2021 (9) TMI 374 - HC - Income Tax

Reopening of assessment u/s 147 - Allowability of TDS credit - assessee filed a rectification application under Section 154 - as submitted that the reopening is sought to be done on the basis of Form 26AS and the report of the Justice MB Shah Commission - contentions raised by the assessee is that the TDS issue could not have been the basis for reopening the assessment as Form 26AS was very much available at the time of scrutiny assessment and based upon the said Form, TDS credit was granted to the assessee and based on the very same material, the Assessing Officer is not justified in reopening the proceedings - HELD THAT - There is a mismatch in receipts appearing in Form 26AS vis-a-vis receipts credited in P L account. The receipts and TDS from the above mentioned parties were not appearing in Form 26AS whereas it was claimed by the assessee in the rectification application dated 20.07.2011. Assessing Officer has recorded that the assessee has claimed less TDS in respect of some other deductors and thereby suppressed corresponding receipts to that extent and during the assessment proceedings, the assessee did not produce the accurate particulars of income and TDS claimed and it is only after the rectification application was filed the issue cropped up. Further the Assessing Officer has noted from the rectification application that the assessee has claimed TDS which was neither claimed in the return under Section 143(1) nor during the assessment proceedings AO recorded that the assessee never disclosed and claimed the above TDS during the assessment proceedings though he had opportunity to do so and therefore, deliberately concealed the particulars during assessment proceedings. Therefore, we are fully satisfied that the issue which is now subject matter of the reopening was never discussed during the original assessment proceedings and no opinion was formed by the Assessing Officer during the original assessment proceedings on this issue. In fact, the issue cropped up only after the assessee filed the rectification application. Therefore, the contention of the assessee that the reopening is a case of change of opinion and based on surmises and conjunctures has to be outrightly rejected. What would be the effect of the report of Justice MB Shah Commission? - The writ petition filed by the State of Odisha was dismissed on the technical ground. In any event, it is too early for this Court to rule on the effect on the judgment of State of Odisha qua the assessee and undoubtedly this is a matter which is required to be adjudicated on facts. The specific stand of the revenue is that the assessee who was a raising contractor engaged for extraction of iron ore by the lessee, the contract charges corresponding to the value of the excess production has been believed to have been suppressed. This aspect has to be gone into in the re-assessment proceedings. Therefore, we are of the clear view that the assessee has not made full and true disclosure of all material facts during the original assessment, the reopening of the assessment was not based on the change of opinion but the facts which emanated after the rectification application was filed by the assessee and it is incorrect on the part of the assessee to state that the reopening of the original assessment was on assumptions and presumptions. The reliance placed on the interim directions which were issued during the pendency of the writ petitions is of little avail as the the main writ petitions have been dismissed which is subject matter of challenge before us in these appeals. Therefore, the assessee cannot be heard to say that they can advance their case based on certain interim directions issued in the writ petitions when the cases were pending before the learned Single Bench. Reopening proceedings have been validly done and the assessee should co-operate in the re-assessment to be done by the Assessing Officer. - Decided against assessee.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Validity of the reasons for reopening the assessment.
3. Alleged failure of the assessee to disclose fully and truly all material facts.
4. Impact of the Justice MB Shah Commission report on the assessment.
5. Discrepancies related to TDS (Tax Deducted at Source) claims.

Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income Tax Act, 1961:
The primary issue was whether the reopening of the assessment under Section 147 of the Income Tax Act for the assessment years 2008-09, 2009-10, and 2010-11 was valid. The appellant (assessee) contended that the reopening was based on the same material available during the original assessment and thus constituted a change of opinion, which is not permissible under the law. The Court, however, concluded that the reopening was valid, noting that the issue of TDS discrepancies arose only after the assessee filed a rectification application under Section 154 of the Act. The Court held that this constituted new tangible material justifying the reopening.

2. Validity of the Reasons for Reopening the Assessment:
The assessee argued that the reasons for reopening the assessment did not meet the conditions under Section 147, specifically the requirement that the Assessing Officer had "reason to believe" that income had escaped assessment. The Court found that the reasons recorded by the Assessing Officer, including discrepancies in Form 26AS and the assessee's Profit and Loss account, provided a valid basis for the belief that income had escaped assessment. The Court emphasized that the sufficiency of these reasons could not be questioned in a writ proceeding under Article 226 of the Constitution of India.

3. Alleged Failure of the Assessee to Disclose Fully and Truly All Material Facts:
The revenue contended that the assessee failed to fully and truly disclose all material facts necessary for the assessment, which justified the reopening. The Court agreed, noting that the discrepancies in the TDS claims and the income reported in Form 26AS vis-a-vis the Profit and Loss account indicated that the assessee had not made a full and true disclosure. The Court pointed out that mere production of books of accounts does not amount to full disclosure as per the explanation to the Proviso to Section 147 of the Act.

4. Impact of the Justice MB Shah Commission Report on the Assessment:
The Justice MB Shah Commission report on illegal mining in Odisha was cited by the revenue as additional material justifying the reopening. The assessee argued that they were not a party to the proceedings before the Commission and that the report could not form the basis for reopening the assessment. The Court, however, noted that the assessee was a raising contractor for a lessee mentioned in the Commission's report and that this relationship warranted further investigation. The Court held that the report provided additional material supporting the reopening of the assessment.

5. Discrepancies Related to TDS Claims:
The Court examined the discrepancies in the TDS claims made by the assessee. The Assessing Officer had noted significant mismatches between the income reported in Form 26AS and the Profit and Loss account, as well as discrepancies in the TDS amounts claimed. The Court found that these discrepancies constituted tangible material justifying the reopening of the assessment. The Court also noted that the assessee had claimed additional TDS credits in their rectification application, which were not disclosed during the original assessment proceedings.

Conclusion:
The Court dismissed the writ appeals, upholding the reopening of the assessments for the relevant years. The Court found that the reopening was based on new tangible material, including discrepancies in TDS claims and the Justice MB Shah Commission report, and that the assessee had failed to fully and truly disclose all material facts necessary for the assessment. The Court directed the assessee to cooperate with the reassessment proceedings.

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