2020 (10) TMI 608 - AT - Income Tax

Reopening of assessment u/s 147 - TDS u/s 194C - Disallowance u/s 40 (a)(ia) on labour charges - Notice beyond 4 years - HELD THAT - In the case of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT held that after substitution of section 147 by the Direct Tax Laws (Amendment) Act, 1987, concept of change of opinion must be treated as an in-built test to check abuse of power by Assessing Officer and therefore, after 01.04.1989, AO has power to reopen, provided there is tangible material to come to conclusion that there is escapement of income from assessment ; reasons must have a live link with formation of belief. In Foramer France 2003 (1) TMI 101 - SC ORDER observing that the law prevailing on date of issue of impugned notice would apply to instant case, and since new section 147 had come into force w.e.f. 01.04.1989, provisions of that section were applicable, held that since admittedly there was no failure on the part of the petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to section, which bars issue of notice u/s 148 after expiry of 4 years from end of relevant assessment year, squarely applied to facts of instant case and therefore, impugned notice was barred by limitation. In the instant case, the AO has issued the notice u/s 148 beyond 4 years from the relevant assessment year. We are of the considered view that the AO has reopened the assessment on the basis of a mere change of opinion and therefore, the same cannot be sustained. Therefore, we uphold the order of the Ld. CIT(A) - Appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act.
2. Disallowance under section 40(a)(ia) of the Act.

Issue 1: Validity of reassessment proceedings under section 147 of the Income Tax Act:

The appeal by the Revenue contested the order of the Commissioner of Income Tax (Appeals) regarding the validity of reassessment proceedings under section 147 of the Income Tax Act for the assessment year 2008-09. The Revenue argued that the reassessment proceedings were valid as there was a reason to believe that income chargeable to tax had escaped assessment. The Revenue contended that the original assessment order did not reflect any opinion formed by the Assessing Officer. However, the Tribunal found that the reopening of the assessment was based on a change of opinion by the Assessing Officer, which is impermissible under the law. The Tribunal referred to various judicial precedents to support its decision, emphasizing that the reassessment was not valid due to a mere change of opinion by the Assessing Officer.

Issue 2: Disallowance under section 40(a)(ia) of the Act:

The dispute also revolved around the disallowance under section 40(a)(ia) of the Act related to labour charges where no TDS was deducted as per section 194C. The Assessing Officer disallowed the amount of the labour charges, leading to an appeal by the assessee before the Commissioner of Income Tax (Appeals). The Commissioner, relying on judicial decisions, concluded that the reassessment was invalid due to a change in opinion by the Assessing Officer. The Commissioner noted that the Assessing Officer had accepted the details provided by the assessee during the original assessment proceedings and had not made any adjustment to the total income. Therefore, the disallowance under section 40(a)(ia) was not upheld, and the reassessment proceedings were dropped.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the Commissioner of Income Tax (Appeals) regarding the invalidity of the reassessment proceedings under section 147 of the Income Tax Act and the disallowance under section 40(a)(ia) of the Act. The Tribunal emphasized the importance of tangible material and the prohibition against reassessment based solely on a change of opinion by the Assessing Officer.