9911796707
TMI Blog2017 (6) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... see by holding that reopening of assessment was not valid, beyond four years, when the material facts were duly disclosed by the assessee and the tax deducted at source was deposited in the state exchequer before due date of filing of return. So far as, the deposit of tax deducted at source and invoking section 40(a)(ia) of the Act is concerned, we have made an elaborate discussion in the earlier paras of this order while disposing off the appeal of the for Assessment Year 2005-06 in favour of the assessee by holding that the amendment is retrospective in effect w.e.f. 01/04/2005. The Hon'ble Calcutta High Court in the case of Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] held that the payment of TDS can be deposited in the state exchequer on or before the last date of filing of return u/s 139(1) of the Act for the relevant Assessment Year and the such deduction has to be allowed. No contrary facts were brought to our notice by the Revenue establishing that the deduction has been granted twice to the assessee. Mere claim/allegation is not enough and it has to be substantiated with facts. Therefore we find no infirmity in the conclusion of the Ld. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified. It was contended that though the addition was deleted (on merit) by the Ld. Commissioner of Income Tax (Appeal) still the First Appellate Authority affirmed the reopening made by the Ld. Assessing Officer. 2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is a partnership firm. The assessee is a basically civil contractor, builder/developer, declared income of ₹ 34,96,990/- in its return filed on 31/10/2005, which was processed u/s 143(1) of the Act resulting into refund to the assessee. Subsequently, the case of the assessee was selected for scrutiny, therefore, notice u/s 143(2), issued on 27/10/2006, and was served upon the assessee on 28/10/2006. Thereafter, further notices u/s143(2) and 142(1) along with annexure/questionnaire, calling upon details mentioned therein, were issued and served upon the assessee. In response to the aforesaid notices, the assessee attended the assessment proceeding (as is evident from assessment order dated 31/12/2007), from time to time and furnished the details called for. During hearing, before the Ld. Assessing Officer more details were filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such issue have not been included in the reasons recorded under subsection (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 2.6. If the aforesaid provision of the Act is analyzed, proviso has been added, where an assessment under subsection (3) of section 143 or the section that no action shall be taken under the section after the expiry of four years from the end of the relevant assessment year due to the failure on the part of the assessee or material facts were not fully and truly disclosed which are necessary for making the assessment. In the present appeal, return was filed by the assessee on 31/10/2005, declaring total income of ₹ 34,96,900/- order u/s 143(3) r.w.s. 148 of the Act was made on 01/03/2013 and reopening u/s 147 was made on 31/03/2012, thus, one fact is clearly oozing out that the required notice was issued beyond the limitation period of four years. 2.7. Now, we shall examine whether there is any failure on the part of the assessee in making th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case and in law the learned CIT(A) erred in confirming disallowance of rent of ₹ 2,40,000/- u/s.4O(a)(ia) without appreciating the fact that the TDS of ₹ 36,720 on the above amount had been deducted and deposited on 15.05.2008 i.e. within due date stipulated u/s 200(1). M/s. Selprint The addition being bad in law the same needs to be deleted. 3. a) On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of commission of ₹ 2,00,000/- u/s 4O(a)(ia) without appreciating the fact that the TDS was deducted on 31.03.2008 and deposited on 15.05.2008 i.e. within the due date stipulated under section 200(1). b) Also, without prejudice to the above, the learned CIT(A) erred in ignoring the fact that the commission was already paid to Mr Hardik Kothari during the previous year ended 31 March 2008 and therefore, provisions of section 40(a)(ia) would not apply as section 40(a)(ia) provides for disallowance in relation to the amounts payable and not to amounts already paid during the previous year. The addition being bad in law the same needs to be deleted. 4. On the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such amount computed the same into his income tax return and has paid the due taxes, then such an assessee will not be deemed to be an assessee in default and then no disallowance is attracted under section 40(a)(ia). He has further submitted that the said newly inserted proviso to section 40(a)(ia) is in fact clarificatory in nature and should be applied/retrospectively for the year under consideration and as such no disallowance is attracted on this issue. 