2020 (1) TMI 1156 - HC - Income Tax

Reopening of assessment u/s 147 - specific information received by the AO from his counterpart at Surat - addition u/s 14A added back to the book profit of the assessee u/s 115JB which amount was not disclosed by the assessee in the original return of income and thus, escaped assessment - HELD THAT - As decided in M/S. BENGAL FINANCE INVESTMENTS PVT. LTD. 2015 (2) TMI 1263 - BOMBAY HIGH COURT relying on M/S ESSAR TELEHOLDINGS LTD. 2015 (5) TMI 810 - BOMBAY HIGH COURT an amount disallowed u/s 14A of the Act cannot be added to arrive at the book profit for purpose of Section 115JB of the Act, TDS u/s 194J on MICR charges to MICR Centre managed by State Bank of India - Assessee in its reply had clearly stated that assessee had deducted tax at source and paid into government account, details of which were provided in the reply - HELD THAT - Basic issue as to whether tax is deductible at source on MICR charges itself is debatable. Assessee had referred to several decisions of the Tribunal including a coordinate bench at Mumbai wherein it was held that there is no obligation to deduct tax at source in such a transaction. When that is the position, we fail to understand as to how the Assessing Officer could invoke jurisdiction under Sections 147/148 of the Act. Therefore, the first appellate authority was justified in deleting such addition. Regarding the third deletion, it is quite evident that assessee had disclosed details of TDS made from the payments to the caterer. Such information was furnished from the record of the bank where payments were made and in support of the payments, internal vouchers were furnished. If the AO had any further doubt in this regard, he could have very well verified the record of the bank by issuing notice to the bank in question. Thus, the addition made by the AO was rightly deleted by the first appellate authority. AO was not justifying in taking the view that assessee had failed to disclose fully and truly all material facts for the purpose of assessment of his income for the assessment year under consideration and the Tribunal is correct in taking the view that Assessing Officer could not have issued notice to reopen the concluded assessment in the facts and circumstances of the case. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment proceedings under Section 260A of the Income Tax Act, 1961.
2. Addition of undisclosed income to the total income of the assessee.
3. Failure to deduct TDS on certain payments leading to income escaping assessment.

Analysis:
1. Validity of Reassessment Proceedings:
The appeal was filed against the order passed by the Income Tax Appellate Tribunal for the assessment year 2005-06. The key issue raised was whether the reopening of assessment by the Assessing Officer was valid. The Tribunal held that the notice issued for reopening the assessment was not sustainable, rendering the reopening of assessment invalid. This decision made the appeal filed by the revenue redundant.

2. Addition of Undisclosed Income:
The Assessing Officer sought to add back certain amounts to the total income of the assessee, alleging that income had escaped assessment. One of the grounds was related to the addition under Section 115JB of the Act, which was upheld by the Commissioner of Income Tax (Appeals). However, the Tribunal referred to a previous decision where it was held that certain disallowed amounts under Section 14A cannot be added to arrive at the book profit for Section 115JB. The Tribunal found that the Assessing Officer's reasons were insufficient to justify reopening the assessment, leading to the deletion of the additions made.

3. Failure to Deduct TDS:
The Assessing Officer also added amounts to the income of the assessee due to alleged failure to deduct TDS on certain payments. The Commissioner of Income Tax (Appeals) deleted these additions. The Tribunal agreed with the deletion, emphasizing that the Assessing Officer did not have sufficient grounds to reopen the assessment. The Tribunal highlighted that the assessee had provided evidence of TDS deductions, and the Assessing Officer should have verified this information before making the additions.

In conclusion, the High Court upheld the Tribunal's decision, stating that no substantial question of law arose in the appeal. The Assessing Officer's failure to demonstrate that the assessee had not fully disclosed material facts for the assessment year led to the dismissal of the appeal. The Court found no error in the Tribunal's decision and dismissed the appeal, with no order as to costs.