Assessment cannot be reopened for excess credit of TDS

PrintPDF

HIGH COURT OF DELHI

Asia Satellite Telecommunications Co. Ltd.

v.

Assistant Director of Income-tax, International Taxation

W.P.(C) NO. 8852 OF 2011

AUGUST 23, 2012

 

Turning now to the validity of the reasons recorded, that credit for TDS of Rs. 2,11,16,426/- was wrongly allowed to the petitioner, counsel for the petitioner is right in his submission that Section 147 of the Act can be invoked only “if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year” and that there is no authority given by the section enabling the Assessing Officer to reopen the assessment on the ground that credit for TDS was wrongly allowed in the original assessment. In the reasons recorded, reference has been made to Explanation 2 to Section 147. We are not reproducing the said Explanation as the same has been reproduced in the reasons recorded, which have been quoted earlier. In our opinion, none of the three clauses of the Explanation applies to the present case. Clause (a) speaks of no return having been filed; that is not the case here. Clause (b) speaks of a return having been filed without an assessment being made and the assessee had understated the income or has claimed excessive loss, deduction, allowance or relief in the return. This also is not the case here. Clause (c) has several sub-clauses and none of the situations applies to the petitioner’s case. Reference is then made to Section 155(14) of the Act in the reasons recorded. A careful reading thereof shows that it is intended for the benefit of the assessee who had omitted to file the TDS certificate along with the return of income but subsequently produces the same before the Assessing Officer within two years from the end of the assessment year in which the income relevant to the TDS is assessable, in which case the Assessing Officer can amend the assessment order and grant the relief, invoking the powers under Section 154 of the Act. The proviso to Section 155(14), however, places a condition, namely that the credit for TDS can be given by the Assessing only if the corresponding income is disclosed by the assessee in the return of income. What perhaps the respondent in the present case had in mind – we are only surmising – is that the assessee has not disclosed the income corresponding to the TDS of Rs. 2,11,16,426/-; and when credit was given for the same by the order passed on 26.06.2006 under Section 154 of the Act, the petitioner was allowed “excessive relief” within the meaning of clause (b) of Explanation 2 to Section 147 of the Act. We are just assuming that this was in the mind of the Assessing Officer though in the reasons recorded it has not been so articulated. Even assuming this was the basis for issuing the notice, it cannot be validated for several reasons. The first assumption we have to make is that the petitioner claimed the relief in the return of income. Factually this is not so in the present case. No claim for the TDS of Rs. 2,11,16,426/- was made by the petitioner “in the return” nor was any credit given in the demand notice for any TDS. This is clear from the income tax computation form dated 26.03.2006 placed at pages 68 – 69 of the writ petition. The petitioner had filed the TDS certificates with the respondent on 18.05.2005 which is obviously in the course of the original assessment proceedings. Despite this, and despite rejecting the assessee’s claim that its income was not taxable in India and thereby bringing to tax the sum of Rs. 64,99,26,627/- in the assessment order passed on 27.03.2006, the respondent did not allow credit for the TDS of Rs. 2,11,16,426/-. It was because of this – not giving credit for TDS despite assessing the income – that the petitioner was compelled to move an application for rectification of the assessment under Section 154 of the Act on 12.05.2006. The claim was accepted by the Assessing Officer and an order under Section 154 of the Act was passed on 26.06.2006 wherein credit for the TDS was allowed (income tax computation form placed at pages 83-84 of Annexure-G to the writ petition). The petitioner thus claimed the relief for TDS not in the return of income but by means of a separate application under Section 154 after the passing of the assessment order. Obviously it was the stand of the petitioner that if the income is in fact assessed, though according to it the same is not assessable, the corresponding credit has to be given for the related TDS. This is the purport and object of Section 155(14) of the Act. The order passed by the respondent on 27.06.2006 is traceable to Section 155(14) read with Section 154 of the Act and by claiming credit for TDS the petitioner cannot be said to have furnished untrue or incorrect particulars of its income; nor can it be said that by allowing credit for the TDS the Assessing Officer has given excessive relief. The other assumption which we have to make is that the relief was allowed to the petitioner in the original assessment order, which would be an erroneous assumption since no credit for TDS was allowed in the original assessment order dated 27.03.2006. The credit given for TDS in an order passed under Section 155(14) read with Section 154 cannot be construed as a relief given in the original assessment order. Section 155 of the Act provides for various situations under which an order can be amended because of developments taking place subsequent to the date on which the order was originally passed. It was this power of amendment which was invoked by the petitioner; thereby the petitioner was not claiming any relief in the return. Lastly, if we were to uphold the reasoning of the respondent we have to make a further assumption that claiming credit for TDS amounts to claiming excessive loss, deduction, allowance or relief. The respondent has not demonstrated in the reasons recorded as to how such an assumption can be validly made. Explanation 2 to Section 147 of the Act cannot travel beyond the main provision. The main provision empowers the Assessing Officer to reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Explanation 2 merely enumerates cases which are deemed to be cases where “income chargeable to tax has escaped assessment”. Therefore, the cases enumerated in the Explanation should also be cases where income chargeable to tax had escaped assessment. It cannot be so construed as to rope in cases where credit for TDS, which is a credit given against the tax payable and is not any allowance or deduction or loss or relief against the income chargeable to tax was erroneously given. There is, therefore, no merit in the reasons recorded by the respondent for reopening the assessment.