2014 (5) TMI 780 - HC - Income Tax

Court invalidates late tax notice; rules against reassessment beyond 4-year limit. Petitioner prevails.

M/s. Asit C. Mehta Investment Intermediates Ltd. Versus The Deputy Commissioner of Income Tax And Others

The petitioner challenged a notice under section 148 of the Income Tax Act 1961 issued more than four years after the relevant assessment year. The notice ... Validity of notice u/s 148 of the Act – Bar of limitation – Mere change of opinion - TDS not deducted – Wrong claim of deduction of STT – Held that:- Neither the notice issued u/s 148 nor the reasons furnished contained any allegation that the escapement of tax was on account of any failure on the part of the assessee to fairly and truly disclose any material - what is sought to be argued was the merits of the issue pertaining to the amount that ought to have been added to the assessee's income - It is not even suggested that any material had been withheld or that the AO had not applied his mind to the relevant material - such a contention could not have been raised as the assessee had clearly disclosed the entire record – thus, the reopening on this ground is not maintainable. The assessee has furnished the details of the deductions of tax in respect of which he had claimed expenditure - it has deducted tax at source u/s 194J of the Act and a statement giving details was also enclosed - It is not contended that any information in this regard had not been disclosed - It is not suggested that the deduction had not been made in respect of any item other than that mentioned in the said query-sheet – the assessee stated that it had deducted tax on Demat charges - it is not contended that any material had been withheld or that the tax not being deducted in respect of any payment other than the mentioned in the statement - It is difficult to understand on what basis it is alleged that the income had escaped tax on a deduction that had not been claimed - the reasons do not even allege that the assessee had failed to disclose fully and truly all material facts necessary for the assessment – thus, the proposed reopening is only on the basis of a change in opinion which is not permissible – Decided in favour of Assessee. Issues:1. Challenge to notice under section 148 of the Income Tax Act 1961 dated 30th March 2012.2. Allegations of non-deduction of tax on specific payments and wrongful deduction in respect of security transaction tax.3. Consideration of responses to queries raised by Assessing Officer.4. Reopening of assessment beyond the four-year period.5. Detailed analysis of specific items mentioned in the notice.Issue 1:The petitioner challenged a notice under section 148 of the Income Tax Act 1961 dated 30th March 2012, issued more than four years after the end of the Assessment Year 2005-06. The reasons for reopening were furnished under a letter dated 19th October 2012.Issue 2:The notice alleged non-deduction of tax on specific payments and wrongful deduction in respect of security transaction tax. The payments mentioned included transaction charges, repairs and maintenance, arbitrage fees, and demat charges. The Assessing Officer added amounts to the petitioner's income for non-deduction of TDS on these payments.Issue 3:The petitioner responded to queries raised by the Assessing Officer regarding each of the specific items mentioned in the notice. The responses were provided in writing, and the Assessment Order was passed under section 143(3) after considering these responses.Issue 4:The reopening of the assessment beyond the four-year period was challenged by the petitioner. The reasons for reopening did not allege any failure to disclose material facts necessary for assessment, and it was argued that the reassessment proceedings were initiated solely on a change in opinion, which is impermissible.Issue 5:Detailed analysis of specific items mentioned in the notice was conducted. Responses to queries regarding transaction charges, repairs and maintenance, arbitrage fees, and demat charges were provided by the petitioner, demonstrating compliance with TDS requirements and disclosure of relevant information. The proposed reassessment on these grounds was deemed not sustainable, and the rule was made absolute in favor of the petitioner.