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2021 (6) TMI 730
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....sessee, against which, assessee company filed its return of income on 11/04/2017 by admitting an income of Rs. 88,07,94,590/-. 2.1 The AO made the addition of Rs. 95,49,67,088/- towards payments made to the sub-contractors on the ground that the assessee could not produce any information nor could produce any sub-contractor. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), the assessee filed the objections, which were extracted by the CIT(A) in his order at pages 2 to 6 which are as under: "2. Objections to reopening: Upon receipt of the reasons which were nothing but the reproduction of the information received from the Investigation Wing, the appellant objected to reopening of the completed assessment on various legal grounds. On facts also the appellant made elaborate submissions along with documentary evidences in its possession that the subcontractors were genuine and completed the work. The salient points contained in the objections which were submitted and reiterated from time to time in various submissions and by way of oral submissions are given below for kind consideration of CIT(A). * Th....
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..../- relating to payments made to alleged subcontractors and raising a demand of Rs. 62,81,25,782/-. (if) AO despite repeated requests did not make available the reopening records maintained at Hyderabad at the time of reopening the assessment for inspection (Boards Instruction 17 (XL) - 36 dated 28-06-1965, copy of the approval in the prescribed pro-forma submitted to Pr. CIT and provide a copy of the order sheet for reopening despite the decision of the Hon'ble Supreme Court in the case of Suraj Mall Mohta and Company Vs A V Viswanath Sastri 26 ITR 1, Delhi High Court in the case of SASH Infrastructure Ltd Vs CIT 398 ITR 198 and Orissa High Court in the case of Shankarlal Khaitan Vs ACIT WP(C) 4816 of 2017 as AO was very well conscious of his own act of omission and commission that no reopening is possible without perusing the facts in case records, particularly in a case falling under First Proviso to section 147. (iii) Even AO did not address to the basic issues which were agitated in various submissions filed by appellant while passing the assessment order. There is nothing in the assessment order as to how there was a failure on the part of the appellant t....
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.... come to the conclusion that there is failure on part of the assessee in the escapement of income chargeable to tax wherein assessment u/s.143(3) was already completed. Thirdly the case was taken up for scrutiny to examine the very same issue and the assessee has filed all the details called for, the basis of re-opening amounts to 'change of opinion', which is not allowed as per various judicial pronouncements on the issue. The assessee also raised the contention that the AO did not mention the reasons recorded on body of the notice issued u/s.148, which makes the proceedings void. The assessee also raised the contention that the AO did not apply his own mind to come to the conclusion that income has escaped assessment rather he based his satisfaction solely on information received from Investigation wing. Each of the above issues raised are discussed below: 8.1 In this case, the assessment year involved is 2010-11. The return of income originally was filed on 01.10.2010 and the assessment u/s.143(3) of the I.T. Act was completed on 20.03.2013. The notice u/s.148 is issued on 23.03.2017. It means it is a case where the scrutiny assessment was completed which is sou....
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....er Butt Vs State of Jammu and Kashmir (1957) SCR 51, 59 Bhagwati, J., in Ram Narain Sons Ltd Vs Asst. Commissioner of Sales Tax(1955) 2 SCR 483, said: It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. Lord Macmillan in Madras and Southern Maharatta Railway Co. Vs Bezwada Municipality (1944) LR 71 lA, 113, 122 laid down the sphere of a proviso as follows: The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. Where as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms. The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within ....
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....b. Unless any income chargeable to tax has escaped assessment for such assessement year by reason of the failure on the part of the assessee. i) to make a return under sec.1390r in response to a notice issued under sub-section (1) of sec. 142 or sec. 148 ; or ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied in as much as the original assessment was completed under sec.l43(3) of the said act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under sec.139 or in response to a notice issued under sub-section (1) of sec.l42 or sec.l48. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment y....
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.... beyond four years after the A.Y. for which the original assessment was framed and yet the reasons for reopening did not categorically state that there was a failure by the assessee to disclose any material particulars on the basis of which there were reasons to believe that the income has escaped assessment. This court has recently, in a decision dt.22nd September, 2015 in ITA No.356 of 2013 (CIT Vs Multiplex Trading and Industrial Co. Ltd) clearly stated in cases where reopening of assessment is beyond four years from the end of the relevant assessment year the condition that there has been a failure on the part of the assessee to truly and fully disclose all material facts must be concluded with certain level of certainty." 8.1.7 The legal position emanating from discussion above is that the AO has to conclude that there is failure on part of the assessee to disclose fully and truly all the material relevant for the computation of income. The same has to be specifically recorded. It is found that in the present case no such recording has been done by the AO. In view of the above it is held that the proceedings have not been validly initiated. 8.2 The s....
