RATNA INFRASTRUCTURE PROJECTS PRIVATE LIMITED,HYDERABAD V. ITO, WARD-3(3), HYDERABAD

ITA 132/HYD/2023

AI Insights

The case involves Ratna Infrastructure Projects Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming additions made by the Assessing Officer related to suppressed work in progress and unaccounted payments. The primary legal contention was the validity of the reassessment under section 147 of the Income Tax Act, 1961, initiated based on information from ADIT (Investigation), Kolkata, which alleged that the company made payments to a shell company and understated work in progress. The tribunal examined whether the reassessment was based on a 'change of opinion' or new tangible material, ultimately deciding it was the former, and thus, the reassessment was quashed.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29090 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs. Kelvinator of India Ltd., DCIT Vs. Financial Software and Systems (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.BALAKRISHNA
• Assessee Lawyers: MOHD. AFZAL
• Keywords: Condonation of delay; Set aside; Difference of opinion; Change of opinion; Invalid notice; Reasonable cause; Reassessment proceedings; Corroborative evidences; Documents seized; Reopening of assessment; Assessment record; Reason to believe; Tangible material; Bogus
• Section: 148; 143(3); 142(1); 250; 132; 139; 40A(3)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” , HYDERABAD BEFORE SHRI LALIET KUMAR, HON’BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER ITA No.132/Hyd/2023 Assessment Year: 2012-13 Ratna Infrastructure Projects Private Limited, Hyderabad. PAN : AADCR5836P. Vs. The Income Tax Officer, Ward –3(3), Hyderabad. (Assessee) (Respondent) Assessee by: Shri Mohd. Afzal, Advocate. Revenue by: Shri B. Balakrishna, CIT-DR Date of hearing: 20.01.2025 Date of pronouncement: 12.02.2025 O R D E R PER MANJUNATHA, G. A.M. This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 15.03.2022, pertaining to A.Y.2012-13. The assessee has raised the following grounds : 2 ITA No.132/Hyd/2023 “1. The order of the learned Commissioner (Appeals) of Income Tax is against the law, weight of evidence and probabilities of case. 2. The learned Commissioner erred in confirming the order of the Assessing Officer wherein, an addition Rs.267,38,00,000/- is made as suppressed work in progress. 3. The learned Commissioner erred in confirming an addition of Rs.5,64,94,670/-which is made with an assumption that the amount paid to Solvent Real Estate Pvt Ltd as unaccounted payment of the assessee 4. The learned Commissioner ought to have appreciated that a search and seizure operation has taken place in the assessees premises on 26.03.2012, after verification of all the documents seized and verification of books of accounts, the then learned Assessing Officer made an addition of Rs. 18,01,00,000/-, as unexplained expenditure/ disallowance u/s 40A(3) of the IT Act. Therefore, erred in confirming additions made by Assessing Officer in reassessment proceedings amounting to Rs.273,02,94,670/-. 5. The learned Commissioner ought to have appreciated that notice u/s 148 is issued on account of a letter from ADIT Kolkata, in respect of a transaction amounting to Rs.5,64,94,670/- and further in respect of transaction of Rs.267,38,00,000/-on merely a TEP. As there is no application of mind and notice u/s 148 is issued on borrowed information, therefore, ought to have held that notice issued is only on surmises and conjectures and therefore, invalid. 6. The learned Commissioner ought to have appreciated the CIT(A) in an appeal against the original assessment order, held that the books of accounts are \"deemed to have been rejected\". Therefore, no further addition can be made from the books of accounts which are already rejected, therefore, erred in confirming an addition of Rs.273,02,94,670/- .”. 2. The assessee also filed a petition for admission of additional grounds, and the relevant additional grounds of appeal filed by the assessee are as under: 3 ITA No.132/Hyd/2023 “1. The learned Assessing Officer issued notice u/s 148 of the IT Act on 26.03.2019, assuming that the consortium in which the assessee is a member filed an affidavit before Hon'ble Supreme Court wherein the assessee admitted Rs.271.90Cr as its work in progress. The members of the Joint Venture M/s Maytas-Gayathri, appears to have filed affidavits before the Hon'ble Supreme Court. The assessee is only a Sub Contractor of the JV, has not filed any affidavit before the Supreme Court and further, the assessee is not a party before the Hon'ble Supreme Court in the case of Union of India Vs Hetovi kappo & Ors, therefore, the learned Assessing Officer erred in issuing notice u/s 148 and further as the assumption of the Assessing Officer, in respect of escapement of income, is not correct, therefore, the same is an invalid notice. 2. The learned Assessing Officer issued notice u/s 148 on 26.03.2019, with incorrect assumptions in respect of facts and circumstances of the case, therefore, the same is an invalid notice and consequently the proceedings u/s 143(3) r.w.s 147 are to be held as invalid.” 