TaxTMI 
TaxTMI 
2022 (5) TMI 1387
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....ts with various Pharmaceutical and FMCG (Fast Moving Consumer Goods) Companies for providing Carrying and Forwarding Agents (C&F Agents) services. As per the terms of the agreements, the petitioner incurs various business expenses on behalf of the principal companies and while reimbursing the expenses, the principal companies deduct TDS. However, the reimbursement of expenses is not the petitioner's income and, therefore, it is not reflected in the petitioner's books of accounts as receipts from C&F business. Some of the companies have deducted TDS under different heads like Section 194 H of the Act that is meant for income from brokerage and commission and Section 194 J that is meant for fee for professional and technical services. 4. During the assessment year 2013-14 the petitioner had shown the total receipts of Rs.3,59,59,861/- in its Profit and Loss (P&L) Account, which comprised of commission income of Rs.3,47,58,295/- and interest income of Rs.12,01,566/-. The amount of TDS as per the statement in Form 26 AS was Rs.32,14,869/-. The petitioner filed its return for a total income of Rs.9,77,090/-. 5. During scrutiny, the Assessing Officer raised a query regarding high r....
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....ice further states that although the assessee had produced the books of account, annual report, P&L account and balance sheet, but the requisite material facts mentioned above were embedded in such a manner that the material facts could not be discovered by the A.O. As all the material facts relevant for the assessment on the issues under consideration were not produced during the assessment proceedings, the AO did not examine the issues and, therefore, it is not a case of change of opinion. 10. The petitioner submitted its objections against the notice under Section 148 mainly on the grounds that in the letter dated 20-10-2020 written to the CIT (Audit), the A.O. had himself stated that the audit objection was not accepted, yet he initiated the action under Section 147 merely to safeguard the interest of Revenue. Secondly, the notice under Section 148 of the Act has been issued without bringing any fresh tangible material on record, on the basis of information which was already available on record, whereas the reassessment cannot be done for matters already discussed. The reasons recorded are based on a mere change of opinion, which is not permissible in law. The approval under....
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.... 15. Before proceeding to examine the rival contentions advanced on behalf the parties, it would be appropriate to have a look at the relevant provisions of the Act and refer to some pronouncements of the Hon'ble Supreme Court explaining the scope of interference under Article 226 of the Constitution of India while examining the validity of a notice issued under Section 148 of the Income Tax Act. 16. The relevant provisions of Sections 147 and 148 of the Act, as those stood at the relevant time, are being reproduced below: - "147. Income escaping assessment.- If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): ....
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.... on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage." 19. We proceed to examine the rival submissions advanced on behalf of the parties in light of the aforesaid pronouncements of the Hon'ble Supreme Court so as to ascertain as to whether there was prima facie some material on the basis of which the Department could reopen the case, without going into the sufficiency or correctness of the material. 20. Mr. Desh Deepak Chopra, the learned Senior Advocate representing the petitioner, has submitted that in the present case the reassessment proceedings have been initiated merely on the basis of an audit objection raised by the revenue auditor and there was no tangible material with the A.O. suggesting that the income of the petitioner has escaped assessment. In the letter dated 07-02-2020 addressed to the CIT (Audit), the A.O. had himself refused to accept the audit para. Relying upon a decision of the Bombay High Court in CIT versus Rajan, 403 ITR 30, he has submitted that if the A.O. has rejected the audit objection, subsequent re-opening on the same ground of audit objection w....
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....of assessment on the very same issue due to change of opinion in the absence of any fresh material is held to be invalid and bad in law. 25. Relying upon the judgment in Arun Gupta versus Union of India, (2015) 371 ITR 394 (All), the learned Counsel for the petitioner has submitted that even if new facts are discovered from the records already available before the A.O., it would amount to a change of opinion, since there is no fresh tangible material from which the authority to reopen the assessment has emerged. 26. The reasons recorded by the A.O. for initiating the process of re-assessment state that on examination of the documents on record and 26 AS, it was noticed that the petitioner has received payments under Section 194 J also, but it has not shown the said receipts in his P&L account and has not given any explanation for the same. The petitioner has not disclosed the amount of reimbursement of expenses claimed by it and the actual amount received by it towards reimbursement. It has not submitted the details of expenses incurred by it for verification during the assessment proceedings. It did not produce any ledger, bills and vouchers of expenses incurred on behalf of....
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....ncome, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requis....
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....t for that year? True it is that Income Tax Officer could have investigated the truth of the said assertion - which he actually did in the subsequent assessment year - but that does not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact - and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons (who are alleged to have advanced loans to the assessee in a total sum of Rs 3,80,000 out of the total hundi loans of Rs 8,53,298) were established to be bogus persons or mere name-lenders in the assessment proceedings relating to the subsequent assessment year. Does it not furnish a reasonable ground for the Income Tax Officer to believe that on account of the failure - indeed not a mere failure but a positive design to mislead - of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment? We are of the firm opinion that it does. It is necessary to reiterate that we are now at....
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....lso keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the assessing officer. Hence, after 1-4-1989, assessing officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunc....
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....ioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice: Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice." 35. The order dated 23-03-2021 passed by the approving authority under Section 151 of the Act has been placed on record by the Department and the detailed reasons recorded by the A.O. have been annexed to, and made a part of the order. The approving authority - the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put ....