M/s. Hindustan Mining & Mineral Services, Angul V. ITO, Ward-2, Dhenkanal

ITA 253/CTK/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4248 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUVENDU DUTTA
• Assessee Lawyers: P K MISHRA
• Keywords: Reopening of assessment; Search and seizure; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK SMC BENCH, CUTTACK BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 M/S. HI NDUSTAN MINING & MINERAL SERVICES, H/O. D.RATH, SHARMA CHHAK, TALCHER, DIST: ANGUL VS. ITO, WARD - 2, DHENKANAL PAN/GIR NO. AADFH 6317 C (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI SUVENDU DUTTA , DR DATE OF HEARING : 1 8 /11 / 2016 DATE OF PRONOUNCEMENT : 18 /11 / 2016 O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2, BHUBANESWAR , DATED 1.3.2016 , FOR THE ASSESSMENT YEAR 2006 - 07 . 2. IN GROUND NOS.2,3 &4 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT AS BAD IN LAW. 3. AT THE TIME OF HEARING, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 ON 31.10.2006 SHOWING TOTAL INCOME AT RS.3,98,190/ - . THE ORIGINAL ASSESSMENT 2 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 U/S.143(3) OF THE ACT WAS COMPLETED ON 27.11.20 08 ASSESSING THE INCOME AT RS.4,78,190/ - . THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/ S.148(2) OF THE ACT ON 12.10.2012 FOR REOPENING THE ASSESSMENT ON THE GROUND THAT THE ASSESSEE HAS SHOWN CONTRACT RECEIPT OF RS.1,11,66,817/ - AFTER DEDUCTING RS.3, 05,95,168/ - PAID TO SUB - CONTRACTORS FROM GROSS CONTRACT RECEIPT OF RS.4,17,61,985/ - . FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSEE WAS KEEPING 10% OF GROSS PAYMENT TO SUB - CONTRACTORS AS PER AGREEMENT FOR ITS ESTABLISHMENT EXPENSES. THIS RECEIPT OF RS.30,59,517/ - I.E. 10% OF RS.3,05,95,168/ - FROM THE SUB - CONTRACTOR IS INCOME OF THE ASSESSEE WHICH HAS ESCAPED ASSESSMENT. 4. HE FURTHER SUBMITTED THAT IT WILL BE SEEN FROM THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT ON 27.11.2008 AT PA GE 2 PARA 3, THE ASSESSING OFFICER HAS OBSERVED AS UNDER: AS PER AGREEMENT, THE TIPPER OWNERS CALLED AS SUB - CONTRACTORS SHALL BEAR ALL THE EXPENSES OF RUNNING THE TIPPERS AND SHALL BE PAID AS PER RATE FOR TRANSPORTATION FIXED BY MCL AND THE ASSESSEE SHALL KEEP 10% OUT OF THEIR GROSS PAYMENT FOR ITS ESTABLISHMENT EXPENSES APART FROM TDS. OUT OF TOTAL CONTRACT RECEIPT OF RS.4,17,61,985/ - , THE ASSESSEE HAS EXECUTED ONLY RS.1,11,66,817/ - AND BALANCE AMOUNT OF RS.3,05,95,168/ - BY SUB - CONTRACTORS. 5. HE ARGUE D THAT AFTER EXAMINING ALL FACTS AT TH E TIME OF ORIGINAL ASSESSMENT, THE ASSESSING OFFICER ACCEPTED THE INCOME SHOWN BY THE ASSESSEE FROM CONTRACT RECEIPTS AND, THEREFORE, ON THE BASIS OF VERY SAME 3 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 SET OF FACTS, HE CANNOT REOPEN THE COMPLETED ASSESSMENT. FOR THIS PROPOSITION , HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (2010) 320 ITR 561 (SC) WHICH WAS FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MADHUKAR KHOSLA VS ACIT, 367 ITR 165 ( DELHI), WHEREIN, IT WAS HELD THAT WHERE THERE WAS NOTHING TO SHOW WHAT TRIGGERED ISSUANCE OF NOTICE OF REASSESSMENT AS THERE WAS NO INFORMATION OR NEW FACTS WHICH COULD LED THE ASSESSING OFFICER TO BELIEVE THAT FULL DISCLOSURE HAD NOT BEEN MADE, SAID NOTIC E COULD NOT BE SUSTAINED. HE SUBMITTED THAT AFTER THE COMPLETION OF ORIGINAL ASSESSMENT, NO NEW MATERIAL HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER ON THE BASIS OF WHICH, IT CAN BE SAID THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AS WILL BE EVIDENT FROM THE REASONS RECORDED BY THE ASSESSING OFFICER FOR ESCAPEMENT OF INCOME . HE, THEREFORE, SUBMITTED THAT NOTICE ISSUED U/S.148(2) TO THE ASSESSEE ON 12.10.2012 IS BAD IN LAW AND CONSEQUENTLY, REASSESSMENT ORDER PASSED U/S.147/143(3) DATED 2 1.3.2014 IS ALSO BAD IN LAW AND SHOULD BE QUASHED. 6. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF THE LD CIT(A), WHEREIN, IT HAS BEEN HELD THAT WHEN THE INCOME LIABLE TO TAX ESCAPED ASSESSMENT IN THE ORIGINAL ORDER OF ASSESSMENT DUE TO OVERSIGHT OR INADVERTENCE OR A MISTAKE COMMITTED BY THE ASSESSING OFFICER, THE REASSESSMENT IS PERMISSIBLE EVEN THOUGH THERE WAS NO NEW MATERIAL BUT 4 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 INFO RMATION IS TRACEABLE FROM THE MA TERIAL AVAILABLE ON RECORD AT THE TIME OF ORIGINAL ASSESSMENT WAS PASSED, FOR WHICH, RELIANCE WAS PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF KALYANJI MAVJI & CO. VS CIT, 102 ITR 287 (SC). 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 27.11.2008. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U /S.148(2) OF THE ACT ON 12.10.2012 ON THE GROUND THAT THE ASSESSEE HAS NOT SHOWN INCOME FROM SUB - CONTRACT RECEIPTS OF RS.3,05 ,95,168/ - @ 10% AND HENCE, THE INCOME LIABLE TO TAX OF RS.30,59,517/ - HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER COMPLETED THE REASSESSMENT U/S.147 R.W.S. 143( 3) OF THE ACT ON 21.3.2014 MAKING AN AD D ITION OF RS. 30,59,517/ - TO THE INCOME OF THE ASSESSEE . 8. THE CONTENTION OF THE ASSESSEE IS THAT THE REOPENING OF ASSESSMENT ON THE BASIS OF VERY SAME SET OF FACTS, WHICH WERE BEFORE THE ASSESSING OFFICER AT THE TIME OF PASSING ORIGINAL ASSESSMENT U/S.143(3), AMOUNTS TO CHANGE OF OPINION AND, THEREFORE, THE NOTICE ISSUED U/S.148(2) OF THE ACT IS BAD IN LAW. I FIND THAT THE ASSESSING OFFICER HAS RECORDED THE FOLLOWING REASONS FOR REOPENING THE ASSESSMENT: 5 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 'IN THE P& L A/C, THE ASSESSEE HAS SHOWN CONTRACT RECEIPT AT RS.1,11,66,817/ - I.E, AFTER DEDUCTION OF RS. 3,05,95,168/ - TOWARDS SUB CONTRACTOR PAYMENT FROM THE GROSS CONTRACT RECEIPT OF RS.4,17,61,985/ - AS SEEN FROM THE ASSESSMENT ORDER, THE ASSESSEE WAS KEEPING 10% OF GROSS PAYMENT TO SUB CONTRACTORS AS PER AGREEMENT TOWARDS ITS ESTABLISHMENT EXPENDITURE . THIS RECEIPT OF RS 30,59,517/ - ( 10% OF RS.3,05,95,168/ - ) FROM THE SUB CONTRACTOR IS NOTHING BUT THE INCOME OF THE ASSESSEE. . THE ASSESSEE HAS NOT DISCLOSED THE SAID INCOME IN HIS RETURN DURING THE RELEVANT ASST YEAR. IN VIEW OF THE ABOVE I HAVE REASON TO BELIEVE THAT INCOME OF RS. 30,59,517/ - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE F.Y. 2005 - 06 RELEVANT TO THE A.Y. 2006 - OY.WITRNIRF LIE MEANING OF SECTION 147 OF THE I.T. ACT.' 9. A PERUSAL OF ABOVE RECORDED REASONS BEFORE ISSUANCE OF NOTICE U/ S.148(2) OF THE ACT, I FIND THAT THERE IS NO REFERENCE TO ANY NEW MATERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER AFTER THE PASSING OF THE ORIGINAL ASSESSMENT ORDER DATED 27.11.2008 U/S.143(3) OF THE ACT TO SHOW THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 10. FURTHER, I FIN D FROM THE ASSESSMENT ORDER AT P A GE 2 PARA 3, THE ASSESSING OFFICER HAS OBSERVED AS UNDER: AS PER AGREEMENT, THE TIPPER OWNERS CALLED AS SUB - CONTRACTORS SHALL BEAR ALL THE EXPENSES OF RUNNING THE TIPPERS AN D SHALL BE PAID AS PER RATE FOR TRANSPORTATION FIXED BY MCL AND THE ASSESSEE SHALL KEEP 10% OUT OF THEIR GROSS PAYMENT FOR ITS ESTABLISHMENT EXPENSES APART FROM TDS. OU T OF TOTAL CONTRACT RECEIPT OF R S.4,17,61,985/ - , THE ASSESSEE HAS EXECUTED ONLY RS.1,11 ,66,817/ - AND BALANCE AMOUNT OF RS.3,05,95,168/ - BY SUB - CONTRACTORS. 