Introduction
In Grid Solutions OY (LTD) v. Assistant Commissioner of Income Tax & Anr.[i], the Delhi High Court examined the validity of reassessment notices issued to Grid Solutions OY (LTD) (‘Petitioner’) under s. 148 of the Income-tax Act, 1961 (‘IT Act’), after the Petitioner challenged the reassessment proceedings for assessment years (‘AYs’) 2013-14 to 2017-18, arguing that they were arbitrary and relied on extrapolated findings from earlier surveys of associated entities.
Facts
The Petitioner was previously known as Alstom Grid OY until November 2015, after which it became a part of the GE Group following its acquisition. The Petitioner was engaged in offshore supply contracts and had entered into contracts with Power Grid Corporation of India Limited (‘PGCIL’) to supply offshore equipment. However, the Petitioner had no direct operations in India.
The Income-tax Department (‘Respondent’) initiated reassessment proceedings qua the Petitioner for AYs 2013-14, 2015-16, 2016-17 and 2017-18 by issuing reassessment notices under s. 148 of the IT Act.
The Respondent initiated such reassessment after relying upon a survey conducted in 2019 under s. 133A(2A) of the Act, on GE Group, which led the Assessing Officer (‘AO’) to believe that the Petitioner had a permanent establishment (‘PE’) in India, citing alleged control and management of Indian associated enterprises by foreign GE Group entities. Further, the AO also relied on a 2007 survey, statements and email recordings given by employees, and a previous Delhi High Court ruling[ii], wherein it was affirmed that certain GE group entities were PEs.
In light of the aforementioned factual scenario, the AO initiated reassessment proceedings against the Petitioner, alleging that they had a PE in India and, therefore, they were liable to pay tax in India on income earned from its contract with the Indian company.
The Petitioner argued that since it had fully disclosed material facts in prior assessments and no new facts had been introduced, the reassessment was unwarranted. It further contended that the AO relied blindly on surveys conducted in 2007 and 2019, which pertained to other GE Group entities and thus could not justify reassessment under s. 148. Thus, this could not be the sole basis for initiating reassessment against the Petitioner under s. 148 of the IT Act. This submission was made in addition to the assertion that the Petitioner’s supply activities were entirely offshore and that it did not have a PE in India.
Held
The Delhi High Court held that the reassessment proceedings based on findings from surveys conducted in unrelated periods, i.e., 2007 and 2019, lacked legal justification, as the relied-upon surveys pertained to other GE Group entities and were not specific to the Petitioner’s activities during AYs 2013-14 to 2017-18.
The High Court found no failure in the Petitioner’s original assessments in disclosing material facts and that the AO had failed to demonstrate any new or specific material relevant to the AYs under review to justify the initiation of reassessment proceedings under s. 147 of the IT Act. Further, it was also clarified that judicial precedents involving other entities in the GE Group, such as GE Energy Parts Inc., cannot be applied in a mechanical manner without examining the distinct factual matrix of the Petitioner’s case.
The Court quashed the reassessment notices for AYs 2013-14 to 2017-18, ruling that the AO failed to apply independent reasoning, rendering the proceedings arbitrary and unsustainable.
Our Analysis
This ruling reinforces the principle that tax authorities must rely on relevant and contemporaneous material when reopening assessment proceedings. By rejecting the arbitrary extrapolation of survey findings and unrelated judicial precedents, the High Court reaffirmed that reassessment must be based on case-specific, contemporaneous evidence directly linked to the Assessee and the relevant AY.
End Notes
[i] 2025 SCC OnLine Del 183 dated 17.01.2025.
[ii] [2019] 101 taxmann.com 142/411 ITR 243.
Authored by Maarij Ahmad, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.