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2015 DIGILAW 137 (GUJ)

COMMISSIONER OF INCOME-TAX I v. AMAR QUARRY PVT.

2015-02-04

JAYANT PATEL, S.H.VORA

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ORDER JAYANT PATEL, J. 1. The Revenue has preferred the present appeal on the following questions of law, which reads as under: “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in quashing the re-assessment on the ground that the A.O. has reopened the assessment on the same material which were in the records during the course of the original assessment proceedings, without appreciating the fact and law that the assessee’s case is fully covered under section 147 of the Act and not the proviso to Section 147 of the Act since as per the provision of section 147 of the Act, only condition required to be fulfilled for reopening within four years from the end of the relevant assessment year is that the A.O. must have reason to believe that any income chargeable to tax escaped assessment?” 2. We have heard Mr. Parikh, learned counsel appearing for the appellant. 3. The short facts are that, for the assessment year 2004-2005, AO reopened the assessment already made in purported exercise of the power under section 147 read with section 143(3) of the Income-Tax Act (hereinafter referred to as the “Act”) and ultimately, reassessed the income at Rs. 1,32,70,744/- by disallowing the expenses of Rs.1,17,21,020/- 4. In appeal, CIT (Appeals) found that the reopening of the assessment under section 147 of the Act would not be justified and consequently, the whole action taken pursuant to such reopening cannot be sustained and the reassessment was held to be ab initio void and the appeal was allowed. In further appeal, being Appeal No. 1930/Ahd/2010, the Tribunal, has made the observations at paragraphs 6 to 6.1, which reads as under: “6. We have heard both the sides at some length. At the outset, it is worth to mention that the assessment record for the year under consideration has been produced before us. There was an ordersheet which had mentioned that the said reply dated 17.11.2006 was kept in a separate record. Therefore, the finding on facts about the existence of the reply of the assessee dated 17.11.2006 as recorded by learned CIT(A) appears to be correct. This reply was in compliance of a questionnaire dated 10.11.2006 issued by the AO, wherein one of the query was in respect of the payment made to subcontractors. The assessee has furnished the details of the subcontractor expenses. This reply was in compliance of a questionnaire dated 10.11.2006 issued by the AO, wherein one of the query was in respect of the payment made to subcontractors. The assessee has furnished the details of the subcontractor expenses. Even in the books of account, the assessee has furnished the details of "work expenses" which had included the payment made to subcontractors. Therefore, upto this extent facts have revealed that the preliminary information in respect of the "subcontractor expenses" were very much on record furnished along with Income Tax Return filed. It appears that on scrutiny of the accounts, AO had issued the said questionnaire dated 10.11.2006 and inquired about the payments made to subcontractors. That notice was complied with and a list was furnished. At this point of time, during the argument, learned DR has contested that the assessee had defaulted in not furnishing the names and addresses of the subcontractors and the AO was prevented to know the correct facts. According to learned DR, it was a deliberate attempt on the part of the assessee not to disclose the full facts. However, we are not in agreement with the said argument of learned DR. As we have noted, the basic information was very much available with the AO. The onus was on the AO to further investigate. Now during the course of Appellate Proceedings, we cannot judge that how all accounts and related evidences were examined by the AO during the assessment proceedings. The only thing we can judge is that the basic information was available on record before him and on the scrutiny of the same the AO had not made any disallowance. Therefore, considering the facts of this case we can say that the possibility of forming an opinion about the expenditure claimed by the assessee could not be ruled out. For this legal proposition that the AO is not entitled to change the opinion even after the reopening has been done within four years, few case laws have been cited, as listed above. This issue is covered by an order of Gujarat High Court pronounced in the case of Gujarat Power Corporation Ltd., 350 ITR 266 (Gujarat). 6.1 In addition to the above, an important feature for reopening has also been noted by us that the reasons recorded were vague rather presumptive. This issue is covered by an order of Gujarat High Court pronounced in the case of Gujarat Power Corporation Ltd., 350 ITR 266 (Gujarat). 6.1 In addition to the above, an important feature for reopening has also been noted by us that the reasons recorded were vague rather presumptive. It was a presumption, "very often subcontractors are used as front men to reduce the income as the work was entrusted to them was also normally carried out by the assessee and such payments revert back to the assessee." There was no evidence in possession of the AO that the assessee in fact was involved in such practice. After having that presumption, next, the AO has not mentioned the exact escapement of income but wanted to examine the genuineness of payment. The AO had reason to believe that to verify the identity of subcontractors and genuineness of the work, examination is required. It was not the reason to believe that an income had escaped assessment but he has reason to believe that an examination is required. There should be a definite reason so as to form a belief that some income had escaped assessment. Then only reopening is permissible. We, therefore, hold, after perusing the reasons recorded for reopening, that the same was presumptive in nature and proceeded merely to further investigate the case on the point on which an inquiry had already conducted by the AO during the course of original assessment order. Such an action of reopening cannot be approved, hence, we hereby confirm the finding of learned CIT(A) and dismiss this ground of the Revenue.” Ultimately, the Tribunal dismissed the appeal. Under the circumstances, the present appeal before this Court. 5. As such, the aforesaid reasoning of the Tribunal shows that the Tribunal having considered the record, has found that when the earlier assessment was made before the AO, one of the query was in respect to the payment made to the subcontractor and the assessee had furnished all details. In this manner, all preliminary informations were already there on record. The Tribunal also found that the possibility of forming an opinion about the expenditure claimed by assessee could not be ruled out at the time when the earlier assessment was made and therefore, thereafter, the AO is not entitled to change the opinion and thereby again reopen the assessment within the period of four years. The Tribunal also found that the possibility of forming an opinion about the expenditure claimed by assessee could not be ruled out at the time when the earlier assessment was made and therefore, thereafter, the AO is not entitled to change the opinion and thereby again reopen the assessment within the period of four years. The Tribunal has relied upon the decision of this Court in the case of Gujarat Power Corporation Ltd. reported at 350 ITR 266 (Guj). It further appears that the Tribunal, on facts found that the reasons recorded were vague and rather presumptive and there was no formation of the belief that some income had escaped assessment. Under the circumstances, the Tribunal has dismissed the appeal of the Revenue. 6. In our view, on the aspect as to whether there was sufficient material before the AO in the earlier assessment and whether there was valid ground for reopening of the assessment can be concluded only if all relevant materials are considered and thereafter, the said ground can be answered. CIT (Appeals) as well as the Tribunal, both, after perusing the record, has found that there was no justification for reopening of the assessment and consequently, has quashed all subsequent proceedings. 7. As such, if the record is to be considered and the conclusion is to be arrived at for justification, it would be a finding of fact, but even otherwise also, as referred to by the Tribunal, the issue is already covered by the decision of this Court in the case of Gujarat Power Corporation Ltd. (supra). 8. Under the circumstances, we do not find that any substantial question of law would arise for consideration in the present appeal as canvassed. 9. Hence, the appeal is meritless. Therefore, dismissed.