3. At the outset, we find that there is a delay of 291 days in the appeal filed before the Tribunal, for which a petition for condonation of delay along with an affidavit explaining the reasons for the delay has been filed. 4. The learned counsel for the assessee, Shri Mohd. Afzal, Advocate, referring to the petition filed by the assessee, submitted that the appellate order passed by the Ld.CIT(A) has been sent to the e-mail address provided by the assessee, which was not in active, and this fact has been brought to the notice of the Ld.CIT(A) in Form No.35, and a new e-mail address has been given for all communications. Although the assessee has informed the department about the new e-mail address, it appears that the appellate authority has sent the appellate order to the earlier e- mail address given by the assessee, which was unnoticed. 4 ITA No.132/Hyd/2023 Therefore, the assessee could not file the appeal within the time, but the delay in filing the appeal is neither intentional nor due to any undue benefit. Therefore, the delay may be condoned, and the appeal be admitted in the interests of justice. 5. The Ld.CIT-DR, Shri B. Bala Krishna, on the other hand, opposed the petition filed by the assessee for condonation of delay in filing the appeal and has submitted that the reasons given by the assessee do not come under a reasonable cause for condoning the delay, and therefore, the delay in filing the appeal should not be condoned. 6. Heard both the parties and considered the relevant contents of the petition filed by the assessee for condonation of delay. The order u/s 250 of the Act, has been passed by the LD.CIT(A) on 15.03.2022 and appears to have been sent to the e-mail address available with the appellate authority. It is the argument of the counsel for the assessee that in Form No.35, the assessee has provided the e-mail address for all communications before the first appellate authority. However, it appears that the first appellate authority has sent the appellate order to a different e-mail address available with the department. The assessee came to know about the order passed by the first appellate authority when the assessee met the Assessing Officer about the stay of collection of taxes and that time, the Assessing Officer informed the assessee that the appellate order was passed by the Ld. CIT(A) on 5 ITA No.132/Hyd/2023 15.03.2022. The assessee then took steps to file the appeal after noticing of the fact that the Ld.CIT(A) has dismissed the appeal filed by the assessee, which caused the delay of 291 days. We find that the assessee claims that the order passed by the Ld.CIT(A) was not communicated to the e-mail address given in Form 35, and this fact has not been disputed by the revenue. Therefore, we are of the considered view that the reasons given for the delay in filing the appeal appear to be reasonable and bona fide and do come under a reasonable cause for condoning the delay in filing the appeal. Thus, we condone the delay in the filing of the appeal and admit the appeal filed by the assessee for adjudication. 7. The brief facts of the case are that the assessee company has filed its return of income for A.Y. 2012-13 on 01.01.2014, declaring a total income of Rs.39,84,93,420/-. A search and seizure operation u/s 132 of the Income Tax Act, 1961 was carried out on 26.03.2012, and the assessment has been completed u/s 143(3) on 31.03.2014, determining the total income of the assessee at Rs.57,85,93,420/-. The case has been subsequently reopened u/s 147 of the Act for the reasons recorded, as per which income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act. Therefore, notice u/s 148 dt.21.03.2019 was issued and served on the assessee. In response to the notice, the assessee filed a return of income on 03.05.2019, admitting a total income of Rs.39,84,93,420/-. 6 ITA No.132/Hyd/2023 8. The case was selected for scrutiny, and during the course of assessment proceedings, the Assessing Officer noticed that information was received from ADIT(Investigation), Unit-2(1), Kolkata that M/s. Solvent Real Estate Pvt. Ltd., receiving funds from several entities/companies, and the entire funds were transferred to other bank accounts without any business rationale. The enquiry done by Directorate of Kolkata, ADIT (Investigation), Kolkata, revealed that M/s. Solvent Real Estate Pvt. Ltd., is a shell company and its bank account was used only for the purpose of rotation of money / booking bogus expenses. Further, the assessee company has paid an amount of Rs.5,64,94,670/- to M/s. Solvent Real Estate Pvt. Ltd., for sub- contract work. Therefore, the assessee was called upon to file relevant evidences, including necessary evidences for payment made to the above company. The Assessing Officer further noted that information in the form of Tax Evasion Petition (hereinafter referred as “TEP”) has been received that the assessee company has done the sub-contract work for M/s. Gayatri Projects Ltd., and Ms. IL&FS Engineering and Construction Company Ltd., for a road project in Nagaland. M/s. Gayatri Projects Ltd., and Ms. IL&FS Engineering and Construction Company Ltd., have formed a Joint Venture (JV), namely Maytas - Gayatri JV. This JV was awarded a contract for road widening project in Nagaland for an amount of Rs.1130.66 crores in February, 2011. The partners of the JV sub-contracted their share of work to the assessee company on back-to-back basis after discounting 22% and 11.5%, respectively. 