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2023 (7) TMI 120 - AT - Income TaxAssessment u/s 153A or reopening of assessment u/s 147 - whether proceeding initiated u/s 147 is completely bad in law' and without jurisdiction as it is a search and seizure case and in the impugned case proceeding could have been initiated only u/s 153 A ? - HELD THAT - As Section 153A starts with an non-obstante clause, i.e. notwithstanding. Hence once a search has been conducted upon an assessee, then notice under section 153A is must and income is to be determined according to the Scheme of this Section as explained earlier. According to the assumption of the ld. Assessing Officer, no notice required to be issued under section 153A, therefore, he cannot take action under any other section in this A.Y. Reopening of assessment u/s 147 - scrutiny assessment u/s 143(3) - AO possessing any material, which can enable him to form a belief that income has escaped assessment or not? - whether AO has jurisdiction to issue notice upon the assessee u/s 148 for reopening of the assessment inspite of the fact that a search has been conducted upon the assessee under section 132? - HELD THAT - Since in the present case, earlier scrutiny assessment under section 143(3) was made, thereafter assessment was reopened by issuance of a notice under section 148 of the Income Tax Act and again a reassessment order was passed on 18.12.2017 under section 143(3) read with section 147. Therefore, proviso to this section would puts an embargo upon the powers of AO to issue a notice upon the assessee unless he demonstrated that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In other words, the AO has to demonstrate how assessee has failed to disclose all material facts fully and truly which resulted the income escaped from taxation. The assessee itself has offered profit @ 3% and on the last contract at 3.14%. This total profit is around Rs. 2,01,96,284/-. It has been assessed to income and once it has been assessed to income, then it is to be construed that this ledger account must have been gone through by the ld. Assessing Officer in two scrutiny assessments, then whereas the failure or omission at the end of the assessee to disclose all material facts fully and truly. AO has observed that in the data-base of the Income Tax Department, these seven companies are branded as accommodation providers. How these sweeping statements could help the ld. Assessing Officer to doubt the case of the assessee. It is not ascertainable when this data-base was prepared, what is the foundation of the data-base, whether any opportunity to contest, such an observation has been granted or not, not only to the assessee but to those companies, who have been branded as an entry provider. This issue had ever travelled to independent adjudicating bodies like ITAT or Hon ble High Courts, which would have upheld that these companies were indulged in providing accommodation entries. Therefore, whatever information has been referred by the ld. Assessing Officer, it is vague and incomplete and on the basis of this information, the assessment of the assessee cannot be reopened again. Therefore, we quash the reopening of assessment and accordingly assessment order also. Bogus transaction - Whether any addition deserves to be made or not ? There is no evidence possessed by the Revenue to say that contracts assigned by the assessee is a bogus transaction. Addition of the gross contract receipt cannot be made without even determining whether the projects for which contracts were received by the assessee were completed or not. There is no evidence with the Revenue to demonstrate that this whole transaction is bogus and the total money was retained by the assessee. Thus gross addition cannot be made. As far as the finding of the ld. CIT(Appeals) is concerned, that income is to be re-determined out of these contracts on ad hoc basis. It is pertinent to note that assessee has been maintaining regular books of account. Section 145 of the Income Tax Act provides the method of accounting required to be adopted by an Assessing Officer. Sub-clause (3) of this section would contemplate if the ld. Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, then he may reject the method of accounting or books of account, only thereafter he would proceed to estimate the income. No such steps have been taken by the authorities. The quantification at 6% is without any basis. The assessee itself has shown profit at 3% and 3.1% on last contract. This profit was not doubted in a scrutiny assessment as well as in a re-assessment proceeding. Then how it is to be disturbed in a one more of reassessment is not discernable from the finding. Therefore, the order of the ld. CIT(Appeals) justifying the additions computed at 6% of the contract receipt is not sustainable.
Issues Involved:
1. Validity of reopening the assessment under section 147/148 of the Income Tax Act. 2. Jurisdiction of the Assessing Officer to issue notice under section 148 instead of section 153A. 3. Whether the Assessing Officer possessed any material to form a belief that income had escaped assessment. 4. Legitimacy of the addition made by the Assessing Officer based on the alleged bogus transactions. 5. Estimation of income by the CIT(A) and whether the method of accounting adopted by the assessee was acceptable. Summary of Judgment: Issue 1: Validity of Reopening the Assessment under Section 147/148 The Tribunal examined whether the Assessing Officer (AO) had the jurisdiction to issue a notice under section 148 for reopening the assessment despite a search conducted under section 132. The Tribunal noted that the AO must satisfy the conditions under section 147, which include having a reason to believe that income had escaped assessment and that this belief must have a rational connection with the information possessed. The Tribunal found that the AO's reasons for reopening the assessment were based on information already available during the original and reassessment proceedings, and thus, the reopening was invalid and void ab initio. Issue 2: Jurisdiction of the AO to Issue Notice under Section 148 Instead of Section 153A The Tribunal emphasized that section 153A, which starts with a non-obstante clause, mandates the issuance of a notice under this section once a search has been conducted. The Tribunal held that the AO could not take action under any other section for the assessment year in question, and thus, the notice under section 148 was invalid. Issue 3: Possession of Material by the AO to Form Belief of Escaped Income The Tribunal scrutinized the AO's possession of material to form a belief that income had escaped assessment. The AO referred to a ledger account and statements from directors of M/s. Silverpoint Infratech Limited, which were already available during prior assessments. The Tribunal found that these statements did not provide new information justifying the reopening of the assessment, as they were already considered in earlier proceedings. Issue 4: Legitimacy of Addition Based on Alleged Bogus Transactions The Tribunal examined the AO's addition of Rs. 66,40,68,972/- based on the alleged bogus transactions with M/s. Silverpoint Infratech Limited. The Tribunal noted that the AO failed to establish a complete chain of evidence showing that the money ultimately returned to the assessee. The Tribunal found that the AO's reliance on vague and incomplete information was insufficient to justify the addition. Issue 5: Estimation of Income by CIT(A) The Tribunal reviewed the CIT(A)'s estimation of income at 6% of the contract receipts. The Tribunal held that the CIT(A) did not provide specific reasons for rejecting the assessee's method of accounting, which had been accepted in prior assessments. The Tribunal concluded that the CIT(A)'s ad hoc estimation was unsustainable. Conclusion: The Tribunal allowed the assessee's appeal, quashing the reopening of the assessment and the addition made by the AO. The Tribunal dismissed the Revenue's appeal, holding that the AO's actions were without sufficient reason and the estimation of income by the CIT(A) was unjustified. The order was pronounced on 03.04.2023.
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