2022 (11) TMI 413 - AT - Income Tax

Assessment u/s 153A - validity of Reopening of assessment u/s 147 - HELD THAT - An assessment order under section 153A r.w.s 143(3) of the Act does not deal with the materials other than incriminating material found during the search. Assessee s claim that he has already disclosed the amount debited and paid to JIPL was duly reflected in the books of accounts and verified also by the AO is not correct. For verification other than amount debited in the books of accounts nothing was there like agreement of consultancy, reports prepared by consultant or any other material which substantiates the genuineness of the expenditure. It is only after a report from DDIT (Inv.) Unit-1(3), Mumbai dated 24.03.2014 was received against an enquiry conducted on JIPL with reference to a Tax Evasion Petition filed against JIPL. With reference to this report various people from assessee s side and JIPL were examined on oath with relevant agreement, etc. Claim of the assessee that action under section 147 is merely a change of opinion, hence not tenable is unwarranted in the light of report of DDIT (Inv.) Unit-1(3), Mumbai and contradictory statements given by various persons of both the sides, we found action of the AO under section 147 of the Act as legitimate one and original Ground No.1 and Additional Ground Nos. 1 2 are dismissed. Disallowance of professional fee paid - genuineness of expenses - Amount debited to WIP in the balance-sheet - HELD THAT - Where the payment to a consultant (JIPL) was being made in crores of rupees over the period, it is highly inconvincible that with reference to services rendered there is not even a single document /report/communication ever submitted by assessee. Even a layman will not convince that after paying crores of rupees over the period to consultant assessee is not in possession of any document in the form of report/advice/road map/blueprint about the project, company, HR matters, Legal matters, financial matters, Engineering Services etc. Assessee s counsel vehemently argued the matter but despite of bench s specific reference about the reports of deliverables his reply was not satisfactory. In the lights of above observation at all the forums including ITAT, we are of the firm view that this claim of the assessee is liable to be rejected and order of the Ld. CIT(A) is in right perspective requires no interference. Original Ground no- 2 of the assessee is dismissed. Expenses claimed towards consultancy charges - HELD THAT - Assessee never produced before any form evidence of expenses claimed towards consultancy charges paid to M/s. JIPL. In our humble opinion there is no flaw in the order of AO as far as following the direction in the case of Asian Paints Ltd. 2007 (1) TMI 159 - BOMBAY HIGH COURT and directions of Hon ble Supreme Court in the case of M/s. GKN Driveshaft (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT In view of the above we don t agree with additional ground of appeal no. 3 raised by the assessee, hence dismissed.

Summary

Issues Involved:
1. Legality of the re-opening of the assessment under section 148 of the Income Tax Act, 1961.
2. Disallowance of Rs. 35,00,000/- from the Work-in-Progress (WIP) related to professional fees paid to M/s. Jitnat Infrastructure Pvt. Ltd.
3. Compliance with the procedural requirement of rejecting objections to the reopening of the assessment four weeks before passing the assessment order.

Detailed Analysis:

Issue 1: Legality of the Re-opening of the Assessment under Section 148
The assessee challenged the re-opening of the assessment on the grounds that it was completed under section 143(3) r.w.s. 153A and that the re-opening was merely based on a change of opinion. The assessee also argued that there was no taxable income that had escaped assessment, thus making the action of the Assessing Officer (AO) bad in law.

The Tribunal found that the re-opening was justified based on new information obtained from a search and seizure action under section 132(1) and subsequent inquiries. The AO had received a field report and statements indicating that the payment to M/s. Jitnat Infrastructure Pvt. Ltd. was not genuine. The Tribunal held that the AO had "prima-facie reason to believe" that income had escaped assessment, which is sufficient for re-opening under section 147. The Tribunal cited various case laws, including Kalyanji Maji & Co. v/s CIT and ITO v/s Lakhmani Mewal Das, to support the validity of the re-opening.

Issue 2: Disallowance of Rs. 35,00,000/- from WIP
The AO disallowed Rs. 35,00,000/- from the WIP, arguing that no actual services were rendered by M/s. Jitnat Infrastructure Pvt. Ltd. The AO noted inconsistencies in the statements of the directors and the accountant of JIPL and the absence of any documentary evidence to substantiate the delivery of services.

The Tribunal upheld the AO's decision, noting that despite ample opportunities, the assessee failed to provide any evidence of the services rendered. The Tribunal found it highly implausible that no documents or reports were available to substantiate the payment of such a significant amount. The Tribunal concluded that the disallowance was justified and dismissed the assessee's appeal on this ground.

Issue 3: Compliance with Procedural Requirement
The assessee argued that the AO did not pass the order rejecting the objections to the reopening of the assessment four weeks before passing the assessment order, as required by the jurisdictional High Court in the case of Asian Paints Ltd Vs DCIT.

The Tribunal analyzed the facts and found that the assessee had not promptly responded to the notices and had delayed its objections. The Tribunal noted that the final assessment order was passed almost 27 days after the objections were furnished, which was deemed appropriate. The Tribunal held that the assessee could not take advantage of its own delay and dismissed this ground of appeal as well.

Conclusion:
The Tribunal dismissed all the appeals filed by the assessee for the various assessment years, upholding the re-opening of the assessment under section 148, the disallowance of Rs. 35,00,000/- from the WIP, and the procedural compliance by the AO. The Tribunal found that the AO had acted within the legal framework and that the assessee had failed to substantiate its claims.