2015 (3) TMI 600 - AT - Income Tax

Reopening of assessment - assessee failed to deduct TDS under the provisions of section 194C of the Act and consequently disallowance as per section 40(a)(ia) - Held that - As relying on Sita World Travels (India) Ltd. v. CIT 2004 (5) TMI 23 - DELHI High Court from the original assessment orders as well as order made by the appellate authority, it was very clear that the Assessing Officer was well aware about the primary facts, namely, the claim made by the assessee, the circumstances under which the claim was made and the provisions of law which could be applied while granting the benefits. A decision may be wrong or right is none of the concern of the sub sequent officer. If the primary facts were not available or there was concealment or there was no application of mind at all, then a case for reopening the assessment could be made out. But, when all the facts were placed before the Assessing Officer and the Assessing Officer consciously considered the facts and arrived at a decision, then it cannot be reopened merely because subsequently he changes his opinion or some other officer takes a different view. The relevant facts were taken into consideration by the Assessing Officer while making the assessment and, therefore, there was no question of any escapement of income chargeable to Income-tax. Therefore, it was a case of wrongful assumption of jurisdiction and as such the notices, the speaking orders and the assessment orders made in pursuance to the notices were required to be quashed and set aside and were, accordingly, set aside. We uphold the order of the Commissioner of Income-tax (Appeals) in holding the reassessment proceedings to be invalid and consequently assessment framed thereunder in pursuance thereto to be void ab initio. - Decided in favour of assessee. Deletion of addition made under section 40(a)(ia) - Held that - The assessee was making payment for carriage of goods and there was admittedly no oral or written agreement between the assessee and transporters and in the absence of the same, there is no merit in the order of the Assessing Officer in holding that the provisions of section 194C of the Act had been violated. In the absence of the same no disallowance is warranted under section 40(a)(ia) of the Act. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening assessment under section 147 of the Income-tax Act, 1961.
2. Deletion of addition made under section 40(a)(ia) due to failure to deduct TDS as per section 194C.
3. Deletion of disallowance of Rs. 85,357 related to car expenses, car depreciation, car insurance, and telephone expenses.

Issue 1: Validity of Reopening Assessment under Section 147

The Revenue challenged the Commissioner of Income-tax (Appeals)'s decision that reopening the assessment was invalid and void ab initio. The assessee had filed a return declaring Rs. 4,15,160, which was initially assessed at Rs. 4,87,500. Subsequently, the assessment was reopened under section 148, citing discrepancies in freight income and non-compliance with section 194C regarding TDS on freight payments. The Commissioner of Income-tax (Appeals) found that the Assessing Officer had no new facts and was merely changing his opinion based on the same information available during the original assessment. This was supported by the hon'ble Delhi High Court's ruling in Sita World Travels (India) Ltd. v. CIT, which stated that reopening an assessment cannot be based on a mere change of opinion.

The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision, referencing the Supreme Court's ruling in CIT v. Kelvinator of India Ltd., which emphasized that reopening must be based on tangible material indicating income escapement, not merely a change of opinion. Thus, the Tribunal dismissed the Revenue's appeal on this ground, declaring the reassessment proceedings invalid and void ab initio.

Issue 2: Deletion of Addition Made under Section 40(a)(ia)

The Revenue also contested the deletion of an addition of Rs. 62,21,063 made under section 40(a)(ia) due to the assessee's failure to deduct TDS on freight payments as per section 194C. The assessee argued that Forms 15-I and 15-J were submitted, exempting them from TDS requirements. The Commissioner of Income-tax (Appeals) noted that these forms were submitted to the prescribed authority and no defects were identified. Furthermore, the Commissioner of Income-tax (Appeals) found that the assessee merely hired trucks from time to time without any formal agreement, aligning with the Punjab and Haryana High Court's decision in CIT v. United Rice Land Ltd., which held that TDS provisions under section 194C were not applicable in the absence of a formal contract.

The Tribunal agreed with the Commissioner of Income-tax (Appeals), finding no merit in the Assessing Officer's observations and upheld the deletion of the addition under section 40(a)(ia). The Tribunal dismissed the Revenue's appeal on this ground as well.

Issue 3: Deletion of Disallowance of Rs. 85,357

In I.T.A. No. 1084/Chd/2013, the Revenue appealed against the deletion of disallowance of Rs. 85,357 related to car expenses, car depreciation, car insurance, and telephone expenses. The Assessing Officer had disallowed one-fifth of these expenses for personal use, totaling Rs. 1,22,351. The Commissioner of Income-tax (Appeals) upheld the disallowance for car running and repair expenses but allowed the expenses for car depreciation, car insurance, and telephone.

The Tribunal found no merit in the Commissioner of Income-tax (Appeals)'s decision regarding car depreciation, car insurance, and telephone expenses. It directed the Assessing Officer to disallow one-tenth of these expenses while maintaining the one-fifth disallowance for car running and repair expenses. Therefore, the Tribunal partly allowed the Revenue's appeal on this ground.

Conclusion

The Tribunal dismissed the Revenue's appeal in I.T.A. No. 833/Chd/2011, upholding the invalidity of the reassessment proceedings and the deletion of the addition under section 40(a)(ia). In I.T.A. No. 1084/Chd/2013, the Tribunal partly allowed the Revenue's appeal, directing specific disallowances related to car and telephone expenses. The order was pronounced on June 19, 2014.

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