TaxTMI 
TaxTMI 
2018 (8) TMI 207
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....attempts to revisit the original scrutiny assessments, (on the allegation that claims for bogus expenditures were made) were unsuccessful and the final orders for the assessment year (A.Y. 2007-08) culminated in the revisional and subsequent remand orders by the Assessing Officer (hereafter "AO") finally in the assessee's favour. The order pursuant to the remand was, in fact, accepted after the appellate Commissioner endorsed that view on 08.05.2014. 3. The reassessment for A.Y. 2009-10 was through a notice dated 30.03.2016 which inter alia claimed that upon receipt of a Tax Evasion Petition (TEP), investigation was conducted which showed that for the year ending 31.03.2009, the contract charges claimed were unduly high - Rs. 24,01,79,349/-. The TEP also alleged that these amounts were distribution of illegal gratifications by the assessee. The reassessment notice proceeded to state as follows: "5. From the above referred TEP, and report of the ITO (Inv) OSD-1,Unit-3, New Delhi, the modus operandi of the assessee in the AY 2009-10 is same as was in AY 2007-08 & 2008-09. It appears that contractor's charges amounting to Rs. 2,41,79,349/- claimed as expenses by the assessee in ....
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....this year is sub-judice with the Hon'ble Delhi High Court are currently in progress. 3. On perusal of P&L for the year ending 31.03.2010 received along with above quoted letter of ITO (Inv) OSD-1, Unit-3, New Delhi the assessee is showing Consultancy Income of Rs. 3,31,14,209/- and expenses on account of Contractor's charges amounting to Rs. 3,07,95,559/- and has shown net income only at Rs. 3,10,336/-. It was alleged in the TEP that for the A Y 2007-08 & 2008-09 the contractor charges being claimed by the assessee is the bribe amount distributed by the assessee. 4. ITO (Inv) OSD-1, Unit-3, New Delhi in his findings has stated that the assessee was provided opportunity to explain the expenses and to provide the necessary details which were called for vide summons u/s 131 (1A) dated04.03.2015 so that independent enquiries could be conducted from the third parties. As per his report the assessee has neither provided any justification with documentary evidence nor the details of the parties to whom the contract charges were paid. 5. From the above referred TEP, and report of the ITO (Inv) OSD-1, Unit-3, New Delhi, the modus operandi of the assessee in the A Y 2010-11 ....
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....the AO to refer to the previous orders for A.Y. 2007-08 which had gone into the same aspects to suspect expenditure. It was also stated that no changes were forthcoming and that revisiting sole issues did not constitute a valid ground for invoking the power of reassessment under Sections 147/148. In fact, the mechanical citing of same reasons vitiated and rendered invalid the impugned notice under Section 147. The other grounds, such as failure to mention the fact that though there was mention of substantive addition of Rs. 1,60,94,586/- for A.Y. 2008-09 that was subject matter of an appeal, that relevant facts were not intentionally considered. The assessee complained that re-opening besides being the result of a mechanical exercise, appears to be on the basis of directions of higher authorities. 5. These objections were rejected, therefore, the assessee has approached this Court. Dr. Rakesh Gupta, the learned counsel submitted that it is settled law that the information which forms the basis for reassessment notice should have a live link or nexus to the assessment order in question. This resort to information in respect of another year was an entirely irrelevant factor. It wa....
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....reasons for reassessment, the AO noted that assessee was showing consultancy income of Rs. 3,31,14,209/- from its single client Pernod Ricard and had debited an amount of Rs. 3,07,95,559/- as sub-contractor charges and returned an income of Rs. 3,10,336/- only. The counsel distinguished the reasons which persuaded this court to quash reassessment proceedings for AY 2009-10 urging that the reasons on which this Court was constrained to pass the said order do not exist in the factual matrix for the relevant period. Learned counsel emphasized that in the present case the AO did not blindly follow the investigation unit's recommendation or the assessment order for A.Y.2008-09 but rather examined that material in light of the facts of the relevant period that the assessee was showing consultancy income of Rs. 3,31,14,2091/- from its single client Pernod Ricard and has debited an amount of Rs. 3,07,95,5591- as sub- contractor charges and returned an income of Rs. 3,10,3361- only. Therefore, the live nexus missing in A.Y. 2009-10 is present in the present case. Counsel pointed out, moreover, that that the AO who had passed the assessment order for the A. Y. 2008-09 was the same person....
