2016 (6) TMI 1028 - HC - Income Tax

Reopening of assessment - non deduction of TDS - Held that - The issue with regard to tax deducted at source was raised for the purpose of scrutiny. The assessee had replied thereto. The scrutiny order had proceeded on a basis. Therefore, in such fact scenario, it cannot be said that the assessee is guilty of not disclosing fully and truly all material facts necessary for its assessment in respect of the assessment year. Thus the pre-condition for assumption of jurisdiction under the first proviso of Section 147 of the Income Tax Act, 1961, has not been satisfied for the purpose of issuance of a notice under Section 148 of the Income Tax Act, 1961. - Decided in favour of assessee

Summary

Issues Involved:
Assessment year 2001-02, Notice under Section 148 of the Income Tax Act, 1961, Applicability of tax deducted at source, Invocation of Section 147, Disclosure of material facts for assessment.

Analysis:
The petitioner challenged a notice dated March 14, 2008, issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2001-02. The income tax authorities invoked Sections 142 and 143 during scrutiny proceedings, focusing on tax deducted at source. The petitioner contended that it was not liable to deduct tax at source for a portion of payments made. An order under Section 143 was passed after the petitioner's responses. The authorities sought to invoke Section 148 more than four years later, alleging non-disclosure of material facts. The petitioner argued that the conditions for invoking Section 148 were not met, thus the notice should be quashed.

The assessing officer had previously raised the issue of tax deducted at source in a notice under Section 143(3) for the assessment year 2001-02. The petitioner had responded, stating non-deduction of tax for a portion of payments. The subsequent order under Section 143(3) did not hold the petitioner liable for the alleged failure to deduct tax at source. However, the authorities later issued the impugned notice under Section 148, beyond the permissible period of four years from the relevant assessment year.

The petitioner's contention of not withholding tax for a specific portion was considered in the scrutiny proceedings, and the order under Section 143(3) did not find the petitioner at fault. The court analyzed whether the assessee had fully disclosed all material facts necessary for assessment in the relevant assessment year. Given the facts and circumstances, the court held that the pre-condition for assuming jurisdiction under Section 147 had not been satisfied for issuing the notice under Section 148. Consequently, the impugned notice was set aside, and the case was disposed of without costs.