TaxTMI 
TaxTMI 
2016 (11) TMI 601
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....016. On 4th August, 2016, assessee's Counsel argued about the major issue of reopening of assessment, on which additional grounds were also filed. After hearing the preliminary issue of jurisdiction, the arguments on issues on merits were continued on 5th August, 2016. As certain clarifications were required, the case was adjourned to 19-08-2016 as part-heard on that day. However, on 19-08-2016, Ld. CIT, who appeared in the earlier hearings, Shri B.V. Gopinath did not turn up for hearing and on his behalf, Ms. Hemalatha Devi, CIT-DR requested for adjournment. Vide a separate order sheet dt. 19-08- 2016, the case was posted on 23-08-2016 on which date, the Ld. CIT-DR appeared. After arguments were completed by Ld. Counsel for assessee, he refused to argue the case for Revenue by stating that he has recused himself on earlier occasion and walked away from the court without arguing the case. In these circumstances, as there is no other person to argue the case after having been heard the appeal in ITA No. 185/Hyd/2016 is heard 'ex-parte' qua the Revenue. Smt. Kiranmayee was authorized to represent the case at about 3.40 PM on 23-08-2016 through an authorisation received by fax from th....
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....ugned assessment years were reopened by issue of notices u/s. 148 of the IT Act dt. 25-03- 2011. The reasons for reopening which are common for both the assessment years [except the assessment year and the dates of processing of the returns] are as under: "M/s. Maytas properties Ltd, was incorporated as M/s. Maytas Rajeswari Development Pvt Ltd, on 20-05-2005, and was later renamed as 'Maytas Hill County Pvt Ltd.' w.e.f. 28-12-2005 and as "Maytas Hill County Ltd, w.e.f 20-12-2007. Subsequently, its name was again changed as 'Maytas properties Ltd' w.e.f. 31-12-2007. The company was floated by the promoters of M/s. Satyam Computer Services Ltd (M/s. SCSL). Viz., Shri B. Rama Raju. On 7th January, 2009, Sri B. Ramalinga Raju, Ex-Chairman of M/s.Satyam Computer Srvices Ltd(SCSL for shortcut) in his letter sent to the Board of Directors with a copy marked to SEBI has stated that Books of account of SCSL have been fudged for the last several years. He further stated that the revenues and profits were manipulated by falsification of accounts for the last several years. The sworn statement of Sri B. Rarnalinqa Raiu was recorded under section 131 ....
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....ors of these front companies are the family members of Sri B. Ramalinga Raju, including B. Rama Raju & others. It is believed that since the accounts of M/s. Satyam Computer Services Ltd, are doctored and fabricated, the accounts of M/s. Maytas properties Ltd.(Formerly Known as M/s. Maytas 'Hill County Ltd), which is closely connected do not reflect the true and correct financial results being under the same management and control. Further, Sri B. Ramalinga Raju is the Chairman and Sri B. Rama Raju is the CMD of M/s. Satyam Computer Services Ltd. Both the persons have been accused in a multi crore scam and are presently in judicial custody. The assessee company has been floated by the persons belonging to M/s. Satyam computer Services Ltd. group, Viz., B. Rama Raju, who had direct control over the affairs of the assessee-company. The Return of income filed by the assessee company for the A.Y.2006-07 has been processed u/s.143(1) of the I.T. Act, 1961 and it is believed that the assessee company in its return did not disclose the material facts as below: a) The facts relating the fudging and manipulation of accounts of the assessee company and transact....
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....nbsp; 28,600/- 02 Addition (as discussed in Para 9.2) on account of disallowance of interest paid to banks and Financial Institutions 56,11,320/- 03 Addition (as discussed in Para 9.3) on account of purchase of Blakberry Phone i.e. Capital Expenditure debited to P&L A/c 8,400/- 04 Addition (as discussed in Para 9.3.4) with respect to fixed assets where bills not produced: 1,06,492/- 05 Addition under the head Trunk Road Cost (as discussed in Para 9.4) i.e. Entire amount of reimbursement made to LOCs and debited work-in-progress 2,49,06,130/- 06 Addition under the head HUDA Fees (as discussed in Para 9.5) 67,44,463/- 07 Addition under the head Other Works Contracts given by assessee (as discussed in Para 9.6) 82,24,731/- 08 Disallowance u/s. 40(a)(ia) of the Income Tax Act, 1961 made on account of Contractual payment made to MIPL (as discussed in Para 9.7) 10,91,41,612/- ....
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....towards the addition to vehicles to the tune of Rs. 6,37,057/- is taken. Thus the consequent depreciation claimed by the assessee on the subject amount @ 15% amounting to Rs. 95,559/- is here by disallowed. (Rs.2,90,876/- + Rs. 95,559/- = Rs. 3,86,435) 3,86,435 06 Disallowance (as discussed in para 9.4.9) of entire amount of reimbursement made to LOCs and debited to Work in Progress, by way of journal entries (which is being treated as the cost of the development of land and charged to customers eventually) amounting to Rs. 1,30,53,852/- 1,30,53,852 07 The subject payment of Rs. 5,67,00,000/- (as discussed in Para 9.5.5) under the head other works contract works given by the assessee to M/s. Sarala Projects Pvt. Ltd., is not an expenditure incurred for the purpose of business of the assessee, hence disallowed 5,67,00,000 08 Addition (as discussed in para 9.6.4) on account of short recognition of ....
