2017 (4) TMI 971 - HC - Income Tax

Reopening of assessment - not deducting T.D.S. on the payment of Tanker Hire Charges to the resident of France - Held that - From the objections it appears that payment of Tanker Hire Charges was made to the resident of U.K. and Singapore only. The learned counsel appearing on behalf of the 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. Under the circumstances, 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 of the Act.- Decided in favour of assessee. Interest paid to the banks situated outside India - Held that - The reason 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 outside 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. - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Justification for reopening the assessment beyond the period of four years.
3. Requirement of tangible material for reopening the assessment.
4. Proper addressing of objections raised by the assessee.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30/3/2016 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the Assessment Year (AY) 2009-2010. The notice alleged that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act. The petitioner argued that the reopening was beyond the permissible period and lacked tangible material evidence.

2. Justification for Reopening the Assessment Beyond the Period of Four Years:
The petitioner contended that reopening the assessment beyond 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 petitioner asserted that there was no such failure in this case. The court noted that the reopening was based on the assertion that payments were made to residents of France and banks outside India, which required TDS deduction. However, the petitioner clarified that no such payments were made to residents of France or banks outside India.

3. Requirement of Tangible Material for Reopening the Assessment:
The court examined whether there was any tangible material available with the Assessing Officer (A.O.) to justify the belief that income chargeable to tax had escaped assessment. The reasons recorded by the A.O. included payments in foreign currency for Tanker Hire Charges and interest, which allegedly required TDS deduction under Section 195 of the Act. However, the court found that the A.O. did not address the specific objections raised by the assessee, particularly that no payments were made to residents of France or banks outside India. The court concluded that there was no tangible material to support the A.O.'s belief, making the reopening unjustified.

4. Proper Addressing of 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 and that interest payments were made to banks in India. The court observed that the A.O. failed to address these objections adequately. The A.O.'s decision to dispose of the objections was deemed too broad and general, failing to engage with the specific points raised by the petitioner. This lack of proper consideration further invalidated the reassessment proceedings.

Conclusion:
The court concluded that the reassessment proceedings were unsustainable due to the lack of tangible material and the failure to address the specific objections raised by the assessee. The notice issued under Section 148 of the Income Tax Act, 1961, for the AY 2009-2010 was quashed and set aside. The court emphasized that reopening beyond four years requires clear evidence of failure to disclose material facts, which was not present in this case. Consequently, the petition succeeded, and the reassessment proceedings were invalidated.

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