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Wci (Madras) (P) Ltd. v. Assistant Commissioner Of Income-Tax

Madras High Court

Aug 10, 2009

Judgment

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Factual and Procedural Background

The assessee is a company engaged as a clearing and forwarding agent. For assessment years 1996-97 to 2002-03 the Assessing Officer (AO) observed discrepancies between amounts shown in TDS certificates (gross receipts) and amounts credited to the assessee's profit and loss account. The AO did not accept the assessee's explanation—that TDS is deducted on gross receipts including reimbursements of expenses incurred on behalf of principals—and made additions equal to the difference. On appeal the Commissioner of Income-tax (Appeals) allowed the assessee's appeal on the merits, observing that reimbursements do not necessarily vest the character of income and relying on a precedent to that effect; the Commissioner directed deletion of the additions.

The Revenue appealed to the Income-tax Appellate Tribunal (Tribunal). The Tribunal allowed the Revenue's appeal, holding that the assessee had not provided proper reconciliation or documentary proof of the discrepancy and remitted the matter to the AO for reconciliation of the difference between TDS gross receipts and amounts credited in the profit and loss account. The Tribunal also dismissed the assessee's cross-objection on reopening, treating the audit party's factual error as a valid basis to reopen assessments. For assessment years 1999-2000 to 2002-03 the Tribunal held that proceedings had been only processing under section 143(1) and relied on an apex court decision that such intimation cannot be treated as an assessment order for the purpose of limitation.

The assessee moved this Court against the common Tribunal order, and the Court admitted the appeals on four substantial questions of law concerning (1) whether the Tribunal was correct in finding that the assessee had not explained the difference between TDS certificates and profit and loss account when the AO had accepted the explanation in the assessment order, (2) whether the Tribunal was correct in remitting the case without considering that the assessee maintained accrual accounts as per statutory and professional accounting norms, (3) whether the Tribunal was right in holding jurisdiction to issue the notice when the respondent allegedly lacked jurisdiction, and (4) whether the Tribunal was right in not considering the issue of limitation raised by the assessee.

Legal Issues Presented

Whether, on the facts and circumstances of the case, the finding of the Tribunal that the assessee had not explained the difference between receipts in the TDS certificate and the amount credited in the profit and loss account is correct in law when the same was accepted by the Assessing Officer in the assessment order itself?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in remanding the case without considering the fact that the appellant was maintaining its accounts in accrual system of accounting as per the provisions of the Companies Act and the method of accounting prescribed by the Institute of Chartered Accountants of India for corporate assessees?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the respondent has jurisdiction to issue the notice is correct in law when admittedly, the respondent lacks jurisdiction?
Whether on the facts and in the circumstances of the case, the Tribunal was right in not considering the issue of limitation raised by the appellant is right in law?

Arguments of the Parties

Appellant (Assessee)'s Arguments

For assessment years 1996-97 to 1998-99 the regular assessment orders under section 143(3) had been passed (dates given) and notices under section 148 were issued on 26-3-2003 (for 1996-97) and 29-3-2004 (for 1997-98 and 1998-99), which the assessee contended were beyond the four-year limitation period in the absence of fresh material.
The notice under section 148 lacked the requisite "reason to believe" escapement of income because the AO himself admitted that TDS certificates were the only basis available and that such TDS information had been filed with returns from the beginning; therefore there was no new information and no failure to disclose truly and fully.
Assessee relied on various authorities (including Foramer France, Premier Mills Ltd., Elgi Ultra Industries Ltd., A.V Thomas Exports Ltd., Chamundeswari and GKN Driveshafts) to support the contention that recorded reasons had not been furnished and that limitation/recorded reasons defects made the reopening invalid.
On merits, the assessee argued that in the clearing-and-forwarding business it is customary to collect and pass on reimbursements (harbour dues, handling charges, warehousing, demurrage etc.), that the Institute of Chartered Accountants of India's guidance note for tax audits treats such reimbursements as not forming part of gross receipts for certain purposes, and therefore the accounting practice (netting reimbursements and crediting net receipts to profit and loss) was uniform and acceptable; the assessee contended it should not be singled out.
Assessee argued that invocation of Explanation 2(c)(iii) of section 147 to reopen assessments for 1999-2000 to 2002-03 was not correct because there was no excessive relief granted and therefore notices under section 147 lacked jurisdiction for these years.

