M/S. Arati Engineering & Construction Co., Hooghly V. ITO, Ward-1(2), Hooghly, Hooghly

ITA 2152/KOL/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 5043 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: M D SHAH
• Keywords: Depreciation; Reason to believe; Reassessment proceedings; TDS
• Section: 40A(3); 40(a)(ia); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.2152/KOL/2014 ( / ASSESSMENT YEAR: 2006-07) M/S ARATI ENGINEERING & CONSTRUCTION CO. 1/A, BUROBIBI LANE, P.O.- SERAMPORE, DIST. HOOGHLY- 712201 VS. ITO, WARD-1(2), HOOGHLY ./ ./PAN/GIR NO.: AALFA 8525 H (APPELLANT) .. (RESPONDENT) ASSESSEE BY : SHRI M. D. SHAH, AR RESPONDENT BY : SHRI SUPRIYO PAL, JCIT, SR. DR / DATE OF HEARING : 05/11/2019 /DATE OF PRONOUNCEMENT : 22/11/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERT AINING TO ASSESSMENT YEAR 2006-07, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-XXXVI, KOLKATA IN APPEAL NO. 558/CIT(A)-XX XVI/KOL/WD-1(2), HG/10-11, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 147 / 144 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 15/12/2010. 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGE D IN THE BUSINESS OF CONSTRUCTION OF BUILDINGS ETC. THE ASSESSMENT YEAR UNDER CONSIDE RATION I.E. AY 2006-2007 WAS THE FIRST ASSESSMENT YEAR. THE FIRM AUDITED ITS ACC OUNTS AND SUBMITTED ITS INCOME TAX RETURN AY 2006-2007 ON 07.12.2006 ALONG WITH TA X AUDIT REPORT DECLARING M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 2 22 2 A TOTAL LOSS OF RS.1,64,558/-. THE FIRM HAD DECLARE D A TURNOVER OF RS.61,74,765/- FROM CONSTRUCTION CONTRACT BUSINESS. 3. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN THIS A PPEAL IS THAT RE-ASSESSMENT PROCEEDINGS INITIATED BY THE AO UNDER SECTION 147/1 48 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 REFUN D CERTAIN DISCREPANCIES WERE NOTICED AND FOR THE SAME A NOTICE WAS ISSUED U/S 14 8 OF THE IT ACT 1961. THE CASE WAS REOPENED U/S147 OF THE IT ACT 1961 AFTER RECORD ING THE FOLLOWING REASONS WHICH IS RECORDED IN THE ORDER OF THE LD. CIT APPEA L 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 1 ST 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 A NNEXURE FILED WITH THE AUDIT REPORT BY THE ASSESSEE READS AS FOLLOWS: PARTICULARS ASST. YEAR 2006-07 ASST. YEAR 2005- 06 PAID UP SHARE CAPITAL 1417266.54 NIL SECURED LOANS 301981.00 NIL CURRENT LIABILITIES 678031.33 NIL TOTAL OF BALANCE SHEET 2397278.87 NIL GROSS TURNOVER 6174765.00 NIL DEPRECIATION 78226.00 NIL IT IS OBSERVED THAT THE ASSESSEE, BEING A CONTRACTOR OUGHT TO HAVE FOLLOWED THE ACCOUNTING STANDARD-7, WHICH WAS NOT ADOPTED IN ORD ER TO DEDUCE THE REAL PROFIT OF THE ACCOUNTING YEAR. BARRING THE PROJECT COMPLETION METHOD WHERE REVENUE IS RECOGNIZED ON COMPLETION OF THE PROJECT ONLY, THE ASSESSEE HAVE ADOPTED PERCENTAGE COMPLETION OF THE METHOD BUT WITHOUT OFFERING