2022 (3) TMI 65 - AT - Income Tax

Reopening of assessment u/s 147 - Notice after expiry of four years from the end of the relevant assessment year - addition made u/s. 40(a)(ia) for non-deduction of tax - HELD THAT - We find merit in the pleadings of the Ld. A.R. that reopening has to be made in terms of stipulation of 1st Proviso to section 147. We find that in the present case the Assessing Officer as well as CIT(A) failed to demonstrate any failure on the part of the assessee to fully and truly disclose the material facts for the income which is related in the assessment of income. After perusal of the records before us, we find that there was a mistake of mentioning the correct assessment year while deducting the TDS and therefore, the tax deducted at sources by the assessee did not get displayed on the TIN system which was got rectified later on and the TDS deducted appeared correctly in the TIN system of the assessee. Under the circumstances, we are of the considered view that reopening has been made without satisfying the conditions as envisaged in the 1st Proviso to section 147. Even on merits, the assessee has fool proof case. In our opinion that no meaningful purpose would be served except wastage of time and resources. Accordingly we set aside the order of the CIT(A) by holding that the reopening has not been validly made and the reassessment proceedings and consequent assessment framed is quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of assessment reopened after four years under section 147 of the Income Tax Act.
2. Merit of addition made under section 40(a)(ia) for non-deduction of tax.

Validity of Assessment Reopened after Four Years:
The appeal was filed against an order passed under section 143(3)/147 of the Income Tax Act for the Assessment Year 2007-08. The appellant challenged the order of the Commissioner of Income Tax(Appeals) upholding the order of the Assessing Officer on both legal and merit grounds. The main legal issue raised was regarding the reopening of assessment after the expiry of four years without the assessee failing to disclose any material fact. The appellant argued that as the assessment was already framed under section 143(3), the reopening under section 147 without fulfilling the conditions of the 1st Proviso to section 147 would render the reassessment without jurisdiction. The appellant contended that the reopening was invalid and non-existent. The Tribunal found merit in the appellant's argument, stating that the reopening did not satisfy the conditions of the 1st Proviso to section 147. The Tribunal held that no failure on the part of the assessee was demonstrated in disclosing material facts, and the reassessment proceedings were quashed.

Merit of Addition Under Section 40(a)(ia):
Regarding the merit of the addition made under section 40(a)(ia) for non-deduction of tax, the appellant argued that the addition was incorrect. The appellant explained that the TDS amount was deposited on time but with a typographical error in the assessment year, leading to non-display in the TIN system. The appellant provided rectified challans and evidence to support the correction. The appellant prayed for the reversal of the CIT(A)'s order on both legal and merit grounds. The Departmental Representative acknowledged the mistake in the challans but suggested referring the matter back to the Assessing Officer for verification of the corrected challans. The Tribunal, after considering the submissions and records, found that the TDS mistake was rectified, and the tax deduction was correctly reflected in the TIN system. The Tribunal concluded that the addition made by the Assessing Officer and upheld by the CIT(A) was not justified. The Tribunal allowed the appeal of the assessee on both legal and merit grounds, setting aside the CIT(A)'s order.

In conclusion, the Appellate Tribunal ITAT Kolkata ruled in favor of the assessee, holding that the reopening of assessment after four years was invalid and the addition made under section 40(a)(ia) was not justified. The Tribunal quashed the reassessment proceedings and allowed the appeal of the assessee.