmitted that the Respondent in the purported reasons tobelieve has alleged that payment of guarantee fees is in thenature of fees for technical services and accordingly, the sameis subject to tax in India under the Income-tax Act. However,such assumption of the respondent is legally unsustainable,since respondent has failed to appreciate that Article 13 of theIndia-UK DTAA, which categorically includes a 'make available'clause i.e., to say that the definition of Fees for TechnicalServices as given in the treaty brings to tax an amount as FTSonly if the consideration received is for making available aservice. Relevant extract of the Article 13(4) is reproducedbelow: “For the purposes of paragraph 2 of this Article, andsubject to paragraph 5, of this Article, the term“fees for technical services” means payments of anykind of any person in consideration for the renderingof any technical or consultancy services (includingthe provision of services of a technical or otherpersonnel) which: (a) are ancillary and subsidiary to the application orenjoyment of the right, property or information forwhich a payment described in paragraph 3(a) of thisarticle is received; or (b) are ancillary and subsidiary to the enjoyment ofthe property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience,skill know-how or processes, or consist of thedevelopment and transfer of a technical plan ortechnical design.” 9. The learned Senior Standing counsel opposed thecontentions raised on behalf of the petitioner by stating thatthe reopening in the case of the petitioner is made within aperiod of four years and therefore, the conditions stipulated inthe proviso clause to Section 147 is not applicable. If theAssessing Officer has ‘reason to believe’ that income chargeableto tax escaped assessment, then jurisdiction is conferred forreopening of assessment. (b) are ancillary and subsidiary to the enjoyment ofthe property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience,skill know-how or processes, or consist of thedevelopment and transfer of a technical plan ortechnical design.” 9. The learned Senior Standing counsel opposed thecontentions raised on behalf of the petitioner by stating thatthe reopening in the case of the petitioner is made within aperiod of four years and therefore, the conditions stipulated inthe proviso clause to Section 147 is not applicable. If theAssessing Officer has ‘reason to believe’ that income chargeableto tax escaped assessment, then jurisdiction is conferred forreopening of assessment. 10. Regarding the point of change of opinion raised, thelearned Senior Standing counsel solicited the attention of thisCourt with reference to the reasons furnished and such reasonshave live link with the tangible materials and the order,disposing of the objections would reveal that the objectionsraised by the petitioner in this regard are elaboratelyconsidered and findings in paragraph 4.3 & 4.4 of the impugnedorder would reveal that the case of the petitioner is a fit casefor reopening of assessment. The reasons recorded in proceedingsdated 08.10.2012 would also reveal that the assessee hasrepresented that there is no item of expenditure falling underSection 40(a) of Income Tax Act, 1961, which have been debitedto the profit & Loss account. However, the above does notinclude deferred tax credit of Rs.85,37,56,383/- as perfinancial statements. In respect of section 40(a)(ia) theauditors have test checked material items and also relied onmanagement representation for the purpose of reporting underthis clause”. Therefore, it is apparent that for the paymenteffected in foreign currency towards loan guarantee fee/interest, no tax was deducted by the assessee at source. Thisprovided for the Assessing Officer has ‘reason to believe’ forreopening of assessment. Thus, reopening of assessment in thepresent case is based on tangible material and the directivesissued by the Hon’ble Supreme Court in the case of GKNDriveshafts (India) Ltd., Vs. ITO, reported in 259 ITR 19 hasbeen scrupulously followed and therefore, the petitioner /assessee has to participate in the process of reopening ofproceedings in order to defend their case. 11. Though the learned Senior counsel for the petitionerelaborately argued and submitted umpteen number of judgments,the principles laid down by the Hon’ble Supreme Court in thosecases are not disputed by the respondents. The learned SeniorStanding counsel also emphasized that there is no dispute on theprinciples submitted on behalf of the petitioners. However, the application of the principles with reference to the facts andcircumstances of the case is important for the purpose testingthe validity of reopening proceedings initiated under Section147 of the Income Tax Act. The relevant portion of the reasonsrecorded for reopening of assessment in proceedings dated08.10.2012, reads as under: 11. Though the learned Senior counsel for the petitionerelaborately argued and submitted umpteen number of judgments,the principles laid down by the Hon’ble Supreme Court in thosecases are not disputed by the respondents. The learned SeniorStanding counsel also emphasized that there is no dispute on theprinciples submitted on behalf of the petitioners. However, the application of the principles with reference to the facts andcircumstances of the case is important for the purpose testingthe validity of reopening proceedings initiated under Section147 of the Income Tax Act. The relevant portion of the reasonsrecorded for reopening of assessment in proceedings dated08.10.2012, reads as under: “In the Guarantee fees agreement enclosed to thereturn that the assessee had entered into Loan facilityagreement on 20[th] January 2004 with M/s.The Royal Bankof Scotland, PLC. The assessee's share of facility was48000000 US Dollars for which M/s.Cairn Energy, PLC, acompany incorporated under the laws of Scotland hasextended guarantee. According to the guarantee feeagreement for such guarantee provided, the assessee wasrequired to pay PLC 1.5% of the amount of Loan facilityguaranteed for each fiscal year. On this score, in theProfit and Loss account for the year ended 31.03.2007,under “interest and bank charges”, the assessee hasdebited a sum of Rs.14,91,73,063/- towards the paymentof loan guarantee fee. However, it has debited a sum ofRs.14,91,73,063/- towards the payment of loan guaranteefee. However, in the Notes on Accounts, the gross sumof Rs.14,91,73,063/- was fully exhibited as interestexpanded in foreign currency. In Form 3CD, against column 17(1), about theamount inadmissible, under Section 40(a), theAccountant has stated as follows:- (i) Provision for current tax Rs.17,00,00,000/- (ii)