2018 (11) TMI 1654 - AT - Income Tax

Reopening of assessment u/s 147 - assessment order passed u/s 143(3) - notice beyond four years - Asstt.Year 2006-07 - HELD THAT - It is an admitted position that notice under section 148 was issued after expiry of four years from the end of the assessment year. The assessment year involved in Asstt.Year 2006-07 and notice under section 148 was issued by the AO on 20.3.2012. Four years from the end of relevant assessment year is expired on 31.3.2011. It shows that notice has been issued after four years. Interdiction provided in proviso appended to section 147 puts an embargo on the powers of the AO to issue notice under section 148 after expiry of four years in cases where originally assessment was framed under section 143(3) of the Act. He can issue such a notice only if it is established that the assessee failed to make a return under section 139 or in response to the notice issued under section 142(1) or section 148 or to disclose all material facts fully and truly necessary for its assessment. A perusal of the reasons extracted nowhere reveals that the AO has pointed out any fact which was not disclosed by the assessee fully and truly. The facts recorded by him with regard non-payment of employees contribution towards ESIC and PF are taken from the audit report. This audit report was already available with him. He has passed assessment order under section 143(3). Thus the case of the assessee fully falls within the ambit of provisio appended to section 147 and conditions contemplated in the proviso were not fulfilled by the AO. Therefore reopening is not justified. We quash the reassessment in the Asstt.Year 2006-07. Assessee failed to deposit employees contribution to EPF and ESCI - Asstt.Year 2011-12 - HELD THAT - There are large number of decisions of different High Courts viz. Delhi Bombay Rajasthan wherein it has been propounded that if employees contribution collected by the assessee and paid before the due date of filing of return then deduction under section 43B would be allowed. In some of the cases even SLP has been dismissed by the Hon ble Supreme Court. But Hon ble jurisdictional High Court has considered similar issue and differed with other High Courts in the case of CIT Vs. Gujarat State Road Transport Corpn. Ltd. 2014 (1) TMI 502 - GUJARAT HIGH COURT . We do not find any merit in these two grounds of appeal in the Asstt.Year 2011-12. They are rejected and disallowance is confirmed. Non deduction of TDS - disallowance of interest expenses u/s 40(a)(ia) - HELD THAT - Following case of ANSAL LAND MARK TOWNSHIP (P) LTD. 2015 (9) TMI 79 - DELHI HIGH COURT we are of the view that if recipients have included the amounts of taxes embedded in the payment made by the assessee in its return then the assessee cannot be treated in default and no disallowance under section 40(a)(ia) is to be made. Accordingly we set aside this issue to the file of the AO for verification. The ld.AO shall call for details from parties mentioned hereinabove and verify whether they have accounted these interest receipts in their income tax returns or not. If they are accounted then no disallowance shall be made. It is also observed that the assessee should also make effort for submitting these details of recipient companies. Accordingly this ground of appeal is allowed for statistical purpose.

Summary

Issues involved:
1. Reopening of assessment in the Asstt.Year 2006-07.
2. Disallowance of employees' contribution to PF and ESIC after due date in the Asstt.Years 2006-07 and 2011-12.
3. Disallowance of interest expenses under section 40(a)(ia) of the Act.

Issue 1: Reopening of assessment in the Asstt.Year 2006-07
The assessee challenged the reopening of assessment in the Asstt.Year 2006-07. The AO had issued a notice under section 148 based on discrepancies in the employees' contribution to PF and ESIC as per the audit report. The AO believed that income had escaped assessment due to non-payment of these contributions. However, the Tribunal found that the AO did not establish any non-disclosure of material facts by the assessee. Since the audit report was already available during the previous assessment under section 143(3), the Tribunal held that the conditions for reopening were not met. Consequently, the reassessment in the Asstt.Year 2006-07 was quashed.

Issue 2: Disallowance of employees' contribution to PF and ESIC after due date
In the Asstt.Year 2011-12, the AO disallowed the claim of the assessee for not depositing employees' contribution to EPF and ESCI within the due dates. The disallowance was confirmed by the ld.CIT(A) citing a judgment of the jurisdictional High Court. The assessee argued that deductions should be allowed if payments were made before the due date of filing the return, referring to decisions of other High Courts and a dismissed SLP by the Supreme Court. However, the Tribunal noted that the jurisdictional High Court had a different stance on the issue. Therefore, the Tribunal rejected the grounds of appeal and confirmed the disallowance.

Issue 3: Disallowance of interest expenses under section 40(a)(ia) of the Act
Regarding the disallowance of interest expenses due to non-deduction of TDS under section 40(a)(ia) of the Act, the Tribunal considered a judgment of the Delhi High Court. The Tribunal observed that if the payee had disclosed the payment received in their income tax return, the assessee would not be considered in default. As the recipients of interest payments had included the amounts of taxes in their returns, the Tribunal directed the AO to verify this aspect. The Tribunal set aside the issue for verification, instructing the AO to ensure that if the recipients had accounted for the taxes, no disallowance should be made. The ground of appeal was allowed for statistical purposes.

In conclusion, the Tribunal allowed ITA No.2527/Ahd/2017 and partly allowed ITA No.2528/Ahd/20125 for statistical purposes, emphasizing compliance with tax regulations and judicial interpretations in each issue addressed.