7 ITA No.132/Hyd/2023 Due to escalation in the prices, a PIL was filed in Guwahati High Court, which was disposed off on 13.10.2015. Before the Guwahati High Court, the JV filed an affidavit stating that it had to receive arrears of Rs.540.31 crores from the Road Transport Ministry, which was upheld by the Guwahati High Court. On appeal by the Government of India, the Hon'ble Supreme Court decided the appeal vide order dt.11.01.2017. During the court proceedings, the JV and its partners filed affidavits declaring the work-in- progress for A.Y. 2012-13 @ Rs.330.50 crores. From the information received, it is seen that the consortium, in which the assessee is a member, filed an affidavit before the Hon'ble Supreme Court, wherein the assessee company admitted Rs.271.90 crores as its work-in-progress after discounted adjustments. However, in the corresponding return of income, the assessee admitted work- in-progress at Rs.4.52 crores. Therefore, there is under- assessment of income due to a difference in work-in-progress of Rs.267.38 crores. Therefore, the assessee was called upon to file necessary evidences, including justification for the difference in work-in-progress. 9. In response to the notice, the assessee submitted that the company has paid Rs.5,64,94,670/- for the outstanding amount of Rs.9,13,11,062/- as on 31.03.2011 to M/s. Solvent Real Estate Pvt. Ltd., for carrying out sub-contract work. The assessee had entrusted the excavation, job work at Mithy River at Delhi and other work to M/s. Solvent Real Estate Pvt. Ltd., for which it has 8 ITA No.132/Hyd/2023 made payment. In this regard, relevant documents, including ledger extracts of the parties in their books of accounts, were filed. Insofar as the difference in work-in-progress is concerned, the assessee submitted that during the financial year under consideration, the assessee company has raised a bill for Rs. 146.06 crores and considered the same as unbilled revenue for the year ending 31.03.2012. In addition to the above, the assessee paid an amount of Rs.252 crores to various sub-contractors for execution of the above work, and the same has been shown under the head \"advances.\" Since the work has not been certified by the main contractor, the assessee has also not considered the work- in-progress, and the payment made to the sub-contractor on a piecemeal basis was considered as ‘advances’ in the balance-sheet and the same balance was continued up to 31.03.2016. Subsequently, the assessee, after getting the order from Hon'ble Supreme Court for cancellation of the above work subject to the clearance of the outstanding expenses incurred by the principal contractor, made provision for doubtful advances of Rs.252 crores in the A.Y. 2017-18, and the same has been added back in the computation of income. Therefore, there is no difference in work- in-progress as claimed in the show cause notice. 9 ITA No.132/Hyd/2023 10. The Assessing Officer, after considering the submissions of the assessee and also taking note of various details, observed that even though the assessee claims payments made to M/s. Solvent Real Estate Pvt. Ltd., for carrying out sub-contract work, but failed to prove the genuineness of payments with relevant evidence, which is evident from the fact that the investigation carried out by the ADIT (Investigation), Kolkata, reveals that M/s. Solvent Real Estate Pvt. Ltd., is a shell company, used for rotating the money to various entities. The Assessing Officer further noted that although the assessee claims that a sum of Rs.4,64,94,670/- has been paid against an outstanding balance of Rs.9,13,11,062/-, but on going through the assessment records for A.Y. 2010-11, the assessee stated that it had made the entire payment to M/s. Solvent Real Estate Pvt. Ltd. Therefore, the argument that the outstanding balance against which the payment has been made now is devoid of merit. The Assessing Officer, therefore, observed that although the assessee claims to have furnished ledger accounts, it has not furnished any ledger accounts to prove its argument that it has paid Rs.4,64,94,670/- against the outstanding balance. Therefore, the entire amount of payment of Rs.5,64,94,670/- has been added back to the total income. 10 ITA No.132/Hyd/2023 11. In so far as the difference in work-in-progress when compared to work-in-progress as shown in the balance sheet as on 31.03.2012 and the work-in-progress as shown in the affidavit filed before the Hon'ble Supreme Court in the proceedings of JV, the Assessing Officer observed that although the assessee claims to have paid a sum of Rs.252 crores to various sub-contractors and shown as advances, it failed to furnish relevant evidences for the argument that the work-in-progress claimed in the affidavit before the Hon'ble Supreme Court is in the form of loans and advances. The Assessing Officer further noted that the assessee failed to file any agreements/work orders with those sub- contractors with whom it has claimed to have paid Rs.252 crores. Further, during the course of the search operation, no evidence of any agreements/work orders were found by the department. Therefore, the argument of the assessee that the difference in work-in-progress is in the form of ‘loans and advances’ was not accepted. Thus, the Assessing Officer rejected the argument of the assessee and made an addition of Rs.267.38 crores towards the difference in work-in-progress as per the affidavit filed before the Hon'ble Supreme Court when compared to the work-in-progress shown in the balance sheet. 11 ITA No.132/Hyd/2023 12. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has challenged the additions made by the Assessing Officer towards the sub-contract payment made to M/s. Solvent Real Estate Pvt. Ltd., for an amount of Rs.5,64,94,670/- and also the addition made towards the difference in work-in-progress. The assessee further contended that the Assessing Officer has erred in making the addition towards sub-contract payment made to M/s. Solvent Real Estate Pvt. Ltd., only on the basis of the Investigation Report of ADIT (Investigation), Unit-2(1), Kolkata, without bringing on record any evidence to suggest that the payment made by the assessee is not supported by necessary evidence. The assessee has also challenged the addition made by the Assessing Officer towards the difference in work-in-progress on the ground that the Assessing Officer has failed to understand the method of accounting followed by the assessee to account for work-in-progress whereby the assessee has explained the reasons that as per the books of accounts and the affidavit filed by the JV Partners before the Hon'ble Supreme Court, the work carried out by the assessee was not certified by the JV due to disputes and as a result, the assessee has shown the amount under the head 'advances paid to various sub-contractors' in loans and advances. The assessee further argued that if the amount of loans and advances of Rs.252 crores, along with a markup, is considered, then the difference quantified by the Assessing Officer is matching with the work-in-progress as claimed by the JV Partners in their 12 ITA No.132/Hyd/2023 affidavit before the Hon'ble Supreme Court. Therefore, the assessee submitted that the addition made by the Assessing Officer should be deleted. 13. The Ld. CIT(A), after considering the submissions of the assessee and taking note of the relevant facts, rejected the explanation of the assessee and sustained the addition of Rs. 5,64,94,670/- made by the Assessing Officer on the ground that the assessee could not furnish relevant evidence to prove the genuineness of the payment made to M/s. Solvent Real Estate Pvt. Ltd in light of the facts gathered during the course of the investigation carried out by the ADIT(Investigation), Unit-2(1), Kolkata. The LD.CIT(A) rejected the arguments of the assessee and sustained the addition made by the Assessing Officer. The relevant findings of the Ld.CIT(A) are as under: “5. Ground No.2. The ground is against addition of Rs.5,64,94,670/-. 5.1. Relevant parts of AO's order are extracted as under: QUOTE: 2 Subsequently, the following information has been received in the case of the assessee which pertains to the year under consideration. (i). Information was received in this case, from ADIT (Investigation), Unit- 2(1). Kolkata vide letter dated 09.03.2018 that M/s Solvent Real Estate Pvt. Ltd. (A/c No.310213500000Z 444-Karur Vysya Bank) received funds from several entities/Companies and the entire funds were transferred to other bank accounts without any business rationale. The enquiry done by Directorate of Kolkata, Income Tax Department (Investigations) revealed that the company M/s Solvent Real Estate Pvt. Ltd. is a shell company and its bank account was used only for the purpose of rotation of money/booking bogus expenses. It is also seen that the alleged funds 13 ITA No.132/Hyd/2023 were transferred from M/s Solvent Real Estate Pvt. Ltd to bank account of those entity/companies which also do not exist at their address, which supports the fact that the funds which were transferred to M/s Solvent Real Estate Pvt. Ltd. Was for purpose of booking bogus expenses M/s solvent Real Estate Pvt. Ltd. is a paper/shell company, which received an amount of Rs.5,64,94,670/- from M/s Ratna Infrastructure Projects Pvt. Ltd. However, it is not forth coming record of M/s Ratna Infrastructure Projects Pvt. Ltd. as to why this amount has been given by the assessee company to M/s Solvent Real Estate Pvt. Ltd. M/s Solvent Real Estate Pvt. Ltd. being a paper/shell company. The entire transaction becomes dubious & sham. Therefore, the source for the amount of Rs 5,64,94,670/- which has direct bearing on the income of the assessee has escaped assessment.” 