2013 (5) TMI 21 - HC - Income Tax

Re opening of assessment - failure to deduct TDS on commission payment - Held that - No hesitation in believing and upholding the petitioner s factual assertion that during the previous year relevant to the assessment year under consideration, the petitioner had not paid any commission as even at the time of issuing notice such contention had formed part of the objection raised by the petitioner before the AO also & despite such stand of the petitioner from the outset, the respondent has totally failed in dislodging this clear and unequivocal factual assertion, therefore, there was no question of deducting tax at source. The entire basis for issuance of impugned notice thus lack validity. As decided in in case of Ratna Trayi Reality Service Pvt. Ltd. 2013 (4) TMI 677 - GUJARAT HIGH COURT as relying on ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. 2007 (5) TMI 197 - SUPREME Court it is equally well settled that merely because an assessment was not previously framed after scrutiny, would not give unlimited right to the Assessing Officer to reopen by merely issuing a notice without valid reasons. Even in case of reopening of an assessment which was previously accepted under section 143(1) of the Act without scrutiny, the Assessing Officer would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. In favour of assessee.

Summary

Issues involved:
Notice for reopening assessment under section 148 of the Income Tax Act, 1961 based on alleged non-deduction of TDS on commission paid, objections raised by petitioner, validity of reasons recorded for issuing notice, factual assertion of non-payment of commission by petitioner, legal principles governing reopening of assessment without scrutiny, relevance of reasons recorded for reopening assessment.

Analysis:

1. The judgment involves petitions concerning the same assessee and the tax department, with similar facts, heard together and disposed of by a common order. The petitioner challenged a notice dated 30.3.2012 under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2005-06 based on alleged non-deduction of TDS on commission paid. The petitioner raised objections to the notice, which were rejected by the respondent, leading to the petitioner approaching the High Court to challenge the reopening notice.

2. The petitioner contended that the Assessing Officer (AO) alleged non-deduction of TDS on commission payment at the rate of 12% on the overall sale made during the year. However, the petitioner argued that no commission was paid during the relevant year, hence no tax deduction was required. The respondent failed to dispute this crucial factual assertion, leading to a lack of validity in the reasons recorded for issuing the notice for reassessment.

3. The High Court upheld the petitioner's factual assertion that no commission was paid during the previous year, thus no tax deduction was necessary. The judgment referred to legal principles governing the reopening of assessments without prior scrutiny, emphasizing that the AO must have tangible material to form a belief that income chargeable to tax had escaped assessment. The Court highlighted that the reasons recorded for reopening assessments must be valid, even in cases where no scrutiny assessment was previously conducted.

4. Citing previous judgments and legal precedents, the Court emphasized that the Assessing Officer cannot arbitrarily exercise powers to circumvent scrutiny proceedings by issuing reopening notices without valid reasons. The judgment quashed the impugned notices, allowing the petitions and disposing of them accordingly. The analysis focused on the importance of factual assertions, validity of reasons for reopening assessments, and adherence to legal principles governing income tax assessments under the relevant provisions of the Income Tax Act, 1961.