2018 (11) TMI 1649 - AT - Income Tax

Reopening of assessment u/s 147 - notice beyond four years by issuing notice u/s. 148 without any allegation that the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly - HELD THAT - Income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year therefore CIT(A) was not in holding that the initiation of reassessment proceedings u/s. 147 is bad in law and the first appellate order is correct in quashing the initiation of reassessment and all consequent proceedings and orders including impugned reassessment and first appellate order. Benefit of the ratio of the decision of Hon ble Delhi High Court in the case of Consolidated Photo Finvest Ltd. 2006 (1) TMI 59 - DELHI HIGH COURT is not availed for the Revenue as it was not a case of change of opinion and initiation of reassessment beyond four years of relevant assessment year. Therefore we respectfully hold that the benefit of ratio of this decision having dissimilar facts and circumstances from the present case is not available in favour of the Revenue in the extant case. Per contra the ratio of the decision of Hon ble Delhi High Court in the case Usha International 2012 (9) TMI 767 - DELHI HIGH COURT is applicable to the present in favour of the assessee which again supports the conclusion recorded by the CIT(A) in quashing the reassessment order. Accordingly there is no valid reason to interfere with the first appellate order and thus we uphold the findings arrived by the ld. CIT(A). Consequently legal ground of Revenue being devoid of merits is dismissed. - Decided against revenue.

Summary

Issues involved:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act, 1961.
2. Disallowance of transportation expenses under sections 40(a)(ia) and 40A(3) of the Income Tax Act.

Detailed Analysis:

Issue 1: Validity of reassessment proceedings under section 147 of the Income Tax Act, 1961.
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2005-06. The Revenue contended that the reassessment proceedings initiated under section 147 were valid, while the CIT(A) held them as bad in law and directed to be quashed. The Departmental Representative argued that the reassessment was justified based on the satisfaction of the Assessing Officer regarding the escapement of income. However, the Appellate Tribunal observed that there was no new tangible material with the Assessing Officer at the time of initiating reassessment, indicating a change of opinion rather than fresh grounds for reassessment. The Tribunal also highlighted the non-compliance of the first proviso to section 147, emphasizing the necessity of clear findings on the part of the assessee for reassessment beyond four years. The Tribunal upheld the CIT(A)'s decision to quash the reassessment order, citing the lack of valid grounds for reassessment.

Issue 2: Disallowance of transportation expenses under sections 40(a)(ia) and 40A(3) of the Income Tax Act.
The dispute involved the disallowance of transportation expenses totaling ?4,04,27,421 and ?1,53,31,244 under sections 40(a)(ia) and 40A(3) of the Income Tax Act, respectively. The Assessing Officer contended that TDS was not deducted on certain payments, leading to under-assessment of income. The Appellate Tribunal, however, noted that the reassessment was based on a mere change of opinion without fresh material, rendering it invalid. Additionally, the reassessment proceedings were initiated beyond four years without alleging any failure on the part of the assessee to disclose material facts. The Tribunal relied on relevant case laws to support the quashing of the reassessment order, emphasizing the need for valid grounds for reassessment within the prescribed time limit. Consequently, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the first appellate authority to quash the reassessment proceedings based on legal grounds.