Income Tax Appellate Tribunal - Kolkata
Purnima Dutta., Kolkata vs Assessee on 3 September, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
[Before Hon'ble Sri Mahavir Singh, JM & Hon'ble Sri Shamim Yahya, AM ]
ITA No.432/Kol/2013
Assessment Year : 2006-07
(APPELLANT ) (RESPONDENT)
Smt Purnima Dutta, -vs- I.T.O, Ward-55(4),
Kolkata Kolkata
(PAN:ADRPD 5608 D)
For the Appellant Shri Soumitra
Chowdhury, Advocate
For the Respondent Shri Vivek Verma, JCIT,
Sr.DR
Date of Hearing : 28.08.2014
Date of Pronouncement : 03.09.2014.
ORDER
Per Shri Shamim Yahya, AM
This appeal filed by the assessee is directed against order of ld. C.I.T.(A)- XXXVI, Kolkata dated 21.12.2012 and pertains to Assessment year 2006-07.
2. The grounds of appeal in this appeal read as under :-
"1. For that the Ld.Commissioner of Income Tax (Appeal)-XXXVI/Kol has erred in law as well as on facts of the case in confirming the addition of Rs.32,10,999.00 (Rs.42,81,332.00 - Rs.10,70,333.00) u/s 40(a)(ia) of the I.T.Act, 19761 on the grounds which are not correct.
2. For that the Ld.Commissioner of Income Tax (Appeal)-XXXVI,/Kol has erred in law as well as on facts of the case in enhancing the assessed income by a sum of Rs.22,32,562.00 u/s 40(a)(ia) of the I.T.Act, 1961 to the tune of Rs.23,32,532.00 on the grounds which are not correct.
3. For that the appellant craves leave to adduce, modify and/or alter the grounds at or before hearing."
2.1. The assessee has also raised additional grounds of appeal which is as under :-
"2. For that on the facts of the case, the ld.CIT(A) was wrong in not considering the facts that the reopening u/s 147 was itself bad-in-law, therefore, the order passed by the AO u/s 148 dated 23.12.2011 and sustained by the ld. CIT(A) is completely arbitrary, unjustified and illegal and should have been quashed."2 ITA.No.432/Kol/2013
Smt.Purnima Dutta A.Yr.2006-07
3. In this case original assessment was passed u/s 143(3) of the Act on 30.12.2008 on a total income of Rs.36,13,450/-. Thereafter assessment was reopened. During the re-assessment AO observed as under :-
"On scrutiny of the records it is seen that the assessee has paid Rs.42,81,332/- to M/s.Paramount Films of India Ltd. during the financial year 2005-06 relevant to the assessment year 2006-07.
As per records, M/s. Paramount Films of India Ltd having P.A.No.AAACP9517E is assessed to tax in International Taxation, Circle-4(2), Mumbai. The residential status of M/s.Paramount Films of India Ltd. is Non-resident and it is a Foreign Company and is incorporated in USA.
Under the provisions of Section 195 of the I.T.Act, 1961, a person responsible for paying to non-resident or to a foreign company shall deduct income-tax thereon at the rate in force. As such the assessee was required to deduct tax on gross basis while making payment to M/s.Paramount Films of India Ltd., a non-resident and foreign company, as required u/s 195 of the I.T.Act, 1961. But the assessee has failed to do so. The assessee was, therefore, asked to show cause as to why the amount of Rs.42,81,332/- should not be disallowed and added back to her total income for the assessment year 2006-07 u/s 40(a)(i) of the I.T.Act, 1961, for non-deduction of tax at source."
The assessee contended that section 195(1) of the Act does not apply. However AO was not satisfied. He referred to the confirmation received from AO, International Taxation, Mumbai having jurisdiction over M/s.Paramount Films of India Ltd. and proceeded to hold as under :-
"In view of the above, M/s. Paramount Films of India Ltd., to whom the assessee has paid Rs.42,81,332/- during the F.Y.2005-06 relevant to the assessment year 2006-07 without deduction of tax at source from payment, is a foreign company and provisions of section 195 of the Income-tax Act, 1961, is applicable in this case. But the assessee has failed to do so.
Out of the above sum of Rs.42,81,332/- paid to M/s. Paramount Films of India Ltd. an amount of Rs.10,70,333/- has already been added by the A.O. in the order u/s 143(3) of the I.T.Act, 1961, for the assessment year 2006-07 which was sustained by the Learned CIT(A)-XXXVI, Kolkata, vide order dated 26/9/2011. As such, an amount of Rs.32,10,999/- (Rs.4,81,332 - 10,70,333) is added back to the total income of the assessee for the assessment year 2006-07 as per provisions of section 40(a)(ia) of the Income-tax Act, 1961, for failure on the part of the assessee for non-deduction of tax at source as per provisions of section 195 of the Income-tax Act, 1961."
