9911796707
TMI Blog2012 (5) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... 000=00. The return was processed under Section 143(1)(a) of the Act on 17 th February 2006. The case of the petitioner was selected for scrutiny under Section 143(3). The assessment order came to be passed on 27 th December 2007, wherein the Assessing Officer disallowed export commission payment made by the petitioner to one M/s.Softgenie Limited at the rate of 5% to the tune of Rs.1,01,46,996=00. 3. The said assessment order came to be challenged by the petitioner by way of appeal before the Commissioner of Income Tax (Appeals) III, Baroda. The Commissioner of Income Tax (Appeals), vide order dated 28 th February 2008, partly allowed the appeal of the petitioner. The export commission payment to the extent of 2% was considered reasonable, and while passing the said order, the Commissioner of Income Tax (Appeals) placed reliance on order passed for the Assessment Year 2004-05 in the case of the petitioner itself. 4. The said order of the Commissioner of Income Tax (Appeals) was challenged both by the department and the petitioner-company before the Income Tax Appellate Tribunal being I.T.A. No.1618 of 2008 filed by the department and I.T.A. No.1327 of 2008 of the petitioner-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed form. The case made out by the writ-petitioner in this writ-application may be summed up thus : 1. The petitioner-company, by way of its objections to the notice of reopening under Section 148 of the Act very specifically brought to the notice of the officer that a certificate has been issued by the respondent, whereby the petitioner was permitted to make the payment of commission to M/s.Softgenie without deducting tax under Section 194H of the Act. Even in the earlier writ-petition being Special Civil Application No.8378 of 2011 filed by the petitioner, the certificates issued by the Income Tax department were annexed and the respondent was aware about the valid certificate issued by the department under Section 194H of the Act. It was explained to the respondent that the party receiving the payment has not to apply for certificate under Section 194H of the Act as it is a payer who has to obtain a certificate permitting payment without TDS. The petitioner-company had obtained such a certificate. In light of the certificate issued, there is no valid ground to proceed further with reopening of assessment. 2. During the course of regular assessment, the petitioner had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been issued and in the event the petitioner is aggrieved by the reassessment order to be passed, the statutory remedy of appeal under the provisions of the Act is available. 2. In course of regular assessment proceedings finalized by the Assessing Officer under Section 143(3) of the Act, the commission paid to M/s.Softgenie Limited was dealt with by the Assessing Officer from the view point of Section 40A(2)(b) of the Act and not from the view point of Section 194H of the Act. The assessment for the Assessment Year 2005-06 was reopened by the Revenue not just on the violation of the provisions laid down under Section 40(a)(ia) of the Act, and thus, there is no change of opinion as canvassed by the petitioner in this petition. 3. There was nothing on record to establish that M/s.Softgenie Limited had sought any certificate of short/no deduction of TDS in the prescribed form and, therefore, the Assessing Officer had valid reasons to believe that the income has escaped the assessment. 4. The issue of payment of commission made by M/s.Softgenie Limited was examined by the Assessing Officer in regular assessment proceedings under Section 143(3) of the Act from the view of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer that it is a fit case for issuance of notice. While rejecting the objections, it observed that the Assessing Officer of the rank of ACIT or DCIT is empowered to issue notice under Section 148 of the Act if four years from the end of the relevant Assessment Year have not elapsed. This is how the Deputy Commissioner tried to justify issuance of notice under Section 148 of the Act. The second objection raised by the petitioner was that the assessment was finalized under Section 143(3) of the Act and the details of commission paid to M/s.Softgenie were furnished to the then Assessing Officer and the entire expenses was disallowed under Section 40A(2)(b) of the Act. According to the assessee, the condition precedent for issuance of notice under Section 148 of the Act was not satisfied with reference to the fact that there was no escapement of income tax by either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment. This objection was overruled by the officer concerned, stating that in the course of regular assessment finalized under Section 143(3) of the Act, the issue was based on the addition made under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction of TDS. This confirmed that the non-deduction of TDS by the assessee. This violated the provisions of section 194H and, therefore, entire expenditure was required to be disallowed." In order to appreciate the aforesaid question, it will be profitable to refer to the provisions contained in Section 147 of the Act, which are quoted below : Income escaping assessment. "147. 