TMI Blog2018 (2) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying 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 in the hands of the recipient of such income. As mentioned earlier, each GR can be said to be a separate contract for transportation of goods. Thus, on this issue also the appeal of the assessee deserves to be allowed. - ITA NO. 7000/Mum/2013 - - - Dated:- 13-2-2018 - Shri JOGINDER SINGH, Judicial Member And Shri RAMT KOCHAR, Accountant Member For The Assessee : Shri Dhirendra M . Shah - AR For The Revenue : Shri T . A . Khan - DR ORDER Per Joginder Singh ( Judicial Member ) The assessee is aggrieved by the impugned order dated 08/10/2013 of the ld. First Appellate Authority, Mumbai. The first ground raised by the assessee pertains to challenging the validity of re-assessment proceedings without considering the objections filed during re-ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was affirmed and the assessee is in further appeal before this Tribunal. 4.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find from the original assessment order dated 09/11/2009 that in response to the notices the assessee was attended from time to time, furnished its details, books of accounts were produced and the same were examined by the Assessing Officer (page 1 of the original assessment order). This factual finding has been duly recorded in the original assessment order. So far as the issue of transportation expenses is concerned, the same has been duly examined in para 6 of the original assessment order. So far as the observation made in the impugned order that necessary details were not filed by the assessee is also factually incorrect because it is evident from letter addressed to the ACIT (page No. 19 of the paper book) wherein it was claimed that there was contract with the transporter, therefore, the provision of section 194C of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the basis of any new material which was not filed by the assessee. The obvious reply is that no new material was found by the assessee and the material facts were fully and duly disclosed by the assessee during original assessment proceedings. It is not the case of the Revenue that new material was digged out by the Revenue at the later stage. Thus, reopening of assessment merely on the basis of change of opinion is not permissible. It is our bounded duty to analyze section 147 of the Act, which is reproduced hereunder:- 147 . Income escaping assessment .- If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re - compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned ( hereafter in this section and in sections 148 to 153 referred to as the relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub - section ( 2 ) of section 148 . 4.3. If the aforesaid provision of the Act is analyzed, we are of the view that for reopening an assessment made under section 143(3) of the Act, the following conditions are required to be satisfied:- (i) the Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is underassessment or escapement of income ; (ii) he must record the prima facie opinion into writing ; (iii) the opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (iv) reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. The Explanation to the section stipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/ disallowances are made. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessed before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. 4.7. The Hon‟ble Delhi High Court in the case of Photo and Finvest Ltd. [2006] 281 ITR 394 (Delhi) held as under: In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee . What is important is whether the Assessing Officer had based on the material available to him taken a view . If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion . 4.8. From the foregoing discussion, the clear position emerges as under: ( 1 ) Reassessment proceedings can be validly initiated in case return of income is processed under section 143 ( 1 ) and no scrutiny assessment is undertaken . In such cases there is no change of opinion . ( 2 ) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee . Reassessment proceedings in the said cases will be hit by the principle of change of opinion . ( 3 ) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be examined to determine whether the stand of the Revenue is correct. A decision of the Hon‟ble Delhi High Court dated September 26, 2011 in Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) and another decision from Hon‟ble jurisdictional High Court dated November 8, 2011, in Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) are two such cases, which throws light on the issue. In the first case, the Assessing Officer in the original assessment had made addition of ₹ 19,86,551 under section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details, etc., were not furnished, were to the extent of ₹ 52,84,058 and not ₹ 19,86,551. In Indian Hume Pipe Co. Ltd. (supra), after verification the claim under section 54EC was allowed but subsequently on examination it transpired that the second property was purchased prior to the date of sale. The aforesaid decisions/ facts cases must be distinguished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did not appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that income has escaped assessment . This takes us to the observations of the Delhi High Court in Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] which read as under (page 18): The Board in exercise of its jurisdiction under the aforementioned provisions had issued the circular on October 31, 1989 . The said circular admittedly is binding on the Revenue . The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular . From a perusal of clause 7.2 of the said circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view to allay the fears that the omission of the expression 'reason to believe' from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for reopening a completed assessment. 