4. On the other hand, the Ld. D.R. has contended that it has been specifically provided in the Act that the said proviso comes into operation w.e.f. 01.04.13 and that where the language of the section as well as the date of operation of such provisions has been mentioned specifically the courts cannot supply words to the provisions or amend the provisions to give it a different meaning and further that the newly inserted proviso under such circumstances is prospective in nature i.e. w.e.f. 01.04.13 and cannot be applied retrospectively. 5. The Ld. A.R. of the assessee has brought to our notice that the issue relating to operation of the newly inserted proviso whether prospective or retrospective in nature has already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishing of Form No.26A, we are of the view that since the second proviso to section 40(a)(ia) of the Act is held to be retrospective in operation w.e.f. 1.4.2005, similarly, Form 26A was to be filed for an assessee not to be held as an assessees in default as per proviso to section 201 of the Act. In all fairness, the assessee in the period under consideration i.e. Assessment Year 205-06 could not have contemplated that such a compliance was to be made and therefore in the interest of equity and justice we set aside the order of the learned CIT (Appeals) and remit the matter to the file of the Assessing Officer directing the Assessing Officer to consider the allowance or otherwise of the expenditure claimed amounting to ₹ 4,23,96,500; being the payments made by the assessee to Sri G. Shankar of ₹ 2,69,21,500 and to Sri Ramesh Kotiar, of ₹ 1,54,75,000 after affording the assessee adequate opportunity to file Form No.26A and only after due verification of whether the aforesaid two payees / recipients have reflected the same receipts in their books of account and have M/s. Selprint offered the some to tax. In these circumstances, we hereby set aside the order of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gin Creations (ITA No.302 of 2011) order dated 23/11/2011 on the issue whether section 40(a)(ia) of the Act is having retrospective operation or not, by following the decision in the case of Allied motors and Allom Extrusion Ltd. held that it is retrospective in operation. The ratio laid down in Shri Piyush C. Mehta vs ACIT (ITA No.1321/Mum/ 2009) for Assessment Year 2005-06 order dated 11/04/2012 held that any payment of tax deducted at source during the previous year relevant to and from Assessment Year 2005-06 could be made to the government on or before the due date of filing of return u/s 139(1) of the Act. If the payments are made before filing of return then no disallowance can be made u/s 40(a)(ia) of the Act. Likewise, the Hon'ble Delhi High Court in the case of CIT vs Rajendra Kumar (ITA No.65/2013) order dated 01/07/2013 on a question whether the Tribunal was right in deleting the addition of ₹ 78,51,800/- u/s 40(a)(ia) of the Act, the Hon'ble High Court held as under:- Having heard learned counsel for the parties, we frame the following substantial question of law: Whether the Income Tax Appellate Tribunal was right in deleting addition of ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither at the time of payment or at the time of credit of such sum to the account of the payee, whichever is earlier. It did not make any difference whether the assessee was following cash system or mercantile system. Reference was made to Explanation (c) to Section 194J which stipulates that credit to suspense account or account by any other name in the books of accounts required deduction of TDS. 8. On further appeal by the respondent-assessee, ITAT by their order dated 1st August, 2012 has deleted the said addition relying upon decision dated 23rd November, 2011 of the Calcutta High Court in ITA No. 302/2011 GA No. 3200/2011, Commissioner of Income Tax versus Virgin Creations. In the said decision, it has been held that the proviso to Section 40(a)(ia) of the Act amended by Finance Act, 2010 has retrospective effect. 9. Learned counsel for the appellant submits that the decision of the Calcutta High Court in the case of Virgin Creations (supra) should not be applied and the ratio laid down in the said decision is debatable. Amendments were made to the proviso to Section 40(a)(ia) of the Act by Finance Act, 2010 and these are not retrospective but applicable to and from asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e., well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. And also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs. 13. Section 40(a)(ia) of the Act was introduced with effect from 1st April, 2005 by Finance (No. 2), 2004 Bill. Explaining the rationale behind insertion of the said Section, the Memorandum elucidated:- With a view to augment compliance of TDS provisions, it is proposed to extend the provisions of section 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which such tax has been paid. (emphasis supplied) 15. Section 40(a)(ia) was further amended by Finance Act, 2010 with effect from 1st April, 2010 and the amended provision now reads as under: (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resi-dent, or amounts payable to a contractor or subcontractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not been paid on or before the due date specified in sub-section (1) of Section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in subsection (1) of section 139, such sum shall be allowed as a deducted in computing the income of the previous year in