2016 (3) TMI 1282 - AT - Income Tax

Tribunal quashes assessment re-opening & expenditure disallowance, emphasizes need for new material.

The Tribunal allowed the appeal, quashing the re-opening of the assessment under section 147/148 and deleting the disallowance of expenditure of Rs. ... Re-opening of assessment - Change of opinion - Failure to disclose fully and truly all material facts - Section 147/148 reassessment after four years - Section 40(a)(ia) disallowance for non-deduction of TDS - Section 194I threshold for TDS on rentRe-opening of assessment - Change of opinion - Failure to disclose fully and truly all material facts - Section 147/148 reassessment after four years - Section 194I threshold for TDS on rent - Section 40(a)(ia) disallowance for non-deduction of TDS - Validity of reopening assessment under section 147/148 after four years and consequent disallowance under section 40(a)(ia) in respect of rent of boards - HELD THAT: - The Assessing Officer issued notice after the four year period and the reasons recorded did not state that any income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The material on record (including replies, ledger details and correspondence) shows that the assessee had disclosed the primary facts regarding rent received and rent paid and had answered queries at the original assessment; the Assessing Officer had examined the payments in the original assessment and accepted the assessee's explanation that individual payments did not exceed the threshold under Section 194I. Re opening was therefore founded on an audit objection and amounted to a mere change of opinion by the revenue, which is not a valid ground for reassessment after four years. Reliance on precedents establishing that reassessment cannot be based on facts already available to the Revenue and that only non disclosure of primary facts justifies reopening was accepted. As the reopening was invalid, the consequential disallowance under Section 40(a)(ia) could not stand and was deleted; the appellate tribunal did not decide the merits of the disallowance as the issue became academic once reopening was quashed. [Paras 6, 8, 10]Reopening under section 147/148 was invalid as it was based on change of opinion/audit objection and not on failure by the assessee to disclose material facts; consequently the reassessment and the disallowance under section 40(a)(ia) are quashed.Final Conclusion: Appeal allowed; reopening of assessment for Assessment year 2007-08 under section 147/148 quashed and the addition/disallowance under section 40(a)(ia) deleted. Issues Involved:1. Re-opening of the assessment under section 147/148 of the Income Tax Act.2. Disallowance of expenditure of Rs. 2,07,43,117/- under section 40(a)(ia) of the Income Tax Act.Detailed Analysis:1. Re-opening of the Assessment under Section 147/148 of the Income Tax Act:The assessee challenged the re-opening of the assessment on the grounds that there was no new information available to the Assessing Officer (AO) and that the original assessment had already considered the issue in question. The original assessment was completed under section 143(3) on 12.10.2009, and the re-opening was based on an audit objection regarding non-deduction of TDS on expenditure of Rs. 2,07,43,177/-.The assessee argued that the re-opening was merely a change of opinion and relied on various judicial precedents to support the contention that re-opening based on audit objections or change of opinion is not justified. The CIT(A) upheld the re-opening, citing that the issue of TDS deduction was neither raised by the AO nor addressed by the assessee during the original assessment.The Tribunal considered the reasons recorded for re-opening and noted that the AO did not mention any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It was observed that the assessee had disclosed all primary facts during the original assessment, and the AO had examined the expenditure and was satisfied with the explanation provided.The Tribunal referred to several judicial decisions, including those of the Hon'ble Supreme Court and various High Courts, which established that mere change of opinion or audit objections do not justify re-opening of assessments. It was concluded that the re-opening was based solely on audit objections without any new material facts, and thus, the re-opening was quashed.2. Disallowance of Expenditure under Section 40(a)(ia) of the Income Tax Act:The AO disallowed the expenditure of Rs. 2,07,43,177/- under section 40(a)(ia) for non-deduction of TDS on rent paid for advertising boards. The assessee contended that the rent paid was below the threshold limit of Rs. 1,20,000/- prescribed under section 194I, and therefore, no TDS was required to be deducted.The CIT(A) confirmed the disallowance, stating that the assessee failed to provide evidence to support the claim that the payments were below the threshold limit. The Tribunal, however, found that the assessee had provided sufficient details and explanations during the original assessment, which were accepted by the AO.The Tribunal noted that the AO had verified the facts from the concerned Police Station regarding the loss of documents and was satisfied with the explanations provided by the assessee. It was observed that the AO had already considered the issue of rent payments and found no discrepancies during the original assessment.Given the quashing of the re-opening of the assessment, the Tribunal held that the disallowance of expenditure under section 40(a)(ia) was also not justified. Consequently, the addition made in the re-assessment order was deleted.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the re-opening of the assessment under section 147/148 and deleting the disallowance of expenditure of Rs. 2,07,43,177/- under section 40(a)(ia). The decision emphasized that re-opening based on mere change of opinion or audit objections without new material facts is not permissible.