9911796707
TMI Blog2019 (12) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... tion contract business. 3. The solitary grievance of the assessee in this appeal is that re-assessment proceedings initiated by the AO under section 147/148 is bad in law. 4. In the assessment order which was made u/s 147 / 144 of the IT Act196l dated 15.12.2010 made by the ITO Ward 1(2) Hooghly it has been stated that at the time of issue of processing of return and issue of refund certain discrepancies were noticed and for the same a notice was issued u/s 148 of the IT Act 1961. The case was reopened u/s147 of the IT Act 1961 after recording the following reasons which is recorded in the order of the Ld. CIT Appeal on Page 5/6: "The assessee firm Arti Engineering & Construction Co. - in the return of income filed for the assessment year 06-07 had shown the income from contractual business for Rs.(-) 1,64,558/ -. On the top of the return filed in ITS-2D-signed by Prabir Ghosh - it is written -1st year. In the Part B point 7(b) of the Form 3CD being signed by the auditor it is also evident that this was the first year of operation. The major points of observation in the annexure filed with the audit report by the assessee reads as follows: Particulars Asst. Year 2006-07 Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know that income had escaped assessment and there is reason to believe that income had escaped assessment. The aforesaid reasons are recorded before initiation of the proceedings as u/s. 147 of the IT Act, 1961." 5. The Assessing Officer then assessed the income of the firm at Rs. 38,50,630/- i.e. making an addition of Rs. 40,15,188/- The breakup of the addition are as follows: (a) Partners Capital Rs. 14,17,966/- (b) Disallowance u/s 40(a)(ia) Rs. 20,69,078/- (c) Turnover difference Rs. 3,24,849/- (d) 40A(3) disallowance Rs. 1,53,796/- (e) Partners remuneration disallowed Rs. 49,500/- 6. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the ld CIT(A), who has confirmed the addition made by assessing officer. Aggrieved, the assessee is in appeal before us. 7.Ld Counsel for the assessee reiterated the submissions made before the authorities below, whereas ld DR relied on the assessment order passed by the AO. 8. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same as per law. At the time of reopening before the Assessing Officer only the copy of tax audit report was available and hence that was the only material on record. In the audit report there was no qualification of non deduction of TDS and therefore at the time of reasons recording there was nothing before the Assessing Officer to come to the conclusion that the assessee had not deducted the TDS on rent. Thus the reasons recorded had no material having live link to the escapement of income. Even with respect to sub contractor payment, the TDS is applicable only if the payment exceeds a particular amount per person in a year. On the fact of the material before the Assessing Officer at the time of reopening i.e. that the Income Tax Return and Tax Audit Report there was nothing to lead the Assessing Officer to conclude that the sub contract payment was paid to only one person and or that no TDS was deducted thereon. In the audit report there was no qualification of non deduction of TDS and therefore at the time of reasons recording there was nothing before the Assessing Officer to come to the conclusion that the assessee had not deducted the TDS on rent. Thus the reasons reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, the recorded debtor in the books is nothing but part of the turnover recorded in the books for which payment is yet to be received. Thus the disclosed debtor figure in balance sheet recorded in the books cannot be added with the disclosed turnover to hold that such turnover is out of books. Thus, this reason is also non-existent and does not survive as there is no material basis to come to such conclusion of escapement of income. Thus, we note that there was no material to provide live link to the escapement of income available before the assessing officer to conclude that there was escapement of income thus the entire reopening was bad in law and hence the assessment order deserves to be quashed. 13. We note that the items listed in the reasons were either not added by the AO to the income of the assessee in reassessment proceedings or on merits it has been demonstrated that the same cannot be added and therefore once the items for which reasons have been recorded are not added or held to be not assessable then no other item of income can be added in such proceedings. The reasons as recorded itself alone without taking any assistance to any other documents or affidavits etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to the reasons must be able to justify the same based on material available on record; (11). He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence; (12). That vital link is the safeguard against arbitrary reopening of the concluded assessment; 14. We note that if the recorded reasons shout contradiction and inconsistency it means necessary satisfaction in terms of the statutory provision has not been recorded at all. The AO was not competent to continue with the proceeding under section 147 on some other issues or grounds which were not mentioned in the reasons recorded under section 148(2). A plain reading of Explanation (3) to Sec. 147 shows that for the purpose of reassessment u/s 147 the AO can reassess income in receipt of an issue which escaped assessments and such other income which comes to his notice subsequently in the course of proceedings under the said section even though the reasons for such issue/income were not included in the recorded reasons. The explanation (3) however pre-supposes th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