which such tax has been paid. (emphasis supplied) 16. The note on clauses and the memorandum explaining the amendments to Section 40(a)(ia) reproduced in (2010) 321 ITR Statutes 79 reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,221/- on professional charges of ₹ 69,92,700/- in February, 2007. TDS on the said amount which was deducted in the month of February was deposited on 7th March, 2007, within the due date. 18. The aforesaid facts show that the assessee had made payment of ₹ 78,51,800/- in the month of March, 2007 only and not in the month of February, 2007. The assessee has throughout stated and it is not disputed either in the assessment order or in the order passed by the first appellate authority that they were for convenience maintaining a Memorandum relating to pending bills but this Memorandum did not get reflected and was not shown in the annual accounts as sundry creditors or liabilities, which were specifically holds that the account of the payee was credited with ₹ 78,51,800/- or with ₹ 1,48,49,500/-. The first appellate order again does not specifically state so. In such circumstances, we feel a pragmatic and a practical approach has to be adopted. The respondent assessee had deducted tax at source when the payment was made in the month of March, 2007 and thereafter deposited the payment in the month of April, 2007. It is an accepted position that in case tax w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before the due date for filing of the return under Section 139(1) but as per the Revenue under the proviso clause A, TDS should be deducted during the last month of the previous year but paid before the said due date i.e. the date by which TDS is payable under the Act. This interpretation if accepted means that clause A of the proviso and clause A of the main Section would become irreconcilable and mutually contradictory. Clause A of the proviso does not postulate the obvious but seeks to relax the rigor when tax deducted stands paid. This is the reason why the proviso in clause A does not use the expression tax was deductable and was so deducted but uses the expression tax has been deducted during the last month of the previous year . The expression said due date in the clause A to the proviso does not mean and refer to the date on which tax should have been deposited without interest or penalty under Chapter XVII-B. This is obvious. Clause A to the proviso applies when the deduction is post the period specified by law but in the last month of a previous year. In such cases under the proviso clause A, TDS should be paid before the said due date i.e. the date on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by Section 43B were paid on or before the due date for furnishing of the return under Section 139(1), the deduction/expense, equal to the amount paid would be allowed. The Supreme Court noticed the purpose behind the proviso and the remedial nature of the insertion made. Of course, the Supreme Court also referred to Explanation 2 which was inserted by Finance Act, 1989 which was made retrospective and was to take effect from 1st April, 1984. Highlighting the object behind Section 43B, it was observed that the proviso makes the provision workable, gives it a reasonable interpretation. It was elucidated: 12. In the case of Goodyear India Ltd. V. State of Haryana this Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. 13. Therefore, in the well-known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Judha Mal Kuthiala v. CIT, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed where the statutory dues covered by Section 43B stand paid on or before the due date of filing of return of income. Section 40(a)(ia) is applicable to cases where an assessee is required to deduct tax at source and fails to deduct or does not make payment of the TDS before the due date, in such cases, notwithstanding Sections 30 to 38 of the Act, deduction is to be allowed as an expenditure in the year of payment unless a case is covered under the exceptions carved out. The amended proviso as inserted by Finance Act, 2010 states where an assessee has made payment of the TDS on or before the due date of filing of the return under Section 139(1), the sum shall be allowed as an expense in computing the income of the previous year. The two provisions are akin and the provisos to Sections 40(a)(ia) and 43B are to the same effect and for the same purpose. 24. In Podar Cement Private Limited (supra), the Supreme Court considered whether term owner‟ would include unregistered owners who had paid sale consideration and were covered by Section 53A of the Transfer of Property Act. The contention of the assessees was that the amendments made to the definition of term owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure will be allowed in the previous year notwithstanding the main Section. The section as well as the proviso before the amendment in 2010 had ambiguities and doubts. The proviso as amended by Finance Act, 2008 with retrospective effect from 1st April, 2005 was not free from interpretative difficulties and problems. This aspect is highlighted above. The intention behind Section 40(a)(ia) is to ensure that TDS is deducted and paid. The object of introduction of Section 40(a)(ia) is to ensure that TDS provisions are scrupulously implemented without default in order to augment recoveries. It is not to penalise an assessee when payment has been made within the time stated. Failure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due and payable. The provision should be interpreted in a fair, just and equitable manner. It should not be interpreted in a manner which results in injustice and creates tax liabilities when TDS has been deposited/paid and the respondent who is following cash system of accountancy has made actual payment to the third party for services rendered. If the said object and purpose is kept in view, we do not think the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax (Appeal) in affirming the same. We find that the assessee filed the return on 30/10/2005 and the case was, subsequently, on scrutiny assessment, completed u/s 143(3) r.w.s 148 of the Act on 01/03/2013, thus, reopening is beyond a period of four years, more specifically when the material facts were fully and truly disclosed by the assessee. Before adverting further it is noted that the Assessing Officer while disposing off the application made u/s 154 of the Act, due to enhancement of disallowance u/s 40(a)(ia) of the Act, the matter travelled upto the Tribunal, wherein, it was held that while passing order u/s 154 of the Act, no enquiry can be made as no debatable issue dealt with and thus the Tribunal dismissed on same lines. Even otherwise, the assessee vide letter dated 09/11/2012 pointed out that 154 notice, issued earlier was still alive and proceedings initiated u/s 148 was bad in law. In the aforesaid order, we find that no disallowance was held to be justified u/s 40(a)(ia) of the Act as the assessee had already deposited the TDS before the due date of filing of return u/s 139(1) of the Act, therefore, we find no justification to reopen the assessment b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined to determine whether the stand of the Revenue is correct. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject-matter, entry, claim, deduction, etc. When the Assessing Officer fails to examine a subjectmatter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. Whether or not the Assessing Officer had applied his mind and examined the subject-matter, claim, etc., depends upon factual matrix of each case. The Assessing Officer can examine a claim or subject-matter even without raising a written query. There can be cases where an aspect or question is too apparent or obvious to hold that the Assessing-Officer did not examine a particular subject-matter, claim, etc. The stand and stance of the assessee and the Assessing Officer in such cases are relevant. 2.12. Section 114 of the Evidence Act, 1872, is permissive and not a mandatory provision. Nine situations by way of illustrations are stated, which are by way of example or guidelines. As a permissive provision it enables to judge to support his judgment but there is no scope of presumption when facts are known. Presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 34, 35) Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) (para 17) 3i Infotech Ltd. v. Asst. CIT [2010] 329 ITR 257 (Bom) (para 26) International Woollen Mills v. Standard Wool (U. K.) Ltd. [2001] 5 SCC 265 (para 30) Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) (paras 9, 33, 34, 35) KLM Royal Dutch Airlines v. Asst. Director of I. T. [2007] 292 ITR 49 (Delhi) (para 12) Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) (para 31) Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) (para 34) Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 (Ker) (para 9) New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi) (para 18) Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21) Snowcem India Ltd. v. Deputy CIT [2009] 313 ITR 170 (Bom) (para 31) Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58) Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29) Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20) United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker) (para 9) 2.13. For reopening an assessment made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applies his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. 2.16. The Hon ble Delhi High Court in Consolidated Photo and Finvest Ltd. [2006] 281 ITR 394 (Delhi) held as under: In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion. 2.18. From the foregoing discussion, the clear position emerges as under: (1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of change of opinion . (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) are two such cases, which throws light on the issue. In the first case, the Assessing Officer in the original assessment had made addition of ₹ 19,86,551 under section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details, etc., were not furnished, were to the extent of ₹ 52,84,058 and not ₹ 19,86,551. In Indian Hume Pipe Co. Ltd. (supra), after verification the claim under section 54EC was allowed but subsequently on examination it transpired that the second property was purchased prior to the date of sale. The aforesaid decisions/ facts cases must be distinguished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did not appreciate the implications or did not apply the correct law. The