ORDER appeals by assessee for asst. yrs. 2000-01 and 2001-02 and appeal by Revenue for asst. yr. 2001-02 arise out of single order of CIT(A)- XL, Kolkata, dt. 28th Feb., 2007. As these appeals involve common issues, for sake of convenience, same are being disposed of by this consolidated order. ITA No. 1517/Kol/2007 Asst. yr. 2000-01 (Assessee s appeal) : 2. There are five grounds of appeal in this year. All grounds relate to only one issue, i.e. rejection of appellant s claim by CIT(A) that it did not have PE in India in relevant financial year, and that profits earned by appellant were not taxable in India. 3 . At time of hearing before us, assessee s learned counsel submitted that appellant company was incorporated in Netherlands, and its entire control and management was in that country. As such, appellant was foreign company within meaning of s. 2(23A) of Act. appellant had undertaken sub-contract for dredging, which was executed in Haldia Port near Kolkata in year 1999-2000. work commenced on 26th Feb., 1999 and ended on 28th July, 1999. Thus, appellant had project office in India for period of 153 days, which was less than six months, maximum period available according to DTAA between Netherlands and India for not being treated as PE . It is settled law that provisions of DTAA would always override provisions of Act. Sec. 90(2) of Act also provides as follows : "where Central Government has entered into agreement with Government of any country outside India under sub-s. (1) for granting relief of tax, or as case may be, avoidance of double taxation, then, in relation to assessee to whom such agreement applies, provisions of this Act shall apply to extent they are more beneficial to that assessee." In view of this binding legal situation, AO ought to have held that appellant did not have any PE in India, and therefore, no taxable income had arisen in hands of appellant in India. However, AO did not take any decision on this issue on ground that matter was not raised before him. 4 . Before CIT(A) appellant explained that dredging work was completed on 18th July, 1999, after which dredger, Volvox Atlanta, was exported from Haldia on 28th July, 1999. appellant also submitted copy of completion certificate issued by Calcutta Port Trust, certifying that entire contract was completed on 18th July, 1999. Attention of CIT(A) was drawn to definition of PE given in art. 5 of DTAA between Netherlands and India, which provided that building site or construction, installation or assembly project constituted PE only when such site or project continued for period of more than six months. 4.1 Since issue was first raised at appellate stage, CIT(A) called for remand report from AO on issue of maintenance of PE by appellant in India. In remand report AO made following observations : (i) Sailing of dredger out of India on 28th July, 1999 did not necessarily mean closure of project office in India; (ii) RBI s approval was mandatory for closure of project office; (iii) Books of account revealed that project office was operating till 31st March, 2000; (iv) Bank account with ABN Amro Bank was maintained in Indian currency at least till 12th June, 2000. 4.2 In rejoinder to remand report, appellant denied that it had any fixed place of business after dredger sailed out of India. It was also pointed out that permission of RBI was not necessary for closure of project office and that maintenance of books of account and bank accounts beyond period of six months could not be considered as maintenance of fixed place of business as required in art. 5 of DTAA. In addition, appellant relied on decision of Tribunal, Delhi Bench, in case of BKI/HAM V.O.F. C/o Arthur Anderson & Co. vs. Addl. CIT (2001) 70 TTJ 480 (Del), decision of Authority of Advance Rulings in case of ABC, In re (1999) 153 CTR (AAR) 259 : (1999) 237 ITR 798 (AAR), and also decision of Hon ble Tribunal, Mumbai Bench, in case of Dy. CIT vs. Subsea Offshore Ltd. (1998) 61 TTJ (Mumbai) 339 : (1998) 66 ITD 296 (Mumbai). learned CIT(A), however, supported stand taken by AO. He considered grounds of appeal as n o t admissible and not sustainable on merit, and dismissed grounds of appeal in its totality. 5 . Before us, learned counsel for appellant, Sri S. K. Tulsiyan, argued that learned CIT(A) erroneously held that issue regarding PE did not emerge out of assessment records, when nature of business and source of income were disclosed by appellant in return of income along with supporting evidences. In para 4 of assessment order, AO categorically stated that "assessee is non-resident foreign company of Netherlands who was awarded sub-contract by HAM, another non-resident foreign company of Netherlands, to carry out maintenance dredging work at Kolkata for Calcutta Port Trust. HAM was main contractor for this project. In order to carry out contractual work, dredging ship Volvox Atlanta was brought into India by assessee on 26th Feb., 1999. said dredger sailed from Haldia in West Bengal on 28th July, 1999 to leave India." learned counsel strongly contended that after this categorical statement of AO, learned CIT(A) should not have concluded that issue regarding PE did not emerge out of assessment order or assessment records. 