TaxTMI 
TaxTMI 
2020 (9) TMI 1133
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....rd for such reassessment proceedings? ii) Whether the ITAT is correct in law in quashing the reassessment order without considering Explanation 1 and Explanation 2(c) to Section 147 of the Income Tax Act, when there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment? iii) Whether the Appellate Tribunal was right in forming an opinion that the assessee has furnished all the details and when the assessee only produced the books of accounts but did not make fully and truly disclosure in Tax Audit Report which is an annexure to the return of income?" 2. The learned Tribunal has decided in favour of the Assessees that the Assessing Authority was not entitled to invoke the proviso to Section 147 of the Act and reopen the Assessment for those Assessment Years on the ground of failure on the part of the Assessee to truly and fully disclose the relevant materials before the original Assessing Authority, who passed the Scrutiny Assessment Order under Section 143(3) of the Act. 3. The relevant portion of the order passed by the learned Tribunal is quoted below for ready reference:- "8. From the above it appears that the....
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.... the report as required under Section 44AB of the Act. The assessee, at the best, can produce all the relevant material before the auditor for the purpose of preparing the audit report. 11. Preparation of audit report is the exclusive function of auditor, therefore, if at all there was any negligence and omission to disclose correct fact in the report prepared under Section 44AB of the Act, this Tribunal is of the considered opinion that the assessee cannot be found fault. If the assessee suppresses any material either before the auditor or before the Assessing Officer, then we may say there was negligence on the part of the assessee. In this case, the Assessing Officer himself called upon the entire details of gross receipts, TDS certificates, details of opening stock, work in progress, payment of wages, payment of interest, payment of vehicle hire and machinery charges, copy of sales tax order, etc. Therefore, when the assessee has furnished all the details which are required in completing assessments, this Tribunal is of the considered opinion that mere omission of auditor to mention certain items in the audit report prepared under Section 44AB of the Act, that alone cannot b....
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.... limitation cannot be invoked by the Authority concerned and the reassessment order was set aside. Aggrieved by the same, the Department is in these Appeals. 6. Per contra, the learned counsel Mr.M.P.Senthilkumar appearing for the Assessee, has drawn our attention to the relevant materials on record and submitted that during the course of Original Assessment Proceedings itself the Assessee had made true and full disclosure of the tax deducted and amount paid by it to various Contractors vide letter dated 7.12.2009 filed before the Deputy Commissioner of Income Tax, Circle-I, Erode through the Chartered Accountant M.Chinnayan & Associates and in reply to the Deputy Commissioner of Income Tax for the Audit Objection, the said Chartered Accountant M.Chinnayan & Associates, vide its communication found at page 60 of the paper book (TCA 774/2017), for the Assessment Year 2007-2008, it was also contended before the Assessing Authority that such amounts paid to the Contractors did not amount to payments of rentals as there was no Lease Agreement and therefore Section 194-I cannot apply to such payments. He further submitted that the Assessing Authority had disallowed a part of the said a....
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....ontended while giving reply to the Audit Objection that the payments, having been made as Machine Hire Charges, do not amount to rentals and thereby did not attract Section 194-I of the Act, but, despite that the Assessing Authority appears to have made additions to the extent of Rs. 44,45,185/- in Assessment Year 2007-2008 under Section 40(a)(ia) of the Act in case of one of the Assessees viz., URC Construction (Private) Limited. The facts in both the Assessees' case are said to be almost similar and it was represented by the same Chartered Accountant M/s.Chinnayan & Associates, Erode. 9. Thus, we do not see any failure on the part of the Assessee to truly and fully disclose the relevant materials before the Assessing Authority during the course of Original Assessment Proceedings. In view of the same, the extended period of limitation beyond four years after the end of relevant Assessment Years, cannot be invoked for the re-assessment proceedings under Section 147/148 of the Act in view of the first Proviso to Section 147 of the Act. 10. However, we are not inclined to agree with the observations made by the learned Tribunal in para 11 of its order quoted above to the extent....