2022 (8) TMI 382 - AT - Income Tax

Reopening of assessment u/s 147 - Reassessment done on the basis of an audit objection - eligibility of reasons to beieve - HELD THAT - As in the case before us, we find that as stated in the aforesaid reasons to believe , the case of the assessee was reopened not for any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment, but on the basis of an audit objection raised by Internal Audit Party (IAP), Bilaspur.Apart from that, we find that there is no whisper in the reasons to believe that the case of the assessee was being reopened for any failure on its part to disclose fully and truly material facts that were necessary for its assessment for the year under consideration. As the assessment in the case of the assessee which was originally framed by the A.O vide his order passed u/s.143(3), dated 30.12.2010, had thereafter despite there being no failure on its part to disclose fully and truly all material facts necessary for framing of its assessment been reopened u/s.147 on 25.01.2014, i.e, beyond a period of four years from end of the relevant assessment year, therefore, we concur with the AR that the same not being as per mandate of the first proviso to Section 147 of the Act, is thus, not maintainable and is liable to be quashed on the said count itself. We quash the assessment framed by the A.O vide his order passed u/s.143(3)/147 for want of valid assumption of jurisdiction by him. - Decidedin favour of assessee.

Summary

Issues:
1. Validity of jurisdiction assumed by Assessing Officer under Sec.147
2. Disallowance of interest paid to NBFCs u/s.40(a)(ia)
3. Addition made u/s.69C regarding discrepancies in sundry debtors
4. Disallowance of excess remuneration under Sec.40(b)

Issue 1: Validity of jurisdiction assumed by Assessing Officer under Sec.147:
The appeal challenged the jurisdiction assumed by the Assessing Officer (A.O) for reopening the case under Sec.147/143(3) of the Income Tax Act, 1961. The original assessment was done in 2010, and the case was reopened in 2014 based on an audit objection. The appellant contended that full and true disclosure was made, and the reopening was beyond the permissible four-year limit. The A.O's reasons to believe were based on non-compliance with TDS provisions on interest payments to NBFCs. The tribunal observed that the reopening was not valid as no income had escaped assessment due to failure in disclosing material facts, quashing the assessment based on precedents.

Issue 2: Disallowance of interest paid to NBFCs u/s.40(a)(ia):
The A.O disallowed the deduction claimed on interest paid to NBFCs under Sec.40(a)(ia) due to non-compliance with TDS provisions. The CIT(Appeals) upheld this addition, leading to an increase in the assessed income. The tribunal noted the discrepancies in the A.O's reasoning for reopening the case, which influenced the decision on the validity of jurisdiction. Since the assessment was quashed on jurisdictional grounds, the tribunal did not delve into the merits of this disallowance.

Issue 3: Addition made u/s.69C regarding discrepancies in sundry debtors:
The CIT(Appeals) enhanced the income by adding an amount under Sec.69C due to discrepancies in the balance shown as recoverable from a debtor. The tribunal found that the CIT(Appeals) conducted verifications and identified a significant difference in the amounts claimed by the appellant and the debtor. As the appellant failed to reconcile the discrepancy satisfactorily, the CIT(Appeals) exercised powers under Sec.251(1) to enhance the income. However, since the assessment was quashed on jurisdictional grounds, the tribunal did not delve into the merits of this addition.

Issue 4: Disallowance of excess remuneration under Sec.40(b):
The A.O disallowed the excess remuneration paid to partners under Sec.40(b), which was recalculated by the CIT(Appeals leading to a further disallowance. The tribunal noted discrepancies in the A.O's order regarding the reasons for reopening the case, which influenced the decision on jurisdictional validity. As the assessment was quashed on jurisdictional grounds, the tribunal did not address the merits of this disallowance. The appeal was allowed based on the quashing of the assessment for lack of valid jurisdiction.

This comprehensive analysis of the judgment covers all the issues raised in the appeal, detailing the arguments, decisions, and legal reasoning involved in each aspect of the case.