second category will be a case of change of opinion and cannot be reopened for the reason that the assessee, as required, has placed on record primary factual material but on the basis of legal understanding, the Assessing Officer has taken a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have taken a view, which would run counter to the mandate of the said circular. From a perusal of clause 7.2 of the said circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view to allay the fears that the omission of the expression 'reason to believe' from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment. 2.21. Another aspect of the matter also cannot be lost sight of. A statute conferring an arbitrary power may be held to be ultra virus article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality, it is trite, should be favoured. In the event it is held that by reason of section 147 if the Income-tax Officer exercises its jurisdiction for initiating proceeding for re-assessment only upon mere change of opinion, the same may be held to be unconstitutional. We are, therefore, of the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law. 2.22. In A. L. A. Firm (supra), the Hon ble Apex Court explained that there was no difference between the observations of the Supreme Court in Kalyanji Maviji [1976] 102 ITR 287 (SC) and Indian and Eastern Newspaper Society case [1979] 119 ITR 996 (SC), as far as proposition (4) is concerned. It was held that (page 297 of 189 ITR) : We have pointed out earlier that Kalyanji Maviji's case [1976] 102 ITR 287 (SC) outlines four situations in which action under section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has only indicated that propo sition (2) outlined in this case and extracted earlier may have been somewhat widely stated ; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Maviji's case [1976] 102 ITR 287 (SC). Proposition (2) may be briefly summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC), it also ropes in cases of a 'bare or mere change of opinion' where the Income-tax Officer (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor Income- tax Officer) was, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 (SC) that the amended provisions are wider. What is important and relevant is that the principle of change of opinion was equally applicable under the un-amended provisions. The Supreme Court was, therefore, conscious of the said principle, when the observations mentioned above in A. L. A. Firm [1991] 189 ITR 285 were made. 2.24. Under the new provisions of section 147, an assessment can be reopened if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment; but if he wants to do so after a period of four years from the end of the assessment year, he can do so only if the assessee has fallen short of his duty to disclose fully and truly all material facts necessary for his assessment. It does not follow that he cannot reopen the assessment even within the period of four years as aforesaid if he has reason to believe that the assessee has failed to make the requisite disclosure. All that the section says is that in a case where the assessment is sought to be reopened after the period of four years, the only reason available to the Assessing Officer is the non-disclosure of material facts on the part of the assessee. The Act places a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT (2012) 346 ITR 254 (Guj.), h. Ms. Praveen P. Bharucha vs DCIT (2012) 348 ITR 325 (Bom.), i. CIT vs Usha International Ltd. 348 ITR 485 (Del.), j. Agricultural Produce Market Committee vs ITO (2013) 355 ITR 348 (Guj.), k. B.B.C. World News Ltd. vs Asst. DIT (2014) 362 ITR 577 (Del.). 2.25. Identical ratio was laid down in CIT vs Malayala Manorma Company Ltd. (2002) 253 ITR 378 (Ker.) We think this thread runs through the various provisions of the Act. But Explanation 1 to the section confines the duty to the disclosure of all primary and material facts necessary for the assessment, fully and truly. As to what are material or primary facts would depend upon the facts and circumstances of each case and no universal formula may be attempted. The legal or factual inferences from those primary or material facts are for the Assessing Officer to draw in order to complete the assessment and it is not for the assessee to advise him, for obvious reasons. The Explanation, however, cautions the assessee that he cannot remain smug with the belief that since he has produced the books of account before the Assessing Officer from which material or evidence could have been with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment is not permissible. As was held in CIT vs TTK Prestige ltd. (2010) 322 ITR 390 (Karn.) SLP dismissed in 2010 322 ITR (St.) 14 (SC). Reference also made to Asian Paints ltd. vs DCIT (2009) 308 ITR 195 (Bom.), Andhra Bank Ltd. vs CIT (1997) 225 ITR 447 (SC). The observations of the Supreme Court are a protection against the abuse of power; they also protect the Revenue which can, in the light of subsequent coming into light of facts or law, reopen the assessment. In the light of the aforesaid discussion, since, there was no new tangible material available with the Assessing Officer while resorting to section 147/148 of the Act, more specifically, while framing original assessment u/s 143(3) of the Act, there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act. Even otherwise, it is noted by the ld. Assessing Officer issued statutory notices u/s 143(2) and 142(1) to which the assessee furnished the necessary details as is evident from page-1 of the assessment order itself, therefore, in our humble opinion, the reassessment is unjustified as the reopening was done by the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctronically admitting income to a particular extent. In the replies, the petitioners also sought the reason for issuance of the notice. 