2019 (10) TMI 710 - AT - Income Tax

Validity of the re-opening of the assessment u/s 147 on account of change of opinion - Whether there was prima facie material on the basis of which the department could reopen the case? - HELD THAT - The sufficiency and correctness of the material is not a thing to be considered as this stage. The decision relied by AR which justifiable on the facts are not applicable to the facts and the case as being justifiable, further the AR has not brought on record in contrary judgments in rebuttal to the contentions of the department. We hold that there is no sufficient material to establish that there was change of opinion on the part of the AO while recording reasons to believe u/s 147 of the Act. We find no merit and substance in the argument and in the absence of corroborative evidence to substantiate the contentions of the assessee on the change of opinion of the AO, the ld. Counsel, we approve the reason to believe that the income escaped assessment in the meaning of section 147. CIT(A) was justified in confirming the reopening of the assessment. Following the Hon ble Apex Court RAJESH JHAVERI STOCK BROKERS P. LIMITED 2007 (5) TMI 197 - SUPREME COURT on the reopening of the assessment u/s 147 we uphold the order of the Ld. CIT(A) that the AO has reason to believe that the income had escaped assessment within the meaning of section 147. Interest income received from FDR s - Double addition being duly disclosed in the P L account and balance sheet in the return of income filed - We note that in the original assessment order the AO has applied net profit rate only on the contract receipts. AR has not brought on record any evidence to demonstrate either before the AO or the ld. CIT(A) or even in the appellate proceedings before us to show as to how the amount of interest income received from FDR s could be treated as part of assessee s business income or contract receipts when the net profit rate was applied by the AO on the contract receipts. Further the counsel has not established that whether there was a pre-condition to please the aforesaid the FDR s to procure business before applying for determination of contract tenders by the assessee. Assessee s claim to consider the interest on FDRs as part of his business income to give benefit of double taxation is not supported by a logical or cogent explanation. Accordingly, the ld. CIT(A) has rightly upheld the interest income from FDRs as other income of the assessee in the reassessment proceedings and confirmed the addition made by the AO.

Summary

Issues Involved:
1. Validity of the reopening of the assessment under Section 147 of the Income Tax Act.
2. Confirmation of the addition of ?47,34,000/- being interest on Fixed Deposit Receipts (FDRs) as income from other sources.
3. Alleged double addition of ?47,34,000/-.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment under Section 147 of the Income Tax Act:
The assessee challenged the reopening of the assessment under Section 147 on the grounds of change of opinion. The Assessing Officer (AO) initially assessed the income of the assessee by estimating the profit rate after rejecting the books of account. Later, the AO noticed that the interest income from FDRs amounting to ?47,34,000/- had escaped assessment. The AO recorded his satisfaction regarding the escapement of income and issued a notice under Section 148 for reassessment. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the reopening, citing precedents from the Hon’ble Apex Court and other High Courts, which clarified that the sufficiency of the material is not a consideration at the stage of reopening. The Tribunal concurred, stating that the AO had a valid reason to believe that income had escaped assessment, and the reopening was justified.

2. Confirmation of the Addition of ?47,34,000/- as Income from Other Sources:
The assessee argued that the interest income from FDRs was shown in the audited profit and loss account under the head ‘other income’ and should not be added again. However, the CIT(A) observed that the interest on FDRs was not included in the contract receipts, and the AO had rightly assessed it as income from other sources. The Tribunal noted that the assessee could not provide evidence to show that the interest income from FDRs should be considered as business income. Therefore, the addition of ?47,34,000/- as income from other sources was confirmed.

3. Alleged Double Addition of ?47,34,000/-:
The assessee contended that there was a double addition of ?47,34,000/-, as this amount was already disclosed in the profit and loss account. However, the Tribunal found that in the original assessment, the AO applied the net profit rate only on the contract receipts and did not consider the interest income from FDRs. The assessee failed to demonstrate how the interest income from FDRs could be treated as part of the business income. As a result, the Tribunal upheld the CIT(A)’s decision that the interest income from FDRs should be assessed as income from other sources, and there was no double addition.

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(A)’s order on all grounds. The reopening of the assessment under Section 147 was deemed valid, the addition of ?47,34,000/- as income from other sources was confirmed, and the claim of double addition was rejected. The order was pronounced in the open court on 03/09/2019.