TMI Blog2020 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ch payment. In such a situation, there can be no disallowance under Section 40 (a) (ia) in the hands of the Assessee. This ignorance cannot escape our judicial notice, as the assessment is sought to be reopened after a period of four years from the end of the relevant assessment year. The notice does not state that the EDC charges collected by HUDA have not been subjected to tax as income in the hands of HUDA. This also shows non-application of mind that warrants our interference. - Decided in favour of assessee. - W.P.(C) 13803/2018, and W.P.(C) 13812/2018 - - - Dated:- 28-11-2019 - MR. VIPIN SANGHI AND MR. SANJEEV NARULA JJ. Petitioner Through: Mr. Piyush Kaushik, Advocate. Respondents Through: Ms. Vibhooti Malhotra, Senior Standing Counsel with Mr. Shailendera Singh, Advocate. SANJEEV NARULA, J. (Oral): 1. The above noted writ petitions under Article 226 of the Constitution of India are directed against the respective notices dated 02.11.2018 issued under Section 148 of the Income Tax Act for reopening of assessment for assessment years (hereinafter AY ) 2012-13 [WPC No. 13812/2018] and AY 2013-14 [WPC No. 13803/2018] and all co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 148 of the Act for re-opening of the assessment for AY 2012-13. In response thereto, Assessee filed its return in accordance with the ROI filed initially. On 30.11.2018, the AO provided reasons for re-opening dated 05.07.2018 along with the satisfaction note. Since, it did not record the satisfaction of the concerned authorities i.e. Joint Commissioner of Income Tax and Principal Commissioner of Income Tax, it was replaced with fresh reasons recorded on 21.08.2018 and accompanying satisfaction note. The reasons for re-opening the assessment are primarily premised on the ground that the EDC as paid to Haryana Urban Development Authority (HUDA) were subject to TDS under Section 194 of the Act and in absence of TDS, amount would be subject to disallowance under Section 40(a)(ia) of the Act and as a result, income has escaped assessment. 7. On 04.12.2018, Assessee filed detailed objections before the AO inter alia stating that there has been no failure on its part to deduct TDS, since EDC charges are in the nature of statutory levy/ licence fee that are compulsorily required to be paid to HUDA for the purpose of land development and not require deduction of tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d compulsory levy, being a licence fee required to be paid to HUDA for the purposes of land development and is not subject to TDS under any provision of Income Tax Act much less Section 194, invoked by the AO. 12. He further argued that the incurring of EDC charges was disclosed as a part of inventory evaluation and cost in the audited accounts and was subjected to scrutiny assessment under Section 143(3) of the Act. Voluminous details with respect to TDS deduction and deposits were furnished during the course of original assessment proceedings under Section 143(3) of the Act and thus the assumption of jurisdiction after 4 years is wholly unsustainable, as it is founded on a change of opinion. 13. Ms. Vibhooti Malhotra and Mr. Shailendra Singh, learned senior standing counsels for the Revenue, on the other hand, have vehemently opposed the petition and have argued that the Court should not exercise its jurisdiction under Article 226 of the Constitution of India at the stage of initiation of action under Section 147 of the Act. It is argued that at this preliminary stage, only question that is relevant is whether there is any relevant material which is sufficient f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. Subsequently, it came to notice that EDC (External Development Charges) were paid to HUDA by the assessee without TDS. EDC is received for use of urban development infrastructure known as EDW (External Development Work) done by HUDA on its own land. Since, EDC has income character, therefore, it should have been subjected to TDS by assesse. The provisions of non-deduction of tax u/ s 196 of the Income Tax Act, 1961 is applicable to the Government and to other authorities mentioned under the Section. Haryana Urban Development Authority (HUDA) is a development authority of State Government of Haryana and is a taxable entity under the Income Tax Act, 1961. The assesse has made the payments in the nature External Development Charges (EDC) to the HUDA and not to the Government. Hence, TDS provisions would be applicable on EDC payable by the assesse to HUDA. 2. Brief details of information collected/received by the AO In case of assessee an enquiry was conducted by ADIT, Unit-IV, New Delhi and summons were issued on 29.07.2016 directing assesse to file details of EDC charges collected from customers and paid to the HUDA. In response, vide letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(ia) of the Income Tax Act,1961 for the assessment year under consideration relevant to F.Y. 2011-12. 7. Escapement of income chargable to tax in relation to any assets including financial interest in any entity located outside India. NA 8. Findings of AO on true and full disclosure of the materials facts necessary for assessment under proviso to section 147. The assessee had failed to disclose fully and truly all material facts including non-deduction of TDS on the amount paid to the HUDA during the F.Y. 2011 12 which were necessary for correct assessment of its income. 9. Applicability of the provisions of section 147I151 to the facts of the case: In this case a return of income was filed for the year under consideration and assessment order u/ s 143(3) of the I. T. Act, 1961 was passed on 30/03/2015 and total income of the assessee was assessed at ₹ 157,73,04,000/- Since 4 years from the end of the relevant year have expired in this case, the requirements to initiate proceedings u/s 147 of the Act are reason to believe that income for the year Linder consideration has escaped ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided any proof that TDS has been deducted on the EDC charges. This is more than enough for reason to believe that income have escaped assessment for the year under consideration. 