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....n both the years which was subject matter of appeals before the Ld. CIT(A). 8. Ld. CIT(A) has considered assessee's submissions and order of the AO and gave relief on the issue of interest disallowance in both the years. He also set aside the disallowances u/s. 40(a)(ia), both non-deduction as well as short deduction, following various case law. However, he has confirmed partly the disallowance made u/s.40A(3) and confirmed substantial disallowance of cost of trunk road claimed by assessee in both the years along with HUDA's fees paid as not relating to assessee's business. In some of the issues like disallowance of expenditure on account of other works, non-deduction of tax, CIT(A) directed the AO to examine and these were allowed by the AO in the consequential orders, after due examination. 8.1. In 2007-08 also, the CIT(A) has given similar relief and Revenue is in appeal on those issues. Assessee is in appeal on one major issue of disallowance of cost of roads claimed which was to an extent of Rs. 2,49,06,130/- in AY. 2006-07 and Rs. 1,30,53,852/- in AY. 2007-08. There are other grounds of payment to HUDA which is similar to the above disallowance. 9. In assessee's appe....
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....transactions were not recorded in the books of Satyam Computer Services Ltd., at the behest of Sri B.Ramalinga Raju. It is mentioned by the Assessing Officer that the accounts of Satyam Computer Services Ltd., are doctored and fabricated and, therefore, the accounts of Maytas Infra Pvt.Ltd., formerly known as Maytas Hill County Ltd., which is closely connected with Satayam Computer Services Ltd., do not reflect the true and correct financial results as it was under the same management and control. For the reasons mentioned above, the Assessing Officer initiated proceedings u/s 147 and issued notice u/s 148 of the I.T.Act. Similar notices were issued to other concerns of Satyam Group. The question of validity of initiation of proceedings uj s 147 was decided by the Hon'ble ITAT vide consolidated order in ITA No.1233/Hyd/2011 dated 31.12.2013. In the said order, the Hon'ble ITAT held as under: a) The Hon'ble ITAT held that no valid reasons to reopen the assessment of the company were recorded as the reopening was merely to examine the veracity and financial implications between the appellant company and Satyam Computer Services Limited. The Hon&....
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....r this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] [Provided [also] that the Assessing Officer ....
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....the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.] 11.1. As can be seen from the above provisions, if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or re-assess such income and also any other income which comes to his notice subsequently in the course of the proceedings. It means that AO shall assess or re-assess such income which has lead to reopening of assessment to bring it to tax as 'escaped income'. However, as already stated herein above, the reasons for reopening are for examining the fraudulent transactions undertaken by the promoter, Shri B. Ramalinga Raju and his company Satyam Computer Services Ltd. However, there is no such addition made. In view of that, bringing to tax any other income does not arise as held by various decisions of this forum and also by the Hon'ble High Courts. The Co-ordinate Bench in the case of 1233/Hyd/2011 M/s. Rohini Biotech (P) Ltd., and others dt. 31-12-2013 has held as under: "12. We also find that CIT(A) erred in holding that the....
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.... 147 namely that 'reason to believe' that income of the assessee had 'escaped assessment'. The reason to believe is lacking. 17. Further, the 'reason to believe' is not based on tangible material. We find that in the case of Ranjit Reddy vs. Dy.CIT, Hyderabad (2013) 144 ITD 361 the Coordinate Bench of this Tribunal has dwelled on the contention of the assessee that reopening of the assessment is not permissible as there is no tangible material. The relevant portion of the Order is reproduced here under: "One needs to give a schematic interpretation to the words 'reasons to believe' failing which, section 147 would give arbitrary power to Assessing Officer to reopen assessments on the basis of mere change of opinion, which cannot be per se reason to reopen. The A.O. has no power to review; he has the power to reassess. But reassessment has to be taxed on fulfilment of certain pre- conditions and if the concept of 'change of opinion' is removed, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the A.O. Hence, th....
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....ion, it is open to an assessee to challenge the notice on the ground that there is no reason to believe that income chargeable to tax has escaped assessment. As regards the decision of Hon 'ble Supreme Court in the case of Rajesli lhaveri Stock Brokers (P) Ltd. (supra) cited by the Revenue and relied upon by- the Accountant Member, the Third Member held that the same was applicable in cases where the return was processed u/ s 143( 1) but later on notice was issued u/ s 148 and the assessee challenges the notice on the ground that it is prompted by a mere change of opinion. The Third Member then referred to the decision of Hon'ble Supreme Court in the case of Keluinator of India Ltd. (supra) wherein it was held that there should be "tangible material" to come to the conclusion that income had escaped assessment. Relying on the said decision, it was held by the Third Member that while resorting to section 147 even in a case where only an intimation had been issued u/ s 143(1)(a), it is essential that the Assessing Officer should have before him tangible material justifying his reason to believe that income had escaped assessment. Since there was no such tangible material befo....
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.... reasons recorded and the 'formation of belief to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer. We, therefore, hold that the reopening of the jurisdiction under section 147 is bad in law and is to be quashed". 11.2. Respectfully following the above decision, which applies on all fours, we have no hesitation in holding that the assessment completed has no nexus with the reasonings given for reopening of assessment. On that reason, proceedings are held as bad in law. 12. Even on merits, Ld. CIT(A) has considered the law on the points and gave substantial relief on many of the issues, on which Revenue has come in appeal. We do not find any merit in those grounds raised by Revenue as those findings of Ld. CIT(A) are in tune with the findings of the ITAT in various cases and law on the issue. Not only that, on....