2021 (5) TMI 725 - AT - Income Tax

Reopening of assessment u/s 147 - Income from other sources or business income - receipt towards land development - receipt in assessee's credit side without carrying out any development works - second round of appeal - HELD THAT - A perusal of the Tribunal's order in first round remand directions makes us clear that the same have already sealed the ultimate outcome of the instant 'lis'. This is for the reason that learned co-ordinate bench had made it clear inter alia concluded that it could not uphold the treatment of the twin receipt amounts received by the assessee as its taxable income. More particularly in view of the fact that it had not performed any development work at all. Learned co-ordinate bench further observed that neither the said disallowance of the entire expenditure could be agreed with nor these receipts could be subjected to estimation as well. These three key findings make it evident that the department's action seeking to assess the assessee's entire receipts credit or debit side as well as estimation, thereof in case of M/s. NCCPL (supra) already stands decided against the Revenue and in favour of the tax payer. We therefore are of the opinion that there is nothing left in the instant second round for to delve deeper on the impugned issue(s). The purpose of reopening mechanism was only to assess the assessee qua these receipts followed by the alleged bogus invoices wherein the learned coordinate bench had made it clear in the former round itself that neither of them could be taken as assessee's income. We thus hold that merely because the Assessing Officer has added these receipts as income from other sources or the CIT(A) as business income (supra), does not make any difference at all. This is more particularly for the reason that the assessee had already succeeded qua assessment of the very sum as income in the first round as set aside in Section 254 proceedings. There is hardly any dispute that the Assessing Officer had invoked his section 148/147 jurisdiction for the reason that the survey exercise dt. 20.7.2007 had witnessed the impugned receipt in assessee's credit side without carrying out any development works since involving as bogus invoices only. Learned co-ordinate bench's first round order had admittedly reversed the said twin reasoning that neither of them could be assessed as assessee's income. Faced with this situation, we hold that once the impugned reopening mechanism based on this twin reasoning itself was decided against the department on merits, there is no reason left to support the impugned reopening since its very foundation itself has no legs to stand. The impugned reopening itself is not sustainable in the light of the alleged twin reasons recorded by the Assessing Officer which have been decided in the tribunal first round that the same did not give rise to any taxable income which could be stated to have escaped assessment in assessee's case. It is thus apparent that the impugned additions be it as income from 'other' sources or 'business', both are contrary to the tribunal's remand directions closing all options of assessing the entire credit, debit as well as estimates thereof would not help the Revenue's cause. We thus quash the impugned reopening as well in both these appeals.

Issues Involved:
1. Validity of reopening assessments under section 147.
2. Treatment of revised returns and revised audited accounts.
3. Taxability of receipts from M/s. New Cyberabad City Projects P. Ltd. (NCCPL).
4. Validity of additions made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].
5. Compliance with the tribunal's remand directions.

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessments under Section 147:
The Tribunal upheld the reopening of assessments under section 147, stating that the AO had a valid reason to believe that income had escaped assessment due to the absence of expenditure vouchers found during survey proceedings. The Tribunal cited the Supreme Court's decision in *Rajesh Jhaveri Stock Brokers Ltd.* (291 ITR 500) to support that an intimation under section 143(1) cannot be treated as an order of assessment, thus eliminating the possibility of a "change of opinion." The Tribunal concluded that the reopening was justified as the AO had valid reasons at the time of issuing the notice under section 148.

2. Treatment of Revised Returns and Revised Audited Accounts:
The Tribunal rejected the assessee's contention that revised returns and revised audited accounts should be considered in reassessment proceedings. Citing the Supreme Court's decision in *Sun Engineering Works Ltd.* (198 ITR 297), the Tribunal emphasized that proceedings under section 147 are for the benefit of the Revenue and not the assessee. Therefore, the revised returns and revised audit reports filed by the assessee were not accepted, as the reassessment was initiated to bring to tax the escaped incomes.

3. Taxability of Receipts from M/s. New Cyberabad City Projects P. Ltd. (NCCPL):
The Tribunal noted that the AO had brought the entire receipts from NCCPL to tax, treating them as revenue receipts since the assessee did not carry out any development activity. However, the Tribunal found that the AO's action of taxing the entire receipts as income could not be upheld. The Tribunal observed that there were no development activities carried out by the assessee, as confirmed by the statements of the VRO and the Director of NCCPL. The Tribunal directed the AO to make fresh inquiries to determine the correct position of incomes and whether the amounts received could be considered as the assessee's income.

4. Validity of Additions Made by the AO and Confirmed by the CIT(A):
The Tribunal found that the AO had incorrectly taxed the entire receipts as income without proper justification. The Tribunal highlighted that the AO had failed to inquire about the ultimate recipients of the money and how the funds received from NCCPL were utilized. The Tribunal set aside the assessment to the AO for fresh inquiries, directing the AO to determine if the amounts received and appropriated by the assessee could be considered as income. The Tribunal also instructed the AO to verify if any proceedings were initiated under other Acts, such as the Money Laundering Act, and to arrive at the correct position of incomes as per law and facts.

5. Compliance with the Tribunal's Remand Directions:
The Tribunal noted that the AO had made further inquiries as directed in the remand order, but the AO's action of treating the entire receipts as income from "other sources" or "business" was not upheld. The Tribunal emphasized that the purpose of reopening was to assess the assessee qua these receipts and alleged bogus invoices, which had already been decided against the Revenue in the first round. The Tribunal quashed the reopening as the reasons recorded by the AO did not give rise to any taxable income, rendering the additions unsustainable.

Conclusion:
The Tribunal allowed the assessee's appeals, quashing the impugned reopening and the additions made by the AO. The Tribunal directed the AO to accept the income returned by the assessee if further inquiries revealed no concealed income. The Tribunal's decision emphasized the importance of proper justification and adherence to legal principles in reassessment proceedings.

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