2013 (11) TMI 809 - AT - Income Tax

Assessment reopened without valid grounds; Assessee's appeal allowed, Revenue's dismissed

SUPER CONSTRUCTION CO Versus DEPUTY COMMISSIONER OF INCOME TAX

SUPER CONSTRUCTION CO Versus DEPUTY COMMISSIONER OF INCOME TAX - TMI Issues Involved:1. Validity of reopening the assessment under Section 147 by issuing notice under Section 148.2. Method of accounting adopted by the assessee.3. Non-admission of rental income from properties.Detailed Analysis:1. Validity of Reopening the Assessment under Section 147 by Issuing Notice under Section 148:The assessee challenged the reopening of the assessment by the Assessing Officer (AO) on the grounds that it was barred by limitation and lacked any new tangible material. The original assessment was completed under Section 143(3) on 24.3.2004, and the reassessment was initiated by a notice under Section 148 on 5.2.2007. The assessee argued that the notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year, which is not permissible unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal noted that the AO did not bring out anything on record to show that any income chargeable to tax had escaped assessment due to the failure of the assessee to disclose material facts. The Tribunal held that the reopening after four years is not valid for want of the conditions prescribed under the proviso to Section 147.2. Method of Accounting Adopted by the Assessee:The assessee consistently followed the work-in-progress/percentage completion method of accounting, which was accepted by the AO in the original assessment as well as for subsequent assessment years. The reassessment was based on the order under Section 263, which was later reversed by the Tribunal. The CIT(A) directed the AO to accept the method of accounting declared by the assessee, following the Tribunal's decision. The Tribunal upheld the CIT(A)'s decision, noting that the method of accounting was consistently followed and accepted in previous assessments, and reopening on this issue was not sustainable as it was based on a change of opinion.3. Non-Admission of Rental Income from Properties:The reassessment was also based on the non-admission of rental income from two bungalows. The AO noted that no rental income was shown from these properties, and computed the Annual Letting Value (ALV) under Section 23(1)(a). The assessee claimed that one of the bungalows was used as a Guest House and office, and the rental income from the other property was already declared in the Profit & Loss account. The Tribunal found that the reasons for reopening on this issue were vague and contrary to the facts on record. It was held that in the absence of any new tangible material and failure on the part of the assessee to disclose material facts, the reopening on this issue was not permissible after the expiry of four years.Conclusion:The Tribunal held that the reopening of the assessment after four years was not valid due to the lack of new tangible material and failure on the part of the assessee to disclose material facts. The method of accounting adopted by the assessee was consistently followed and accepted in previous assessments, and the reassessment on this issue was not sustainable. The non-admission of rental income was found to be contrary to the facts on record, and the reopening on this issue was also not permissible. Consequently, the appeal of the assessee was allowed, and the appeal of the revenue was dismissed.