2015 (9) TMI 227 - HC - Income Tax

High Court overturns CIT(A) and Tribunal decisions on Section 148 assessment, emphasizing fair review of tax issues

The High Court set aside the decisions of the CIT(A) and Tribunal in a case concerning the validity of reopening an assessment under Section 148 of the ... Validity of reopening of assessment - non deduction of TDS - Whether the power under Section 148 was exercised by the Assessing Officer due to any change of opinion or the income had really escaped assessment was essentially a question of fact - contention of the assessee was that tax was not deducted because it was not deductible - ITAT allowed assessee appeal - Held that:- Some amount of exercise in order to find out whether the contention of the assessee was correct was required both on the part of the CIT(A) and the Tribunal, regard being had to the fact that they are the fact finding authorities. Surprisingly they did not think it necessary to do any such thing and proceeded to dispose of the matter merely on the basis that the exercise of power was based on change of opinion. We have no doubt in our mind that without application of mind they had disposed of the matter. In the circumstances, both the orders passed by the CIT(A) and the Tribunal are set aside. The matter is remanded to the CIT(A) for a decision afresh. The CIT(A) shall decide the question as regards the legality of exercise of power under Sections 147 and 148 after going into the claims and contentions raised by the assessee including the submission that no tax was deductible at source. - Decided in favour of revenue for statsitical purposes. Issues:1. Validity of reopening assessment under Section 148 of the Income Tax Act.2. Disallowance of interest under Section 40(a)(ia) for non-deduction of TDS.3. Whether the exercise of power under Section 148 was based on a change of opinion.Analysis:1. The case involved a dispute regarding the validity of reopening the assessment under Section 148 of the Income Tax Act for the assessment year 2005-06. The Assessing Officer issued a notice under Section 148 in 2009, citing discrepancies related to the non-deduction of TDS on interest payments made to Binani Cement Ltd. The Assessing Officer disallowed the interest under Section 40(a)(ia) amounting to Rs. 8,59,78,653. An appeal was filed by the assessee before the CIT(A) challenging this order.2. The CIT(A) allowed the appeal of the assessee on the grounds that the reopening of the case was merely based on a change of opinion by the Assessing Officer. The assessee contended that no tax was deductible at the source due to the nature of the transactions involving back-to-back loans between the holding company and the subsidiary company. However, the CIT(A) did not delve into this contention and solely focused on the issue of the reopening of the assessment.3. The revenue, aggrieved by the CIT(A)'s order, appealed to the Tribunal, which upheld the decision of the CIT(A) without considering the substantive contention raised by the assessee regarding the non-deductibility of tax at the source. The High Court observed that the question of whether the power under Section 148 was exercised due to a change of opinion or actual escapement of income was a factual matter. The Court criticized the CIT(A) and Tribunal for not applying their minds to the substantive contentions raised by the assessee.4. Consequently, the High Court set aside the orders of the CIT(A) and Tribunal, remanding the matter back to the CIT(A) for a fresh decision. The Court directed the CIT(A) to consider the legality of the exercise of power under Sections 147 and 148, taking into account the claims and contentions raised by the assessee, particularly regarding the non-deductibility of tax at the source. The High Court emphasized the importance of fact-finding and proper consideration of all relevant arguments in such matters before reaching a decision.5. In conclusion, the High Court disposed of the appeal by ordering a fresh consideration of the case by the CIT(A) to determine the validity of the assessment reopening and the disallowance of interest under Section 40(a)(ia) in light of the contentions raised by the assessee. The judgment highlighted the necessity for a thorough examination of facts and legal arguments by the tax authorities in such cases to ensure a just and informed decision.