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2014 (12) TMI 210 - AT - Income TaxValidity of reopening of assessment u/s 147 - Validity of addition u/s 40(a)(ia) Income enhancement Held that - Original assessment was made u/s 143(3) of the Act - AO has dealt with the disallowance in respect of sundry creditors - there is a clear mention of payment to M/s. Paramount Film (India) Pvt. Ltd. wherein the outstanding amount has been shown at ₹ 10,59,716 - The AO has noted that the assesse has given the names and address details very late - the AO has duly considered the payment to M./s. Paramount Film (India) Pvt. Ltd. assessee submitted that the agreement under which payment was made to M/s. Paramount Film (India)Ltd. was also submitted before the AO - He was also aware of the payments and balance outstanding in the name of the company - it cannot be said that the AO was not aware of the nature of payments made to the party - AO has also considered and chosen not to make any addition u/s 41(1) of the Act in the name of the party, despite noting that the Inspector has reported that payment made during the year to the party was ₹ 55,54,177 - Thus AO after conscious application of mind has chosen not to make any disallowance - the AO has applied his mind regarding the nature of payment and chosen not to make any disallowance. Validity of reopening of assessment u/s 147 change of opinion Held that - No new fact has come to the notice of AO for reopening the issue of payment to M/s. Paramount Film (India) Ltd. - The nature of payments, licencee agreement made with the party were all available with the AO in the original assessment u/s 143(3) of the Act - AO consciously made a decision not to make any disallowance in this regard - Hence on the same issue when the reopening is done and the AO changes his opinion and comes to the decision that the assessee should have been deducted TDS u/s 195 of the Act, it is clearly a change of opinion - It is a fresh application of mind on the same set of facts which is impressible - thus it is not open for the officer to reopen the assessment just because he does not agree to the decision of the previous officer - reopening on mere change of opinion between two officers is not legally permissible. Relying upon CIT vs Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT OF INDIA - if the AO has considered the payment and nature of the payment to M/s. Paramount (India) Ltd. and chosen not to make any disallowance, reopening and addition on this account is merely a change of opinion and is not permissible thus, the reopening is set aside Decided in favour of assessee.
Issues Involved:
1. Legality of reopening the assessment under Section 147 of the Income Tax Act, 1961. 2. Validity of the addition of Rs. 32,10,999 under Section 40(a)(ia) for non-deduction of tax at source under Section 195. 3. Enhancement of assessed income by Rs. 22,32,562 by the CIT(A). Detailed Analysis: 1. Legality of Reopening the Assessment under Section 147: The assessee contended that the reopening of the assessment was bad in law. The original assessment was completed under Section 143(3) of the Income Tax Act on 30.12.2008. During the reassessment, the Assessing Officer (AO) noted that the assessee had paid Rs. 42,81,332 to M/s. Paramount Films of India Ltd., a non-resident foreign company, without deducting tax at source as required under Section 195. The AO added Rs. 32,10,999 to the total income under Section 40(a)(ia). The assessee argued that the issue of payment to M/s. Paramount Films was already considered during the original assessment, and the reopening was merely a change of opinion. The Tribunal agreed, citing the Calcutta High Court's decision in CIT vs M/s. Kanoi Industries (P) Ltd., which held that reopening on the same set of facts is not permissible as it constitutes a change of opinion. The Tribunal also referred to the Supreme Court's decision in CIT vs Kelvinator of India Ltd., which emphasized that reassessment cannot be based on a mere change of opinion. Consequently, the Tribunal held that the reopening was invalid. 2. Validity of the Addition of Rs. 32,10,999 under Section 40(a)(ia): Since the Tribunal quashed the reopening of the assessment, it did not delve into the merits of the addition of Rs. 32,10,999 under Section 40(a)(ia). The AO had initially added this amount for non-deduction of tax at source under Section 195, but this issue became moot following the Tribunal's decision on the invalidity of the reopening. 3. Enhancement of Assessed Income by Rs. 22,32,562 by the CIT(A): The CIT(A) had enhanced the addition by Rs. 22,32,562, holding that the total payment made by the assessee to M/s. Paramount Films of India Ltd. was Rs. 66,13,884. However, since the Tribunal found the reopening itself to be invalid, this enhancement was also rendered irrelevant and was not further considered. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment under Section 147 was invalid as it was based on a mere change of opinion. Consequently, the Tribunal did not address the merits of the additions made under Section 40(a)(ia) or the enhancement by the CIT(A). The order was pronounced on 03.09.2014.
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