Tribunal upholds CIT(A) order quashing assessment reopening & deleting commission addition.

The Tribunal dismissed the revenue's appeal, upholding the order of the ld.CIT(A) in quashing the reopening of assessment and deleting the addition on account of commission payment. The Tribunal found no failure on the part of the assessee to disclose material facts and no valid grounds for the reopening, thereby supporting the decision of the lower authorities.

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Issues:
1. Validity of reopening assessment after the lapse of four years.
2. Deletion of addition on account of commission payment which was provision in nature.

Issue 1: Validity of reopening assessment after the lapse of four years

The appeal was filed by the revenue against the order of Commissioner of Income-tax (Appeals) regarding the reopening of assessment u/s 143(3) r.w.s. 147 of the I.T Act, 1961 for A.Y. 2005-06. The Assessing Officer recorded reasons and issued notice u/s 148 after four years from the original assessment. The first proviso to section 147 states that no reopening shall be done after the expiry of four years from the original assessment u/s 143(3) unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The reasons recorded by the Assessing Officer alleged that income had escaped assessment due to commission payments not being offered to tax by the Directors in their returns. However, the Tribunal found these reasons unsustainable as there was no failure on the part of the assessee to disclose material facts. The Tribunal cited various judgments supporting this view, including Hindustan Lever Ltd vs. R.B. Wadkar and Allanasons Ltd. v DC IT. The Tribunal concluded that the reopening was illegal and upheld the order of the ld.CIT(A) in quashing the reopening.

Issue 2: Deletion of addition on account of commission payment

The Assessing Officer had made an addition on account of commission payment which was provision in nature, alleging that it was not reflected in the Directors' returns. The Tribunal found that the assessee had disclosed the payment of commission in its books of account and during the assessment proceedings. The assessee had also provided evidence of TDS deduction on the payment. The Tribunal noted that the Assessing Officer's approach was irresponsible and casual, trying to presume no commission payment based on the Directors' returns. The Tribunal held that the payment was part of the directors' salary, subject to TDS under section 192, not 194H. The Tribunal found no escapement of income and no valid belief for reopening the assessment. The ld.CIT(A) rightly deleted the addition, and the Tribunal upheld this decision, dismissing the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the order of the ld.CIT(A) in quashing the reopening of assessment and deleting the addition on account of commission payment. The Tribunal found no failure on the part of the assessee to disclose material facts and no valid grounds for the reopening, thereby supporting the decision of the lower authorities.

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