IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No. 2197 of 2010 (M/S) B.J. Services Company Middle East Ltd. ….. Petitioner Versus Deputy Director of Income Tax, International Taxation, Dehradun & others ..… Respondents With Writ Petition No. 2196 of 2010 (M/S) B.J. Services Company Middle East Ltd. ….. Petitioner Versus Deputy Director of Income Tax & others ..… Respondents With Writ Petition No. 2129 of 2010 (M/S) M/S GIL Mauritius Holding Ltd. ….. Petitioner Versus Deputy Director of Income Tax ..… Respondent With Writ Petition No. 2138 of 2010 (M/S) M/S Aker Solutions (Services) PTE Ltd. ….. Petitioner Versus Deputy Director of Income Tax ..… Respondent With Writ Petition No. 2139 of 2010 (M/S) M/S Kvarner Energy Ltd. ….. Petitioner Versus Assistant Director of Income Tax ..… Respondent With Writ Petition No. 2140 of 2010 (M/S) M/S PGS Geophysical ….. Petitioner Versus Assistant Director of Income Tax ..… Respondent With Writ Petition No. 2141 of 2010 (M/S) M/S PGS Exploration (UK) Ltd. ….. Petitioner Versus Deputy Director of Income Tax ..… Respondent With Writ Petition No. 2149 of 2010 (M/S) M/S Western GECO International Ltd. ….. Petitioner Versus Deputy Director of Income Tax ..… Respondent With Writ Petition No. 2150 of 2010 (M/S) M/S Schlumberger Asia Services Ltd. ….. Petitioner Versus Additional Director of Income Tax ..… Respondent 2 With Writ Petition No. 2193 of 2010 (M/S) M/S Vacro International PTE Limited ….. Petitioner Versus Assistant Director of Income Tax ..… Respondent With Writ Petition No. 2218 of 2010 (M/S) M/S Weatherford Asia Pacific PTE Ltd. ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2228 of 2010 (M/S) Precision Energy Services Limited ….. Petitioner Versus Deputy Director of Income Tax & others ..… Respondents With Writ Petition No. 2229 of 2010 (M/S) Halliburton Offshore Services Inc ….. Petitioner Versus Deputy Director of Income Tax & others ..… Respondent With Writ Petition No. 2230 of 2010 (M/S) M-I Overseas Limited ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2242 of 2010 (M/S) Baker Hughes Asia Pacific Limited ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2243 of 2010 (M/S) Subsea 7 Singapore PTE ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2244 of 2010 (M/S) Baker Hughes Singapore PTE ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2245 of 2010 (M/S) Expro Gulf Limited ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents 3 With Writ Petition No. 2247 of 2010 (M/S) Tidewater Marine International Inc ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2248 of 2010 (M/S) Smith International Inc ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2249 of 2010 (M/S) Baker Hughes Asia Pacific Limited ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2250 of 2010 (M/S) Baker Hughes Singapore PTE ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents With Writ Petition No. 2251 of 2010 (M/S) Smith International Inc ….. Petitioner Versus Deputy Director of Income Tax & another ..… Respondents Hon’ble Tarun Agarwala, J. This batch of petitions questions the validity of the notices issued u/S 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) as well as the order of the Assessing Officer rejecting the objections of the petitioner. These petitions are further divided into two groups, namely, those petitions where a notice u/S 148 of the Act has been issued within four years from the end of relevant assessment year and petitions where a notice has been issued after the expiry of four years. For facility, the facts of Writ Petition No. 2197 of 2010 (M/B) is being taken into consideration. The petitioner B.J. Services Company Middle East Ltd. is a company incorporated under the laws of the United Kingdom and is engaged in the business of providing services and facilities in connection with the exploration and extraction as well as the 4 production of mineral oils. The petitioner is an assessee under the Act since the financial year 1985-86 and is being assessed to income tax. For the assessment year 2003-04, the petitioner filed the return of income on 29/11/2003 declaring a total income of Rs.10,20,75,480/- offering its gross revenue to be taxed u/S 45 BB of the Act since the petitioner was being assessed u/S 44 BB of the Act in the previous years. The Assessing Officer issued a notice dated 13th April, 2004 u/S 143 (2) of the Act indicating to the petitioner that it has reasons to believe that the return filed by the petitioner was incorrect and inadmissible and directed the petitioner to supply particulars and documents in support of such claim. The petitioner filed his reply dated 22/11/2005 and 28/11/2005 furnishing the details and the information in response to the queries made by the Assessing Officer. The Assessing Officer, after examining the return of the income and other documents and the replies filed by the petitioner and, after applying its mind, issued an assessment order dated 29/11/2005 u/S 143 (3) of the Act. The matter did not end here. After a lapse of more than four years, the Deputy Director of Income Tax, International Taxation, Dehradun respondent No.1 issued a notice dated 31st March, 2010 u/S 148 of the Act proposing to reassess the income of the petitioner on the ground that income has escaped assessment within the meaning of Section 147 of the Act. The petitioner vide letter dated 23rd April, 2010 filed the same return of income as originally filed for the financial year 2003-04 and, further requested the Assessing Officer, to furnish the reasons recorded for reopening the assessment. The request of the petitioner was acceded to and the Assistant Director of Income Tax International Taxation, respondent