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]: 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recorded under sub-section [2] of section 148." In the case before us, the assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution, before proceeding further, we propose to deal with the scope of interference in such a matter. The Supreme Court in the case of the Commissioner of Income Tax, Gujarat v/s. M/s. A Raman and Company, reported in AIR 1968 SC 49, had the occasion to deal with such a question. We may appropriately refer to the following observations made by a three-judge-bench in the above matter by relying upon the majority view taken in an earlier decision of that court taken by a bench of five judges: " 4. It was held by this Court in Calcutta Discount Co. Ltd. v. Income-tax Officer, (1961) 41 ITR 191 = (AIR 1961 SC 372) that the High Court in appropriate cases has power to issue an order prohibiting the Income-tax Officer from proceeding to reassess the income when the conditions precedent do not exist. At p. 207, K.C. Das Gupta, J., delivering the majority judgment of the Court observed: "It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the jurisdiction does not exist. The Court may, in exercise of its powers, ascertain whether the Income-tax Officer had in his possession any information: the Court may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the Court extends no further. Whether on the information in his possession he should commence a proceeding for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act; if he has information from which it may be said prima facie, that he had reason to believe that income chargeable to tax had escaped assessment, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside or vacate the notice for reassessment on a re-appraisal of the evidence. 7. The High Court in this case was apparently of the view that the information in consequence of which proceedings for reassessment were intended to be started, could have been gathered by the Income-tax Officer in charge of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee in material particulars. The following observations are in this connection relevant and are quoted below: " Non-production of the documents executed in 1957 at the time of the original assessments cannot therefore be regarded as non-disclosure of any material fact necessary for the assessment of the respondent for the relevant assessment years. The High Court was right in holding that the Income-tax Officer had no valid reason to believe that the respondent had omitted or failed to disclose fully and truly all material facts and consequently had no jurisdiction to reopen the assessments for the four years in question. Having second thoughts on the same material does not warrant the initiation of a proceeding under Section 147 of the Income-tax Act 1961." (Emphasis supplied) At this stage, we may rather aptly refer to a latest three-judge-bench decision of the Supreme Court in the case of Commissioner of Income Tax v/s. Kelvinator of India Limited, reported in (2010) 2 SCC 723, where the said court after taking into consideration the effect of Direct Tax Laws (Amendment) Act, 1987 on section 147 made the following observations while dismissing the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in Section 147.-A number of representations were received against the omission of the words 'reason to believe' from Section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression 'has reason to believe' in the place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." (Emphasis supplied) 9 . For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." (Emphasis given by us) Bearing in mind the aforesaid principles, we now propose to consider the case before us. After hearing the learned counsel for the parties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94H of the Act is not tenable in law. To appreciate this issue, it is necessary for us to take note of the provision viz. 40(a)(ia), which reads as under : " 40. Amounts not deductible.- Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (i) xxx xxx xxx (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, 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 XVIIB 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." Explanation is also relevant, which reads as under : "(i) 'commission or brokerage' shall have the same meaning as in clause (I) of the Explanation to section 194H." On plain reading of Section 40(a)(ia), it appears that commission or brokerage paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194G, 194H, 194I, 194J, 194K, 194LA and 195, the Assessing Officer is satisfied, that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be." We have also noticed that the department has issued certificate under Section 197(1) of the Income Tax Act for the Financial Year 2003-04 dated 10 th December 2003 and for the Financial Year 2004-05 dated 11 th August 2004 indicating that the petitioner-company is permitted to make the payment of commission to M/s.Softgenie Limited for both the Assessment Years without deducting tax under Section 194H of the Act. Thus, in our view, there is no violation of provisions of Section 194H of the Act as alleged by the Revenue. This is precisely the reason why M/s.Softgenie Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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