14. In so far as the issue of addition towards the difference in work-in-progress is concerned, the Ld. CIT(A) has held that the assessee could not reconcile the difference in work-in-progress as noticed by the Assessing Officer when compared to the work-in- progress in the books of accounts of the assessee as on 31.03.2012 and the work-in-progress claimed before the Hon'ble Supreme Court by the JV Partners. Although the assessee claims that the department has seized all the books of accounts during the course of the search, the fact remains that nearly ten years have already passed from the date of the search and further, the assessment in connection with the search has already been completed long back. Therefore, it is not understood as to how the assessee is not in a position to produce relevant documents related to work-in- progress before the Assessing Officer at the time of assessment proceedings. Thus, the Ld.CIT(A) rejected the arguments of the 14 ITA No.132/Hyd/2023 assessee and sustained the addition made by the Assessing Officer. The relevant findings of the Ld.CIT(A) are as under: “4.3. I have considered the matter. From a reading of the assessment order, it can be understood that assessee had taken back to back sub- contract work from Maytas-Gayatri JV. The said JV had filed affidavit before the Hon'ble Court stating that on the contract work allotted, it had WIP of Rs.330.20 crore which, after discounts and adjustments, came to Rs.271.90 crore. The assessee, who was executing back to back contract. disclosed WIP of Rs.4.52 crore only. The stand of AO is that there is short fall of discloser of WIP by assessee to the tune of Rs.267.38 crore. In this scenario, the assessee should have given complete reconciliation of WIP standing in its books of accounts/return of income with the WIP disclosed by Contract Principal in affidavit furnished to the court. From a reading of submission furnished by assessee to the AO in course of assessment proceeding, it can be seen that it claimed to have made substantial advances to sub-contractors in Nagaland. It also claimed to have incurred payments in the form of security deposits. But the AO found that there was no such complete reconciliation supported by book of accounts. Assessee had filed some purported ledger extracts, but details were found unverifiable by the AC. The assessee ought to have submitted copies of books of accounts to the AO with supporting evidences. That was not done by assessee in course of assessment proceeding. This is compounded by the fact that even in appeal proceeding, no such reconciliation was filed. The assessee is simply repeating the arguments advanced before the AO. 4.3.1. The issue in hand involves addition of over Rs. 267 Crore. This is by no means a small sum of money. The assessee should give a threadbare step by step reconciliation of WIP shown to Court and what was shown in its books of accounts. This should not be an impossible exercise on the part of the assessee. If there was claim of Security Deposit of such and such amounts, the assessee should furnish party-wise details of such deposits. It should be supported by the entries in the books of accounts. It should also be supported by documents authenticating such deposits. Substantial advances was also claimed to have been made to suppliers 1 fail to understand as to how the assessee did not give party-wise advances of such supplies. Instead of giving general arguments, assessee should have given full details of such advances supported by its books of accounts and other documents authenticating such advances. The assessee, it appears, is not willing to undertake the exercise. 15 ITA No.132/Hyd/2023 4.3.2. In the reply dated 26.12.2019 submitted by assessee to the AO, it was stated that books of accounts with respect to work in Nagaland were seized by the Department and that Work Orders and agreements entered into by assessee with sub-contractors were seized by the Department. The AO was requested to give more time for production of the same. In this regard, it may be stated that the search in case of assessee took place on 26.03.2012. Nearly ten years have already passed from the search. Even the assessment in connection with the search was already completed long back. It is not understood as to how the assessee is not in position to produce the books of accounts and relevant documents which pertained to the impugned WIP before the AO at the time of assessment proceeding.” 15. The first issue that came up for our consideration from additional grounds of appeal filed by the assessee is the validity of reopening of assessment u/s 147 of the Act and the consequent assessment order passed by the Assessing Officer under section 143(3) r.w.s 147 of the Income Tax Act, 1961, dated 30.12.2019. 