2013 (5) TMI 52 - HC - Income Tax

Re opening of assessment - AO was acutely conscious about the petitioner not having deducted tax on labour payment charges and the petitioner s contention that it was so done because provision for TDS was not applicable - Held that - As in the scrutiny assessment, AO had thoroughly and fully scrutinized the assessee s claim of deduction of labour expenditure. To the extent he was inclined to disallow the same, he did so. By no stretch of imagination it can be stated that the issue was not at large before the Assessing Officer in the original scrutiny assessment. Any reexamination of such a question at this stage would only amount to change of opinion. Remedy of reopening the assessment, therefore, was simply not available. In the decision of the Supreme Court in case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. reported in 2010 (1) TMI 11 - SUPREME COURT OF INDIA it was held that if the Revenue was of the opinion that the AO erroneouly and to the prejudice of the interest of the Revenue allowed certain claim, in a given situation, it would have been open for the appropriate authority to exercise revisional powers. However, once the claim was fully examined, power of reopening was simply not available. In favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for assessment year 2007-2008.

Analysis:

1. Background and Challenge to Notice:
The petitioner, a company registered under the Companies Act, challenged a notice dated 30.03.2012 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961. The notice was based on the contention that the petitioner failed to deduct TDS on labour payment charges of Rs. 3.05 crores, leading to under-assessment.

2. Scrutiny Assessment and Disallowance:
The Assessing Officer had previously framed a scrutiny assessment under Section 143(2) of the Act, where he made an ad-hoc disallowance of Rs. 25,60,000 at 8% of the total payments. However, the CIT(A) later deleted such additions, stating that TDS provision was not applicable.

3. Reasons for Notice and Objections:
The reasons for the notice issued on 30.12.2012 highlighted the non-deduction of TDS on certain labour payments, leading to under-assessment. The petitioner raised objections to the notice, which were rejected by the respondent, leading to the filing of the petition.

4. Judicial Analysis and Legal Interpretation:
The High Court analyzed the Assessing Officer's actions and concluded that the issue of TDS deduction on labour payments had been thoroughly scrutinized during the initial assessment. The court emphasized that any reexamination of the same issue at a later stage would amount to a change of opinion, which is not a valid ground for reopening an assessment.

5. Legal Precedent and Jurisdiction:
Referring to the Supreme Court's decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd., the High Court highlighted the importance of tangible material and a live link with the formation of belief for reopening assessments. The court emphasized that once a claim has been fully examined, the power of reopening is not available, and revisional powers may be exercised instead.

6. Final Decision:
In conclusion, the High Court quashed the impugned notice dated 30.03.2012, allowing the petition and disposing of the matter accordingly. The court's decision was based on the lack of valid grounds for reopening the assessment and the thorough scrutiny conducted during the initial assessment process.