2015 (11) TMI 531 - AT - Income Tax

Reopening of assessment - non deducted TDS on discount payments u/s 194H - Held that - The formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. Further the intimation sent by the Department u/s.143(1) of the Act cannot be treated to be an assessment order and he is within power conferred u/s.147 to issue notice u/s.148 of the Act. Further failure to take steps u/s.143(3) will not render the AO powerless to initiate reassessment proceedings u/s.147 r.w.sec.148 of the Act though the intimation was sent u/s.143(1) of the Act. In our opinion the AO is justified in reopening the assessment in this case. For the discount offered to the parties liable to be deducted TDS u/s.194H of the Act as held by the Tribunal in the case of M/s. Vodafone Essar Cellular Ltd. (2011 (4) TMI 882 - ITAT Chennai ). However in view of the order of the Special Bench of the Tribunal in the case of Merylin Shipping & Transport vs. Addl. CIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) if the discount is already offered to the parties and it is not an outstanding entry in the books of account of the assessee then the claim of the assessee cannot be disallowed on account of non-deduction of TDS. Accordingly on merit we remit this issue to the file of the AO for fresh consideration in the light of the above order of the Special Bench.

Summary

Issues Involved:
1. Reopening of assessment.
2. Disallowance of discount claimed due to non-deduction of TDS under Section 194H.

Issue-Wise Detailed Analysis:

1. Reopening of Assessment:
The Revenue raised the issue regarding the reopening of the assessment for the Assessment Year (AY) 2007-08. The assessee, engaged in the business of air travel ticket booking, had filed her return of income on 31.10.2007, which was processed under Section 143(1) of the Income Tax Act on 20.02.2009. The Assessing Officer (AO) issued a notice under Section 148 on 23.02.2012 to reopen the assessment. The reason for reopening was that the assessee had claimed a discount of Rs. 52,03,410/- without deducting TDS under Section 194H. The CIT(Appeals) observed that the reopening was bad in law, referencing the Supreme Court's judgment in CIT vs. Kelvinator of India Ltd. (320 ITR 561), as there was no tangible fresh material to justify reopening. However, the Tribunal held that the AO had relevant material to form a belief that income had escaped assessment, thus justifying the reopening. The Tribunal cited the Supreme Court's decision in ACIT v. Rajesh Jhaveri Stock Broker Pvt. Ltd. (291 ITR 500) to support the reopening. Consequently, this issue was decided in favor of the Revenue.

2. Disallowance of Discount Claimed Due to Non-Deduction of TDS:
The AO disallowed Rs. 52,03,410/- claimed as a discount due to non-deduction of TDS under Section 194H, treating it as commission. The assessee argued that the discount allowed to customers did not require TDS deduction under Section 194H, as it was not commission but a rebate in the invoice. The CIT(Appeals) supported the assessee's view, referencing the Supreme Court's decision in the case of Ahmedabad Stamp Vendor Association, which held that discounts allowed are not commissions and thus not subject to TDS under Section 194H. The Tribunal, however, referenced the decision in M/s. Vodafone Essar Cellular Ltd., where it was held that discounts given to distributors are akin to commission and thus subject to TDS under Section 194H. The Tribunal remitted the issue back to the AO for fresh consideration, particularly in light of the Special Bench decision in Merylin Shipping & Transport vs. Addl. CIT, which stated that if the discount is not an outstanding entry in the books, it cannot be disallowed for non-deduction of TDS.

Conclusion:
The appeal of the Revenue was allowed, and the reopening of the assessment was upheld. The issue of disallowance of the discount claimed was remitted back to the AO for fresh consideration. The cross-objection filed by the assessee was dismissed as infructuous.