4. You your self is saying that HUDA was created somewhere in 1977. Since then HUDA is filing Income Tax Return and various entities are deducting TDS. Same can be verified from website of HUDA. It clearly shows HUDA was not created under an Act of Central Government . Your objection to re-open of assessment vide notice u/s 148 of the Act for A.Y. 2012-13 is not found satisfactory and same is rejected and disposed of accordingly. Yours faithfully (Sd/-) Kailash V Gautam 18. With respect to both the years in question, the notice under Section 147/148 has been issued after a period of four years from the end of the relevant assessment years. Thus, the case would be covered by the first proviso to Section 147 of the Act which requires the satisfaction of other pre-conditions for assuming jurisdiction to reopen the case viz (i) the income chargeable to tax has escaped assessment by reason of a failure on the part of the Assessee to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned is that the AO should have reason to believe that the income of the Assessee has escaped assessment. However the proviso to Section 147(1) as amended kicks in where the reopening is sought to be done after four years after the end of the relevant assessment year for which the original assessment was made. This brings in the requirement of the AO satisfying himself of the existence of either jurisdictional fact. The escapement of income should be occasioned 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 subsection(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. [Emphasis Supplied] 21. In Commissioner of Income Tax-III v. Suren International Pvt. Ltd., 2013 SCC OnLine Del 1832 : ILR (2013) 3 Del 2321 , the Court held as under: 15. Having stated the above, we are also unable to accept the contention that there has been failure on the part of the assessee to disclose all material facts in his return as, first of all, there is no such allegation in the reasons as furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts necessary for assessment. Insofar as this precondition is concerned, there is not a whisper of it in the reasons recorded by the Assessing Officer. In fact, as indicated above, the Assessing Officer could not have made this a ground because the Assessing Officer had required the petitioner to furnish details with regard to loss occasioned by foreign exchange fluctuation which the petitioner did by virtue of the reply dated February 5, 2002. Since the petitioner had fully and truly disclosed all the material facts necessary for the assessment, the pre-condition for invoking the proviso to section 147 of the said Act had not been satisfied. In this connection, it may be relevant to note one decision, although there are several others. The said decision is that of the Punjab and Haryana High Court in the case of Duli Chand Singhania v. Asstt. CIT, (2004) 269 ITR 192. In the said decision, the High Court of Punjab and Haryana was faced with a similar situation. The court noted that there was not even a whisper of an allegation that the escapement in income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2015) 371 ITR 87 (Del. In the said case, the Court held that the explanation clarifies the general refrain by the words not necessarily . Burden is equally placed on the AO to exercise due diligence in examining the record (account books or evidence) produced before him in light of the declarations made in the return or responses to the notices or questionnaires. This is necessary as the AO has to gather tangible material which is a pre-requisite for reopening the matter under Section 147 of the Act. In CIT v. Central Warehousing Corporation, (2015) 371 ITR 81 (Del.), the Court held that the expression reason to believe on which a re-assessment under Section 147 of the Act can be validly ordered should necessarily be based on tangible material which an AO comes by after original assessment. 24. It would also be profitable to refer to the decision of Central Warehousing Corporation (supra) and CIT vs Kelvinator of India Ltd., (2002) 256 ITR 1and CIT vs. Usha International Ltd., 348 ITR 485 (Del.) and several other decisions wherein it has been repeatedly held that reopening initiated without any failure on the part of the Assessee in fully and truly discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to reassess and not the power to review. 25. It becomes evident on perusal of the Scrutiny questionnaires issued by the AO and the information furnished in response thereto by the Assessee that there has been no failure on the part of the Assessee in furnishing the information. On the other hand, there appears to be non application of mind on such material on the part of the AO to make an appropriate determination in accordance with law. Thus, the AO cannot now review its decision, having failed to perform its statutory duty and therefore the impugned action of reopening is nothing but a change of opinion. 26. The AO in paragraph 2 of the recorded reasons quotes that EDC is covered by the provisions of Section 194 of the Income Tax Act,1961. The Assessee has failed to deduct TDS on the payments made to the HUDA . There is no explanation or rationale for the aforesaid observation made by the AO. We, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from making aforenoted observations and referring to Section 194 and Section 40 (a) (ia), there is no apparent rationale for assumption of jurisdiction by the AO. The judgment in Greater Mohali Area (supra) is of no assistance to the Revenue as the same is distinguishable on facts. In the said case, the Petitioner who was recipient of EDC had approached the Court seeking quashing of the order disposing of its objections to the reasons recorded for reopening the assessment under Section 147 and 148 of the Act. In the assessment under Section 143 (3) of the Act, the effect of EDC upon Petitioner s income was not referred to, the AO sought to reopen the assessment on the basis of reason to believe that income on account of EDC had escaped assessment. In these circumstances, since, the assessment order, did not deal with the character of the income of EDC or its effect on Petitioner s income, the Court upheld the action of reopening on the ground that the issue had not been considered at the time of the assessment. Likewise, the other judgment relied upon by the Revenue in the case of M/s New Okhla Industrial Development Authority (supra) is also distinct on facts. In the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 194-I, a conclusion drawn by the Court on a reading of the relevant clauses of the lease deed. In the present case, the EDC charges, on the aforesaid rationality, cannot be subjected to Section 194-I of the Act. Moreover, if such was the understanding of the Revenue, it should have been well founded and disclosed in the reasons recorder by the AO. Deduction at source is dealt under Chapter XVII of the Income Tax Act. The provisions enumerated thereunder, stipulate requirement of deduction of tax at source. Revenue is unable to point out any specific provision which deals with EDC payment except for alluding to Section 194-I. We need not delve into this question any further as we do not find this to be a ground spelt out in the reasons for reopening the assessment under Section 147 of the Act. The statutory orders containing reasons have to be judged on the basis of what is apparent and not what is explained later. Revenue cannot be permitted to improve the same by offering better explanation during the course of the proceedings. On this issue we would like to refer the view of the Supreme Court in Mohinder Singh Gill and Another vs Chief Election Commissioner, New Del ..... 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