Sh. Sharad Malhotra, Mandi V. ITO, Mandi

ITA 1202/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5188 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA,ACCOUNTANT MEMBER ITA NO. 1202/CHD/2016 ASSESSMENT YEAR: 2007-08 SHRI SHARAD MALHOTRA, VS THE ITO, PROP. M/S WIRE COMMUNICATION SYSTEM, WARD, MOTI BAZAR, MANDI (HP). MANDI (HP). PAN: ADGPM5666D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 19.04.2017 DATE OF PRONOUNCEMENT : 27.04.2017 O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 06.09.2016 OF LD. CIT (APPEALS), PALAMPUR RELATING TO ASSESSMENT YEAR 200 7-08. 2. THE ASSESSEE THROUGH THIS APPEAL, APART FROM CHALLENGING THE ADDITIONS MADE BY THE ASSESSING OFF ICER UNDER SECTION 40(A)(IA) OF INCOME TAX ACT,1961 (IN SHORT THE ACT) WHICH HAVE BEEN FURTHER CONFIRMED BY THE CIT (APPEALS), HAS ALSO CHALLENGED THE VERY VALIDITY OF THE RE- 2 OPENING OF THE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CABLE NETWORK OPERATOR AND IS IN THE BUSINESS OF DISTRIBU TING CABLE CONNECTIONS. THE ASSESSEE RECEIVES SIGNALS FR OM VARIOUS CHANNELS ON PAYMENT OF SUBSCRIPTION CHARGES TO THEM AND FURTHER DISTRIBUTES THE SAME TO THE SUB DE ALERS ON RECEIVING SUBSCRIPTION FEE FROM THEM. IN ADDIT ION TO THIS, HE ALSO PROVIDES CABLE CONNECTION SERVICES TO INDIVIDUAL CUSTOMERS ON RENT. THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 1,16,815/- FROM THE A BOVE STATED BUSINESS WAS FILED BY THE ASSESSEE ON 29.10. 2007. SCRUTINY ASSESSMENTS WERE CARRIED OUT IN THIS CASE UNDER SECTION 143(3) OF THE ACT. DURING SCRUTINY ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER RAISED CERTAIN Q UERIES INCLUDING THAT REGARDING THE PAYMENTS MADE BY THE ASSESSEE TO VARIOUS PARTIES LIKE ZEE TV, SONY, ESPN ETC. AND WHETHER THE ASSESSEE HAD DEDUCTED TAX AT SOURCE WHILE MAKING SUCH PAYMENTS? THE ASSESSEE REPLIED TO THE SAID QUERIES OF THE ASSESSING OFFICER. THEREAFTER, THE ASSESSMENT PROCEEDINGS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 30.6.2009 OF THE AO DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 3,66,820/- AS AGAINST THE RETURNED INCOME AT RS. 1,16,815/-. HOWEVER, NO ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN RESPECT OF THE NON DEDUCTION O F TDS ON THE AMOUNTS PAID TO THE TV CHANNELS. 3 4. THEREAFTER, THE ASSESSING OFFICER REOPENED THE ASSESSMENT PROCEEDINGS BY WAY OF ISSUE OF NOTICE DA TED 23.3.2012 UNDER SECTION 148 OF THE ACT. IN THE REA SONS RECORDED FOR RE-OPENING OF THE ASSESSMENT, IT WAS N OTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE A TOTAL PAYMENT OF RS. 67,43,869/- TO VARIOUS TV CHANNELS A S SUBSCRIPTION CHARGES DURING THE RELEVANT FINANCIAL YEAR BUT THE ASSESSEE HAS NOT DEDUCTED THE TDS ON THE SA ID AMOUNT. THE ASSESSING OFFICER FURTHER OBSERVED THA T AS PER PROVISIONS OF SECTION 194C OF THE ACT, ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THESE PAYMENT S BUT HE HAD FAILED TO DO SO. HE, THEREFORE, OBSERVED TH AT THE EXPENDITURE OF RS. 67,43,689/- WAS NOT AN ALLOWABLE DEDUCTION AS PER PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HOWEVER, THE SAID EXPENDITURE WAS ALLOWED DURING TH E ORIGINAL ASSESSMENT PROCEEDINGS, WHICH HAS RESULTED INTO EXCESS DEDUCTION OF THE SAID EXPENDITURE. HE, THER EFORE, OBSERVED THAT HE HAD REASON TO BELIEVE THAT THE INC OME OF THE ASSESSEE TO THE ABOVE EXTENT HAD ESCAPED ASSESS MENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. HE, ACCORDINGLY, REOPENED THE ASSESSME NT PROCEEDINGS. 5. IN THE REOPENED ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF ABOVE ST ATED EXPENDITURE CLAIMED BY THE ASSESSEE REJECTING THE CONTENTION OF THE ASSESSEE THAT THE SUBSCRIPTION AM OUNT 4 PAID BY THE ASSESSEE WAS NOT COVERED UNDER THE DEFI NITION OF WORK UNDER SECTION 194C OF THE ACT. 6. THE ASSESSEE CARRIED OVER THE MATTER TO THE FIRS T APPELLATE AUTHORITY I.E. CIT (APPEALS). THE ASSESS EE CHALLENGED BEFORE THE CIT (APPEALS) THE VERY RE-OPE NING OF THE ASSESSMENT PROCEEDINGS PLEADING THAT THE RE-OPE NING WAS BAD IN LAW BECAUSE IT WAS JUST A CHANGE OF OPIN ION OF THE ASSESSING OFFICER AND NO NEW FACT OR INFORMATIO N HAS COME INTO THE KNOWLEDGE OR POSSESSION OF THE ASSESS ING OFFICER FOR THE FORMATION OF BELIEF REGARDING THE ESCAPEMENT OF INCOME. HOWEVER, THE CIT (APPEALS) REJECTED THE AFORESAID CONTENTION OF THE ASSESSEE O N THIS ISSUE AND UPHELD THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT. HE ALSO CONFIRMED THE ADDITIONS SO MAD E BY THE ASSESSING OFFICER IN THE REOPENED ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT.BEING AGGR EIVED BY THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS. SO FAR AS T HE VALIDITY OF RE-OPENING OF THE ASSESSMENT IS CONCERN ED, THE LD. AR OF THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PAPER BOOK PAGE 1 TO 3 OF THE FILE, WHICH IS THE CO PY OF THE LETTER DATED 05.01.2009 ISSUED BY THE ASSESSING OFF ICER POSING CERTAIN QUERIES TO THE ASSESSEE DURING THE O RIGINAL ASSESSMENT PROCEEDINGS CARRIED OUT UNDER SECTION 14 3(3) OF THE ACT. THE LD. AR HAS CATEGORICALLY INVITED OUR 5 ATTENTION TO QUERY NO.3 OF THE LETTER VIDE WHICH TH E ASSESSING OFFICER HAD SPECIFICALLY ASKED THE ASSESS EE WHETHER HE HAD DEDUCTED TDS IN RESPECT OF PAYMENT OF RS. 67,63,537/- TO VARIOUS PARTIES LIKE ZEE TV, SON I AND ESPN ETC. THE LD. COUNSEL HAS FURTHER INVITED OUR ATTENTION TO REPLY DATED 11.05.2009 FILED BY THE AS SESSEE TO THE ASSESSING OFFICER IN THIS RESPECT WHEREIN TH E ASSESSEE HAS EXPLAINED THAT HE WAS NOT LIABLE TO DE DUCT TDS ON THE AFORESAID PAYMENT MADE TO THE CHANNELS. IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT GOT ANY WOR K DONE FROM THE ABOVE STATED PARTIES AND THAT THERE W AS NO DEFAULT ON THE PART OF THE ASSESSEE REGARDING