Respondent (Revenue)'s Arguments

The Tribunal's remittal was simply to enable the AO to obtain a proper reconciliation of the difference between the gross receipts as per TDS certificate and amounts credited to profit and loss; if the assessee had documentary materials it could establish on reconciliation that the order would not be prejudicial to it.
The remittal was appropriate even if the assessee raised jurisdictional objections; lack of jurisdiction to reopen assessments does not immunize the assessee from being required to reconcile differences where factual discrepancies exist.
The Revenue maintained that the Tribunal was correct to treat the reassessments as valid and to remand the matter for factual reconciliation rather than allow the assessee's theoretical explanations to prevail without documentary proof.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1	Used by the Commissioner to support the conclusion that TDS is required on “any sum paid” and that some payments, though not bearing the character of income, attract TDS.	The Commissioner of Income-tax (Appeals) relied on this decision to hold in favour of the assessee and delete additions on the merits.
Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC)	Holds that processing under section 143(1) (intimation) cannot be equated with an assessment order for the purpose of limitation; reassessment can be made in respect of proceedings which were only processed under s.143(1).	The Tribunal (and this Court) relied on this apex court decision to treat reassessments for years where only s.143(1) processing occurred as valid and to reject the assessee's limitation argument for those years.
Commissioner Of Income Tax v. P.V.S Beedies Pvt. Ltd. [1999] 237 ITR 13	Holds that reopening on the basis of a factual error pointed out by an internal audit party can be valid.	The Tribunal cited this decision to support the view that reopening of assessment based on internal audit factual error is valid; Court accepted that reasoning in upholding reopening.
Sri Krishna (P) Ltd. v. ITO [1996] 221 ITR 538	Holds that disclosure by the assessee to avoid reassessment must not only be true but also fully explained; mere assertion is insufficient.	The Tribunal invoked this principle to require the assessee to provide full reconciliation and documentary proof, and the Court relied on it in concluding that lack of full explanation justified reassessment.
GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19	Addressed adequacy of communication of reasons recorded for reopening and whether the recorded reason was furnished to the assessee.	The assessee relied on this authority to argue that recorded reasons were not furnished (only a gist was given); the Court noted the contention but found on facts that the assessee had accepted in grounds that a gist of reasons was communicated.
CIT v. Foramer France [2003] 264 ITR 566 (SC)	Relied upon by the assessee in support of limitation/related procedural arguments (as cited by the assessee).	The assessee relied on this decision to buttress limitation contentions; the Court considered the submission among other authorities but ultimately rejected the limitation plea on the facts.
Commissioner Of Income-Tax v. Premier Mills Ltd. [2008] 296 ITR 157 (Mad)	Relied upon by the assessee in support of limitation/related procedural arguments (as cited by the assessee).	Cited by the assessee; the Court noted reliance but found the factual circumstances did not sustain the limitation argument and rejected it.
Commissioner Of Income-Tax v. Elgi Ultra Industries Ltd. [2008] 296 ITR 573 (Mad)	Relied upon by the assessee in support of limitation/related procedural arguments (as cited by the assessee).	Cited by the assessee; the Court considered it in the sequence of authorities but did not accept the limitation contention on the facts.
Commissioner Of Income-Tax v. A.V Thomas Exports Ltd. [2008] 296 ITR 603 (Mad)	Relied upon by the assessee in support of limitation/related procedural arguments (as cited by the assessee).	Cited by the assessee; considered by the Court but did not persuade the Court to allow the limitation plea in view of the factual findings of nondisclosure.
Commissioner Of Income-Tax v. Chamundeswari [2007] 290 ITR 583 (Mad)	Relied upon by the assessee in support of limitation/related procedural arguments (as cited by the assessee).	Cited by the assessee; the Court noted the reliance but upheld reopening and rejected the limitation plea on the facts of the present case.

