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TMI Blog2019 (10) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... A-P & L A/c against Column (j) Rs. 47,34,000/- being other income under head (Business & Profession). Thus, there is double addition of Rs. 47,34,000/-. 3. That the learned Commissioner of Income Tax (A)-2, Agra has erred in law and on facts in not appreciating the facts of the case properly in as much as the Assessing Officer passing the original assessment order u/s 143(3) of Income tax Act, 1961 dated 26.12.2012 after lengthy discussion held "In this way, extra profit addition of Rs. 17,06,190/- (7.3% - 6.92%) on work done by self amounting to Rs. 44,74,30,030/- is made to the income returned by the assessee". Hence computation of total income should have been (Income returned Rs. 2,73,46,630/- + Addition as discussed Rs. 17,06,190/- = Rs. 2,90,52,820/-). 4. That the appellant craves to alter, amend, add, and modify any grounds of appeal. 5. The appellate order being unjust, illegal, and arbitrary; hence deserves to be amended." 2. Apropos Ground No. 1, the assessee has challenged validity of the re-opening of the assessment u/s 147 of Income Tax Act, on account of change of opinion. 3. The AO framed original assessment in the case of assessee u/s 143(3) by estimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's only business income of assessee was determined on basis of gross contractual receipts of assessee, on which net profit rate was applied by the AO. As regards the assessee's claim, that the AO's action is based on change of opinion. It is observed that assessee's objection is not based on the proper appreciation of the clear cut factual and legal position of the assessee's case wherein the AO has adequately demonstrated that assessee's income is liable to be assessed under a separate head which is provided in the scheme of the Income Tax Act, 1961. "Therefore the assessee's claim is without any merit or credence into it. Thus in view of me forgoing it is well borne out that the AO has undertaken the re-assessment proceedings for bringing to tax the amount that has escaped assessment earlier. Therefore, the assessee's contention that it was a change of opinion is misconceived and without any legal force. 4.4 As per the scheme of re-assessment provisions u/s 147 of the Act, the word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the assessing officer has a cause or justification to think or suppose that income had escaped assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and such formation of belief by the assessing officer is within the realm of subjective satisfaction. The Hon'ble Supreme Court in its another decision in the case of Raymond Woolen Mills Ltd. Vs. ITO reported at (1999) 236 ITR 34 (SC) has even held that at the time of reopening of assessment proceeding u/s 147, we have only to see whether there was prima facie material on the basis of which the Department could reopen the case. The sufficiency or correctness of material is not a thing to be considered at this stage. Further, the Hon'ble jurisdictional High Court in the case of Anand Prakash Agarwal vs. CIT reported at (121 DTR 227) and Hon'ble Karnataka High Court in the case of CIT vs. United Racing & Blood Stock Breeders Pvt. Ltd. reported at 131 DTR 344, have also held so relying on the decision of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra)." 6. Further the ld. CIT(A) after considering the facts of the case, written submissions filed by the ld. AR confirmed the addition made on account of income from other sources by observing vide para 5.2 of the impugned order: "5.2 I have considered the facts of the case, written submissions filed by the Ld.AR for the appellant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r income after validly reopening assessment u/s 147 of the Act. He contended that since the AO did not examine the issue of interest from FDR's in the original assessment so he has rightly opened the assessment.In support, he placed reliance in the following case laws besides relied by the ld. CIT(A): i) 'M/s Larson & Turbo Ltd. vs. State of Jharkhand', in Civil Appeal No.5390/2007, (S.C.). ii) 'A.L.A. Firm vs. Commissioner of Income Tax', 1991 SCR (1) 624, 1991 SCC (2) 558 (SC). iii) 'CIT vs. Popular Vehicles & Services Ltd.', ITA No.1628/2009 (Kerala) 10. Heard the rival contention, perused the material on record and the case law relied upon on the issue of validity of reopening of assessment u/s 147.The AO has recorded reason to believe u/s 147 of the IT Act 1961 as follows (APB-52). "In this case, the assessment was completed u/s 143(3) of the IT Act at total income of Rs. 2,90,52,820/- against the return income of Rs. 2,73,46,630/-. From the perusal of Balance sheet, Profit and loss account, assessment order and other documents placed on record, it is noticed that the Assessing Officer has rejected the books of accounts of the assessee u/s 145(3) of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sheet) by the assessee as 'Other Income'. This amount is not included in the Contract receipt by the Assessing Officer and also not added in his Income during assessment order. Therefore 'reason to believe' that the income of Rs. 47,34,000/- escaped assessment in the meaning of section 147 of the Income Tax Act. So, Notice u/s 148 is being issued in this case." 12. In the original assessment the AO has assessed income of the assessee in the following manner (refer para 4.1 of AO's order). 13. On perusal of the computation of original assessment order passed u/s 143(3) of the Act, as above, we find that there was no reference made regarding the other income earned by the assessee on account of interest on FDR's either in the notices issued by the AO or the compliance and written submission furnished by the assessee during the course of assessment proceedings. 14. In the case of 'A.L.A. Firm vs. Commissioner of Income Tax' (supra). The Hon'ble Apex Court held that: "................... The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the accounts noticed that assessee which has paid Rs. 3 crores towards interest on borrowings in the accounting year relevant for the assessment year advanced above Rs. 84 lakhs as interest-free loans to sister concerns and so much so the entire borrowings was not for business purposes and hence deduction of interest allowed under section 36(1)(iii) is excessive relief granted in assessment. In this context Explanation 2 to section 147 has to be referred to which exhaustively states certain cases where income chargeable to lax has escaped assessment under sub-clause (iii) of clause (c) of Explanation 2, if income has been made the subject of excessive relief under the Act, then the same is one of the circumstances of income escaping assessment. Therefore, if excessive deduction of interest is allowed under section 36(1)(iii), then certainly it is a case of income escaping squarely covered by Explanation 2 to section 147 of the Act. Even though counsel for the assessee submitted that when the claim was allowed in the original assessment any proposal for subsequent disallowance of relief granted originally in the assessment either fully or partially should be taken as on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an another case of Raymond Woolen Mills (supra) held that at the time of reopening assessment proceedings u/s 147, we have only to see whether there was prima facie material on the basis of which the department could reopen the case. The sufficiency and correctness of the material is not a thing to be considered as this stage. The decision relied by ld. AR which justifiable on the facts are not applicable to the facts and the case as being justifiable, further the AR has not brought on record in contrary judgments in rebuttal to the contentions of the department. We hold that there is no sufficient material to establish that there was change of opinion on the part of the AO while recording reasons to believe u/s 147 of the Act. 17. We find no merit and substance in the argument of the ld. Counsel, and in the absence of corroborative evidence to substantiate the contentions of the assessee on the change of opinion of the AO, the ld. Counsel, we approve the 'reason to believe' that the income of Rs. 47,34,000/- escaped assessment in the meaning of section 147 of the Income Tax Act.In view of that the ld. CIT(A) was justified in confirming the reopening of the assessment. 18. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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