M/s SPR Infrastructure (India) Limited, Hyderabad V. ACIT,Central Circle-3(2), Hyderabad

ITA 1174/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82550 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Depreciation; Tangible material; Difference of opinion; Assessment record; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 133A; 139(5); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1173 & 1174/HYD/2014 ASSESSMENT YEAR 2007-2008 & 2008-2009 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD PAN AACCD4913G VS. ACIT, CIRCLE 3(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. MURALI MOHAN RAO FOR REVENUE : MR. D. SUDHAKAR RAO DATE OF HEARING : 21.10.2014 DATE OF PRONOUNCEMENT : 03 .12.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE TWO ARE ASSESSEES APPEALS AGAINST THE COMMON ORDER OF LD. CIT(A)-IV, HYDERABAD CONFIRMING ORDERS OF A.O. ASSESSEE HAS RAISED 12 GROUNDS IN A.Y. 2007 -08 AND 13 GROUNDS IN A.Y. 2008-09. 2. BRIEFLY STATED, ASSESSEE IS A COMPANY AND FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 02.11.2007 DEC LARING TOTAL INCOME OF RS.6,48,27,000. FOR A.Y. 2008-09 IT FILED RETURN OF INCOME ON 30.09.2008 (WRONGLY STATED AS 30.08.20 10 IN THE ORDER OF LD. CIT(A)), ACKNOWLEDGED BY I.T. DEPARTME NT ON 07.10.2009 AS PER PAGE 36 OF THE PAPER BOOK, DECLAR ING TOTAL INCOME OF RS.1,33,68,000. THERE WERE SURVEY OPERATI ONS UNDER SECTION 133A IN ASSESSEES BUSINESS PREMISES ON 20. 07.2011. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT ASSE SSEE HAS NO 2 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. BILLS OR VOUCHERS FOR THE EXPENDITURE CLAIMED IN TH E RETURNS OF INCOME. SIMILARLY, FROM THE BANK STATEMENT FOUND DU RING THE SURVEY AND ALSO OBTAINED POST SURVEY, IT WAS FOUND THAT ASSESSEE HAD RECEIVED HUGE AMOUNTS FROM M/S. GLOBAL CITY PROJECTS P. LTD., NOW KNOWN AS NEW GLOBAL CITY PROJ ECTS P. LTD(NCCPL). ENQUIRIES WERE MADE FROM THE SAID COMPA NY AND A STATEMENT OF THE DIRECTOR MR. PRASAD V. POTLURI W AS RECORDED. CONSEQUENT TO THE ABOVE FINDINGS, A.O. HAS ISSUED N OTICE UNDER SECTION 148 BY INITIATING PROCEEDINGS UNDER S ECTION 147 AND SERVED NOTICES ON 20.09.2011. IN RESPONSE, ASSE SSEE FILED LETTERS ON 15.11.2011 REQUESTING TO TREAT THE RETUR NS FILED ORIGINALLY AS RETURNS FILED IN RESPONSE TO THE NOTI CE ISSUED UNDER SECTION 148. THE REASONS FOR ISSUANCE OF NOTI CE UNDER SECTION 148 WERE COMMUNICATED BY LETTER DATED 16.11 .2011 AND THEREAFTER, NOTICE UNDER SECTION 143(2) AND 142 (1) HAVE BEEN ISSUED. IT WAS THE ASSESSING OFFICERS CONTENT ION THAT ASSESSEE HAS RECEIVED VARIOUS AMOUNTS FROM THE SAID COMPANY TOWARDS LAND DEVELOPMENT COST AND WITHOUT DOING ANY LAND DEVELOPMENT COST, ASSESSEE HAS RECEIVED THE ENTIRE AMOUNT AND UTILIZED FOR FURTHER INVESTING IN VARIOUS OTHER GRO UP CONCERNS. ACCORDINGLY, A.O. WAS OF THE OPINION THAT THE TOTAL RECEIPTS OF RS . 99,65,65,250 FOR A.Y. 2007-08 AND RS.54,77,75,359 F OR A.Y. 2008-09 ARE ASSESSEES INCOME. IN ARRIVING AT THAT , A.O. HAS NOTED STATEMENT RECORDED FROM MR. PRASAD V. POTLURI AND ALSO VARIOUS AMOUNTS OF INFLOW AND OUTFLOW IN ASSESSEES ING VYSYA BANK AND THEREAFTER, GIVING DUE OPPORTUNITY TO ASSE SSEE, THE GROSS RECEIPTS FROM NCCPL WERE BROUGHT TO TAX. 3. BEFORE THE LD. CIT(A), ASSESSEE CONTESTED THAT INITIATION OF PROCEEDINGS UNDER SECTION 147 WERE NO T CORRECT AND IT WAS ONLY CHANGE OF OPINION BY A.O. AS THE OR IGINAL 3 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. RETURNS WERE ACCEPTED. THIS CONTENTION OF ASSESSEE WERE REJECTED BY LD. CIT(A) BY STATING AS UNDER : 7.6. THE NOTICE U/S 148 WAS ISSUED FOLLOWING A SURVEY AT THE APPELLANT'S BUSINESS