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2015 (3) TMI 577 - BOMBAY HIGH COURT

2015 (3) TMI 577 - BOMBAY HIGH COURT - TMI - Reopening of assessment - excessive and bogus claim of labour charges - Held that:- In this case, the labour charges paid by the Respondent for Assessment Year 2004-05 was subject matter of enquiry during the regular assessment proceedings. This enquiry was in the context of the fact that there were outstanding labour charges payable as was evidenced from the Respondent-Assessee's balance sheet filed along with return of income. A detailed enquiry .....

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ing the regular assessment proceedings and cannot be sustained. The contention urged by Revenue that as the Revenue's Appeal for the Assessment Year 200506 has been admitted, this appeal should also be admitted is not required to be considered. This is because, we find that the jurisdictional requirement of issuing the notice under Sections 147 and 148 of the Act is not satisfied. This is threshold issue and, therefore, the result of the Revenue's appeal for Assessment Year 2005-06 would .....

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dma Divakar For the Respondent : Ms A Vissanji ORDER P.C. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 26th September, 2011 passed by the Income Tax Appellate Tribunal (the Tribunal) for the Assessment Year 2004-05. 2. The Revenue has formulated the following questions of law for our consideration: "(a) Whether on the facts and circumstance of the case and in law, the ITAT is correct in its decision that the finding of the Assessing Office .....

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oduced by partners? (c) Whether on the facts and circumstance of the case and in law, the ITAT is correct in observing that the reopening is bad in law if the basis on which the assessment has been reopened by A. O. was not found as sustainable and justifiable on the facts in a later assessment year? (d) Whether on the facts and circumstances of the case and in law, the ITAT is correct in not considering the second aspect of the reasons recorded for reopening while deciding the sufficiency of re .....

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ct reopened assessment for Assessment Year 2004-05 on the basis of the following reasons recorded as under:- "3.4 While completing of the assessment of the assessee firm for A. Y. 2005-06 wherein the Assessing Officer disallowed the labour charges of ₹ 4,80,95,723/- on the ground that the said labour charges could not remain outstanding for more than a month, the Assessing Officer recorded the reasons and reopened the assessment of the assessee firm for A. Y. 2004-05. The said reasons .....

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g to ₹ 4,44,09,104/ for manufacturing and processing 1,20,547.58 carat of diamonds. It is seen that the above mentioned parties are also among these labour parties and therefore, I have reason to believe that income to the extent of ₹ 2,30,85,067/- has escaped for A. Y. 2004-05." During the assessment u/s. 143(3) for AY 2005-06, the capital introduced by the partners was added as mentioned below since the partners could not establish the source of capital. a. Shri Manubhai G. Ji .....

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fore, notice u/s. 148 is issued." Thus, from the above, it is clear that the reasons are two fold (i) in respect of excessive labour charges to the extent of ₹ 2.30 Crores which had escaped assessment; and (ii) capital introduction of partners are to be added to the assessee's income for the subject assessment year. Questions (a) to (c) have been formulated in respect of the first issue. Question (d) has been formulated in respect of the second issue. 5. So far as Question (d) i.e .....

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enue, it would have moved a rectification application which it does not urge to have been made. Thus, the second issue which is raised in Question (d) above is being dismissed as it does not arise out of the impugned order as no submission in that regard were urged before the Tribunal. Hence, Question (d) dismissed. 6. The Tribunal by the impugned order held that the notice issued under Sections 147 and 148 of the Act seeks to reopen the assessment for the subject Assessment Year could not be su .....

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54. It is submitted that in view of the aforesaid decision, the material obtained during the subsequent assessment year which indicated that deduction on account of labour charges had been excessively claimed as they have remained outstanding for more than one month, would be a valid ground for the Revenue to reopen the assessment for Assessment Year 2004-05. Thus, the impugned order was not justified in holding that the reopening notice is without jurisdiction. Moreover, it is submitted that th .....

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g the order of CIT(A) observed that the RespondentAssessee had in its balance sheet indicated details regarding outstanding labour charges. In the regular assessment proceedings, the Assessing Officer had specifically by a letter dated 30th August, 2006 called upon the RespondentAssessee to give details of the labour charges. The RespondentAssessee's in its reply by letter dated 13th September, 2006 (referred in the order of CIT(A) made available details of labour charges along with the quan .....

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ar which is treated as tangible material by the Revenue to reopen the proceedings. There can be no manner of doubt that material obtained during the assessment proceedings for another year can form the basis of reopening of an assessment. However, the reopening of an assessment cannot be on the basis of a material which has already been considered during the regular assessment proceedings by the Assessing Officer. The decision relied upon by the Revenue in the matter of Multiscreen Media (supra) .....

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change of opinion, the Revenue must demonstrate before the court that during the course of the assessment proceedings for the subsequent year, i.e. the assessment year 200708 some new information or material had been brought on record which was not available when the assessment order was passed for the assessment year 2006-07. That indeed is not the case of the Revenue. All material which was relevant to the determination was available when the assessment was completed for the assessment year 2 .....

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case, there was no tangible material, no new information and no fresh material which came before the Revenue in the course of assessment for the assessment year 200708 which can justify the reopening of the assessment for the assessment year 2006-07." (emphasis supplied) 9. The facts of the present case are similar to NYK Line Limited (supra). The view in the following Assessment Year that the labour charges paid were excessive is not tangible material but opinion/ view on the material ava .....

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