5.1 learned counsel further contended that CIT(A) did not consider landmark judicial pronouncements on this issue. He referred to case of CIT vs. Sayaji Mills Ltd. (1974) 94 ITR 26 (Guj) in which Hon ble Gujarat High Court was very specific when it held that "all questions, whether of law or of fact, which relate to assessment of assessee may ordinarily be allowed to be raised by him in appeal even though not raised before ITO, if grant of relief would be available on determination of such questions. Tribunal rightly felt that substantial justice required in present case that claim of assessee, although it was advanced for first time before AAC should be investigated by AAC and Tribunal was competent to direct AAC to rehear parties and give finding on contention." judgment of Hon ble Supreme Court in case of Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) was also cited, in which Hon ble apex Court held that "an appellate authority has all powers which Hon ble apex Court held that "an appellate authority has all powers which original authority may have in deciding question before it subject to restrictions or limitations, if any, prescribed by statutory provisions. In absence of any statutory provision, appellate authority is vested with all plenary powers which subordinate authority may have in matter. There is no good reason to justify curtailment of power of AAC in entertaining additional ground raised by assessee in seeking modification of order of assessment passed by ITO". learned counsel pointed out that similar issue came up for adjudication before Hon ble Supreme Court in case of CIT vs. Nirbheram Daluram (1997) 139 CTR (SC) 484 : (1997) 224 1TR 610 (SC), in which Hon ble Court relied on Jute Corporation case (supra) and held that "the appellate powers conferred on AAC under s. 251 of Act were not confined to matters considered by ITO." Reference was also made to subsequent case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) in which Hon ble apex Court categorically stated that Tribunal has power to decide on issues not taken up by lower authorities. It was vehemently argued by learned counsel for appellant that by overlooking these important judicial decisions learned CIT(A) acted against principles of natural justice, and that in all fairness learned CIT(A) should have admitted all grounds of appeal on basis of above judicial decisions. 5.2 Coming to merits of case, Sri Tulsiyan argued that both learned CIT(A) and AO wrongly interpreted definition of PE as given in art. 5 of DTAA between Netherlands and India. Our attention was drawn to provisions of s. 90(2) of Act, which clearly indicated that provisions contained in DTAA overrode provisions of Act. This fact was overlooked by lower authorities, it was submitted. learned counsel explained before us that art. 5 of convention stated that "the term PE means fixed place of business through which business of enterprise is wholly or partly carried on". Firstly, there had to be fixed place of business, and secondly, there had to be business carried on from that fixed place. It was submitted by learned counsel that in appellant s case, dredger sailed off on 28th July, 1999, after which appellant did not have any fixed place of business. As proof of arrival and departure of dredger, appellant had submitted before AO copies of bill of entry, marine delivery receipt, completion certificate issued by Calcutta Port Trust on 16th Sept., 1999 confirming completion of job of dredging on 18th July, 1999, and also copy of invoice issued on 30th July, 1999 by J.M. Baxi & Co. on account of "incidental expenses for completion of entire customs and dock formalities, obtaining special permission from different authorities for exportation of dredger Volvox Atlanta from Haldia on 28th July, 1999". Copies of these documents were also submitted before us by learned counsel in paper book. It was strongly argued that there was no question of carrying on any business by appellant after dredger had left Haldia, and that, if there was no business carried on by appellant after 28th July, 1999 and there had been no fixed place of business, there could not be any PE within meaning of definition given in art. 5 of DTAA. According to learned counsel, even if, for sake of argument, it was accepted that project office of appellant was fixed place of business, no business was carried on from there after 28th July, 1999. Therefore, second part of condition laid down in art. 5 of convention was not fulfilled. According to definition of PE given in article, there has to be not only fixed place of business, but also business of enterprise has to be carried on wholly or partly through that fixed place of business. As no business of appellant was carried on through project office (if that could be called fixed place of business) either wholly or partly, after 28th July, 1999, and as total period during which appellant carried on business was less than six months (26th Feb., 1999 to 28th July, 1999), it could not be said that appellant had PE in India. 5 . 