2018 (9) TMI 110 - HC - Income Tax

Reopening of assessment - employee s contributions of provident fund - Time period for filing an annual return under Section 139(1) - Held that - In the facts of present case, the employee s portion of the provident fund was paid on August 8, 2006. It was paid within the due date for filing the annual return for the financial years. Therefore, the petitioner was entitled to the deductions as claimed before the assessing officer. In the facts of the present case, the assessing officer had a tax audit report which disclosed the deductions claimed by the petitioner. It had shown, in the tax audit report that, the employee s contributions of provident fund for the month of June 2006 was paid in the month of August 2006. Since the payment was made within the time period for filing an annual return under Section 139(1) of the Act of 1961, it cannot be said that there was any delay on the part of the petitioner to claim the deduction. Moreover, there was no new material before the assessing officer to form an opinion under Section 147 of the Act of 1961. - Decided in favour of assessee

Issues involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for initiating proceedings under Section 147 for assessment year 2007-2008.
2. Interpretation of Section 43(B) of the Income Tax Act, 1961 regarding the due date for depositing the employees' portion of the Provident Fund.
3. Jurisdictional facts required for invoking Section 147 of the Act of 1961.
4. Compliance with statutory provisions for claiming deductions.
5. Requirement of tangible material for invoking Section 147 of the Act of 1961.

Issue 1: Validity of Notice under Section 148:
The petitioner challenged a notice issued under Section 148 for initiating proceedings under Section 147 for the assessment year 2007-2008. The petitioner argued that the reasons provided for invoking Section 147 were not valid as they pertained to a review of the assessment order, which is impermissible under the Act. The assessing officer's change of views without new material was also contested. The petitioner contended that the notice lacked jurisdictional facts required for invoking Section 147, citing relevant case laws to support their argument.

Issue 2: Interpretation of Section 43(B) - Due Date for Provident Fund Deposit:
The dispute revolved around the interpretation of Section 43(B) concerning the due date for depositing the employees' portion of the Provident Fund. The petitioner claimed that the payment made within the time limit for filing the Income Tax Return entitled them to claim deductions under Section 43(B). The assessing officer's contention that the delay in payment disentitled the petitioner from claiming deductions was challenged, citing relevant case laws supporting the petitioner's interpretation.

Issue 3: Jurisdictional Facts for invoking Section 147:
The petitioner argued that the assessing officer lacked the necessary jurisdictional facts to invoke Section 147. It was contended that the assessing officer did not have new material to suggest income escapement and that the objections raised by the petitioner were disposed of without addressing the alleged default under Section 43(B). The petitioner emphasized the importance of tangible material for invoking Section 147, referencing case laws to support their stance.

Issue 4: Compliance with Statutory Provisions:
The petitioner, a partnership firm, complied with statutory provisions by filing returns, providing audited accounts, and tax audit reports. The petitioner claimed to have deposited the Employees' Provident Fund within the due date as per relevant provisions of the Act. The assessing officer's alleged oversight of this aspect in the assessment order was highlighted by the petitioner to support their compliance with statutory provisions.

Issue 5: Requirement of Tangible Material for invoking Section 147:
The judgment emphasized the necessity of tangible material for invoking Section 147 post-April 1, 1989. It was held that the assessing officer must have a live link between the reasons provided and the belief of income escapement. In this case, the assessing officer's reliance on the tax audit report, which disclosed the deductions claimed by the petitioner, was considered sufficient. The absence of new material to form an opinion under Section 147 further supported the quashing of the impugned notice.

In conclusion, the High Court of Calcutta quashed the impugned notice dated April 20, 2011, and all proceedings initiated thereunder were also quashed. The judgment provided a detailed analysis of the issues involved, emphasizing compliance with statutory provisions, interpretation of relevant sections of the Income Tax Act, and the requirement of tangible material for invoking Section 147.

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