TaxTMI 
TaxTMI 
2013 (8) TMI 249
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....erassessment of income of Rs. 59,29,617/- involving tax effect of Rs.19,95,909/-. The escapement of income has been on account of failure on the part of the assessee to truly and fully disclose all the material facts necessary for assessment. Thus it is a fit case for initiation of proceedings u/s 148 of I.T. Act, 1961. Therefore, I have reason to believe that the income of Rs.59,29,617/- has escaped assessment within the meaning of Section 147 of the I.T. Act, 1961. In view of the above, as per provisions of section 151, it is requested to kindly accord approval for issuance of notice u/s 148 for AY 2006-07." 3. The petitioner after receipt of the reasons to believe had filed written objections to the initiation of the re-assessment proceedings in terms of the decision of the Supreme Court in GKN Driveshafts India Ltd. vs. ITO, (2003) 259 ITR 19 (SC). The said objections have been disposed of by the impugned order dated 14th November, 2012 recording:- "The only objection to the reopening as narrated by you is that the assessment has been re-opened on the basis of mere change of opinion. In this regard it is stated that the assessment has been reopened on the basis of r....
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....s of tours and travels. It specialises in arranging tours, hotel bookings for individuals and groups for travel within and outside India. It also handles incentives, meetings and conferences. In the objections filed, the petitioner had submitted that the income on tours was accounted after netting off directed expenses relating thereto. In other words, the income taken to the profit and loss account was not the gross receipts but gross receipts minus direct costs paid/transferred to third parties. The income declared consists of margin earned on services relating to tour arrangements i.e. after reducing from the billing, direct costs incurred like hotel, transport, guides etc. These costs were directly matched with the revenue earned and balance being the margin earned, was transferred to "income from tours accounts". This exercise was undertaken at the time of original assessment. 7. For the assessment year 2006-07, the petitioner had filed its return of income on 29th November, 2006 declaring loss of Rs.44,50,039/-. The return was taken up for scrutiny and vide assessment order dated 5th February, 2008, the loss was computed at Rs. 44,28,400/-. 8. During the course of the a....
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....ned. Reference was made to the TDS certificates received and they were collated with the "income" disclosed. 9. A bare perusal of the said letter would indicate that the method of accounting adopted by the petitioner was that the direct costs were deducted from the billings and this was the standard method of accounting adopted by the petitioner and other tour operators. Thus, the Assessing Officer in the first or original round of assessment was fully conscious and aware of the method of accounting followed by the petitioner. This method of accounting has been accepted by Delhi High Court in CIT Vs. International Travel House Ltd. (2010) 344 ITR 554 (Del). 10. The reasons to believe recorded above clearly do not reflect any application of mind on the accounting practice adopted by the petitioner being a tour operator. It is obvious that the assessing officer ignored and was oblivious to said factum. If he had noticed the said position, the reasons to believe would not have recorded that there was difference in the payment/receipt mentioned in the TDS certificates and the amount of income disclosed by the assessee. We notice that audit objection or query was raised and the As....
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....pted by the petitioner. The petitioner has adopted a system of netting as their billing was inclusive of "direct costs" incurred which were paid to third parties. It is impossible to perceive and accept the contention of the Standing Counsel for the Revenue that the Assessing Officer during the course of the original assessment proceedings would have not reflected and considered the method of accounting adopted by the petitioner. This is not possible as the Assessing Officer at the very first instance was required to examine the said aspect. The method of accounting adopted by the petitioner was set out in clear terms and explained by the petitioner in their letter dated 31st October, 2008, which has been quoted above. The petitioner has stated that they have always and continue to follow the said method of accounting. This is not a case where explanation 1 to Section 147 is applicable. The question relates to the WPC 8685/2010 Page 12 of 13 very method and manner of accounting, which will be apparent and clear to any person when scrutiny of the return and accounts is undertaken. The reopening is, therefore, bad for want of jurisdictional pre-condition under Section 147 of the Act.....