2023 (10) TMI 1317 - AT - Income Tax

Reopening of assessment u/s 147 - reassessment beyond 4 years - Undisclosed investment u/s. 69 - performance guarantees/deposits - deductions towards performance guarantee and other deposits by the PWD were in the nature of deposits that were refundable after a period of time as mutually agreed upon by the parties, thus, the same should have been shown by the assessee as deposits on the asset side of his balance sheet - HELD THAT - When the assessee s claim as regards the allowability of performance guarantee/other deposits, which the assessee accounted for under the head Contract expenses, had been looked into by the A.O in the course of original assessment proceedings, therefore, we find substance in the claim of the Ld. AR that in the absence of any fresh material coming to the notice of the A.O after the culmination of the original assessment proceedings that had culminated vide order passed u/s. 143(3) same could not have been reopened merely on the basis of a change of opinion on the basis of the same set of facts as were available on record in the course of the original assessment proceedings. As per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is a must that the A.O has fresh material or information with him, that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of NYK Lime (India) Ltd 2012 (2) TMI 283 - BOMBAY HIGH COURT and Purity Tech Textile Pvt. Ltd. 2010 (2) TMI 26 - BOMBAY HIGH COURT As the case of the assessee had been reopened by the A.O merely on the basis of change of opinion and not on the basis of any fresh tangible material coming to his notice after the conclusion of the original assessment proceedings which would reveal any income of the assessee chargeable to tax had escaped assessment, therefore, in light of the aforesaid settled position of law, quash the assessment framed by the A.O u/s. 143(3)/147 of the Act dated Nil for want of valid assumption of jurisdiction. Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of Rs. 11,49,738/- on account of performance guarantee.
2. Deletion of addition of Rs. 18,95,121/- on account of miscellaneous deposit/other deposit.
3. Validity of jurisdiction assumed by the A.O. for reopening the assessment under Section 147 of the Income-tax Act, 1961.

Summary:

Issue 1: Deletion of Addition on Account of Performance Guarantee
The A.O. observed that the assessee, a Civil Contractor, did not disclose Rs. 11,49,738/- deducted by the PWD as performance guarantee in the balance sheet, treating it as an undisclosed investment under Section 69. The CIT(A) vacated this addition, stating that the assessee had consistently treated such deductions as contract expenses in the Profit & Loss account, considering them as non-refundable. The CIT(A) found that the assessee's accounting practice was justified and consistent, thus deleting the addition.

Issue 2: Deletion of Addition on Account of Miscellaneous Deposit/Other Deposit
Similarly, the A.O. added Rs. 18,95,121/- for miscellaneous deposits not disclosed in the balance sheet, considering it as unexplained investment under Section 69. The CIT(A) also deleted this addition, agreeing with the assessee's consistent practice of treating such amounts as expenses in the Profit & Loss account and only recognizing them as income upon actual receipt.

Issue 3: Validity of Jurisdiction for Reopening the Assessment
The assessee challenged the reopening of the assessment under Section 147, arguing that it was based on a mere "change of opinion" without any fresh material. The Tribunal upheld this objection, citing the Supreme Court's judgment in CIT Vs. Kelvinator of India, which prohibits reopening based on a change of opinion. The Tribunal noted that the A.O. had already considered the relevant expenses in the original assessment, and no new information had emerged to justify reopening. Thus, the Tribunal quashed the reassessment for lack of valid jurisdiction.

Conclusion:
The Tribunal dismissed the revenue's appeal, upheld the CIT(A)'s deletion of the additions, and quashed the reassessment for want of valid jurisdiction. The Tribunal emphasized that reopening based merely on a change of opinion is not permissible under the law.