2020 (1) TMI 157 - AT - Income Tax

Reopening of assessment u/s 147 - bogus software purchase - HELD THAT - A perusal of the assessment order framed u/s 143(3) r.w.s 147 of the Act shows that entire assessment order is devoid of any reference to the statement of Shri S.K. Gupta. It is not known as to what question Shri S.K. Gupta said that M/s CFAM Soft India Pvt Ltd and M/s BT TechNet Ltd. were providing accommodation bills. Further, we find that the entire transactions have been done through A/c payee cheques and it is not the case of the Revenue that the appellant has purchased the accommodation bills by making payments through cheques and receiving cash through back door. It is pertinent to mention here that search operations at the premises of Shri S.K. Gupta were conducted on 12.12.2006 and original assessment order was framed u/s 143(3) of the Act vide order dated 10.07.2008. This means that the Assessing Officer had sufficient time to gather information relating to search conducted at the premises of Shri S.K. Gupta and yet the Assessing Officer accepted the transactions without making any enquiry. In our considered opinion, reasons for reopening the assessment are nothing but change of opinion which is not permissible as per the ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT as no new tangible material was in possession of the Assessing Officer. Therefore, notice u/s 148 of the Act is bad in law and assessment framed pursuant to the notice is also bad in law. The notice issued u/s 148 of the Act is bad in law and hence the same is set aside. The assessment so framed is quashed. Merits of the case the assessee has purchased software from M/s CFAM Soft India Pvt Ltd and M/s BT TechNet Ltd. The ld. DR vehemently stated that after the completion of assessment of these two companies, the Assessing Officer came to know that these two companies were providing accommodation bills and the assessee is one of the beneficiaries. However, we find that during the course of assessment proceedings also, the assessee filed confirmations from these two companies relating to the transactions done with them. The Assessing Officer did not even confront the assessee with his findings given in the case of these two companies nor did he make any enquiry in respect of the confirmations filed by the two companies. The assessee is into the business of call centre services and the nature of business activities is such that it requires latest and upgraded software. If the assessee did not purchase any new upgraded software and has only taken accommodation bills, then we fail to understand how the assessee generated revenue of ₹ 5.33 crores in F.Y. 2004-05 which jumped to ₹ 12.45 crores during the year under consideration. There is not even an iota of evidence produced on record by the Assessing Officer to demonstrate that even the sales of call centre services are bogus. Assessing Officer has accepted the net profit as per the books of account and merely on surmises and conjectures, treated the purchase of software as bogus yet allowing depreciation on software which is evident from the fixed assets schedule at page 8 of the paper book. In our considered view, since there is no demonstrative evidence brought on record to justify that the software purchase is bogus, we do not find any merit in the additions made by the Assessing Officer and accordingly, we direct the Assessing Officer to delete the impugned additions. - Decided in favour of assessee.

Summary

Issues Involved:
1. Assumption of jurisdiction under Section 147 of the Income-tax Act, 1961.
2. Validity of the additions made during the reassessment proceedings.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction under Section 147 of the Income-tax Act, 1961:

The primary grievance of the assessee was regarding the assumption of jurisdiction under Section 147 for framing the assessment order under Section 143(3) read with Section 147. The assessment was originally completed under Section 143(3) on 10.07.2008. Subsequently, a notice under Section 148 was issued based on information obtained from a search and seizure operation conducted on Shri S.K. Gupta and his associated companies. The reasons for reopening included transactions amounting to ?3,05,22,660 with M/s Camsoft (India) Pvt Ltd and M/s BT Technet Ltd, which were allegedly accommodation entries.

The Tribunal observed that the reasons for reopening were based on the statement of Shri S.K. Gupta and seized documents, but there was no specific mention of the relationship between Shri S.K. Gupta and the companies involved. The Tribunal noted that during the original assessment, specific queries regarding the transactions were raised, and the assessee provided detailed replies with supporting documents. The Tribunal emphasized that the Assessing Officer (AO) did not conduct further inquiries or issue notices under Sections 133(6) or 131.

The Tribunal held that the reopening was based on a change of opinion, which is not permissible as per the Supreme Court's ruling in Kelvinator of India Ltd. The Tribunal cited the Delhi High Court's judgment in Meenakshi Overseas Pvt. Ltd, which stressed that reasons to believe must be based on tangible material. The Tribunal concluded that the notice under Section 148 and the subsequent assessment were bad in law.

2. Validity of the Additions Made During the Reassessment Proceedings:

On the merits of the case, the assessee contended that the software purchases from M/s Camsoft (India) Pvt Ltd and M/s BT Technet Ltd were genuine. During the original assessment, the assessee provided confirmations and invoices supporting the transactions. The Tribunal noted that the AO did not confront the assessee with any adverse findings or conduct further inquiries regarding the confirmations.

The Tribunal observed that the assessee's business required updated software, and the revenue generated from call center services increased significantly during the relevant period. The Tribunal found no evidence suggesting that the sales were bogus or that the software purchases were not genuine. The AO's decision to allow depreciation on the software further contradicted the claim that the purchases were bogus.

The Tribunal directed the AO to delete the additions made during the reassessment proceedings, as there was no demonstrative evidence to support the AO's claims.

Conclusion:

The Tribunal allowed the appeal, setting aside the notice under Section 148 and quashing the reassessment order. The Tribunal also directed the AO to delete the additions made during the reassessment proceedings, emphasizing the lack of tangible evidence and the improper assumption of jurisdiction under Section 147.