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21-08-2019, LALIT BAGAI, Section 147, 148, 40(a)(ia), HIGH COURT OF DELHI
1. The Revenue is in appeal against an order dated 9th March 2018 passed by the Income Tax Appellate Tribunal („ITAT‟) in ITA No.5833/Del/2015 for Assessment Year („AY‟) 2006-07.
2. The issue sought to be urged by the Revenue is whether the ITAT was justified in quashing the reassessment proceedings under Section 147 of the Act on the ground of change of opinion on the applicability of Section 40 (a) (ia) of the Act even when the Assessing Officer („AO‟) had not expressed any opinion on the applicability of such provision during the original assessment proceedings under Section 143(3) of the Act?
3. The admitted factual position is that for the AY in question the return of income was filed by the Assessee on 31st October 2006 declaring an income of Rs.1,02,35,913/-. The return was picked up for scrutiny and notice to the Assessee was issued by the Assessing Officer („AO‟) under Section 143(2) and 142(1) of the Act on 19th October 2007 along with a detailed questionnaire to the assessee.
4. Consequent thereto an assessment order was passed on 28th March 2008 assessing the business income of Assessee at Rs.71,66,970/- and taxable long term capital gains(LTCG) at Rs.37,85,502/-. In the course of the framing of the assessment the AO disallowed wage expenses to the extent of 1% of Rs.4,71,86,794/- which equals to Rs.4,71,867/- to cover up the leakage in the income. There was also disallowance of miscellaneous expenses.
5. Thereafter, on 28th March 2008 notice was issued to the Assessee under Section 147/148 of the Act. In the order of reassessment dated 28th March 2014 the AO disallowed Rs.4,89,15,024/- under Section 40 (a) (ia) on the ground that the Assessee had not deducted TDS on the payments made to the labour. The Assessee was also found to have made payment of job work charges amounting to Rs.84,03,444/- and rent charges of Rs.31,83,736/-. However, TDS had only been deducted on a sum of Rs.78,84,248/-.
6. Aggrieved by the above order of the AO the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)]. By an order dated 7th August 2015 the CIT (A) allowed the appeal of the Assessee essentially on the ground that the reopening by the AO was based on change of opinion.
7. The Revenue‟s appeal against the aforementioned order of the CIT (A) was dismissed by the ITAT by the impugned order and that is how the Revenue is in appeal before this Court.
8. On 14th December 2018 while directing notice to issue in the present appeal the following order was passed by this Court:
“2. By the impugned order dated 19.2.2018, Income Tax Appellate Tribunal ( Tribunal for short) has affirmed the finding given by the Commissioner of Income Tax (Appeals) that this was a case of change of opinion; and, therefore, the reassessment proceedings initiated against the respondent — Lalit Bagai for the assessment year 2006-07 were contrary and bad in law
3. It is an accepted and admitted position that the original tax return of the respondent/assessee for the assessment year 2006-07 was taken up for scrutiny assessment. Vide assessment order under Section 143 (3) dated 28th March, 2008, additions were made including dis-allowance of one per cent of the wage expenses of Rs.4,71,86,794, i.e. Rs.4,71,867/- to cover up leakage or wrongful claims.
4. At this stage itself, we may record, that the respondent/assessee had claimed that he had incurred wage expenses of Rs.4.71 crores based upon the muster roll which was relied upon before Assessing Officer.
5. Subsequently, re-assessment proceedings under Section 147