16. The learned counsel for the assessee, Shri Mohd. Afzal, Advocate, referring to the reasons recorded for reopening of the assessment, submitted that the Assessing Officer has formed a reasonable belief of escapement of income on the basis of reasons recorded for reopening of the assessment and alleged that income escaped assessment on account of payment made to M/s. Solvent Real Estate Pvt. Ltd., to the tune of Rs.5,64,94,670/- without appreciating the fact that the issue of payment made to sub- contractor M/s. Solvent Real Estate Pvt. Ltd., has been the subject matter of assessment proceedings u/s 143(3) by the Assessing Officer, where the Assessing Officer has issued a specific notice on 16.01.2014 and called for specific information vide question no.16, 16 ITA No.132/Hyd/2023 for which the assessee has furnished the complete details of expenditure. Therefore, the reopening of assessment on the very same issue based on subsequent information received from ADIT, Investigation, Kolkata, is a change of opinion. In this regard, he relied upon the decision of the hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. reported in (2010) 107 Taxman 312 (SC). The learned counsel for the assessee further submitted that the reopening of assessment u/s 147 of the Act, is invalid insofar as the issue of difference in work-in-progress is concerned, as there is no live nexus between the formation of belief of escapement of income and the income escaped assessment, which is evident from the reasons recorded by the Assessing Officer, where the Assessing Officer refers to an affidavit filed before the hon'ble Supreme Court in connection with proceedings before the hon'ble Supreme Court. However, the fact remains that the assessee is not a member of the Consortium / JV, but only a sub- contractor, who executes work for the JV partners. Further, the assessee has not filed any appeal before the hon'ble Supreme Court and claimed work-in-progress of Rs.271.90 crores. Therefore, the reasonable belief of escapement of income formed by the Assessing Officer on the basis of the material is totally incorrect. Therefore, he submitted that the reopening of the assessment and the consequent assessment order passed by the Assessing Officer is invalid and needs to be quashed. 17 ITA No.132/Hyd/2023 17. The ld. CIT-DR, Shri B. Bala Krishna, on the other hand, supporting the order of Ld. CIT(A), submitted that the assessment has been reopened on the basis of information received from ADIT, Investigation, Kolkata, regarding payment to M/s. Solvent Real Estate Pvt. Ltd., which company has provided accommodation entries to various parties, and the assessee is one of the beneficiaries from the said company. Further, information on the basis of Tax Evasion Petition (TEP) was received by the Assessing Officer, and as per the said petition, it was noticed that the assessee has claimed work-in-progress of Rs.271.90 crores in an affidavit filed before the hon'ble Supreme Court, whereas the work- in-progress in the books of accounts of the assessee was Rs.4.52 crores. Since there is a difference in work-in-progress as claimed by the assessee in the affidavit filed before the hon'ble Supreme Court and the work-in-progress as shown in the books of accounts, there is an escapement of income from tax and on the basis of the said information, Assessing Officer has formed reasonable belief of escapement of income. Therefore, the reopening of assessment in the present case is valid and grounds raised by the assessee are devoid of merit and need to be dismissed. 18 ITA No.132/Hyd/2023 18. We have heard both parties, perused the material on record, and gone through the orders of the authorities below. The facts borne out from the record indicate that the original assessment in the present case was completed u/s 143(3) on 31.03.2014 pursuant to a search operation conducted u/s 132 of the Act on 26.03.2012. Admittedly, the Assessing Officer reopened the assessment and issued notice u/s 148 of the Act on 21.03.2019, which is beyond four years from the end of the relevant assessment year. Once the original assessment is completed u/s 143(3) of the Act, and the assessment is reopened after four years from the end of relevant assessment year, then as per the proviso to Section 147 of the Act, when the assessment has been made for the relevant assessment year under Section 143(3) of the Act, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income escaped from tax, for such assessment by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice u/s 142(1) of the Act or to disclose fully and truly all material facts necessary for that assessment year. Admittedly, in the present case, the proviso to Section 147 is applicable, because the assessment has been reopened after four years from the end of the relevant assessment year. 19 ITA No.132/Hyd/2023 19. In this legal background, if we examine the facts of the present case, there is no dispute with regard to the fact that during the course of original assessment proceedings, the Assessing Officer issued a specific notice u/s 142(1) of the Act dated 16.01.2014 and called for specific information regarding sub-contract payment made to M/s. Solvent Real Estate Pvt. Ltd., vide question no.16, for which the assessee filed complete details, including relevant copies of the work order issued to the sub- contractor, nature of sub-contract work, total amount of sub- contract, and payment made to the above party. Further, the assessee has also explained the amount of sub-contract and payment made during the relevant assessment year and the amount outstanding in the books of accounts of the assessee. The Assessing Officer, after considering the submissions of the assessee has completed the assessment and accepted the payment made to M/s. Solvent Real Estate Pvt. Ltd., towards sub-contract charges and therefore, in our considered view, reopening the assessment on the basis of the very same information in the guise of subsequent information received from ADIT (Investigation), Kolkata, is nothing but a ‘change of opinion’, which is not permissible under the law. Further, although the Assessing Officer refers to the investigation report received from the ADIT (Investigation), Kolkata, but there is no evidence as to the basis of such report. Therefore, in our considered view, unless there is fresh tangible material in the possession of the Assessing Officer which came to his possession subsequent to completion of the 20 ITA No.132/Hyd/2023 original assessment, in our considered view, reopening of the assessment on the very same material amounts to change of opinion, which is not permissible under law. This legal principle is supported by the decision of the Hon'ble Supreme Court in the case of CIT Vs. M/s. Kelvinator of India Limited [2010] 107 Taxman 312 (SC), wherein it was clearly held that the Assessing Officer has power to reopen the assessment, but such power should be based on formation of a reasonable belief of escapement of income on the basis of fresh tangible material. In the present case, going by the reasons recorded for reopening the assessment, it is undisputedly clear that the Assessing Officer has reopened the assessment on the very same material which was available to him when he passed the original assessment order under Section 143(3) of the Act. Although the Assessing Officer claims that subsequent information was received from the ADIT (Investigation), Kolkata, but there is no details as to how payment made to the said company is assessable as the income of the assessee. This legal principle is further supported by the decision of Hon’ble Supreme court in the case of DCIT Vs. Financial Software and Systems (P.) Ltd. [2022] 145 taxmann.com 37(SC), wherein it was held that where at the time original assessment u/s 143(3), specific queries were raised by Assessing Officer, which were duly answered by assessee company and thereafter assessment order was passed, it was not open for revenue to reopen assessment on same issue and, thus, impugned reassessment proceedings initiated on mere change of opinion was 21 ITA No.132/Hyd/2023 to be set aside. Therefore, we are of the considered view that the reopening of the assessment on this issue is illegal and void ab initio. 20. In so far as the issue of reopening of assessment on work-in- progress is concerned, we find that as per the reasons recorded by the Assessing Officer, information received in the form of a Tax Evasion Petition (TEP) shows that the assessee is a member of a Consortium and filed an affidavit before the Hon'ble Supreme Court, wherein it has admitted work-in-progress of Rs. 271.90 crores. The Assessing Officer, on the basis of the TEP, came to the conclusion that there is an under-assessment of income to the extent of Rs. 267.38 crores on account of the difference in work- in-progress, when compared the affidavit filed before the Hon'ble Supreme Court and work-in-progress as claimed in the books of account of the assessee as on 31.03.2012. In our considered view, the formation of belief of escapement of income is not based on tangible material, which suggests escapement of income, which is evident from the reasons recorded for reopening of the assessment, where the Assessing Officer refers to the TEP and claimed that the assessee is a member of the Consortium. However, the assessee is not a member of the Consortium but only a sub-contractor, who executed work for the JV and its partners on back-to-back basis. Therefore, the allegation of the Assessing Officer that the assessee has filed an affidavit before the Hon'ble Supreme Court is not backed by any evidence. Even otherwise, going by the reasons 22 ITA No.132/Hyd/2023 recorded by the Assessing Officer, the reference to the TEP shows that there is a dispute regarding a road project work in Nagaland between Mythas Gayatri JV and the Chief Engineer, PWD, NH, Government of India. A Public Interest Litigation (PIL) has been filed before the Guwahati High Court invoking jurisdiction under Article 226 of the Constitution of India. The Hon'ble Guwahati High Court has passed an order, and the same has been challenged by the Union of India before the Hon'ble Supreme Court in Civil Appeal Nos. 342 and 343 of 2017. The Hon'ble Supreme Court passed an order in Civil Appeal Nos. 342 and 343 of 2017 on 11.01.2017. On going through the orders passed by the Hon'ble Guwahati High Court and confirmed by the Hon'ble Supreme Court, we find that the assessee is not a party to the said litigation. The dispute is between Mythas Gayatri JV, its partners, and the Union of India. Whatever the affidavits filed before the Hon'ble Supreme Court by the JV Partners have nothing to do with the case of the