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TMI Blog2013 (8) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... correct such an error, through the process of re¬opening of the assessment - Following decision of Commissioner of Income Tax Vs. Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT OF INDIA] - Decided in favour of assessee. - Special Civil Application No. 1907 of 2013 - - - Dated:- 22-4-2013 - AKIL KURESHI AND SONIA GOKANI , JJ. For the Appellant : Manish J. Shah. For the Respondent : Sudhir M. Mehta. ORDER:- PER : Akil Kureshi Heard learned counsel for the parties for final disposal of the petition. 2. Petitioner has challenged a notice dated 24.8.2012, as at Annexure A to the petition, issued by the respondent -Assessing Officer under Section 148 of the Income Tax Act, 1961 (for short "the Act"). 3. The petition arises in the following factual background: 3.1. The petitioner is a partnership firm. For the Assessment Year 2008 -09 the petitioner filed its return of income on 26.09.2008 declaring total income of Rs.7,22,630/ . Along with return, the petitioner also filed audited accounts, as statutorily required. Such return of the petitioner was taken in scrutiny by the Assessing Officer, who framed scrutiny assessment under Section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort disallowance of expenditure Rs.12,87,37,740 (16,09,22,175 -3,21,84,435) on account of freight payment resulted in under assessment of income of Rs.12,87,37,740/ with consequent short levy of tax of Rs.5,81,98,082/ as shown below. Tax on Rs.12,87,37,740/ Rs.3,86,21,322/ Surcharge @ 10% Rs.38,62,132/ Education Cess/Secondary Higher Ed. Cess @3% Rs.12,74,503/ Total Tax Rs.4,37,57,957/ Int. U/s.234B from 04/08 to 12/10 Rs.1,44,40,125/ Total Tax Interest Rs.5,81,98,082/ ] In view of the above facts, I have reason to believe that Income has escaped assessment up to Rs.12,87,37,740/ . Accordingly, assessment is reopened u/s 147 of the Income tax Act, 1961." 3.5. The petitioner thereupon, under its communication dated 24.01.2013, raised several objections to the re opening of assessment. Such objections were, however, rejected by the respondent, by an order dated 06.02. 2013. Hence, the petition. 4. Learned counsel for the petitioner raised following contentions in support of the prayers; (i) That the entire issue of non- deduction of tax at source on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operly deducted and amount of Rs.3,27,48,509/ being 20% will be disallowed u/s 40(a)(ia) of the IT Act" In the final order of assessment, he devoted several pages to the petitioner's claim of deduction of labour payment charges. In paragraph 4 of the assessment order, he discussed the disallowance on account of non -deduction of TDS on cartage, labour and octroi expenses. In reply to the notice dated 24.11.2010, the assessee made averments as to why disallowance should not be made relying on provisions contained in Section 194 (c) of the Act. He, ultimately, rejected the assessee's contentions and concluded as under: "In view of the above, contention of the assessee has no basis. However to be reasonable, 20% of the total payment i.e. Rs.16,09,22,175/ is disallowed u/s 40(a) (ia) of the IT Act. The disallowance comes to Rs.3,21,84,435." (b) It is this claim, which the Assessing Officer now seeks to re examine by issuance of notice for re opening of the assessment. The reasons recorded by him clearly bring about this aspect. 8. In the reason, he concluded that the Assessing Officer made disallowance at the rate of 20 per cent. However, the entire am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner's contention that it was so done because provision for TDS was not applicable. He was not convinced by such explanation. He, however, for some strange reasons did not apply the provision of Section 40(a)(ia) of the Act instead made ad hoc disallowance of Rs. 25,60,000/ @ 8% of the total labour payment charges. 11.Whatever be the legality of such assessment, fact remains that, in the scrutiny assessment, the Assessing Officer had thoroughly and fully scrutinized the assessee's claim of deduction of labour expenditure. To the extent he was inclined to disallow the same, he did so. By no stretch of imagination it can be stated that the issue was not at large before the Assessing Officer in the original scrutiny assessment. Any reexamination of such a question at this stage would only amount to change of opinion. Remedy of reopening the assessment, therefore, was simply not available. In the decision of the Supreme Court in case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC) the Apex Court observed as under: "On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers. However, once the claim was fully examined, power of reopening was simply not available. 12. Such observations would apply in the present case also. We make it clear that it is not a case where the Assessing Officer, while framing original scrutiny assessment, did not examine the petitioner's claim of deduction. He was acutely conscious of such a claim and was also of the opinion that the entire claim was not required to be granted. He called for explanation of the assessee and after taking into consideration the explanation, made disallowance to the extent he was convinced to do. If, in the process, he made a legal error, the succeeding Assessing Officer cannot correct such an error, through the process of re opening of the assessment. This is precisely, in the present case, what the respondent seeks to achieve. His reasons recorded clearly reflect such a state of affairs. He expresses his opinion that the disallowance which was limited to 20% of the expenditure was not justified in law and the entire expenditure should have been disallowed. We are afraid, this cannot be the basis for re opening of the assessment previously framed after scrutiny. 13. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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