SO MUCH OF THE PROFIT E ARNED DURING THE GEAR AS BEARS M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 3 33 3 TO THE WHOLE PROFIT CONCEIVABLE FROM THE PROJECT TH E SAME PROPORTION AS THE EXPENSES INCURRED BEARS TO THE TOTAL COST OF THE PR OJECT. MOREOVER, IT IS FOUND FROM THE P&L ACCOUNT THAT A S UM OF RS. 10,96,677/- HAD BEEN ENVISAGED AS EXPENDITURE TO HAVE BEEN INCURRED AS ' HYDRA RENT (ORISSA). THIS EXPENDITURE TOGETHER WITH THAT OF RS.9,71,401/-TOWA RDS THE HEAD SHOWN AS 'SUB- CONTRACTOR PAYMENT', FORMS A PART OF THE INADMISSIBLE CATEGORY OF EXPEN DITURE U/S.40(A)(IA) OF THE IT ACT. FROM THE ACCOUNTS AND THE DOCUMENTS ACCOMPANIED THEREWITH IT IS UNDERSTOOD THAT THE DEVIATION FROM COMPLYING WITH THE PROVISION WILL LEAD TO DISALLOWANCE OF SUCH EXPENDITURE. THE ACCOU NTS HAVE BEEN INCORRECTLY COMPLETED LEADING TO ESCAPEMENT OF INCOME FROM THE TDS CERTIFICATE (FORM16A) IT IS EVIDENT THAT THE TOTAL AMOUNT CREDITED/PAID TO T HE ASSESSEE BY 'BHUSAN STEEL & STRIPS LTD., DHENKANAL(ORISSA) WAS FOR RS.53,26,614 / - ON WHICH THE ASSESSEE HAD CLAIMED A 'TDS FOR RS. 1,19,769/-. IN THE BALANCE S HEET FILED THE ASSESSEE HAD SHOWN SUNDRY DEBTORS FORRS.11,73,000/-. ON SUMMATIO N OF SUCH CREDITED AMOUNT AND THE DEBTOR AMOUNT THE TURNOVER OUGHT TO HAVE BE ENRS.64,99,614/-, WHEREAS THE ASSESSEE HAD SHOWNRS.61,74,765/- AS THE TURNOVER. T HUS THERE IS A CLEAR ESCAPEMENT OF RECEIPTS WHICH WAS NOT REFLECTED IN T HE P&L ACCOUNTS THIS BEING THE FIRST YEAR OF BUSINESS. THESE SPECIFICATIONS ARE ARRIVED AT FROM THE MATERI AL FOR THE BELIEF I.E. RETURN OF INCOME AND THE ACCOMPANYING DOCUMENTS FILED WITH SU CH RETURN. THUS, THERE EXISTS CIRCUMSTANCES AND THERE IS A NEXUS BETWEEN THE MATE RIAL ON RECORD AND THE BELIEF HELD TO ARRIVE OF AN OPINION THAT INCOME HAD ESCAPE D ASSESSMENT. FOR THE REASONS SPECIFIED ABOVE THERE IS COURSE OF JUSTIFICATION TO KNOW THAT INCOME HAD ESCAPED ASSESSMENT AND THERE IS REASON TO BELIEVE THAT INCO ME 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 O F THE FIRM AT RS.38,50,630/- I.E. MAKING AN ADDITION OF RS. 40,15,188/- THE BREA KUP 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/- M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 4 44 4 (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 T HE ADDITION MADE BY ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 7.LD COUNSEL FOR THE ASSESSEE REITERATED THE SUBMIS SIONS MADE BEFORE THE AUTHORITIES BELOW, WHEREAS LD DR RELIED ON THE ASSE SSMENT ORDER PASSED BY THE AO. 8. