2022 (5) TMI 1325 - AT - Income Tax

Reopening of assessment u/s 147 - Notice after expiry of more than 4 years - difference in income as the contract receipt shown in the profit and loss account and Form 26AS - difference in amount as per TDS certificates and as shown in the accounts of the assessee - HELD THAT - As during the course of assessment proceedings, the assessee had filed the duly explained the difference in response to the query raised by the Assessing Officer on same point and assessee had filed the reconciliation statement based and TDS certificate and also the contract receipt shown in the books of accounts. It was demonstrated that there was certain mistake in the TDS certificate due to wrong inclusion of reimbursement of service tax. There was TDS deduction taken on a gross amount including service tax which was included in the TDS certificate. All those reconciliations were filed before the AO during the course of the original assessment proceedings which has been accepted by the Assessing Officer. Same thing was further explained post completion of assessment in response to notice under Section 154 of the Act as incorporated supra. Now again in the garb of escapement of income, a notice under Section 148 of the Act was issued mainly to review the same thing, which was already explained before the AO and have also been accepted. Thus, clearly there was no failure on the part of the assessee to disclose fully and truly all material facts during the course of original assessment proceedings, albeit the re-opening is based on purely change of opinion, which is impermissible. Accordingly, the entire proceeding u/s 148 is hereby quashed being without jurisdiction. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of Assessing Officer under Section 147 of the Income Tax Act.
2. Validity of assessment order under Section 147 and proviso to Section 147 of the Act.
3. Validity of re-opening assessment under Section 148 of the Act.
4. Addition of income to the original assessment order.

Issue 1: Jurisdiction of Assessing Officer under Section 147 of the Income Tax Act:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) for the quantum of assessment under Section 143(3)/147 of the Income Tax Act, 1961. The Assessing Officer sought to re-open the assessment due to an alleged understatement of income by the assessee. The Assessing Officer added the difference in contract receipts as income of the assessee. The CIT (Appeals) upheld the addition and the validity of re-opening under Section 148 of the Act. However, the appellant argued that the re-opening was based on a change of opinion and no failure on the part of the assessee to disclose material facts. The Tribunal found that the re-opening was impermissible as it was based on a change of opinion, and the entire proceeding under Section 148 was quashed.

Issue 2: Validity of assessment order under Section 147 and proviso to Section 147 of the Act:
The grounds raised by the assessee challenged the jurisdiction of the Assessing Officer under Section 147 and the validity of the assessment order. The CIT (Appeals) held that the assessment order was not barred by limitation as mandated by the proviso to Section 147 of the Act. The Tribunal, however, found that the re-opening of the assessment under Section 148 was without jurisdiction as there was no failure on the part of the assessee to disclose material facts during the original assessment proceedings. The Tribunal quashed the entire proceeding under Section 148 and deleted the addition made by the Assessing Officer.

Issue 3: Validity of re-opening assessment under Section 148 of the Act:
The Assessing Officer re-opened the assessment under Section 148 of the Act, alleging an understatement of income by the assessee. The CIT (Appeals) confirmed the addition made by the Assessing Officer and upheld the validity of the re-opening. However, the Tribunal found that the re-opening was based on a change of opinion and not on any new tangible material. The Tribunal concluded that the re-opening was impermissible and quashed the entire proceeding under Section 148.

Issue 4: Addition of income to the original assessment order:
The Assessing Officer added the difference in contract receipts as income of the assessee, which was confirmed by the CIT (Appeals). The Tribunal, however, found that there was no failure on the part of the assessee to disclose material facts during the original assessment proceedings. The re-opening of the assessment under Section 148 was deemed impermissible as it was based on a change of opinion. Consequently, the Tribunal quashed the entire proceeding under Section 148 and deleted the addition made by the Assessing Officer.

In summary, the Tribunal allowed the appeal filed by the assessee, quashed the re-opening of the assessment under Section 148, and deleted the addition made by the Assessing Officer, as there was no failure on the part of the assessee to disclose material facts during the original assessment proceedings.