Court's Reasoning and Analysis

The Court proceeded by focusing on the factual findings and the interplay between factual non-disclosure (or incomplete disclosure) and the validity of reopening assessments. The Court emphasized the following analytical steps, all grounded in the material and findings recorded in the Tribunal and lower authorities:

Establishment of factual matrix: The Court summarized the dates of filing returns, completion of assessment proceedings under sections 143(1) and 143(3), dates when reconciliation was sought and filed, dates of notices under section 148, and dates of reassessment orders for each assessment year (the Court referred to the tabular chronology in the record).
On remittal: The Tribunal remitted the matter to the AO for the assessee to furnish a proper reconciliation and documentary proof for the discrepancy between gross receipts per TDS and amounts taken to profit and loss. The Court observed that this remittal was limited in scope (an opportunity to reconcile) and did not, on the face of it, prejudice the assessee. The Court noted that the assessee had not shown how remittal would cause prejudice or that it had already furnished documentary evidence to the AO demonstrating reconciliation.
On obligation to explain disclosures: Relying on precedent cited by the Tribunal (Sri Krishna and P.V.S Beedies), the Court accepted the principle that disclosures made by an assessee must be not only true but fully explained and supported by documentary evidence; mere theoretical or unsupported explanations are inadequate.
On reopening and limitation: For years where assessments had only undergone processing under section 143(1) (1999-2000 to 2002-03), the Court accepted the apex court authority (Rajesh Jhaveri) that such processing does not amount to an assessment order that would preclude reassessment. Thus reassessment was held permissible for those years. For years originally assessed under section 143(3) (1996-97 to 1998-99), the Court examined whether the reopening under section 148 was time-barred and concluded that the factual finding of discrepancy and distorted financial picture (netting of reimbursements leading to nondisclosure of gross receipts) amounted to failure to disclose fully and truly all material facts; accordingly the limitation objection was rejected on the facts.
On adequacy of reasons communicated: The assessee contended recorded reasons were not furnished; however, the Court observed that the assessee had accepted in the grounds before the Commissioner that a gist of reasons had been communicated. The Court did not allow this contention to invalidate reopening on the facts.
Concluding analysis: Because the Tribunal had found that the assessee had not provided reconciliation and documentary explanation and because that factual finding was supported by the record, the remittal and the validation of reopening stood. The Court therefore found no error in the Tribunal's approach and reached conclusions adverse to the assessee on the substantial questions.

Holding and Implications

Final Holding: The appeals are dismissed and the order of the Income-tax Appellate Tribunal requires no interference. No costs.

Implications (direct effect on the parties):

The Tribunal's remittal to the Assessing Officer for the assessee to provide a detailed reconciliation and documentary evidence of the difference between gross receipts as per TDS certificates and amounts credited to profit and loss account stands upheld.
The re-openings under section 148/147 for the assessment years in question are sustained on the factual finding that the assessee failed to fully and truly disclose material facts (netting reimbursements resulted in a distorted financial picture), and the limitation challenges were rejected on the facts.
No broader legal precedent was declared beyond applying existing authorities; the decision affirms that (a) disclosures must be fully explained with documentary support, and (b) processing under s.143(1) does not bar reassessment per Rajesh Jhaveri. The Court did not announce any novel or far-reaching principle beyond these applications.

Show all summary ...

The Judgment of the Court was delivered by

K. Raviraja Pandian, J.:— These appeals are filed against the common order of the Income-tax Appellate Tribunal “C” Bench, Chennai dated July 27, 2007, made in I.T.A No. 1066.Mds/2006 and I.T.A Nos. 2560 to 2565.Mds/2005. The appeal was admitted by this court on the following substantial questions of law:

“1. Whether, on the facts and circumstances of the case, the finding of the Tribunal that the assessee had not explained the difference between receipts in the TDS certificate and the amount credited in the profit and loss account is correct in law when the same was accepted by the Assessing Officer in the assessment order itself?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in remanding the case without considering the fact that the appellant was maintaining its accounts in accrual system of accounting as per the provisions of the Companies Act and the method of accounting prescribed by the Institute of Chartered Accountants of India for corporate assessees?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the respondent has jurisdiction to issue the notice is correct in law when admittedly, the respondent lacks jurisdiction?

