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2013 (11) TMI 8 - AT - Income TaxRe-opening of assessment u/s 147 on the basis of TDS Certificates Held that - There was no other fresh tangible material before the Assessing Officer apart from the TDS certificates submitted with the return for forming a belief that income has escaped assessment - Assessment could not have been reopened only on the basis of difference in the TDS certificate and receipts shown in the P & L A/c Reliance has been placed on the judgment of Kolkata Bench of Hon ble Tribunal in the case of Meheria Reid & co. Vs. ITO 2013 (2) TMI 348 - ITAT KOLKATA , wherein it has been held that assessment has been reopened on the ground that there is discrepancy between professional income declared by the assessee and the professional income as per TDS certificates and that it requires verification to find out whether any taxable income has escaped assessment There is nothing in the reasons to indicate that there is escapement of income A variation in these two figures does not necessarily lead to escapement of income Mere need to verify the discrepancy does not bring the matter within the scope of cases in which reassessment proceedings can be validly initiated There is subtle, though significant, distinction between reason to believe and reason to suspect While the former is good enough to hold that income has escaped assessment and initiate suitable remedial measures in respect thereof, the latter can, at best, be the ground to verify and examine the matter further. In the present case, assessee has shown receipt of ₹ 1,20,35,798/- in its books of accounts is of no consequence as such figure has not been taken into account by the Assessing Officer while computing the income. As would be evident from the assessment order, the Assessing Officer is only considering receipt of ₹ 85,33,333/- as mentioned in the TDS certificate. Thus, considering the totality of facts and the circumstances of the case, the addition of ₹ 50,98,000 to the income of the assessee for the impugned assessment year is legally not sustainable and accordingly Decided in favor of Assessee.
Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act. 2. Addition of Rs. 50,98,842 to the income of the assessee based on TDS certificates. Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 147 of the Income Tax Act: The learned authorized representative for the assessee contended that the reopening of the assessment was made after a lapse of four years without any fresh material before the Assessing Officer, merely for reconciliation of gross receipts based on the TDS certificate. It was argued that such a basis does not justify reopening under Section 147. Additionally, it was submitted that no sanction under Section 151(2) was obtained from the prescribed authority, hence vitiating the initiation of proceedings. The representative relied on the decisions in CIT Vs. SPL's Siddhartha Ltd. (345 ITR 223) and Ghanshyam K. Khabrani vs. ACIT (346 ITR 443) to support these contentions. The learned Departmental Representative argued that the assessee had not raised these grounds before the CIT (A) and cannot do so for the first time before the Tribunal. However, the Tribunal, considering the legal nature of these issues, entertained the grounds based on the Supreme Court's decision in National Thermal Power Co. Ltd. Vs. CIT (229 ITR 383). Upon review, the Tribunal found that the reopening of the assessment was solely based on the difference between the gross receipts shown in the TDS certificate and those disclosed in the profit and loss account. There was no fresh tangible material apart from the TDS certificates. Citing the decisions in Mehera Reid & Co. Vs. ITO, 81 DTR (Cal.Trib.) 376 and M/s. Vansu Erectors Private Limited, Hyderabad vs. ITO, Ward-3(2), Hyderabad (ITA No.456/Hyd/2012), the Tribunal held that reopening on such a basis is not sustainable in law. Thus, the assessment order was annulled on this ground. 2. Addition of Rs. 50,98,842 to the Income of the Assessee: The assessee claimed that the differential amount as per the TDS certificate related to reimbursement of expenses incurred on behalf of clients, which were subsequently reimbursed and not income. The assessee provided substantial evidence, including letters from major clients (M/s Wipro, XL Energy Ltd., and M/s Granite Mart Limited) and ledger accounts, confirming the reimbursement of expenses. The Assessing Officer and CIT (A) rejected this claim, arguing that the nature of payment was mentioned as "contracts" in the TDS certificate and the assessee failed to provide documentary evidence for the expenses. The CIT (A) further noted discrepancies in the gross receipts as per the TDS certificate and the information received from clients. The Tribunal, however, found that the revenue authorities did not dispute the nature of the assessee's business as a clearing and forwarding agent, nor the fact that the assessee incurred expenses on behalf of clients, which were reimbursed. The Tribunal noted that the clients confirmed the reimbursement of expenses, and necessary evidence was provided. The CIT (A) was not justified in rejecting the claim without properly examining the explanation and evidence submitted by the assessee. The Tribunal held that merely because tax was deducted at source on reimbursed expenses does not constitute income of the assessee. It relied on the decision in ITO vs. Travels & Shipping (P) Ltd. (ITA No.3595/Mum/2011) to support this view. Therefore, the addition of Rs. 50,98,842 to the income of the assessee was not legally sustainable and was directed to be deleted. Conclusion: The Tribunal allowed the appeal filed by the assessee, setting aside the order of the CIT (A) and directing the deletion of the addition of Rs. 50,98,842. The appeal succeeded both on the legal issue regarding the validity of proceedings under Section 147 and on the merits of the case concerning the addition based on TDS certificates.
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