Whether grant of excessive credit of TDS amounts to escapement of income — Held, No. Whether it can be construed as grant of excessive relief under sub-clause (iii) of Explanation 2(e) to S. 147 — Held, No

39 2009 TIOL 01 ITAT Hyd.

GMR Projects Pvt. Ltd. v. ACIT

ITA No. 1014/Hyd./2007

A.Y. : 2000-2001. Dated : 26-9-2008

Facts :

For A.Y. 2000-01 the assessee company filed its return of income declaring total income of Rs.11,20,190. During the year under consideration the assessee had in its profit & loss account admitted receipts of Rs.3,33,87,112, but had claimed credit for TDS, amounting to Rs.56,30,970, in respect of entire gross receipts of Rs.25,70,53,996. The Assessing Officer completed the assessment u/s.143(3) of the Act assessing the total income to be the same as returned income and granted credit of TDS amounting to Rs.56,27,970.

Subsequently, the AO initiated reassessment proceedings since he was of the view that as per provisions of S. 199 of the Act credit should be restricted to the extent of income admitted during the year. In the order passed u/s.143(3) r.w. S. 147 of the Act, the AO restricted credit of TDS to Rs.7,34,516.

In an appeal to the CIT(A) the assessee challenged the reopening of assessment on the ground that grant of excessive credit of TDS cannot be construed as escapement of income. The CIT(A) upheld the reopening and held that grant of excess credit of TDS is a case of income being subjected to excessive relief.

Aggrieved, the assessee preferred an appeal to the Tribunal, wherein it challenged the reopening of the assessment.

Held :

The Tribunal noted that the words ‘income’ and ‘tax’ have different connotations and are separately defined in the Act. The tax on income is on the basis of charge prescribed in Chapter II of the Act. It further observed that what needs to be assessed under the Act is the income earned by the assessee. Chapter XIV of the Act prescribes the procedure for assessment. Once the income is earned, returned and assessed, the collection and recovery of tax start simultaneously at each stage as prescribed in Chapter XVII of the Act. The Tribunal observed that as per the scheme of the Act, each stage is a distinct stage, and each stage culminates into the next. In the present case, the Tribunal noted that it was dealing with assessment stage.

The Tribunal observed that S. 147 is contained in Chapter XIV of the Act and deals with income which has escaped assessment. It stated that when one says that income has escaped assessment, it only means that such income has escaped the tax net though it was taxable. According to the Tribunal, granting of excess credit cannot be equated with income escaping assessment. By granting excess credit everything revolves around correct collection and recovery of tax. Nowhere income is in picture and if income is not in picture, where is the question of its escapement ? The Tribunal held that the AO assumed the jurisdiction wrongly when no income had escaped assessment.

As regards the provision of clause (c)(iii) of Explanation 2 to S. 147 of the Act, the Tribunal noted that the issue is squarely covered in favour of the assessee by the decision of the Bombay High Court in the case of Bombay Gas Co. Ltd.

The Tribunal quashed the order of reassessment.