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Facts
The assessee, an advertising agency, was reassessed under section 147 for AY 2016-17 based on the issue of non-deduction of TDS on advertising charges paid to print media. The AO had previously examined this issue during the regular assessment under section 143(3) and accepted the assessee's submissions, relying on CBDT Circular No. 715/1995.
Held
The Tribunal held that the reopening of assessment was based on a change of opinion by the Assessing Officer, which is not permissible under law. The Tribunal noted that a similar issue for AY 2015-16 was dropped by the AO based on identical submissions and reliance on the same circular, rendering the reassessment for AY 2016-17 unjustified.
Key Issues
Whether the reassessment proceedings initiated under section 147 were valid when the issue was already examined and accepted in the original assessment, and if the reopening amounts to a change of opinion.
Sections Cited
147, 148, 143(3), 40(a)(ia), 143(2), 194C, 194H, 194J, 148A(d), 54
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 09.09.2024 for A.Y. 2016-17. The assessee has raised following grounds of appeal:
1. Validity of the re-assessment proceedings: “1.1The Ld. Assessing Officer erred in re-opening the assessment u/s 147 of the Act.
1.2. The appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the impugned re-opening and the order passed in pursuance thereof was in excess of jurisdiction and is also otherwise bad in law.
1.3 The appellant submits that the re-assessment proceedings and the order passed in pursuance thereof is not in accordance with law and consequently ought to be struck down.
Disallowance u/s 40(a)(ia) amounting to Rs. 1,60,30,718/- 2.1 The learned AO erred in disallowing Rs. 1,60,30,718/- u/s 40(a)(ia) being 30% of Rs. 5,34,35,728/- advertising charges paid without TDS.
2.2 The appellant submits that as per circular no. 715 dated 08.08.1995 , advertising agency is not required to deduct tax at source while making payment to print media.
2.3 The appellant submits that scrutiny assessment u/s 143(3) has been done after considering the said circular.
2.4 The appellant submits that it has submitted all the details pertaining to advertisement charges paid to print media at the time of assessment.
2.5 The appellant submits that disallowance made u/s 40(a)(ia) amounting to Rs. 1,60,30,718/- be deleted.
General 3.1 The appellant craves leave to add, alter amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the bearing of the appeal.”
Rival submissions of both the parties have been heard and record perused.
The learned Authorised Representative (ld. AR) of the assessee fairly submits that assessee has raised legal ground against the validity of reassessment for the first time before Tribunal and as such, such ground of appeal was not raised before ld. CIT(A). The ld. AR of the assessee further invited our attention on order sheet dated 19.06.2025 wherein raising of such additional ground of appeal was allowed. For admission of such additional ground of appeal, the ld. AR of the assessee submits that such ground of appeal is purely legal in nature and no additional fact is to be required to brought on record and that facts relating to adjudication of fresh / additional ground of appeal are emanating from the orders of lower authorities. To support his submission, the ld. AR of the assessee relied upon the decision of Hon’ble Apex Court in National Thermal Power Co.
Ltd. vs CIT reported in (1998) 97 Taxman 358 (SC) / 229 ITR 383 (SC). In support of legal ground / additional ground, the ld. AR of the assessee submits that case of assessee was reopened by issuing notice under section 148 dated 28.04.2021 by invoking Explanation 2 to Section 147.
The issue on which case was reopened by assessing officer was duly examined by Assessing Officer (AO) while passing the assessment order under section 143(3) on 13.12.2018. The ld AR of the assessee submits that he has filed copy of notice under section 143(2), wherein one of the basis of selection of case for scrutiny is the TDS issue. During regular assessment, the AO specifically examined the issue of non-deduction of tax at source by the assessee on its advertisement charges paid to various print media and publishers. The assessee filed detailed reply before the assessing officer on the nature of its activity and explained that assessee was not required to deduct tax at source on advertisement charges paid to print media and in support of their submission relied upon Circular issued by Central Board of Direct Taxes (CBDT) vide circular No. 715 dated 08.08.1995. From print media, the assessee has shown gross amount in its income. The ld. AR explained that on similar set of fact the case of assessment year (A.Y.) 2015-16 was also reopened and on filing similar submission, the proceedings under section 147 was dropped. The ld. AR of the assessee carried us through the reasons recorded for A.Y. 2015-16 and various reply filed by assessee and the order passed by AO in accepting the contention of assessee and dropping the proceeding. The ld. AR of the assessee while explaining the facts submits that main business activities of assessee is of advertising. The assessee collects the advertisement order for publications in newspaper/magazine and in print media on behalf of its clients. The assessee earned commission from print media on such activities. The assessee raised invoices to its clients who in turn make payment to the assessee after deduction of appropriate tax at source (TDS) under section 194C or under section 194H and 194J. The assessee makes payment to print media after retaining its commission. As per CBDT Circular No. 715 dated 08.08.1995, the advertising agency are not required to make TDS while making payment to print or electronic media. Such position was further clarified in CBDT Circular No. 5 of 2016. The assessee is following similar practice for collecting the advertisement charges from its clients who makes payment after making TDS and the assessee further made payment to print media. The ld. AR for the assessee also carried us through assessment order under section 143(3) dated 13.12.2018, copy of which is filed at page no. 69 and 70 wherein the business activities of assessee of advertising agency is accepted. The ld. AR of the assessee submits that during assessment the assessing officer issued specific show cause notice dated 24.05.2018 about TDS vide question no. 11 of annexure attached with show cause notice. In response to such show cause notice, the assessee furnished complete details of advertisement received and the commission earned. The assessing officer accepted the contention of assessee and consciously made no addition while passing assessment order. Thus, the reopening on same issue is nothing but change of opinion. To support his submission, the ld. AR of the assessee relied upon the decision of Jurisdictional High Court in Gagan Omprakash Navani Vs ITO (2022) 138 taxmann.com 233, Asian Paints Ltd. vs DCIT (2009) 308 ITR 195, and Marico Ltd. vs ACIT (2019) 111 taxmann.com 253.
