SC Upholds Delhi HC; Reopening Against GE Entities Held Invalid.

The Supreme Court recently addressed a significant tax dispute involving the GE Group, centring on the Revenue Department’s attempt to reopen assessments for several global entities between 2013 and 2018. Following a 2019 survey, the Revenue Department alleged that GE operated via an “invisible” office or Permanent Establishment (PE) in India, claiming local agents and fixed bases made their global income taxable domestically. However, the High Court quashed these reassessment notices, a decision the Supreme Court was asked to review.

The judiciary found the department’s claims lacked tangible evidence, characterising the revenue’s stance as a “hunch” rather than an established fact. The ruling reinforces a vital legal shield for multinational corporations: the government cannot trigger reassessments under Section 148 based solely on retrospective theories or suspicious survey reports. Ultimately, the case establishes that “income escaping assessment” requires hard proof of a taxable business setup during the specific years in question.

Main Issue: Whether reassessment under Section 148 can be sustained without tangible material establishing a permanent establishment in India.

SC’s Decision: The Supreme Court dismissed the special leave petitions filed by the revenue, thereby affirming the Delhi High Court’s ruling. While the delay in filing was condoned, the court found no merit in the petitions and declined to interfere with the High Court’s judgment.

By upholding the quashing of reassessment notices, the Court reinforced the principle that the reopening of assessments must be backed by concrete and tangible material. Mere reliance on survey findings or generalised allegations of PE, without specific evidence for the relevant assessment years, is insufficient to invoke Section 147/148.

To Read Full Judgment, Download PDF Given Below.