No. 2, furnished the 5 reasons recorded for reopening the assessment proceedings u/S 147 of the Act vide letter dated 08/10/2010, namely, (1) that in view of the decision dated 15.12.2005 of the High Court of Uttarakhand in Income Tax Appeal No. 239 of 2001 in the case of O.N.G.C. as agent of M/s Foramer France, Dehradun, the income of the petitioner is required to be assessed as “fees for technical services” and that the income of the petitioner is not covered by the provision of Section 44 BB of the Act. (2) that in view of the explanatory note to the Finance Bill 2010 indicating that the combined effect of the provision of Section 44 BB, 44 DA and 115A of the Act is that if the income of a non resident is in the nature of a fee for technical services, in that event, it would be taxable under the provision of Section 44 DA or u/S 115 A and that Section 44 BB would only apply in a case where the consideration is for the services and other facilities relating to exploration activity which was not in the nature of technical services. In the light of the aforesaid, the Assessing Authority was of the opinion that there was a clear cut failure on the part of the assessee to disclose fully and truly all material facts necessary for the completion of its assessment and, consequently, justified its action for issuing a notice u/S 148 of the Act and reopening the assessment u/S 147 of the Act. The reasons given by the Assessing officer for reopening the assessment is the same in all the writ petitions. The procedure to be followed when a notice u/s 148 of the Act is issued has been settled by a decision of the Supreme Court in the Case of GKN Driveshafts (India) Ltd. Vs. Income-Tax Officer and others, (2003) 259 ITR 19 wherein the Supreme Court held :- 6 “We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years.” Accordingly, on receipt of the reasons recorded by the Assessing Officer, the petitioner filed its objections to the initiation of the re-assessment proceedings submitting therein that the proceedings so initiated were without jurisdiction and illegal contending that there was no new material or opinion which had come into the possession of the Assessing Officer subsequent to the passing of the original assessment order and, therefore, the proposed reassessment proceedings was being initiated on the same material which was already on the record which amounts to a change of opinion and which was not permissible. It was also contended that the notice was issued after the expiry of the period of four years and, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment, the proceedings were barred by limitation in view of the proviso to Section 147 of the Act. It was further contended that the decision of the High Court of Uttarakhand was distinguishable on facts and had no application and that the 7 proposed amendment as per the Finance Bill 2010 was prospective in nature and was not applicable. Inspite of the objections raised by the petitioner, the Assessing Authority, by its order dated 09/12/2010, rejected the objection of the petitioner contending that in view of the decision of the High Court of Uttarakhand in the case of M/s Foramer (Supra) and in view of the Finance Bill 2010, there was fresh material to show that the payments received by the petitioner were towards “fees for technical services” which could not be assessed u/S 44 BB of the Act and that the same is to be assessed u/S 9 (1) (vii) of the Act. The Assessing Authority held that it was not a mere change of opinion and that there was sufficient material to come to a conclusion that the petitioner had not disclosed fully and truly all material facts necessary for the assessment. The Assessing Authority further held, that even assuming all the facts had been disclosed by the assessee in the original assessment proceedings, the same had escaped the attention of the Assessing Officer since no conscious decision was taken on such set of facts and, consequently, on this ground also, the assessment proceedings could be reopened and that it would not amount to a mere change of opinion. The petitioner being aggrieved by the said order has filed the present writ petition praying for the quashing of the notice dated 31st March, 2010 issued u/S 148 of the Act and for the quashing of all the proceedings initiated pursuant to the said notice. Heard Sri M.S. Syali, Senior Advocate assisted by Sri P.R. Mullick, Advocate for the petitioner in WPMS Nos. 2196/2010, 2197/2010, 2228/2010, 2229/2010, 2230/2010, 2242/2010, 2243/2010, 2244/2010, 2245/2010, 2247/2010, 2248/2010, 2249/2010, 2250/2010 and 2251/2010, Sri Salil Kapoor, Advocate with Sri Chetan Joshi, Advocate for the petitioner in WPMS Nos. 8 2129/2010, 2138/2010, 2139/2010 and 2193/2010, Sri M.S. Syali, Senior Advocate assisted by Sri Chetan Joshi, Advocate for the petitioner in WPMS Nos. 2140/2011, 2141/2010, 2149/2010 and 2150/2010 and Sri Manoj Tiwari, Senior Advocate assisted by Sri Rishabh Maheshwari and Sri K.K. Tiwari, Advocates for the petitioner in WPMS No. 2218/2010 and Sri Arvind Vashisth, Advocate with Mrs. Monika Pant, Advocate for the respondent/Income Tax Department. The contention of the petitioner is, that the notice issued u/S 148 of the Act and the proceedings initiated pursuant to the said notice was without jurisdiction. The petitioner contends that the Assessing Officer having “reasons to believe” that the income of the petitioner had escaped assessment was patently illegal and was not based on any material whatsoever for the formation of its reasons to believe. It was further contended that “reasons to believe” was nothing else but a change of opinion which is not permissible especially