IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 28 of 2007 (1) The Commissioner of Income Tax, Dehradun. (2) Dy. Commissioner Income Tax Circle-I, Dehradun. …………………..Appellants. Versus McDermott International Inc. C/o Price Water House, Trade World, 8th Floor, C Wing Kamla Mills Compound Senapati Bapat Marg, Lower Parel, Mumbai-4000 013 ………………Respondent. Sri Arvind Vashistha, Advocate, for the appellants. Sri V.B.S. Negi, Advocate, for the respondent. Hon’ble Prafulla C. Pant, J. Hon’ble Dharam Veer, J. [Oral- Hon’ble Prafulla C. Pant, J.] This appeal, preferred under Section 260-A of the Income Tax Act, 1961, is directed against the judgment and order passed in April 2006, in Income Tax Appeal No. 2420/Del/2003, by Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi (hereinafter referred as ITAT), whereby upholding the order of Commissioner of Income Tax (Appeals)-I (hereinafter referred as CIT (A)- I), the appeal of the revenue is dismissed. 2 (2) The question of law involved in this appeal is as under:- “Whether the ITAT has erred in law in holding that once it is found that notice under Section 148 of Income Tax Act, 1961, is without jurisdiction, the action under Section 147 taken by the Assessing Officer cannot be sustained.” (3) Heard learned counsel for the parties. (4) Brief facts of the case are that respondent / assessee McDermott International Inc. is a Non Resident Company (NRC). The assessment in respect of the year 1989-90 was completed on the total income of Rs.5,69,73,130/- as against the return of income shown by assessee at Rs.2,16,87,460/-. The assessee NRC had offered contractual revenue on cash basis under Section 44BB of the Act read with C.B.D.T. Instruction No. 1767 of July 1987. The revenue relating to outside activities were offered at the deemed profit rate of 1% and the Assessing Officer (hereinafter referred as A.O.) taxed it at the deemed profit rate of 1%. The decision as to outstanding dues was accepted by assessee NRC who paid the same by availing the benefit of Kar Vivad Samadhan Scheme (KVSS). It appears that on the ground that the outside activities related to mobilization and demobilization, the A.O. reopened the matter by issuing notice under Section 3 148 of the Act, on 30th March 2000, after getting approval under Section 151 of the Act from Commissioner of Income Tax, Meerut. He took the view that the deemed profit should have been accepted at the rate of 10% instead of 1%. (5) The aforesaid notice dated 30th March 2000 was challenged by respondent / assessee by filing Writ Petition No. 729 of 2001 (M/B), which was decided on 25.10.2002 by a Division Bench of this Court. The notice issued under Section 148 of the Act to respondent / assessee was quashed by this Court on the ground that in respect of the alleged escaped assessment in question, there was no failure on the part of the assessee to make a return under Section 139 of the Act or to make disclosure of all material facts in response to the notices issued to him. As such, after expiry of four years of assessment, even if approval has been taken from the CIT (A), the assessment could not have been reopened. It appears that said decision of this Court in McDermott International Inc. Panama Vs. Additional Commissioner of Income Tax, Special Range, Dehradun and another 2003 U.D., 301, has attained the finality as there is no order shown to us by which the said decision of this Court appears to have been interfered with. However, meanwhile, the assessment order dated 28.03.2002, was passed by A.O., whereby in pursuance to the notices under Section 148 of the Act, after reopening the case, the A.O. completed the assessment declaring taxable 4 income at Rs.3,48,43,146/- under Section 44BB and at Rs.8,58,000/- under Section 44D respectively. Also, the interest was charged under Section 234B of the Act at Rs.1,82,71,512/-. The said order was challenged by the respondent / assessee by filing Appeal No. 362/DDN/2002-03, before the CIT (A)-I, Dehradun. The CIT (A)-I took note of the decision of this Court in McDermott International Inc. Panama Vs. Additional Commissioner of Income Tax, Special Range, Dehradun and another 2003 U.D., 301, and held that since the notice issued under Section 148 of the Act itself was quashed, the assessment made in pursuance thereof cannot be upheld. On this, the revenue preferred an appeal before ITAT by filing ITA No. 2420/Del/2003, challenging the order passed by CIT (A)-I, which was decided by ITAT vide impugned order dated Nil April 2006, upholding the order passed by CIT (A)-I. Hence, the appeal before this Court. (6) Admittedly, the notice issued by A.O. under Section 148 of the Act, which is basis of assessment in question made by A.O. on 28.03.2002 for the year 1989-90, after reopening the case, has already been quashed as is apparent from the decision of this Court in McDermott International Inc. Panama Vs. Additional Commissioner of Income Tax, Special Range, Dehradun and another 2003 U.D., 301. Learned counsel for the appellants argued that though the notice was quashed by this Court, but meanwhile the assessment in pursuance to the notice under 5 Section 148 had already been completed, as such the same cannot be set aside on the ground that the notice has been quashed. However, on going through the order dated 28.03.2002, passed by A.O., we found that the A.O. has not passed the absolute order of assessment rather he has mentioned in Para 10 of the assessment order that the assessment order dated 28.03.2002 is passed subject to amendment on the receipt of the Hon’ble High Court’s verdict on this issue. In the same para he has clearly mentioned that assessee vide his written submission disclosed him that Writ Petition No. 729 of 2001 is pending before Uttaranchal High Court, in which notice dated 30th March 2000 is under challenge. As such, it cannot be said that after the notice under Section 148 is quashed by this Court, the assessment made in pursuance thereof can be upheld. Similar view was taken in the same circumstances by another Bench of this Court in ITA No. 26 of 2007, which was decided on 13.09.2007 in respect of assessment year 1993-94. (7) For the reasons as discussed above, we answer the question of law that ITAT did not commit any error of law in holding that after notice under Section 148 is quashed, action under Section 147 can not be upheld. We do not find force in this appeal, which is liable to be dismissed. The appeal is dismissed. (Dharam Veer, J.) (Prafulla C. Pant, J.) 05.09.2008 NS 6