4. Whether on the facts and in the circumstances of the case, the Tribunal was right in not considering the issue of limitation raised by the appellant is right in law?”

2. The facts are: The assessee is a company carrying on the business as clearing and forwarding agent. In respect of the assessment years 1996-97 to 2002-03 the Assessing Officer noted that there was a difference between the income as per the TDS certificate and that credited in the profit and loss account. The assessee's explanation was that in this line of business, tax is deducted on the gross income including reimbursable expenses incurred by the assessee. The explanation was not accepted by the Assessing Officer and he made an addition of the difference between the income as per the TDS and that credited in the profit and loss account. On appeal, the Commissioner of Income-tax (Appeals) held in favour of the assessee by observing that the question of taking a receipt to the credit in the profit and loss account under the accrual system of accounting arises only when the receipt bears the character of income. In the case of all the clearing and forwarding agents including the assessee, it is customary to collect monies for expenses like harbour dues, air cargo handling charges, warehousing charges, demurrage and other charges required to be paid on behalf of their principals in their capacity as licensed customs house agents under the Customs Act and Rules and Regulations framed thereunder. Tax is deducted at source on these payments to customs house agents as per the Central Board of Direct Taxes Circular No. 715 dated August 8, 1995 ([1995] 215 ITR (St.) 12), requiring deduction of tax at source on “any sum paid” including monies paid for expenses which do not bear the character of income. In order to come to that conclusion, the Commissioner relied on the decision in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1. The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee on the merits and directed the Assessing Officer to delete the addition made in respect of the relevant assessment years under consideration.

3. The Department carried that order on further appeal to the Tribunal. The assessee filed cross-objections against the finding that the reopening of assessment was correct. The Tribunal allowed the appeal filed by the Department by observing that it is incumbent on the assessee to explain by way of proper reconciliation and documentary evidence the reason for the discrepancy and remitted the matter to the file of the Assessing Officer for proper reconciliation of the difference between income as per the TDS certificate and that taken for the profit and loss account. The cross-objection filed by the assessee has also been dismissed on the premise that the reopening on the basis of the factual error pointed out by the audit party is valid in law. The disclosure by the assessee must not only be true but should also be fully explained. In respect of the assessment years 1999-2000 to 2002-03, the Tribunal held that there was only processing under section 143(1) of the Act and any intimation under the provision cannot be treated as assessment order and for that purpose, the Tribunal relied on the decision of the apex court in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500. The correctness of the same is put in issue.

4. Mr. A. Thiagarajan, learned counsel for the appellant/assessee contended that in respect of the assessment years 1996-97 to 1998-99 assessment order under section 143(3) was passed on March 19, 1997, February 25, 2000 and February 20, 2001, respectively. However, notice under section 148 of the Act for revision of assessment was issued on March 26, 2003 for the assessment year 1996-97 and on March 29, 2004 for the assessment years 1997-98 and 1998-99, which is beyond the period of four years and hence barred by limitation, in the absence of any new material coming to the notice of the Assessing Officer.

5. It is contended that notice of assessment under section 148 of the Act suffers from “reason to believe” escapement of income for all the assessment years. The Assessing Officer, in his order dated December 28, 2004, admitted that TDS certificates are the basis available with him and hence there is no fresh information. The TDS are filed along with return of income and are available with the Department since inception and there is no failure on the part of the assessee to disclose truly and fully the material facts. Hence, notice under section 148 of the Act in respect of the assessment years 1996-97 and 1997-98 and 1998-99 suffers from limitation prescribed by sections 143 and 147 of the Act.

6. In order to buttress this proposition, he relied on the decision of the apex court in the case of CIT v. Foramer France [2003] 264 ITR 566 (SC), Commissioner Of Income-Tax v. Premier Mills Ltd. [2008] 296 ITR 157 (Mad), Commissioner Of Income-Tax v. Elgi Ultra Industries Ltd. [2008] 296 ITR 573 (Mad), Commissioner Of Income-Tax v. A.V Thomas Exports Ltd. [2008] 296 ITR 603 (Mad) and Commissioner Of Income-Tax v. Chamundeswari [2007] 290 ITR 583 (Mad). He further contended that as per the apex court judgment in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19, the recorded reason has not been furnished to the assessee. Only gist of the reason has been communicated.

7. He further contended that notice under section 148 of the Act issued on March 26, 2003, for the assessment year 1996-97 and on March 29, 2004, for the assessment years 1997-98 to 2002-03 are not in accordance with the requirement of statute as there is no reason to believe escapement of income, which is a condition precedent for issuance of notice under section 148 of the Act. In the regular assessment in respect of the assessment years 1997-98 and 1998-99, the Assessing Officer observed that the regular assessment under section 143(3) of the Act for the assessment year 1997-98 was completed on February 25, 2000. Subsequent to the completion of the assessment, it was noticed that the operational income credited to the profit and loss account is less than the income as per the TDS certificate.

8. It is further contended that the Assessing Officer observed that the assessee, after deducting the operational expenses from the gross receipt is taking the net figure to the profit and loss account. By netting the expenses, the assessee has not furnished the actual picture of transaction carried out by the company and thereby the true state of financial affairs of the assessee-company have not been reflected properly in the return of the income filed. Hence, there is escapement of income to the extent of variation between the income admitted and the income as per the TDS certificate available on record. From the above observation, it is evident that the materials are available before the Assessing Officer while he was making the assessment under section 143(3) of the Act in respect of the assessment years 1999-2000 to 2002-03. In that case there cannot be any discrepancy. When there is no discrepancy, there is no escapement of income. He further concluded that the objection of the assessee that all the assessees doing the business of clearing and forwarding agency are following one and the same method of accounting, i.e, monies received for expenses are credited to bills for collection account and expenses incurred are debited to the said account and unclaimed surplus are transferred to the profit and loss account. This method has been prescribed by the Institute of Chartered Accountants of India in its guidance note on tax audit under section 44AB of the Act, wherein it is stated that under clause (vi) reimbursement of customs duty and other charges collected by a clearing agent would not form part of the gross receipt in business for the purpose of section 44AB. Further, it is contended that the assessee alone cannot be singled out and treated differently. Invocation of Explanation 2(c)(iii) of section 147 of the Act for reopening of the assessment for the assessment years 1999-2000 to 2002-03 is not correct because, there is no excessive relief granted to the assessee and hence the notices under section 147 of the Act lack jurisdiction in respect of these assessment years.

9. However, Mrs. Pushya Sitaraman, learned senior standing counsel for the Revenue contended that the Tribunal had only remitted the matter to the Assessing Officer for the purpose of reconciliation of the difference between the income as per the TDS certificate and income credited in the profit and loss account and if the appellant is having materials, it can very well prove by way of reconciliation that the order cannot be taken as prejudicial for maintaining the appeal. However, the argument was refuted by the learned counsel for the assessee by contending that it is not as simple as argued by the learned senior standing counsel. When there is lack of jurisdiction to reopen the assessment and even for issuance of notice under section 148 of the Act, jurisdiction is lacking, this court cannot be swayed by saying that the said impugned order is only a remittal order.

10. Heard the learned counsel on either side and perused the materials available on record.

11. The following tabular column will show a clear picture about the date of return of income, completion of proceedings, etc.

