ACIT, NEW DELHI vs. M/S. MANISH JAIN, HUF, NEW DELHI

PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This appeal has been filed by the department against the

impugned order dated 10.10.2013 passed by the Ld. CIT(A)-XXIII,

New Delhi for Assessment Year 2007-08.

of Rs. 1,68,29,330/- was filed by the assessee on 31.12.2007

which was processed u/s 143(1) and later selected for scrutiny

under CASS and assessment proceedings were completed u/s

143(3) vide order dated 30.10.2009 at the returned income.

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2.1 However, consequent upon assessment, it was noted by the

Assessing Officer that assessee had debited a sum of

Rs.61,24,658/- on account of commission paid to overseas

foreign parties on which no TDS was deducted. Keeping this fact

in view and provisions of the Act, Assessing Officer initiated

proceedings u/s 147 of the Act and issued notice u/s 148 on

30.03.2012 which was duly served upon the assessee. In

response to the above notice, assessee filed letter dated 17lh

April, 2012 contending therein that original return filed for the

year under consideration may be treated as filed in response to

notice u/s 148. Thereafter, Assessing Officer issued statutory

notices u/s 143(2)/142(1) of the Act which were duly complied

by the assessee from time to time and written submissions were

filed before the Assessing Officer. However, Assessing Officer

found the submissions of the assessee not convincing and

disallowed the claim of the assessee and invoked the provisions

of section 40(a)(ia) of the Act making an addition of

Rs.61,24,658/- on a/c of commission paid to foreign parties

without deducting tax at source and taxable income was

computed at Rs.2,30,13,870/- as against the returned income of

Rs. 1,68,29,330/-.

I.T.A. No. 195/D/2014 Assessment Year 2007-08

preferred an appeal before the Ld. First Appellate Authority

wherein the appeal of the assessee was allowed by holding that

the issue of notice u/s 148 of the Income Tax Act, 1961 and re-

opening of the assessment u/s 147 was without jurisdiction and

null and void ab initio.

the following grounds of appeal:-

“1. On the facts and circumstances of the case, the Ld CIT(A) has erred in holding that the issue of notice u/s 148 and reopening of the assessment u/s 147 was without jurisdiction, null and void ab-initio despite the fact that the AO had bonafide reason to believe that assessee’s income had escaped assessment in view of issue of circular dated 22.10.2009 by the CBDT. 2. On the facts and circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs. 61,24,658/- on account of commission paid to overseas foreign parties on which TDS was deducted, by wrongly relying on circular No. 786 dt. 7/2/86 of CBDT, which was already withdrawn by issue of CBDT circular No. 7/2009 dt 22.10.2009.” 5. Ld. DR relied and supported the order of the Assessing

Officer whereas the Ld. AR placed heavy reliance on the order of

the Ld. CIT(A).

also perused the impugned order. It is observed that the Ld.

CIT(A) has given a detailed finding on the issue in para 4.1 of his 3

I.T.A. No. 195/D/2014 Assessment Year 2007-08

order which is being reproduced hereunder for a ready

reference:-

“4.1 In Ground Nos. 1 & 2, the appellant has impugned the reopening of the assessment u/s. 147 of the Act by issue of notice u/s. 148. The appellant has submitted that the Assessing Officer was not justified in reopening the assessment u/s. 147 as there was no case of income escaping assessment. It has further been submitted that the case has been reopened on the basis of "A change of opinion” on the part of the AO as there was no failure on the part of the assessee in disclosing the true and relevant particulars of its income during the course of assessment u/s. 143(3). The Ld. AR of the appellant submitted that the reasons recorded by the AO for reopening the assessment u/s. 147 reveal that there was no case of any omission or failure on the part of the assessee in furnishing full and complete particulars relating to its income. It is not even the case of the AO that this issue was not examined during original proceedings. The only allegation in the reasons recorded for the purpose of reassessment is that TDS has not been deducted on the payment of commission to overseas foreign parties. It is thus evident that the proceedings u/s 148 had been initiated merely on the basis of change of opinion. The Ld. AR has relied upon the case of CIT Vs Kelvinator of India Ltd. 320 ITR 561 (SC), in which the Hon'ble Court has held that the concept of "Change of opinion” must be treated as an in- built test to check the abuse of power. Hence, after 01.04.1989, the Assessing Officer has power to reopen the assessment, provided there is "tangible material” to come to the conclusion that there was escapement of income from assessment and reasons recorded must have a link with the formation of belief. The Ld. AR has also relied upon the case of M/s. Replika Press Pvt. Ltd. and Anr. Vs. DCIT 92 DTR 153 (Del). I have carefully perused the submissions of the appellant and the arguments put forth by the Ld. AR. I have carefully perused the assessment records, wherein I find that notice u/s 142(1) of the Act was issued by the AO during 4

