1. The Petitioner M/s. Tractebel Industry is abody corporate registered under the laws of the Republic of Belgium.

2. For the assessment year 2002-03, the Petitioner had filed return of income in India in respect of "Indian operations" declaring total income of Rs. 2,53,01,260/-. Assessment order under Section 343(3) of the Income Tax Act, 1961 (Act, for short) dated 24th March, 2005 was passed by the Assessing Officer computing the total taxable income at Rs. 2,74,78,666/-. While computing the said taxable income, it was held by the Assessing Officer that Article 12 of the Double Taxation Avoidance Agreement (DTAA) between Republic of India and Republic of Belgium was applicable and the payments received from the "Indian operations" were taxable under the head "Fees for technical services" and was taxable @ 10% on gross basis without allowing any deduction on account of reimbursement of expenses. In view of the above, deduction of Rs. 18,56,756/- claimed on account of reimbursement of expenses was disallowed and added back to the income of the Petitioner.

3. The Petitioner had filed an appeal but the same was dismissed vide order dated 1st December, 2005. No further appeal was filed and the assessment order became final.

4. The Income Tax Department issued notice under Sections 147/148 of the Act dated 26th March, 2007 for re-opening the said Assessment for the Assessment year 2002-2003. The Petitioner after getting copy of the reasons filed objections but by the impugned order dated 28th September, 2007, the objections have been rejected. It may be noted here that the Petitioner had earlier filed Writ Petition (C) No. 7045/2007 and had submitted that the Assessing Officer was not dealing with the objections raised by the Petitioner for re-opening of the assessment. It is during the pendency of the said writ petition that the impugned order dated 28th September, 2007 rejecting the objections was passed.

5. The "reasons to believe" as is recorded by the Assessing Officer before issuing notice under Sections 147/148 of the Act read as under:

The Assessee Company M/s. Tractebel Industry Engineering (now known as Tractebel Gas Engineering) is a company incorporated in Belgium. The Assessee company is engaged in providing technical services to various customers in India. During the previous year 2001-02 relevant to asstt year 2002-03 the following contracts were executed in India-

Job/work detail Date of Contract Duration

1. Engineering of pipeline Meeting Station for IPCL Plant July 19, 2001 5 months

2. Engineering Services for Pipe-line and metering station GNFC & Vidiocon March 23, 2001 4 months

3. Engineering services for Pipe-line metering station For NTPC Plant March 23, 2001 4 months

4. Engineering of Dewpoint Control System March 22, 2001 6 months

5. Engineering services for Pipe-line and metering station for Kribhko Plant Feb 7, 2001 8 months

6. Engineering services for Gas Metering Station at GPEC Power Plant Feb 7, 2001 10 months

7. Engineering services for Mora Ultra Pipleline Nov 30, 2000 18 months Thus the Assessee was involved in several engineering projects in supervisory capacity simulatenously with GSPNL during previous year 2001-2002. The duration of projects ranged from four to eighteen months. Thus clearly establishes the fact that Assessee was doing business in India through a permanent establishment. Hence Assessee was not eligible for lower tax @ 10% under Article 12(2) of DTAA and should be taxed @ 20% on gross receipts under Section 44 D of Income Tax Act, 1961. The assessment under Section 143(3) was completed on 24.3.2005 at the tax rate of 10% as per Article 12 of DTAA. As income of the Assessee was taxable @ 20% as per Section 9(i)(vii) of Income Tax Act, 1961 because of existence of permanent establishment in India, I have reason to believe that income chargeable to tax has escaped assessment because of application of lower rate of tax. This clearly falls under Clause (c) of Explanation 2 of Section