PREMISES ON 20.07.2011 IN WHICH IT WAS NOTICED THAT THERE WERE NO BILLS OR VOUCHERS CLAIMED BY THE APPELLANT IN IT S RETURNS. THE ASSESSING OFFICER HAD ALSO RECORDED A STATEMENT FROM SRI PRASAD V. POTLURI, DIRECTOR OF NCC, WHO HAD CONFIRMED THAT THE APPELLANT HAD NOT CARRIE D OUT ANY OF THE WORKS FOR WHICH THE PAYMENT HAD BEEN MADE AND FOR WHICH THE EXPENDITURE HAD OSTENSIVELY BEEN CLAIMED BY THE APPELLANT. THUS, THERE WAS MORE THAN ADEQUATE TANGIBLE MATERIAL FOR ASSESSING OFFICER'S BELIEF THAT INCOME HAD ESCAPED ASSESSMENT NECESSITATING ACTION U/S 147. 7.7. IN ITS DECISION IN THE CASE OF GKN DRIVESHAFTS INDIA LTD V ITO 259 ITR 19 (SC), THE SUPREME COURT HAD LAID DOWN THE PROCEDURE TO BE FOLLOWED ON ISSUE OF NOTICE U/S 148. INTER ALIA, THE COURT DIRECTED THAT THE ASSESSING OFFICER SHOULD PASS A SPEAKING ORDER ON THE OBJECTIONS OF ASSESSEE TO THE ISSUE OF NOTICE, BEFORE PROCEEDING WITH THE ASSESSMENT. THER E IS NO REFERENCE IN THE ASSESSMENT ORDER TO THE OBJECTIONS CLAIMED TO HAVE BEEN RAISED BY THE APPELLANT TO THE ISSUE OF NOTICE U/S 148. IN ORDER TO ASCERTAIN WHETHER THE APPELLANT HAD MADE ANY OBJECTIONS TO THE ISSUE OF NOTICE U/S 148, THE ASSESSMENT RECORDS WERE CALLED FOR AND PERUSED. A PERUSAL OF THE ASSESSMENT RECORDS SHOWS THAT THOUGHT THE APPELLANT SOUGHT AND WAS PROVIDED THE REASONS RECORDED FOR ISSUE OF NOTICE U/S 148, IT DI D NOT OBJECT TO THE ISSUE OF THE NOTICE. IN THE ABSEN CE OF ANY OBJECTION FROM THE APPELLANT, THERE WAS OBVIOUS LY NO OCCASION FOR THE ASSESSING OFFICER TO PASS ANY ORDER, SPEAKING OR OTHERWISE, DEALING WITH THE OBJECTIONS. 7.8 THE APPELLANT HAS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAD FAILED TO COMPLY WITH THE PROVISIONS OF SEC.151. SEC.151(1) APPLIES TO A SITUATION WHERE THE ORIGINAL ASSESSMENT HAD BEEN MADE U/S 143(3) OR U/S 147. IN THE APPELLANT'S CASE , THE RETURNS HAD MERELY BEEN PROCESSED U/S 143(1) BEFORE ISSUE OF NOTICE U/S 148 RESULTING IN THE PRE SENT 4 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. PROCEEDINGS. SEC.151(1) IS, THEREFORE, NOT RELEVANT TO THE FACTS IN THE APPELLANT'S CASE. 7.9. SEC.151(2) APPLIES IN A SITUATION WHERE THE NOTICE U/S 148 IS ISSUED MORE THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IN THE APPELLANT'S CASE, THE NOTICES FOR BOTH THE YEARS WE RE ISSUED WELL BEFORE THIS PERIOD OF 4 YEARS. SEC.151( 2) IS, THEREFORE, NOT RELEVANT TO THE FACTS IN THE APPELLANT'S CASE EITHER. 7.10 IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT ALL T HE GROUNDS (PARTICULARLY THE ADDITIONAL GROUNDS) FILED BY THE APPELLANT ARE FRIVOLOUS AND HAVE NO BASIS IN FACTS. THE APPEAL IS DISMISSED ON THE ISSUE OF VALIDITY OF THE NOTICE U/S 148 AND THE PROCEEDINGS U/S 147. 4. ANOTHER GROUND RAISED BEFORE LD. CIT(A) WAS NON - PROVIDING COPY OF STATEMENT OF MR. PRASAD V. POTLUR I. LD. CIT(A) DIRECTED THE A.O. TO PROVIDE COPY TO ASSESSEE AND O PPORTUNITY TO ASSESSEE TO MAKE ITS SUBMISSIONS. LD. CIT(A) REC ORDS THAT ASSESSEE HAS NO SUBMISSIONS TO MAKE AND THE GRIEVAN CE OF ASSESSEE HAS BEEN REDRESSED. 5. NEXT OBJECTION RAISED BY ASSESSEE WAS THAT ASSESSEES REVISED RETURNS FILED ON 12.02.2013 ARE TO BE TREATED AS VALID RETURNS. IT WAS ASSESSEES CONTENTION THAT SINCE PROCEEDINGS UNDER SECTION 148 WERE INITIATED, ASSES SEE CAN VALIDLY REVISE THE RETURNS AND RELIED ON VARIOUS CA SE LAW. LD. CIT(A), HOWEVER, REJECTED THESE CONTENTIONS BY STAT ING AS UNDER: 9.9. THE AR HAS SOUGHT TO ARGUE THAT A RETURN FILED IN RESPONSE TO A NOTICE U/S 148 IS TO BE TREA TED AS A RETURN REQUIRED TO BE FURNISHED U/S 139 AND CONSEQUENTLY, THE APPELLANT WAS ENTITLED, ALL OVER AGAIN, TO REVISE ITS RETURNS OF INCOME. I DO NOT AG REE WITH THIS VIEW OF THE AR FOR REASONS DISCUSSED BELO W. FIRSTLY, AS HELD IN THE CASE OF CIT V SUN ENGG WORKS LTD 198 ITR 297 (SC), PROCEEDINGS U/S 147 ARE FOR 5 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. THE BENEFIT OF THE REVENUE AND NOT FOR THE BENEFIT OF ASSESSEE. THE MERE FACT OF ISSUE OF NOTICE U/S 148 IS NOT MEANT TO GIVE A FRESH LEASE OF LIFE TO ASSESSEE AND ENABLE IT TO RESORT TO ALL THE BENEVOLENT PROVI SIONS OF THE ACT FOR ITS BENEFIT. THE DEEMING PROVISIONS OF SEC.148(1), DEEMING A RETURN FILED UNDER IT TO BE A RETURN FILED U/S 139, DO NOT ENTITLE THE APPELLANT TO INVOKE SEC.139(5). 9.10. FURTHER, AS POINTED OUT BY THE ADD\. CIT IN HIS LETTER, THE TIME LIMIT FOR FILING A RETURN U /S 139(5) IS WITHIN TWO YEARS OF THE END OF THE ASSESSMENT YEAR OR THE COMPLETION OF ASSESSMENT, WHICHEVER IS EARLIER. WHILE THE COMPLETION OF ASSESSMENT IS A VARIABLE, THE PERIOD DEFINED BY THE END OF TWO TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IS NOT. THE CLAUSE, WHICHEVER IS EARLIER, EMPHASISES THAT THE APPELLANT CANNOT TURN THE PROVISIONS OF SEC.139(5) INTO AN OPEN-ENDED BENEFIT . THE PERIOD ENDING WITH THE END OF TWO YEARS FROM TH E END OF THE ASSESSMENT YEAR HAD INDISPUTABLY ENDED ON 31.3.2010 FOR AY 2007-08 AND ON 31.3.2011 FOR AY 2008-09 AND THEREFORE, THE BENEFIT OF SEC.139(5) WAS NO LONGER AVAILABLE TO IT ON 12.03.2013 FOR EIT HER OF THE TWO YEARS. 9.11. EVEN IF IT WERE TO BE PRESUMED THAT THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 WAS EQUIVALENT TO ONE FILED U/S 139, SUCH A RETURN WOUL D BE SUBJECT TO ALL THE CONDITIONS LAID DOWN U/S 139( 5). THE BENEFIT OF SEC.139(5) IS AVAILABLE ONLY TO A RE TURN FILED U/S 39(1) AND NOT TO A BELATED RETURN U/S 139 (4). THE APPELLANT DID NOT FILE THE RETURN IN RESPONSE T O THE NOTICE U/S 148 WITHIN THE TIME OF 30 DAYS ALLOWED TO IT AND THE BELATED LETTER FILED BY IT, DEEMING THE ORIGINAL RETURN FILED AS ONE FILED U/S 148, WOULD AT BEST QUALIFY THE APPELLANT TO THE BENEFITS OF SEC.139(4), NOT OF SEC.139(5). 9.12. IT IS, THEREFORE, HELD THAT THE REVISED RETURNS FILED ON 12.03.2013 FOR THE TWO YEARS WERE NOT VALID RETURNS AND THE ASSESSING OFFICER WAS JUSTIFIED IN IGNORING THEM FOR THE PURPOSE OF MAKIN G THE ASSESSMENT. 6 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. 6. ASSESSEE FURTHER CONTENDED THAT IT HAS FILED RE VISED AUDIT REPORT AND ACCORDINGLY, THE INCOMES AS DECLAR ED IN THE REVISED AUDIT REPORT SHOULD BE CONSIDERED. HOWEVER, THIS CONTENTIONS OF ASSESSEE WAS ALSO REJECTED BY LD. CI T(A) VIDE PARAS 10.2 TO 10.4. 7. NOW COMING TO THE MERITS OF THE ADDITIO NS MADE BY A.O., LD. CIT(A) WAS OF THE OPINION THAT SINCE ASSE SSEE HAS NOT CARRIED OUT ANY DEVELOPMENT ACTIVITY, THE ENTIRE RE CEIPTS RECEIVED BY ASSESSEE ARE REVENUE RECEIPTS AND ARE T AXABLE ACCORDINGLY. LD. CIT(A) FINAL FINDINGS ARE AS UNDER : 11.4. INDEED, IT IS INTERESTING TO NOTE THAT THOUGH NCC WAS AWARE OF THE LACK OF ANY DEVELOPMENT ACTIVITY HAVING ACTUALLY BEEN CARRIED O UT BY THE APPELLANT AT LEAST IN JULY 2012 WHEN THE STATEMENT OF ITS MANAGING DIRECTOR WAS RECORDED BY THE ASSESSING OFFICER, IT HAS FAILED TO TAKE ANY LE GAL ACTION FOR RECOVERY OF THE AMOUNT EVEN TILL MARCH, 2014, I.E. MORE THAN A YEAR AND HALF LATER. 11.5. TO CONCLUDE, I HOLD THAT A. THE REVISED FILED BY THE APPELLANT WERE NOT VALID AND NO COGNISANCE CAN BE TAKEN OF THESE RETURNS. B. THE REVISION OF ACCOUNTS CARRIED ON BY THE APPELLANT WAS NOT VALID AND NO COGNISANCE CAN BE TAKEN OF THE REVISED AUDITED RESULTS. C. THE RECEIPTS FROM NCC WERE IN THE NATURE OF REVENUE RECEIPTS AND LIABLE TO TAX. 11.6. SINCE IT IS UNDISPUTED THAT THE APPELLANT DID NOT CARRY OUT ANY OF THE DEVELOPMENTAL WORKS AN D THAT IT HAD ADMITTEDLY NOT INCURRED ANY EXPENSES FO R EARNING THIS INCOME, I HOLD THAT THE ASSESSING OFFICER HAD CORRECTLY BROUGHT THE ENTIRE RECEIPTS O F RS.47,15,18,833 FOR AY 2008-09 AND RS.99,65,65,250 FOR AY 2007-08 TO TAX AS INCOME OF THE APPELLANT. 