when all the relevant and material facts were fully and truly disclosed by the petitioner. It was further contended that no new material or opinion had come in the possession of the Assessing Officer warranting the reopening of the assessment proceedings. The petitioner further contended that the present assessment proceedings was initiated after the expiry of four years from the end of the relevant assessment year which was barred by limitation in view of the proviso to Section 147 of the Act since there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment. On the other hand, the contention of the respondents is, that the Assessing Officer has wide powers to reopen the assessment if he has reasons to believe that the income has escaped assessment. The respondents submitted that if the Assessing Officer has some reasonable ground to believe that there has been a non-disclosure 9 of a primary fact which could have a material bearing on the question that the assessment so made was under assessed, in that event, it would be sufficient to initiate proceedings for reassessment. The respondents further submitted that it was not necessary that the reasons should be given in detail in the notice so issued u/s 148 of the Act and that the Assessing Officer could justify its action while disposing the objection of the assessee by supplementing the reasons for reopening the assessment. In rejoinder, it was contended that the petitioner was only required to disclose fully and truly all primary relevant facts and, once all the primary facts was before the Assessing Authority, the assessee was not required to give any further assistance to the Assessing Officer by way of disclosure. It was submitted that all the primary facts were before the Assessing Officer who after applying his mind and drawing the inference of facts passed the assessment order. It was further urged that while deciding the objection, the reason have to be same which was recorded earlier while issuing the notice u/S 148 of the Act. It was further contended that where an assessment order was passed u/S 143 (3) of the Act, a presumption could be drawn that such an order had been passed on due application of mind. Before proceedings further, it would be appropriate to peruse Section 147 and 148 of the Act which is extracted hereunder:- “Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year 10 concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2 : For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) Where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but - (i) Income chargeable to tax has been underassessed; or 11 (ii) Such income has been assessed at too low a rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed.” “Issue of notice where income has escaped assessment. 148. [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. [Provided that in a case - (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) Subsequently a notice has been served under sub- section (2) of section 143 after the expiry of twelve months specified in the proviso to sub- section (2) of section 143, as it stood immediately before the amendment of said sub- section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case – (a) where a return has been furnished during period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) Subsequently a notice has been served under sub- clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the 12 proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. [Explanation. – For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.” A perusal of the aforesaid provisions indicates that the Assessing Officer has wide powers to reopen the assessment if he has reason to believe that the income chargeable to tax has escaped assessment. However, this wide power is circumscribed and does not give jurisdiction to the Assessing Officer to reopen a completed assessment on a mere change of opinion. The reasons to believe is not based nor can it be an outcome of a change of opinion. Further, the proviso indicates that if more than four years have elapsed from the end of the relevant assessment year, in addition to the satisfaction of the Assessing Officer that he has reasons to believe, must also indicate that the assessee had failed to disclose fully and truly all material facts necessary for his assessment for that assessment year. The words “reasons to believe”, change of opinion, “failure to disclose fully and truly material facts” and “material facts” have been a subject of interpretation by various High Courts and also by the Supreme Court of India. The proviso to Section 147 of the Act stipulates that where the assessment is framed u/S 143 (3) of the Act and the period of four years from the end of the relevant assessment year has expired, unless and until the income chargeable to tax has escaped the assessment by virtue of a failure to file the return as prescribed or failure to respond to the notice issued u/S 142 (1) of the Act or 13 Section 148 of the Act or to disclose fully and truly all material facts necessary for the assessment of the relevant assessment years, no action could be taken by the Assessing Officer. According to the petitioner, it is imperative that the Assessing Officer must have a “reason to believe” that income chargeable to tax has escaped assessment. This “reason to believe” must be a genuine belief and must be based on some material that has come to the notice of the Assessing Officer and must not represent a mere change in opinion. In Ganga Saran & Sons P. Ltd. Vs. Income-Tax Officer and others, 1981 Vol.130 ITR 1, the Supreme Court held : “It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the