ITO 24(2)(1), MUMBAI V. PARESH B VORA, MUMBAI

ITA 956/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83636 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHIT JAIN
• Assessee Lawyers: NEELAM JADHAV
• Keywords: Audit objection; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion
• Section: 147; 148; 10; 154; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDI CIAL MEMBER . / ITA NO. 956 /MUM./ 2013 ( / ASSESSMENT YEAR : 20 06 07 ) INCOME TAX OFFICER WARD 24(2)(1), C 13 ROOM NO.606, 6 TH FLOOR BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 .. / APPELLANT V/S SHRI PARESH B. VORA 503, MAHARAJA APARTMENT S.V. ROAD, MALAD (W) MUMBAI 400 065 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAA PV3819J / REV E NUE BY : SHRI MOHIT JAIN / ASSESSEE BY : DR. K. SHIVARAM A/W SHRI AJAY SINGH AND MS. NEELAM JADHAV / DATE OF HEARING 12 .08.2014 / DATE OF ORDE R 28.08.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 23 RD NOVEMBER 2012 , PASSED BY SHRI PARESH B. VORA 2 THE LEARNED COMMISSIONER (APPEALS) XXX IV , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 14 3(3) R/W SECTION 147 , OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 20 06 07 , ON THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSMENT U/S 14 7 IS INVALID IN THE EYES OF LAW DESPITE IS BEING REOPENED WITHIN 4 YEARS IGNORING DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. (TS 16 HC 2013 (BOM.) . 2. FACTS IN BRIEF : THE ASSESSEE IS A CIVIL CONTRACT OR CARRYING OUT THE BUSINESS UNDER THE NAME AND STYLE OF VAIBHAV ENTERPRISES . THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 07, WAS FILED ON 18 TH OCTOBER 2006, DECLARING INCOME OF ` 8,67,074. THE RETURN OF INCOME WAS DULY ACCOMPANIED BY AUDITED FINA NCIAL STATEMENT AND TAX AUDIT REPORT. AS AGAINST THE RETURNED INCOME, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3), VIDE ORDER DATED 19 TH SEPTEMBER 2008, WHEREBY THE ASSESSEES NET PROFIT RATE WAS ESTIMATED @ 3.42% , AS AGAINST NET PROFIT RATE OF 1.42% SHOWN BY THE ASSESSEE. ACCORDINGLY, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` 20 ,95,40 0, AFTER MAKING AN ADDITION OF ` 12,28,327. THEREAFTER, THE ASSESSMENT SO COMPLETED HAS BEEN RE OPENED UNDER SECTION 147, BY ISSUING NOTICE UNDER SECTION 148, DATE D 21 ST MARCH 2011, AFTER RECORDING THE FOLLOWING REASONS : SHRI PARESH B. VORA 3 SHRI PARESH B. VORA (PAN AAAPV3819J) A.Y. 2006 07 18.3.2011 IN THIS CASE THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 12.09.2008 ASSESSING TOTAL INCOME AT ` 20,95,400 AS AGAINST THE RETURNED INCO ME OF ` 8,67,074. IN THIS CASE, THE NET PROFIT WAS ESTIMATED @ 3.42% INSTEAD OF @ 1.42% DECLARED BY THE ASSESSEE AND ADDITION OF ` 12,28,327 WAS MADE TO THE TOTAL INCOME. 