I.T.A. No. 195/D/2014 Assessment Year 2007-08

original assessment proceedings u/s. 143(3) on 15.09.2009, wherein the AO had directed the assessee to furnish the details of sundry creditors vide point no. 10 and to provide details of TDS deducted in a given format vide point no. 11. Further, another notice u/s. 142(1) was issued on 07.10.2009, wherein the first query raised by the AO itself directed the assessee to furnish complete party-wise details of commission paid in a particular format. These details were provided by the assessee vide letters dt. 22.09.2009 and 12.10.2009, wherein the assessee has clearly indicated that commission of Rs.61,24,658/- has been paid to M/s. Ashi Collection for booking orders on behalf of the assessee and no TDS has been deducted thereon. Further, complete ledger account of commission on sales (overseas) was submitted to the AO wherein it has been clearly shown that all amounts have been paid through bank in USD to M/s. Ashi Collections. These details were taken into account by the AO before passing order u/s. 143(3). Thereafter, an internal audit objection was raised dt. 03.11.2009 wherein it has been stated that nothing has been placed on record to prove that TDS was not deductible on payment of Rs.61,24,658/- towards commission to overseas foreign parties and therefore, in view of Section 195(1) and Section 40(a)(ia), this amount should have been added back to the income of the assessee. The AO replied to the Audit Party vide letter dt. 15/18.01.2010, quoting CBDT 's Circular No. 786 dt. 07.02.2000, as per which it was clarified that Where the non-resident agent was operating outside the country and no part of its income arose in India, payment made to such parties were not taxable in India and therefore no tax was deductible u/s 195(1) of the Act. The AO therefore, requested for the audit objection to be settled. Subsequently, there was a change of incumbent and the new AO reopened the assessment giving the reasons that Rs.61,24,658/- was debited to the P&L A/c of the assessee towards commission to overseas foreign parties and that there was nothing on record to prove that TDS was not deductible on such payments u/s. 195(1). Therefore, in 5

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the light of provisions of Section 40(a)(ia) of the Act, the entire amount was required to be added back to the income of the assessee. Holding that the amount of Rs.61,24,658/- had escaped assessment, the new incumbent AO reopened the assessment u/s 147 and issued notice u/s 148. In my considered opinion, the above sequence of events clearly indicate that all the relevant facts pertaining to the issue were clearly brought on record by the assessee during original assessment u/s 143(3) and the AO at that time had clearly considered the issue before passing the assessment order. He had also replied to the audit memo quoting Circular No. 786 dt. 07.02.2000 of the CBDT, requesting for the audit objection to be dropped. Thereafter, the reopening of the assessment on the same grounds tantamounts to “Change of Opinion”, which is not permitted by law as per the judgment of Hon’ble Supreme Court of India in the case of Kelvinator of India Ltd. (supra). Therefore, I hold that the issue of notice u/s. 148 and reopening of the assessment u/s. 147 was without jurisdiction and null and void ab-initio.”

the issue before him and has rightly held that in the facts and

circumstances of the case, the re-opening and reassessment was

without jurisdiction and void ab initio. We find no reason to

interfere with the conclusion and adjudication of the Ld. CIT(A)

and we uphold the same.

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Order pronounced in the Open Court on 22nd of March, 2016.

Sd/- Sd/- (J.S. REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: the 22nd of March, 2016 ‘GS’