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TMI Blog2019 (8) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... laring an income of Rs. 1,02,35,913/-. The return was picked up for scrutiny and notice to the Assessee was issued by the Assessing Officer ('AO') under Section 143(2) and 142(1) of the Act on 19th October 2007 along with a detailed questionnaire to the assessee. 4. Consequent thereto an assessment order was passed on 28th March 2008 assessing the business income of Assessee at Rs. 71,66,970/- and taxable long term capital gains(LTCG) at Rs. 37,85,502/-. In the course of the framing of the assessment the AO disallowed wage expenses to the extent of 1% of Rs. 4,71,86,794/- which equals to Rs. 4,71,867/- to cover up the leakage in the income. There was also disallowance of miscellaneous expenses. 5. Thereafter, on 28th March 2008 notice was issued to the Assessee under Section 147/148 of the Act. In the order of reassessment dated 28th March 2014 the AO disallowed Rs. 4,89,15,024/- under Section 40 (a) (ia) on the ground that the Assessee had not deducted TDS on the payments made to the labour. The Assessee was also found to have made payment of job work charges amounting to Rs. 84,03,444/- and rent charges of Rs. 31,83,736/-. However, TDS had only been deducted on a sum of Rs. 78, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion amount. The assessee neither at time of Assessment proceedings nor at the time offling of returns of income disclosed the above mentioned facts. In view of these facts and after due application of mind, I have reason to believe that income chargeable to tax has escaped assessment for the A.Y. 2006-07 for the reason of failure on the part of the assessee to disclose fully and truly all mentioned facts necessary for his assessment. Therefore, case is fit for reopening the assessment u/s 147/148 of IT Act. The prior sanction of CIT is required before issue of notice u/s 148 of IT Act as per provision of Section 151 (1) Income Tax Act." 6. The second reason/ground recorded above refers to alleged failure on the part of the respondent/assessee to deduct tax at source on payment of Rs. 5.27 crores and attracting provisions of Section 40(a)(ia) of the Act. 7. Contentions of the counsel for the appellant/Revenue is that this amount of Rs. 5.27 crores includes labour charges of Rs. 4.71 crores, job work charges of Rs. 84 lakhs and rent of Rs. 31.83 lakhs. He submits that while it is possible to argue that payment to labour i.e. wages was examined in the first round, the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On 28th March 2013 the AO wrote to the DCIT (Audit-1) and specific to the present Assessee for the AY 2006-07 it was stated as under: "1. Lalit Bagai (PAN AAAPB2885L) A. Y - 2006-07 After receiving the audit objection, the case has been considered for reopening the assessment u/s 147/148 of IT Act. After approval of Ld. Commissioner of Income Tax, Delhi-XIII New Delhi, notice u/s 148 has already been issued. As the necessary remedial action has been taken, the audit objection may be treated as settled." 14. It is further seen that on 17th February 2014 the Joint Commissioner of Income Tax (JCIT) (Audit-1) wrote to the AO asking that the outcome of the reassessment proceedings in respect of the issue for AY 2006-07 and the remedial action for AY 2007-08 'may be intimating to this office, in proper channel.' It is in the above context that the ACIT Circle 38(1) proposed to reopen the assessment by initiating the steps in that regard on 26th March 2013. 15. It is clear from the above correspondence that there was no independent decision arrived at by the AO to form 'reasons to believe' for reopening of the assessment after being satisfied that there was an escapement of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals that the Assessing Officer has not accepted the objections raised by the audit party and has given his reasons for the same and has further stated that he had considered the applicability of provisions of section 14A of the Act and was satisfied in adopting 0.5% of average value of investment for disallowance under section 14A of the Act. He was, accordingly, of the view that the objection raised by the audit party could not be accepted and is required to be dropped. 9. A perusal of the reasons recorded shows that the assessment for the year under consideration is sought to be reopened on the ground that the disallowance of expenditure under section 14A of the Act read with rule 8D of the rules had not been correctly worked out. On the other hand, the Assessing Officer, after considering the audit objections, has not accepted the same has stated that after considering the applicability of section 14A of the Act, he was satisfied with the disallowance made, despite which the impugned notice has been issued seeking to reopen the assessment on the very ground to which he has objected, which is indicative of the fact that the reopening of assessment is not based on the satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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