On merit, the ld. AR of the assessee submits that assessee has shown all the receipts in the return of income and offered the same for taxation. In the assessment proceedings as well as during reassessment proceeding, the assessee furnished various documents and explanations to substantiate the fact. The assessee is now filing invoices raised by print media to assessee and further by assessee to its client, ledger extract of assessee’s client in its books of account and ledger account of print media in the assessee’s books of account. The ld. AR of the assessee submits that he has also filed application for admissions of additional evidence under Rule 29 of Income Tax (Appellate Tribunal) Rules. In the application, the assessee has stated that all such evidences are essential for proper appreciation and adjudication of issue involved in the appeals. The ld. AR of the assessee submits that he has also filed a brief synopsis of his submission along with the notice under section 143(2) which may also be considered. The ld. AR while explaining the various evidences submits that all such income received on adverse business as already been offered and accepted during the original assessment proceeding. Thus, the assessee has good case on legal issue as well as on merit.
On the other hand, the learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of AO and ld. CIT(A) on merit. However, on admission of additional ground of appeal, the ld. CIT-DR for the revenue submits that no such ground of appeal was raised before first appellate authority and as such there is no consideration or finding on such legal issue. The alleged legal issue is raised for the first time and may not be admitted for adjudication.
On admission of additional evidence, the ld. CIT-DR for the revenue submits that such evidence if filed for the first time were not considered by lower authorities so at this stage such evidence may not be taken on record. The ld. CIT-DR for the revenue also submits that department has also filed comments of assessing and on additional ground of appeal, which may be considered.
We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. Firstly, we are considering the admission on legal issue/ additional issue. Which is on validity of reopening which has been raised for the first time before Tribunal? We find that raising of additional ground of appeal was allowed by our predecessor vide order sheet dated 19.06.2025, therefore, we deem it appropriate to consider such ground of appeal on merit. As no additional fact is to be brought on record for consideration of such issue, therefore, we conquer with our predecessor. Now, we shall advert to consider such legal issue.
8. We find that assessee filed its return of income for A.Y. 2016-17 on 18.11.2016 declaring income of Rs. 27,43,910/-. The case was selected for scrutiny. On perusal of reasons for selection of scrutiny, we find that one of the issue on which return was selected for scrutiny was “whether disallowance on account of non-deduction, sought deduction or non- payment of TDS has been correctly shown in the return of income”. We further find that during assessment proceeding, the assessing officer vide notice dated 24.05.2018 sought details on TDS. The assessee in response to such show cause notice furnished reply on 07.09.2018 in explaining the nature of business activities, its audit report and computation of total income including various details of advertisement job charges. The assessing officer thereafter passed assessment order. Copy of assessment order is available at page no. 69 to 71 of paper book. In the assessment order, the assessing officer accepted that Assessee Company is in advertising agency business and no addition on TDS issue was made.
We also find that on similar issue, the case of assessee for A.Y. 2015-16 was reopened. The reasons recorded for A.Y. 2015-16 is available at page no. 38 to 43 of paper book and reasons recorded for A.Y. 2016-17 are at page no. 72C to 72D. On comparison of reasons recorded, we find that on similar issue, the case for A.Y. 2015-16 was reopened however, on filing similar reply by assessee and on relying CBDT Circular No. 715 dated 08.08.1995, the case of assessee was closed that is reassessment was dropped in order dated 29.07.2022 passed under section 148A(d).
However, on similar set of fact, the assessing officer for A.Y. 2016-17 proceeded for reassessment.
10.We find that Hon’ble Jurisdictional High Court in Gagan Omprakash Navani Vs ITO (supra) held that when issue under section 54 was a subject matter of consideration by assessing officer during assessment proceeding, reopening of assessment was merely on the basis of change of opinion.
Similarly, in Asian Paints Ltd. Vs DCIT (supra) also held that the assessing officer cannot take recourse of provisions of section 147 for his own failure to apply his mind to the material, accordingly to him which was available on record. When nothing new material came on record or no new information has been received, it was merely a fresh application of mind by the same assessing officer to the same set of fact and the reasons had been given was that same material was available on record while assessment was made, was inadvertently excluded from consideration.
This amounted to opening of assessment merely because there was change of opinion which was impermissible and reassessment was not justified. Similar view was taken in Marico Ltd. vs ACIT (supra) that when assessing officer issued notice and allowed relief to the assessee, subsequent reassessment on the ground that there was no provision for deduction of depreciation for amortisation not charged in profit and loss account was without jurisdiction. Thus, on the basis of aforesaid legal position settled by Hon’ble Jurisdiction High Court, we find merit in the submission of ld. AR of the assessee that reassessment was based on change of opinion which is not permissible under law.
On comparison of reasons recorded for A.Y. 2015-16 which is available at page no. 38 to 39 and reasons recorded for A.Y. 2016-17 which are at page no. 72C and 72D, we also find merit on the submissions of ld AR of the assessee that the case for A.Y. 2015-16 on similar reasons recorded was dropped / accepted while case for A.Y. 2016-17 was reassessed.
Hence, reopening on same issue in the year under consideration is nothing but change of opinion. Thus, there is no justification for reassessment for A.Y. 2016-17. Thus, the assessee succeeded on legal issue. Considering the fact that assessee had succeeded on legal issue, therefore, adjudication on merit have become academic. In the result, grounds of appeal of assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order was pronounced in the open Court on 26/08/2025.