THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 05.12.2014 + W.P.(C) 5054/2014 and CM No. 10078/2014 LALIT BAGAI ... Petitioner versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 38 (1) ... Respondent Advocates who appeared in this case: For Petitioner : Mr Gagan Kumar For Respondents : Ms Suruchi Aggarwal CORAM:- HON BLE MR JUSTICE BADAR DURREZ AHMED HON BLE MR JUSTICE SIDDHARTH MRIDUL JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1. This writ petition is directed against notice dated 26.03.2014 issued under Section 148 of Income-tax Act, 1961 seeking to reopen assessment for assessment year 2007-08. It is obvious that notice has been issued beyond four years from end of relevant assessment year. Therefore, learned counsel for petitioner has urged that proviso to Section 147 would be applicable. said W.P.(C) No. 5054/2014 Page 1 of 8 proviso requires, inter alia, following conditions to be fulfilled before assessment can be reopened beyond said period of four years:- (a) assessee has failed to fully and truly disclose all material particulars necessary for his assessment; and (b) because of such failure income has escaped assessment. 2. According to learned counsel for petitioner, there is no failure on part of assessee / petitioner in disclosing all material particulars. Furthermore, it is contended that reopening is premised on mere change of opinion which is also not permissible. 3. Alongwith notice dated 26.03.2014, recorded reasons for reopening assessment were supplied to petitioner. said reasons were as under:- REASONS FOR REOPENING CASE U/S 147 assessment in this case was completed u/s 143(3) on 30.3.2008 at income of Rs 1,58,73,600/-. On examination, it is found that assessee has not shown receipts in Profit & Loss account of Rs 18,95,45,672/-. Which appear in form 16A of relevant previous year, thereby showing less income. It is pertinent to note here that similar issue came before undersigned for A.Y. 2006-07. During course of assessment u/s 143(3)/147. It was observed that no TDS was deducted on payment of Rs 5,27,52,272/- and difference in contract receipt could not be reconciled by assessee. Further on perusal of records for relevant previous year, it is also seen that assessee has not deducted any tax on Rs W.P.(C) No. 5054/2014 Page 2 of 8 5,80,70,078/- payment. Therefore, provisions of Section u/s 40(a)(ia) attract on above mentioned amount. assessee neither at time of Assessment proceedings nor at time of filing of returns of income disclosed above mentioned facts. In view of these facts and after due application of mind, I have reason to believe that income chargeable to tax has escaped assessment for A.Y. 2007-08 for reason of failure on part of assessee to disclose fully and truly all mentioned facts necessary for his assessment. Therefore, case is fit for reopening assessment u/s 147/148 of IT Act. prior sanction of CIT is required before issue of notice u/s 148 of IT Act as per provision of Section 151(1) Income Tax Act. File is submitted for kind approval of CIT-XII, New Delhi in aforesaid case before reopening case u/s 147. petitioner filed objections on 02.05.2014 which were considered and rejected by Assessing Officer by order dated 09.05.2014. petitioner is aggrieved by said notice dated 26.03.2014 and rejection order dated 09.05.2014. 4. learned counsel for department / revenue defended action taken by Assessing Officer. She reiterates stand taken in counter affidavit and submits that this is fit case for reopening of assessment. 5. Having considered arguments advanced by counsel for parties, it is evident that recorded reasons disclose two points which W.P.(C) No. 5054/2014 Page 3 of 8 have purportedly led to issuance of impugned notice. first point was that on examination of records it was found that assessee had not shown receipts in Profit and Loss Account to extent of Rs 18,95,45,672/- which had appeared in 16A Forms that were submitted by assessee for relevant previous year. In other words, there was problem of reconciliation between receipts in Profit and Loss Account and income as evident from 16A Forms submitted by assessee. Insofar as this issue is concerned, learned counsel for petitioner drew our attention to document at page 35 of paper book which was issued by petitioner s Chartered Accountants to Assessing Officer during course of original assessment under section 143(3) in respect of assessment year 2007- 08. said letter reads as under:- SATINDER SAINI & CO. Chartered. Accountants 514, Suneja Tower I, District Centre, Janakpuri, New Delhi-58, Tele-Fax-25511904, Phone 25612574, 20060558 E-Mail:sainisk@ssc-india.com Asstt. Commissioner of Income Tax Circle 38(1), New Delhi. DearSir, Ref: Mr Lalit Bagai Assessment Year 2007-08 W.P.(C) No. 5054/2014 Page 4 of 8 With due respect it is stated that your goodself asked to file certain details for which we have instructed by our client to submit as under: Copy of Creditors Account: Complete copy of account specifically asked for by your honour along with confirmations of balances from parties are enclosed. Reason for Difference in gross receipt: Your good self asked to prepare reconciliation explaining difference in amount as per TDS certificates and amount shown as turnover in profit and loss account. In this regard we explain that amount shown in TDS certificates are inclusive of all taxes like Service Tax, Works Contract Tax, VAT/ CST whereas amount taken as turnover in profit and loss account is exclusive of all taxes. taxes appearing on bills are accounted as liability and hence appears in balance, if remains payable. Further in case there is some recovery on account of freight / Octroi etc that will be credited to respective expense head and not included in turnover. This accounting procedure is followed by assessee for last many years and there is no change in that. party deducts TDS on gross value of bill. Hence there will always be difference if one will compare turnover of profit and loss account with amount credited as shown in TDS certificates / details. Secondly, assesee booked its turnover as soon it raises bills whereas party mostly book its expenses after certification / passing of bills. TDS is being deducted at time of credit or payment whichever is earlier. Accordingly there are certain amounts / bills which assesee accounted for in last year as turnover whereas since these bills were certified/ paid off in current financial year hence party booked its expenses in current year. After taking into account effect of all above assesee calculate gross turnover for purpose of comparison as follows: W.P.(C) No. 5054/2014 Page 5 of 8 Turnover as per Profit and Loss account Rs 27,19,15,817/= Add : Amount of Service Tax Rs 1,90,48,930/ = Add : Amonut of VAT / CST / W.CT Rs 92,76,580/= Add : Income accounted in earlier year Rs 2,51,72,403/= Add : Maintenance Contract Rs 6,60,000/= Add : Recovery of Expenses Rs 9,18,556/ = Total Rs 32,69,92,286/= We hope your honour will find above in order and oblige. Thanking You Your's Faithfully For Satinder Saini & Co . Chartered Accountants (S K Saini) It is evident from above extract that very same difference which is sought to be made subject matter of reasons for initiating action of reassessment was in contemplation of Assessing Officer at time of original assessment and full reply had been given by petitioner s Chartered Accounts reconciling differences pointed out by Assessing Officer. Thereafter, Assessing Officer in assessment order dated 30.03.2008 had not made any additions after, apparently, being fully satisfied by reply submitted on behalf of petitioner / assessee. It is, therefore, clear that attempt to reopen assessment on this ground would be nothing but attempt at changing earlier opinion, which is not permissible in law. In any event all these facts had been fully and truly disclosed before Assessing Officer at time of original assessment. W.P.(C) No. 5054/2014 Page 6 of 8 6. second point raised in recorded reasons was that assessee had not deducted any tax on payment of Rs 5,80,70,078/- and, therefore, provisions of section 40(a)(ia) would get attracted and deductions would not be available to assessee. Insofar as this aspect is concerned, learned counsel for petitioner pointed out that payments were made to its own employees and were not of nature of payments covered under section 40(a)(ia) of said Act. learned counsel for petitioner states that even assessment order would reveal that these payments were made to its own employees inasmuch as he had produced muster roll and Assessing Officer at time of original assessment had even made ad-hoc deduction of Rs 4 lakhs. On this ground also we find that reopening of assessment order could not have been directed inasmuch as nature of payments by themselves indicate that same could not be covered under section 40(a)(ia) of said Act. There was, therefore, no basis for seeking reopening of assessment insofar as assessment year 2007-08 was concerned. No other reasons have been indicated in recorded reasons. 7. As result, impugned notice dated 26.03.2014 and W.P.(C) No. 5054/2014 Page 7 of 8 impugned order dated 09.05.2014 are set aside. writ petition is allowed as above. There shall be no order as to costs. BADAR DURREZ AHMED, J DECEMBER 05, 2014 SIDDHARTH MRIDUL, J SU W.P.(C) No. 5054/2014 Page 8 of 8 Lalit Bagai v. Deputy Commissioner of Income-tax, Circle-38(1)