Assessment year Date of filing of return Income returned Date of completion of proceedings u/s 143(1) accepting the returned income Date of notice u/s 143(2) of the Act Datc of assessment order u/s 143(3) accepting the returned income Date on which reconciliation was sought between income as per profit and loss account and gross receipt as per TDS certificate Reconciliation filed on Date of notice u/s 148 Date on which copy of reasons for reopening were sought Date on which only gist of reasons were furnished Date on which objections for reasons were filed Date on which order against the reasons for reopening was passed Date on whieh detailed objections for reassessment were filed together with clarification on variation between gross receipts as per TDS certificate and income as per profit and loss account Date of reassessment order Addition made on reopening u/s 147 (Rs.) (Rs.) 1996-97 20-9-96 1,92,790 28-1-97 18-2-97 19-3-97 8-9-98 11-9-98 26-3-03 19-12-03 28-2-05 21,22,223 1997-98 30-9-97 2,82,890 27-5-98 3-7-98 25-2-00 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 69,99,136 1998-99 18-4-98 61,290 22-1-99 22-1-99 20-2-01 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 21,85,092 1999-00 6-12-99 58,140 21-8-00 17-7-00 — 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 14,43,022 2000-01 30-11-00 1,32,400 22-6-01 — — 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 12,53,970 2001-02 31-10-01 1,27,460 18-10-02 — — 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 11,07,724 2002-03 24-10-02 1,24,500 21-2-03 — 29-3-04 20-4-04 9-12-04 20-12-04 28-12-04 17-1-05 28-2-05 23,81,448

12. 1. raising the issue of reconciliation between gross receipt as per the TDS certificates and income as per the profit and loss account.

13. From a reading of the above, it is clear that for the assessment years 1996-97, 1997-98 and 1998-99, assessments were completed under section 143(3) of the Income-tax Act and assessment orders were passed on March 19, 1997, February” 25, 2000 and February 20, 2001, respectively and later, the assessment was reopened under section 148 of the Act and notice was issued on March 26, 2003 for the assessment year 1996-97 and on March 29, 2004 for the assessment years 1997-98 and 1998-99 and reassessment was also completed on March 29, 2004 and February” 28, 2005 respectively. In respect of the assessment years 1999-2000 to 2002-2003, the assessment was made under section 143(1) of the Act on August 21, 2000, June 22, 2001, October 18, 2002 and February 21, 2003 respectively. For the assessment year 1996-97, notice under section 148 of the Act was issued on March 26, 2003 and in respect of all the other assessment years viz., 1997-98 to 2002-03, notice under section 148 of the Act was issued on March 29, 2004. Subsequently, for the assessment year 1996-97, reassessment was completed on March 29, 2004 and for the assessment years 1997-98 to 2002-03, reassessment was completed on February 28, 2005. In respect of all the assessment years, the Assessing Officer reopened the assessment on the ground that gross receipts are not transferred to the profit and loss account and made additions. Aggrieved by that order, the assessee has filed an appeal to the Commissioner of Income-tax (Appeals). The said Commissioner of Income-tax (Appeals) upheld the reopening of the assessment, but on the merits, deleted the addition. Aggrieved by that order of the Commissioner of Income-tax (Appeals), the Revenue filed appeals before the Income-tax Appellate Tribunal. The Tribunal, considering the facts, held that there is no proper explanation on behalf of the assessee and only mere theoretical explanation was offered by the assessee and it is for the assessee to make reconciliation of the difference between the receipt in TDS certificate and amount credited in the profit and loss account and there is no material available on record to consider the matter. Therefore, the Tribunal set aside the order on the merits and remitted back the appeal filed by the Revenue and held as follows:

“We have heard both the counsel and perused the relevant records. We find that it is not disputed in this case that gross receipt as per the TDS certificate did include some expenditure reimbursement. In such circumstances, it is incumbent upon the assessee to explain and prove by way of proper reconciliation and documentary evidence the reason for the discrepancy. The reliance upon the hon'ble apex court decision referred to above will be taken into account only after factual details are established. Mere theoretical explanation of the nature of the case will not suffice. Hence, it is the duty of the assessee to make a proper reconciliation of the amount of difference between the receipt as per the TDS certificate and that as per the profit and loss account. Hence, in the interest of justice, we remit this issue to the file of the Assessing Officer to give an opportunity to the assessee to submit a proper reconciliation for the reasons for the difference between the income as per the TDS certificate and that taken into the profit and loss account and explain the veracity thereof by way of documentary evidence.”