7 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. 8. CONTESTING THE ABOVE FINDINGS OF LD. CIT(A), LD . COUNSEL SUBMITS THAT INITIATION OF PROCEEDINGS ARE NOT CORRECT. FURTHER, IT WAS ALSO CONTENTION THAT ASSESSEE HAS R ECEIVED FUNDS AND IN TURN, PAID THE FUNDS TO VARIOUS PEOPLE AND SO CONSIDERING THAT FACT OTHER COMPANY TREATED THE AMO UNT AS ADVANCE OF PURCHASE OF PROPERTY, ASSESSEE HAS REVIS ED THE COMPANY ACCOUNTS AND FILED REVISED BALANCE SHEET AN D P & L ACCOUNTS WITHDRAWING THE INCOMES. THEREFORE, THE RE VISED FINANCIALS ADOPTED BY COMPANY SHOULD BE CONSIDERED FOR RE- ASSESSMENT PROCEEDINGS. IN SUPPORT ASSESSEE ALSO PL ACED ON RECORD, THE ANNUAL REPORTS OF NEW CYBERABAD CITY PR OJECT P. LTD., FOR THE YEAR ENDING 30.03.2007 AND 30.03.2008 . LD. COUNSEL ALSO RELIED ON MCA CIRCULAR NO.1/2003 17/75 /2002- CLV DATED 13.01.2003 TO SUPPORT THE CONTENTION THAT ASSESSEE IS COMPETENT TO REVISE THE ACCOUNTS. WITH REFERENCE TO MERITS OF THE ADDITION MADE BY A.O. IT WAS SUBMITTED THAT ASS ESSEE DID ENTER INTO AGREEMENT WITH M/S. NEW CYBERABAD CITY P ROJECTS P. LTD., FOR THE PURPOSE OF DEVELOPMENT OF PROJECT AND FUNDS HAVE COME AND GONE AND IT WAS THE INTENTION OF ASSESSEE TO ENTER INTO REAL ESTATE TRANSACTIONS. BUT SINCE THERE WERE DISPUTES REGARDING PROJECT AND THE AREA, NOTHING HAS MATERIA LIZED AND SO ASSESSEE HAS REVISED THE ACCOUNTS AND THERE WERE NO INCOMES. IT WAS THE SUBMISSION THAT REVISED INCOME SHOULD BE CONSIDERED IN RE-ASSESSMENT PROCEEDINGS. 9. IN REPLY, LD. D.R. SUBMITTED THAT ASSESSEE HAS ORIGINALLY OFFERED GROSS PROFIT ON CONTRACT RECEIPT S AND OFFERED INCOME. A.O. FOUND OUT IN THE SURVEY PROCEEDINGS TH AT NO EXPENDITURE AS CLAIMED IN THE P & L ACCOUNT, WAS IN CURRED BY ASSESSEE AND ACCORDINGLY, THE RECEIPTS WERE BROUGHT TO TAX CORRECTLY. IT WAS, HOWEVER, FOR ASSESSEE TO SUBSTAN TIATE THE 8 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. EXPENDITURE CLAIMED. CONSIDERING THE STATEMENT OF M R. PRASAD V. POTLURI IT CAN BE STATED THAT ASSESSEE HAS ENTER ED INTO TRANSACTIONS AND ISSUED BOGUS EXPENDITURE BILLS. TH EREFORE, THE GROSS RECEIPTS ARE TAXABLE AS ASSESSEE HAS SHOWN AM OUNTS AS REVENUE RECEIPTS IN THE P & L ACCOUNT. 10. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE CONTENTIONS AND DOCUMENTS PLACED ON RECORD. THERE I S NO DISPUTE THAT ASSESSEE HAS INITIALLY SHOWN RECEIPTS AS REVENUE RECEIPTS AND CLAIMED VARIOUS EXPENSES AND DECLARIN G INCOMES IN THE P & L ACCOUNT. THE RETURNS WERE ALSO FILED A CCORDINGLY. THE SAME WERE ALSO PROCESSED. CONSEQUENT TO THE SUR VEY PROCEEDINGS, A.O. FOUND THAT THE EXPENDITURE ENTRIE S MADE IN THE BOOKS OF ACCOUNTS ARE NOT GENUINE AND ACCORDING LY, HE BROUGHT TO TAX ENTIRE RECEIPTS AS SHOWN IN THE P & L ACCOUNT AS INCOME OF ASSESSEE. IN THE RE-ASSESSMENT PROCEED INGS AFTER THE NOTICE UNDER SECTION 148 WAS ISSUED, ASSESSEE R EVISED ITS ACCOUNTS AND CLAIMED THAT NO INCOME HAS ACCRUED TO IT OR LOSS SHOULD BE ASSESSED. 