2017 (4) TMI 919 - HC - Income Tax

Reopening of assessment - payment made towards Tanker Hire Charges in foreign currency on cash basis - Held that - From the objections it appears that payment of Tanker Hire Charges was made to the resident of U.K. and Singapore only. Revenue is not in a position to point out any tangible material available with the A.O. in support of his belief that any payment of Tanker Hire Charges was made to the resident of France, on which T.D.S. was required to be deducted. There is not tangible material available with the A.O. to form an opinion that the income chargeable to tax has escaped assessment within the meaning of section 147. The assessment is sought to be reopened beyond the period of four years and there does not appear to be any failure on the part of the assessee in not disclosing the true and correct facts necessary for assessment and also on the ground that there was no tangible material available with the A.O. with respect to any payment of Tanker Hire Charges to the resident of France, on which T.D.S. was required to be deducted and thereby no income chargeable to tax has assessed the assessment, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside. It is required to be noted that one of the grounds on which the assessment is sought to be reopened is that the interest was paid to the banks situated in India. However, the same is factually not correct. As per the specific case on behalf of the assessee so stated even in the objections, no amount of interest was paid to any of the banks situated in India. Under the circumstances, assumption of jurisdiction to reopen the assessment on the aforesaid ground is on incorrect factual premise. Under the circumstances also the impugned reassessment proceedings deserve to be quashed and set aside. Present petition succeeds. The impugned notice issued upon the assessee under section 148 of the Income Tax Act, 1961 for the A.Y. 2009-2010 is hereby quashed and set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment beyond four years under Section 147 of the Income Tax Act, 1961.
2. Requirement of TDS deduction on Tanker Hire Charges paid in foreign currency.
3. Failure to consider objections raised by the assessee regarding payments made to residents of France.
4. Incorrect factual premise regarding interest payments to banks situated in India.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessment Beyond Four Years:
The petitioner challenged the reopening of the assessment for the A.Y. 2009-2010 beyond the period of four years, arguing that it was not permissible unless there was a failure on the part of the assessee to disclose true and correct facts necessary for the assessment. The Court emphasized that under the proviso to Section 147 of the Income Tax Act, reopening beyond four years is only permissible if there is a failure to disclose fully and truly all material facts. Since there was no failure on the part of the assessee to disclose the necessary facts, the reopening was deemed invalid.

2. Requirement of TDS Deduction on Tanker Hire Charges:
The A.O. sought to reopen the assessment on the grounds that the petitioner had not deducted TDS on Tanker Hire Charges paid in foreign currency, which was alleged to be in violation of Section 195 of the Act. The petitioner countered this by stating that no such payments were made to residents of France, and thus no TDS was required. The Court found that the A.O. did not provide tangible material evidence that payments were made to residents of France, and thus the assumption of jurisdiction to reopen the assessment was without basis.

3. Failure to Consider Objections Raised by the Assessee:
The petitioner had submitted detailed objections to the reasons recorded for reopening the assessment, specifically stating that no payments were made to residents of France. The A.O. dismissed these objections without addressing the specific points raised. The Court noted that the failure to deal with these objections rendered the reopening process flawed, as the A.O. did not substantiate the claim that income chargeable to tax had escaped assessment.

4. Incorrect Factual Premise Regarding Interest Payments:
The A.O. also contended that the assessment should be reopened because interest payments were made to banks situated in India without TDS deduction. The petitioner clarified that no such interest payments were made to banks in India. The Court found that the A.O.'s assumption was factually incorrect, further invalidating the grounds for reopening the assessment.

Conclusion:
The Court concluded that the reopening of the assessment was not justified as it was based on incorrect factual premises and a failure to consider the assessee's detailed objections. The impugned notice issued under Section 148 of the Income Tax Act for A.Y. 2009-2010 was quashed and set aside. The Court emphasized that there was no tangible material evidence to support the A.O.'s belief that income chargeable to tax had escaped assessment, and the reopening beyond four years was not permissible under the circumstances. The petition succeeded, and the reassessment proceedings were annulled.