Income Tax Appellate Tribunal - Kolkata
Ito, Ward - 40(2), Kolkata vs Smt. Uma Chakraborty, Kolkata on 28 August, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "B", BENCH KOLKATA BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM M.A. No.220/Kol/2018 (Arising out of आयकरअपीलसं./ITA No.25/Kol/2017) ( नधारणवष / Assessment Year: 2011-12) ITO, Ward-40(2), Kolkata Vs. Smt. Uma Chakraborty 11/1, Temer Lane, Kolkata-700009.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AEPPC 7708 C (Assessee) .. (Revenue) आयकरअपीलसं./ITA No.25/Kol/2017 ( नधारणवष / Assessment Year: 2011-12) ITO, Ward-40(2), Kolkata Vs. Smt. Uma Chakraborty 11/1, Temer Lane, Kolkata-700009.
थायीले खासं . /जीआइआरसं . /PAN/GIR No.: AEPPC 7708 C (Assessee) .. (Revenue) Assessee by : Shri Baij Nath Singh, JCIT, Sr. DR Respondent by : Shri Sukumar Mondal, CA सुनवाईक तार ख/ Date of Hearing : 09/08/2019 घोषणाक तार ख/Date of Pronouncement : 28/08/2019 आदे श / O R D E R Per Dr. A. L. Saini:
This is a miscellaneous application filed by the Revenue praying to recall the order of the Tribunal dated 01/08/2018.
2. The case of the Revenue in this miscellaneous application is that the assessee's case was reopened u/s 147 of the Act because of audit objection. Audit objection is one of the exception which does not apply to CBDT circular no. 3/2018 dated Smt. Uma Chakraborty MA No. 220/Kol/2018 (Arising out of I.T.A. No. 25/Kol/2017) ITA No. 25/Kol/2017 Assessment Year:2011-12 11.07.2018 for low tax effect. The audit objection was that the assessee has not deducted tax at source against the payment of royalty, cover design & illustrations and printing & binding charge.
3. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon. We have gone through the audit objection and we note that the assessment was reopened by the Assessing Officer u/s 147 / 143(3) of the Act to deal with audit objections of the department and the addition was made by the Assessing Officer based on the audit objection. Since the addition was made by the Assessing Officer based on the audit objection therefore we note that it falls under the exception in clause 10(c ) of the CBDT circular No. 3/2018 dated 11.07.2018 therefore, we think fit and appropriate that it is a reasonable cause to recall this order and therefore, we recall the order of Tribunal dated 01.08.2018.
4. We allow the miscellaneous application of the revenue.
5. With the consent of both the parties and after allowing the miscellaneous application of the Revenue, the related appeal itself has been heard today i.e. 9.8.2019 , therefore now we adjudicate the main appeal in ITA No. 25/Kol/2017 for A.Y. 2011-12.
6. The captioned appeal filed by the Revenue, pertaining to assessment year 2011- 12, is directed against the order passed by the Commissioner of Income Tax (Appeal)-12, Kolkata, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 / 143(3) of the Income Tax Act, 1961 (in short the 'Act') dated 06/10/2015.
7. Brief facts qua the issue are that the assessee filed its return of income on 05.03.2012 which was assessed by the Department u/s 143(3) of the Act determining total income at Rs. 21,70,230/-. Subsequently, it was noted by the Assessing Officer that the assessee violated the provision of section 40a(ia) of the Pa g e | 2 Smt. Uma Chakraborty MA No. 220/Kol/2018 (Arising out of I.T.A. No. 25/Kol/2017) ITA No. 25/Kol/2017 Assessment Year:2011-12 Act by not deducting the TDS at source u/s 194C and 194J of the Act having payments made to concerned parties in aggregate exceeding the prescribed limit of Rs. 75,000/- and Rs. 30,000/- during the financial year in spite of fact that payments were mostly made to individuals exceeding to Rs. 5,000/- Accordingly, the case was reopened by invoking the provisions of section 147 of the Act. During the assessment proceedings, the assessee submitted that there is no violation of provision of section 194C and 194J and the reopening made by the Assessing Officer is on account of change of opinion therefore the reopening made by the Assessing Officer is bad in law. However, the ld. Assessing Officer rejected the contention of the assessee and made addition on account of violation of provision of section 40a(ia) of the Act at Rs. 42,75,030/-.
8. Aggrieved the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has quashed the reassessment proceedings observing the following:
"I have considered the facts of the case and the submissions of the appellant. The appellant has challenged the reopening of the assessment u/s 148 on the grounds that it was a change of opinion. It is a fact that the original assessment order was passed u/s 143(3) of the Act on 28.03.2014. This was reopened as the Assessing Officer had reason to believe that ..During the course of rechecking of the assessment records, it was noticed that though the payments made to different parties on account of author's fee, royalty, illustration cover designing printing binding etc. did not exceed Rs. 5000/- the same did exceed the threshold limit of Rs. 30,000/- for sec. 194J and Rs. 75,000/- for sec. 194C of the Act during the Financial Year relevant to A.Y. 2011-12. Hence deduction of tax was mandatory in these cases which the assessee failed to do so. The same has been tabled below...Total amount of Rs. 42,75,032/-. I have therefore reason to believe that an amount of Rs. 42,75,032/- has escaped assessment within the meaning of sec. 147 of Act. According, notice u/s 148 of the Act may kindly be issued to the assessee.
It was reassessed U/S 147/143(3) of the Act vide order dated 06-10- 2015 . The appellant has appealed against this primarily on the ground that this was a clear case of 'change of opinion '. Section 147 is as under :- 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 recompute the loss or the depreciation allowance or any other Pa g e | 3 Smt. Uma Chakraborty MA No. 220/Kol/2018 (Arising out of I.T.A. No. 25/Kol/2017) ITA No. 25/Kol/2017 Assessment Year:2011-12 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 year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section 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 assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
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 foregoing 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 incomeor 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 underassessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this Act; or
(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.
Explanation 3. -For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding "" the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Thus we see that for reopening an assessment made under Section 143(3) of the Act, 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 under-assessment 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.
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(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. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to
-full and true disclosure of material facts. (The proviso is not applicable where reasons to believe for issue of notice are recorded and notice is issued within four years from the end of assessment year.) It need hardly be said that change of opinion presupposes that there was earlier a formation of an opinion. When no such opinion was formed, it will be too far- fetched to assume that a change in that opinion was being effected. Further, the safest and surest guide for ascertaining whether any such opinion was formed at the original assessment stage is to look to the assessment order itself. When it, of its own, does not reveal that the matters and controversies now sought to be raised by way of reassessment were at all before the ITO or considered by him, it would be entirely surmiseful and, therefore, not permissible to still import their existence and consideration. This can, however, be permissible only where the assessment record of that stage overwhelmingly brings out that the matter did come for due consideration and was in fact considered. Mere silence on a matter or absence of discussion in the original order does not imply that the AO adjudicated upon the same one way or the other. 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 principle of 'change of opinion'.
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 assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons.
In the present case, a reading of the assessment clearly reveals that the matter of Allowability of section 40(a)(ia) of the Act was verified and examined . The relevant portion of the assessement order is "* * * The books of accounts produced by the assessee were test checked and verified. It was found that the given data is the accumulated balance at the end of the financial year. Hence provision of sec.40(a)(ia) of the Income tax act 1961 was not attracted. The assessee produced the supporting evidences, such as ledgers, bills, vouchers and other primary books of accounts maintained by the assessee. "
From the above it is crystal clear that the issue of application of sec.40(a)(ia) of the Act, has already been examined in course of original assessment proceedings and found not applicable in the instant case. Reopening the assessment on the same issue of applicability of sec.40(a)(ia) of the Act , already settled in course of original assessment proceedings is nothing but change of opinion which should Pa g e | 5 Smt. Uma Chakraborty MA No. 220/Kol/2018 (Arising out of I.T.A. No. 25/Kol/2017) ITA No. 25/Kol/2017 Assessment Year:2011-12 not be sufficient and valid ground for invoking the provision of section 147 of the Act. The other question is whether in such cases, the Revenue is without any remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked.
Thus where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. There is a distinction between erroneous application/ interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge 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 affect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition -which confers jurisdiction to reopen the assessment. 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. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. Thus if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and therefore, it is the case of 'change of opinion'. When at the first instance, in the original assessment proceedings, no opinion is formed, principle of 'change of opinion' cannot and does not apply. There is a difference between change of opinion and failure or omission the Assessing Officer to form an opinion on a subject matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. Thus in the present case, I find strength in the Pa g e | 6 Smt. Uma Chakraborty MA No. 220/Kol/2018 (Arising out of I.T.A. No. 25/Kol/2017) ITA No. 25/Kol/2017 Assessment Year:2011-12 submission of the appellant and agree that this is a case of 'change of opinion' and the AO's act of reopening the case was illegal and bad in law."
Aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us.
9. The ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand, the ld. Counsel for the assessee has defended the order of the ld. CIT(A).
10. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the ld. CIT(A) has passed a reasoned order stating that the reopening made by the Assessing Officer u/s 147 / 148 of the Act was nothing but a change of opinion as the matter relating to tax deduction at source u/s 40(a)(ia) of the Act which had already been examined by the Assessing Officer during the original assessment proceedings u/s 143(3) of the Act; and therefore reopening is bad in law. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the grounds of appeal raised by the revenue is dismissed.
11. In the result, the Miscellaneous Application of the Revenue is allowed and the appeal of the revenue is dismissed.
Order is pronounced in the open court on 28.08.2019.
Sd/- Sd/-
(S.S.GODARA) (A.L.SAINI)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
दनांक/ Date: 28/08/2019
(SB, Sr.PS)
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Smt. Uma Chakraborty
MA No. 220/Kol/2018
(Arising out of I.T.A. No. 25/Kol/2017)
ITA No. 25/Kol/2017
Assessment Year:2011-12
Copy of the order forwarded to:
1. ITO, Ward-40(2), Kolkata
2. Smt. Uma Chakraborty
3. C.I.T(A)- 4. C.I.T.- Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
6. Guard File.
True copy
By Order
Assistant Registrar
ITAT, Kolkata Benches
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