2018 (3) TMI 800 - HC - Income Tax

Reopening of assessment - addition u/s 40(a)(ia) - change of opinion - Held that - Assessing Officer had issued notice to the assessee as to why these payments should not be disallowed under Section 40(a)(ia) of the Act. The Assessing Officer has not been able to refer to any evidence or material on record to suggest as to what prompted him to form the opinion that there existed violation of the provisions of Section 40(a)(ia) of the Act. In the absence of any material, taking recourse to Section 147 of the Act was unwarranted. The Tribunal while accepting the appeal of the assessee concluded that the conditions required for invoking Section 147 were conspicuously absent. The revenue did not claim to have come in possession of any material to form the basis for the belief that income escaped assessment. It was, thus, held that the case seemed to involve a matter of change of opinion which was not permissible under law. Thus, invoking of jurisdiction under Section 147 of the Act by the Assessing Officer was held to be impermissible and could not be sustained. - Decided in favour of assessee.

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
2. Quashing of assessment under Section 147 of the Act due to non-compliance with Section 40(a)(ia) by the assessee.
3. Jurisdiction under Section 147 of the Act and change of opinion by the Assessing Officer.

Analysis:
1. The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal quashing the assessment for the assessment year 2007-08. The Tribunal held that after four years from the end of the relevant assessment year, no action under Section 147 of the Act could be taken unless there was a failure on the part of the assessee to disclose necessary material facts. The Tribunal concluded that the Assessing Officer's jurisdiction under Section 147 was impermissible, leading to the quashing of the assessment order.

2. The Assessing Officer had made additions to the total income of the assessee under Section 40(a)(ia) of the Act and for differences in gross receipts. The Tribunal found that there was no evidence or material to suggest a violation of Section 40(a)(ia) by the assessee. The Tribunal held that the conditions required for invoking Section 147 of the Act were absent, indicating a case of change of opinion rather than a valid reason for reassessment. The Tribunal quashed the assessment order as the Assessing Officer's action was deemed impermissible under the law.

3. The revenue contended that the Tribunal erred in quashing the assessment based on a change of opinion by the Assessing Officer regarding non-compliance with Section 40(a)(ia) by the assessee. However, the Tribunal found that there was no new material or evidence to support the reassessment under Section 147 of the Act. The Tribunal concluded that the Assessing Officer's actions were unwarranted and impermissible, as they seemed to be based on a change of opinion rather than a valid reason for reassessment. The appeal was dismissed as no substantial question of law arose, and the Tribunal's decision was upheld.

In conclusion, the High Court upheld the Tribunal's decision to quash the assessment under Section 147 of the Income Tax Act, 1961, due to the absence of valid reasons and material for reassessment. The Court found no error in the Tribunal's order and dismissed the appeal by the appellant-revenue.