Difference in figures of income as per TDS certificates and in return of income does not necessarily lead of escapement of income :

[2013] 30 taxmann.com 54 (Kolkata - Trib.)

IN THE ITAT KOLKATA BENCH 'B'

Meheria Reid & Co.

28-12-2012

  •  In the instant case, there is nothing in the reasons to indicate that there is an escapement of income, but, at the most, need to verify that the reasons of discrepancy between income from profession as per return of income vis-à-vis as per the certificates of tax deduction at source. A variation in these two figures does not necessarily lead to escapement of income, because, for example, when income is booked on mercantile basis, the aggregate of such amounts, on which taxes have been deducted at source during the relevant previous year, will not necessarily tally with the income figure.

 •  There is thus no cause and effect relationship between the aggregate of payments, in respect of which taxes have been deducted at source, being more than relevant income having been booked in the profit and loss account, and the income escaping assessment. In other words, just because the aggregate of such payments is more than income booked in the profit and loss account, as is the situation in the case, there is no valid reason to indicate that income has escaped assessment.

 •  All that the Assessing Officer records is the fact that these two figures are different, but then this fact does not necessarily lead to the inference that the income has escaped assessment, and, therefore, the Assessing Officer himself refers to the need to verify the matter by observing that " the discrepancy may be verified" . So far so good, but then the fallacy creeps in when the Assessing Officer concludes that, for the said reason, " this is a fit case for reopening the assessment ".

 •  The reasons should provide link between evidence and the conclusion. The evidence is that the figures of professional receipts as per TDS certificates and as shown in the profit and loss account vary, but then this does not lead to the conclusion that the income has escaped assessment.

  •  There may be need to verify but that mere need to verify does not bring the matter within the scope of cases in which reassessment proceedings can be validly initiated. What is needed, to successfully invoke the reassessment proceedings, is the reasons to believe that income has escaped assessment. No doubt, even a prima facie reason for believing that income has escaped assessment is sufficient to invoke the reassessment proceedings, but there is a subtle, though significant, distinction between reasons to believe and reasons to suspect.

 •  While the former is good enough to hold that income has escaped assessment and initiate suitable remedial measures in respect thereof, the latter can at best be the ground enough to verify and examine the matter further. The mere fact that matter needs to be verified and deserves to be examined further can, never be a reason good enough to 'believe', even if it is a good reason to suspect so, that income has escaped assessment, and therefore, a reason good enough to invoke the reassessment proceedings.

 •  An Assessing Officer may have a hunch that here is a case in which some income may have escaped assessment but that hunch or suspicion, howsoever legitimate, cannot be a reason to 'believe' that income has escaped assessment. The condition precedent for invoking section 147 is, thus, far from satisfied.

 •  In this view of the matter, the very initiation of reassessment proceedings on the facts of this case was devoid of legally sustainable merits. Therefore, the reassessment proceedings are quashed. [Para 11]

  •  In the result, the appeal of the assessee is allowed. [Para 12]