Income Tax Officer, Ward-1, Kadapa V. Veerabhadra Constructions, Kadapa

ITA 733/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6680 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 30-10-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARAVIND DARSHAN
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Tangible material; Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 40(a)(ia); 148

Judgement Text

ITA NO 733 OF 2018 VEERABHADRA CONSTRUCTIONS KADAPA . PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.733/HYD/2018 (ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER WARD-1, KADAPA VS M/S. VEERABHADRA CONSTRUCTIONS, KADAPA PAN:AAEFCV1257E (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI ARAVIND DARSHAN, DR FOR ASSESSEE : SHRI P. MURALI MOHAN RAO O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2010-11 AGAINS T THE ORDER OF THE CIT (A)-KURNOOL DATED 23.02.2018 C ANCELLING THE ASSESSMENT MADE BY THE AO U/S 143(3) R.W.S. 147 OF THE I.T. ACT DATED 29.12.2016. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS, FILED ITS RETURN OF INCOME FOR THE A.Y 2010-11 ON 23.09.2 010 AND THE SAME WAS PROCESSED U/S 143(3) OF THE ACT ON 31.12.2 012 DETERMINING THE TOTAL INCOME AT RS.12,29,020 AS AGA INST THE RETURNED INCOME OF RS.2,89,020/-. THEREAFTER, THE A O EXAMINED THE RECORDS OF THE ASSESSEE AND NOTICED THAT THE AS SESSEE HAS DATE OF HEARING : 30.10.2018 DATE OF PRONOUNCEMENT: 21.01.2019 ITA NO 733 OF 2018 VEERABHADRA CONSTRUCTIONS KADAPA . PAGE 2 OF 5 DEBITED RS.5,40,09,067 TOWARDS WORK EXPENSES AGAINS T THE GROSS RECEIPTS OF RS.6,27,83,632 AND THAT OUT OF THE TOTA L WORK EXPENSES, RS.2,97,92,935 IS TOWARDS LABOUR CHARGES WHICH WAS MADE MOSTLY BY WAY OF CASH AND THAT THE ASSESSEE FI RM HAS ALSO SHOWN A SUM OF RS.1,62,98,456 AS LABOUR CHARGES PAY ABLE. THEREFORE, HE WAS OF THE OPINION THAT THE PROVISION S OF SECTION 40(A)(IA) ARE ATTRACTED IN RESPECT OF PAYMENTS MADE BY WAY OF CASH IN EXCESS OF RS.20,000 TO THE TUNE OF RS.1,34,94,47 9. HE OBSERVED THAT THE AO, DURING THE COURSE OF ORIGINAL ASSESSME NT, DID NOT VERIFY THESE ASPECTS AND THEREFORE, THERE IS ESCAPE MENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. 3. THEREFORE, HE REOPENED THE ASSESSMENT U/S 147 BY ISSUANCE OF A NOTICE U/S 148 AND COMPLETED THE ASSE SSMENT BY MAKING DISALLOWANCE AND BRINGING TO TAX VARIOUS AMO UNTS. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) CHALLENGING THE VALIDITY OF THE REOPENING AS WELL A S THE MERITS OF THE ADDITIONS MADE BY THE AO. THE CIT (A) AFTER GOI NG THROUGH THE ASSESSMENT RECORDS OBSERVED THAT DURING THE ORIGINA L PROCEEDINGS ITSELF THE ASSESSEE HAS DISCHARGED ITS DUTY BY FURN ISHING THE FULL DETAILS WHICH WERE NECESSARY FOR PASSING THE ORIGIN AL ASSESSMENT ORDER AND THAT THE AO HAS ALSO DISCHARGED ITS FUNCT IONS IN THE MANNER REQUIRED OF HIM AT THE TIME OF ORIGINAL ASSE SSMENT. HE OBSERVED THAT THE AO HAD NO TANGIBLE MATERIAL IN HA ND TO HOLD THAT THERE IS ESCAPEMENT OF THE INCOME FROM THE ORI GINAL ASSESSMENT AND THAT THERE IS NO OMISSION/FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR HIS ORIGINAL ASSESSMENT. THUS, FOLLOWING THE JU DGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVIN ATOR INDIA ITA NO 733 OF 2018 VEERABHADRA CONSTRUCTIONS KADAPA . PAGE 3 OF 5 REPORTED IN 320 ITR 561 AND THE CBDT CIRCULAR DATED 31.10.1989, HE QUASHED THE ASSESSMENT ORDER U/S 143 (3) R.W.S. 147 OF THE I.T. ACT, AGAINST WHICH, THE REVENUE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. WHETHER CIT(A) IS RIGHT IN HOLDING THAT THE ASSESSMENT PROCEEDINGS UJS.143(3) R.W.S 147 ARE BAD IN LAW, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT AS PER THE EXPLANATION HO SECTION 147 'PRODUCTION BEFORE T HE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENC E FROM WHICH MATERIAL EVIDENCE COULD, WITH DUE DILIGE NCE, HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF SECTION 147 AND HENCE ASSESSING OFFICER HAS RIGHTL Y ISSUED NOTICE U/S.148 WITHIN SIX YEARS PERIOD. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THE SUPR EME COURT JUDGEMENT IN THE CASE OF INDO-ADEN SAL MFG. & TRADING CO.(P) LTD. VS CIT(1986)159 ITR 624 (SC) : 25 TAXMAN 356 (SC) WHEREIN THE APEX COURT HELD THAT 'MERE PRODUCTION OF EVIDENCE BEFORE THE INCOME TAX OFFICER IS NOT ENOUGH. THERE MAY BE OMISSION OR FAI LURE TO MAKE A TRUE AND FULL DISCLOSURE, IF SOME MATERIA L FOR THE ASSESSMENT LAY EMBEDDED IN THE EVIDENCE WHICH THE ASSESSEE COULD HAVE UNCOVERED, BUT DID NOT, THE N IT IS THE DUTY OF THE ASSESSEE TO BRING IT TO THE NOTI CE OF THE ASSESSING AUTHORITY. THE ASSESSEE KNOWS ALL THE MATERIAL AND RELEVANT FACTS, THE ASSESSING AUTHORIT Y MAY NOT. IN RESPECT OF THE FAILURE TO DISCLOSE, THE OMISSION TO DISCLOSE MAY BE DELIBERATE OR INADVERTE NT. THAT IS IMMATERIAL. BUT IF THERE IS OMISSION TO DIS CLOSE THE MATERIAL FACTS, THEN SUBJECT TO THE OTHER CONDI TIONS, JURISDICTION TO REOPEN IS ATTRACTED. ' 5. ANY OTHER ADDITIONAL GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING. 4. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO WH ILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDERS OF THE ITA NO 733 OF 2018 VEERABHADRA CONSTRUCTIONS KADAPA . PAGE 4 OF 5 CIT (A) AND PLACED RELIANCE UPON THE CASE LAW FILED IN THE PAPER BOOK BEFORE US. 5. UPON GOING THROUGH THE RECORDS AND ALSO THE CASE LAW ON THE ISSUE, WE FIND THAT THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT AND THE REOPENING OF THE ASSESSME NT IS AFTER A PERIOD OF 4 YEARS AND THEREFORE, THE FIRST PROVISO TO SECTION 147 COMES INTO PLAY ACCORDING TO WHICH UNTIL AND UNLESS THE AO HAS RECORDS A FINDING THAT THERE IS AN ESCAPEMENT OF IN COME DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF ITS INCO ME, THE ASSESSMENT CANNOT BE REOPENED. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA REPORTED IN (2 010) 187 TAXMANN.COM 312 HELD THAT THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO AND THEREFORE, AFTER 1.4.1989, THE AO HAS THE POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM THE ASSESSMENT A ND THE REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BEL IEF. FOLLOWING THE SAID LAW LAID DOWN BY THE HON'BLE APEX COURT, T HE VARIOUS BENCHES OF THE TRIBUNAL HAVE HELD THAT THE REOPENIN G OF THE ASSESSMENT WITHOUT ANY TANGIBLE MATERIAL IS NOT SUS TAINABLE. IN THE CASE BEFORE US ALSO, THERE IS NO MATERIAL, MUCH LESS TANGIBLE MATERIAL WHICH HAS TO THE KNOWLEDGE OF THE AO SUBSE QUENT TO THE ASSESSMENT U/S 143(3), TO FORM A BELIEF THAT THERE IS ESCAPEMENT OF INCOME. FURTHER, AO HAS NOT RECORDED THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS. THE LEARNED DR HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO REBUT THE ABOVE FINDINGS OF THE CIT (A). THEREFORE, RESPECTFULLY ITA NO 733 OF 2018 VEERABHADRA CONSTRUCTIONS KADAPA . PAGE 5 OF 5 FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT , WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) A ND THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2019. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 21 ST JANUARY, 2019. VINODAN/SPS COPY TO: 1 ITO WARD 1, VASANTHAPET, PRODDATUR 516360 2 M/S. VEERABHADRA CONSTRUCTIONS, 3/141, THALLAMAPU RAM (V), PRODATTUR (M), KADAPA, A.P 3 CIT (A)-KURNOOL 4 PR. CIT - KURNOOL 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER