TaxTMI 
TaxTMI 
2012 (12) TMI 899
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....,70,869/-. Eventually, the Assessing Officer passed scrutiny assessment order dated 30th December 2008 determining total income at Rs. 24,18,14,000/-. 2. In the present petition, challenge is to the communication dated 4th March 2011 whereby notice issued under Section 148 of the Income Tax Act, 1961 ["Act" for short] for the year 2006-07 for re-opening of the assessment on the ground of escapement of income. 3. The reasons for re-opening were recorded on 4th March 2011, which reads, thus : "On verification of the records for the above assessment year, it is noticed that the assessee company had paid discount as trade incentive slab scheme - Garma Garam offer to the extent of Rs. 22,70,869/- to various parties. The above payment is in fact commission paid against the sale and hence, covered under the provisions of Section 194C of the Act. However, no TDS has been deducted. Therefore, the expenditure of Rs. 22,70,869/- was required to be disallowed u/s. 40(a)(ia) of the Act. During the course of assessment proceedings, the assessee failed to disclose the full and true material facts before the Assessing Officer. In view of the above, I have reason to believe that the income char....
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....l submissions, not liable for TDS u/s. 194C of I.T Act. "15. We would like to submit that the relationship between the assessee company and the persons to whom the amount has been credited is that of principal to principal and not that of principal to agent. Further, the credit note which is there on record clearly shows that the same is given for 'discount' which is based on quantity sold by them. Thus, the same is in the nature of quantity discount and not in the nature of commission as alleged and therefore the question of deduction of tax does not arise either under section 194C or any other provisions of Chapter XVII." "17. Without prejudice to the above, we would like to submit that the assesses has floated sales promotion scheme for traders in the jodhpur region namely 'Garma Garam offer' according to which based on lifting of the quantity, they are allowed discount as specified in the scheme by the super-stockist and company reimburses to super-stockist the said discount by issue of credit note. The assessee had issued credit note for the discount to three persons namely M/s. Meenakshi Enterprise, M/s. Krishna Udhyog & M/s. Amber Marketing, all of whom are super-stockists....
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....of the Apex Court in case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. to hold that, "..at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief and whether the material would conclusively prove the escapement is not the concern at that stage." On the basis of this, it is held that the formation of belief by the Assessing Officer was within the realm of subjective satisfaction, and therefore, objections filed were rejected. 6. On issuance of the notice, on the lines of rejection of objections, affidavit-in-reply has been filed reiterating those aspects. It is reiteratively emphasized that as per the provisions of Section 194H, the assessee has to deduct tax on said payments and to deposit the same in the Government account. As deduction at source is not made, it is violative of provisions of Section 40(a)(ia) of the Act. Thus, the income needed to be assessed has escaped the assessment in the present case. Moreover, the discount paid to various parties under the trade incentive slab "Garma Garam" offer is in fact the commission paid against the sale and as the nature of dis....
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....rt to the submissions made :- [1] CIT v. Kelvinator India Ltd. [2010] 320 ITR 561; [2] Praful Chunilal Patel v. M.J Makwana, Asstt. CIT [1999] 236 ITR 832 (Guj.) 10. On having considered rival contentions raised by the parties and on having closely examined the material on record, it needs to be mentioned at the outset that the challenge in this petition is to the re-opening of assessment within four years from the end of the relevant Assessment Year, which was finalized on a scrutiny assessment under Section 143(3) of the Act. As the assessment is being re-opened within four years from the end of the relevant assessment year, the requirement of income chargeable to tax having escaped assessment on account of failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment could not be warranted. If such re-opening is based on mere change of opinion, the same would be impermissible even if the re-opening of the assessment is done within four years. Reference will have to be made to the judgment in case of M/s. Kelvinator India Limited (Supra) where noticing the amendment in Section 147, from time to time, the concept....
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....ction gets covered under Section 194C of the Act. 14. As can be noted from communication dated 18th December 2008, wherein the present respondent had called for certain details under Section 142(1) of the Income Tax Act, 1961, there were certain details already furnished by the present petitioner, pursuant thereto, this communication is sent calling for details and nature of various types of expenses debited under the head, "Selling & Distribution Expenses" and furnish the details of persons to whom the amount was paid and also the details of TDS. The total amount for which the inquiry had been raised is Rs. 3,27,65,760/- which is at serial 8.12 of this correspondence seeking justification of disproportionate increase/ decrease in expenses in comparison to the immediate preceding year. By return communication dated 26th December 2008, with respect to this query at para 8.12, the petitioner enclosed statement reflecting details of sales discount given by way of credit notes in respect of sum of Rs. 22,70,869/-. This statement reflects credit notes with date and number issued in respect of trade incentive slab "Garma Garam" offer to three different parties who are termed as "Super S....
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....ten percent (10%), at the time of crediting such amount to the account of payee, or at the time of making payment of such income either in cash, or by way of cheque or draft, or by any other mode. This would apply where the amount exceeds a sum of Rs. 5,000/-. It would be relevant to make a mention of Section 194C of the Act, which also makes it obligatory on the part of the person to deduct an amount equal to 1 per cent, or 2 per cent of the payments being made to an individual or HUF at the time of crediting such amount to the account of contractor. It is rightly insisted by the petitioner that this is neither a contract for service, nor is it a case of paying of commission or brokerage. This case would neither fall under Section 194C which covers the case of contract for service nor under Section 194H of the Act which covers the income by way of commission or brokerage. It is the case of contract for goods which is neither covered under Section 194C nor under Section 194H of the Act, and therefore, Section 40A [ia] will not be attracted in as much as this is neither a case for non-deduction of commission or brokerage, nor of an amount payable to the contractor or sub-contractor.....