4. Assessee appealed before the ld. CIT(A) for adjudicating both the issues on reopening as well as merits of the addition of Rs.32,10,999/-. The ld. CIT(A) did not adjudicate the issue of reopening. However, he confirmed the disallowance made by the AO. Furthermore the ld. CIT(A) held that the total payment made by the assessee 3 ITA.No.432/Kol/2013 Smt.Purnima Dutta A.Yr.2006-07 to M/s. Paramount Film of India Ltd. within the year was Rs.66.13,884/-. Hence he enhanced the addition by Rs.22,32,562/-. Against the above the assesee is in appeal before us.
5. At the outset, the ld. Counsel of the assessee contended that the issue of reopening has not been adjudicated by the ld. CIT(A). He submitted that the reopening in this case is clearly bad in law. He submitted that the issue of payment to M/s. Paramount Film of India was duly considered by the AO during the assessment u/s 143(3) of the Act. The ld. Counsel of the assessee further submitted that the licensee agreement with M/s.Paramount Film India Ltd. was also submitted before the AO. Hence the AO was fully aware of the nature of the payments made to M/s.Paramount Film (India) Ltd. The AO has considered the issue and also made addition in this regard. Hence he submitted that the reopening on the same issue of payment to M/s.Paramount Film of India Ltd. by the AO is not valid as it is a change of opinion and the AO has duly considered the issue of payment to M/s.Paramount Film of India Ltd. On the same issue now he cannot reopen the assessment to make further addition on fresh application of mind. In this regard the ld. Counsel of the assessee also contended that all material facts were disclosed before the AO and no material has come to the possession of the AO. Hence he submitted that reopening is clearly bad. In this regard the ld. Counsel of the assessee referred to the decision of the Hon'ble Calcutta High Court in ITAT NO.108 of 2012, GA No.1510 of 2012 in the case of CIT vs M/s.Kanoi Industries (P)Ltd. order dated 15th June, 2012 wherein it has held as under :-
"When on the same set of fact and materials Assessing Officer takes bona fide decision, it is not open for the subsequent officer to reopen the same just because he does not agree to the decision of the previous officer. In this case the Tribunal has recorded that a mere change of opinion between two officers in reopening of the assessment and it is not legally permissible. We, therefore, do not find any infirmity and illegality in the impugned judgment and order dated 12th January, 2012 passed by the learned Tribunal."
5.1. The ld. Counsel of the assessee further placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. 320 ITR 561 4 ITA.No.432/Kol/2013 Smt.Purnima Dutta A.Yr.2006-07 and the decision of the Hon'ble Bombay High Court in the case of Mrs.Parveen P.Bharucha vs DCIT and Another 348 ITR 325.
6. The ld. DR, on the other hand, relied on the orders of the authorities below.
7. We have heard the rival submissions and carefully perused the records. We find that in this case original assessment was made u/s 143(3) of the Act. In the assessment order u/s 143(3) of the Act we note that in para -2 the AO has dealt with the disallowance in respect of sundry creditors. In this there is a clear mention of payment to M/s. Paramount Film (India) Pvt. Ltd. wherein the outstanding amount has been shown at Rs.10,59,716/-. The AO in this regard has noted that the assesse has given the names and address details very late. The AO has deputed the Inspector. The Inspector with regard to M/s.Paramount Film (India) Pvt.Ltd. has mentioned that "payments made during the year Rs.55,54,177/-. As address is given at Mumbai. We could not verify the same within one day.". The AO noted that the assesseee was given an opportunity to represent the above discrepancy/payment and reconciliation. The AO noted that the assessee has chosen not to reconcile the same. AO also observed that the assessee has not given all the agreements to ascertain the exact payments that she has made. AO proceeded to compute the disallowance u/s 41(1) of the Act as under :-
Name Amounts said to have Total
been paid during the
year
Arjoe Entertainment Pvt.Ltd. 7438 30,139 37,577
Black Magic Motion Pictures 1275 5576 6851
Beyond Reels 12080 520 12,600
Deep Films 3,20,060 NIL 3,20,060
Inner Circle 7923 *71463
Assessee received
Rs.63,916/-
Difference amount is
Rs.71,463-63916 =
7,447
Jagannath Productions 134924 4740 1,39,664
Tejasvi Entertainment 3790 13,281 17,071
Paramount Film (India) Pvt. 10,59,716
Ltd.
TOTAL 5,33,823
Therefore, based on the above facts the total disallowance u/s 41(1) is Rs.5,33,823/-".
5 ITA.No.432/Kol/2013Smt.Purnima Dutta A.Yr.2006-07 7.1. From the above we note that the AO has duly considered the payment to M./s. Paramount Film (India) Pvt. Ltd. The ld. Counsel of the assessee has submitted that the agreement under which payment was made to M/s.Paramount Film (India)Ltd. was also submitted before the AO. He was also aware of the payments and balance outstanding in the name of the said company. Hence it cannot be said that the AO was not aware of the nature of payments made to the said party. AO has also considered and chosen not to make any addition u/s 41(1) of the Act in the name of the said party, despite noting that the Inspector has reported that payment made during the year to the said party was Rs.55,54,177/-. Thus AO after conscious application of mind has chosen not to make any disallowance. Hence it is clear that the AO has applied his mind regarding the nature of payment and chosen not to make any disallowance.
7.2. Now in this background we note that while reopening of the assessment on the same ground of payment to M/s.Paramount Film (India) Pvt. Ltd. AO has noted in the reason of reopening that as per records M/s.Paramount Film (India)Pvt.Ltd. having PA NO.AAACP9517E is assessed to tax in International Taxation 4(2), Mumbai. AO was of the opinion that the assesee was required to make TDS u/s 195 of the Act which the assessee has not done. Thus we note that no new fact has come to the notice of AO for reopening the issue of payment to M/s.Paramount Film (India) Ltd.. The nature of payments, licencee agreement made with the party were all available with the AO in the original assessment u/s 143(3) of the Act. AO consciously made a decision not to make any disallowance in this regard. Hence on the same issue when the reopening is done and the AO changes his opinion and comes to the decision that the assessee should have been deducted TDS u/s 195 of the Act, it is clearly a change of opinion. It is a fresh application of mind on the same set of facts. This, in our considered opinion, is not permissible as held by the Jurisdictional High Court in the case of CIT vs M/s.Kanoi Industries (P)Ltd. (supra). In this case it was expounded that "When on the same set of fact and materials Assessing Officer takes bona fide decision, it is not open for the subsequent officer to reopen the same just because he does not agree to the decision of the previous officer. In this case the Tribunal has recorded that a mere change of opinion between two officers in reopening of the assessment and it is not legally permissible. We, therefore, do not find any infirmity and illegality in the 6 ITA.No.432/Kol/2013 Smt.Purnima Dutta A.Yr.2006-07 impugned judgment and order dated 12th January, 2012 passed by the learned Tribunal."
Thus it is not open for the officer to reopen the assessment just because he does not agree to the decision of the previous officer. Hence reopening on mere change of opinion between two officers is not legally permissible.
7.3. We may also refer to the following case laws The Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd reported in 320 ITR 561 (SC) has held as under :-
"Therefore, post - 1st April 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer."
7.4. Similar was expounded by the Hon'ble Apex Court in the case of CIT vs Foramer France 264 ITR 566. It was held that reassessment cannot be done on the basis of mere change of opinion. It was held that law in this regard was same before and after the amendment by Direct Tax Law amendment 1987.
7.5. Thus the decisions referred to the above supports the case of the assessee. If the AO has considered the payment and nature of the payment to M/s.Paramount (India) Ltd. and chosen not to make any disallowance, reopening and addition on this account is merely a change of opinion and is not permissible. Moreover if it is considered that when the details were available and AO chose not to make any disallowances by invoking provision of section 195 of the Act, the remedy lied with the Commissioner of Income Tax u/s 263 of the Act. This cannot be made a subject matter of reopening u/s 147 of the Act and fresh application of mind by another assessing officer. In these 7 ITA.No.432/Kol/2013 Smt.Purnima Dutta A.Yr.2006-07 circumstances we hold that reopening in this case is bad in law. Since we have quashed the issue of reopening the merits of the case is not considered.
8. In the result the appeal of the assessee is allowed.
Order pronounced in the court on 03.09.2014.
Sd/- Sd/-
[ Mahavir Singh ] [Shamim Yahya]
Judicial Member Accountant Member
Date: 03.09.2014.
R.G.(.P.S.)
Copy of the order forwarded to:
1. Smt.Purnima Dutta, 95, Rash Behari Avenue, Kolkata-700029.
2 I.T.O., Ward-55(4), Kolkata
3. CIT(A)-XXXVI, Kolkata 4. CIT - Kolkata.
5. CIT-DR, Kolkata Benches, Kolkata True Copy, By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches