TaxTMI 
TaxTMI 
2021 (5) TMI 725
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....yd/2014 in former round. Learned coordinate bench's earlier order dt. 3.12.2014 had restored the same back to the file of with specific directions Assessing Officer as under : " 2. Briefly stated, assessee is a company and filed its return of income for A.Y. 2007-08 on 02.11.2007 declaring total income of Rs. 6,48,27,000. For A.Y. 2008-09 it filed return of income on 30.09.2008 (wrongly stated as 30.08.2010 in the order of Ld. CIT(A)), acknowledged by I.T. department on 07.10.2009 as per page 36 of the paper book, declaring total income of Rs. 1,33,68,000. There were survey operations under section 133A in assessee's business premises on 20.07.2011. During the course of survey, it was found that assessee has no bills or vouchers for the expenditure claimed in the returns of income. Similarly, from the bank statement found during the survey and also obtained post survey, it was found that assessee had received huge amounts from M/s. Global City Projects P. Ltd., now known as New Global City Projects P. Ltd. (NCCPL). Enquiries were made from the said company and a statement of the Director Mr. Prasad V. Potluri was recorded. Consequent to the above findings, A.O. has....
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....s of Assessee to the issue of notice, before proceeding with the assessment. There is no reference in the assessment order to the objections claimed to have been raised by the appellant to the issue of notice u/s. 148. In order to ascertain whether the appellant had made any objections to the issue of notice u/s. 148, the assessment records were called for and perused. A perusal of the assessment records shows that thought the appellant sought and was provided the reasons recorded for issue of notice u/s. 148, it did not object to the issue of the notice. In the absence of any objection from the appellant, there was obviously no occasion for the Assessing Officer to pass any order, speaking or otherwise, dealing with the objections. 7.8 The appellant has also submitted that the Assessing Officer had failed to comply with the provisions of sec. 151. Sec. 151(1) applies to a situation where the original assessment had been made u/s. 143(3) or u/s. 147. In the appellant's case, the returns had merely been processed u/s. 143(1) before issue of notice u/s. 148 resulting in the present proceedings. Sec. 151(1) is, therefore, not relevant to the facts in the appellant's c....
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....he completion of assessment is a variable, the period defined by the end of two years from the end of the assessment year is not. The clause, whichever is earlier, emphasises that the appellant cannot turn the provisions of sec. 139(5) into an open-ended benefit. The period ending with the end of two years from the end of the assessment year had indisputably ended on 31.3.2010 for AY 2007-08 and on 31.3.2011 for AY 2008-09 and therefore, the benefit of sec. 139(5) was no longer available to it on 12.03.2013 for either of the two years. 9.11. Even if it were to be presumed that the return filed in response to notice u/s. 148 was equivalent to one filed u/s. 139, such a return would be subject to all the conditions laid down u/s. 139(5). The benefit of sec. 139(5) is available only to a return filed u/s. 39(1) and not to a belated return u/s. 139(4). The appellant did not file the return in response to the notice u/s. 148 within the time of 30 days allowed to it and the belated letter filed by it, deeming the original return filed as one filed u/s. 148, would at best qualify the appellant to the benefits of sec. 139(4), not of sec. 139(5). 9.12. It is, therefore, he....
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....uld be considered for reassessment proceedings. In support assessee also placed on record, the annual reports of New Cyberabad City Project P. Ltd., for the year ending 30.03.2007 and 30.03.2008. Ld. Counsel also relied on MCA Circular No. 1/2003 17/75/2002- CLV dated 13.01.2003 to support the contention that assessee is competent to revise the accounts. With reference to merits of the addition made by A.O. it was submitted that assessee did enter into agreement with M/s. New Cyberabad City Projects P. Ltd., for the purpose of development of project and funds have come and gone and it was the intention of assessee to enter into real estate transactions. But since there were disputes regarding project and the area, nothing has materialized and so assessee has revised the accounts and there were no incomes. It was the submission that revised income should be considered in re-assessment proceedings. 9. In reply, Ld. D.R. submitted that assessee has originally offered gross profit on contract receipts and offered income. A.O. found out in the survey proceedings that no expenditure as claimed in the P & L Account, was incurred by assessee and accordingly, the receipts were brou....
