2018 (2) TMI 1339 - AT - Income Tax

Validity of re-assessment proceedings - change of opinion - addition on account of payment for transport expenses without deducing tax at source and application of provision of section 194C - Held that - There was no new tangible material available with the AO while resorting to section 147/148 more specifically, while framing original assessment u/s 143(3) there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act, therefore, in our humble opinion, the reassessment/reopening u/s 147 of the Act is unjustified as there was no fresh tangible material with the Assessing Officer, while reopening the assessment, therefore, the reopening beyond a period of four years is not permissible, more specifically, when the material facts were disclosed by the assessee and assessment was framed u/s 143(3) of the Act. Thus, the reopening of assessment is bad in law. This ground of the assessee is allowed. On merits of addition any person responsible for paying any sum to any resident for carrying out any work in pursuance to a contract between the contractor and the specified persons. However, there was no contract between the assessee and the transporters and it was merely on truck to truck basis. Therefore, section 194C of the Act has no application to the facts of the present appeal. Any income generated out of the transportation was expected to be included / taxed in the hands of the recipient of such income. As mentioned earlier, each GR can be said to be a separate contract for transportation of goods. Thus, on this issue also the appeal of the assessee deserves to be allowed.

Issues Involved:

1. Validity of reassessment proceedings.
2. Merits of the addition made on account of transport expenses without deduction of tax at source.

Detailed Analysis:

1. Validity of Reassessment Proceedings:

The assessee challenged the validity of the reassessment proceedings, arguing that the reassessment was based on a change of opinion and that the necessary details regarding transport expenses were already submitted during the original assessment. The original assessment order dated 09/11/2009 recorded that the assessee provided details and books of accounts, which were examined by the Assessing Officer. The reassessment was initiated on 19/05/2011, based on the non-deduction of tax under section 194C from transportation expenses, leading to an addition of ?8,23,115.

The Tribunal analyzed the original assessment order and found that the issue of transportation expenses was duly examined. The assessee had clarified that there was no contract with the transporters, and each GR (Goods Receipt) was treated as a separate contract. The Tribunal referred to the case of CIT v. Bhagwati Steels, where it was held that payments based on individual GRs do not attract the provisions of section 194C for TDS deduction. The Supreme Court dismissed the SLP against this decision.

The Tribunal noted that no new material was found by the Revenue, and the reassessment was based on the same facts considered during the original assessment. The Tribunal emphasized that reopening of assessment based on a change of opinion is not permissible. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Kelvinator of India Ltd., which held that mere change of opinion does not justify reassessment.

The Tribunal concluded that the reassessment proceedings were invalid as they were based on a change of opinion without any new material. The reassessment was beyond the permissible period and was not justified as there was full disclosure of material facts by the assessee during the original assessment.

2. Merits of the Addition on Account of Transport Expenses:

On the merits of the case, the Tribunal examined the addition of ?8,23,115 made on account of payment for transport expenses without deduction of tax at source under section 194C. The Tribunal reviewed the details of transport expenses and found that each payment was less than ?10,000, which is below the threshold for TDS deduction under section 194C.

The Tribunal referred to the provisions of section 194C, which requires TDS deduction for payments made to contractors for carrying out any work in pursuance of a contract. However, the Tribunal noted that there was no contract between the assessee and the transporters, and the payments were made on a truck-to-truck basis. The Tribunal reiterated that each GR can be treated as a separate contract, and therefore, section 194C was not applicable.

The Tribunal concluded that the addition made by the Assessing Officer was not justified as the provisions of section 194C did not apply to the facts of the case. The Tribunal allowed the appeal of the assessee on this ground as well.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the reassessment proceedings were invalid and the addition made on account of transport expenses was not justified. The Tribunal emphasized that reassessment based on a change of opinion is not permissible, and the provisions of section 194C were not applicable to the payments made by the assessee. The order was pronounced in the open court on 13/02/2018.

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