TaxTMI 
TaxTMI 
2020 (1) TMI 56
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....etitioner is engaged in the business of real estate and earns income from sale of plots, sale of residential/commercial properties and interest income on FDRs etc. Return of Income (ROI) for AY 2012-13, declaring a total income of Rs. 157.35 crores was filed on 29.09.2012. On the same date, the ROI was revised in order to correct certain inadvertent errors and the total income remained unchanged at Rs. 157.35 crores. The ROI was selected for scrutiny assessment under Section 143(3) of the Act. A comprehensive questionnaire was issued to the Assessee seeking certain information/clarification. The Assessee was required to submit inter alia the audited accounts; computation of income; details of inventories; purchase and sales; details of Tax Deducted at source (TDS) under various heads. 4. On 03.11.2014, Assessee submitted part details before the Assessing Officer(AO) and clarified that the income from sale of properties is recognized on the basis of percentage of completion method of accounting. Thereafter, on various dates, the remaining details as required by the AO were furnished. 5. The details of the cost charged to profit and loss account project wise, included Government du....
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....arification. The Assessee responded to the same and furnished the requisite information. Revenue then issued another questionnaire on 27.10.2015 followed by yet another questionnaire on 15.01.2016. These were also responded by way of submissions dated 22.02.2016, endorsing project wise cost charged to profit and loss account, including Government dues as a prominent line item of cost, comprising of EDC and other Government dues in connection with development of land and other real estate activities of Assessee. 10. On 16.03.2016, the AO passed the scrutiny assessment order under Section 143(3) of the Act, and assessed the total income at profit, declared under MAT and a loss under normal provisions after making certain additions. Even in this case, after an expiry of four years from the end of relevant assessment year, the AO has issued notice under Section 148 for reopening of the assessment year. Reasons recorded for re-opening the assessment along with satisfaction note, as provided to the aseesee are postulated on the same ground that the EDC paid to HUDA was subject to TDS under Section 194 of the Act. Assessee's detailed objections to the reopening have been rejected vide or....
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....aising all issues relating to merits of the matter and the Court should refrain from exercising its writ jurisdiction. On merits, she argued that HUDA is not a local/statutory authority and the payments made towards EDC are towards 'rent', which income is subject to deduction of TDS. In support of her submissions, she relied upon the judgment of the Apex Court in the case of M/s New Okhla Industrial Development Authority Vs. CIT, (2018) 406 ITR 209 SC and also the judgment of High Court of Punjab and Haryana in Greater Mohali Area vs. Deputy Commissioner of Income Tax, 2018 SCC Online P&H 426. 14. With respect to Petitioner's contention that reasons for reopening refer to a provision which is in applicable, it was argued that quoting of the wrong provision is immaterial, as long as the source of power exercised exists in law, and the action could be traced to the source available in law. By referring to the reasons for reopening, it was thoughtfully urged that the EDC payment would qualify as payment towards rent and as long as such a position is correct in law, notwithstanding the wrong provision quoted in the reasons, it would not ipso facto render the notice to be invalid. In s....
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....me chargeable to tax under the head profit and gains of business and profession. In this case tax has not been deducted on Rs. 173,52,21,186/- and therefore the same was wrongly claimed and allowed as expenses. In view of these facts the income to the tune of Rs. 173,52,21,186/- has been under assessed as per the provisions of sub-clause (i) to clause (c) to explanation-2 of section 147 of the Act. 3. Analysis of information collected/received Assessee has paid of Rs.l73,52,21 ,186/- to HUDA without deducting TDS. 4. Enquiries made by the AO as sequel to information collected or received. The information was gathered during enquiry by the office of the Asstt. Director of Income Tax (Inv.), Unit-IV, New Delhi and the file has been transferred to this office. The information regarding payment of EDC charges amounting to Rs. 173,52,21,186 I- was filed by the assesse during course of enquiry. Hence, the authenticity of the information cannot be doubted. 5. Findings of the AO. In view of the detailed information received from Asstt. Director of Income Tax (Inv.), Unit-IV, New Delhi, the provisions of section 40a(ia) of the Income Tax Act, non-deduction of *TDS on the amount ....
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....ening u/ s 147 of the Act. In this case more than four years have elapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 has to be obtained from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act." [Emphasis Supplied] 16. The reasons for re-opening with respect to AY 2013-14 are nearly identical and therefore the same are not being reproduced separately. 17. The Petitioner filed objections to the aforesaid reasons, which have been disposed of by way of a speaking order, rejecting the same. The order reads as under:- "Sub: Your Scrutiny assessment proceedings of AY 2012-13 -Reg. Refer to your letter dated 04.12.2018 received in this office on 05.12.2018. 1. You are asking copy of Assistant Director of Income Tax, Investigation, Unit-IV, New Delhi. Here report means transfer of file from ADIT(Inv), Unit-IV to this charge. Your reply is part of the file and on basis your reply reason to believe that TDS has not been deducted in respect of EDC charges has been framed. 2. Copy of satisfaction enclosed with this office letter dated 30.11.2018 may be treated as withdrawn same was....
