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TMI Blog2022 (4) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2,61,28,435/- in its Profit and Loss (P&L) Account, which comprised of commission income of Rs. 2,50,58,983/- and interest income of Rs. 10,69,452/-. The amount of TDS as per the statement in Form 26 AS was Rs. 36,13,755/-. The Petitioner had filed Income tax return for a total income of Rs. 9,62,130/-. The petitioner's case was selected for scrutiny under CASS. During scrutiny, the Assessing Officer asked the Petitioner to reconcile 26 AS with gross receipts as per P&L Account. During the hearing of the assessment proceedings held on 12.02.2015, the A.O. raised a specific query with regard to reconciliation of gross receipts as per 26AS and P&L Account. The petitioner submitted replies on 12-02-2015 and 20-02-2015 stating that it is working as C&F agent for a number of companies, which outsource their logistics and distribution operations to it. As part of the services, the petitioner incurs several expenses on behalf of the companies. The agreements are in the nature of a contract and hence TDS should be deducted @2%. However, the nomenclature used for the payments made to the petitioner is Commission and following the nomenclature, some companies deduct TDS @10% under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of the audit objection whereas earlier the A.O. had himself refused to accept the audit objection by means of his letter dated 20-10-2020 addressed to the Additional CIT.The notice under Section 148 was issued in contravention of CBDT Instruction no. 07 of 2017 dated 21-07-2017, through which the CBDT has strictly prohibited the remedial action if audit objection has not been accepted; ii. the reasons recorded are merely based on a change of opinion and no new material has been brought on record.; and iii. the case cannot be reopened for the matters already discussed. 10. On 02.03.2022, the National Faceless Assessment Centre passed an order on the petitioner's objection stating that the petitioner had filed its return of income at Rs. 9,62,130/- whereas in the P&L account it had shown a commission income of Rs. 2,50,58,983/- and interest at Rs. 10,69,452/-, thus a total receipt of Rs. 2,61,28,435/- was there pertaining to TDS of Rs. 36,13,775/-. However, as per 26 AS the total receipts under Sections 194 A, 194 C, 194 H, 194 I and 194 J is Rs. 5,23,84,738/-. Hence there is a difference of Rs. 2,62,56,303/- in the receipts shown by the petitioner. This diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced below: - "147. Income escaping assessment.- If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped 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): ............ Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso." "148. Issue of notice where income has escaped assessment.- (1) Before making the assessment, reassessment or re-computation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior Advocate appearing for the petitioner, has submitted that in the present case there was a discrepancy in 26 AS and Profit & Loss account due to TDS having been deducted on the expenses paid to the petitioner, who is a Carrying and Forwarding agent. The Revenue Audit team had informed that some income had escaped assessment, but the A.O. had rejected the audit objection. However, the Commissioner of Income Tax has ordered reassessment solely on the basis of an audit objection raised by the revenue auditor and there was no other reason for ordering reassessment. He has drawn attention of the Court towards the order dated 12-02-2015 passed by the A.O. during assessment proceedings in which it is recorded that the petitioner's representatives had submitted a reply regarding low income in comparison to large receipts. They were required to file reconciliation of gross receipt as per 26 AS and as per the Profit and Loss account and on 20-02-2015, a reply was submitted stating that the discrepancy in 26 AS and P&L account was because the net margin of profit of the petitioner after taking into account all the expenses, is lower than the tax deducted at source and, therefore, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax - 1, Lucknow granted his approval by recording his satisfaction with the reasons recorded. 21. In reply to the first submission made on behalf of the petitioner, that the A.O. had rejected the audit objection by means of his letter dated 07-02-2020, Sri. Manish Misra has submitted that Clause 5.2 of the CBDT Instructions 07 of 2017 dated 21-07-2017 provides that the PCIT shall, after calling for the report from the A.O. and the Range Head, if needed, take a decision as to whether or not the objection is acceptable. Thus the authority to accept or reject the Revenue audit objection vests in the Commissioner of Income Tax. By means of the letter dated 07-02-2020 the A.O. had merely sent a report to the CIT (Audit) and he did not have the authority to take a decision regarding the audit objection. Therefore, the ground taken by the learned Counsel for the petitioner that the A.O. had not accepted the audit objection in his letter dated 07-02-2020 cannot be accepted. 