4.11. Another aspect of the matter also cannot be lost sight of. A statute conferring an arbitrary power may be held to be ultra virus artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment . In our opinion, an error discovered on a reconsideration of the same material ( and no more ) does not give him that power . That was the view taken by this court in Maharaj Kumar Kamal Singh v . CIT [ 1959 ] 35 ITR 1 ( SC ) , CIT v . A . Raman and Co . [ 1968 ] 67 ITR 11 ( SC ) and Bankipur Club Ltd . v . CIT [ 1971 ] 82 ITR 831 ( SC ) , and we do not believe that the law has since taken a different course . Any observations in Kalyanji Mavji and Co . v . CIT [ 1976 ] 102 ITR 287 ( SC ) suggesting the contrary do not, we say with respect, lay down the correct law . 4.13. In A. L. A. Firm (supra), the Hon‟ble Apex Court explained that there was no difference between the observations of the Supreme Court in Kalyanji Maviji [1976] 102 ITR 287 (SC) and Indian and Eastern Newspaper Society case [1979] 119 ITR 996 (SC), as far as proposition (4) is concerned. It was held that (page 297 of 189 ITR) : We have pointed out earlier that K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later . What then, is the difference between the situations envisaged in propositions ( 2 ) and ( 4 ) of Kalyanji Maviji's case [ 1976 ] 102 ITR 287 ( SC ). The difference, if one keeps in mind the trend of the judicial decisions, is this . Proposition ( 4 ) refers to a case where the Income - tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e . g . , as in the two Madras decisions referred to earlier . Proposition ( 2 ) no doubt covers this situation also but it is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 answer to the issue that if a particular subject-matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. 4.14. So far as, the decision from Hon'ble Bombay High Court in the case of Dr. Amin‟s Pathology Laboratory (supra) is concerned, there also, the assessment was framed u/s 143(3) and subsequently, the Ld. Assessing Officer found that he overlooked an entry with respect to unpaid purchases, in respect of which, he wrongly granted deduction. Notice u/s 148 was issued. However, the Hon'ble High Court found that there was no change of opinion. The Ld. counsel for the assessee, cited a later decision dated 09/06/2011 from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose truly and fully all material facts necessary for his assessment for that assessment year. It is also noted that the scope of newly substituted (w.e.f. 01/04/1989) section 147 has been elaborated in department circular number 549 dated 31st October, 1989, meaning thereby, on or after 01/04/1989, initiation of reassessment proceedings has to be governed by the provisions of section 147 to 151 as substituted (amended) w.e.f. 01/04/1989. Still, power u/s 147 of the Act, though very wide but no plenary. We are aware that Hon‟ble Gujarat High Court in Praful Chunilal Patel: Vasant Chunilal Patel vs ACIT (1999) 236 ITR 82, 840 (Guj.) even went to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks 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 in various cases that there should be some tangible material coming into the possession of the Assessing Officer in such cases to enable him to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 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 ₹ 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 ₹ 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 resident ( hereafter in this section referred to as the contractor for carrying out any work1 ( including supply of labour for carrying out any work ) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 ( g ) any society registered under the Societies Registration Act, 1860 ( 21 of 1860 ) or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 2005, w.e.f. 1-6-2005, Finance Act, 2007, w.e.f. 1-6-2007 and Finance Act, 2008, w.e.f. 1-6-2008, read as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover from the business or profession carried on by him exceed the monetary limits specified under clause ( a ) or clause ( b ) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub - contractor, shall be liable to deduct income - tax under this 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work ( including supply of labour for carrying out any work ) undertaken by the contractor for the co - operative society . Explanation .- For the purposes of clause ( i ) , goods carriage shall have the same meaning as in the Explanation to sub - section ( 7 ) of section 44AE . ( 4 ) [***] ( 5 ) [***]. ' 99 . See also Circular No . 433, dated 25 - 9 - 1985, Circular No . 487, dated 8 - 6 - 1987, Circular No . 502, dated 27 - 1 - 1988, Circular No . 558, dated 28 - 3 - 1990, Circular No . 681, dated 8 - 3 - 1994, Circular No . 713, dated 2 - 8 - 1995, Circular No . 714, dated 3 - 8 - 1995, Circular No . 715, dated 8 - 8 - 1995, Circular No . 723, dated 19 - 9 - 1995, Circular 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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