2. ON PERUSAL OF THE INCOME & EXPENDITURE ACCOUNT OF M/S. VAIBHAV ENTERPRISES (PROP. PARESH B. VORA), IT IS REVEALED THAT THE ASSESSEE HAS SHOWN CONTRACT RECEIPTS OF ` 6,12,93,710, LABOUR CHARGES RECEIPTS OF ` 2,25,000 AND ALSO SHOWN WIP OF ` 1,06,00,000, THE TOTAL OF THESE THREE AMOUNTS WORK TO ` 7,21,18,710. THE ASSESSEE HAS SHOWN OPEN ING WIP OF ` 1,32,50,000. ON THE OTHER HAND TOTAL CONTRACT RECEIPTS AS PER THE TDS CERTIFICATES WORKS OUT AT ` 7,68,74,174. THEREFORE, THERE IS A DIFFERENCE OF ` 47,55,464 IN CONTRACT RECEIPTS SHOWN BY THE ASSESSEE IN INCOME & EXPENDITURE ACCOUNT AND CONTR ACT RECEIPT AS PER TDS CERTIFICATES ON RECORD. 3. IN VIEW OF THE ABOVE, IT IS CLEARLY NOTICED THAT THE ASSESSEE HAS SUPRESSED CONTRACT RECEIPT BY ` 47,55,464 AND THE SAME HAS NOT OFFERED FOR TAXATION, HOWEVER, THE ASSESSEE HAS CLAIMED WHOLE AMOUNT OF TDS OF ` 14,24,905 WHICH WAS DEDUCTED FROM THE CONTRACT RECEIPTS OF ` 7,86,74,174, AS PER THE TDS CERTIFICATE ON RECORD. IN VIEW OF THE AFORESAID, I HAVE A REASON TO BELIEVE THAT INCOME TO THE TUNE OF ` 47,55,464, HAS ESCAPED ASSESSMENT WHICH IS REQUIRED TO B E BROUGHT TO TAX BY TAKING ACTION AS PER PROVISIONS OF SECTION 147/148 AND HENCE, THE CASE IS REOPENED. 3. IN RESPONSE TO THE SAME, THE ASSESSEE FILED LETTER DATED 16 TH AUGUST 2011, STATING THAT THE RETURN FILED EARLIER MAY BE TREATED AS RETURN OF INCOME FI LED IN RESPONSE TO NOTICE UNDER SECTION 148. SHRI PARESH B. VORA 4 4. BEFORE THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THE ALLEGED DIFFERENCE OF ` 47,55,464, IN THE CONTRACT RECEIPTS AS ALLEGED IN THE REASONS RECORDED , BY SUBMITTING THAT OUT OF THE SAID AMOUNT , SUM OF ` 24, 51,751, RELATES TO VAT CHARGES , WHICH HAS BEEN ACCOUNTED SEPARATELY AND, THEREFORE, TO THIS EXTENT THERE IS NO DIFFERENCE. REGARDING THE BALANCE DIFFERENCE OF ` 23,03,713, THE ASSESSEE SUBMITTED THAT MCGM (FOR WHOM ASSESSEE CARRIED OUT CONTRACT WORK) ADD C ERTAIN CHARGES LIKE SEWERAGE CHARGES, WATER CHARGES, ETC., AND THEN AGAIN DEDUCT THE SAME. MCGM ALSO MADE VARIOUS DEDUCTIONS IF THERE IS ANY DEFAULT ON THE PART OF THE CONTRACTOR IN CARRYING OUT THE CONTRACT WORK. THE CERTIFICATE TO THIS EFFECT ISSUED BY M CGM WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER AND BASED ON THESE EXPLANATIONS, IT WAS SUBMITTED THAT THERE IS PRACTICALLY NO DIFFERENCE IN THE CONTRACT RECEIPTS. HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION PARTLY AND INSOFAR AS THE DIFFERENCE IN ACCOUNT OF VAT CHARGES OF ` 24,51,751, HE ACCEPTED THE SAME AND BALANCE DIFFERENCE OF ` 23,03,713, WAS ADDED IN THE INCOME OF THE ASSESSEE AS PER THE DISCUSSION MADE IN PARA 7 AND 8 OF THE ASSESSMENT ORDER. 5. BEFORE THE LEARNED COMMISSIONE R (APPEALS), THE ASSESSEE CHALLENGED THE VALIDITY OF RE OPENING THE CASE UNDER SECTION 147, ON THE GROUND THAT THERE IS NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD AND RE OPENING HAS BEEN DONE ON MERE CHANGE OF OPINION ON THE SHRI PARESH B. VORA 5 SAME SET OF FACTS WHICH WAS T HERE BEFORE THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. IN SUPPORT, R ELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN GERMAN REMEDIES LTD. V/S DCIT, [2006] 285 ITR 26 (BOM.) AND CATENA OF OTHER DECISIONS. BESIDES THIS, IT WAS ALSO POINTED OUT THAT REASONS RECORDED ARE BASED ON AUDIT OBJECTION AND THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER. ON MERITS ALSO, THE RECONCILIATION OF SUCH A DIFFERENCE WAS DULY EXPLAINED WITH FACTS AND MATERIAL ON RECORD IN THE FOLLOWING MANNER: 11. RECONCILIATION OF DIFFERENCE IN CONTRACT AMOUNT RECEIPTS AS PER BOOKS OF ACCOUNT AND AS PER TDS CERTIFICATE ISSUED BY MCGM: GROSS RECEIPTS AS PER TDS CERTIFICATES ` 7,68,74,174 LESS: VAT CHARGES LEVIED SEPARATELY ` 24,51,751 CERTAIN RECOVERIES / REBATES DEDUCTIONS MADE BY MCGM (CERTIFICATE ATTACHED HEREWITH) ` 1,31,60,329 ` 1,56,12,080 NET CONTRACT AMOUNT RECEIPT (A) ` 6,12,62,094 CONTRACT RECEIPTS AS PER BOOKS OF ACCOUNT (B) ` 6,12,93,710 EXCESS RECEIPTS OF CONTRACT AMOUNT (B A) 6. APART FROM THAT, THE REASONS FOR DEDUCTIONS MADE BY MCGM WAS ALSO EXPLAINED IN THE FOLLOWING MANNER: SHRI PARESH B. VORA 6 13. THE LEARNED AO ACCEPTED THE DEDUCTION FOR VAT CHARGES BUT THE AMOUNT OF RS.1,31,60,329 BEING DEDUCTION FOR RE COVERIES, REBATES AND OTHER DEDUCTIONS WAS NOT ACCEPTABLE TO HIM. OUR EXPLANATION FOR THE SAME IS GIVEN BELOW. 14. AS SHOWN ABOVE, MCGM, WHILE MAKING PAYMENT TOWARDS THE CONTRACT/JOB WORKS MAKES CERTAIN DEDUCTIONS / RECOVERIES. HOWEVER, WHILE ISSUING TDS CERTIFICATE, THE GROSS CONTRACT AMOUNTS ARE SHOWN IN TDS CERTIFICATE AND TAX IS DEDUCTED AT SOURCE ON THESE GROSS AMOUNTS DISREGARDING THE RECOVERIES / DEDUCTIONS. 15. THESE RECOVERIES / DEDUCTIONS ARE MADE BY MCGM FOR CERTAIN TECHNICAL REASONS / AND AS PE R TERMS AND CONDITIONS OF TENDER DOCUMENTS. THESE RECOVERIES STATED ABOVE MAY BE ON VARIOUS REASONS; SUCH AS UNDER: A. THE QUANTITY STATED IN OUR MEASUREMENT DETAILS SUBMITTED TO MCGM IS NOT APPROVED BY MCGM. ACCORDINGLY THE SANCTIONED AMOUNT IS REDUCED. B. THERE ARE MANY ITEMS AND HENCE MANY RATES AS PER CONTRACT AGREED UPON. HENCE MANY A TIMES RATE QUOTED BY US IS NOT APPROVED BY MCGM. THEY APPLY SOME OTHER RATE. HENCE THE FINAL SANCTIONED AMOUNT GETS REDUCED ACCORDING TO THE RATE APPLIED BY THE CORPO RATION. C. SOMETIME, THE WORK CARRIED OUT BY US IS NOT UPTO THE MARK OR CRITERIA IN THE OPINION OF SANCTIONING AUTHORITY OF MCGM. SOMETIMES, 100% PERFECTION IS NOT ACHIEVED IN THE JOB WORK DONE; IN THE OPINION OF THE SANCTIONING AUTHORITY. HENCE THE SANC TIONED AMOUNT IS REDUCED TO THAT EXTENT. TO ACHIEVE THAT 100% PERFECTION, WE MAY HAVE TO SPEND FURTHER ADDITIONAL AMOUNTS WHICH MAYOR MAY NOT BE ECONOMICALLY AND PRACTICALLY VIABLE IN THE GIVEN SET OF CIRCUMSTANCES. D. SOMETIMES, THE WORK CARRIED OUT BY US INVOLVES GUARANTEE OR WARRANTY PERIOD. IN SUCH CIRCUMSTANCES, CERTAIN ESTIMATED AMOUNT IS DEDUCTED AND KEPT WITH THEM AS A DEPOSIT TILL THE FIXED PERIOD IS OVER. AGAIN, SOMETIMES, THAT AMOUNT WILL BE FORFEITED BY MCGM IF WE FAIL TO ATTEND DURING THE GU ARANTEE PERIOD OR IF