Mere Discovery of Under-Assessment cant’ be Reason for Re-Assessment: ITAT grants relief to Idea [Read Order]

While granting relief to Idea, the Mumbai bench of Income Tax Appellate Tribunal ( ITAT ) held that mere discovery of under-assessment cant’ be a reason for Re-Assessment.

In instant case Assessing officer filed the present appeal and Assessee raised a cross-objection. Assessee – company engaged in providing cellular mobile services and trades in accessories filed its return of income declaring nil income after set off of brought forward business loss.

However, AO completed the assessment determining the income of the assessee at Rs.96.41 crores. Consequently, on re-assessment proceedings, AO held that regarding the payment on service provided for roaming charges are in the nature of revenue sharing. Accordingly, AO disallowed the roaming charges as per provisions of Section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source under Section 194J of the Income Tax Act.

AO pressed the Supreme Court decision in Bharti Cellular Ltd wherein court had directed Department to establish that any human interference was required for international roaming, that the matter of international roaming had not reached finality.

Being aggrieved Assessee appealed before First Appellate Authority and made elaborate submissions and cited various case laws in support of his contentions. The FAA observed that the AO had to bring new or fresh information otherwise he would have no jurisdiction to initiate the proceedings u/s.147/148. A mere change of opinion could lead a re-assessment.

Finally, he held that the AO was not justified in reopening the assessment for the year under consideration.

Before the tribunal Revenue relied on the provision under section 40(a)(i)of the Act and justified the act of AO was correct. On the counterpart counsel for Assessee argued that reopening based on the mere change of opinion was bad in law, that the AO had reopened the case in absence of any new tangible material on record.

Thereafter tribunal noticed the entire fact and found that regarding the inquiries made by AO about roaming charges were satisfactory to him and passed original order, allowed the roaming charges and did not invoke the provisions of section 40(a)(ia)of the Income Tax Act. Later the same reversed during the re-assessment without any material before AO for issuing the notice under section 148.

Finally, the bench noted that “He had changed his opinion about the application of the provisions of section 40(a)(ia). Reassessing the income of the assessee on such change of opinion is not permissible under the Act. The issue of roaming charges was deliberated upon during the original assessment, so, without bringing something new on record the AO should not have issued the reassessment notice.Cases relied upon by the FAA also support our views. Considering the above, we hold that the order of the FAA does not suffer from any legal infirmity”.