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....ssee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148." [Emphasis Supplied] 20. Similarly, this court in Coperion Pvt. Ltd. v. CIT, (2015) 378 ITR 525 (Del), held as under: "The effect of the change brought about to Section 147 by way of amendment with effect from 1st April 1989 requires to be examined. Prior to 1st April 1989, in order to reopen an assessment the AO ought to have had reason to believe that the income of the Assessee has escaped assessment on account of the omission or failure by the Assessee to file a return or to disclose fully and truly all material facts necessary for asse....
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.... v. CIT &Anr., (2009) 308 ITR 38 (Del) held that it would not be open for the Assessing Officer to reopen the assessment already done beyond the period of four years unless the income has escaped assessment on account of failure, on the part of the assesse, to disclose all the material facts. In the case of Wel Intertrade P.Ltd. (supra) it has been held as under: "A plain reading of the said proviso makes it more than clear that where the provisions of section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under section 139, etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the present case, the question of making of a return is not in issue and the only question is with regard to the second portion of the proviso, which relates to failure on the part of the as....
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....ear. 23. We find force in the submissions advanced by Mr. Kaushik that in the present case, the test for reopening the assessment as per proviso to Section 147 has not been met. The questionnaire raised by the AO during the course of assessment proceedings categorically adverted to the question of withholding tax. The details of the TDS paid and EDC charges were available with the AO. Revenue has sought to contend that even if the AO could have, with due diligence, discovered material from the tax audit report, it does not necessarily mean that the petitioner had made a full and true disclosure of material facts. The mere production of evidence before AO is not enough and there may be a failure to make full and true disclosure, if some material for the assessment lies embedded in that evidence which the AO could uncover, but did not do so. The aforesaid submissions may be correct proposition in law; however, each case has to turn on its own facts. In the present case, the details of the TDS and EDC charges paid to HUDA were brought to the notice of the AO. On this question, it would be sufficient to refer to the decision of this Court in Donaldson India Filters Systems Pvt. Ltd. v....
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....ose fully and truly all material facts, however, the recorded reasons except for using the expression "failure on the part of the Assessee to disclose fully and truly all material facts", do not specify as to what is the nature of default or failure on the part of the Assessee. The reasons also do not explain or specify as to what is the rationale connection between the reasons to believe and the material on record. The Supreme Court in Income Tax Officer v. Techspan Pvt. Ltd And Ors. (2018) 6 SCC 685 has held that "The use of the words "reason to believe" in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of some facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature." The said judgment further held that "Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with re....
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....ax deduction at source. Revenue in its counter affidavit has sought to elaborate on the aforesaid reasons by contending that the EDC payment is akin to rent. However, we are not impressed with this submission. Firstly, such an understanding is not borne out from the recorded reasons and, secondly, the department cannot by way of a counter affidavit supplement the recorded reasons by introducing such legal submissions. The source of the power in this case, as sought to be argued, is not discernible. 27. If the AO harboured a reason to believe that the payment of EDC requires TDS under the provisions of the Income Tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that "Since, EDC has Income Character, therefore it should have been subjected to TDS by Assessee." The AO has further proceeded to observe since the Assessee is a development authority of State of Government of Haryana and is a taxable entity, TDS provisions could be applicable on EDC payable by the Assessee through HUDA. Apart from making aforenoted observations and refe....
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....usion that payment which is to be made as annual rent is rent within the meaning of Section 194-I, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that TDS shall be deducted on the payment of the lease rent to the Greater Noida Authority as per Section 194-I. Reliance on the Circular dated 301-1995 has been placed by the Noida/Greater Noida Authority. A perusal of the Circular dated 30-1-1995 indicate that the query which has been answered in the above circular is "Whether requirement of deduction of income tax at source under Section 194-I applies in case of payment by way of rent to Government, statutory authorities referred to in Section 10(20-A) and local authorities whose income under the head "Income from house property" or "Income from other sources" is exempt from income tax." 29. We are unable to see as to how the above provision and decision is of any assistance to the Revenue. It can be seen from the quoted portion of the said judgment that in the said case, the payment of annual rent was considered to be falling within the ambit of Section 194-I, a conclusion drawn by the Court on a reading of the relevant cla....