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TMI Blog2018 (2) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... ails regarding transport charges at Rs. 8,88,843/- in the profit & loss account and TDS deducted thereon. Thereafter, the ld. counsel invited our attention to page 17 of the paper book containing the notice issue under section 148 of the Act and also to the reasons recorded (page 18). It was explained that the matter was travelled to Tribunal wherein the addition was reduced to 5% (para 5). Our attention was also invited CBDT Circular No.715, dated 08/08/1995. Reliance was placed upon the decision in the case of CIT v. Bhawati Steels (2011) 198 Taxman 275 ( P & H) against which the SLP was dismissed. 3. On the other hand, the ld. DR Shri T.A. Khan relied upon the assessment order by contending that reassessment was validly done. 4. We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee is a partnership firm declared total income of Rs. 1,33,38,231/- in its return filed on 15/11/2007. The assessment was completed on 09/11/2009 under section 143(3) of the Act determining the total income at Rs. 1,50,99,280/-. The Ld.Commissioner of Income Tax (Appeals) dated 24/10/2011 partly allowed the relief to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would make assessee liable for deduction of tax at source under section 194C, such freight charges paid by assessee could not be disallowed under section 40(a)(ia) [A.Y. 2006-07]" The SLP filed against the aforesaid decision was dismissed by the Hon'ble Apex Court. The CBDT vide Circular No. 715, dated 08/08/1995 also clarified and in reply to question No.9, with respect to payments to transporters and whether each GR can be said to be a separate contract, even though payments to several GRs are made under one bill, it was clarified that normally, each GR can be said to be a separate contract if the goods are transported at one time. But, if the goods are transported continuously in pursuance of a contract for a specified period or quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purposes of TDS. From page No. 19 of the paper book filed by the assessee, we note that it was clarified to the Assessing Officer that there was no contract with the transporters. M/s. Bhumi Transports vide letter 30/10/2011 addressed to the ACIT it was clairified that the assessee was engaged / hired from time to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary for his assessment for that assessment year. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the fore going proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment proceeding, the Assessing Officer proposes or wants to take a different view. 4.5. The word "opinion" is derived from the latin word "opinari" which means "to believe", "to think". The word "opinion" as per the Black's Law Dictionary means a statement by a judge or a court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P. Ramanatha Aiyar (third edition) explains the term "opinion" to mean "something more than mere retaining of gossip or hearsay ; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question . . . An opinion is a conviction based on testimony . . . they are as a result of reading, experience and reflection". 4.6. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is formed on facts. "Opinion" formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of "change of opinion". Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression "material facts" means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has rightly noticed, this was not a case of the Assessing Officer merely acting at the behest of the audit party or on its report. It has independently examined the materials collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question is, therefore, in the affirmative, in favour of the Revenue and against the assessee." "As recorded above, the reasons recorded or the documents available must show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) that reopening would cover a case "where income has escaped assessment due to the oversight, inadvertence or mistake" was too broadly expressed and did not lay down the correct law. It was clarified and observed at page 1004 in Indian and Eastern Newspaper Society [1979] 119 ITR 996 (SC) as under : "Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such opinion is consequent on 'information' in the shape of some light thrown on aspects of facts or law which the Income-tax Officer had not earlier been conscious of. To give a couple of illustrations ; suppose an Income-tax Officer, in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the Income-tax Officer derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose the Income-tax Officer accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas 21 STC 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) : The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a complete an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial facts necessary for his assessment. It does not follow that he cannot reopen the assessment even within the period of four years as aforesaid if he has reason to believe that the assessee has failed to make the requisite disclosure. All that the section says is that in a case where the assessment is sought to be reopened after the period of four years, the only reason available to the Assessing Officer is the non-disclosure on the part of the assessee. The Act places a general duty on every assessee to furnish full and true particulars along with the return of income or in the course of the assessment proceedings so that the Assessing Officer is enabled to compute the correct amount of income on which the assessee shall pay tax. The position has been further clarified by the proviso itself in a case where assessment under sub-section (3) of section 144 of the Act or this section has been made for the relevant assessment year, no action shall be taken 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 year by the reason of failure on the part of the assessee to make a return u/s 139 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld depend upon the facts and circumstances of each case and no universal formula may be attempted. The legal or factual inferences from those primary or material facts are for the Assessing Officer to draw in order to complete the assessment and it is not for the assessee to advise him, for obvious reasons. The Explanation, however, cautions the assessee that he cannot remain smug with the belief that since he has produced the books of account before the Assessing Officer from which material or evidence could have been with due diligence gathered by him, he has discharged his duty. It is for him to point out the relevant entries which are material, without leaving that exercise to the Assessing Officer. The caveat, however, is that such production of books of account may, in the light of the facts and circumstances, amount to full and true disclosure; this is clear from the use of the expression "not necessarily" in the Explanation. Thus, the question of full and true disclosure of primary or material facts is a pure question of fact, to be determined on the facts and circumstances of each case. No general principle can be laid down. It was observed by the Hon‟ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more specifically, while framing original assessment u/s 143(3) of the Act, there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act, therefore, in our humble opinion, the reassessment/reopening u/s 147 of the Act is unjustified as there was no fresh tangible material with the Assessing Officer, while reopening the assessment, therefore, the reopening beyond a period of four years is not permissible, more specifically, when the material facts were disclosed by the assessee and assessment was framed u/s 143(3) of the Act. Thus, the reopening of assessment is bad in law. This ground of the assessee is allowed. 5. So far as on merits of the case is concerned and consequent addition of Rs. 8,23,115/- made on account of payment for transport expenses without deducing tax at source and application of provision of section 194C is concerned, we find that each payment is less than Rs. 10,000/- (pages 4 to 7 of the paper book) is concerned, we are reproducing hereunder the provision of section 194C of the Act for ready reference and analysis:- 194C. (1) Any person responsible for paying any sum to any resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, 3a[where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with] his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.-For the purposes of this section,- (i) "specified person" shall mean,- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : '194C. Payments to contractors and sub-contractors.-(1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sub-section. Explanation I.-For the purposes of sub-section (2), the expression "contractor" shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India. Explanation II.-For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation III.-For the purposes of this section, the expression "work" shall also include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering. (3) No deduction shall be made under sub-section (1) or sub-section (2) from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 13/2006, dated 13-12-2006 and Circular No. 9/2012, dated 17-10-2012. For details, see Taxmann's Master Guide to Income-tax Act. See rules 28, 28AA, 28AB, 30, 31, 31A, 31AB and 37BA and Form Nos. 13, 16A, 24G, 26AS, 26B, 26Q and 27A. 99a. For relevant case laws, see Taxmann's Master Guide to Income-tax Act. 1. For the meaning of the terms/expressions "carrying out any work" and "contractor", see Taxmann's Direct Taxes Manual, Vol. 3. 2. Substituted for "twenty" by the Finance Act, 2010, w.e.f. 1-7-2010. 3. Substituted for "fifty" by the Finance Act, 2010, w.e.f. 1-7-2010. 3a. Substituted for "on furnishing of" by the Finance Act, 2015, w.e.f. 1-6-2015". If the aforesaid provision is analysed, it speaks about any person responsible for paying any sum to any resident for carrying out any work in pursuance to a contract between the contractor and the specified persons. However, there was no contract between the assessee and the transporters and it was merely on truck to truck basis. Therefore, section 194C of the Act has no application to the facts of the present appeal. Any income generated out of the transportation was expected to be included / taxed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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