TMI Blog2016 (1) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the assessee of not disclosing fully and truly all relevant primary material facts necessary for completion of assessment because in the reasons itself it was mentioned, “as per column 27(a) of the Audit Report, it is stated that the assessee has not deducted tax at source in accordance with the provisions of chapter.". This averment in the reasons recorded for reopening is itself copied from the very same audit report of the assessee which was furnished with the original return of income. Thus, we find that the assessee has truly and completely disclosed all material facts relating to all the expenses at the time of scrutiny assessment proceedings itself and the AO, after scrutinizing the details furnished by the assessee in the course of scrutiny assessment, has passed the original assessment order u/s 143 (3) of the Act. Therefore, we concur with the CIT (A) that no new facts were brought on record which can be the basis for reasons to believe that the income of the assessee had escaped assessment and, therefore, the reopening of assessment in the present case had been merely on the basis of change of opinion, which is not permissible in the eyes of law. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised objections against reopening of the assessment which was disposed off vide order dated 28.02.2013. Against the same, the assessee filed a reply which was considered and not accepted by the AO. The AO observed that the explanation given by the assessee could not be accepted because section 194C of the Act nowhere limits the deduction of any particular type of payment made to the sub-contractor and as such, the assessee was liable to deduct TDS on the balance payment of ₹ 6,13,90,130/- which the assessee had failed to comply with. So, the AO made an addition of ₹ 6,13,90,130/- on account of TDS not deducted under the prescribed heads were added back to the income of the assessee and completed the reassessment on total income of ₹ 9,18,37,870/-. 3.2 Aggrieved, the assessee filed an appeal before the first appellate authority challenging the order of the AO u/s 147/148 of the Act. The CIT (A) quashed the assessment u/s 147/148 of the Act by holding as under :- Ground No.1 to 4 are together: I have perused the facts stated in the re-assessment order as well as the facts stated by the assessee in his submissions. The return for assessment year 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 2008 and 03 December, 2008 have also been examined from where it can be observed that the appellant has not failed to disclose any material fact to the AO. It is apparent that the appellant has truly and completely disclosed all material facts relating to all the expenses at the time of scrutiny assessment proceedings itself. The AO, after scrutinizing the details furnished by the appellant in the course of scrutiny assessment, formed an opinion that the appellant has correctly claimed these expenses. In view of these facts, no new facts are brought on record which gives reasons to believe that the income of the appellant has escaped assessment. Therefore, the reopening of assessment in the present case has been merely on the basis of change of opinion. It is seen that the reopening u/s 147 was done subsequent to the fouryear period stipulated in the proviso to Section 147 and, consequently, the same could only be initiated if any income chargeable to tax had escaped assessment by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice under Section 142(1) or Section 148 or to disclose fully and truly all mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which reopening of assessment u/s 147 has been initiated after recording the reasons. Under these circumstances we find that the ld. CIT(A) has rightly accepted the objection of the assessee that initiation of reopening proceedings u/s 147 of the Act in the present case after the expiry of 4 years from the end of the relevant assessment year was not valid as per the proviso to section 147 of the Act since there was no failure on the part of the assessee to disclosed fully and truly all material facts necessary for its assessment for assessment year under consideration... We do not find reason to interfere with the findings of the ld. CIT(A) that initiation of reopening proceedings in the present case was barred under the proviso of section 147 of the Act and hence we are of the view that the ld. CIT(A) has rightly quashed the assessment u/s 147/143(3) of the Act made in furtherance to the invalid notice issued u/s 148 of the Act. Further, in appellant's own case for the assessment year 2004-05 with the honourable IT AT Bench of Delhi where it was held that .....it is evident that in the original assessment, the assessee claimed certain expenses whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power to review an assessment and he cannot reopen as assessment only because of a mere change in the opinion. The AO must, in other words, have tangible material to come to the conclusion that there is an escapement of income. The mere fact that the order of assessment did not specifically deal with the issue as to whether the payment fell within the purview of s. 36(1)(ii) is not dispositive in the present case. The test is as to whether the assessee had furnished to the AO all the primary facts on the basis of which a deduction was claimed in respect of the commission that was paid to the two directors for services rendered. The record indicates that the assessee had specifically placed before the AD by its letter dt. 4th Sept., 2009, copies of the agreement dt. 16th June, 2005 between the assessee and its directors in pursuance of which remuneration was paid to them for the relevant year which included the payment of commission. The attention of the AO was clearly and specifically drawn to the quantum of the fixed monthly remuneration and in addition to the payment of commission which is computed at a stipulated proportion of the net profits. The assessee explained the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the decision of the question before the Assessing Officer and non-disclosure of which would have a material bearing on the question of escapement of income from assessment. Whether or not primary facts have been disclosed is normally a question of fact and depends upon the facts and circumstances of each case. The requirement of Explanation 1 is that there should be full and true disclosure of the primary or material facts and not beyond that. It is the obligation of the assessee to disclose fully and truly the primary facts. It is not the obligation of the assessee to indicate and state what legal inference can be drawn from the primary facts. The assessee had claimed special deduction for the assessment year 2000-01 under section 80HHC. The deduction was reduced by the Assessing Officer. The original return of income was accompanied by audited accounts and auditor's report required to be submitted in terms of section 80HHC (4) of the Act. Similarly, the assessee had claimed deduction under section 80-IB of the Act, which was specifically mentioned in the audited accounts and the auditor's report. The special deductions were allowed. Subsequently, in March, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings the Assessing Officer had considered and examined whether or not the non-compete fee payment was of capital or revenue nature. The Assessing Officer accepted the stand of the assessee and treated the noncompete fee as a revenue expenditure. The reassessment proceedings could not, therefore, be initiated on the ground that the Assessing Officer was legally wrong and had misapplied and wrongly understood the law/legal position. The Assessing Officer was not correct in his action to assume jurisdiction over the appellant for the year under consideration in view of the proviso to section 147 of the Act. Additionally reasons recorded are based on audit report furnished with return of income and accepted in original assessment. The case was selected for scrutiny and assessment proceedings u/s 143(2) were initiated by the Assessing Officer and the same were completed U/S 143(3). It is a case of change of opinion i.e. reappraisal of same facts. On which earlier Assessing Officer had taken a view on which the new Assessing Officer differs. In view of the above, it is submitted that, proceedings initiated u/s 147 of the Act and completion of assessment u/s 1471143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reupon has been found to have been complied with. We further take note that questionnaire of AO dated 27.10.2008 sought information pertaining to the impugned reopening vide question no. 19 and the assessee in response to it had filed reply to it on 26.11.2008 and 03.12.2008 which have also been before the AO during the original assessment. So, it cannot be said that the assessee has failed to disclose any material fact before the AO during the original scrutiny assessment. We further concur with the view of the ld. CIT (A) that there has been no failure which could be attributed to the assessee of not disclosing fully and truly all relevant primary material facts necessary for completion of assessment because in the reasons itself it was mentioned, as per column 27(a) of the Audit Report, it is stated that the assessee has not deducted tax at source in accordance with the provisions of chapter .... . This averment in the reasons recorded for reopening is itself copied from the very same audit report of the assessee which was furnished with the original return of income. Thus, we find that the assessee has truly and completely disclosed all material facts relating to all the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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