NON DEDUCTION OF TDS. THE LD. AR OF THE ASSESSEE HAS F URTHER INVITED OUR ATTENTION TO PAGE 8 TO 13 OF THE PAPER BOOK TO SHOW THAT QUERIES IN THIS RESPECT WERE ALSO RAISED BY THE ASSESSING OFFICER TO THE THIRD PARTIES/PAYEES REGAR DING THE PAYMENT MADE BY THE ASSESSEE TO THESE PARTIES AND T HE THIRD PARTIES HAVE ALSO REPLIED TO THE ASSESSING OF FICER CONFIRMING THE PAYMENTS MADE BY THE ASSESSEE TO THE M AND FURTHER THAT ALL THE AMOUNTS SO PAID BY THE ASS ESSEE WERE DULY ACCOUNTED FOR IN THEIR ACCOUNTS. THE LD. AR OF THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO O RIGINAL ASSESSMENT ORDER DATED 30.06.2009 UNDER SECTION 143 (3) OF THE ACT WHEREIN IN PARA 2 OF THE ORDER, THE ASSE SSING OFFICER HAS DISCUSSED THE ISSUE OF PAYMENT OF THE A MOUNT TO SAID TV CHANNELS. THE LD. AR FURTHER INVITING O UR ATTENTION TO THE COPY OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT HAS SUBMITTED THAT NO N EW 6 FACT OR INFORMATION HAD COME INTO KNOWLEDGE OF THE ASSESSING OFFICER. HE HAS FURTHER SUBMITTED THAT NO T ONLY RELEVANT QUERIES WERE RAISED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, BUT THE ASSESSING OFFICER H AD ALSO MADE NECESSARY INVESTIGATION REGARDING GENUINE NESS OF THE TRANSACTION IN RESPECT OF THE PAYMENTS MADE BY THE ASSESSEE TO THE THIRD PARTIES. THE ASSESSING OFFIC ER HAD ALSO ACCEPTED THE EXPLANATION OF THE ASSESSEE REGAR DING THE NON LIABILITY OF THE ASSESSEE TO DEDUCT TDS ON SUCH PAYMENTS. HE, THEREFORE, HAS CONTENDED THAT THE RE- OPENING IN THIS CASE WAS DONE BY THE ASSESSING OFFI CER ON THE SAME ISSUE MERELY ON THE BASIS OF CHANGE OF OPI NION WHICH WAS NOT WARRANTED AS PER PROVISIONS OF LAW L AID DOWN BY VARIOUS COURTS INCLUDING HON'BLE SUPREME CO URT IN THE CASE OF KELVINATOR (INDIA) 320 ITR 561. HE HAS ALSO RELIED IN THIS RESPECT UPON THE DECISIONS OF VARIOU S HIGH COURTS INCLUDING THE DECISION OF THE JURISDICTIONAL HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PR. CIT VS ANIL NAGPAL ITA 11/2016 DATED 14.12.2016. 8. ON THE OTHER HAND, LD. DR HAS STRONGLY RELIED UP ON FINDINGS OF THE LOWER AUTHORITIES AND HAS STRESSED THAT THE RE-OPENING OF ASSESSMENT IN THIS CASE WAS VALID. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O GONE THROUGH THE RECORDS. UNDISPUTEDLY, NO NEW FAC T OR INFORMATION HAD COME TO THE KNOWLEDGE OF THE ASSESS ING OFFICER TO FORM A BELIEF THAT THE INCOME OF THE ASS ESSEE IN 7 THIS CASE HAD ESCAPED ASSESSMENT. THE LD. AR OF TH E ASSESSEE HAS DEMONSTRATED FROM THE EVIDENCE ON RECO RD THAT THE ISSUE WAS THOROUGHLY EXAMINED BY THE ASSES SING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE EXPLANATION OF THE ASSESSEE REGARDING NON-DEDUC TION OF TDS ON THE SAID AMOUNT WAD DULY ACCEPTED BY THE ASSESSING OFFICER. IT IS TO BE FURTHER NOTED THAT THE ASSESSING OFFICER IN THE REASONS RECORDED FOR RE-OP ENING OF THE ASSESSMENT HAS NOT POINTED OUT AS TO WHAT NEW F ACT OR INFORMATION HAD COME TO HIS KNOWLEDGE TO FORM THE B ELIEF THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE VIEW OF THE ASSESSING OFFICER REGARDING THE ESCAPEM ENT OF INCOME ON ACCOUNT OF NON-DEDUCTION OF TDS IS, THUS, WAS A MERE CHANGE OF OPINION. 