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 
2023 (10) TMI 1317
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellaneous deposit/other deposit debited by the assessee in the P & L A/c. The appellant reserves the right to add, alter, modify the grounds of appeal up to and also during the course of hearing." 2. Succinctly stated, the assessee had filed his return of income for A.Y. 2010- 11 on 24.11.2010, declaring an income of Rs. 7,71,230/-. The original assessment was, thereafter, framed by the A.O. vide his order passed u/s. 143(3) dated 07.03.2013 determining the income of the assessee at Rs. 9,99,893/-. 3. During the assessment proceedings, the A.O., on verification of the audit report, balance sheet, and profit & loss a/c, observed that the primary source of the receipts of the assessee, a Civil Contractor, was from the State Government Departments. On perusal of the books of accounts and "Form 16A" issued by the PWD, it was observed by the A.O that the PWD had deducted a sum of Rs. 30,44,859/- towards performance guarantee and other deposits from the gross amount of the bills. The A.O was of the view that as the aforesaid deductions towards performance guarantee and other deposits by the PWD were in the nature of deposits that were refundable after a period of time as m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the reason that the assessee had failed to complete the contract. In his attempt to further justify his aforesaid accounting practice, the assessee had drawn support from the fact that the amount of Rs. 5,69,747/- that was received as a refund of the performance guarantee from PWD, Bridge Division, Bilaspur during the year was accounted for by him as his income for the year under consideration. 5. The A.O., after deliberating at length on the explanation of the assessee to justify his practice of debiting/charging the amount of performance guarantee/deposits as contract expenses in his books of account, did not find favor with the same. Referring to Form 20, which the PWD had issued, the A.O. observed that the same clearly mentioned that the amount of the deposit was refundable. Also, the A.O was not impressed with the claim of the assessee that, as in the past, certain amounts of performance guarantee had been confiscated by the department; therefore, for the said reason, the same was, thereafter, being accounted for as an expenditure in his books of accounts Observing, that performance guarantees/deposits were security deposits which were refundable after some time as agre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rely received back hence, he preferred, to debit out rightly in the P&L A/c. The AO had insisted on the principle of mercantile system followed by the assessee and he thought that in absence of clear indication of forfeiture of performance guarantee and miscellaneous deposits/other deposits, the assessee should have shown these amounts as receivable from toe Government account and every amount receivable is shown in the Balance Sheet on the assets side. The Ld. AO did not try to verify from the record of the year as well as of earlier years as what is being debited by the assessee in the contract account. Since the assessee has shown to have debited all these performance guarantees in earlier years as well during the year in the P&L A/c as such question does not arise to reflect these amounts as receivable because he has claimed these amounts in the P&L A/c directly. Since these amounts are small and received frequently in F.Y.2011-12 and F.Y. 2012-13 respectively, the assessee had shown them during A.Y. 2012- 13 and 2013-14 as relevant to F.Y. 2011-12 and 2012-13. At best the AO could have rejected the books of accounts on the basis of following hybrid system of accountin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....resh material coming to his notice after the culmination of the original assessment that was earlier framed vide order passed u/s. 143(3) dated 07.03.2013 but on the basis of re-appreciation of the same material that was available on record during the original assessment, therefore, he had wrongly assumed jurisdiction and framed the re-assessment vide his order passed u/ss.143(3)/147 of the Act dated Nil. The Ld. AR, in support of his aforesaid contention, had relied on the judgments of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC) and that of the ITO Vs. TechSpan India Private Ltd. & Anr. (2018) 404 ITR 10. It was, thus, the claim of the Ld. AR that a mere "change of opinion" by the successor A.O. on the basis of the same set of facts available on record would by no means justify the reopening of a concluded assessment. Also, the Ld. AR placed his contention as regards the merits of the case and supported the order of the CIT(Appeals), who had vacated the addition made by the A.O u/s. 69 of the Act. 10. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the assessment order. Apropos the preliminary objection....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e validity of the jurisdiction assumed by the A.O for reopening the concluded assessment. 13. Admittedly, it is a fact borne from the record that the assessee respondent has neither preferred before us a cross-appeal nor a cross-objection. The objection as regards the validity of the jurisdiction assumed by the A.O. had orally been raised by the Ld. AR at the threshold of hearing of the appeal. As observed by the Hon'ble High Court of Delhi in the case of Sanjay Sawhney Vs. Pr. CIT (supra) that as Rule 27 of the Income Tax Appellate Tribunal Rules, 1963 does not specify any definite structure for making any application in a particular manner; therefore, the view taken by the Tribunal, which had declined the objection filed by the assessee respondent that was rejected for the reason that it was not raised on the basis of an application made in writing was fallacious. For the sake of clarity, the relevant observations of the Hon'ble High Court are culled out as follows: "11. The Tribunal has taken a pedantic view on the interpretation of Rule 27 by holding that for availing the remedy under the said provision, an application in writing is necessary. In our opinion, this s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts involved in the appeal before the Hon'ble High Court in the context of which the latter had looked into the scope of Rule 27. (i) The assessee before the Hon'ble High Court had, in the proceedings before the Tribunal, filed cross-objections, which involved a delay of 248 days. The cross-objections filed by the assessee were dismissed by the Tribunal, which declined to condone the delay therein involved. On further appeal, it was the claim of the assessee that as it had assailed the validity of the jurisdiction that was assumed by the A.O u/s. 153C of the Act, which was purely an issue of law, therefore, there was no justification on the part of the Tribunal in refusing to consider such significant issue. It was the claim of the assessee that as he was under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, only supporting the order passed by the CIT(Appeals) before the Tribunal, which was already in his favor, thus, there was no necessity for filing of a cross-objection. (ii) After deliberating on the contentions of the assessee, the Hon'ble High Court found favor with the same. Adverting to the issue as to whether the assessee could have assailed the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellate Tribunal Rules, 1963 as also the provisions of Section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon'ble Supreme Court in S. Nazeer Ahmed (supra) we think that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross-objections. Accordingly, the additional substantial question of law is required to be answered in favor of the Appellants/assessees and against the Revenue." (emphasis supplied by us) 16. Considering the aforesaid judgment of the Hon'ble High Court of Bombay in the case of Peter Vaz Vs. CIT, Central Circle, Bangalore (supra), we are of the view that the assessee respondent before us, by triggering Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, is well within his right to assai the validity of the jurisdiction assumed by the A.O for reopening of his concluded assessment u/s. 147 of the Act 17. Also, the vesting of similar rights with the assessee respondent can be traced in the judgment of the Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Dehati Co-operative Marketing cum Processing Society (1981) 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....resulted in undisclosed investment under section 69. The details of deductions are as under:- Sr. No. Name of deductor Deduction amount performance guarantee Mise/Deposit/other deposit Total 1. O/o. The EE, PWD, Div. Champa 97209/- 97,209/- 2. O/o. the EE, Div. Pathangaon 244654/- 244654/- 3. O/o. The EE, PWD, Bridge Cons. Div. Bilaspur 569747/- 1029194/- 1598941 4. O/c. The EE, PWD, Bridge Cons. Div. Raigarh 238128/- 238128/- 5. O/o. The EE, PWD, Raigarh 865927/- 865927/- Total 1149738/- 1895121/- 3044859/- I have, therefore, a reason to believe that section 69 of the Income Tax Act has been violated, so income of the assessee has escaped assessment for the A.Y. 2010-11, therefore..........." 20. Admittedly, it is a matter of fact borne from the record that the A.O had framed the original assessment in the case of the assessee for A.Y. 2010-11 vide order passed u/s. 143(3) of the Act dated 07.03.2013, Page 2-7 of APB. On a perusal of the assessment order u/s. 143(3) dated 07.03.2013, it transpires that the A.O in the course of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO 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 live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt sought to be reopened and the date of forming of opinion by respondent No. 1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It is merely a fresh application of mind by the same officer to the same set of facts. Thus, it is a case of mere change of opinion, which, in our opinion, does not provide jurisdiction to respondent No. 1 to initiate proceedings under s. 148 of the Act. It can now be taken as a settled law, because of a series of judgments of various High Courts and the Supreme Court, which have been referred to in the judgment of the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. (supra) referred to above, that under s. 147 assessment cannot be reopened on a mere change of opinion." We further find that the Hon'ble High Court of Bombay, in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom), had observed that as the A.O received no new information/material, therefore, the fresh application of mind by the A.O to the same set of facts and material which were available on record at the time of framing of the assessment but had inadvertently remained ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gible material to reopen an assessment, the power cannot be held to be validly exercised." Also, in the case of Aventis Pharma Ltd. Vs. Asst. CIT (2010) 323 ITR 570 (Bom), the Hon'ble High Court of Bombay reiterated its aforesaid view that reassessment proceedings could not be permitted on the basis of a "Change of opinion" and had held as under:- "There is merit in the submission which has been urged on behalf of the assessee that there was no tangible material before the AO on the basis of which the assessment could have been reopened and what is sought to be done is to propose a reassessment on the basis of a mere change of opinion. This, in view of the settled position of law is impermissible. No tangible material is shown on the basis of which the assessment is sought to be reopened. In the absence of tangible material, what the AO has done while reopening the assessment is only to change the opinion which was formed earlier on the allowability of the deduction. The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangibl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... में रू. 5,601 /- यà¥à¤¨à¤¿à¤¯à¤¨ बैंक ऑफ इंडिया, चाà¤à¤ªà¤¾ के खाते में अंतिम शेष होना दरà¥à¤¶à¤¾à¤¯à¤¾ गया है। इसीपà¥à¤°à¤•à¤¾à¤° सेनà¥à¤Ÿà¥à¤°à¤² बैंक ऑफ इंडिया, पतà¥à¤¥à¤²à¤—ांव के बैंक खाते का अंतिम शेष रू. 4.451 / - दरà¥à¤¶à¤¾à¤¯à¤¾ गया है। इस संबंध में यूनियन बैंक ऑफ इंडिया à¤à¤µà¤‚ सेनà¥à¤Ÿà¥à¤°à¤² बैंक....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(c) की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ पृथक रूप से आरंठकी जाती है। 3 (iv). मजदूरी à¤à¥à¤—तान à¤à¤µà¤‚ Earth work निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ ने मजदूरी à¤à¥à¤—तान रू. 2,17,09,032 / -, à¤à¤µà¤‚ अरà¥à¤¥ वरà¥à¤• के मद में रू. 29,45,204 /- वà¥à¤¯à¤¾à¤ªà¤¾à¤° खाते में नामें लिखे हैं। उकà¥à¤¤ à¤à¥à¤—तान मजदूरों को कारà¥à¤¯à¤¸à¥à¤¥à¤² में कारà¥à¤¯ करने के लिठदिया गयà¤....
X X X X Extracts X X X X
X X X X Extracts X X X X
....या है। छायापà¥à¤°à¤¤à¤¿à¤¯à¥‹à¤‚ में à¤à¥à¤—तान की तिथी का वरà¥à¤£à¤¨ नहीं है। उकà¥à¤¤ कमियों के कारण इस खरà¥à¤š का मिलान नहीं किया जा सकता। वà¥à¤¯à¤µà¤¸à¤¾à¤¯ की पà¥à¤°à¤•à¥ƒà¤¤à¤¿ को देखते हà¥à¤ इन मदों में होने वाले खरà¥à¤š से इंकार नहीं किया जा सकता किनà¥à¤¤à¥ सहायक साकà¥à¤·à¥à¤¯ के अà¤à¤¾à¤....
X X X X Extracts X X X X
X X X X Extracts X X X X
....¤§à¤¿à¤•à¤¾à¤‚श सामगà¥à¤°à¥€ सà¥à¤¥à¤¾à¤¨à¥€à¤¯ बाजार से खरीदी गई है। रेती खरीदी की संपूरà¥à¤£ खरीदी नगदी में है इसी पà¥à¤°à¤•à¤¾à¤° अधिकांश सीमेनà¥à¤Ÿ खरीदी व फà¥à¤¯à¥à¤²à¥à¤¸ à¤à¤µà¤‚ लà¥à¤¬à¥à¤°à¤¿à¤•à¥‡à¤¨à¥à¤Ÿ वà¥à¤¯à¤¯ की नगदी में है। इन मदों के अधिकांश वाऊचरà¥à¤¸ सà¥à¤µà¤¯à¤‚निरà¥à¤®à¥€à¤¤ हैं। सà¥à¤µà¤¯à¤‚ निरà¥à¤®....