2019 (7) TMI 607 - HC - Income Tax

Reopening of assessment u/s 147 - disallowance u/s 36(1)(iii) and non deduction of tds u/s 194H commission allowance - validity of reasons to believe - HELD THAT - A reading of the impugned order would show that the original assessment order was framed under Section 143 (3) i.e. after scrutiny of all the claim by the assessee. It is thus apparent that the declarations and claims made, received careful consideration by the A.O. In terms of Calcutta Discount Ltd. Co. Vs. I.T.O. 1960 (11) TMI 8 - SUPREME COURT the job of the A.O. essentially is to consider the claims in accordance with law and not in accordance with what an assessee states. Likewise, that an assessee might not claim a benefit would not deny it that relief, conversely, since the A.O is bound to administer the law in its correct interpretation. The impugned judgment took into account the binding decision of Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd., 2010 (1) TMI 11 - SUPREME COURT where the Court after reviewing the entire law, including the decision in Raymond Woollen 1997 (12) TMI 12 - SUPREME COURT held that for a valid reopening of an assessment completed under Section 143 (3), the revenue must be in possession of tangible material outside of the record. In other words, a second opinion or a review on the existing material is impermissible. This Court is of the opinion that the learned Single Judge was justified in granting the relief to the assessee on both aspects, there was no allegation of suppression or mis-declaration by the assessee. The A.O. in the original assessment took into account all claims. The mere fact that he overlooked some provisions itself-in the absence of tangible material could have afforded opportunity of reassessment to the revenue. - Decided against revenue

Summary

Issues:
1. Validity of re-assessment notice under Section 147/148 of the Income Tax Act, 1961 for A.Y. 2005-06, 2006-07, and 2007-08.
2. Disallowance under Section 36(1)(iii) and non-deduction under Section 194H by the assessee.
3. Applicability of extraordinary remedy of writ petition.
4. Requirement of tangible material for valid reopening of assessment under Section 143(3).

Analysis:
1. The High Court addressed the issue of the validity of the re-assessment notice issued under Section 147/148 of the Income Tax Act, 1961 for the assessment years 2005-06, 2006-07, and 2007-08. The notice was challenged by the assessee, contending that the matter regarding interest allowance was debatable as it had been appealed to the ITAT, which granted relief. The Court held that the mere preference of the Revenue to challenge the ITAT order did not justify the re-opening of assessments for the concerned years.

2. The Court further examined the issue of disallowance under Section 36(1)(iii) and non-deduction under Section 194H by the assessee. The assessee successfully argued that the income tax amounts were paid in accordance with the provisions at the time of filing the final return, well within the stipulated time. The Court considered the provisions of Section 194H and upheld the assessee's contentions in this regard.

3. The Court discussed the applicability of extraordinary remedies like a writ petition in tax matters. The Revenue relied on various judgments to support its position that the assessee should not have availed of the writ petition as a remedy. However, the Court did not find merit in this argument and upheld the decision of the learned Single Judge in granting relief to the assessee.

4. Finally, the Court analyzed the requirement of tangible material for a valid reopening of assessments under Section 143(3). It emphasized that the Assessing Officer's job is to consider claims in accordance with the law and not solely based on what the assessee states. The Court referred to the Supreme Court's decision in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd., emphasizing the need for tangible material outside the existing record for a valid reopening of assessments. The Court concluded that in the absence of tangible material, the revenue could not have been afforded an opportunity for reassessment, leading to the dismissal of the appeal.

In conclusion, the High Court dismissed the appeal, affirming the decision of the learned Single Judge in granting relief to the assessee on both aspects, highlighting the absence of suppression or mis-declaration by the assessee and the necessity of tangible material for valid reassessment.