2016 (6) TMI 247 - AT - Income Tax

Reopening of assessment - difference in income declared by the assessee and the income shown in the TDS certificate - Held that - Only for the purpose of requirement of verification to find out any excess TDS benefit has been given to the assessee, assessment was reopened. There is nothing in the reasons to indicate that there is an escapement of income. To consider the variation in the TDS benefit to be given to the assessee, the assessment was reopened. The variation in the TDS benefit to be given does not necessarily lead to escapement of income. Mere need to verify the discrepancy does not bring matter within the scope of the cases in which reassessment proceedings can be validly initiated. There is distinction between the reasons to believe and reason to suspect while the former is good enough to hold that income has escaped assessment and to initiate suitable remedial measures in respect thereof, the latter can, at best, be the ground to verify and examine the matter further. Mere fact that matters need to be verified and examined further can never be a reason good enough to believe that income has escaped assessment and reopen the assessment proceedings, that too, the very initiation of proceedings but the facts of the instant case was devoid of merit and reassessment is bad in law. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of reopening the assessment
2. TDS claim restriction

Validity of Reopening the Assessment:
The case involved two appeals against a common order of the Commissioner of Income-tax (Appeals) for the assessment years 2006-07 and 2007-08. The Assessing Officer reopened the assessment as there was an alleged escapement of income due to the assessee not declaring the full amount of royalty income. The Commissioner of Income-tax (Appeals) upheld the action of the Assessing Officer, stating that the assessee is eligible for TDS credit only to the extent of income stated in the financial statements for the relevant years. The Tribunal noted that the assessment was reopened based on differences between the income declared by the assessee and the income shown in the TDS certificates. However, it was observed that the reassessment was merely to verify discrepancies in TDS benefits and did not indicate any escapement of income. The Tribunal referred to previous judgments to support its decision and ultimately quashed the reassessment order, stating that the mere need for verification does not justify reopening the assessment.

TDS Claim Restriction:
Regarding the TDS claim restriction, the Tribunal highlighted that the assessment was reopened to consider relevant TDS relating to the income offered by the assessee and included in the TDS certificate. The reassessment did not result in any addition to the income declared originally. The Tribunal emphasized that the income included in the TDS certificate did not entirely belong to the assessee as it included a portion of income from copyright holders. Therefore, the Assessing Officer only allowed TDS credit to the extent of income declared by the assessee, withdrawing credit related to other assesses. The Tribunal concluded that the reassessment was unjustified as it was based on the need for verification rather than a genuine belief of income escapement. As a result, the Tribunal allowed both appeals of the assessee and pronounced the order in favor of the assessee.

This detailed analysis of the judgment provides insights into the legal issues involved, the reasoning of the Tribunal, and the ultimate decision in favor of the assessee based on the lack of justification for reopening the assessment and the restriction of TDS claims.