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2016 (1) TMI 398 - ITAT DELHI

2016 (1) TMI 398 - ITAT DELHI - TMI - Reopening of assessment - Non deduction of tds - Held that:- As during the original scrutiny assessment proceedings u/s 143(3), the AO had issued detailed questionnaire to the assessee seeking information relating to contract and sub-contract works, supervision fee, legal & professional Services etc and TDS compliance thereon; and the assessee has duly replied the questionnaire and complied with the said notice by submitting information regarding the same an .....

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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, ďas 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 reop .....

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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 uphold the view of the ld. CIT (A) that this is not a fit case for reopening of assessment. - Decided in favour of assessee - ITA No. 4282/Del./2013 - Dated:- 21-10-2 .....

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gainst quashing of the assessment proceedings u/s 147/148 of the Income-tax Act, 1961 (hereinafter the Act ) by the CIT (A). 3. Brief facts of the case are that the assessee, SMCC Construction India Limited (earlier known as Mitsui Kensetsu India Limited) was incorporated on 12.12.1996 as a joint venture between Mitsui Construction Co. Ltd., Japan and M/s. Kairali Construction, India. The assessee commenced its business operations in August 1997 and the first year of assessment was AY 1998-99. D .....

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were initiated and the same were completed vide order under section 143(3) of the Act dated 11.12.2008 at an income of ₹ 3,04,47,740/-. A notice u/s 148 of the Act was issued on 23.03.2012 after recording the reasons. In response to notice u/s 148, the assessee filed reply dated 20.04.2012 stating that the original return of income filed for the relevant year i.e. 2005-06 be treated as return filed in compliance to notice issued u/s 148 of the Act and requested for copy of reasons recorded .....

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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 fil .....

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ion 143(1) of the Act. Assessment was made under section 143(2) on December 11, 2008. A notice under section 148 was issued on March 23, 2012. The reason recorded for reopening of assessment proceedings were provided to the appellant as under: "In the instant case, 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. It has now been noticed that the assessee has not deducted TDS on the following .....

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essee to truly and fully disclose all the material facts necessary for the assessment." It has been observed that during the assessment proceedings u/s 143(3) of the Income Tax Act, 1961, the AO has issued detailed questionnaire to the appellant seeking information relating to contract and sub-contract works, supervision fee, legal & professional Services etc and TDS compliance thereon. The appellant has duly complied with the above notice by submitting complete information and any furt .....

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ny 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 .....

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ould be attributed to the assessee of not disclosing fully truly all relevant primary material facts necessary for completion assessment because in the reasons itself it is 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 ...." It is evident that reasons recorded are based on the audit report of the assessee which were furnished with the return of income. Further it is self evident t .....

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(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 expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year 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 sub-section (1) of section 142 or section 148 or to disclose fully and truly all mat .....

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debt and on the provision of warranty and current liabilities vide query no. 12 of the questionnaire and being convinced with the submission of the assessee made in this regard he had accepted the claim. The tax Audit Report filed by the assessee was already there on record on the basis of 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 o .....

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e 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 which are in the nature of purchas .....

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nue expenditure is in the nature of capital expenditure. However, as per the proviso to Section 147, unless there is any failure on the part of the assessee to disclose any material fact, the assessment cannot be reopened." Reliance in this respect is also placed on the following judgment is as under:- In the case of CIT vs USHA International Ltd. In ITA No. 202612010 dated September 21, 2012 where in the court reiterated that onus is on AO to prove that there is failure on the part of the .....

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ange of opinion and if the same is done it would give arbitrary powers to the AO to reopen the past assessments on mere change of opinion and this is not permissible even as per legislative intent. " The Bombay High Court in the case of OHM Stock Brokers (P) Ltd. Vs Commissioner of Income Tax & Anr. in writ petn. Nos.79 to 82 of 2013 vide order dated 20th February, 2013 wherein it is held that:- "Though the power of the AO to reopen as assessment within a period of four years is in .....

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ave 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 r .....

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ion of the net profits. The assessee explained the basis on which a decision was taken to make the payment of commission at a fixed monthly remuneration and the rest at a proportion of the net profit. According to the assessee, this decision was based on the volatility of the stock market and having regard to the fact that the income of the assessee from share business had reduced and in fact, it was ₹ 35.51 crores in comparison to the income of ₹ 57.07 crores for the previous year, .....

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n dispute that the two directors have been assessed under s. 143(3) on the amounts paid by the assessee to them as salary income. The Revenue has admittedly treated the amounts paid to the directors in question as salary income in their hands and their assessments have been completed accordingly. In this view of the matter, the reopening of the assessments must be held to be based on a pure change of opinion and not on tangible material. Therefore, the conclusion is that the reopening of the ass .....

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gh Court) it is held that:- "... One of the jurisdictional pre-conditions for reopening of an assessment after four years is that there should be failure on the part of the assessee to disclose material facts necessary for assessment. The expression "material facts" in Explanation J to section 147 of the Income-tax Act, 1961 refers to primary facts. The term "primary facts" or "material facts" are those facts which are material and relevant for the decision of .....

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nd 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 .....

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hat the reassessment proceedings were not valid. On appeal to the High Court: Held, dismissing the appeal, that there was no indication that the assessee had failed or admitted to disclose the material or primary facts. These were available on record. The Assessing Officer had failed to draw correct legal inferences at the time of original assessment from the primary facts. This was not an error or omission on the part of the assessee. It was not alleged that the assessee had suppressed, misrepr .....

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s, there should have been a failure on the part of the assessee to disclose material facts necessary for assessment. If the Assessing Officer had failed to apply legal provisions/section of the Income-tax Act, 1961, the fault cannot be attributed to the assessee. The requirement is that the assessee should have failed or omitted to make full and true disclosure of material facts. The assessee is not required to disclose, state or explain the law ... " BLB Limited Vs Assistant Commissioner o .....

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ot disclosed fully and truly all material facts. In the original assessment 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 la .....

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e 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 the Act is ab-initio void and illegal is therefore quashed. 4. The revenue, being aggrieved, filed the appeal before us. 5. Ld. DR relied on the order of the AO. 6. On the other hand, ld. AR for the assessee reiterated the subm .....

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rther submitted that there has been no failure on the part of the assessee to disclose fully and truly all material facts which were necessary at the time of the assessment proceedings. He submitted that the reassessment is made only on the basis of a mere change of opinion which could not be a ground for reopening assessment proceedings. Ld. AR submitted that all the relevant information was submitted at the time of assessment proceedings and also at the time of reassessment proceedings. He sub .....

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ake 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 material facts necessary for his assessment" for that assessment year. We take note that during the original scrutiny assessment proceedings u/s 143(3), the AO had issued detailed questionnaire to the assessee seeking information relating to contract and sub-contract works, supervision fee, legal & professional Services etc and TDS compliance thereon; an .....

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