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE THR OUGH 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 INCLU DING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. FIRST OF ALL WE SHALL EXAMINE AND ANALYSE THE REASONS RECORDED BY THE ASSESSING OFFIC ER AS FOLLOWS: WE NOTE THAT THE REASONS RECORDED CONTAIN THE FOLLO WING BASIS FOR REOPENING: (A) REASON-1: THE ASSESSEE HAS NOT ADOPTED AS-7 HENCE REAL PROFIT NOT DEDUCED. (B) RAASON-2: THE ASSESSEE HAS APPLIED PERCENTAGE COMPLETION MET HOD (C) REASON-3: THE PROFIT OFFERED BY THE ASSESSEE IS NOT MUCH. (D) REASON-4: TDS WAS NOT DEDUCTED ON SUM OF RS. 10,96,677/- BEI NG RENT OF HYDRA MACHINERY. (E) REASON-5: TDS CERTIFICATE ISSUED BY BHUSAN STEEL STRIPS LTD. SHOWS TURNOVER OF RS. 53,26,614/- AND ASSESSEE HAS SHOWN DEBTOR OF RS.11,73,000/- AND THEREFORE TOTAL TURNOVER BY ADDING BOTH THIS COMES TO RS. 64, 99,616/- WHILE THE TURNOVER DISCLOSED BY THE ASSESSEE WAS RS. 61,74,765/-. BASED ON THESE 5 REASONS THE ASSESSING OFFICER CAME TO BE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. 9. ABOUT REASON 1 AND 2 OF REOPENING, WE NOTE THAT NONE OF THE REASONS HAV E ANY BASIS OR MATERIAL LINK TO COME TO THE CONCLUSION OF ESCAPEMENT OF INCOME. THE AO HIMSELF IN THE REASONS HAS ADMITTED THAT THE ASSESS EE WAS FOLLOWING PERCENTAGE OF COMPLETION METHOD. AS PER AS-7, THE REVENUE RECOGNI TION SHOULD BE DONE AS PER PERCENTAGE OF COMPLETION METHOD WHICH AS PER THE A O HIMSELF THE SAME WAS M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 5 55 5 FOLLOWED BY THE ASSESSEE, THUS THIS REASONS IS THER EFORE NON-EXISTENT AND DOES NOT SURVIVE AS THERE IS NO MATERIAL BASIS TO COME TO SU CH CONCLUSION OF ESCAPEMENT OF INCOME. FURTHER NO ADDITION ON THIS ACCOUNT WAS MAD E IN THE ASSESSMENT ORDER. 10. ABOUT REASON-3, WE NOTE THAT THE ASSESSEE DID NOT OFFER MUCH PROFIT FROM THE CONTRACT. THIS ITSELF IS A WILD ALLEGATION BASED ON CONJECTURES AND SUMMARIZES. THERE IS NO BASIS / MATERIAL ON THE RECORD FOR THE ASSESSING OFFICER TO COME TO THE CONCLUSION THAT THE PROFIT WAS SHOWN LESS BY THE AS SESSEE. THUS THIS REASON IS ALSO NON-EXISTENT AND DOES NOT SURVIVE AS THERE IS NO MA TERIAL BASIS TO COME TO SUCH CONCLUSION OF ESCAPEMENT OF INCOME. FURTHER NO ADDI TION ON THIS ACCOUNT WAS MADE IN THE ASSESSMENT ORDER. 11. ABOUT REASON-4, WE NOTE THAT WITH RESPECT TO THE ISSUE OF TDS NOT D EDUCTED ON HYDRA MACHINE RENT PAYMENT OF RS.10,96,677/- AND RS.9,71,401/-. WE NOTE THAT THE AUDITED ACCOUNTS AND THE TAX AUDIT REPORT ON PA GE 7 WHERE THE AUDITOR HAS STATED THAT THE ASSESSEE HAS DEDUCTED TAX AND DEPOSITED TH E 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 R ECORD. IN THE AUDIT REPORT THERE WAS NO QUALIFICATION OF NON DEDUCTION OF TDS AND TH EREFORE AT THE TIME OF REASONS RECORDING THERE WAS NOTHING BEFORE THE ASSESSING OF FICER TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD NOT DEDUCTED THE T DS ON RENT. THUS THE REASONS RECORDED HAD NO MATERIAL HAVING LIVE LINK TO THE ES CAPEMENT OF INCOME. EVEN WITH RESPECT TO SUB CONTRACTOR PAYMENT, THE TD S 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 O F REOPENING I.E. THAT THE INCOME TAX RETURN AND TAX AUDIT REPORT THERE WAS NOTHING T O 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 