ACIT, CIRCLE CIRCLE-2(10), KOLKATA, KOLKATA vs. M/S DECCON INDIA PVT.LTD, KOLKATA

- This Revenue’s appeal for assessment year 2011-12 arises from the Commissioner of Income Tax (Appeals)-4, Kolkata’s order dated 07.10.2016, passed in case No.1134/CIT(A)-4/Circle-12/Kol/14-15, in proceedings u/s. 147/143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

The Revenue’s sole substantive grievance challenges the CIT(A)’s findings quashing the re-opening / re-assessment to be not sustainable in the eyes of law as under:- “4.2 I have considered the submission of the AR of the appellant against the action of the AO. I find that in the instant case I find that indeed the assessment has been reopened by the AO on the ground that there is a mismatch of income as reflected in the appellants profit & loss account vis-à-vis income reflected in the 26AS form. The AO observed that the ape has claimed TDS credit of ₹22,30,677/- only. However as per 26AS the TDS credit was ₹24,24,945/- which is more compared to the claim ITA No.2243/Kol/2016 A.Y.2011-12 ACIT, Cir-10(2), Kol. Vs. M/s Deccon India Pvt. Ltd. Page 2 of the appellant. Thus the appellant had offered income for taxation in respect of income on which TDS of 24,24,495/- was deducted. Therefore the AO had reason to believe that the income of the appellant escaped as. I find that the AO has reopened the assessment to verify the TDS claim of the appellant. The AO after recording reasons has not established the nexus with the escaped income and material available with him to arrive at a subjective satisfaction that the income of the appellant has actually escaped assessment. The decision related upon by the AR of the appellant is squarely applicable to the facts of the instant case. The decision of Kolkata ITDAT as relied upon by the AR (supra) has dealt with exactly similar issue and then after considering the arguments and counter arguments held that proceedings u/s 147 cannot survive. Thus respectfully following the decision of the jurisdictional ITAT, I have no hesitation in holding that the proceeding initiated u/s. 147 is bad in law. This ground is allowed.”

We have given our thoughtful consideration to rival contentions. There is no dispute that the Assessing Officer had issued sec. 148 notice alleging discrepancies in assessee’s Form 26AS indicating TDS credit of ₹24,24,945/- as against that claimed of ₹22,30,677/-. He thus formed reasons to believe that assessee’s taxable income liable to be assessed had escaped assessment. All this culminated in the impugned re-assessment framed on 28.03.2014 making various disallowances / additions.

The assessee preferred appeal. The CIT(A) has quashed the re- assessment in issue without adjudicating assessee’s other grievance(es) on merits.

Learned Departmental Representative vehemently contends during the course of hearing that the assessee’s Form 26A statement indicating difference in TDS claim (supra) formed sufficient tangible material for the Assessing Officer to invoke sec. 147 r.w.s. 148 of the Act. Learned Authorized Representative on the other hand quotes this tribunal’s decision in B.S. Consultancy Services vs. ITO decided on 06.09.2017 that such a difference in TDS figures does not amount to escapement of taxable income from being assessed. We find merit in Revenue’s arguments. Suffice to say, learned co-ordinate bench has adjudicated upon merits of the issue whereas we are concerned with legality of the impugned re-opening. It A.Y.2011-12 ACIT, Cir-10(2), Kol. Vs. M/s Deccon India Pvt. Ltd. Page 3 has already come on record that the Assessing Officer set into motion than re- opening mechanism on account of difference in TDS claimed deducted. We quote apex court’s landmark decision in ITO vs. Lakhmani Mewal Das (1976) ITR 103 437 (SC) to conclude the same formed sufficient tangible material having live nexus with the addition in issue to invoke sec. 147 r.w.s 148 proceedings. We thus reverse CIT(A)’s findings on this legal issue.

Both the parties urge at this stage that CIT(A) has admittedly not adjudicated upon merits of the various issues raised in the course of lower appellate proceedings. We therefore restore the instant lis back to the CIT(A) for adjudicating upon assessee’s other substantive grounds on merits.