TAMILNADU PETRO PRODUCTS LIMITED,CHENNAI vs. DCIT (LTU), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -17, Chennai, dated 23.11.2017 and pertains to assessment year 2005-06.

The first issue arises for consideration is validity of reopening of assessment.

Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the Assessing Officer by issuing a notice dated 17.03.2010 under Section 148 of the Income-tax Act, 1961 (in short 'the Act') reopened the assessment. According to the Ld. counsel, the assessment was reopened beyond the period of four years. It is not the case of the Revenue, according to the Ld. counsel, that there was any negligence on the part of the assessee in furnishing required particulars and material facts for completing the assessment. According to the Ld. counsel, this issue was taken as additional ground before this Tribunal.

Coming to the merit of the appeal, the Ld.counsel for the assessee submitted that the assessee has reimbursed the expenditure for travelling and stay to the technical persons for providing UOP Catalyst Technology. According to the Ld. counsel, the expenditure reimbursed by the assessee is not subject to income-tax, therefore, the assessee is not liable to deduct tax under Section 195 of the Act. Hence, according to the Ld. counsel, even on merit, the assessee has a good case.

On the contrary, Ms. D. Rohini, the Ld. Departmental Representative, submitted that merely because the Assessing Officer could have with due diligence discovered the facts on the basis of the material filed by the assessee, that would not necessarily amount to disclosure. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly found that the assessment was validly reopened by the Assessing Officer.

Coming to the merit of the appeal, the Ld. Departmental Representative pointed out that the so-called travelling and stay expenses were incurred in respect of technical services, therefore, all the expenditures relating to technical services, including travel and stay, have to be construed as fee for technical services, hence, the assessee is liable to deduct tax under Section 195 of the Act.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, for the assessment year under consideration, the assessee filed return of income on 29.10.2005 declaring a loss of ₹234.76 lakhs under the normal provisions of Income-tax Act and book profit of ₹724.66 lakhs under Section 115JB of the Act. The assessment was completed under Section 143(3) of the Act by an order dated 11.12.2008. Subsequently, the Assessing Officer on the basis of the material already available on record, found that the assessee has not deducted tax with regard to reimbursement of travelling and stay expenses.

We have carefully gone through the provisions of Section 147 of the Act. The first proviso to Section 147 clearly says that no action shall be taken under this Section after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to file the return of income or to disclose fully and truly all the material facts necessarily required for assessment. In this case, the assessee has filed all the details and material facts required for completing the assessment. It is not the case of the Revenue that there was any negligence on the part of the assessee in furnishing required particulars and material facts before the Assessing Officer.

The claim of the Ld. D.R. before this Tribunal is that the Assessing Officer could have with due diligence discovered the facts from the material filed by the assessee, however, that would not amount to disclosure of all the material facts. This Tribunal is unable to accept the contention of the Ld. D.R. As a taxpayer, the assessee can furnish all the details before the Assessing Officer. It is for the Assessing Officer to examine all the facts and find out whether the income was rightly disclosed in the return of income for taxation. If for any reason, the Assessing Officer finds that the income was not disclosed correctly for the purpose of taxation, it is always open to the Assessing Officer to take up the matter for scrutiny and bring all the income for taxation subject to other conditions and limitations provided in Income-tax Act.

In this case, in fact, the return was taken up for scrutiny and assessment order was passed under Section 143(3) on 11.12.2008.

Since there was no negligence on the part of the assessee in furnishing the material facts required for completing the assessment, this Tribunal is of the considered opinion that reopening of assessment by issuing notice under Section 148 of the Act after four years is bad in law. Therefore, the consequential order passed by the Assessing Officer cannot stand in the eye of law. Moreover, the very object of provisions of limitation is to provide finality to the proceedings. The threat of reopening of the assessment cannot be allowed to hang over the head of the taxpayer for an unlimited period. Therefore, the Parliament in its wisdom thought it fit that the completed assessment need not be reopened unless there was negligence on the part of the assessee.

In the result, the appeal filed by the assessee is allowed.