2020 (12) TMI 435 - AT - Income Tax

Reopening of assessment u/s 147 - non-deduction of TDS a s mentioned in the Form no. 3CD Tax Audit Report u/sec. 44AB - Reopening after four years - HELD THAT - Assessee has produced bills and vouchers for expenditure, prima facie, the Assessing Officer has not verified the facts of TDS/material filed on record, therefore the mistake on the part of assessing officer in the original assessment cannot be a reason for reopening of assessment. Assessment is reopened beyond the time limit prescribed under Section 149(1)(a) of the Act. We find that the assessment order u/sec. 143(3) of the Act was passed on 13-12-2010 for the Asst Year 2008-09 and whereas notice u/sec. 148 of the Act dated 21-01-2014, was issued, which is beyond the expiry of four years from the end of assessment year 2008-09 and the assessee has filed the details and disclosed fully and truly all material facts relevant to the assessment year in consideration. We considering the facts and provisions of law, observe that the assessment was reopened beyond a period of four years and cannot be sustained. Accordingly, we quash the reassessment order and allow the appeal of the assessee.

Issues:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Applicability of provisions of TDS under Section 194C and 194H of the Act.
3. Disallowance of expenses under Section 40(a)(ia) in respect of commission and hire charges.
4. Levy of interest under Section 234B and 234C of the Act.

Analysis:

Issue 1: Validity of reopening of assessment under Section 147:
The assessee challenged the reopening of the assessment beyond the prescribed time limit of four years under Section 147 of the Act. The Tribunal observed that the original assessment order was passed within the stipulated time frame, and the reassessment notice issued later was beyond the statutory limit. The Tribunal noted that the assessee had fully disclosed all material facts during the original assessment proceedings. The Tribunal held that the reassessment beyond the four-year period was not valid and quashed the reassessment order, allowing the appeal of the assessee.

Issue 2: Applicability of provisions of TDS under Section 194C and 194H:
The Assessing Officer observed that the assessee had debited commission charges, land development costs, and hire charges without deducting tax at source as required under Section 194C and 194H of the Act. The Tribunal noted that the assessee contended that the payments did not exceed the specified limits under these sections. However, the AO disallowed the claims and assessed the total income accordingly. The Tribunal considered the explanations provided by the assessee and the provisions of TDS, ultimately ruling in favor of the assessee due to the invalidity of the reassessment.

Issue 3: Disallowance of expenses under Section 40(a)(ia):
The Assessing Officer disallowed expenses under Section 40(a)(ia) in relation to commission and hire charges for non-compliance with TDS provisions. The CIT (Appeals) upheld this disallowance. However, the Tribunal, after ruling on the validity of the reassessment, did not delve into the merits of the disallowance, as it became academic following the decision to quash the reassessment order.

Issue 4: Levy of interest under Section 234B and 234C:
The assessee contested the levy of interest under Sections 234B and 234C of the Act. However, the Tribunal did not address this issue explicitly in the judgment, as the primary focus was on the validity of the reassessment and subsequent implications on the other issues raised in the appeal.

In conclusion, the Tribunal allowed the appeal of the assessee, primarily on the grounds of the reassessment being beyond the statutory time limit, thereby rendering the other issues moot in light of the decision on the validity of the reassessment.

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