3 In this connection, learned counsel brought to our notice decision in case of BKI/HAM V.O.F. C/o Arthur Anderson & Co. vs. Addl. CIT (supra), in which Hon ble Tribunal, Delhi D Bench, dealt with similar issues and made following observations : basic ingredients of term PE under art. 5 are : -the existence of enterprise; -its carrying on business; -for latter, existence of place of business which is fixed; and -through which business is carried on. PE begins to exist when enterprise commences to carry on its business through fixed place of business. This is case once enterprise prepares activity for which facility is permanently to be used. same principles apply when determining points of time at which PE ceases to exist. If enterprise ends its business activities for good, its PE will also cease to exist. According to learned counsel, this decision is squarely applicable in appellant s case. As pointed out by him, second ingredient was missing, as no business was carried on through project office after 28th July, 1999. 5.4 learned counsel contended that argument that RBI s approval was mandatory for closure of project office was misplaced. permission letter issued by RBI would show that there was no such clause in that letter. It only stated that RBI was agreeable to opening of project office at Calcutta upto February, 2000 for purpose of executing sub-contract. copy of RBI s letter dt. 15th March, 1999 was submitted before us. It was stated that work relating to sub-contract was completed long before RBI s deadline of February, 2000, as would be evident from completion certificate issued by Calcutta Port Trust on 16th Sept., 1999. In any case, whether there was approval from RBI or not. for closure of project office, was immaterial, as no business was carried on by appellant through that project office after departure of dredger from Haldia Port. learned counsel further stated that continuation of project office beyond period of six months could not by itself lead to conclusion that there was PE. If there was project office without any business being transacted through that office, it could not be called "PE" within definition given in art. 5 of convention. In appellant s case, as indicated by learned counsel for appellant, no evidence was brought on record to prove that any business was carried on through project office after departure of dredger from Haldia on 28th July, 1999. learned counsel concluded his arguments by saying that AO wrongly formed opinion that appellant had PE as it maintained books of account and bank account in India beyond period of six months, and that maintenance of books of account and bank account could not be considered as fixed place of business, as contemplated in art. 5 of convention. 6. learned Departmental Representative, on other hand, drew our attention to judgment of Hon ble apex Court in case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) and submitted that in reassessment proceedings, it was not open to assessee to seek review of concluded items unconnected with escapement of income for purpose of computation of income escaping assessment. learned Departmental Representative argued that matter not agitated in concluded original assessment proceedings could not be permitted to be agitated in reassessment proceedings unless relatable to items sought to be taxed as "escaped income". learned Departmental Representative also argued strongly that project office of appellant company was fixed place of business and that existence of such fixed place of business was nothing but PE. findings and observations of AO were fully supported by learned Departmental Representative in course of his arguments. 7. In rejoinder, learned counsel stated that taxes under IT Act are imposed by Union under Constitution as per Art. 265. Art. 265 of Constitution says "No tax shall be levied or collected except by authority of law". Thus, learned counsel argued that Art. 265 requires that (i) there must be law; (ii) law must authorize tax; and (iii) tax must be levied and collected according to law. It is also argued by him that tax illegally levied must be refunded. He further stated that Hon ble apex Court s decision in case of Sun Engineering Works (P) Ltd. (supra) touches upon such relief of item of income which is not subject-matter of escaped assessment and it is in that context that Hon ble Supreme Court says that such relief cannot be claimed in reopened proceeding under s. 148 of Act. Whereas case of appellant is that there being no PE of appellant in India, in terms of art. 5 r/w art. 7 of DTAA, beneficial provision, which in absence of PE does not provide for charging of tax on non-resident foreign company in India due to s. provide for charging of tax on non-resident foreign company in India due to s. 90 sub-s. (2) of IT Act. shall have to prevail. Therefore, appellant is not chargeable to tax in India in terms of aforesaid article of Constitution of India. In view of above, entire assessment framed is null and void and assessee ought to get relief accordingly. 8. We have heard rival submissions of parties and also perused documents produced by both parties. Before dealing with main issue regarding existence of any PE of appellant company in India and question of taxability of appellant s income in India, we would like to decide question of admissibility of grounds of appeal. learned CIT(A) dismissed grounds of appeal in its totality, presumably because issues covered by these grounds were not raised before AO. In our view, Department s reliance on judgment of Hon ble apex Court in case of Sun Engineering Works (P) Ltd. (supra) is misplaced on facts and circumstances of case. This decision pertains essentially to proceedings under s. 147 of Act and entails as to what should be role of AO and assessee in reassessment proceedings. This is exactly what apex Court said : "In proceedings under s. 147 of IT Act, 1961, ITO may bring to charge items of income which had escaped assessment other than or in addition to item or items which led to issuance of notice under s. 148 and where reassessment is made under s. 147 in respect of income which had escaped tax, ITO s jurisdiction is confined only to such income which has escaped tax or has been underassessed and does not extend to revising, reopening or reconsidering whole assessment or permitting assessee to reagitate questions which had been decided in original assessment proceedings. It is only underassessment which is set aside and not entire assessment when reassessment proceedings are initiated. ITO cannot make order of reassessment inconsistent with original order of assessment in respect of matters which are not subject-matter of proceedings under s. 147. assessee cannot resist reassessment proceedings validly initiated under this section merely by showing that other income which had been assessed originally was at too high figure except in cases under s. 152(2). words such income in s. 147 clearly refer to income which is chargeable to tax but has escaped assessment and ITO s jurisdiction under section is confined only to such income which has escaped assessment. It does not extend to reconsidering generally concluded earlier assessment. Claims which have been disallowed in original assessment cannot be permitted to be reagitated on assessment being reopened for bringing to tax certain income which has escaped assessment, because controversy on reassessment is confined to matters which are relevant only in respect of income which had not been brought to tax during course of original assessment. matter not agitated in concluded original assessment proceedings also cannot be permitted to be agitated in reassessment proceedings unless relatable to items sought to be taxed as escaped income . Indeed, in reassessment proceedings for bringing to tax items which had escaped assessment, it would be open to assessee to put forward claims for deduction of any expenditure in respect of that income or regarding non-taxability of items at all. Sec. 147, being for benefit of Revenue and not assessee, assessee cannot be permitted to convert reassessment proceedings into appeal or revision in disguise and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in original assessment proceedings, unless relatable to escaped income . Even in cases where claims of assessee during course of reassessment proceedings relating to escaped income are accepted, still allowance of such claims has to be limited to extent to which they reduce income to that originally assessed. income, for purposes of reassessment cannot he reduced beyond income originally assessed." 8.1 There is no conflict between what Hon ble Supreme Court said and what appellant did. appellant did not challenge proceedings under s. 147 of Act either at assessment stage or at appellate stage. It was not case of appellant raising any fresh issue before AO, as was in case adjudicated by Supreme Court. appellant claimed before CIT(A) that it was not liable for taxation in India, as it did not have any PE in India during relevant financial year. AO, although he had full facts in his possession, did not consider this aspect and proceeded with reassessment of total income of appellant. clear distinction between two situations should be noted carefully. facts narrated in judgment of Supreme Court in case of Sun Engineering Works (P) Ltd. (supra) related to proceedings under s. 147 of Act before AO. judgment reviewed powers and jurisdiction of AO in proceeding under s. 147 of Act, and also discussed and defined restrictions/limitations assessee would have in these proceedings. judgment did not go beyond and analyze powers of appellate authority in admitting fresh ground of appeal. On other hand, facts of present case are entirely different. appellant accepted jurisdiction of AO in reopening assessment, but challenged assessment before CIT(A) by claiming that there was no tax liability in its case as it had no PE in India. subject-matter of discussion and deliberation in this case was jurisdiction of appellate authority in admitting fresh ground of appeal, and also question as to whether appellant company was having PE in India in terms of provisions contained in art. 5 of DTAA between India and Netherlands. On both issues, learned counsel for appellant placed his arguments to our satisfaction. judgments in Jute Corporation (supra) case and also NTPC case (supra) are squarely applicable in case of appellant. In view of above, we are of considered opinion that due to distinction drawn earlier in this para, judgment in case of Sun Engineering Works (P) Ltd. (supra), relied on by learned Departmental Representative, is not applicable to case before us. We are, therefore of view that it was erroneous on part of CIT(A) not to have admitted grounds of appeal. 9 . As regards merits of case, we find sufficient force in arguments of learned counsel for appellant. basic ingredients of PE, as indicated in art. 5 of DTAA are (i) fixed place of business and (ii) carrying on of business from that fixed place. From facts available on record it transpires that appellant did not have any fixed place of business after 28th July, 1999 when dredger left Haldia Port. After dredger left port there was no activity which could be termed as business carried on from fixed place of business . Maintenance of books of account or bank account cannot be factor for determining fixed place of business as PE. At best, these can be termed as activities of auxiliary character, which have been specially exempted from definition of PE in cl. 4(e) of art. 5. appellant s project office was in operation from 26th Feb., 1999 to 28th July, 1999, i.e. for period of 153 days only, which is much less than period required for establishment to be termed as PE . Therefore, there was no valid reason for treating project office of appellant as PE . We are, therefore, of view that appellant company did not have any PE in India during relevant financial year as defined in art. 5 of DTAA between India and Netherlands. income earned by appellant during its stay of 153 days in India cannot, therefore, be held as taxable in India. 9.1 In view of our aforesaid finding, we find arguments placed by learned counsel to point. Art. 265 of Constitution of India provides as under : "265. Taxes not to be imposed save by authority of law. No tax shall be levied or collected except by authority of law. Notes on Article 265 Article 265 requires that : (i) there must be law; (ii) law must authorize tax; and (iii) tax must be levied and collected according to law. Tax illegally levied must be refunded." In view of fact that Constitution debars undue enrichment of Exchequer without there being any authority of law as provided in Art. 265 of Constitution, assessment made in this case by AO is beyond his purview and power to do so. We, therefore, have no hesitation in holding that appellant company was not liable to tax in India and hence assessment made on appellant-company is quashed. appeal succeeds. ITA No. 1518 (Kol)/2007 Asst. yr. 2001-02 (Assessee s appeal) : 1 0 . In appeal for asst. yr. 2001-02, assessee has raised following grounds of appeal : "1. order of learned CIT(A) is bad in law, lacks jurisdiction and opposed to facts of case. 2. learned CIT(A) ought to have held that recovery of bad debts made during previous year could not be taxed in hand of appellant because appellant did not have PE in India during initial year or any other assessment year. 3. learned CIT(A) failed to appreciate that appellant was resident o f Netherlands and therefore governed by Agreement for Avoidance of Double Taxation (ADT) between India and Netherlands, and since appellant had fixed place of business in India only for 153 days, it did not have PE in India, hence profit from contract was not taxable in India in view of art. 7 r/w art. 5 of ADT. So also amount of bad debts written off in earlier years which were recovered during previous year could not be taxed in hands of appellant, because appellant did not have PE in India in any of years. 4. learned CIT(A) failed to appreciate that all relevant facts establishing that appellant did not have PE in India were on records of AO, hence he ought to have held that profits earned by appellant were not taxable in India. 5. learned CIT(A) failed to appreciate that fresh plea concerning legal issue could be raised at appellate stage and was maintainable." 11. Ground Nos. 1 and 5 are of general nature and do not require any separate discussion/adjudication. 12. Ground Nos. 3 and 4 relate to issue regarding PE . This issue has already been discussed in detail in previous paras while dealing with assessee s appeal for asst. yr. 2000-01. For reasons and discussions held therein, we decline to uphold orders of Revenue authorities and allow appeal of assessee on this issue. 13. Now, coming to ground No. 2, in view of our finding that income earned by appellant during its stay of 153 days in India cannot be held as taxable in India and thus addition made by AO in assessment is thus erroneous, this ground, therefore, has become academic. However, as ground has been raised, same is being dealt with as under. 13.1 As is evident from assessment order, sum of Rs. 24,11,98,673 was recovered/credited in books of account on basis of assessee s letter dt. 30th Oct., 2002, as against which assessee offered only Rs. 22,97,77,487 in asst. yr. 2001-02. difference of Rs. 1,14,21,186 was, therefore, added to total income of assessee for asst. yr. 2001-02. learned CIT(A) deleted addition with following observation : "(11) I have considered submission and facts of case. contention of appellant that entire amount has been offered for taxation in three years is found correct. This is merely matter of taxing particular income in year under consideration or in subsequent year. income has been offered in subsequent two years on recovery basis and it is taxed accordingly. Thus, addition of Rs. 1,41,21,186 is not called for and same is deleted. As regards to appellant s claim of not having PE in India it may be mentioned that Division Bench of Tribunal, Mumbai, in case of Van Dard Dredging and Marine Contractor B.V. has held that foreign firms are liable to pay tax even if they do not have PE when they actually received money. Hence, this plea is not sustainable." 13.2 appellant contended that learned CIT(A) ought to have held that recovery of bad debts made during previous year could not be taxed in hands of appellant because appellant did not have PE in India during initial year or any other subsequent year. From order of CIT(A) we find that after considering submission of appellant that recovery was shown by appellant in three years, addition of Rs. 1,14,21,336 on account of recovery of bad debts was deleted. 13.3 In this connection, we may reiterate that basic ingredients of PE as indicated in art. 5 of DTAA are (i) fixed place of business and (ii) carrying on of business from that fixed place. From facts available on record it transpires that appellant did not have any fixed place of business after 28th July, 1999 when dredger left Haldia Port. After dredger left port there was no activity which could be termed as business carried on from fixed place of business . Further, if there was project office without any business being transacted through that office, it could not be called PE within definition in art. 5 of convention. Maintenance of books of account or bank account cannot be factor for determining fixed place of business as PE. At best, these can be termed as activities of auxiliary character, which have been specially exempted from definition of PE in cl. 4(e) of art. 5 of convention. In view of above, question of treating recoveries in three years, as indicated by learned CIT(A), as income chargeable to tax in India does not arise. We, therefore, hold that impugned recoveries of bad debt do not form part of income chargeable to tax in India and, accordingly, direct AO to vacate assessment. ITA No. 1515/Kol/2007 Asst. yr. 2001-02 (Revenue s appeal) : 14. In this appeal, Department has raised following ground : "That on facts and in circumstances of case, learned CIT(A) erred in deleting sum of Rs. 1,14,21,186 ignoring fact that above sum was actually received by assessee during relevant previous year as part of recovery of bad debt." 14.1 At time of hearing before us, it was contended by learned Departmental Representative that learned CIT(A) erred in deleting sum of Rs. 1,14,21,186 ignoring fact that above sum was actually received by assessee during relevant previous year as part of recovery of bad debt. In assessment order it was observed by AO that sum of Rs. 24,11,98,673 was recovered/credited in books of account on basis of assessee s letter dt. 30th Oct., 2002 as against sum of Rs. 22,97,77,487 offered in return. difference of Rs. 1,14,21,186 was added to total income. learned Departmental Representative, in order to justify action taken by AO, argued that in this year, there was PE in terms of provisions contained in art. 5 of DTAA between India and Netherlands, as t h e fixed place of business continued and bad debts were recovered. learned counsel for appellant explained before us that appellant company had raised invoices for sum of Rs. 41,89,43,626 for entire contract and included same in turnover for financial year relevant to asst. yr. 2000- 01. In addition, appellant was entitled to exchange gain of Rs. 3,82,49,336 from HAM. Thus, total amount receivable was Rs. 45,71,92,962. During financial year 1999-2000, HAM expressed its inability to pay balance amount due to appellant because principal, Calcutta Port Trust, had defaulted to make payments to HAM, main contractor. sub-contract agreement provided that payment to appellant would be made only after receipt of money from Calcutta Port Trust. Therefore, sum of Rs. 25,76,00.028 which was due as on 31st March, 2000 was non-recoverable from HAM and thus had to be written off during asst. yr. 2000-01. However, appellant made persistent efforts in subsequent years to recover bad debts. matter was handled even at diplomatic levels between India and Netherlands, and ultimately said amount was paid in next three years. As and when amount was received from HAM, appellant voluntarily informed this fact to AO and paid income-tax on same in each subsequent year of receipt of dues. reconciliation of turnover offered to tax in all three years was given as under : Assessment Year 2000-01 Rs. Project turnover 41,89,43,626 Less : Bad debts w/o 25,76,00,028 Turnover offered to tax 16,13,43,598 Assessment Year 2001-02 Bad debts recovered 6,81,39,305 (Expenses incurred Rs. 1,80,805) Exchange difference 3,82,49,336 Addl. amount recovered 12,35,69,650 Turnover offered to tax 22,99,58,291 Assessment Year-2003-04 Bad debts recovered 6,58,91,070 Total turnover offered to tax 45,71,92,962 learned counsel further explained that in respect of payment received in foreign exchange on various dates, uniform rate of NLG 1 = INR 21.2766 was