11. AS FAR AS RE-OPENING OF ASSESSMENTS ARE CONCERNED, WE SUPPORT THE ORDERS OF LD. CIT(A) ON T HE ISSUE AS A.O. HAS REASON TO BELIEVE THAT INCOMES HAVE ESCAPE D AT THAT POINT OF TIME. AO DID NOT FIND ANY EXPENDITURE VOUC HERS IN ASSESSEES PREMISES DURING SURVEY PROCEEDINGS AND S O, HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. THUS HE HAS VALIDLY INITIATED PROCEEDINGS UNDER SECTION 147. AS NO ASSESSMENT UNDER SECTION 143(3) WAS ORIGINALLY DONE AND ONLY RETURNS WERE ACCEPTED UNDER SECTION 143(1), FOLLOWI NG THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN TH E CASE OF RAJESH JHAVERI STOCK BROKERS LTD 291 ITR 500(SC), T HE INTIMATION UNDER SECTION 143(1) CANNOT BE TREATED A S ORDER OF 9 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. ASSESSMENT. PRIOR TO 01.04.1989, A.O. HAD TO PASS A N ASSESSMENT ORDER IF HE DECIDES TO ACCEPT THE RETURN BUT NOW AMENDED PROVISIONS, REQUIREMENT OF PASSING THE ORDE R HAS BEEN DISPENSED WITH AND INSTEAD ONLY INTIMATION IS REQUIRED TO SENT. AS THERE IS NO ASSESSMENT U/S 143(3), THE QUE STION OF CHANGE OF OPINION DOES NOT ARISE. FURTHER, WHAT IS REQUIRED AT THE TIME OF ISSUEANCE OF NOTICE UNDER SECTION 147 I S REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT, BUT NOT THE ESTABLISHED ACT OF ESCAPEMENT OF INCOME. IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT, WE ARE OF THE OP INION THAT ASSESSEES CONTENTIONS ON REOPENING ARE NOT VALID A ND ACCORDINGLY, THEY ARE REJECTED. 12. COMING TO THE MERITS OF THE ISSUE INCLUDING FI LING OF REVISED RETURNS WITH REVISED AUDITED ACCOUNTS, W E ARE OF THE OPINION THAT ASSESSEES ACTION CANNOT BE SUPPORTED IN THE LIGHT OF THE FACT THAT PROCEEDINGS ARE UNDER SECTION 147. THE HONBLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS LTD., 198 ITR 297 IT WAS HELD THAT PROCEEDINGS UNDER SECTION 147 ARE FOR THE BENEFIT OF REVENUE AND NOT FOR THE BENEFIT OF A SSESSEE. SINCE, ASSESSEE HAS OFFERED INCOMES ORIGINALLY WHIC H WERE ACCEPTED, THE PROCEEDINGS BEING INITIATED ARE ONLY TO ADD SOME MORE TO THE ORIGINALLY ADMITTED INCOMES. THEREFORE, ON THAT CONTEXT, THE REVISED RETURNS AND REVISED AUDIT REPO RTS CANNOT BE CONSIDERED. THE HONBLE SUPREME COURT ORDER IN T HE ABOVE REFERRED CASE HAS HELD AS UNDER : HELD UNDER S. 147, THE ASSESSING OFFICER HAS BEEN VESTE D WITH THE POWER TO 'ASSESS OR REASSESS' THE ESCAPED INCOM E OF AN ASSESSEE. THE USE OF THE EXPRESSION 'ASSESS OR REASSESS SUCH INCOME OR RECOMPUTE THE LOSS OR DEPRECIATION ALLOWANCE' IN S. 147 AFTER THE CONDITI ONS FOR 10 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. REASSESSMENT ARE SATISFIED, IS ONLY RELATABLE TO TH E PRECEDING EXPRESSION IN CLS. (A) AND (B), VIZ., 'ES CAPED ASSESSMENT'. THE TERM 'ESCAPED ASSESSMENT' INCLUDES BOTH 'NON-ASSESSMENT' AS WELL AS 'UNDERASSESSMENT'. INCOME IS SAID TO HAVE 'ESCAPED ASSESSMENT' WITHIN THE MEANING OF THIS SECTION WHEN IT HAS NOT BEEN CHARGE D IN THE HANDS OF AN ASSESSEE IN THE RELEVANT YEAR OF ASSESSMENT. THE EXPRESSION 'ASSESS' REFERS TO A SIT UATION WHERE THE ASSESSMENT OF ASSESSEE FOR A PARTICULAR Y EAR IS, FOR THE FIRST TIME, MADE BY RESORTING TO THE PR OVISIONS OF S. 147 BECAUSE THE ASSESSMENT HAD NOT BEEN MADE IN THE REGULAR MANNER UNDER THE ACT. THE EXPRESSION 'REASS ESS' REFERS TO A SITUATION WHERE AN ASSESSMENT HAS ALREA DY BEEN MADE BUT THE ITO HAS, ON THE BASIS OF INFORMAT ION IN HIS POSSESSION, REASON TO BELIEVE THAT THERE HAS BE EN UNDERASSESSMENT ON ACCOUNT OF THE EXISTENCE OF ANY OF THE GROUNDS CONTEMPLATED BY THE PROVISIONS OF S. 147(B) R/W THE EXPLAN. 1 THERETO. (PARA 7) THE PRINCIPLE LAID DOWN IN V. JAGANMOHAN RAO'S CASE (1970) 75 ITR 373 (SC) : TC51R.313 IS ONLY TO THE E XTENT THAT ONCE AN ASSESSMENT IS VALIDLY REOPENED BY ISSU ANCE OF NOTICE THE PREVIOUS UNDERASSESSMENT IS SET ASIDE AND THE ITO HAS THE JURISDICTION AND DUTY TO LEVY TAX O N THE ENTIRE INCOME THAT HAD ESCAPED ASESSMENT DURING THE PREVIOUS YEAR. WHAT IS SET ASIDE IS, ONLY THE PREVI OUS UNDERASSESSMENT AND NOT THE ORIGINAL ASSESSMENT PROCEEDING. AN ORDER MADE IN RELATION TO THE ESCAPE D TURNOVER DOES NOT AFFECT THE OPERATIVE FORCE OF THE ORIGINAL ASSESSMENT, PARTICULARLY IF IT HAS ACQUIRED FINALIT Y, AND THE ORIGINAL ORDER RETAINS BOTH ITS CHARACTER AND I DENTITY. IT IS ONLY IN CASES OF 'UNDERASSESSMENT' BASED ON CLS. (A) TO (D) OF EXPLN. 