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2025 (3) TMI 1167 - AT - Income TaxReopening of assessment u/s 147 - AO did not take mandatory permission of PCIT/CIT at the time of issuance of notice under Section 148 - HELD THAT - We observe that the case of assessee falls u/s 151(2) which provides that in case a regular assessment under Section 143(3) has not taken place then notice can be issued with the authority of JCIT after expiry of four years from the end of the relevant assessment years. In the instant case admittedly the return of the assessee was processed u/s 143(1) of the Act and no regular assessment of the assessee was carried out under Section 143(3) of the Act prior to the present proceedings. Accordingly we find no infirmity in the notice issued under Section 148 of the Act and the legal challenge to the issuance of 148 notice raised by the Counsel for the assessee is hereby rejected. Restricted the disallowance to 15% of the cartage expenses - On going through the order passed by CIT(A) for A.Y. 2011-12 and considering the arguments placed by the assessee to the effect that since identical facts are involved for the impugned assessment year as well in the interest of justice the disallowance with respect to cartage expenses paid are hereby directed to be restricted to 15%. Appeal of the assessee is partly allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in the judgment are as follows: 1. The legality of the reopening of the assessment under Section 148 of the Income Tax Act and whether the Assessing Officer (AO) followed the mandatory procedures, including obtaining the necessary permissions. 2. The validity of disallowance of expenses, specifically:
3. Whether the reopening of the assessment was a result of a change of opinion or based on new material evidence. ISSUE-WISE DETAILED ANALYSIS 1. Legality of Reopening the Assessment under Section 148 Relevant Legal Framework and Precedents: The reopening of assessments is governed by Section 147 and 148 of the Income Tax Act. Section 151 stipulates the requirement for obtaining permission from the appropriate authority before issuing a notice under Section 148. Court's Interpretation and Reasoning: The Tribunal examined whether the AO obtained the necessary permission from the Joint Commissioner (JCIT) as required under Section 151(2). It was determined that since the original assessment was processed under Section 143(1), the AO was correct in obtaining permission from the JCIT, thus complying with the legal requirements. Conclusion: The Tribunal found no infirmity in the notice issued under Section 148, rejecting the assessee's legal challenge. 2. Disallowance of Rs. 22,75,000/- for Contractual Payments Relevant Legal Framework and Precedents: The disallowance was made under the premise that the expenses were falsely claimed, referencing the findings from A.Y. 2011-12. Court's Interpretation and Reasoning: The Tribunal noted that the facts for A.Y. 2008-09 were identical to those for A.Y. 2011-12, where the AO had disallowed similar expenses. The Tribunal also considered the past decision of the CIT(A) for A.Y. 2011-12, which restricted the disallowance to 15% of the expenses. Conclusion: The Tribunal directed that the disallowance for A.Y. 2008-09 be similarly restricted to 15% of the expenses, aligning with the precedent set in A.Y. 2011-12. 3. Disallowance of Rs. 4,799/- as Interest Relevant Legal Framework and Precedents: The issue revolves around whether interest payments on TDS, VAT, and Royalty constitute penalties, which are not deductible. Court's Interpretation and Reasoning: The Tribunal did not provide a detailed analysis in the judgment text concerning this specific disallowance, focusing instead on the major disallowances. Conclusion: The judgment text does not specify the Tribunal's conclusion on this issue. 4. Disallowance under Section 40A(3) for Cash Payments Relevant Legal Framework and Precedents: Section 40A(3) disallows cash payments exceeding a specified limit unless covered by exceptions in Rule 6DD. Court's Interpretation and Reasoning: The assessee argued that the payment was made to a government body and should be exempt under Rule 6DD. However, the Tribunal did not elaborate on this issue in the judgment text. Conclusion: The judgment text does not specify the Tribunal's conclusion on this issue. 5. Disallowance under Section 40(a)(ia) for Interest Payments Relevant Legal Framework and Precedents: This section pertains to disallowance of expenses where tax is not deducted at source. Court's Interpretation and Reasoning: The Tribunal did not provide a detailed analysis or conclusion in the judgment text regarding this disallowance. Conclusion: The judgment text does not specify the Tribunal's conclusion on this issue. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reaffirmed the necessity of adhering to statutory requirements for reopening assessments and emphasized consistency in applying disallowance percentages based on precedents. Final Determinations on Each Issue: The Tribunal upheld the reopening of the assessment under Section 148 and directed the disallowance of Rs. 22,75,000/- to be restricted to 15% of the claimed expenses, consistent with the precedent set in A.Y. 2011-12. The appeal was partly allowed, with the Tribunal providing relief to the assessee by reducing the disallowance percentage.
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