THE DEFECTS ARE NOT RECTIFIED BY US WITHIN THE STIPULATED TIME. E. THERE IS A CONDITION IN THE TENDER THAT MCGM WILL PROVIDE THE WATER AND SEWERAGE FACILITY FOR THE WORKERS OF CONTRACTOR. THE SAME HAS BEEN PROVIDED FREE OF COST TO THE CO NTRACTOR. TO FIND OUT THE BUDGETED AMOUNT OF THE WORK MCGM IS ADDING WATER SHRI PARESH B. VORA 7 AND SEWERAGE CHARGES IN THE GROSS AMOUNT PAYABLE TO THE CONTRACT. THEREFORE, IT IS THE PRACTICE OF MCGM WHILE MAKING THE PAYMENT TO THE CONTRACTOR THERE SHOULD BE ADDITION AND DED UCTION OF WATER AND SEWERAGE CHARGES TO ARRIVE THE BUDGETED FIGURE IN THE MEASUREMENT BOOK (I.E. CALLED AS MB. 16. IN SUPPORT OF ABOVE FACTS WE SUBMIT THE LETTERS/ CERTIFICATES ISSUED BY MCGM CERTIFYING THE ABOVE FACTS AS DETAILED BELOW: DY. CAWS / FDP / 236 ` 1,21,37,815 CA / FCH / F1 / 1771A / 2012 13 ` 34,639 CA / FCH / F1 / 820 / 2012 13 ` 9,87,875 IN SUPPORT OF THE ABOVE - MENTIONED POINTS YOUR APPEL L ANT IS SUBMITTING THE CHART SHOWING THE DEDUCTIONS MADE BY THE MCGM ALONGWITH THE ABOVEMENTIONED CE RTIFICATE. TDS CERTIFICATE - WISE SUMMARY OF THE DEDUCTION / RECOVERY ETC. IS ALSO SUBMITTED. 7. THE LEARNED COMMISSIONER (APPEALS) EXAMINED THE ENTIRE ASPECT OF VALIDITY OF RE OPENING AFTER AND CALLED FOR THE ENTIRE ASSESSMENT RECORDS. AFTER EXAMINING THE SA ID RECORDS, HE FOUND THAT THERE WAS AN INTERNAL AUDIT OBJECTION ON 6 TH MARCH 2009, WHEREIN THE ALLEGED DIFFERENCE IN THE CONTRACT RECEIPT OF ` 47,55,464, WAS POINTED OUT. THE GIST OF AUDIT OBJECTION HAS BEEN INCORPORATED AT PAGE 9 OF THE APPELLATE ORDER . F ROM THERE, H E NOTED THAT THE SAME LANGUAGE AND REASONS HAVE BEEN USED ADVENTURE IN THE REASONS RECORDED ALSO , WHICH GOES TO SHOW THAT THE ASSESSING OFFICER HAS NOT INDEPENDENTLY APPLIED HIS MIND ON THE ISSUE OF RE OPENING . THE LEARNED COMMISSIONER (APPEA LS) ALSO REFERRED TO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ICICI HOME FINANCE CO. LTD., VIDE SHRI PARESH B. VORA 8 JUDGMENT AND ORDER DATED 20 TH JULY 2012, PASSED IN W.P. NO.430/2012, WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT IF THE RE OPENI NG HAS BEEN MADE BY THE ASSESSING OFFICER WITHIN FOUR YEARS BASED ON REVENUE AUDIT OBJECTION WITHOUT THERE BEING ANY INDEPENDENT APPLICATION OF ASSESSING OFFICERS MIND, THEN IT CANNOT BE HELD THAT THE ASSESSING OFFICER ENTERTAINED REASONS TO BELIEVE FOR RE OPENING THE ASSESSMENT WITHIN THE MEANING OF SECTION 147. THE RELEVANT OBSERVATION OF THE HIGH COURT AS INCORPORATED BY THE LEARNED COMMISSIONER (APPEALS) WHICH ARE QUITE RELEVANT, READS AS UNDER: (I) THE BELIEF U/S 147 THAT INCOME HAS ESCAPED ASSES SMENT HAS TO BE THE REASONABLE BELIEF OF THE AO HIMSELF AND CANNOT BE AN OPINION AND/OR BELIEF OF SOME OTHER AUTHORITY. THE AO CANNOT BLINDLY FOLLOW THE OPINION OF AN AUDIT AUTHORITY FOR THE PURPOSE OF ARRIVING AT A BELIEF THAT INCOME HAS ESCAPED ASSESSMEN T. ON FACTS, THE RECORDED REASONS ARE IDENTICAL TO THE OBJECTION OF THE AUDIT