10. AS PER THE PROVISIONS OF SECTION 147 OF THE ACT , THE ASSESSING OFFICER IS AUTHORIZED TO REOPEN THE ASSES SMENT PROCEEDINGS, IF HE HAS REASON TO BELIEVE THAT NO IN COME CHARGEABLE TO TAX HAS ESCAPED AT. THE COURTS OF LAW , TIME AND AGAIN, HAVE HELD THAT SUCH A REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT S HOULD BE BASED ON SOME TANGIBLE MATERIAL WHICH COMES TO T HE KNOWLEDGE OF THE ASSESSING OFFICER. AN ASSESSMENT CANNOT BE REOPENED UNDER SECTION 147 OF THE ACT ON THE BAS IS OF MERE SUSPICION OR CHANGE OF OPINION. THE POWERS OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT, THOUGH W IDE, ARE NOT PLENARY. IN THIS CASE, THE ORIGINAL ASSESSM ENT U/S 143(3) OF THE ACT HAD ALREADY BECOME FINAL. THE AO THEREFORE 8 WAS PRECLUDED FROM REVIEW OF THE ASSESSMENT WHICH H AD ALREADY BECOME FINAL. THE ADDITION BY THE AO IN RE SPECT OF NON DEDUCTION OF TDS ON PAYMENTS TO THE TV CHANNELS WAS NOTHING BUT THE REVIEW OF THE ALREADY FINALIZED ASS ESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. K ELVINATOR OF INDIA LTD.' HAS HELD THAT WE MUST KEEP IN MIND T HE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO RE-ASSESS. THE ASSESSING OFFICER HAS NO POWER TO RE VIEW; HE HAS THE POWER TO RE-ASSESS. IDENTICAL VIEW HAS ALSO BEEN TAKEN BY THE HONBLE PB. & HRY. HIGH COURT IN THE CASE O F PR. CIT VS ANIL NAGPAL (SUPRA) AS RELIED UPON BY THE LD. COUNSEL. AS OBSERVED ABOVE, THE REOPENING AND REASSESSMENT IN T HIS CASE WAS NOTHING, BUT, THE REVIEW U/S 143(3) OF THE ACT IN THE GARB OF THE PROVISIONS OF SECTION 147 OF THE ACT, WHICH WAS NOT PERMISSIBLE IN VIEW OF THE LAW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA). 11. THE FACTS OF THE CASE IN HAND WHEN SEEN IN THE LIGHT OF THE LEGAL PROPOSITION AS LAID DOWN BY THE HONBLE S UPREME COURT AND BY THE HONBLE JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE, THE REOPENING IN THIS CASE IS TO B E HELD AS ILLEGAL AND BAD IN LAW AND THE SAME ACCORDINGLY IS QUASHED. 12. SINCE WE HAVE QUASHED THE VERY REOPENING OF THE ASSESSMENT BEING BAD IN LAW, HENCE THE CONSEQUENTIA L ADDITIONS MADE BY THE AO HAVE NO LEGS TO STAND. HE NCE, WITHOUT GOING INTO THE MERITS OF THE ADDITIONS MADE BY THE AO 9 CONSEQUENT TO THE REOPENING OF THE ASSESSMENT, THE APPEAL OF THE ASSESSEE IS ALLOWED ON THE GROUND OF THE VALIDI TY OF THE REOPENING OF THE ASSESSMENT. ORDER PRONOUNCED IN OPEN COURT ON 27.04.2017. SD/- SD/- (ANNAPURNA GUPTA) ( SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH APRIL, 2017. POONAM/RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD