2018 (6) TMI 542 - AT - Income Tax

Validity of the notice u/s 148 - non deduction of tds - Change of opinion - Held that - AO during the original assessment proceedings u/s 143(3) had called for details of the expenditure and the assessee has furnished the details and thus regular assessment was completed - AO was satisfied with the explanation and no addition was made - thus relying on the judgement of Hon ble Delhi High Court in the case of CIT vs. Usha International Ltd 2012 (9) TMI 767 - DELHI HIGH COURT wherein it is held that reopening of the assessment on the very same ground on which an inquiry was made during the assessment proceedings would amount to reopening on change of opinion - hence re-assessment proceedings are not valid - Decided in favor of assessee. Disallowance u/s 40(a)(ia) for non deduction of TDS - Held that - The advance received by the assessee towards his professional fee when it is returned is not covered by any of the provisions of Chapter XVIIB requiring TDS - also re-assessment proceedings are not valid the grounds against the disallowance u/s 40(a)(ia) of the Act need no adjudication.

Summary

Issues Involved:
1. Validity of the reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Disallowance under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS.

Issue-wise Detailed Analysis:

1. Validity of the Reassessment Proceedings under Section 147/148:
The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO) under Section 147/148 on the grounds that it amounted to a change of opinion. Initially, the AO completed the assessment under Section 143(3) on 14.12.2011. Subsequently, a notice under Section 148 was issued on 04.01.2013, within four years from the end of the relevant assessment year. The AO observed that the assessee had debited an amount of ?20.00 lakhs in the Profit and Loss Account without deducting TDS, which should have been disallowed under Section 40(a)(ia).

The Tribunal found that during the original assessment proceedings, the AO had called for details of the expenditure, which the assessee furnished, including the ?20.00 lakhs returned to M/s Sumant Art Production. The Tribunal held that the AO was satisfied with the explanation during the original assessment, and reopening the assessment on the same ground constituted a change of opinion. This view was supported by the Hon'ble Supreme Court's decision in Kelvinator India Ltd (320 ITR 561) and the Hon'ble Delhi High Court's decision in CIT vs. Usha International Ltd (348 ITR 485).

The Tribunal further cited the Coordinate Bench's decision in S. Ranjith Reddy vs. Deputy Commissioner of Income-tax, Circle -6(1), Hyderabad (144 ITD 461), which emphasized that reopening an assessment requires new tangible material, not merely a change of opinion. The Tribunal concluded that there was no new information or fresh material to justify the reassessment, making the proceedings invalid.

2. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:
The AO disallowed ?20.00 lakhs under Section 40(a)(ia) on the grounds that the assessee failed to deduct TDS on the amount paid to M/s Sumant Art Production. The assessee contended that the amount was an advance received for a project that did not materialize and was subsequently returned, which did not fall under any TDS provisions.

The Tribunal, while noting that the reassessment proceedings were invalid, did not need to adjudicate on the merits of the disallowance under Section 40(a)(ia). However, it was observed that the returned advance was not covered by any TDS provisions under Chapter XVIIB.

Conclusion:
The Tribunal allowed the assessee's appeal on the grounds that the reassessment proceedings were invalid due to a change of opinion without any new tangible material. Consequently, the grounds against the disallowance under Section 40(a)(ia) were not adjudicated. The appeal was partly allowed, with the reassessment proceedings quashed.