TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 114
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as under: "Basis of forming reason to believe and the details of escapement of income. On verification of records it is reveals (sic) that assessee had debited subcontracting charges of Rs. 23,03,36,536/- in the profit and loss account under the head 'other expenses'. On perusal of records, it is observed that the assessee has debited and expenditure under the head 'contractors and subcontractors' and has deducted TDS on Rs. 35187025 against payment of Rs. 74931004 (Clause 34 (a) of Form 3CD). Further it was also observed that the assessee has paid subcontractors charges to M/s Broadcom Communications Technologies Private Limited of Rs. 3.77 crore which means that the assessee had not deducted TDS on payment of subcontracting charges paid of Rs. 3,97,43,979/- (74931004 - 35187025) which would have been deducted u/s. 194C of the Act. Since the assessee has not deducted TDS, the amount of Rs. 3,97,43,979/- is not allowable to the assessee u/s. 40 (a)(ia.) of the IT Act, 1961. This amount has thus escaped assessment. The case of assessee for AY:20142015 is being reopened to bring to tax the income escaping assessment u/s 147 r.w.s 148 of IT Act, 1961" 2. The first respondent, af....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad with Section 147 of the I-T Act resulting in the impugned order dated 23.08.2019. 5. Sri. T.Suryanarayana, the learned Senior counsel for the petitioner and Sri. K.V.Aravind, the learned counsel for the authorities, submit at the threshold that the question that will have to be decided by this Court would be: "Whether in the facts and circumstances of the case, this Court could opine that there is a deemed opinion of the assessing officer [AO] on the expenditure filed by the petitioner disclosing the actual TDS affected and the tax withheld on behalf of M/s. Broadcom Communications Technologies Limited with the assessment order dated 22.11.2016 under Section 143(3) of the IT Act" Sri T. Suryanarayana submits that if the petitioner persuades this Court to accept that indeed the AO has expressed an opinion on the details furnished by the petitioner towards the tax withheld on payments made to M/s. Broadcom Communications Technologies Limited in issuing the assessment order dated 22.11.2016 under section 143 (3) of the I-T Act, reopening of assessment would amount to change of opinion and therefore, re-opening of the assessment would be impermissible in law. 6. Sri. T. Suryana....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Full Bench decision of the High Court of Delhi in Commissioner of Income Tax v. Kelvinator of India Ltd stating that this decision is considered by the Apex Court in the proceedings between the same parties in its decision reported in (2010) 187 taxman 312 (SC). The assessment order dated 22.11.2016, after the query and the response, can only be construed as a result of the AO's deemed opinion on the petitioner's claim for allowance. In which event, the threshold bar of a subsequent change in the deemed opinion on an issue or a query raised and considered would apply and the proposed reassessment would be without jurisdiction. 7.3 In continuation, it is contended that the reassessment proceedings will be invalid in case where a query is raised and is answered by the assessee in the original assessment proceedings but thereafter the AO does not make any addition in the assessment order as in such situations it must be considered that the AO has examined the issue but did not find any ground or reason to make addition or reject the assessee's stand, and in this there is a deemed opinion. In support of this contention, a strong reliance is placed upon another Full Bench decision o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T (2021) 123 Taxmann.com 468 (Karnataka). These decisions are to reiterate the propositions that though alternative remedy would be available for an assessee if aggrieved by the reasons for reopening of the assessment, this Court could exercise jurisdiction under Article 226 of the Constitution of India if it is shown that the proposed reopening would be without jurisdiction; if the notice under section 147 read with section 148 of the I-T Act is only based on a change of opinion, the AO would not have jurisdiction and the other propositions reiterated by the earlier decisions referred to hereinabove. 8. Sri K. V. Aravind, the learned counsel for the revenue, contests the maintainability of the writ petition while not contesting the proposition that if there is a deemed opinion at the time of assessment, and if reassessment is commenced because of change of opinion, such commencement of the assessment would be without jurisdiction. However, Sri K V Aravind strenuously refutes the canvass on behalf of the petitioner that there is a deemed opinion in the assessment order dated 22.11.2016 and the impugned notice is because of a change in this opinion. 8.1 Sri K V Aravind contends th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TechSpan supra in support of the above proposition and to contend that an attempt to bring to tax that income which has escaped assessment cannot be absorbed by judicial intervention on an assumption that there is change of opinion even in cases where the assessment order does not address itself to a given aspect sought to be examined in the reassessment proceedings. 9. The Hon'ble Apex Court in Kalyanji Mavji and Co. v. CIT, West Bengal-II supra while considering the provisions of section 34(1) of the I-T Act, 1922, and the amendments thereto over a period of time, and the significance of the expression, "information" as found in the last of the amendments to this section1, has declared that for the purposes of reassessment, "information" contemplated for reassessment in 34(1)(b) could be when it is secured by the AO in certain circumstances. The circumstances delineated by the Hon'ble Apex Court are as follows: (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 147 of the I-T Act. However, by the later amendment, the requirement of reason to believe is brought back into the statute replacing reasons to be recorded in writing and opinion. 12. In the later decision in A.L.A. Firm v. CIT, Madras supra, the Hon'ble Apex Court, after referring to these amendments, has reiterated that only the second proposition delineated in Kalyanji Mavji and Co. v. CIT, West Bengal-II is doubted and not the other three propositions, and insofar as 'information' gathered by the AO for commencing reassessment based on the material already on record, the Hon'ble Supreme Court has held as follows. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra)? The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oresaid proposition that, the reiteration that the material which is part of the original assessment proceedings could be the basis for reopening of assessment prevails and this is provided the other conditions are satisfied5. This Court, as such, cannot interfere with the impugned show cause notice dated 28.03.2019 (Annexure- E) or the order dated 23.08.2019 (Annexure-M) only because the proposed reassessment is based on the materials furnished during the hearing prior to the Assessment order dated 22.11.2016. 14. At this stage, this Court must refer to the decision of the Full Bench of the High Court of Delhi in Commissioner of Income Tax - VI, New Delhi v. Usha International Ltd., supra because circumstances akin to the present case's circumstances are discussed. The relevant part reads as under: Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n assessment only when there is tangible material to conclude that there is escapement of income from assessment. 18. The question of tangible material that would justify the reason to believe that certain income has escaped tax must be tested against the settled law that, 'material on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant and it must bring home the appropriate rational of the action taken by the AO in pursuance of such belief; if the material relied upon by the AO for reopening assessment does not satisfy these requirements, the AO's action would be held as arbitrary and bad in law6. 19. The reason offered in justification of the notice issued under section 147 read with section 148 of the I-T Act is that on perusal of records it is observed by the AO that though the petitioner has paid subcontractor charges in a sum of Rs. 7,4,931,004/- to M/s Broadcom Communications Technologies Private Limited, the petitioner has not deducted the TDS for the entire amount and therefore a sum of Rs. 39,743,979/- cannot be allowed under section 40(a)(ia) of the I-T Act. If there is conscious application of mind on an issu....