9911796707
TMI Blog2019 (12) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law, the Ld.CIT(a) erred in ignoring the fact during the course of survey, assessee had admitted Rs. 15,16,44,927/- as income at the time of statement on oath recorded u/s. 131 of the I.T. Act, whereas the assessee has filed return of income on 23.09.2009 for A.Y.-2009-10 offering the net profit at Rs. 6,56,45,003/-. 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CU(a) erred in allowing additional ground of appeal without providing opportunity to the Assessing Officer to rebut the same. 5. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the A.O. be restored. 6. The appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary." 3. The issue raised in ground No.1 is against the order of Ld. CIT(A) allowing the appeal of the assessee on the jurisdictional issue. 4. The facts in brief are that the assessee filed the return of income on 23.09.2009 declaring an income of Rs. 6,69,31,103/- which was processed under section 143(1) of the Act. The assessee is engaged in the business of property development. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the senior audit officer on 12.06.2014 disposing of/settling the audit objections as the AO did not agree to any of the objections raised by the audit party. The Ld. A.R. submitted that the AO who disposed of the audit objections vide his letter dated 12.06.2014 issued notice under section 148 on 13.08.2014 on the basis of same audit objections which is a clear cut change of opinion. However, the objection raised by the assessee firm against the reopening of assessment was rejected by the AO on 20.01.2015 and went with the reassessment proceedings. The Ld. CIT(A) thus considering all these contentions of the assessee allowed the appeal of the assessee by observing and holding as under: "5.7. HELD: I have carefully considered the assessment order, re-assessment order, written submission of the appellant and assessment record called for during appellate proceedings. In my opinion there is substance in the above argument of the Appellant. It seems that reason to believe were recorded u/s 148 of the Act on 27.03.2014 and notice u/s 148 was issued on the same day. On perusal of assessment record, it is found that the case was reopened on the basis of audit objection. In the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as paid Rs. 95287549/- ( Rs. 65645003/- for A.Y. 2009-10 and Rs. 29642546/- for A.Y. 2010-11) as 50% profit from the project ( the details of 50% of share of profit of Rs. 29642546/- in A.Y. 201-12 was collected from the land owners return) passed on the land owner Mr. R.P. Vaviana. This 50% of the profit paid to the land owner has arisen from the project and the said share of profit has been paid to the land owner has arisen from the net profit passed on to the land owner therefore it was duty of the firm to pay the tax on it. As per the agreement also land cost and net profit explained separately. Hence this profit escapes the tax liability in the firm's hand. Without prejudiced to above it was also observed that during the survey, assessee firm has disclosed the profit from this project at Rs. 15.16 crores, whereas the income offered only Rs. 6.56 crores during the A. Y. 2009-10. In this regard, it is bring to your kind notice that a survey u/s. 133A of the Act was conducted at the premises of the assessee on 9/9/2009. In the year in reference the assessee has executed only one project at Juhu Tara Road. In the course of the survey, the survey party had prepared a profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said additional consideration will accrue in the year the OC is received. Since the OC was received this year and the project profit are assessable this year, the amount payable to Mr. Veviana is cost or a charge on the profits of assessee and in any event this amount will be diverted by an overriding title and hence the same would be deductible from the profits, arrived at in the course of survey. Mr. Veviana has also declared this amount as his income. In any event the same amount cannot be taxed in the hands of the assessee and this amount was rightly taxed in the hands of Mr. Vevaina and hence would be deductible in the hands of the assessee. 5. Add: Renovation charged recovered from Mr. Veviana not accounted by Survey party accounted by assessee. accounted by Survey party accounted by assessee. 1,64,70,000 6. Net Profit Declared by Assessee 6,56,45,003 At the time of the survey the audit of the accounts of the assessee had not been completed and the accounts had not been finalized. The return profit is based on audited accounts wherein all the aforesaid matters has been duly accounted for. During the course of assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of law is well-settled in respect of reopening of case u/s 147/148 of the Act. Under two situations the AO has the right to reopen a completed assessment. In the first situation, a completed assessment can be reopened either, if there was omission or failure on the part of the assessee to disclose fully and truly all material and relevant facts and the AO must have in his possession, before he issues notice, some material from which he can reasonably form a belief that there has been escapement of income due to some failure or omission on the part of the assessee to disclose fuily all relevant or material facts. In the second situation, the AO has the right under Explanation 2, sub-clause(c) of section 147 of the Act, which empowers the AO to reopen a completed assessment. The AO can resort to reopening under clause (c) of section 147 of the Act notwithstanding the fact that there was no omission or failure on the part of the assessee, either to make a return or to disclose fully and truly all material facts, but the AO in consequence of information in his possession subsequent to the first assessment, has reason to believe that income chargeable to tax has been under assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature, further necessary action in this case will be taken after carrying out necessary verification. A final reply wilt be sent to the audit in due course." 10.1. The perusal of the aforesaid paragraph would show that the AO himself found that the issue was debatable in nature. The requirement of law for reopening of the case is that the AQO should be in a position to form a belief about escapement of income. Although, it is true that at the stage of reopening, the belief need not be conclusive, but it is equally expected that the position of law should be clear in the mind of the AO, at least primafacie. The belief need not be conclusive but it should be firm and clear. No belief can be formed out of confusion and doubtful thoughts. If this kind of situation is allowed to be sustainable in law, then it is quite possible that there will be experiments by the revenue officials by reopening the case of any assessee at their whims and fancies and that too on the basis of doubts and suspicions and without complying with jurisdictional and other procedural requirements of law. The re-assessment proceedings are not meant to make fishing enquiries and to experiment with the legal iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned notice is not sustainable. In that view, the first condition precedent of reason to believe is that income chargeable to tax is escaped assessment being the primary requirement is not satisfied, the notice for reopening is without jurisdiction. 7. Mr. Malhotra, learned counsel for the Revenue, supports the appeal by stating that once an audit objection had been raised, then the AO is obliged to take remedial action as in this case, by issuing a reopening notice. This for the reason he states that otherwise the revenue due to the State would be lost even in case the audit objection is upheld. 8. We are unable to understand how the mandate of the Act requiring the AO to have reason to believe that income chargeable to tax has escaped assessment can be ignored on the altar of revenue collection. If such a submission is to be accepted, it would, be the beginning of the end of the Rule of Law." The aforesaid judgment is squarely applicable upon the facts of this case before us. Thus, we find that the "reasons" recorded by the AO were not in accordance with law." 5.9. Strength is also drawn from the case of Elecon Engineering Co Ltd vs. AC1T (Gujarat High Court)where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing issued u/s 148 of the Act was therefore, bad in law. Thus, the notice is not sustainable. The Grounds of appeal are allowed. 6. The Grounds of Appeal No.3 to 9 are not adjudicated as the reopening of assessment u/s 147 is itself held as invalid ab-initio. Hence, these grounds are dismissed for statistical purposes." 6. After hearing both the parties and perusing the material on record, we observe that in this case the AO has reopened the assessment on the basis of audit objections raised by the Department audit officer which were duly explained vide letter dated 16.08.2013 and 21.10.2013. Thereafter, the AO wrote a letter to senior audit officer on 12.06.2014 disposing/settling these objections. However, the AO again reopened the case of the assessee on the basis of same audit objection. The Ld. CIT(A) has passed a very reasoned and detailed order wherein it has been stated that AO himself has not accepted the audit objection and thus on the basis of same reason the AO could not have reason to believe that income has escaped assessment. The Ld. CIT(A) has held that AO has acted at the behest of the audit party without applying his own mind and thus quashed the assessment on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