1 TO S. 147, THAT THE ASSESSMENT OF T AX DUE HAS TO BE RECOMPUTED ON THE ENTIRE TAXABLE INCOME. THE JUDGMENT IN JAGANMOHAN RAO'S CASE, THEREFORE, CANNO T BE READ TO IMPLY AS LAYING DOWN THAT IN THE REASSESSME NT PROCEEDINGS VALIDLY INITIATED, ASSESSEE CAN SEEK REOPENING OF THE WHOLE ASSESSMENT AND CLAIM CREDIT IN RESPECT OF ITEMS FINALLY CONCLUDED IN THE ORIGINAL ASSESSMENT. ASSESSEE CANNOT CLAIM RE-COMPUTATION OF THE INCOME OR REDOING OF AN ASSESSMENT AND BE ALLOWED A CLAIM WHICH HE EITHER FAILED TO MAKE OR WHICH WAS OTHERWISE REJECTED AT THE TIME OF ORIGINAL ASSESSME NT WHICH HAS SINCE ACQUIRED FINALITY. OF COURSE, IN TH E REASSESSMENT PROCEEDINGS IT IS OPEN TO AN ASSESSEE TO SHOW THAT THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT HAS IN TRUTH AND IN FACT NOT ESCAPED 11 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. ASSESSMENT BUT THAT THE SAME HAD BEEN SHOWN UNDER SOME INAPPROPRIATE HEAD IN THE ORIGINAL RETURN. (PA RA 25) ALTHOUGH, S. 147 IS PART OF A TAXING STATUTE, IT IM POSES NO CHARGE ON THE SUBJECT BUT DEALS MERELY WITH THE MACHINERY OF ASSESSMENT AND IN INTERPRETING A PROVI SION OF THAT KIND, THE RULE IS THAT CONSTRUCTION SHOULD BE PREFERRED WHICH MAKES THE MACHINERY WORKABLE. SINCE THE PROCEEDINGS UNDER S. 147 ARE FOR THE BENEFIT OF THE REVENUE AND NOT AN ASSESSEE AND ARE AIMED AT GARNER ING THE ESCAPED INCOME' OF AN ASSESSEE, THE SAME CANNO T BE ALLOWED TO BE CONVERTED AS REVISIONAL' OR REVIEW' PROCEEDINGS AT THE INSTANCE OF ASSESSEE, THEREBY MA KING THE MACHINERY UNWORKABLE. THUS IN PROCEEDINGS UNDER S. 147 THE ITO MAY BRING TO CHARGE ITEMS OF INCOME WHI CH HAD ESCAPED ASSESSMENT OTHER THAN OR IN ADDITION TO THAT ITEM OR ITEMS WHICH HAVE LED TO THE ISSUANCE OF NOT ICE UNDER S. 148 AND WHERE REASSESSMENT IS MADE UNDER S . 147 IN RESPECT OF INCOME WHICH HAS ESCAPED TAX, THE ITO'S JURISDICTION IS CONFINED TO ONLY SUCH INCOME WHICH HAS ESCAPED TAX OR HAS BEEN UNDER ASSESSED AND DOES NOT EXTEND TO REVISING, REOPENING OR RECONSIDERING THE WHOLE ASSESSMENT OR PERMITTING ASSESSEE TO REAGITATE QUES TIONS WHICH HAD BEEN DECIDED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IT IS ONLY THE UNDERASSESSMENT WHICH I S SET ASIDE AND NOT THE ENTIRE ASSESSMENT WHEN REASSESSME NT PROCEEDINGS ARE INITIATED. THE ITO CANNOT MAKE AN O RDER OF REASSESSMENT INCONSISTENT WITH THE ORIGINAL ORDE R OF ASSESSMENT IN RESPECT OF MATTERS WHICH ARE NOT THE SUBJECT-MATTER OF PROCEEDINGS UNDER S. 147. AN ASSE SSEE CANNOT RESIST VALIDLY INITIATED REASSESSMENT PROCEE DINGS UNDER THIS SECTION MERELY BY SHOWING THAT OTHER INC OME WHICH HAD BEEN ASSESED ORIGINALLY WAS AT TOO HIGH A FIGURE EXCEPT IN CASES UNDER S. 152(2). THE WORDS SUCH INCOME' IN S. 147 CLEARLY REFER TO THE INCOME WHICH IS CHARGEABLE TO TAX BUT HAS 'ESCAPED ASSESSMENT' AND THE ITO'S JURISDICTION UNDER THE SECTION IS CONFINED ON LY TO SUCH INCOME WHICH HAS ESCAPED ASSESSMENT. IT DOES N OT EXTEND TO RECONSIDERING GENERALLY THE CONCLUDED EAR LIER ASSESSMENT. CLAIMS WHICH HAVE BEEN DISALLOWED IN TH E ORIGINAL ASSESSMENT PROCEEDING CANNOT BE PERMITTED TO BE RE-AGITATED ON THE ASSESSMENT BEING REOPENED FOR BR INGING TO TAX CERTAIN INCOME WHICH HAD ESCAPED ASSESSMENT BECAUSE THE CONTROVERSY ON REASSESSMENT IS CONFINED TO MATTERS WHICH ARE RELEVANT ONLY IN RESPECT OF THE I NCOME WHICH HAD NOT BEEN