22. Sri. Misra has submitted that a perusal of the reasons recorded by the A.O. for initiating the reassessment proceedings establishes that the reassessment has not been ordered on the basis of the audit object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reimbursing the expenses, some of its principals are deducting TDS under Section 194 C and some are deducting it under Section 194 H and, therefore, these receipts are not reflecting in its income. However, the petitioner has received payments under Sections 194 I and 194 J also, but it did not show the above receipts and gave no explanation for the same. It did not produce any ledger, bills and vouchers of expenses incurred by it on behalf of the principal companies. Thus the petitioner has not truly and fully disclosed all material facts necessary for the assessment thereby necessitating reassessment under Section 147 of the Act. 26. From the reasons recorded by the A.O. for initiating the process of re-assessment, we find that the A.O. has recorded his reason to believe that the petitioner had received payments under Sections 194 I and 194 J also, but it had not shown the said receipts in his P&L account and had not given any explanation for the same. The petitioner had not disclosed the amount of reimbursement of expenses claimed by it and the actual amount received by it towards reimbursement. It had not submitted the details of expenses incurred by it for verification du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment." 28. In Srikrishna (P) Ltd. v. ITO,(1996) 9 SCC 534, the Hon'ble Supreme Court held that: - "Now, what needs to be emphasised is that the obligation on the assessee to disclose the material facts - or what are called, primary facts - is not a mere disclosure but a disclosure which is full and true. A false disclosure is not a true disclosure. The disclosure must not only be true but must be full - "fully and truly". A false assertion, or statement, of material fact, therefore, attracts the jurisdiction of the Income Tax Officer under Sections 34/147. Take this very case: the Income Tax Officer says that on the basis of investigations and enquiries made during the assessment proceedings relating to the subsequent assessment year, he has come into possession of material, on the basis of which, he has reasons to believe that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he escapement of income is established. It is necessary to keep this distinction in mind. A recent decision of this Court in Phool Chand Bajrang Lal v. ITO, we are gratified to note, adopts an identical view of law and we are in respectful agreement with it. The decision rightly emphasises the obligation of the assessee to disclose all material facts necessary for making his assessment fully and truly. A false disclosure, it is held, does not satisfy the said requirement. We are also in respectful agreement with the following holding in the said decision" (Emphasis supplied) 29. As all material facts relevant for the assessment on the issues under consideration were not produced during the assessment proceedings, the A.O. could not examine the issues and could not form an opinion regarding the same during the original assessment proceedings. 30. The meaning of the expression "change of opinion" has been explained by the Hon'ble Supreme Court in CIT v. Techspan India (P) Ltd., (2018) 6 SCC 685, in the following words: - "16. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The words "change of opinion" im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the reassessment proceedings." (Emphasis supplied) 31. In the present case, at the time of making the assessment originally, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued. To say it more particularly, the A.O. had not formed any opinion regarding (1) receipt of payments by the petitioner under Sections 194 I and 194 J, which had not been shown in its P&L account, (2) non-disclosure of the amount of reimbursement of expenses claimed by it, (3) non-submission of the details of expenses incurred by it for verification during the assessment proceedings and (4) non-production of any ledgers, bills and vouchers of expenses incurred on behalf of the Principal Companies etc. Therefore, it is not a case of "change of opinion" and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. 32. Relying upon a decision of Delhi High Court in United Electrical Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision as to whether there is suppression of material facts by the petitioner or not, as the sufficiency or correctness of the material is not required to be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after recording a reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income amounting to Rs. 2,62,56,303/- has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice under Section 148 of the Act. The notice dated 26-03-2021 issued under Section 148 of the Act as well as all the proceedings undertaken in consequence of the notice, including the order dated 18-02-2022 passed by the National Faceless Assessment Centre rejecting the petitioner's objections against the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction, 36. The Writ Petition lacks merits and is, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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