2017 (4) TMI 244 - AT - Income Tax

Reopening of assessment - disallowance u/s. 40(a)(ia) - true and full disclosure - Held that - There was an assessment order u/s. 143(3) completed, after due verification of the return and AO in that order has disallowed various amounts. It shows that AO has examined the documents placed on record. The fact that a notice u/s. 154 was issued prior to reopening u/s. 147, belatedly after four years, itself indicate that the so called disallowance u/s. 40(a)(ia) is based on the evidence available on record. Therefore, it can be concluded that there is no failure on the part of assessee in furnishing necessary details. AO has resorted to proceedings u/s.147, as assessee objected to proceedings u/s. 154 which were initiated beyond four years period from the date of the order. Thus, on that preliminary ground itself, the reopening per se is not justified. - Decided in favour of assessee

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Disallowance of expenditure under Section 40(a)(ia) for non-deduction of TDS.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The assessee contested the reopening of the assessment under Section 147 of the Income Tax Act, asserting that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The original assessment was completed under Section 143(3) on 09-11-2006, and the reopening notice under Section 148 was issued on 30-03-2012, which was beyond the four-year period from the end of the relevant assessment year.

The Tribunal noted that the Assessing Officer (AO) had issued a notice under Section 154 to rectify the assessment order, which was later dropped due to non-service of the notice. This indicated that the disallowance under Section 40(a)(ia) was based on the evidence already available on record. The Tribunal held that there was no failure on the part of the assessee in furnishing necessary details, and the reopening was not justified as it was based on the same evidence that was available during the original assessment proceedings.

The Tribunal referred to the jurisdictional High Court judgment in the case of Kohinoor Hatcheries Pvt. Ltd. Vs. DCIT, which stated that reopening after four years is not permissible unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal concluded that the reopening after four years was bad in law and allowed the grounds pertaining to this issue.

2. Disallowance of Expenditure under Section 40(a)(ia):

The assessee also contested the disallowance of ?12,56,805/- under Section 40(a)(ia) for non-deduction of TDS. The Tribunal noted that the provisions of Section 40(a)(ia) came into effect with the assent of the President on 10th September 2004 and were not applicable for the Assessment Year 2005-06, as held by the Hon'ble Calcutta High Court in the case of PIU Ghosh Vs. DCIT.

However, since the Tribunal had already concluded that the reopening of the assessment was bad in law, the issue of disallowance under Section 40(a)(ia) became academic. The Tribunal did not adjudicate this issue further and restored the original assessment order, setting aside the orders passed by the AO and CIT(A).

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment under Section 147 was invalid as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Consequently, the disallowance of expenditure under Section 40(a)(ia) was not addressed, and the original assessment order was restored.

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