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TMI Blog2017 (10) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating that the re-assessment proceedings had been initiated on a change of opinion as the original assessment had been completed under Section 143(3) of the Act after detailed scrutiny and no tangible material had come to the knowledge of the AO thereafter justifying initiation of proceeding under Section 147/148 of the Act. 1.2 That on facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that in the original assessment completed under section 143(3) of the Act, the AO had disallowed certain payments made to non-resident recipients under section 40(a)(i) after detailed scrutiny and, therefore, reassessment proceedings could not have been initiated in respect of a similar issue without any fresh tangible material coming to the knowledge of AO. 1.3 That on facts and circumstances of the case and in law. the CIT(A) erred in confirming the action of the AO in initiating reassessment proceedings under section 147 of the Act on the issue of disallowance under section 40(a)(i) of the Act without appreciating that the AO failed to point out how payments made to various non-resident parties were chargeable to tax in India on which tax was deductible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material had come to the knowledge of the AO thereafter justifying initiation of proceeding under Section 147/148 of the Act. 1.2 That on facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in initiating reassessment proceedings under section 147 of the Act on the issue of disallowance u/s.40(a)(i) of the Act without appreciating that the AO failed to point out how payments made to various non-resident parties were chargeable to tax in India on which tax was deductible under section 195(1) of the Act. 1.3 That on facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that the reassessment proceedings had been initiated by the AO on an erroneous assumption that all payments to non-resident are subject to withholding taxes under section 195 of the Act and. therefore, income had escapement assessment for failure to withhold tax u/s 195(1) r/w 40(a)(i), which is in complete disregard of the decision of Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT: 327ITR456. 2. 2. That on facts and circumstances of the case, the CIT(A) erred in confirming the action of the AO in disallowing ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76.77,44,000/- the case of the assessee for the assessment year 2007-08 is reopened u/s.147 of the I.T.Act, 1961." 5. For the assessment year 2008-09, the Assessing Officer has also recorded following reasons for reopening the assessment: ""Later on it is noticed that (1) The assessee company has debited Rs. 15,33,71,000/- towards electricity Duty in the P&L Account, but has paid to the Government account and "no lien account" in the ratio 6:14(i.e. 6 parts to the government account of Rs. 4,60,11,000/- and 14 parts to the "no lien' account of Rs. 10,73,59,000/-). Since the assessee had disputed the rate at which electricity duty was demanded by the Government of Orissa before the Hon'ble Orissa High Court, a sum of Rs. 10,73,59,000 was deposited in a designated non lien bank account on the direction of electricity duty debited to the P&L account. As per the provisions of section 43B, the amount would be allowed as a deduction only when the actual payment is made, notwithstanding the method of accounting followed by the assessee. The deposited made in the no-lien account cannot be regarded as payment of electricity duty to the Govt, of Orissa. Therefore, the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court of India in the case of GE India Technology Centre (P) Ltd. v. CIT: 327 ITR 456 (SC), wherein over-ruling the decision of the Hon'ble Karnataka High Court in the case of CIT v. Samsung Electronics Co. Ltd.: 320 ITR 209 (Kar), it has been held by the Hon'ble Supreme Court that the provisions of section 195 of the Act are attracted only if the payments made to the non-resident recipient are chargeable to tax in India and hence subject to deduction of tax. The Assessing Officer having failed to demonstrate how the payments to non-resident were chargeable to tax in India, could not have formed the belief that income has escaped assessment. 9. It is further argued that the reassessment proceedings are initiated on a mere change of opinion. It is submitted that the Assessing Officer issued notice u/s.142(1) of the Act, wherein, various details, documents and information and books of account were called for. Vide notice dated 18.9.2009 at Point No.7, the assessee was required to submit hard copy of annual TDS return filed for financial year 2006-07 together with details of deductees. Further vide Point No.19 to the said notice, the assessee was required to submit details ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing officer in the first round did not examine the question or subject matter and form an opinion, would be contrary and opposed to normal human conduct. Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the Assessing Officer and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessary. The stand of the Revenue and the assessee would be relevant. Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opinion can be ascertained and gathered even when no specific question or query in writing had been raised by the Assessing Officer. The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o non-residents and also having made a disallowance on that issue, it is presumed that he applied his mind to the material on record and formed an opinion. Therefore, in the absence of any fresh material, the reappraisal of same material to initiate reassessment proceedings tantamounts to change of opinion and hence bad in law. 14. Similarly, it was submitted that in assessment year, vide notice dated 25.1.2010, the assessee was required to submit copy of e-return, Copy of audited balance sheet and profit and loss account, tax audit report, copy of original TDS certificate. Again, vide notice dated 22.7.2010, the assessee was required to submit details of commission paid during the year and TDS details thereof, which were filed by the assessee on 11.2.2010. The details of travelling and conveyance, commission under the head other selling expenses" were filed by the assessee vide letter dated 27.10.2010 & 18.11.2010 respectively. It was further submitted that in respect of the issue of disallowance under Section 43B of the Act, the assessee made adequate disclosure in Schedule I & N at point No. 4 of the annual accounts. The same was also disclosed in director's report forming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited made in the no-lien account cannot be regarded as payment of electricity duty to the Govt, of Orissa. Therefore, the amount of Rs. 1073,59,000/- deposited in the no lien account calls for disallowance u/s 43B of the I.T Act, 1961 and added back in total income. (2) The amount of Rs. 14789.03 lakh paid towards foreign currency for import and charged to the P& L account for the year ending 31.03.2008 on which no tax was deducted u/s 195(1) would be eligible for deduction in computing the income chargeable under the head " Profit and Gain of Business of profession under section 40(a)(ia) of the I.T Act, 1961. The amount was required to added back to the total income of the assessee company, As the income of the assessee has escaped assessment by Rs. 1,58,62,62,000-/(Rs. 10,73,59,000/- + Rs. l,47,89,03,000/-)-the case of the assessee is reopened u/s 147 of the I.T Act ,1961" 17. A perusal of the recorded reasons shows that nowhere it records any fresh tangible information, which came to the notice of the Assessing Officer after completion of assessment under section 143(3) on 30.12.2009 for the assessment year 2007-08 and on 29.12.2010 for the assessment year 2008-09 and bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer latter on formed a belief that provisions of section 195(1), (2) & (3) are attracted in respect of a transaction on the basis of the very same materials, which were available before the Assessing Officer at the time of making original assessment will empower the Assessing Officer to reopen the assessment even in absence of fresh tangible material. In our considered view, it is contrary to the above stated decision of Hon'ble Supreme Court in the case of Kelvinator of India Limited (supra). 20. Therefore, we set aside the reassessment orders dated 30.12.2009 for the assessment year 2007-08 and on 29.12.2010 for the assessment year 2008-09 and allow the appeals of the assessee. 21. In view of the fact that we have set aside the reassessment orders for the assessment years 2007-08 and 2008-09, the other grounds of appeal of the assessee on merits of the additions have become infructuous and hence not adjudicated upon, 22. In view of our setting aside the reassessment orders for the assessment years 2007-08 and 2008-09 in assessee's appeals, the appeals filed by the revenue are dismissed. 23. In the result, the appeals of the assessee are allowed and the appeals of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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