AUTHORITY. THE REASONS DO NOT RELY UPON ANY TANGIBLE MATERIAL IN THE AUDIT REPORT BUT MERELY UPON AN OPINION AND THE EXISTING MATERIAL ALREADY ON RECORD. THIS ITSELF INDICATES TH AT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE AO BEFORE HE ISSUED THE S. 148 NOTICE (INDIA EASTERN NEWSPAPER SOCIETY 119 ITR 996 (SC) FOLLOWED) (II) FURTHER, THOUGH THE POWER TO REOPEN AN ASSESSMENT WITHIN 4 YEARS IS VERY WIDE, YET THERE MUST B E 'TANGIBLE MATERIAL' TO JUSTIFY THE REOPENING AND IT CANNOT BE BASED ON A 'REVIEW'. ONCE ALL THE MATERIAL WITH REGARD TO PARTICULAR ISSUE IS BEFORE THE AO AND HE CHOOSES NOT TO DEAL WITH THE SAME, I~ CANNOT BE SAID THAT HE HAD NOT APPLIED HIS MIND TO ALL THE MATERIAL BEFORE HIM. A PRESUMPTION CAN BE RAISED THAT HE APPLIED HIS MIND TO ALL THE FACTS INVOLVED IN THE ASSESSMENT (IDEA CELLULAR 301 ITR 407 (BOM), KELVINATOR 256 I TR 1 (DEL)(FB) & KELVINATOR 320 ITR 561 (SC) FOLLOWED) . SHRI PARESH B. VORA 9 8. BESIDES THIS, HE FURTHE R RELIED UPON VARIOUS DECISIONS MOSTLY ON THE ISSUE OF CHANGE OF OPINION AT PAGES 11 TO 13 OF THE APPELLATE ORDER AND CAME TO THE CONCLUSION THAT THE IMPUGNED ASSESSMENT ORDER PASSED UNDER SECTION 147, R/W SECTION 143, IS INVALID IN EYES OF LAW, AS THE R E OPENING HAS BEEN DONE ON THE BASIS OF CHANGE OF OPINION AND ON THE BASIS OF AUDIT OBJECTION , WITHOUT THERE BEING ANY INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER. NO ADJUDICATION ON MERITS , WAS DONE BY THE LEARNED COMMISSIONER (APPEALS) . 9. B EFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT PRIMA FACIE THERE HAS BEEN FACTUAL ERROR WHILE TAKING THE CONTRACT RECEIPTS BY THE ASSESSEE, WHICH HAS BEEN POINTED OUT BY THE AUDIT PARTY . THIS ITSELF WAS PRIMA FACIE SUFFICIENT GROUND FOR R E OPENING THE CASE UNDER SECTION 147. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S P.V.S. BEEDIES PVT. LTD., [1999] 237 ITR 13 (SC), WHEREIN THE HON'BLE SUPREME COURT HELD THAT RE ASSESSMENT ON THE BASIS OF FACTUAL ERROR POINTED OUT BY THE INTERNAL AUDIT PARTY IS PERMISSIBLE. 10. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT ONE VERY IMPORTANT FACT WHICH IS BORNE OUT FROM THE RECORD IS THAT ONCE THE AUDIT PARTIES HA D RAISED THE OBJECTION , THE THE N ASSESSING OFFICER HAD INITIATED THE PROCEEDINGS UNDER SECTION 154, AFTER ISSUING THE NOTICE SHRI PARESH B. VORA 10 UNDER SECTION 154(3) ON 26 TH FEBRUARY 2010 . I N RESPONSE TO THE SAME, THE ASSESSEE VIDE LETTER DATED 14 TH JULY 2010, 26 TH JULY 2010 AND ANOTHER DATED NIL , HAS EXPLAINED THE ENTIRE DIFFERENCE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS VERY MUCH SATISFIED WITH SUCH AN EXPLANATION AND RECONCILIATION MADE BY THE ASSESSEE AND WROTE A LETTER TO THE COMMISSIONER (AUD IT ) II, MUMB A I, VIDE LETTER DATED 7 TH JANUARY 2011, WHEREI N HE STATED THAT MAJOR DIFFERENCE HAS BEEN EXPLAINED BY THE ASSESSEE AND THERE IS ONLY DISCREPANCY OF ` 19,357. HOWEVER, IT APPEARS FROM THE LETTER DATED 14 TH JANUARY 2011, ISSUED BY THE OFFICE OF THE JT. COMMISSIONER, RANGE 2, THAT THE ASSESSING OFFICER W AS REQUIRED TO RE SUBMIT HIS REPORT . AFTER ALL, THIS PROCESS AND APPLICATION OF MIND ON THE ISSUE OF RECTIFICATION OF CONTRACT RECEIPTS, REOPENING HAS BEEN DONE ON THE REASONS THAT HAVE BEEN RECORDED BY THE ASSESSING OFFICER ON THE BASIS OF AUDIT OBJECTI ON. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THERE IS NO TANGIBLE MATERIAL COMING ON RECORD AND THE RE OPENING HAS BEEN DONE PURELY ON CHANGE OF OPINION AS ALL THE DETAILS OF CONTRACT RECEIPTS WAS EXAMINED BY THE ASSESSING OFFICER AND THEN ONLY HE HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING NET PROFIT RATE. IN SUPPORT OF HIS CONTENTION, HE STRONGLY RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S KELVINATOR OF INDIA LTD., [2010] 320 ITR 561 (SC) AND ALSO ORDER OF THE LEARNED COM MISSIONER (APPEALS). SHRI PARESH B. VORA 11 11. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS CONTRACTOR CARRYING OUT CONTRACT WORK , MOST LY FOR THE GOVERNMENT DEPARTMENT AND IN THIS YEAR, THE ASSESSEE HAS CARRIED OUT CONTRACT WORK FOR MCGM. THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED BY THE ASSESSING OFFICER BY ACCEPTING THE CONTRACT RECEIPTS, HOWEVER, THE NET PROFIT RATE SHOWN BY THE ASSESSEE WAS NOT ACCEPTED AND THE SAME WAS ENHANCED BY NET PROFIT RATE OF 2%. AFTER HAVING COMPLETED THE ASSESSMENT UNDER SCRUTINY PROCEEDINGS, THERE WAS AN INTERNAL AUDIT OBJECTION , WHEREIN IT WAS POINTED OUT THAT AS PER THE TDS CERTIFICATE ON RECORD, THE CONTRACT RECEIPTS COMES TO ` 7,68,74,174, AS AGAINST THIS, THE CONTRACT RECEIPT SHOWN BY THE ASSESSEE INCLUDING LABOUR CHARGES RECEIPT S AND WIP WORKED OUT TO ` 7,21,18,710, HENCE, THERE IS A DIFFERENCE OF ` 47,55,464. FROM THE RECORD, IT IS SEEN THAT A NOTICE UNDER SECTION 154(3) WAS ISSUED BY THE ASSESSING OFFICER TO RECTIFY THE SAID DIFFERENCE. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE HAS EXPLAINED THE ENTIRE DIFFERENCE AND RECONCILIATION OF THE CONTRACT RECEIPT . THEREAFTER, NO ACTION HAS BEEN TAKEN AS NO ORDER UNDER SECTION 154 HAS BEEN PASS ED. BASED ON THE SAME AUDIT OBJECTION, THE REASONS HAVE BEEN RECORDED TO ACQUIRE THE JURISDICTION FOR RE OPENING THE CASE UNDER SECTION 147. ON A PERUSAL OF THE AUDIT OBJECTION AND THE REASONS RECORDED , WE AGREE WITH THE FINDINGS OF SHRI PARESH B. VORA 12 THE LEARNED COMMISS IONER (APPEALS) THAT THEY ARE EXACTLY THE SAME AND THERE IS NO INDEPENDENT APPLICATION OF THE MIND BY THE ASSESSING OFFICER FOR ENTERTAINING REASONS TO BELIEVE OR HIS SATISFACTION FOR COMING TO A PRIMA FACIE OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT. THE REASONS TO BELIEVE AS CONTEMPLATED IN SECTION 147, IS THAT THE ASSESSING OFFICER MUST ENTERTAIN HIS REASON S TO BELIEVE WHICH SHOULD BE BASED ON SOME TANGIBLE MATERIAL COMING ON RECORD. THE REASON TO BELIEVE CANNOT BE BASED ON REVIEW OF THE EARLIER ORDER OR ON