MITUL GEMS Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) By way of this petition under Article 226 of the Constitution of India, the petitioner - assessee has prayed for an appropriate writ, order or direction to quash and set aside the impugned notice dated 17.03.2014 issued under Section 148 of the Income Tax Act (hereinafter referred to as the 'Act') for A.Y. 2007-2008 by which, in exercise of powers under Section 147 of the Act, the assessment for A.Y. 2007-2008 is sought to be reopened.

(2.) At the outset, it is required to be noted that the assessment for A.Y. 2007-2008 is sought to be reopened beyond the period of 4 years from the relevant assessment year on the following reasons recorded under Section 148(2) of the Act:-

(3.) Under the circumstances, while dealing with the objections raised by the petitioner and disposing of the same, the Assessing Officer has considered altogether a different issue than the reasons for which, the reassessment proceedings are initiated. From the reasons recorded, it appears that the assessment for A.Y. 2007-2008 was sought to be reopened on the ground that during the financial year 2006-2007 relevant to A.Y. 2007-2008, the assessee firm had incurred labour expenses (outside labour) amounting to Rs. 1,38,26,488/- (Total Manufacturing-Labour expenses: Rs. 1,60,13,090/-). The work was done by six outside parties, however, no tax was deducted from payment of Rs. 22,65,048/-made to one party - Mitul Gems/SSI unit and, therefore, since, no TDS was deducted from the payment, the amount of Rs. 22,65,048/- is not an allowable deduction in terms of Section 40(a)(ia). The assessee has claimed the said expenditure and said had resulted under assessment of income to the tune of Rs. 22,65,048/- in the case of assessee due to the failure on the part of the assessee to disclose truly all material facts necessary for his assessment. However, from the communication dated 19.09.2014 disposing of the objections raised by the petitioner-assessee, it appears that the Assessing Officer had considered altogether a different and new issue with respect to the status of the petitioner-assessee as SSI unit. It is also required to be noted at this stage and from the profit and loss accounts, it appears that as such, the petitioner-assessee never claimed any deduction with respect to the payment of Rs. 22,65,048/-. Therefore, the ground on which, the Assessing Officer has tried to reopen the assessment i.e. the assessee had claimed Rs. 22,65,048/- as expenditure which was not allowable and, therefore, the said has resulted under assessment, is absolutely and factually incorrect. Therefore, as such, the formation of opinion by the Assessing Officer while reopening the assessment has been vitiated.