In the case of ITO Alappuzha v. Mr. Alex Rocky, the ITAT Kochi bench held that audit objection cannot be a ground for re-assessment under Income Tax Act when the issue was concluded by the AO in favour of the assessee during the original assessment proceedings.
In the instant case, the assessee, an individual engaged in the business of trading of rubber, pepper etc. was aggrieved by the re-assessment proceedings initiated by the Revenue on the ground that no tax was deducted on warehousing charges. Accordingly assessment was completed against the assessee by invoking provisions of section 40(a)(ia) of the Income Tax Act and disallowed the claim for warehousing charges.
The assessee maintained that warehousing charges would not come within the ambit of section 194I of the Income Tax Act. The first appellate authority allowed the appeal by relying upon the Apex Court decision in CIT vs Kelvinator of India Ltd.
The Judicial Member noted that the Assessing Officer did not disallow the warehousing charges paid on account of non deduction of tax at source during the original assessment proceedings.
“This clearly shows that question of TDS on warehousing charges paid by the assessee was considered by the Assessing Officer and the contention raised by the assessee was accepted. Therefore, there was no failure or omission on the part of the assessee to file full and true disclosure of material facts during the course or original assessment; such being the case, reassessment is only a change of opinion . For the said proposition, reliance is placed on the judgment of the Hon’ble Apex Court in the case of Kelvinator of India Ltd (supra).”
Upholding the order of the first appellate authority, the Hon’ble Member held that the audit objection cannot be a ground for reopening of assessment, especially when in the course of original assessment proceedings, the said issue was considered by the Assessing Officer in detail and the contention of the assessee was accepted.
Read the full text of the order below.