6 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 11. A READING OF THE ABOVE SHOWS THAT THE ASSESSING OFFICER AFTER CONSIDERING AND EXAMIN IN G THE ENTIRE CONTRACT RECEIPTS OF THE ASSESSEE OF RS.4,17,61,985/ - HAS ACCEPTED THE RETURNED INCOME SHOWN BY THE ASSESSEE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF OF HONBLE SUPREME COURT IN TH E CASE OF KELVINATOR OF INDIA LTD(SUPRA) APPLIES TO THE FACTS OF THE ASSESSEES CASE, WHEREIN, IT WAS HELD AS UNDER: HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE - ASSESS. BUT RE - ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE - CONDITION AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN TH E GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN - BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1 ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO REOPEN PROVI DED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 12. FOLLOWING THE ABOVE DECISION OF HONBLE SUPREME COURT, THE HONBLE DELHI H IGH COURT IN THE CASE OF MADHUKAR KHOSLA (SUPRA) HAS HELD AS UNDER: THE FOUNDATION OF THE AO'S JURISDICTION AND THE RAISON D'ETRE OF A REASSESSMENT NOTICE ARE THE 'REASONS TO BELIEVE'. NOW THIS SHOULD HAVE A RELATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERIALS ON THE 7 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 RECORD. SUCH EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH ENABLES THE AUTHORITY TO LEGITIMATELY RE - OPEN THE COMPLETED ASSESSMENT. IN ABSENCE OF THIS OBJECTIVE 'TRIGGER' , THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE RE - OPENING OF ASSESSMENT AMOUNTS TO 'REVIEW' OR 'CHANGE OF OPINION' ARISES. IN OTHER WORDS, IF THERE ARE NO 'REASONS TO BELIEVE' BASED O N NEW, 'TANGIBLE MATERIALS', THEN THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. 13. I, THEREFORE, HOLD THAT THE ISSUE OF NOTICE U/S.148(2) OF THE ACT DATED 12.10.2012 IN THE INSTANT CASE IS BAD IN LAW AND CONSEQUENTLY THE REASSESSMENT FRAMED U/S.14 3(3)/147 OF THE ACT DATED 21.3.2014 IN PURSUANCE TO SUCH NOTICE IS NOT SUSTAINABLE AND HENCE, I CANCEL THE REASSESSMENT ORDER DATED 21.3.2014 AND ALLOW THIS GROUNDS OF THE ASSESSEE. 14. AS I HAVE CANCELLED THE REASSESSMENT ORDER DATE D 21.3.2014 PASSED U/S.143(3)/147 OF THE ACT, THE OTHER GROUNDS OF APPEAL OF THE ASSESSEE ON MERITS OF THE ADDITION HAVE BECOME INFRUCTUOUS AND HENCE, DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 1 8 11 /2016 IN THE PRESENCE OF PARTIES. SD/ - ( N.S SAINI) A CCOUNTANT MEMBER CUTTACK; DATED 18 /11 /2016 B.K.PARIDA, SPS 8 ITA NO. 253/CTK/2016 ASSESSMENT YEAR : 2006 - 07 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASST.REGISTRAR, ITAT, CUTTACK 1. THE APPELLANT : M/S. HINDUSTAN MINING & MINERAL SERVICES, H/O. D.RATH, SHARMA CHHAK, TALCHER, DIST: ANGUL 2. THE RESPONDENT. ITO, WARD - 2, DHENKANAL 3. THE CIT(A) , CUTTACK 4. CIT , CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//