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TMI Blog2020 (6) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... llenge in the present litigation is the impugned notice issued by the Revenue under Section 148 of the Act dated 28th March, 2018 for the purpose of reopening of the assessment for the A.Y.2011-12. 4. The facts, giving rise to this litigation, may be summarized as under; 4.1 The writ applicant is a partnership firm registered under the provisions of the Indian Partnership Act. The writ applicant filed its return of income for the A.Y.2011-12 on 28th September, 2011, declaring its total income at Rs. 15,23,720/- The assessment was framed under Section 143(3) of the Act at Rs. 20,86,090/- vide assessment order dated 11th February, 2014. Later, the impugned notice under Section 148 of the Act dated 28th March, 2018 came to be issued. The reasons for the purpose of reopening are as under; "Brief details of the Assessee The assessee firm engaged in the business of construction and development of housing project had filed the return of income for the asst. year 2011-12 on 28.09.2011 declaring totla income at Rs. 15,23,720/-. Assessment U/s 143(3) of the Act was completed on 11.02.2014 and the total income of the assessee was assessed at Rs. 20,86,090/- 2. Brief facts of informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed and risk and reward transferred to prospective buyer recognized as income by transferring to profit and loss account. Assessee has not shown anything under the head 'work-in-progress'. It was further noticed that the assessee has shown closing stock of Rs. 6,22,13,506/- as on 31.03.2011. In clause 28 of 3CD report, it has been reported by accountatn that value of closing stock was shown on the basis of valuation done by site supervisor. The bifurcation of the closing stock as worked out by the site supervisor has been discussed in para 2. 4. Enquiries made by the AO as sequel to information collected/received. As per para no.2 5. Findings of the AO From the sample copy of document submitted by the assessee during the course of assessment proceedings u/s.143(3) of the At in respect of sale of flat no.702 to Shri Rajesh Pachoury it was noticed that the assessee is executing two deeds, one related to sale of proportionate share of land at Rs. 10,00,000/- and the other related to construction cost at Rs. 10,00,000/-. The assessee had sold share of land to 15 purchasers of flat @ Rs. 10 Lakhs at Rs. 1,50,00,000/-. As the total cost of land was Rs. 9,11,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing mercantile system of accounting. During the year, whatever amount is received against sale of residential units by executing sale deed are considered as sales consideration and the same is to be recorded in the profit and loss account. Further amount received for construction of residential unit, based on AS-9, revenue recognition of the extent work completed and risk and reward transferred to prospective buyer recognized as income by transferring to profit and loss account. Assessee has shown anything under the head work-in-progress. Based on the certificate of the site supervisor, the assessee has shown closing stock at Rs. 6,22,13,507/- after bifurcating value of land at Rs. 6,00,00,000/- and value of closing material stock at Rs. 22,13,507/-. On the basis of the document with respect to sale of flat no.702, it is seen that the assessee is executing two deeds (I) one related to sale of proportionate share of land at Rs. 10 Lakh and the other is related to construction cost at Rs. 32 Lakh. So, accordingly, the assessee had sold share of land to 15 purchasers of flat @ 10 lakhs valuing for Rs. 1,50,00,000/-. Further, the assessee had claimed an expenditure of Rs. 9,11,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been disclosed with due diligence, accordingly, attracting provisions of explanation 1 of section 147 of the Act." 4.2 The writ applicant filed its objections with regard to the reopening of the assessment dated 14th August, 2018. 4.3 The objections raised by the writ applicant, ultimately, came to be overruled vide order dated 5th October, 2018. The order, overruling the objections, reads thus; "First and foremost, the case has been re-opened by the issuance of notice u/s.148 of the Act dated 28.03.2018 after duly recording the requisite reasons and taking prior approval from the Principal Commissioner of Income-tax-1, Vadodara and duly serving upon the assessee. Furthermore, it is well within 6 years from the end of the relevant assessment year. Therefore, the reopening of the instant case is technically and legally valid. Secondly, given the facts narrated herein above, the Revenue had a 'reason to believe" that in the case of the assessee, an income to the extent of Rs. 1,61,00,000/- which was ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, and the Assessing Officer, on his own, upon application of mind, finds that the ground is valid, the reopening of the assessment cannot be quashed merely because such ground was brought to the notice of the Assessing Officer by the audit party. In support of his submission, Mr. Patel seeks to place reliance on the decision of the Supreme Court in the case of Commissioner of Income Tax vs. P.V.S Beedies Pvt. Ltd., 1999 237 ITR 13. Mr. Patel pointed out that the decision of the Supreme Court in the case of P.V.S. Beedies (supra) has been referred to and relied upon by a Coordinate Bench of this Court in the case of N.K. Industries vs. Income Tax Officer, 362 ITR 502. Mr. Patel invited the attention of this Court to the observations made by the Coordinate Bench in N.K. Industries (supra) as under; "With respect to the first of the two reasons recorded by the Assessing Officer therefore it clearly emerges that she was acting at the instance of the audit party, though she herself held a contrary belief that no income chargeable to tax has escaped assessment on these two counts. Had this being the sold reason for issuing notice for reopening, we would have perhaps allowed the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a certificate. Mr. Patel further pointed out that it is only on the basis of the sample copy of the document that it was revealed that the assessee had executed two deeds, one relating to the sale of proportionate share of land at Rs. 10,00,000/- and the other relating to the construction cost at Rs. 32,00,000/-. Mr. Patel pointed out that the assessee declared his closing stock at Rs. 6,00,00,000/- on the basis of the valuation undertaken by the site supervisor and which resulted into under assessment of income by Rs. 1,61,00,000/- According to Mr. Patel, the case is not one of just change of opinion but, in fact, the declaration on the part of the assessee was in such a manner that the Assessing Officer could not have carried out the assessment in the manner it was shown. In such circumstances, referred to above, Mr. Patel prays that there being no merit in this writ application, the same be rejected. ANALYSIS 5. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned notice for reassessment under Section 148 of the Act should be quashed. 6. With ..... X X X X Extracts X X X X X X X X Extracts X X X X
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