5. Thereafter, the Assessing Officers sent a rejoinder indicating the reasons for reopening. Except the figures indicated therein, the reasons stated in all the notices were identical and hence the reasons stated in respect of one case alone is extracted as follows as a model: It is observed that your gross receipt was ₹ 2,28,48,838/- for the AY 2013-14 and you have admitted total income amounting to ₹ 4,16,840/- which is 2.10% of your total receipt, and the income admitted is also very less compared to others who are in the same line of business. 6. The petitioners filed objections to the reasons indicated by the Assessing Officers contending that the cases would not fall under Section 147(1), as everything turned upon presumptions and surmises without any factual basis. The objections were rejected by the Assessing Officers by the orders impugned in these writ petitions forcing the petitioners to come up with the above writ petitions. 7. The orders rejecting the objections, are also identically worded and hence the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions. Admittedly, the notices under Section 148 was issued on the sole ground that the total income admitted by each of these petitioners, constituted a very small percentage of their gross receipts for the relevant assessment year and that therefore there was income that escaped assessment. The Assessing Officers had drawn presumably a comparison to others in the same line of business, as indicated in the reason for reopening. 9. But the reasons for reopening owefully fall short of the reasons that could form the basis for reopening of assessments. There is no indication in the reasons as to who are the assessees with whom any comparison was made. If the Assessing Officers had compared the gross receipts of yet another assessee in the same line of business and pointed out as to how the income returned by such assessee was at a consistently higher rate of the total receipts, the petitioners could have been in a position to point out how the admitted total income in their cases fell for short. Without making an actual comparison with named assessees in the same line of business, the Assessing Officers cannot leave it to presumptions and surmises. 10. The learned Standing C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees are attempted by the Assessing Officers to be brought within the category of understatement of income , so as to invoke Clause (b) under Explanation 2. 13. But to come to the conclusion that there was understatement of income, it is not sufficient for the Assessing Officers to just arrive at the percentage of gross receipts that were declared as income, without even referring to other assessees whose admitted income was at a better percentage of the gross receipts than the petitioners. Therefore, the invocation of the jurisdiction under Section 147 on the basis of suspicions and presumptions cannot be sustained. Therefore, the writ petitions are allowed. The miscellaneous petitions, if any, pending in these writ petitions shall stand closed. No costs. In the aforesaid order, the Hon'ble High Court has observed/held that though Explanation 2 of s. 147 authorizes the Assessing Officer to reopen an assessment wherever there is an understatement of income , the AO is not entitled to assume that there is understatement of income merely because the assessee's income is shockingly low and others in the same line of business are returning a higher income. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 865/Mum/2014). The Department had raised additional ground as under:- On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) is not justified as the assessee has been allowed relief of ₹ 3,97,76,005/- in Assessment Year 2006-07 on account of disallowance made u/s 40(a)(ia) of the Act in Assessment Year 2005-06, resultantly, the deduction has been allowed twice. 3.1. In the original ground, the Revenue has challenged the order of the Ld. Commissioner of Income Tax (Appeal), wherein, it was held that no disallowance is called for u/s 40(a)(ia) of the Act, thereby, deleting the addition of ₹ 5,30,91,745/-, made by Assessing Officer, without appreciating the fact that the amendment to section 40(a)(ia) and its first proviso by the Finance Act, 2010 w.e.f. 01/04/2010. 3.2. The crux of the argument advanced by Ld. DR is that the assessee deducted tax at source and did not paid in time, therefore, wrongly followed the decision of Hon'ble Calcutta High Court in Virgin Creation (supra). On the other hand, the ld. counsel for the assessee explained that the tax was deducted at source and was deposited before fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