BROUGHT TO TAX DURING THE COURSE OF THE ORIGINAL ASSESSMENT. A MATTER NOT AGITATED IN T HE 12 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. CONCLUDED ORIGINAL ASSESSMENT PROCEEDINGS ALSO CANN OT BE PERMITTED TO BE AGITATED IN THE REASSESSMENT PROCEE DINGS UNLESS RELATABLE TO THE ITEM SOUGHT TO BE TAXED AS ESCAPED INCOME'. INDEED IN THE REASSESSMENT PROCEE DINGS FOR BRINGING TO TAX ITEMS WHICH HAD ESCAPED ASSESSM ENT, IT WOULD BE OPEN TO AN ASSESSEE TO PUT FORWARD CLAI MS FOR DEDUCTION OF ANY EXPENDITURE IN RESPECT OF THAT INC OME OR THE NON-TAXABILITY OF THE ITEMS AT ALL. EVEN IN CAS ES WHERE THE CLAIMS OF ASSESSEE DURING THE COURSE OF REASSES SMENT PROCEEDINGS RELATING TO THE ESCAPED ASSESSMENT ARE ACCEPTED, STILL THE ALLOWANCE OF SUCH CLAIMS HAD TO BE LIMITED TO THE EXTENT TO WHICH THEY REDUCE THE INCO ME TO THAT ORIGINALLY ASSESSED. THE INCOME FOR PURPOSES O F REASSESSMENT' CANNOT BE REDUCED BEYOND THE INCOME ORIGINALLY ASSESSED. (PARA 26 & 27) CONCLUSION ONCE AN ASSESSMENT IS VALIDLY REOPENED ONLY THE PRE VIOUS UNDERASSESSMENT IS SET ASIDE AND NOT THE ORIGINAL ASSESSMENT PROCEEDINGS PARTICULARLY IF IT HAS ACQUI RED FINALITY. IN THE REASSESSMENT PROCEEDINGS IT IS NOT OPEN TO AN ASSESSEE TO SEEK A REVIEW OF THE CONCLUDED ITEM, UNCONNECTED WITH ESCAPEMENT OF INCOME. 13. IN VIEW OF THE LEGAL POSITION AS ENNUNCIATED B Y THE HONBLE SUPREME COURT, THE CONTENTION OF ASSESSEE T O REVISE INCOMES AND ACCOUNTS CAN NOT BE ACCEPTED AS THE PRO CEEDINGS ARE INITIATED FOR BRINGING TO TAX THE ESCAPED INCOM ES. THE CONTENTIONS OF ASSESSEE ON THAT FAILS. 14. HOWEVER, THE ACTION OF THE A.O. IN TAXING THE ENTIRE RECEIPTS AS INCOME CANNOT BE UPHELD. AS FAR AS THE STATEMENT OF POTLURI V. PRASAD IS CONCERNED, IT WAS ADMITTED THAT THEY HAVE ENTERED INTO AN AGREEMENT FOR PURCHASE OF PROP ERTY THROUGH ASSESSEE COMPANY FOR ACQUIRING LAND BANK IN HYDERABAD AND DEVELOPMENT OF THE SAME. FOR PASSING ON AMOUNTS TO ASSESSEE, ASSESSEE MIGHT HAVE RAISED BOG US BILLS BUT AT PRESENT, THE PARTIES ARE IN DISPUTE. THE SAI D COMPANY NEW CYBERABAD CITY PROJECTS P. LTD., ADMITTEDLY TRE ATED THE 13 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. AMOUNT PAID TO ASSESSEE AS ADVANCE AND ASSESSEE EVE N THOUGH TREATED THE RECEIPTS AS REVENUE RECEIPTS AND OFFERE D INCOMES, SUBSEQUENTLY WITH REVISING ACCOUNTS TREATED THEM AS A LIABILITY IN THE BOOKS OF ACCOUNTS. BE THAT AS IT MAY, THERE ARE ENQUIRES MADE BY A.O. ABOUT THE TRANSACTIONS AND AO HAS THE FOLLOWING FINDINGS. IN VIEW OF THE STATEMENT OF SRI PRASAD V. POTLURI, DIRECTOR OF NCCPL THAT NO DEVELOPMENT ACTIVITIES WERE CARRIED ON BY THE ASSESSEE COMPANY AND THE FACT THAT NO EVIDENCE IN THE FORM OF BILLS/VOUCHERS WERE FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE AT THE TIME OF SURVEY, IT WAS FELT NECESSARY TO CAU SE INQUIRIES AT FIELD LEVEL TO ASCERTAIN THE TRUTH. ACCORDINGLY, SRI Y. PRASAD, INSPECTOR OF INCOME TAX WAS DIRECTED TO VISIT THE LANDS AT SURVEY NO.664 AN D 721 OF NADERGUL VILLAGE AND REPORT THE FACTUAL POSITION. ACCORDINGLY, SRI Y. PRASAD VISITED THE LA NDS AT SY.NO. 664 & 721 OF NADERGUL VILLAGE AND SUBMITTED HIS REPORT ON 23.09.2011. AS PER THE REPORT OF INSPECTOR, THE LANDS IN SY.NO. 664 & 721 OF NADERGUL VILLAGE ARE AGRICULTURAL LANDS WHEREIN IS AGRICULTURAL ACTIVITY IS BEING CARRIED O UT EVEN ON THE DATE OF INSPECTION. SOME OF THE LANDS I N THESE SURVEY NO. ARE BARREN LANDS AND A VILLAGE BY NAME RANGANNAGUDA IS SITUATED IN THIS SURVEY NO. NO TRACE OF ANY DEVELOPMENT WORK WAS FOUND TO HAVE TAKEN BY TAKEN PLACE IN THESE SURVEY NOS. 15. NOT ONLY THAT A.O. HAS SUMMONED THE VRO AND HIS STATEMENT WAS EXTRACTED IN PARAS 