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2015 (7) TMI 606 - AT - Income Tax


Issues Involved:
1. Validity of reopening assessments under Section 148 after assessments under Section 153C.
2. Justification for reassessment based on "reason to believe" that income has escaped assessment.
3. Time-barred reassessment under Section 149.
4. Quantum of income considered as undisclosed income.

Detailed Analysis:

1. Validity of Reopening Assessments under Section 148 after Assessments under Section 153C:
The assessee argued that once an assessment is completed under Section 153C read with Section 143(3), it cannot be reopened under Section 147 to issue a notice under Section 148. The Tribunal dismissed this argument, stating that Section 147 permits reassessment of income that has escaped assessment, subject to the provisions of Sections 149 and 153. The Tribunal emphasized that there is no bar on reopening assessments completed under Section 153A/153C if there is a reason to believe that income escaped assessment.

2. Justification for Reassessment Based on "Reason to Believe" that Income Has Escaped Assessment:
The Tribunal highlighted that for reopening an assessment, the Assessing Officer must have "reason to believe" that income has escaped assessment. This term means that the officer must have cause or justification to know or suppose that income had escaped assessment. The Tribunal referenced the Supreme Court's decision in CIT vs. Kelvinator of India Limited, which clarified that post-April 1, 1989, the power to reopen is much wider, provided there is "tangible material" indicating escapement of income. The Tribunal found that the Assessing Officer had sufficient material to form the requisite belief that income had escaped assessment, thus justifying the issuance of notice under Section 148.

3. Time-Barred Reassessment under Section 149:
The assessee contended that the reassessment was time-barred under Section 149. The Tribunal noted that Section 153A allows the Assessing Officer to assess or reassess the total income for the last six preceding assessment years. The non obstante clause in Section 153A overrides the time limits prescribed in Section 149, making the reassessment valid. The Tribunal rejected the argument that the reassessment was time-barred.

4. Quantum of Income Considered as Undisclosed Income:
The assessee argued that the entire unaccounted contract receipts should not be considered as undisclosed income. The Department contended that the gross contract receipts, as per the seized materials, should be considered as income since business expenditure had already been accounted for in regular books. The Tribunal agreed with the assessee that it is not appropriate to consider the entire unaccounted gross receipts as income. Instead, only the gross profits on these unaccounted receipts should be considered as income. The Tribunal directed the Assessing Officer to adopt the average gross profit rate disclosed by the assessee in the last three years to determine the income from unaccounted receipts. This issue was remitted back to the Assessing Officer for quantification of income, with the assessee given an opportunity to review the seized materials.

Conclusion:
The Tribunal upheld the validity of reopening the assessments under Section 148, justified the reassessment based on "reason to believe," rejected the argument that the reassessment was time-barred, and directed the Assessing Officer to consider only the gross profits on unaccounted receipts as income. The assessee's appeals were allowed for statistical purposes, and the matter was remitted back for quantification of income.

 

 

 

 

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