considered for calculation purposes for all amounts received, irrespective of amounts actually realized. On basis of this hypothetical rate, total amount worked out to Rs. 24,11,98,673. In fact, actual amount realized was Rs. 22,97,77,487 (22,99,58,291 less expenses 80,805). Hence, in computation of revised income in letter, actual amount recovered from contractor was offered to tax. Thus, there was difference of Rs. 1,14,21,186 between hypothetical rate and amount actually realized from HAM. We find appellant submitted same explanation before CIT(A) who appreciated that sum of Rs. 1,14,21,186 was hypothetical amount which was not actually received by appellant. He also appreciated fundamental principle that same income could not be taxed twice. In our view, CIT(A) rightly accepted appellant s contention and deleted addition made by AO. arguments of learned Departmental Representative do not appeal to us. We have already dealt with this issue in assessee s appeal for asst. yr. 2001-02 wherein we have held that recovery of bad debts can at most be termed as auxiliary activity which has been specifically exempted in cl. 4 (e) of art. 5 of DTAA. issue regarding PE has been discussed in detail earlier in this order. We do not want to repeat our observations here. We, therefore, do not find any valid reason for sustaining addition made by AO, which is directed to be deleted. This ground of Department fails. 15. In result, assessee s appeals for asst. yrs. 2000-01 and 2001- 02 are allowed and Departmental appeal for asst. yr. 2001-02 is dismissed. 16. Before parting with three orders as narrated above, it is pertinent here to give our observations as follows in view of peculiar facts and circumstances of case. 17. All these three appeals have been based on fact that assessee company filed loss return despite fact that it did not require to file return as there was no PE of its own during material point of time as narrated above and assessee had project office in India for period of 153 days only. Simply because assessee filed loss return, AO proceeded with assessment. AO in our considered opinion is not only tax collector or tax gatherer, he is also treated as quasi-judicial authority. As quasi-judicial authority, he is to safeguard interest of law in right perspective, even if wrong return has been filed or no claim has been made due to assessee. He is bound to allow such due claim or not to entertain wrong return in case there does not accrue any liability on part of assessee. In impugned case assessee although filed loss return, it was not liable to file any return at all. Therefore, wrong return filed by assessee was to be treated as non est return. AO should not have proceeded with non est return but he proceeded with same. This part of action on part of AO itself is in contradiction to its role as quasi-judicial authority. He has to apply proper law whether it goes against assessee or goes in favour of assessee. Our this view finds support from decision of Hon ble Supreme Court in case of CIT vs. Mahalaxmi Sugar Mills Co. Ltd. (1986) 58 CTR (SC) 138 : (1986) 160 ITR 920 (SC) wherein Hon ble apex Court has held that "there is duty cast on ITO to apply relevant provisions of Indian IT Act for purpose of determining true figure of assessee s taxable income and consequential tax liability. That assessee fails to claim benefit of setoff cannot relieve ITO of his duty to apply s. 24 in appropriate case". 18. In case of Kerala Chemicals & Proteins Ltd. vs. CIT (1998) 150 CTR (Ker) 403 : (1999) 235 ITR 467 (Ker), Hon ble Kerala High Court has held that "it is duty of Tribunal to consider law as it existed then even though assessee failed to bring it to its notice". But in impugned case, assessee has already raised issue before first appellate authority. Therefore, Tribunal is duty-bound to take care of prevalent position of law Therefore, Tribunal is duty-bound to take care of prevalent position of law and decide issue in favour of assessee, particularly when AO has proceeded with non est return knowing fully status of assessee not coming within purview of Act to be liable to file return of income before Department. 19. Needless to say that this Bench of Tribunal is of view that there is no estoppel against statutes. Simply because assessee has filed return wrongly, that does not automatically fasten assessee with liability, particularly when provision of law as in impugned case (i.e. question of status read with DTAA between India and Netherland) was not attracted any liability to file return on part of assessee. Therefore, Revenue authorities are not precluded from correcting their views on basis of filing of return by assessee. Our this view fully finds support from Hon ble Delhi High Court in case of CWT vs. Meattles (P) LTD. (1984) 43 CTR (Del) 281 : (1985) 156 ITR 569 (Del). In this case Hon ble Delhi High Court has held that "there is no estoppel against statute. Where Revenue authorities take particular view of statutory provisions in income-tax assessment and later on realise that it was mistaken view, they cannot be estopped from taking correct view of statutory provisions later on". *** VAN OORD ATLANTA B.V. v. ASSISTANT DIRECTOR OF INCOME TAX