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....: "The assessee forwarded his submission vide letter dated NIL on 18-03-2015 through a massager Sh. Pankaj Kumar which is placed on the record. In this submission it is submitted that the assessee is working for a single client M/s Pernord Ricard India P. Ltd. And the agreement with them was terminated w.e.f. 31-032010 and since then there is no operation in the company. The assessee has not given the details called at point no. 2-5 above. The assessee has simply stated that the company used to get some job work carried out by various contractors/sub-contractors and the entire payment has been made through account payee cheques. It is also submitted that in assessment year 2007-08 the AO after recording the statements of 5 contractor parties made 5% disallowance and added an amount of Rs. 8,03,431/-. This case was re-opened u/s 263 of the IT Act and the assessee has filed an appeal before the ITAT against the order of the CIT u/s 263 which is pending for disposal. A fresh assessment was made u/s 143(3)/263 on 28-03-2013 in which disallowance was increased to 7% as against 5% by earlier order. The CIT(A) vide order dated 08-05-2014 has reduced the disallowance to 5% of the rei....
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....nts of the above persons, who also filed their computation of incomes and copies of income tax returns and other relevant records to prove that they had genuinely received the payments. The above documents obtained by the AO during original assessment proceedings are placed in PB 98 to 158 and further at PB 225 to 230. All these documents highlight the existence of agreement between these persons and the assessee. The documents further prove that the payments were made to these persons and taxes were duly deducted thereon. These documents further show that the contractors had declared the income received from the assessee in their returns of income. The statements recorded by the AO of these persons clearly show that the AO had examined them sufficiently to ascertain the authenticity and genuineness of the expenses. Therefore, it is not a case where there were no enquiries. It is not a case of lack of enquiry as the AO had made sufficient enquiries. The various Courts has distinguished the cases of inadequate enquiries & lack of enquiries." In fact, the CIT (A) who reduced and set aside the disallowance of 7% over the previous disallowance also observed as follows: It is obse....
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....ot disputed that the original assessment order for AY 2007-08 was passed by the AO on 11th December, 2009. It was re-opened by the CIT (A) by the order dated 28th March 2012 under Section 263 of the Act. This resulted in a further assessment order dated 28th March 2013 by the AO under Section 143 (3) read with Section 263 of the Act. Only 7% of the 'contractor's expenses' was disallowed and added back. Therefore, even for AY 2007-08, the TEP did not result in adding back the entire amount. The decision in AGR Investments Ltd v Additional CIT (supra) only lays down a general proposition regarding assessments being reopened on the basis of reports of investigation. It does not obviate the need to show that there is tangible material relevant to the AY in question that warrants reopening of the assessment for that particular AY. 14. More importantly, it is not understood how despite being aware of the above orders pertaining to AY 2007-08, the AO in his reasons for reopening the assessment for AY 2009-10 did not refer to them while recording his reasons on 10th March 2016. Clearly this was an instance of non-application of mind by the AO to the relevant material. Since ....
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....ination was of material in light of the facts of the relevant period that Petitioner is showing consultancy income of Rs. 3,31,14,2091- from its single client Pernod Ricard and has debited an amount of Rs. 3,07,95,5591- as sub-contractor charges and returned an income of Rs. 3,10,3361/- only. However, though the letter from the Investigation unit mentioned that the suspicion of bogus expenditure was later dealt with in revision and the addition was revised to only 5% disallowance, the notice recording reasons to justify the reopening of assessment for AY 2010-11 willfully omits to note that. Furthermore, the order of ITAT in the assessee's appeal, for the previous year, which had been reassessed, in fact found that the AO had called the concerned sub-contractors, who had disclosed the amounts received from the present assessee, in their returns. 12. No doubt, each assessment year is to be seen differently; however, the note from the investigation unit talks of a pattern of expenditure claims over a five-year period. Three of those years were dealt with; the assessee emerged unscathed. Given these circumstances, this is clearly a case where the revenue is attempting to fish from ....