TH ERE WAS NO QUALIFICATION OF NON DEDUCTION OF TDS AND THEREFORE AT THE TIME OF REASO NS RECORDING THERE WAS NOTHING BEFORE THE ASSESSING OFFICER TO COME TO THE CONCLUS ION 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. M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 6 66 6 THE LD COUNSEL SUBMITS THAT TILL 13.07.2006 THE DE FINITION OF RENT IS AS FOLLOWS: (I) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME CALL ED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF ANY LAND OR ANY BUILDING (INCLUDING FACTORY BUILDING), TOGETHER WITH FURNITU RE, FITTINGS AND THE LAND APPURTENANT THERETO, WHETHER OR NOT SUCH BUILDING IS OWNED BY T HE PAYEE; THE SCOPE OF THE DEFINITION OF RENT WAS ENHANCED BY THE TAXATION LAWS (AMENDMENT) ACT, 2006, W.E.F.13.07.2006 AS FOLLOWS: [(I) 'RENT' MEANS ANY PAYMENT BY WHATEVER NAME CAL LED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF (EITHER SEPARATELY OR TOGETHER) ANY - (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTO RY BUILDING); OR (D)MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;] THEREFORE TILL 12.07.2006 THERE WAS NO REQUIREMENT TO DEDUCT TDS ON RENT ON MACHINERY. THE ASSESSMENT YEAR IN THE ASSESSEE`S CA SE IS ASSESSMENT YEAR 2006-07 WHICH IS YEAR ENDED 31.03.2006 AND THUS ON THAT DATE THERE WAS NO OBLIGATION TO DEDUCT TDS AND AS A COROLLARY THERE W AS NO DISALLOWANCE U/S 40(A)(IA) OF THE IT ACT, 1961. THUS, THIS REASON IS ALSO NON-EXISTENT AND DOES NOT SURVIVE AS THERE IS NO MATERIAL BASIS TO COME TO SU CH CONCLUSION OF ESCAPEMENT OF INCOME. 12. ABOUT REASONS 5, WE NOTE THAT TDS CERTIFICATE ISSUED BY BHUSHAN STEE L STRIPS LTD. SHOWS TURNOVER OF RS. 53,26,614/- AND ASSESSEE HAS SHOWN DEBTOR OF RS. 11,73,000/- AND THEREFORE TOTAL TURNOVER BY ADDING BOTH THIS COMES TO RS. 64,99,614/- (RS. 53,26,614-RS. 11,73,000) WHICH THE TURNOVER DISCLOSED BY THE ASSESSEE WAS RS. 61,74,765/-. THIS REASONS RECORDED BY AO IS BASED ON SURMISE AN D CONJECTURE. IF THE TURNOVER AS PER TDS CERTIFICATE ISSUED BY BHUSHAN STEEL STRI PS LTD. WAS RS. 53,26,614/- AND THE TURNOVER DECLARED BY THE ASSESSEE WAS RS. 61,74 ,765/-, THEN THERE IS NO MATERIAL TO CONCLUDE THAT THE AMOUNT OF RS. 61,74,765/- DID NOT INCLUDE THIS AMOUNT OF RS. M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 7 77 7 53,26,614/-. THE ASSESSING OFFICER HAS TOTALLY CONF USED ACCOUNTING WITH TURNOVER COMPUTATION. IF THERE IS A DEBTOR IN THE BALANCE SH EET OF RS. 11,73,000/- HOW DOES IT INCREASE TURNOVER. IN FACT, THE RECORDED DEBTOR IN THE BOOKS IS NOTHING BUT PART OF THE TURNOVER RECORDED IN THE BOOKS FOR WHICH PAYMEN T IS YET TO BE RECEIVED. THUS THE DISCLOSED DEBTOR FIGURE IN BALANCE SHEET RECORD ED IN THE BOOKS CANNOT BE ADDED WITH THE DISCLOSED TURNOVER TO HOLD THAT SUCH TURNO VER 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 CO NCLUDE 