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2022 (3) TMI 769 - AT - Income TaxReopening of assessment u/s 147 - income in respect of certain items has escaped assessment - eligibility of reasons to believe - HELD THAT - Where the AO during scrutiny assessment, notices a claim of exemption made by assessee and having entertained prima facie doubts raises queries, asks assessee to satisfy him with respect to such a claim and thereafter does not make any addition in final order of assessment, he can be stated to have formed an opinion irrespective of as to whether or not in final order, he gives his reasons for not making addition reopening of such assessment be said to be based on change of opinion. We do not find any valid reason for reopening of assessment particularly when the original assessment was finalized on the basis of evidences produced by the assessee on the same claim made by him as per the dictate of the Revenue. Respectfully relying upon the ratio laid down in GUJARAT POWER CORPORATION LTD VERSUS ASSISTANT COMMISSIONER OF INCOME TAX 2012 (9) TMI 69 - GUJARAT HIGH COURT the same is found to be based on mere change of opinion and, thus, bad in law and liable to be quashed. With the above reasons we, therefore, quash the entire proceeding which is found to be devoid of any merit. Hence, assessee's appeal is allowed.
Issues:
1. Challenge against non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act. 2. Dispute regarding interest income on advances given as interest-free advances. 3. Contention against disallowance under Section 14A of the Income Tax Act. 4. Validity of the assessment made. 5. Charging of interest under section 234-B without proper application of mind. Issue 1: Challenge against non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act: The appeal challenged the confirmation of an amount due to non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act on payments made to laborers on a cash basis. The argument revolved around the legality and factual accuracy of this non-deduction. Issue 2: Dispute regarding interest income on advances given as interest-free advances: The appeal contested the confirmation of interest income on advances given to a party as interest-free advances. The contention was based on the treatment of these advances and whether they should be considered as interest income. Issue 3: Contention against disallowance under Section 14A of the Income Tax Act: The appeal raised concerns regarding the confirmation of an amount under Section 14A of the Income Tax Act against exempted income disclosed in the Profit & Loss account as dividend income. The dispute focused on the disallowance of expenses related to earning exempt income. Issue 4: Validity of the assessment made: The appeal argued that the assessment made was invalid and illegal, seeking it to be quashed. The challenge was based on the legality and procedural correctness of the assessment process. Issue 5: Charging of interest under section 234-B without proper application of mind: The appeal questioned the direction to charge interest under section 234-B without the proper application of mind, deeming it unjustified. This issue centered on the correctness and justification of charging interest under the mentioned section. The judgment analyzed the additional ground of appeal challenging the reopening of the case under Section 147 of the Income Tax Act. The Judicial Member emphasized the importance of deciding the issue at the threshold, considering the root of the matter. The argument presented highlighted the change of opinion regarding the income escaping assessment and relied on relevant case law to support the appeal's position. The judgment also discussed the arguments put forth by both parties regarding the reopening of the assessment. The Accountant Member relied on a judgment supporting the reopening based on a change of opinion. However, the analysis by the Judicial Member concluded that there was no valid reason for the reopening, especially when the original assessment was finalized based on evidence provided by the assessee. Citing the jurisdictional High Court's judgment, the reassessment was deemed to be based on a mere change of opinion and was quashed, leading to the allowance of the assessee's appeal. In conclusion, the judgment pronounced on 10/03/2022 allowed the appeal of the assessee, quashing the entire proceeding due to lack of merit and being based on a change of opinion, thus rendering it bad in law.
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