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TMI Blog2017 (10) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... And Pavan Kumar Gadale, Judicial Member For the Assessee : Shri Sachit Jolly, AR For the Revenue : Shri Kunal Singh, CIT DR ORDER Per N.S.Saini, AM These are cross appeals filed by the assessee and the revenue against the common order of the CIT(A)- -II, Bhubaneswar dated 12.12.2013 for the assessment years 2007-08 2008-09. 2. Grounds of appeal taken by the assessee in assessment year 2007- 08 are as under: 1. That on facts and circumstances of the case and in law, the Commissioner of Income tax (Appeals) [ CIT(A) ] erred in confirming the action of the assessing officer ('AO ) in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961 ('the Act') on mere change of opinion and without there being any valid reason to believe that the income has escaped assessment. 1 .1 That on facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the re-assessment proceedings had been initiated on a change of opinion as the original assessment had been completed under Section 143(3) of the Act after detailed scrutiny and no tangible material had come to the knowledge of the AO there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onresident service providers towards selling commission and, therefore, not chargeable to tax India, and thus the appellant was not required to deduct tax at source on such amount. 3. Grounds of appeal taken by the assessee in assessment year 2008- 09 are as under: 1. That on facts and circumstances of the case and in law, the Commissioner of Income tax (Appeals) [ CIT(A) ] erred in confirming the action of the assessing officer ('AO ) in initiating reassessment proceedings under Section 147 of the Income Tax Act, 1961 ('the Act') on mere change of opinion and without there being any valid reason to believe that the income has escaped assessment. 1 .1 That on facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the re-assessment proceedings had been initiated on a change of opinion as the original assessment had been completed under Section 143(3) of the Act after detailed scrutiny and no tangible material had come to the knowledge of the AO thereafter justifying initiation of proceeding under Section 147/148 of the Act. 1.2 That on facts and circumstances of the case and in law, the CIT(A) erred in confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Odisha High Court. 4.1 That in holding as aforesaid, the CIT(A) erred on facts and in law in not appreciating that the liability having crystalized and discharged by the appellant. Section 43B of the Act could not have been invoked. 4. The brief facts of the case are that original assessment u/s.143(3) of the Act was completed on 29.12.2010 for the assessment years 2007- 08 and 2008-09. The Assessing Officer thereafter recorded the following reasons for reopening of assessment for assessment year 2007-08 as under: Later on it is noticed that an amount of ₹ 7697.44 lakh has been paid in foreign currency for import expenditure and charged to P L account for the year ending 31.3.2007 on which no tax was deducted u/s.195(1) of the I.T.Act, thus not to be eligible for deduction in computing the income chargeable under the head Profits and Gains of Business or profession u/s.40(a)(ia) of the I.T.Act, 1961. Since the income of the assessee has escaped assessment to the tune of ₹ 76.77,44,000/- the case of the assessee for the assessment year 2007-08 is reopened u/s.147 of the I.T.Act, 1961. 5. For the assessment year 2008-09, the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional information . It is further contended that deduction under Section 37 of the Income tax Act is claimed by the assessee only with respect to raw material and components utilized during the relevant previous year and even though the sum of ₹ 7697.44 lakhs which appears in the balance sheet of the assessee is not necessarily claimed as deduction. Depending on the requirement, the raw material and spare parts are utilized and the balance is taken to inventory, which is valued at cost or market value, whichever is lower. Hence, the Assessing Officer erred in alleging that income of ₹ 7697.44 has escaped assessment, without appreciating that the aforesaid figure does not form part of the profit and loss account of the assessee for the relevant previous year. 8. Further, it is submitted that remittance made to a non-resident will not necessarily suffer deduction of tax at source under Section 195 of the Income tax Act and failure to withhold will render the payment nondeductible under Section 40(a)(i) of the Act is contrary to the decision of the Hon'ble Supreme Court of India in the case of GE India Technology Centre (P) Ltd. v. CIT: 327 ITR 456 (SC), wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,837/- u/s. 40(a)(i) of the Act for alleged non-deduction of tax at source. 10. It was further submitted that no new material had come to the knowledge of the Assessing Officer after framing of assessment u/s.143(3) of the Act on 25.3.2013 for assessment year 2007-08, which may afford reason to believe which may afford 'reason to believe' that income of the appellant had escaped assessment. It is clearly evident from the reasons recorded that no new tangible information/material came to the knowledge of the assessing officer subsequent to the conclusion of the original assessment. The reasons recorded by the assessing officer do not even indicate or allege that any fresh information came to the knowledge of the assessing officer warranting exercise of jurisdiction under section 147/148 of the Act. 11. He relied on the decision of Full Bench of the Hon ble Delhi High Court in the case of CIT v. Usha International Ltd. 348 ITR 485 (Del), wherein, the Hon ble High Court has held as under: 39. In view of the above observations we must add one caveat. There may be cases where the Assessing Officer does not and may not raise any written query but still the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 13. It was further argued that in the present case, the Assessing Officer having examined the issue of disallowance under Section 40(a)(i) in respect of some of the payments to non-residents and also having made a disallowance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.Act, 1961. Since the income of the assessee has escaped assessment to the tune of ₹ 76.77,44,000/- the case of the assessee for the assessment year 2007-08 is reopened u/s.147 of the I.T.Act, 1961. 16. For the assessment year 2008-09, the Assessing Officer has also recorded following reasons for reopening the assessment: Later on it is noticed that (1) The assessee company has debited ₹ 15,33,71,000/- towards electricity Duty in the P L Account, but has paid to the Government account and no lien account in the ratio 6:14(i.e. 6 parts to the government account of ₹ 4,60,11,000/- and 14 parts to the no lien' account of ₹ 10,73,59,000/-). Since the assessee had disputed the rate at which electricity duty was demanded by the Government of Orissa before the Hon'ble Orissa High Court, a sum of ₹ 10,73,59,000 was deposited in a designated non lien bank account on the direction of electricity duty debited to the P L account. As per the provisions of section 43B, the amount would be allowed as a deduction only when the actual payment is made, notwithstanding the method of accounting followed by the assessee. The deposited made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 18. The opinion of the CIT(A) is that simply because ..... X X X X Extracts X X X X X X X X Extracts X X X X
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