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....f the opinion that assessee's contentions on reopening are not valid and accordingly, they are rejected. 12. Coming to the merits of the issue including filing of revised returns with revised audited accounts, we are of the opinion that assessee's action cannot be supported in the light of the fact that proceedings are under section 147. The Hon'ble Supreme Court in the case of Sun Engineering Works Ltd., 198 ITR 297 it was held that proceedings under section 147 are for the benefit of Revenue and not for the benefit of assessee. Since, assessee has offered incomes originally which were accepted, the proceedings being initiated are only to add some more to the originally admitted incomes. Therefore, on that context, the revised returns and revised audit reports cannot be considered. The Hon'ble Supreme Court Order in the above referred case has held as under : "Held "Under s. 147, the Assessing Officer has been vested with the power to "assess or reassess" the escaped income of an assessee. The use of the expression "assess or reassess such income or recompute the loss or depreciation allowance" in s. 147 after the conditions for reassessm....
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....e to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return. (Para 25) Although, S. 147 is part of a taxing statute, it imposes no charge on the subject but deals merely with the machinery of assessment and in interpreting a provision of that kind, the rule is that construction should be preferred which makes the machinery workable. Since the proceedings under s. 147 are for the benefit of the Revenue and not an assessee and are aimed at garnering the 'escaped income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceedings at the instance of Assessee, thereby making the machinery unworkable. Thus in proceedings under s. 147 the ITO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under s. 148 and where reassessment is made under s. 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such income which has escaped tax or has been u....
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....et aside and not the original assessment proceedings particularly if it has acquired finality. In the reassessment proceedings it is not open to an assessee to seek a review of the concluded item, unconnected with escapement of income." 13. In view of the legal position as enunciated by the Hon'ble Supreme Court, the contention of assessee to revise incomes and accounts can not be accepted as the proceedings are initiated for bringing to tax the escaped incomes. The contentions of assessee on that fails. 14. However, the action of the A.O. in taxing the entire receipts as income cannot be upheld. As far as the statement of Potluri V. Prasad is concerned, it was admitted that they have entered into an agreement for purchase of property through assessee company for acquiring land bank in Hyderabad and development of the same. For passing on amounts to assessee, assessee might have raised bogus bills but at present, the parties are in dispute. The said company New Cyberabad City Projects P. Ltd., admittedly treated the amount paid to assessee as advance and assessee even though treated the receipts as revenue receipts and offered incomes, subsequently with revisi....
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....osition to uphold the entire receipts received by assessee as income. At the same time, we are also not in a position to estimate the income on the gross receipts, since assessee itself treated gross receipts as advance in the revised accounts and admittedly, there was no work done by assessee company. In view of this, we cannot uphold the action of A.O. in treating the entire receipts as income and at the same time, we also not in a position to give any finding that the audited accounts revised by assessee are to be accepted as such, in the absence of any justification of the same. Therefore, while disallowance of entire expenditure made by A.O. cannot be upheld as such, we set aside the assessment to the file of A.O. to make fresh enquiries and see the latest position and whether the amounts received and appropriated by assessee can be considered as incomes of assessee. A.O. is directed to enquire whether any proceedings are initiated under any other Act, like Money Laundering Act or whether there are any other violations committed in these transactions. Admittedly, there were bills were given for the so called work which was not done and as seen from the statement of Mr. Prasad ....
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....e issue as to whether the amounts received and appropriated would be taken as assessee's income or not. He considered the payees reply dt. 14.12.2015 and observed that both of them had colluded with the group companies in issuing bogus development invoices only without executing the development works. And that the assessee and its group concerns bank statements along with various land transactions sufficiently proved that it had been merely created as a namesake for the purpose of obtaining funds from "NCCPL" in the guise of contract works; in turn directed to the sister concerns for buying properties and starting newspaper. The Assessing Officer therefore added the impugned sum(s) of Rs. 99.65 Crores and Rs. 47.15 Crores (supra) as income from "other" sources. 5. The CIT(Appeals) has confirmed the Assessing Officer's action but treated the very sum as business income as follows : 4. In accordance with the directions of the Hon'ble ITAT, the Assessing Officer carried out further enquiries and made following observations in assessment order u/s. 143(3) r.w.s. 147 r.w.s. 254 & 263. (a) That the money received from M/s. NCCPL was diverted by the appell....
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....ed with the same officer. He received huge sums from the appellant company which are reflected in his bank account in ING Vysya Bank, Tadepalligudem. The credits for A.Y. 2007-08 in this bank account were Rs. 3,56,27,200/-. In his assessment Sri Kunireddi Srinivas stated that he acted as a agent of the appellant company. Similarly for A.Y. 2008-09, Sri Kunireddi Srinivas received Rs. 7,72,00,000. In his letter dated 'Nil' before Assessing Officer, Sri Kunireddi Srinivas stated that this amount was received for purchase of land in favour SPR Publications as per the directions of the management. A copy of sale deed in favour SPR Publications form part of the assessment order dated 29.2.2016. (e) The appellant company utilized these amounts for purchase of land in the name of Smt. N. Padmaja, one of the directors of the company. 5. The appellant made submissions incorporating the background of the case and also emphasised the directions given by the Hon'ble ITAT which were already mentioned in the preceding paras. 6.1 I have carefully considered the information on record. To summarise the facts, for A.Y. 2007-08, gross receipt of Rs. 99,65,65,250....
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....ly no profit and loss was prepared for the period F.Y. 2006-07. From the verification of balance sheet of M/s. NCCPL, the sources of funds for giving amounts to appellant and to others was, non-convertible debentures issued numbering 23842 at Rs. 1,00,000/- each and these debentures were redeemable on 10.12.2010. Further the PWC in its audit report for F.Y. 2007-08 had stated that "The inventory of the company consists of land which was acquired during the previous year. The physical verification of the land was not carried out subsequent to its acquisition. Since no physical verification was earned out during the year, commenting on adequacy of physical verification procedures does not arise." 6.3 It is also relevant to mention here that the proceedings under Money Laundering Act has no bearing on Income Tax proceedings. The proceedings under Money Laundering Act are criminal, whereas proceeding under Income Tax are civil in nature. In case of money laundering, the source of money is always an act which is criminal in nature. For example Smuggling of goods and generating black money out of it Selling of drugs ....
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....the company for the amounts received, amounts received were not returned back, after taking into account the totality of facts the assessing officer assessed the income under the head 'other sources'. 6.6 Even otherwise the income is clearly taxable under the head Income from business'. This office had issued a letter to the appellant on 19.9.2016 asking him to give the information in the following format to find out whether any repayments were made by appellant or its sister concerns S.No Name of Company Making repayments to M/s NCCPPL Date/Amount Name of the Bank Remarks Enclose the bank account Highlighting the entries The appellant was also asked to submit the reasons as to why such amounts cannot be treated as income u/s. 41 of IT Act, 1961 as he has not discharged repayment of trading liability within reasonable time. In reply submitted by the appellant dated 30.9.201(sic), the appellant stated that the amount is still outstanding. It is further to be mentioned that in the books of accounts of M/s. NCCPL, as per the remarks of the auditors, the amount was given for the purpose of land develop....
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....d 'that word income' is not limited by the words 'profits' and 'gains'. Anything which can properly be described as income is taxable under the Act unless expressly exempted". The diverse forms which income may assume cannot exhaustively be enumerated, and so in each case, the decision of the question as to whether any particular receipt is income or not must (sic) upon the nature of the receipt and the true scope and effect of the relevant taxing provision. The receipt may be an income for the purpose of taxation though it may not amount to profit. What the word "income" denotes has to be determined in the context of the said section itself. Lachit Films vs. CIT (1992) 195 ITR 402 Considering the use of the word "include" in section 2(24), the word "income" shall be construed as comprehending not only those which section 2 (24) declares that they shall include but also such things as it signifies according to its natural import. This leaves the assessee aggrieved. 6. We have given our thoughtful consideration to the rival pleadings against and in support of the impugned/identical addition(s). A perusal of the Tribunal's order in ....
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....de without carrying out any development works since involving as bogus invoices only. Learned co-ordinate bench's first round order had admittedly reversed the said twin reasoning that neither of them could be assessed as assessee's income. Faced with this situation, we hold that once the impugned reopening mechanism based on this twin reasoning itself was decided against the department on merits, there is no reason left to support the impugned reopening since its very foundation itself has no legs to stand as per learned co- ordinate bench decision in Joginder Singh Vs. ITO in ITA No. 222/Ars/2014 Dt. 11.06.2015 taking note of Hon'ble apex court's landmark decision G K N Driveshafts India Ltd. Vs. ITO (2003) 259 ITR 101 (SC) held that - " 7. The short question before us really is whether in such circumstances the CIT(A) ought also to have cancelled the reassessment proceedings as well and whether there is any contradiction in the action of the CIT(A) in upholding the reassessment proceedings and quashing the additions made on the basis of the reasons recorded for reopening the assessment. This question assumes significance in the light of the fact that whi....
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.... of the firm, in which assessee is a partner, having been issued by an account other than the account of the assessee or of the partnership firm cannot be a reason enough to come to the conclusion that 'income has escaped assessment in the hands of the assessee'. There is no cause and effect relationship in this fact and the income escaping assessment in the hands of the assessee. 11. It is a well settled legal position, as held by Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332 (Bom)], that when it comes to examining the validity of reassessment proceedings, ".... No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him". Hon'ble Bombay High Court, in the case of Prashant S. Joshi vs. ITO [(2010) 324 ITR 154 (Bom)] has observed : "The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147" and that "the reasons which are recorded by the AO are the only reasons which can be consi....
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....Chhattisgarh)]. All these decisions were dealing with the law as it stood after the insertion of Explanation 3 to Section 147 but then the views so expressed being contrary to the law laid down by Hon'ble jurisdictional High Courts, these decisions cannot indeed be applied on this assessee. Be that as it may, that is a purely academic aspect of the matter. 14. There cannot possibly be any two opinions with regard to the enunciation of law by Their Lordships in Majinder Singh Kang's case (supra). However, we find that the reliance by the learned Departmental Representative on this decision, on the facts of this case, to be inapt. In Majinder Singh Kang's case, Their Lordships have nowhere held that the proposition of law laid down therein to be applicable even to the cases wherein even when reasons recorded for reopening the assessment are held to be incorrect, and thus unsustainable in law, the Assessing Officer can still go ahead and make additions in the reassessment proceedings in respect of reasons other than the reasons recorded for reopening the reassessment. Hon'ble High Court's judgment in the case of Majinder Singh Kang's case (supra) has n....
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.... so incorrect that he concludes that no income has escaped the assessment and the additions on that count are unwarranted, the same should have been the position at the stage of adjudicating on the correctness of the reasons recorded in the pre-reassessment proceedings. In the latter proceedings also, the assessee has the liberty to bring the material, other than that available to the Assessing Officer on his records, that no income has escaped assessment. The conclusions in these two sets of somewhat parallel exercises cannot, therefore, be ordinarily different. In other words, when the Assessing Officer is satisfied that no additions can be made on the basis of the reasons of reopening, as recorded by him, he has to drop the reassessment proceeding at this initial stage itself. When the examination of correctness of the reasons recorded come up for adjudication before the appellate authorities, the approach, therefore, cannot be any different either. 18. In the case before Hon'ble jurisdictional High Court, as evident from the extracts from the CIT(A)'s order reproduced therein, the reassessment was quashed on the ground that the Assessing Officer "could not make....