The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) observed that non deduction of Tax Deducted at Source ( TDS ) under Section 195(1) of the Income Tax Act, 1961, leading to proposed disallowance under Section 40(a)(i) of the Income Tax Act, 1961
The assessee filed an income tax return for the assessment year 2010-11 on September 30, 2010, stating a total income of Rs. Nil. The assessment was finalized under Section 143(3) of the Income Tax Act on March 13, 2022. Upon reviewing the profit & loss account as of March 31, 2010, it was discovered that a sum of Rs. 5,80,52,487/- was recorded as overseas commission without the required TDS under section 195(1) of the Income Tax Act, 1961. Consequently, the assessment was reopened under Section 148 of the Income Tax Act, 1961, to disallow this expenditure under Section 40(a)(i) of the Income Tax Act, 1961 .
The counsel for the revenue Dr. Nischal argued that the NFAC has overstepped its authority by addressing issues not within its purview. Therefore, it was suggested that the matter be sent back to the NFAC for reconsideration, following a remand report from the Assessing Officer.
The contention raised by the counsel for the assessee Hita M observed that once the original assessment was finalized under Section 143(3) of the Income Tax Act, 1961, a notice under Section 148 of the Income Tax Act, 1961, for reopening the assessment could not be issued after the expiration of four years from the end of the relevant assessment year, unless there was evidence of income escaping assessment for that assessment year and a failure on the part of the assessee to file a return under section 139 of the Income Tax Act, 1961 ,or respond to notices under Section 142(1) or 148, of the Income Tax Act, 1961, or disclose all material facts necessary for assessment.
The bench observed that the assessee failed to fully and truthfully disclose all material facts necessary for the relevant assessment year. The assessing officer did not allege any such failure while recording the reasons for reopening the assessment
The two member bench of the tribunal comprising Chandra Poojari ( Accountant member) and Madhumita Roy ( Judicial member ) noted that the only allegation made was regarding the non-deduction of TDS under Section 195(1) of the Income Tax Act, 1961, leading to a proposed disallowance under Section 40(a)(i) of the Income Tax Act, 1961. Consequently, nullified the reassessment order issued in this case based on this primary issue, particularly considering the proposed disallowance under section 40(a) (i) of the Income Tax Act, 1961
In the result, appeal of the revenue was dismissed.
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