2012 (5) TMI 259 - HC - Income Tax

Reassessment - notice u/s 148 - payment of commission on export - power and authority for reopening a case - held that - the condition precedent for exercising power of reopening the assessment as provided in Section 147 of the Act is absent and the Assessing Officer acted illegally in issuing notice of reassessment by forming a second opinion on the selfsame materials without having any tangible material to exercise jurisdiction. - Decided in favor of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Whether there was a failure to deduct TDS under Section 194H.
3. Whether the reopening of assessment was based on a mere change of opinion.
4. Jurisdiction of the High Court under Article 226 to interfere with the reassessment notice.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act:
The petitioner challenged the notice dated 15th September 2009 under Section 148 of the Act, arguing that it was issued without proper authority and beyond the powers vested under Section 147. The court noted that the initial assessment was completed under Section 143(3), and all necessary details, including the commission payments, were furnished. The reopening was based on the allegation that the petitioner had not deducted TDS under Section 194H, which was not a valid ground since the petitioner had obtained a certificate under Section 197 permitting non-deduction of TDS. The court concluded that the notice was invalid as there was no omission or failure on the part of the petitioner to disclose fully or truly all material facts necessary for assessment.

2. Whether there was a failure to deduct TDS under Section 194H:
The petitioner argued that they had obtained a certificate under Section 197 from the Income Tax Department, which allowed them to make commission payments to M/s. Softgenie Limited without deducting TDS. The court found that the department had indeed issued such certificates for the relevant assessment years, and thus, there was no violation of Section 194H. The court emphasized that the lack of TDS credit claimed by M/s. Softgenie Limited was because of the valid certificate issued under Section 197, justifying non-deduction of TDS.

3. Whether the reopening of assessment was based on a mere change of opinion:
The court highlighted that the original assessment under Section 143(3) had already dealt with the commission payments, and the reopening was merely a change of opinion on the same facts. The court referred to the Supreme Court's decision in Kelvinator of India Limited, which established that reassessment based on a mere change of opinion is not permissible. The court noted that the Assessing Officer did not have any new tangible material to justify the reopening and that the reasons for reopening were not tenable in law.

4. Jurisdiction of the High Court under Article 226 to interfere with the reassessment notice:
The court discussed its power under Article 226 to set aside a notice issued under Section 147 if the conditions precedent for jurisdiction did not exist. It referred to several Supreme Court judgments, including the case of A Raman and Company, which affirmed the High Court's authority to prohibit reassessment proceedings initiated without jurisdiction. The court concluded that the Assessing Officer's decision to reopen the assessment lacked jurisdiction as it was based on a second opinion without new tangible material.

Conclusion:
The court set aside the notice of reassessment dated 15th September 2009, concluding that the conditions for reopening the assessment under Section 147 were not met, and the notice was issued based on a mere change of opinion without any new tangible material. The Special Civil Application was allowed, and the reassessment notice was quashed.

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