5 AND 6 OF THE ORDER WHICH ALSO INDICATE THAT THE SO-CALLED LAND SOLD TO M/S. NEW CYBERABAD CITY PROJECTS LTD., IS IN FACT OWNED BY V ARIOUS AGRICULTURISTS AND THEY ARE CONDUCTING AGRICULTURAL OPERATIONS AND AS PER VRO RECORDS, NEITHER ASSESSEE NOR M/S. N EW CYBERABAD CITY PROJECTS LTD., OR ANY OF ITS ASSOCIA TES ARE OWNERS OF THE LANDS. A.O. ALSO MADE AN ATTEMPT TO T RACE THE TRAIL OF MONEY RECEIVED BY ASSESSEE COMPANY AND THE OUTFLOWS 14 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. ARE TO VARIOUS INDIVIDUALS AND ALSO TO VARIOUS GROU P CONCERNS. HOWEVER, EXCEPT ANALYZING THE FLOW OF MONEY, A.O. D ID NOT ENQUIRE ABOUT THE ULTIMATE RECIPIENTS OF THE MONEY AND HOW THE FUNDS RECEIVED FROM M/S. NEW CYBERABAD CITY PRO JECTS LTD., ARE UTILIZED. SINCE, THERE ARE FINDINGS ON RE CORD BOTH BY A.O. AND BY LD. CIT(A) THAT NO SUCH TRANSACTIONS HA VE EVER OCCURRED AS SHOWN IN THE BOOKS OF ACCOUNT, THE PURP OSE OF RECEIPT OF MONEY AND ITS TRANSFER COULD BE ANY OTHE R, OTHER THAN WHAT IS SHOWN ON RECORD. IN VIEW OF THIS, WE A RE NOT IN A POSITION TO UPHOLD THE ENTIRE RECEIPTS RECEIVED BY ASSESSEE AS INCOME. AT THE SAME TIME, WE ARE ALSO NOT IN A PO SITION TO ESTIMATE THE INCOME ON THE GROSS RECEIPTS, SINCE AS SESSEE ITSELF TREATED GROSS RECEIPTS AS ADVANCE IN THE REVISED AC COUNTS AND ADMITTEDLY, THERE WAS NO WORK DONE BY ASSESSEE COMP ANY. IN VIEW OF THIS, WE CANNOT UPHOLD THE ACTION OF A.O. I N TREATING THE ENTIRE RECEIPTS AS INCOME AND AT THE SAME TIME, WE ALSO NOT IN A POSITION TO GIVE ANY FINDING THAT THE AUDITED ACC OUNTS REVISED BY ASSESSEE ARE TO BE ACCEPTED AS SUCH, IN THE ABSE NCE OF ANY JUSTIFICATION OF THE SAME. THEREFORE, WHILE DISALLO WANCE OF ENTIRE EXPENDITURE MADE BY A.O. CANNOT BE UPHELD AS SUCH, WE SET ASIDE THE ASSESSMENT TO THE FILE OF A.O. TO MAK E FRESH ENQUIRIES AND SEE THE LATEST POSITION AND WHETHER T HE AMOUNTS RECEIVED AND APPROPRIATED BY ASSESSEE CAN BE CONSID ERED AS INCOMES OF ASSESSEE. A.O. IS DIRECTED TO ENQUIRE WH ETHER ANY PROCEEDINGS ARE INITIATED UNDER ANY OTHER ACT, LIKE MONEY LAUNDERING ACT OR WHETHER THERE ARE ANY OTHER VIOLA TIONS COMMITTED IN THESE TRANSACTIONS. ADMITTEDLY, THERE WERE BILLS WERE GIVEN FOR THE SO CALLED WORK WHICH WAS NOT DON E AND AS SEEN FROM THE STATEMENT OF MR. PRASAD V. POTLURI, A SSESSEE ALSO REGISTERED SOME PROPERTIES IN THE NAME OF THE SAID COMPANY WHICH ARE FOUND TO BE NOT CORRECT. THEREFORE, A.O. IS DIRECTED TO 15 ITA.NO.1173 & 1174/HYD/2014 M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD. ENQUIRE ABOUT THESE ASPECTS AND ARRIVE AT THE CORRE CT POSITION OF INCOMES AS PER LAW AND FACTS OF THE CASE. HOWEVE R, IN CASE, NO ESCAPED INCOMES ARE TO BE CONSIDERED, A.O. IS DI RECTED TO ACCEPT THE INCOME RETURNED, AS REASSESSMENT PROCEED INGS ARE ONLY FOR THE BENEFIT OF REVENUE. KEEPING THE PRINCI PLES LAID DOWN BY HONBLE SUPREME COURT(SUPRA), WE DIRECT THE A.O. TO ACCEPT THE INCOME RETURNED IN CASE FURTHER ENQUIRIE S REVEAL THAT THESE TRANSACTIONS DOES NOT GIVE RISE TO ANY C ONCEALED INCOME. WITH THESE OBSERVATIONS, ASSESSEES GROUNDS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, APPEALS OF ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.12.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 03 RD DECEMBER, 2014. VBP/- COPY TO 1. M/S. SPR INFRASTRUCTURE (INDIA) LTD., HYDERABAD C/O. MR. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6- 3- 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. 2. DCIT, CIRCLE 16(1), HYDERABAD 3. COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDERABA D. 4. COMMISSIONER OF INCOME TAX-IV, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD