2016 (3) TMI 1282 - AT - Income Tax

Reopening of assessment - disallowing the amount of rent u/s 40 (a)(ia) for non deduction of tds - audit objection relied upon for reopening of assessment - Held that - All material facts with regard to rent received and rent paid of board for advertisement business were disclosed by assessee in the return of income as well as at assessment stage. AO examined the issue at assessment stage thus the Assessing Officer reopened the assessment merely on change of opinion on the basis of all the facts and material already available on record. No failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment year under appeal. AO merely on audit objection reopened the assessment. The assessment is reopened for mistake/omission of the Assessing Officer alleged to have been committed at the original assessment stage which was the sole basis for re-opening of the assessment. The material on record clearly support the submission of assessee that rent paid was below 1, 20, 000/- therefore provisions of Section 194I of the Income Tax Act may not attract in the case of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Re-opening of the assessment under section 147/148 of the Income Tax Act.
2. Disallowance of expenditure of ?2,07,43,117/- under section 40(a)(ia) of the Income Tax Act.

Detailed Analysis:

1. Re-opening of the Assessment under Section 147/148 of the Income Tax Act:
The assessee challenged the re-opening of the assessment on the grounds that there was no new information available to the Assessing Officer (AO) and that the original assessment had already considered the issue in question. The original assessment was completed under section 143(3) on 12.10.2009, and the re-opening was based on an audit objection regarding non-deduction of TDS on expenditure of ?2,07,43,177/-.

The assessee argued that the re-opening was merely a change of opinion and relied on various judicial precedents to support the contention that re-opening based on audit objections or change of opinion is not justified. The CIT(A) upheld the re-opening, citing that the issue of TDS deduction was neither raised by the AO nor addressed by the assessee during the original assessment.

The Tribunal considered the reasons recorded for re-opening and noted that the AO did not mention any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It was observed that the assessee had disclosed all primary facts during the original assessment, and the AO had examined the expenditure and was satisfied with the explanation provided.

The Tribunal referred to several judicial decisions, including those of the Hon'ble Supreme Court and various High Courts, which established that mere change of opinion or audit objections do not justify re-opening of assessments. It was concluded that the re-opening was based solely on audit objections without any new material facts, and thus, the re-opening was quashed.

2. Disallowance of Expenditure under Section 40(a)(ia) of the Income Tax Act:
The AO disallowed the expenditure of ?2,07,43,177/- under section 40(a)(ia) for non-deduction of TDS on rent paid for advertising boards. The assessee contended that the rent paid was below the threshold limit of ?1,20,000/- prescribed under section 194I, and therefore, no TDS was required to be deducted.

The CIT(A) confirmed the disallowance, stating that the assessee failed to provide evidence to support the claim that the payments were below the threshold limit. The Tribunal, however, found that the assessee had provided sufficient details and explanations during the original assessment, which were accepted by the AO.

The Tribunal noted that the AO had verified the facts from the concerned Police Station regarding the loss of documents and was satisfied with the explanations provided by the assessee. It was observed that the AO had already considered the issue of rent payments and found no discrepancies during the original assessment.

Given the quashing of the re-opening of the assessment, the Tribunal held that the disallowance of expenditure under section 40(a)(ia) was also not justified. Consequently, the addition made in the re-assessment order was deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the re-opening of the assessment under section 147/148 and deleting the disallowance of expenditure of ?2,07,43,177/- under section 40(a)(ia). The decision emphasized that re-opening based on mere change of opinion or audit objections without new material facts is not permissible.