assessee. The assessee has neither filed any affidavit nor made any claim in the said proceedings. Therefore, relying upon the affidavit filed by third parties in the proceedings before the Hon'ble Guwahati Court in a PIL cannot be linked to the assessee merely for the reason that the assessee is a sub- contractor to the said JV. 23 ITA No.132/Hyd/2023 21. In our considered view, for reopening the assessment, there should be a tangible material which suggests escapement of income. In the present case, the Assessing Officer formed a reasonable belief of escapement of income on the basis of TEP, which reveals the facts in PIL before the Guwahati High Court and the Hon'ble Supreme Court, and nowhere in the said petition, the assessee is a party or has made any claim from the Government of India. Therefore, in our considered view, formation of belief of escapement of income by the Assessing Officer based on the TEP is nothing but a case of reopening of the assessment without any tangible material which suggests escapement of income. In our considered view, for reopening of the assessment, there should be a fresh tangible material which suggests escapement of income which came to the possession of the Assessing Officer subsequent to the completion of the original assessment proceedings. In the present case, there is an absence of tangible material, which is the basis for formation of a reasonable belief of escapement of income. Therefore, we are of the considered view that the reopening of the assessment in the present case is without any fresh tangible material. Consequently, the formation of a reasonable belief regarding the escapement of income for reopening of the assessment and the issuance of notice under Section 148 of the Act are illegal and void ab initio. 24 ITA No.132/Hyd/2023 22. The assessee has relied upon the decision of Hon’ble Supreme Court, in the case of CIT Vs. Kelvinator of India Limited [2010] 320 ITR 561 (SC). The Hon’ble Supreme Court in light of provisions of section 147 of the Act, held as under. “Prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions, viz., if (a) the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax had escaped assessment for that year, or (b ) the ITO had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment for any assessment year. The fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 with effect from 1-4-1989 those conditions are given a go-by and only one condition has remained, viz., where the Assessing Officer has reason to believe that income has escaped assessment, the section confers jurisdiction to reopen the assessment. Therefore, post 1-4-1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe', failing which 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. One 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 reassess, but the reassessment has to be based on fulfilment of certain pre- conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the 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 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer.” 25 ITA No.132/Hyd/2023 23. In this view of the matter and considering the facts and circumstances, we are of the considered opinion that reopening of the assessment in the present case on the basis of reasons recorded for reopening of the assessment is not on sound footing. Therefore, the notice issued by the Assessing Officer u/s 148 of the Act dated 21.03.2019 and the consequent assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act dated cannot be sustained. Thus, we quash the reassessment order passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Act dated 30.12.2019. 24. The assessee has raised several grounds and challenged additions made by the Assessing Officer towards sub-contract amount paid to M/s. Solvent Real Estate Pvt. Ltd., and also additions made towards difference in work-in-progress and argued that the Assessing Officer has wrongly made additions, even though the assessee has explained the difference in work-in- progress. We find that the appeal filed by the assessee has been allowed on legal ground challenging the validity of reassessment order passed by the Assessing Officer under section u/s 143(3) r.w.s. 147 of the Act and held that the reassessment order passed by the Assessing Officer is invalid and cannot be sustained. Therefore, in our considered view, the grounds taken by the assessee challenging the additions on merits becomes infructuous and therefore, all the grounds taken by the assessee on two 26 ITA No.132/Hyd/2023 additions made by the Assessing Officer are dismissed as infructuous. 25. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 12th February, 2025. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (G. MANJUNATHA) ACCOUNTANT MEMBER Sd/- Hyderabad, dated 12.02.2025. TYNM/sps Sd/- Sd/- Sd/- Copy to: S.No Addresses 1 Ratna Infrastructure Projects Private Limited, C/o. Mohd Afzal, Advocate, 402, Sherson’s Residency, 11-5-465, Criminal Court Road, Red Hills, Hyderabad – 04. 2 The Income Tax Officer, Ward – 3(3), Hyderabad. 3 Pr.CIT, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "