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2015 (8) TMI 1161 - AT - Income TaxReopening of assessment - AO invoked the provision of section 40(a)(ia) r.w.s. 194C - Held that - From the facts and circumstances of the instant case and respectfully following the judicial precedents 2010 (1) TMI 11 - SUPREME COURT OF INDIA in the impugned subject including that of the Hon ble Supreme Court, Jurisdictional High Court and other High Courts, it is held that the assumption of jurisdiction u/s 147 of the Act by the Learned AO, is based only on change of opinion ; made without any tangible material that constituted new information and hence reopening of the assessment u/s 148 of the Act and consequential reassessment order passed u/s 147 is bad in law and accordingly the reassessment proceedings stand quashed. See CIT vs Kelvinator India Limited (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) - Decided in favour of assessee.
Issues Involved:
1. Assumption of jurisdiction under Section 147 of the Income Tax Act. 2. Disallowance of Rs. 4,76,218 towards transportation charges under Section 40(a)(ia) read with Section 194C of the Income Tax Act. Issue-wise Detailed Analysis: 1. Assumption of Jurisdiction under Section 147 of the Income Tax Act: The primary issue revolves around whether the Assessing Officer (AO) was justified in reopening the assessment under Section 147 of the Income Tax Act. The original assessment for the Assessment Year (A.Y.) 2006-07 was completed under Section 143(3). The AO issued a notice under Section 148 on 12.05.2010 to reopen the assessment, citing that the assessee had claimed transportation charges as deductions without deducting tax at source for payments exceeding Rs. 50,000 per annum to four parties, invoking Section 40(a)(ia) read with Section 194C. The assessee contended that the AO had already thoroughly verified the transportation charges during the original assessment proceedings. The AO had raised queries, and the assessee had provided detailed replies, which were recorded in the order sheet entries. The CIT(A) upheld the AO's decision to reopen the assessment, stating that there was no specific query regarding the transportation charges under Section 40(a)(ia) during the original assessment, and hence, the AO had not formed any opinion on this matter. The Tribunal, however, found that the AO had indeed raised questions about the transportation charges, and the assessee had duly responded. The Tribunal emphasized that there was no new tangible material available to the AO that justified reopening the assessment. The reopening was based on a mere change of opinion, which is not permissible under the law. The Tribunal referenced several judicial precedents, including the Supreme Court's decision in CIT vs Kelvinator India Limited, which held that the concept of "change of opinion" is an inbuilt test to check the abuse of power by the AO. The Tribunal concluded that the reopening of the assessment was illegal and arbitrary as it was based on incorrect facts and without any new information. 2. Disallowance of Rs. 4,76,218 towards Transportation Charges: Given the Tribunal's decision on the jurisdictional issue, the merits of the disallowance of Rs. 4,76,218 towards transportation charges under Section 40(a)(ia) read with Section 194C were rendered moot. The Tribunal refrained from adjudicating on this issue, as the reassessment proceedings themselves were quashed. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment under Section 147 was based on a mere change of opinion without any new tangible material, making the reassessment proceedings invalid. Consequently, the issue of disallowance of transportation charges was not addressed on merits.
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