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Rabbit Builders, Karaikal Versus The Assistant Commissioner of Income Tax, Circle –I, Thanjavur.

2015 (7) TMI 606 - ITAT CHENNAI

Validity of reopening of assessment - whether there is a bar on reopening all the assessments which was completed u/s. 153A/153C r.w.s. 143(3) ? - unreported gross receipts - Held that:- There is escapement of income while framing original assessment order u/s.153C r.w.s 143(3) of the Act. It is apparent that the omission of the assessee to bring it to the Assessing Officer’s notice those particulars of seized material, will amount to omission to disclose fully and truly all materials facts nece .....

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pect. In the light of the aforesaid discussion, we are of the view that in the light of the reasons recorded by the Assessing Officer, there was sufficient material for Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration. The assumption of jurisdiction under section 147 by issuance of notice under section 148 of the Act is valid and legal and as such no case is made out for intervention by this Tribunal. Therefore, the ass .....

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/153C of the Act. The time limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stop having been pulled out, the Assessing Officer under section 153A/153C has been entrusted with the duty of bringing to tax the total income of an assessee who case is covered by section 153A/153C, by even making reassessments subject to provision u/s.153B of the Act. Accordingly, the contention of the ld. Autho .....

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fits rate disclosed by the assessee in immediate preceding years to determine the income from unaccounted contract receipts. Further, we make it clear that the assessee shall be given an opportunity to go through the seized materials on the basis of which the Assessing Officer determine the unaccounted gross receipts of the assessee before arriving the unaccounted gross contract receipts. With these observations, this issue for limited purpose is remitted back to the file of the Assessing Office .....

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ruchirapalli, dated 13.03.2013 for the above assessment years. Since the issue in these three appeals are common in nature, these appeals are combined, heard together, and disposed of by this common order for the sake of convenience. 2. The facts of the case are that the assessee was engaged in civil contract work at Karaikal and was opted to offer the business income u/s.44AD of the Income Tax Act. Return of income were filed voluntarily without notice u/s.142(1) of the Act, for the assessment .....

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(3)r.w.s. 153C for the assessment years 2004-05 to 2006-07 and u/s.143(3) for the assessment year 2007-08 accepting the income admitted by the assessee. The Assessing Officer in contrast to the audit object has relied on the seized materials and concluded that there was an escapement of income to the extent of E13.25 lacs for assessment year 2004-05, E15.12 lacs for assessment year 2005-06, and E22.70 lacs for assessment year 2007-08 and issued notice u/s.148 on 31.03.2011. The re-assessments we .....

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the discrepancy the Assessing Officer has issued notice u/s.148 of the Act for all the assessment years on 31.03.2011 treating the unreported receipts as income escaped assessment. The Commissioner of Income Tax (Appeals) found no rationale in the objections raised by the ld. Authorised Representative for assessee for reopening the assessments, therefore notice issued u/s.148 was valid in reopening the assessments for all the three years. The Assessing Officer considered that there was an escap .....

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Act so as to issue 148 notice of the Act. In our opinion there is no merit in the argument of the assessee s counsel section 147 of the Act permits reassessment of income that has escaped assessment income in any assessment year subject to provisions of sections 149 and 153 of the Income tax Act. Reassessment of escaped income under section 147 of the Act is made where income chargeable to tax has escaped assessment either due to the failure of the assessee to file return or failure to disclose .....

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(a) The Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the As .....

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egard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so beca .....

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sed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were co .....

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mbit of the proviso to Section 147. So long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under Section 147. 6. After search and seizure under section 132, the Assessing Officer shall proceed under section 153A/153C of the Act and he cannot proceed u/s.148 of the Act. There is no bar on reopening all the assessments which was completed u/s. 153A/153C r.w.s. 143(3) of the Income-tax Act, if there is reason to believe that income escaped from .....

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and there was no escapement of income. According, to the ld. counsel only for the purpose of making re-enquiry, he has issued notice for reopening assessment which cannot be done. 9. On the other hand, the Departmental Representative relied on the order of the Assessing Officer passed u/s. 153C r.w.s. 148 of the Act. The Assessing Officer has a jurisdiction for assessment or reassessment proceedings for all the six years to compute the total income of the assessee including undisclosed income wh .....

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the search indicating undisclosed income, the addition shall have to be restricted to those documents or incrementing documents, clubbed only to assessment framed originally. As law does not permit the Assessing Officer to disturb already concluded assessment, whether on the date of intimation of search u/s.132 or requisition of books, no proceedings is pending in the search, materials found indicating incrementing materials, the Assessing Officer engrosses a jurisdiction where he has clubbed t .....

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three assessment years. Accordingly, the reasons were recorded by the Assessing Officer before issuing notice u/s.148 of the Act for these three assessment years stating that there was escapement of income and the seized materials were not properly considered. According to the ld. Authorised Representative for assessee, the seized materials vide Ann.SRK/B &D/S, Ann.SRK/Loose Sheets/S and Ann.SRK/Loose Sheets/S dated 09.11.2005 were fully considered while framing the original assessment u/s.1 .....

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ement for the Assessing Officer to initiate reassessment u/s.147 of the Act is explained by Supreme Court in its decision in the case of CIT vs. Kelvinator of India Limited 320 ITR 561, wherein it is held as under:- 3. After the enactment of the Direct Tax Laws (Amendment) Act, 1987 i.e., prior to April 1, 1989, section 147 of the Act reads as under: '147. Income escaping assessment.-If the Assessing Officer, for reasons to be recorded by him in writing, is of the opinion that any income cha .....

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o 153 referred to as the relevant assessment year) :' (emphasis supplied) 4. After the Amending Act, 1989, section 147 reads as under : '147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice s .....

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above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained viz. that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-April 1, 1989, power to reopen is much wider. However, one needs to give a sc .....

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rtain precondition 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 Assessing Officer. Hence, after April 1, 1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income .....

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ced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989, which reads as follows ([1980] 182 ITR (St.) 1, 29) : '7.2. Amendment made by the Amending Act, 1989, to reintroduce the expression "reason to believe" in section 147.-A number of representations were received against the omission of the words "reason to b .....

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ce the expression "has reason to believe" in the place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same.' (emphasis supplied)". 11. In view of the fact that the seized materials were not considered by the Assessing Officer while framing original assessment order u/s.153C r.w.s. 143(3) of the Act, thus, there was under assessment of the assessee and there was escapement of i .....

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to the same. In our opinion production before the Assessing Officer of accounts books or other evidence from which material facts could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of this section. Had the Assessing Officer applied his mind to the seized document, then the assessment would have been different. 12. In our opinion, there is escapement of income while framing original assessment order u/s.153C r.w.s 14 .....

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assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then, it is the duty of the assessee to bring it to the notice of the Assessing Officer. The assessee knows all the material and relevant facts - The Assessing Authority might not. Testing the facts of the present case in the light of the aforesaid principles, as noted hereinabove, the Assessing Officer in the assessment order has not discussed the seized documents. The Assessing Officer while recording t .....

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Assessing Officer merely because the Assessing Officer mentioned in assessment order passed u/s.153C r.w.s 143(3) about seized documents, it does not mean the Assessing Officer is examined the seized documents. Thus, the Assessing Officer while framing the original assessment u/s.153C r.w.s. 143(3) of the Act does not appear to have formed an opinion with regard to seized documents and he has accepted the claim of the assessee, as the assessee wanted to be accepted by the Assessing Officer. The .....

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resaid discussion, we are of the view that in the light of the reasons recorded by the Assessing Officer, there was sufficient material for Assessing Officer to form the requisite belief that income has escaped assessment for the assessment year under consideration. The assumption of jurisdiction under section 147 by issuance of notice under section 148 of the Act is valid and legal and as such no case is made out for intervention by this Tribunal. Therefore, the assessee fails in this ground. T .....

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y, there would be only one assessment order in respect of six assessment years in which the total disclosed or undisclosed income would be brought to tax. Even though assessment order passed under section 143(1)(a) or under section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetters imposed upon the Assessing Officer by the strict pr .....

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n a case covered by section 153A/153C of the Act. The time limit prescribed for completion of an assessment or reassessment by section 153 has also been done away with in a case covered by section 153A. With all the stop having been pulled out, the Assessing Officer under section 153A/153C has been entrusted with the duty of bringing to tax the total income of an assessee who case is covered by section 153A/153C, by even making reassessments subject to provision u/s.153B of the Act. Accordingly, .....

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