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2015 (8) TMI 1161 - ITAT KOLKATA

2015 (8) TMI 1161 - ITAT KOLKATA - TMI - Reopening of assessment - AO invoked the provision of section 40(a)(ia) r.w.s. 194C - Held that:- From the facts and circumstances of the instant case and respectfully following the judicial precedents o310 ITR 561 n the impugned subject including that of the Hon’ble Supreme Court, Jurisdictional High Court and other High Courts, it is held that the assumption of jurisdiction u/s 147 of the Act by the Learned AO, is based only on “ change of opinion”; mad .....

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Shri Sanjay Mukherjee, JCIT ORDER This appeal of assessee arises from the order of ld.CIT(A)-XXXVI, Kolkata in Appeal No.320/CIT(A)-XXXVI/Kol/Cir.-2,Mid./2011-12 dated 31.07.2013. Assessment was framed by D.C.I.T., Circle-2, Midnapore u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the act ) for A.Yr. 2006-07 vide its order dated 20.12.2011. 2. The only issue to be decided in this appeal is as to whether the ld. CIT(A) is right in confirming the assumption of jurisdiction .....

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of ₹ 7,80,475/- as deduction in the return for A.Y.2006-07 and out of this, it was found that a sum of ₹ 4,76,218/- representing payments were made by the assessee to four parties in excess of ₹ 50,000/- per annum without deducting of tax at source. AO accordingly invoked the provision of section 40(a)(ia) of the Act r.w.s. 194C of the Act and disallowed a sum of ₹ 4,76,218/-. Aggrieved by this order, the assessee challenged this issue on jurisdiction as well as on merit .....

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the ground that the reopening was based on change of opinion raised by the assessee, was dismissed. The ld. CIT(A) also upheld the action of the ld. AO in invoking the provision of section 40(a)(ia) of the Act and accordingly confirmed the addition. Aggrieved, the assessee challenged the issue before this Tribunal. 4. Ground nos. 1 to 3 are legal in nature on assumption of jurisdiction u/s 147 of the Act and ground Nos 4 and 5 are on merits of the issue. 5. Shri Somnath Ghosh, Advocate appeared .....

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ontains the query raised by the ld. AO in the order sheet entry and replies filed thereon by the assessee which fact is duly mentioned by the AO in his order sheet. He stated that based on these replies, the ld. AO was fully convinced about the full and true disclosure made by the assessee with regard to the issue on transportation charges and accordingly he sought not to make any addition. He argued that there is no tangible material available with the AO which constituted new information and a .....

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d the rival submissions. It is seen that in the original scrutiny assessment, the question regarding transportation charges were raised by the ld. AO. The same were duly replied by the assessee. These facts are not disputed by the department and are also mentioned in pages 11 and 12 of the ld.CIT(A) s order which are extracts of order sheet entries of the assessment records. The ld. AO based on the query raised regarding transportation charges and replies filed thereon by the assessee resorted n .....

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the AO to re-initiate the proceedings and since he had derived the facts and materials placed by the assessee himself during the original assessment proceedings, that had not constituted new information. Since in this case, a regular assessment was made u/s 143(3) of the Act, presumption can be drawn that such an order has been passed on application of mind and the subsequent action of the ld. AO is nothing but a change of opinion. Approaching the verification of the transportation charges from .....

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n the said transportation charges to the tune of ₹ 4,76,218/-. However, on perusal of the Tax Audit Report in Form No.3CD at page 110 of the paper book filed by the ld. AR, the tax auditor had only stated N/A in response to question no.27(a). Hence the formation of belief by the AO on the basis of incorrect facts is totally illegal and arbitrary. The authority to reopen an assessment u/s 147 of the Act is, even within a period of four years, conditioned by the requirement that there must b .....

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his alleged belief for initiation of re-assessment proceedings. After the insertion of explanation 2 to section 147, the position remains that so far as the primary facts are concerned, it is assessee s duty to disclose all of them, including particular entries in the accounts books, particular portion of documents, documents and other evidences which could have been discovered by the assessing authority from the documents and other evidences disclosed. The duty however did not extend beyond th .....

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ted (2010) 310 ITR 561 (SC) (confirming CIT vs Kelvinator of India (2002) 256 ITR 1 (Delhi)(FB). J.Kapadia held that the concept of change of opinion must have treated as an inbuilt test to check the abuse of power by AO and that the reasons must have a live link with the formation of belief. Important extracts of the decision is reproduced herein below :- However, one needs to give schematic interpretation to the words reason to believe , failing which 147 would give arbitrary powers to the AO .....

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would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the AO. Hence, after 01.04.1989, the AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Under the Direct Tax Laws ( Amendment ) Act 1987, the party not only deleted the words reason to believe but also inserted the word opinion in section 147. However, on receipt of representations from the companies .....

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In the event it is held that by reason of section 147 if the ITO exercises his jurisdiction for initiating a proceeding for re-assessment only upon a mere change of opinion, the same may be held to be unconstitutional. We are therefore of the opinion that section 147 of the Act does not postulate conferment of power upon the AO to initiate reassessment proceedings upon his mere change of opinion. If reason to believe of the AO, is founded on an information which might have been received by the A .....

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of section 114 of Indian Evidence Act, 1872, judicial and Official Acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. (b) In CIT, Burdwan vs Pioneer cable Network in ITAT No.151 of 2014 dated 29.10.201 .....

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passing the order in favour of the assessee without acknowledging the fact that in case of violation u/s 40(a)(ia) the AO has no scope of his discretion and hence it is covered under Explanation 2(c) (iv) of Section. 147. These two questions were decided in favour of the assessee by the Jurisdictional High Court and the facts of the instant case before me are exactly similar to the facts before the Hon ble Calcutta High Court. (c) In CIT vs Usha International Ltd. (2012)348 ITR 485 (Delhi), it w .....

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roceedings for re-assessment. Similarly if he has raised a wrong legal inference from the facts disclosed, he will not, on that account, be competent to commence re-assessment proceedings. Similar view was taken by the ITO vs Nawab Mir Barkat Ali Khan Bahadur (1974) 97 ITR 239 (SC) wherein the Hon ble Apex Court held that having a second thought on the same material and omission to draw the correct legal presumption during the original assessment do not warrant the initiation of a proceeding u/s .....

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on, it is not open for the subsequent officer to reopen the same just because he does not agree to the decision of the previous officer. In this case the Tribunal has recorded that a mere change of opinion between two officers in reopening the assessment and it is not legally permissible. We, therefore, do not find any infirmity and illegality in the impugned judgment and order dated 12th January, 2012 passed by the learned Tribunal. Since in this case, a regular assessment was made u/s 143(3) o .....

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