2016 (1) TMI 398 - AT - Income Tax

Reopening of assessment - Non deduction of tds - Held that - As during the original scrutiny assessment proceedings u/s 143(3), the AO had issued detailed questionnaire to the assessee seeking information relating to contract and sub-contract works, supervision fee, legal & professional Services etc and TDS compliance thereon; and the assessee has duly replied the questionnaire and complied with the said notice by submitting information regarding the same and further information sought by the AO thereupon has been found to have been complied with. We further take note that questionnaire of AO dated 27.10.2008 sought information pertaining to the impugned reopening vide question no. 19 and the assessee in response to it had filed reply to it on 26.11.2008 and 03.12.2008 which have also been before the AO during the original assessment. So, it cannot be said that the assessee has failed to disclose any material fact before the AO during the original scrutiny assessment. We further concur with the view of the ld. CIT (A) that there has been no failure which could be attributed to the assessee of not disclosing fully and truly all relevant primary material facts necessary for completion of assessment because in the reasons itself it was mentioned, as per column 27(a) of the Audit Report, it is stated that the assessee has not deducted tax at source in accordance with the provisions of chapter. . This averment in the reasons recorded for reopening is itself copied from the very same audit report of the assessee which was furnished with the original return of income. Thus, we find that the assessee has truly and completely disclosed all material facts relating to all the expenses at the time of scrutiny assessment proceedings itself and the AO, after scrutinizing the details furnished by the assessee in the course of scrutiny assessment, has passed the original assessment order u/s 143 (3) of the Act. Therefore, we concur with the CIT (A) that no new facts were brought on record which can be the basis for reasons to believe that the income of the assessee had escaped assessment and, therefore, the reopening of assessment in the present case had been merely on the basis of change of opinion, which is not permissible in the eyes of law. Therefore, we uphold the view of the ld. CIT (A) that this is not a fit case for reopening of assessment. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income-tax Act, 1961.
2. Failure to disclose material facts necessary for assessment.
3. Change of opinion as a basis for reassessment.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148 of the Income-tax Act, 1961:

The appeal was directed against the order of the Commissioner of Income-tax (Appeals) [CIT (A)] which quashed the reassessment proceedings under Section 147/148 of the Income-tax Act, 1961. The original assessment was completed under Section 143(3) on December 11, 2008. A notice under Section 148 was issued on March 23, 2012, after recording reasons for reopening the assessment. The CIT (A) quashed the reassessment stating that the reopening was merely based on a change of opinion and not on any new facts or tangible material.

2. Failure to Disclose Material Facts Necessary for Assessment:

The CIT (A) observed that during the original assessment proceedings under Section 143(3), the Assessing Officer (AO) had issued a detailed questionnaire to the assessee seeking information relating to contract and sub-contract works, supervision fee, legal & professional services, and TDS compliance. The assessee duly complied with these requests by submitting the required information. The reasons recorded for reopening the assessment were based on the audit report, which was already available during the original assessment. The CIT (A) concluded that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

3. Change of Opinion as a Basis for Reassessment:

The CIT (A) held that the reopening of the assessment was merely based on a change of opinion. It was noted that the AO had already scrutinized the details furnished by the assessee during the original assessment proceedings and had formed an opinion that the appellant had correctly claimed the expenses. The CIT (A) relied on various judicial precedents, including the Supreme Court's judgment in the case of M/s Kelvinator of India Limited, which held that reassessment on the basis of a mere change of opinion is not permissible. The CIT (A) also referred to the proviso to Section 147, which restricts reassessment after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

Conclusion:

The tribunal upheld the order of the CIT (A), concluding that the reassessment proceedings were invalid as they were initiated on the basis of a change of opinion and not due to any failure on the part of the assessee to disclose material facts. The appeal of the revenue was dismissed, and the reassessment proceedings under Section 147/148 were quashed. The tribunal emphasized that the reopening of the assessment was not justified as it was based on the same facts that were already available during the original assessment, and no new material had been brought on record to justify the reassessment.