2016 (8) TMI 160 - HC - Income Tax

TDS liability u/s 194C - payments on account of Civil and grass cutting, construction and maintenance and for painting job work - Held that - Exchange of information between the assessee and the Assessing Officer though may not have direct bearing on the requirement of deducting tax at source in relation to such expenditure, undisputedly, these expenditures came pointedly under scrutiny of the Assessing Officer in connection with genuineness thereof. The fact that the Assessing Officer in his order of assessment dated 29.12.2008 made certain adhoc disallowances of ₹ 1,50,000/- towards such expenditure would only emphasize this aspect. Thus all the expenditures to which the Assessing Officer now wishes to attach the requirement of deduction of tax at source, were not only part of the original returns filed by the assessee, came up for minute examination by the Assessing Officer in the context of justification and genuineness of claim. Reopening beyond a period of four years on this sole ground, therefore, was not permissible. Additionally, we also notice that para4 of the Assessing Officer s letter dated 26.9.2008 require the assessee to supply copy of ledger account of tax deducted from various payments made to subcontractor, job work charges, transportation, etc. In response to such inquiry of the Assessing Officer, the assessee conveyed that during the year under consideration, no tax had been deducted at source. In short, the case of the assessee was that no such tax was required to be deducted. If the Assessing Officer wanted to contest this contention of the assessee, it was open for him to do so during the original assessment proceedings. Having dropped this line of disallowance in the order of assessment by accepting the assessee s return, any attempt on his part now to reexamine the question shall be based on change of opinion.

Summary

Issues Involved:
Challenge to the notice for reopening the assessment for the assessment year 2006-2007 based on failure to disclose material facts and disallowance of expenses without deduction of tax at source.

Analysis:

Issue 1: Challenge to the Notice for Reopening
The petitioner challenged a notice dated 29.3.2012 issued by the Assessing Officer to reopen the assessment for the assessment year 2006-2007. The petitioner contended that there was no failure on their part to disclose all material facts, rendering the notice unauthorized. The petitioner also argued that the issue of tax deduction at source was already examined during the original scrutiny assessment and should not be revisited in reassessment. Furthermore, the petitioner claimed that there was no tangible material for the Assessing Officer to believe that taxable income had escaped assessment.

Issue 2: Failure to Deduct Tax at Source
The Assessing Officer issued the impugned notice due to the petitioner's failure to deduct tax at source on payments made to various parties, totaling &8377;1.19,72,036. The notice was based on Section 40(a)(ia) of the Income Tax Act. However, the High Court noted that the payments in question were part of the original assessment record and were discussed during the initial assessment. The Assessing Officer had requested details of these payments during the original assessment, and the petitioner had provided the necessary information. The Court observed that the Assessing Officer had already made ad hoc disallowances towards these expenses in the original assessment, indicating that the expenses were scrutinized for genuineness.

Conclusion:
The High Court held that since the payments subject to tax deduction at source were part of the original assessment record and were examined during the initial assessment, reopening the assessment beyond four years solely on this ground was impermissible. Additionally, the Court noted that the petitioner had clarified during the original assessment that no tax was deducted at source, which was accepted by the Assessing Officer at that time. Therefore, any attempt to revisit this issue in reassessment would amount to a change of opinion. Consequently, the petition was allowed, the notice dated 29.3.2012 was set aside, and the petition was disposed of.