14. It is seen from the above that it is only a remittal order passed by the Income-tax Appellate Tribunal by giving an opportunity to the assessee to submit a proper reconciliation. The said remittal order could not cause any prejudice to the assessee and also the learned counsel appearing for the assessee was not able to bring to our notice that the remittal order would cause great prejudice to the assessee. Further, no attempt was made by the assessee to establish before the court that the amount transferred to the profit and loss account was made after defraying the expenses incurred by it on behalf of its customers by producing materials.

15. In such circumstances, we do not find any error or illegality in the order passed by the Tribunal for remitting the same to the assessing authority. Therefore, on the merits, we answer questions Nos. 1 and 2 in favour of the Revenue and against the assessee. In respect of the reopening of the assessment, there is a factual finding by the Assessing Officer that there is difference between the receipt in the TDS certificate and amount credited in the profit and loss account. Further, the Assessing Officer was of the view that if the profit and loss account is taken into consideration, there was a distorted picture of the true state of financial affairs or business operation of the assessee-company, because the gross receipts were not transferred, but only the net receipts were transferred to the profit and loss account. In view of the above, the Assessing Officer was of the view that there is a failure on the part of the assessee to disclose fully truly all material facts necessary for the assessment. The Commissioner of Income-tax (Appeals) also upheld the validity of reopening. The Tribunal has given a specific finding in respect of reopening, which reads as follows:

“Upon a careful consideration of the issue and after hearing both the parties, we are of the opinion that reopening on the basis of factual error pointed out by the internal audit party has been held to be valid by the hon'ble apex court in Commissioner Of Income Tax v. P.V.S Beedies Pvt. Ltd. [1999] 237 ITR 13. Furthermore, the hon'ble apex court in Sri Krishna (P) Ltd. v. ITO [1996] 221 ITR 538 had held that the disclosure by the assessee for avoiding reassessment must not only be true but it should also be fully explained. The fact that the Income-tax Officer could have investigated the truth of the assertion does not relieve the assessee of his obligation. Considering the present case on the prism of the aforesaid, we find that no explanation as to reconciliation of the difference between the receipt in the TDS certificate and the amount credited in the profit and loss account had been provided by the assessee, Hence, the contention of the assessee that all materials were already disclosed is not tenable in the background of this precedent. Again, we find that in the assessment years 1999-2000 to 2002-03 there was only processing under section 143(1) and as held by the hon'ble apex court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC), such intimation cannot be treated as assessment order and reassessment was held to be valid in such cases and hence the argument of change of opinion would not apply. As regards the issue of lack of communication of information regarding reasons recorded for reopening, we find that the assessee in the appeal before the Commissioner of Income-tax (Appeals) has accepted in the grounds that gist of reasons has been communicated.”

16. It is clear that there is a specific finding given by the Tribunal that there is no explanation for reconciliation of the difference between the receipt in the TDS certificate and the amount credited in the profit and loss account had been provided by the assessee. Therefore, the contention of the assessee that there were already materials available on record, is raised only for rejection. There is no disclosure of material before the Assessing Officer. All the authorities have come to the correct conclusion that there is an escapement of income. Further, it is seen that the Assessing Officer processed the returns in respect of the assessment years 1999-2000 to 2002-03 under section 143(1) of the Act. The apex court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 held that the reassessment can be made in respect of proceedings under section 143(1) of the Act. In respect of the assessment years 1996-97, 1997-98 and 1998-99, the original assessments were made under section 143(3) of the Act and later for the assessment year 1996-97, the assessment was reopened on March 26, 2003, and for the assessment years 1997-98 and 1998-99, the assessments were reopened on March 29, 2004. Inasmuch as there was difference between the receipt in the TDS certificate and the amount credited in the profit and loss account, the financial result of the assessee shows a distorted picture, which amounts to non-disclosure fully, truly all materials facts, the plea of limitation regarding the assessments years 1996-1997 to 1998-99 is also to be rejected. Therefore, the argument that reopening of the assessment for the assessment years 1997-98 and 1998-99 was made beyond the period of four years, is rejected. Accordingly, questions Nos. 3 and 4 are answered against the assessee and in favour of the Revenue.

17. For the foregoing reasons, we are of the view that the order of the Tribunal requires no interference. The appeals are dismissed. No costs.