THE GROUND THAT THERE HAS BEEN SOME ERROR IN THE ORDER PASSED BY THE ASSESSING OFFICER EARLIER. EVEN IF THE RE OPENING IS WITHIN FOUR YEARS, THEN ALSO , IF THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3), THE RE OPENING CA N BE DONE ONLY WHEN THERE IS SOME TANGIBLE MATERIAL HAVING LIVE LINK NEXUS WITH THE INCOME CHARGEABLE TO TAX ESCAPING ASSESSMENT FOR THAT ASSESSMENT YEAR. THE RE OPENING CANNOT BE DONE ON MERE CHANGE OF OPINION OR REVIEW AS UPHELD BY THE HON'BLE SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA). IN THE PRESENT CASE, THE CONCEPT OF CHANGE OF OPINION IS FAR MORE APPARENT , AS BEFORE THE RE OPENING OF THE CASE, THE ASSESSING OFFICER HAS EXAMINED THE SAME ISSUE IN AUDIT OBJECTION IN THE PROCEEDINGS UNDER SEC TION 154. ONCE THE ENTIRE FACTS AND MATERIAL WAS THERE BEFORE THE ASSESSING OFFICER , THEN IT IS NOT CLEAR AS TO WHAT TRANSPIRED TO DROP SUCH PROCEEDINGS AND RE OPEN THE CASE UNDER SECTION SHRI PARESH B. VORA 13 147, ON SAME SET OF FACTS. AS CLEARLY CULLED OUT BY THE LEARNED COMMI SSIONER (APPEALS), IT IS DEFINITELY A CASE OF REVIEW AND CHANGE OF OPINION WITHOUT THERE BEING ANY MATERIAL COMING ON RECORD WHICH WAS NOT BEEN EXAMINED EARLIER. OTHERWISE ALSO, ON THE FACE OF THE EXPLANATION AND RECONCILIATION OF THE DIFFERENCE GIVEN BY THE ASSESSEE IT APPEARS THAT RECONCILIATION AND THE EXPLANATION IS QUITE PLAUSIBLE AND ON SUCH FACTS, IT IS VERY DIFFICULT THAT THE ASSESSING OFFICER COULD HAVE ENTERTAINED REASON TO BELIEVE , ONCE HE HAS EXAMINED THE SAME ASPECT IN DETAIL DURING PROCEED INGS UNDER SECTION 154. NOW, COMING TO THE DECISION OF THE HONBLE SUPREME COURT IN P V S BEEDIES PVT. LTD. (SUPRA), IT IS SEEN THAT IT WAS NOT A CASE WHERE THE ISSUE RAISED BY INTERNAL AUDIT PARTY WERE EXAMINED EARLIER AND ALSO IT WAS NOT A CASE OF CHANGE OF OPINION . THE OBJECTION OF INTERNAL AUDIT CAN CONSTITUTE AN INFORMATION, HOWEVER, SUCH INFORMATION HAD TO BE EXAMINED INDEPENDENTLY BY THE ASSESSING OFFICER AND THEN TO ARRIVE AT HIS REASON TO BELIEVE. HERE IN THIS CASE, AS DISCUSSED ABOVE, THE AUDIT OB JECTION WAS EXAMINED DURING PROCEEDINGS UNDER SECTION 154. THUS, IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) QUASHING THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) / 147, ON THE GROUND T HAT RE OPENING IS INVALID IS FACTUALLY AND LEGALLY CORRECT AND THERE IS NO REASON TO DEVIATE FROM SUCH A FINDING. ACCORDINGLY, THE ORDER OF THE LEARNED SHRI PARESH B. VORA 14 COMMISSIONER (APPEALS) IS AFFIRMED AND THE GROUND RAISED BY THE DEPARTMENT STANDS DISMISSED. 12. 12 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. 28 TH AUGUST 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 28 TH AUGUST 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 28 TH AUGUST 2014 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE R EVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMBAI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI