2011 (5) TMI 667 - AT - Income Tax

Tax Appeal Partially Allowed on Validity of Assessment Order and TDS Deduction

The appeal was partially allowed for statistical purposes, remanding the matter to the Assessing Officer for fresh adjudication on the reasons for ... Assessment - barred by limitation, invalid and inoperative in law - Whether Proceedings u/s 144 of the I.T. Act 61 and that u/s 147 of the Act are different proceedings as Sec 153 of the I.T Act 1961 provides different time-limit for each of the proceedings and therefore an order u/s 144 of the Act 1961 in a proceedings u/s 147 of the I.T. Act 1961 is misleading, unworkable and inoperative in law - ground rejected - whether disallowances and additions were fanciful surmise and should have deleted them – whether CIT(A) was not justified in holding that the proceedings u/s 147 of the Act was valid even in absence of fresh information – whether CIT(A) wrongly hold that the assessee was liable u/s 194C of the Act to deduct tax at source from Freight charges though the Lorries hired by the assessee carried goods only – whether CIT(A) should have that the assessee was not liable to pay advance tax on additions & disallowances u/s 208 of the I.T. Act 1961 but on current income only and consequently was not liable to pay interest u/s 234B of the I.T. Act 1961 Issues Involved:1. Limitation of the assessment order.2. Validity of proceedings under sections 144 and 147 of the Income Tax Act.3. Legitimacy of disallowances and additions made by the Assessing Officer.4. Justification of proceedings under section 147 without fresh information.5. Liability under section 194C for deduction of TDS on freight charges.6. Liability for advance tax and interest under section 234B.Detailed Analysis:1. Limitation of the Assessment Order:The assessee argued that the assessment order dated 29.12.2008, served on 05.01.2009, was barred by limitation. The Tribunal observed that the statutory time for passing the order under section 144 expired on 31.12.2008. The assessee could not provide evidence that the order was passed after the prescribed time limit. The Tribunal found no merit in the assessee's plea and rejected this ground.2. Validity of Proceedings under Sections 144 and 147:The assessee contended that proceedings under sections 144 and 147 are different, and the order under section 144 in a proceeding under section 147 is misleading and inoperative. The Tribunal noted that the return was processed under section 143(1) and no regular assessment was completed. The Assessing Officer (A.O.) found that TDS was not deducted as required under section 194C, which was a valid reason to believe that income had escaped assessment. The Tribunal upheld the validity of the notice under section 148 and the subsequent assessment under sections 144/147.3. Legitimacy of Disallowances and Additions:The assessee challenged the disallowances and additions made by the A.O. The Tribunal observed that the A.O. had disallowed expenses for loading and unloading, freight charges, tyre expenses, and added bogus credits as undisclosed income. The CIT(A) gave partial relief for loading and unloading expenses but upheld other disallowances. The Tribunal did not adjudicate these grounds, as it set aside the orders for fresh adjudication by the A.O.4. Justification of Proceedings under Section 147 without Fresh Information:The assessee argued that the proceedings under section 147 were invalid without fresh information. The Tribunal found that the A.O. had valid reasons for reopening the assessment due to non-deduction of TDS under section 194C. The Tribunal upheld the validity of the proceedings under section 147.5. Liability under Section 194C for Deduction of TDS on Freight Charges:The assessee argued that they were not liable to deduct TDS under section 194C as the lorries hired only carried goods. The Tribunal upheld the CIT(A)'s decision that the assessee was liable to deduct TDS under section 194C.6. Liability for Advance Tax and Interest under Section 234B:The assessee contended that they were not liable to pay advance tax on additions and disallowances but only on current income, and thus not liable to pay interest under section 234B. The Tribunal did not find it necessary to adjudicate this ground as the matter was remanded for fresh adjudication.Separate Judgments:There was a difference of opinion between the Judicial Member (J.M.) and the Accountant Member (A.M.). The J.M. proposed to set aside the orders and remand the matter for fresh adjudication, while the A.M. held that the Tribunal should decide the grounds on merit. The Third Member concurred with the J.M., leading to the majority view that the matter be remanded to the A.O. for fresh adjudication.Conclusion:The appeal was allowed in part for statistical purposes, with the matter remanded to the A.O. for fresh adjudication regarding the reasons for reopening the assessment and the disallowances/additions made. The grounds related to the validity of the assessment order and proceedings under sections 144 and 147 were rejected.