TMI Blog2017 (4) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-9, Hyderabad dated 23-02-2016. Assessee is contesting the issue of reopening u/s. 147 of the Income Tax Act [Act] as well as disallowance of an amount of ₹ 12,56,805/- u/s. 40(a)(ia). 2. Briefly stated, assessee herein is a registered firm engaged in the business of mining of quartz, processing and selling it. For the impugned assessment year, assessment u/s. 143(3) was completed on 09-11-2006 on a total income of ₹ 6,32,810/- as against income returned of ₹ 1,89,010/-. While making the assessment, Assessing Officer (AO) made an addition of ₹ 5,08,490/- by disallowing 25% of certain expenditure claimed. It seems on 05-08-2010, a notice u/s. 154 was issued proposing to add an amount of ₹ 11,39,655/- u/s. 40(a)(ia) on the ground that tax was not deducted on payments towards quartz stone excavation. But the notice was served on 12-02-2012, which was more than four years and assessee objected to that. Subsequently, AO issued a notice u/s. 148 on 30-03-2012 which was served on 31-03-2012. The reasons recorded as communicated to assessee are that As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) and the assessment was completed after obtaining specific information about the expenditure incurred in payment made to the impugned parties along with their names. Form 3CD u/s. 44AB was filed along with the return. Therefore A.O Learned CIT (A) erred in concluding that material facts were not disclosed. 6. Very reopening u/s. 147 is based on the information already existing on the file and specifically called for during assessment proceedings. There is no question of any diligence required (under explanation u/s. 147 of the I.T. Act) to notice the facts already on record. Explanation does not apply to the facts of the case. 7. At any rate disallowance u/s. 40(a)(ia) of the expenses incurred without any binding contracts between the assessee and the payees is neither correct nor justified. 8. For these and any other grounds that may be raised at / before the time of hearing, it is prayed that the reassessment proceedings be held invalid or the disallowance be deleted . 4. Ld. Counsel reiterating the submissions made before the authorities submitted that a scrutiny assessment was originally completed u/s. 143(3) and all the necessary information has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as details furnished by assessee towards excavation expenditure in the original scrutiny proceedings. In view of that, I am of the opinion that reopening after the end of four years in case of scrutiny u/s. 143(3) was completed is hit by the proviso to Section 147 and accordingly, bad in law. Hon'ble Jurisdictional High Court in the case of Kohinoor Hatcheries Pvt. Ltd., Vs. DCIT (WP No. 2148 of 2015) dt. 16th August, 2016 [(2016) 96 CCH 0140 APHC] held as under: 12. Coming to the merits of the case, the reopening of assessment had happened in this case, admittedly after 4 years. This is also a case where an assessment under sub-section (3) of Section 143 had already been made on 31-12-2010 for the relevant Assessment Year. Therefore, by virtue of the proviso to Section 147, no action could have been taken, after the expiry of 4 years from the end of the relevant Assessment Year, unless any income chargeable to tax has escaped assessment, by reason of any one of the 3 contingencies viz., a) failure on the part of the assessee, to make a return under Section 139; b) failure on the part of the assessee to make a return response to a notice under Section 142 (1) or under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of formation of an opinion could inevitably happen. But, on the contrary, upon disclosure of material facts, fully and truly, the Assessing Officer could, nay, expected to, form an opinion. Once an opinion is formed or the possibility of forming an opinion is stepped up, at the time of assessment, the assessing officer is not allowed thereafter, by law, to take recourse to Section 147. 18. By making a distinction between a mere production of necessary materials and a true and full disclosure of materials necessary for assessment, the statute ensures two things viz., a) that an officer, who had once formed an opinion, does not seek to change it later; and b) that an officer, who, deliberately or by his negligence, omitted to form an opinion, despite being made aware of the material facts, do not take refuge latter under Section 147 to cover up his negligence. 19. A question may arise in the second category of cases as to whether the interests of the Revenue would not suffer in such cases. But the answer is not too difficult to find out. It is only to safeguard the interests of the Revenue in cases of this nature that an express power is conferred upon the Commissioners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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