AI Drafter 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (7) TMI 1434
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed u/s 143(1) of the IT Act on 24th January, 2011. Subsequently, the assessment u/s 143(3) was completed for assessment year 2013-14 vide order dated 29th March, 2016 wherein it was held that the interest free security deposits received by the assessee were chargeable to tax. The Assessing Officer, therefore, recorded detailed reasons for reopening of assessment which has been reproduced by him from pages 1 to 16 of the assessment order. After obtaining approval of the competent authority, the Assessing Officer issued notice u/s 148 of the IT act on 31.03.2016. The assessee, in response to the notice u/s 148, submitted a letter dated 26th April, 2016 along with a copy of the return declaring loss of Rs. 62,12,920 which was filed on 25th April, 2016 and requested for copy of reasons recorded for such reopening. The Assessing Officer provided the copy of reasons recorded for reopening of the assessment on 17.11.2016. While providing the reasons, the Assessing Officer clearly mentioned that if no objection was filed by 22.11.2016, it would be understood that there is no objection for reopening of the assessment proceedings. The Assessing Officer, thereafter, issued notices u/s 143(2) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s fact is not supported by the balance sheet of the assessee, since, in the balance sheet of the assessee, it is shown as interest-free security deposits received and nowhere it is mentioned that this amount has been received from M/s Silverline Holding Pvt. Ltd. The submission of the assessee that it has received the security deposit from members of the villa owners through M/s Silverline Holding Pvt. Ltd., in the normal course of business for maintaining and operating the golf course at 'TARUDHAN VALLEY COMPLEX' was also rejected by the Assessing Officer on the ground that the assessee did not furnish any copy of agreement with buyers of the villa owners, but, it simply submitted that the security deposit received by the assessee is refundable to M/s Silverline Holding Pvt. Ltd. The argument of the assessee that there is not privity of contract between the assessee company and the villa owners, but, have been engaged by M/s Silverline Holding Pvt. Ltd., was also rejected by the Assessing Officer on the ground that it is contradictory with the statement given subsequently on 23rd December, 2016 wherein the assessee itself stated that the security deposit received from members b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estion a reference of the buyer agreement is relevant. Clause 18(a) to (e) provides the terms and conditions of the payment of security deposit which is reproduced as under:- (a) The buyer shall pat an interest free security deposit of Rs.....(Rupees..........) to "Company" for onward transfer to SGDP for due performance of its obligations towards Company. (b) The buyer hereby authorizes the Company to collect the said security deposit from the buyer and remit the same to SGDP as per the payment terms of the "Company" (c) The said security deposit will be non-refundable. However, the same would be transferred to the nominee of the buyer subject to approval of the Company. (d) The Security Deposit shall be employed in suitable investment as deemed fit by the Company for generating revenue/income and the revenue income so earned from the investments shall be employed towards operation & maintenance cost of the Golf Course. In case of any shortfall in running the O&M costs after adjusting the incomes from the investments made out of the security amount the same shall be made good by raising the additional bills to the buyers for recouping the shortf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ground no. 1 and 2 are against the reopening of the assessment u/s 148 as well as non disposal of objections filed by the appellant. On perusal of the material available on record, it is noticed that the appellant had received interest free security deposits in various assessment years including the year under consideration. The details of non refundable security deposits received are under:- Particulars F.Y. 2007- 08 F.Y. 2008- 09 F.Y. 2009-10 F.Y. 20010-11 F.Y. 2011-12 F.Y. 2012-13 Opening Balance 82,85,200/- 7,83,50,000/- 10,54,53,085/- 12,05,00,000/- 12,53,50,000/- Received during the year 82,85,200/- 7,00,64,800/ 2,71,03,085/- 1,50,46,915/- 48,50,000/- 39,00,000/- Total 82,85,200 7,83,50,000 10,54,53,085 12,05,00,000 12,53,50,000 12,92,50,000 During the course of assessment proceedings for assessment year 2013- 14, the AO examined the issue of non refundable security deposits and held that the same is chargeable to tax as income of the appellant. Since the return of income for the year under consideration was processed only u/s 143(1), on the basis of findings recorded in assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the AO has rightly initiated the reassessment proceedings u/s 148 and both the grounds of appeal raised in this regard are dismissed." 7. So far as the addition on merit is concerned, the ld.CIT(A) also upheld the action of the Assessing Officer on the ground that such security deposits are not liable to be refunded to the clients under any circumstances. Further, the assessee has not been shown as a debtor by M/s Silverline Holding Pvt. Ltd. Relying on the decision of the Mumbai Bench of the Tribunal in the case of Aakash Lavlesh Leisure Pvt. Ltd. (2017) 78 taxmann.com 338 (Mum), the ld.CIT(A) held that the non-refundable security deposits received by the assessee have nexus with the O&M services provided to the clients and, hence, the same are liable to be taxed as revenue receipts. He accordingly upheld the addition on merit also. 8. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- "l (i) That on facts and circumstances of the case, the CIT(A) is not justified in confirming reassessment u/s. 148 without appreciating that the original assessment was completed u/s 143(3) and there being n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the time of hearing." 9. The ld. counsel for the assessee strongly challenged the order of the CIT(A) in upholding the reassessment proceedings as well as the addition on merit. So far as the validity of reassessment proceedings are concerned, he submitted that such reassessment proceedings are based on change of opinion and are wholly without jurisdiction. Referring to the copy of reasons recorded u/s 147 of the Act, a copy of which is placed at pages 2 to 18 of the paper book, he submitted that a perusal of the reasons shows that the reassessment proceedings have been initiated solely on the basis of opinion formed in assessment year 2013-14 which is inconsistent with the view taken in assessment year 2012-13. Referring to the copy of the order passed u/s 143(3) for assessment year 2012-13, copy of which is placed at pages 96 and 97 of the paper book, he submitted that no such addition has been made by the Assessing Officer on account of such non-refundable security deposit. He submitted that the factual position to this effect has been accepted by the Assessing Officer in the reasons itself wherein it is clearly mentioned that this very issue has been examined in assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive of mode of original assessment i.e., 143(3) or 143(1) as held by the Hon'ble Delhi High Court in the case of Pr. CIT v. Tupperware India P. Ltd. (2016) 284 CTR 68 (Del). 12. He submitted that the term 'record' includes the entire record of subsequent and preceding years which is available before the Assessing Officer as held by the Hon'ble Supreme Court in the case of Mahendra Mills Ltd. vs. AAC (1975) 99 ITR 135 (SC). He submitted that in the present case, the issue of refundable security deposit was examined in A.Y. 2012-13 and the opinion so formed will be equally relevant for A.Y. 2009-10 to A.Y. 2011-12 as well and as such the reassessment proceedings based on different view adopted in A.Y. 2013-14 would be based on change of opinion and reappraisal of facts already on record and as such the impugned reassessment proceedings are vitiated on two counts i.e., (a) Reasons are based on change of opinion; and (b) reasons are not based on tangible material. So far as various decisions relied on by the Assessing Officer and CIT(A) are concerned, he submitted that they are distinguishable and not applicable to the facts of the present case. 12.1 So far as the merit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the paper book, he submitted that as per the above, the assessee company can hold the deposit only for the purpose of maintenance and running of the golf course. Once the assessee company cease to have running and maintenance right or becomes non-functional, the security deposit being liability is to be refunded to M/s Silverline Holding Pvt. Ltd. 12.2 So far as the decision in the case of Aakash Lavlesh Leisure Pvt. Ltd. (supra) relied on by the CIT(A) is concerned, he submitted that the said decision, in fact, supports the case of the assessee and reliance on the same by the CIT(A) is misplaced. He submitted that in that case, the refundable security deposit was accepted by the Assessing Officer as non-taxable receipt and the dispute before the ITAT was only with regard to non-refundable deposit. However, in the present case, the security deposit received by the assessee is shown as liability and is fully refundable to M/s Silverline Holding Pvt. Ltd., and, therefore, the decision of the Mumbai bench of the Tribunal relied on by the CIT(A) is, in fact, in support of the assessee. So far as the observation of the Assessing Officer that M/s Silverline Holding Pvt. Ltd., has no....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... year of receipt. 13. The ld. DR, on the other hand, heavily relied on the order of the CIT(A) both on the issue of validity of reassessment proceedings as well as the addition on merit. So far as the reopening of the case is concerned, the ld. DR submitted that the original assessment was completed u/s 143(1) for assessment years 2009-10 and 2010-11 and under section 143(3) for assessment year 2011-12. Referring to various decisions, he submitted that the reassessment proceedings initiated by the Assessing Officer and upheld by the CIT(A) are fully justified:- 14. Referring to the decision in CIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd, 291 ITR 500 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that so long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings, even when intimation under section 143(1) has been issued. 15. Referring to the decision in the case Yuvraj v. Union of India, 315 ITR 84 he submitted that the Hon'ble Supreme Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns, raises more questions than satisfying the queries already raised. 15.6 Referring to the decision in the case of Aravaliinfrapower Ltd, Vs DCIT [2017] 77 taxmann.com 322 (Delhi) he submitted that in the said decision the Hon'ble Delhi High Court held that where assessee-company furnished only cheque numbers, but failed to provide bank details of share applicants and it was found that share applicants had meager income while investing huge sum of Rs. 8 crores, reopening notice was justified. 15.7 Referring to the decision in the case of Raymond Woollen Mills Ltd. v. ITO And Others, 236 ITR 34, he submitted that in the said decision the Hon'ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 15.8 Referring to the decision in the case of R.K. Malhotra ITO vs. KasturbhaiLalbhai (1977) 109 ITR 537 (SC), he submitted that in the said decision the Hon'ble Supreme Court held that the intimation which the Inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....val arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in the business of operation and maintenance of golf course owned by M/s Silverline Holding Pvt. Ltd. It filed its return of income on 23.11.2009 declaring loss of Rs. 62,12,919/-. We find the Assessing Officer, on the basis of the assessment order for assessment year 2013-14, wherein the refundable security deposit received from M/s Silverline Holding Pvt. Ltd. was considered as taxable income in the hands of the assessee, reopened the assessment by issue of notice u/s 148 of the IT Act. Rejecting the various arguments advanced by the assessee, the Assessing Officer made addition of Rs. 7,00,64,800/- on account of such security deposit received by the assessee during the year under consideration on the ground that such security deposit received by M/s Silverline Holding Pvt. Ltd., is non-refundable and has to be brought to tax. Further, the security deposit so received from M/s Silverline Holding Pvt. Ltd., has not been shown as adva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r for assessment year 2013-14 whereas the same issue was decided and accepted in assessment year 2012-13. Thus, we find merit in the submission of the ld. counsel for the assessee that the reassessment proceedings are based on change of opinion and re-appraisal of facts already on record and are not based on any tangible material and, therefore, such reassessment proceedings are vitiated. We find the Hon'ble Bombay High Court in the case of NYK Line (India) Ltd. (supra) has held that where the assessee has disclosed all material facts relating to container detention charges at the time of making assessment, mere fact that Assessing Officer had come to a different conclusion in respect of said income in subsequent assessment year would not justify reopening of assessment. It has been held in the said decision that an order of assessment which has been passed for a subsequent assessment year may not be the foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for subsequent assessment year which emerge in the order of assessment. Otherwise, a mere change of opinion on the part of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aped assessment and it does not matter that there has been no failure or omission on the part of the assessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show "reason to believe". The fact that the intimation issued under Section 143(1) cannot be equated to an "assessment", a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed." 16. The Court in CIT v. Orient Craft Ltd. (supra) examined the meaning given of the words "reasons to believe‟, quoted from the decision of the Supreme Court in CIT v. Kelvinator India Ltd. and held as under: "Having regard to the judicial interpretation placed upon the expression "reason to believe", and the continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also appear to be self-defeating, because if an "intimation" is not an "assessment" then it can never be subjected to Section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody‟s case that an "intimation" cannot be subjected to Section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke Section 147 it should play by the rules of that section and cannot bog down. In other words, the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under Section 143(3) and another applicable where an intimation was earlier issued under Section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... queries and questions on other aspects? (iv) Whether and in what circumstances Section 114 (e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion?" 21. Therefore, the central issue examined in the decision of the Full Bench in Usha International Ltd. was as to what constituted a "change of opinion‟. The Court, therefore, does not consider the decision in Orient Craft Ltd. as being contrary to the decision in Usha International Ltd. In other words, there is no occasion for the Court to refer to a larger bench the question of the correctness of the decision in Orient Craft Ltd. which decision squarely applies to the facts of the present case. 22. For all of the aforementioned reasons, the Court holds that no substantial question of law arises from the impugned order of the ITAT. The appeal is accordingly dismissed." 21. We find the Hon'ble Delhi High court in the case of Bharti Infratel Ltd. (supra) has held that where assessee has disclosed all material facts relating to transfer of assets in course of assessment, initiation of reassessment proceedings merely on the basis of change of opinion was not ....