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 W ERE EITHER NOT ADDED BY THE AO TO THE INCOME OF THE ASSESSEE IN REASSESSMENT PROCEEDI NGS OR ON MERITS IT HAS BEEN DEMONSTRATED THAT THE SAME CANNOT BE ADDED AND THER EFORE ONCE THE ITEMS FOR WHICH REASONS HAVE BEEN RECORDED ARE NOT ADDED OR H ELD TO BE NOT ASSESSABLE THEN NO OTHER ITEM OF INCOME CAN BE ADDED IN SUCH PROCEE DINGS. THE REASONS AS RECORDED ITSELF ALONE WITHOUT TAKING ANY ASSISTANCE TO ANY OTHER DOCUMENTS OR AFFIDAVITS ETC MUST BE ABLE TO MAKE OUT A CASE FOR VALID REOPENING AND IF NOT THEN THE ENTIRE REOPENING WOULD FAIL. FOR THAT WE RELY O N THE JUDGMENT OF THE HON`BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LT D. V. R.B. WADKAR, ACIT (2004) 268 ITR 332:137 479 (BOM.), WHEREIN IT WAS H ELD THAT REOPENING NOTICE HAS TO BE JUSTIFIED ON THE BASIS OF REASONS RECORDED AT THE TIME OF ISSUING THE IMPUGNED NOTICE. THE IMPUGNED NOTICE MUST STAND OR FAIL ON T HE REASONS RECORDED. THESE REASONS RECORDED CANNOT BE SUPPLEMENTED BY FURTHER REASONS OR BY FILING AN AFFIDAVIT AND/OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHICH WERE LACKING IN THE MATERIAL PARTICULARS WOULD GET SUPPL EMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. THE REASONS ARE A MANIFESTATION OF THE MIND OF THE ASSE SSING OFFICER AND MUST JUSTIFIED ON THE BASIS OF INFERENCES OR INTERPRETATION. THE R EASONS AS RECORDED PRIME FACIE DO M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 8 88 8 NOT SEEM TO INDICATE REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS NEEDLESS TO MENTION THAT THE REAS ONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER .NO SUB STITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REAS ONS. THUS, IN HINDUSTAN LEVER LIMITED V. R.B. WADKAR, ACIT(2OO4) 268 ITR 332 (BOM .) (SUPRA), A DIVISION BENCH HAS OPINED THE FOLLOWINGS WITH RESPECT TO REC ORDING OF REASONS WHICH SHOULD FORM THE UNIMPEACHABLE CODE FOR THE ASSESSIN G OFFICERS: (1). THE REASONS ARE REQUIRED TO BE READ AS THEY WE RE RECORDED BY THE ASSESSING OFFICER; (2). NO SUBSTITUTION OR DELETION IS PERMISSIBLE; (3). NO ADDITIONS CAN BE MADE TO THOSE REASONS; (4). IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AN D OPEN HIS MIND THROUGH REASONS RECORDED BY HIM, (5). IT IS FOR THE ASSESSING OFFICER TO REACH TO TH E CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSE SSMENT YEAR, (6). THE REASONS RECORDED SHOULD BE CLEAR AND UNAMB IGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS; (7). THE REASONS RECORDED SHOULD BE SELF EXPLANATOR Y AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS; (8). REASONS PROVIDE THE LINK BETWEEN CONCLUSION AN D EVIDENCE; (9). THE REASONS MUST BE BASED ON EVIDENCE; M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 9 99 9 (10). THE ASSESSING OFFICER, IN THE EVENT OF CHALLE NGE 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 F ACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSES SMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE; (12). THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBI TRARY REOPENING OF THE CONCLUDED ASSESSMENT; 14. WE NOTE THAT IF THE RECORDED REASONS SHOUT CONT RADICTION AND INCONSISTENCY IT MEANS NECESSARY SATISFACTION IN TERMS OF THE STATUT ORY PROVISION HAS NOT BEEN RECORDED AT ALL. THE AO WAS NOT COMPETENT TO CONTIN UE WITH THE PROCEEDING UNDER SECTION 147 ON SOME OTHER ISSUES OR GROUNDS WHICH W ERE NOT MENTIONED IN THE REASONS RECORDED UNDER SECTION 148(2). A PLAIN READ ING 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 ASSESSM ENTS AND SUCH OTHER INCOME WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF PROCEEDINGS UNDER THE SAID SECTION EVEN THOUGH THE REASONS FOR SUCH ISSUE/INCO ME WERE NOT INCLUDED IN THE RECORDED REASONS. THE EXPLANATION (3) HOWEVER PRE-S UPPOSES THAT THE ISSUE WITH REFERENCE TO WHICH THE REASON WAS RECORDED, WAS FOU ND TO BE LEGALLY & JUDICIALLY TENABLE AND WITH REFERENCE THERETO THE AO IS ABLE T O PROVE THAT INCOME HAD INDEED ESCAPED ASSESSMENT. IT IS ONLY WHEN THE AO IS ABLE TO ESTABLISH VALID INITIATION OF REASSESSMENT PROCEEDINGS WITH REFERENCE TO THE RECO RDED REASONS AND IN THE REASSESSMENT U/S 147; SUCH INCOME IS ALSO ASSESSED; ONLY THEN THE AO WILL BE ABLE TO BE EXPAND THE SCOPE OF REASSESSMENT PROCEEDINGS BY ASSESSING ANY OTHER ESCAPED INCOME WHICH COMES TO HIS NOTICE IN THE COU RSE OF REASSESSMENT. IF ON THE OTHER HAND, THE AO IS NOT ABLE TO JUSTIFY THE REOPE NING OF A CONCLUDED ASSESSMENT WITH REFERENCE TO REASONS RECORDED U/S148(2) OR WHE RE ON EXAMINATION OF ASSESSEE'S SUBMISSIONS AO AGREES THAT ON THE BASIS OF REASONS RECORDED IT CANNOT BE HELD THAT INCOME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 THEN IN SUCH AN EVENT THE VERY REOPENING OF A CONCLUDED ASS ESSMENT STANDS VITIATED AND M/S ARATI ENGINEERING & CONSTRUCTION CO. ITA NO.2152/KOL/2014 ASSESSMENT YEAR:2006-07 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 THEREFORE THE AO CANNOT EXPAND THE SCOPE OF REASSES SMENT BY INCLUDING SOME MORE ISSUES OR REASONS WHICH DID NOT FIND MENTION I N THE REASONS RECORDED U/S148(2). FOR THAT WE RELY ON THE JUDGMENT OF THE HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS JET AIRWAYS INDIA LTD (331 ITR 2 36). IN VIEW OF THE FACTS NARRATED ABOVE AND THE BINDIN G PRECEDENTS APPLICABLE TO THE FACTS, WE ARE OF THE VIEW THAT THE REASONS RECORDED ARE BAD IN LAW THEREFORE WE QUASH THE REASSESSMENT ORDER PASSED BY AO UNDER SEC TION 147/148 OF THE ACT. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 22.11.2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 22/11/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S ARATI ENGINEERING & CONSTRUCTION CO. 2. ITO, WARD-1(2), HOOGHLY 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES