2017 (1) TMI 1330 - AT - Income Tax

Reopening of assessment - Disallowance being commission paid by the assessee to a Non-Resident Agent - Held that - Nature of commission paid by the assessee was not proved in the absence of agreements. That apart, we find that the reopening was initiated after four years from the end of the assessment year. In the original assessment assessee had produced all details which were called by the ld. Assessing Officer. For a reopening after four years it is necessary that there should be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. There is nothing on record to prove that assessee had failed to disclose fully and truly all material facts relating to the assessment in the original assessment proceedings. Especially so, since assessee filed all required information called for by the ld. Assessing Officer during the original assessment proceedings. In the circumstances, it s of the opinion that assessee has to succeed in all the grounds raised by it. - Decided in favour of assessee

Summary

Issues:
1. Validity of reassessment
2. Disallowance of commission paid to a Non-Resident Agent

Validity of Reassessment:
The original assessment for the impugned year was completed under section 143(3) of the Act. A disallowance was made for failure to produce vouchers. The assessment was reopened under section 148, where it was noted that commission payment to a Non-Resident was made without deduction of tax at source. The Assessing Officer relied on relevant sections and explanations to disallow the claim under section 40(a)(i) of the Act. The reassessment was completed based on this disallowance.

Disallowance of Commission Paid to Non-Resident Agent:
The assessee contended that the commission was for export sales solicited by the Non-Resident Agent outside India. The Commissioner of Income Tax (Appeals) obtained a remand report where it was noted that the agents were paid commission based on the turnover brought by them. The assessee relied on legal precedents to argue that tax deduction at source was not applicable since the services were provided outside India. However, the Commissioner of Income Tax (Appeals) upheld the disallowance, citing lack of agreements with foreign agents as a reason. The Authorized Representative argued that the facts were similar to previous judgments favoring the assessee, and the reassessment was initiated after the specified time limit.

Judgment:
The Tribunal observed that the facts in the assessee's case were similar to previous judgments that favored the assessee. It was noted that the reassessment was initiated after four years from the end of the assessment year, and there was no failure on the part of the assessee to disclose material facts during the original assessment. Therefore, the appeal filed by the assessee was allowed, overturning the disallowance of the commission paid to the Non-Resident Agent.

This detailed analysis of the judgment covers the issues of validity of reassessment and disallowance of commission comprehensively, highlighting the arguments presented and the reasoning behind the final decision.