Qualcomm Inc vs. ADIT (Delhi High Court)

S. 147: In addition To allegation, there must be finding of failure to disclose material facts

For AY 2003-04 the AO reopened the assessment after 4 years from the end of the AY on the ground that the assessee had not fully and truly disclosed the fact that it had a permanent establishment (PE) in India and that it was subject to the higher rate of tax of 20% on the gross royalty. The assessee filed a Writ Petition pointing out that the AO had reopened the assessment earlier on the same point and that he had passed an assessment order after being satisfied with the assessee’s submissions that it had no PE. HELD by the High Court quashing the reassessment proceedings:

Though in the recorded reasons, the AO alleged that there was no full and true disclosure by the assessee, in the objections order, there is no finding, even prima facie, how the assessee failed to disclose fully and truly all material facts with regard to the allegation of the existence of the PE. It is evident that the question of the assessee having a PE in India had been gone into in the first round. Once that aspect of the matter had been gone into in the earlier round, it was not open to the AO to reagitate it in the second round without any other / fresh material. No such other or fresh material has even been alleged in the reasons in the second round. Re-opening of assessments cannot be done merely on the basis of change of opinion.