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...., necessary approval may kindly be accorded by the 1d. CCIT in terms of guidelines for selection of cases for scrutiny during 2011-12." .. - After that, the AO has completed the assessment u/s. 143(3) which shows that the assessee has complied with the notices issued and furnished details as required by the AO. Out of the expenditure the AO made some disallowance on account that the expenditure was not properly vouched. The above shows that the assessee has produced the details during the assessment proceedings and were examined by the AG. However, certain facts regarding the sub contractors and the expenditure incurred meaning during the Search shows that a new material has come to the possession of the AO which warranted action uls.148. The action taken by the AO based on material unearthed/information obtained during the course of Search proceedings constitute fresh evidence based on which the AD has recorded the reasons. It cannot be said that the recording of reasons is on account of only change of opinion of contending by the assessee. The contentions of the assessee cannot be accepted that the assessments were reopened on account of change of opinion in the facts an....
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....sment. 5. The ld. CIT (A) erred in deleting the addition of Rs. 95,49,67,088/- made on account of bogus sub-contract expenses which is the crucial information available to the AO and the same was mentioned in the reasons recorded before reopening the case u/s 147 of the Act. 6. The ld. CIT(A) erred in defending the assessee's illegal act of obtaining information from the Assessing Officer without officially seeking for it and concluding that it cannot be doubted. 7. The appellant craves leave to amend or alter any ground(s) or add a new ground which may be necessary." 7. Before us, the ld. CIT-DR submitted that the ld. CIT (A) erred in deciding the proceedings initiated u/s 148/147 of the Act, as invalid on the ground that the case records pertaining to original assessment completed u/s. 143(3) were not available with the AO at the time of recording reasons, whereas the AO was in possession of such assessment details through online computer software maintained by the department. He further submitted that the ld. CIT(A) was wrong in not appreciating the fact that the AO was in possession of information of the conclusive findings of the investigation....
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.... Coastal Infra 18,65,77,018 48,48,81,603 Sri Pavitra Engineers Pvt.Ltd. 10,78,28,000 - Sri Venkateswara Constructions 2,60,23,315 69,49,315 GRS Engineers 2,66,40,400 1,72,17,140 42,93,706 Kanyaka paramesshwari Constructions 2,69,66,125 - Coastal constructions 2,55,45,995 Sri Satya Sai constructions 2,46,62,875 50,27,459 14,07,463 Total 95,49,67,088 88,74,10,567 57,01,169 The companies, M/s. Metalpalm Infra Projects Pvt. Ltd. and M/s. Falcon foundations were identified as bogus sub-contractors and the whereabouts of these concerns remain untraceable. Further, the re of the firms/companies mentioned above have not been filing returns and remain untraceable. Further, notices u/s 153A have already been issued for the AYs 2011-12 and 2012-13 as these years have been covered under the block period prior to the date of search. In view of the aforesaid mentioned reasons I have reason to believe that an income of Rs. 95,49,67,088/ - has escaped assessment within the meaning of section 147 of the I.T. Act 1961." ....
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....n is to be conducted for forming a reason to believe as to the escapement of income. It is well settled by a number of judgments of the Hon'ble Supreme Court that the twin conditions which are required to be fulfilled before an Assessing Officer can exercise his jurisdiction under clause (a) of section 147 of the Act are (a) that the Assessing Officer must have reason to believe that income, profits or gains chargeable to tax had either been underassessed or had escaped assessment and (b) that the Assessing Officer must have reason to believe that such escapement or underassessment was caused by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. 9.1 In the case on hand, all the information relating to depreciation on investments were there before the AO at the stage of original assessment, as there was no failure on the part of the assessee to disclose fully and truly all material facts that are necessary for completion of the assessment and further we observe in the reasons recorded, there is no reason to believe, allegation on the assessee that the income of the assessee und....
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.... when copies of statement of income, trading account, profit and loss account, audit report etc., were appended to the return filed by the assessee, taking resort to Section 147/148 was unwarranted as it constituted a change of opinion, since the material acted upon had been made available along with return of income. (4) In Satnam Overseas vs. Addl. Commissioner of Income Tax, (2010) 329 ITR 237 (Delhi), the High Court held that the only reason which has been given seeking reopening of the assessment for the years 1997-98 and 1998-99 is that suppression of sales has taken place on account of the fact that when average price of the closing stock is multiplied with the quantity of the sales in the year then the value of the sales would be at a higher figure, than declared by the assessee. Clearly, there is no new material which is alleged to have come to the notice of the Assessing Officer which has caused him to seek reopening of the assessment. Admittedly, the reasons given for seeking reopening of the assessment contains the expression 'perusal of the case record reveals' clearly showing that it is on the basis of the same assessment record as was filed by the a....
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....ust treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing officer. Hence, after 01-08-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a link with the formation of the belief If the facts of the present case including especially the reasons recorded b y the Assessing Officer for reopening the assessment are considered in the light of the decision of the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai -vs.- Societe International De Telecommunication (supra), I am of the view that the initiation of reassessment proceeding itself was bad in law and the assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance of such invalid initiation is liable to be cancelled. I order accordingly. 9.4 In view of the above discussion, the reopening of assessment can be quashed on two counts, i) no new material was brought on record by the AO in the reopening of assessment to establish that the income of ....