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TMI Blog2007 (1) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred to as 'NTBCL') awarded an engineering procurement and construction con tract for the execution of Delhi Noida Bridge Project to the assessee. An agreement dated19-1-1998was entered into between the assessee and NTBCL. The total value of the contract was Rs. 212 crores. Subsequently on28-12-1998the value of the contract got reduced by a sum of Rs. 6,96,81,183 because of the withdrawal of the work relating to Toll Bridge Hardware. Again on26-9-2000the value of the contract work was further reduced by a sum of Rs. 2,03,71,457 whereby the landscape work was also withdrawn from the work. Thus, the estimated contract price stood reduced to Rs. 21,02,99,47,360. 3.2 The assessee set up the project office inIndiaafter Reserve Bank ofIndia's permission dated3-3-1998. The work, however, commenced belatedly on30-12-1998because of the delay on the part of the NTBCL. The project was to be completed within 29 months from the date of issuance of notice to commence, which notice to commence was issued only on30-12-1998. 4.1 For the assessment year 1998-99 the assessee filed return of income on30-11-1998declaring nil income. The assessee had set up a project office as early ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Income from Business/Profession NIL. The assessee is executing Delhi Noida Bridge Contract for Noida Toll Bridge Co. Ltd., and payments against the Contract, which have been carried forward as Advances - "Current Liability" to be taken as revenue in the year of completion of the Contract on which TDS at the rate of 4.8 per cent has been deducted by the Client as per details hereafter. Corresponding expenses on the Project have been carried forward as Project work-in-progress to be claimed in the year of completion." 5.2 The Assessing Officer issued an intimation under section 143(1)(a) of the Act dated13-3-2001in respect of this return of income filed by the assessee. 6. As far as assessment year 2000-01 is concerned, the assessee filed return of income on 24-10-2000 declaring taxable income under the head 'Income from interest' of Rs. 2,27,250 in a covering letter enclosed along with the return the assessee had duly disclosed the fact that it was adopting the completed contract method of accounting as per the accounting standard AS-7 of Institute of Chartered Accountants of India (hereinafter referred to as 'ICAI'). Therefore, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99. However, in the said assessment order dated24-10-2000, it is dearly suggested that the receipts from the contract will be taxable in the assessment year relevant to financial year 1998-99, i.e., assessment year 1999-2000. The same is also applicable for the assessment year 2000-01. I, therefore, have reason to believe that contract receipts amounting to Rs. 212 crores have escaped tax, and that income exceeding Rs. 1 lakh has escaped tax for assessment year 2000-01. Notice under section 148 is hereby issued." 9. On the above facts the validity of assuming jurisdiction under section 147/148 of the Act was challenged by the assessee before the CIT(A). It was submitted that the reasons recorded do not spell out the belief entertained by the Assessing Officer regarding escapement of income. It was contended that the order of assessment for assessment year 1998-99 did not make any suggestion that the receipts from the contract will be taxable in assessment year 1999-2000. It was contended that the observation to the contrary by the Assessing Officer in the reasons recorded was not proper. It was also contended that the Assessing Officer while framing the assessment for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The CIT(A) also held that as per Explanation 2(b) to section 147 where a return is filed, but no assessment is made and later on the Assessing Officer notices that an assessee has understated his income or has claimed excessive loss, deduction then the same shall be a case of deemed escapement of income. The CIT(A), therefore, held that from the findings of the Assessing Officer for assessment year 1998-99 the Assessing Officer entertained belief regarding escapement of income chargeable to tax and, therefore, was justified in re-opening the assessment under section 147 of the Act. The assessee aggrieved by the aforesaid decision of the CIT(A) has raised the aforesaid common ground of appeal in both the appeals. 12. We have heard the submissions of the learned counsel for the assessee and the learned Departmental Representative. The learned counsel for the assessee reiterated the same arguments as were put forth before the CIT(A). He drew our attention to the order of assessment of the Assessing Officer for the assessment year 1998-99 and submitted that nowhere has the Assessing Officer held that the receipts from contract would be taxable in assessment year 1999-2000. 13. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Transworld International Inc. v. Jt. CIT [2005] 273 ITR 242 wherein the above principles laid down in the various decisions have been reiterated. 14. It was also submitted by the learned counsel for the assessee that the Assessing Officer cannot entertain belief regarding escapement of income based on defects in accounts especially without reference to the material for the relevant assessment year in question. Reference in this regard was made to the decision of the Allahabad High Court in the case of Dass Friends Builders (P.) Ltd. v. Dy. CIT [2006] 280 ITR 77. The learned counsel referred to the remand report of the Assessing Officer filed before the CIT (Appeals) wherein he had mentioned about the wrong method of acc0unting adopted by the assessee as a reason for resorting to re-opening proceedings. It was submitted by the learned counsel for the assessee that the reasons recorded do not spell out any such basis for resorting to reassessment proceedings. It was submitted that it was not open to the revenue to sustain the validity of re-opening by substituting some other reasons apart from what was recorded by the Assessing Officer before re-opening to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons to believe that any claim of loss, deduction or relief claimed in the return is inadmissible or if he considers it expedient to ensure that the assessee has not understated the income he may issue a notice calling upon the assessee to produce evidence in support of the return of income. As a matter of right the Assessing Officer can issue notice under section 143(2) of the Act within a period of 12 months from the end of the month in which the return is furnished. Once the period of 12 months expires the Assessing Officer cannot resort to the provisions of section 143(2) of the Act and has to necessarily invoke the provisions of section 148 of the Act. If the Assessing Officer seeks to invoke the provisions of section 148 of the Act then the condition precedent for exercise of jurisdiction under section 148 has to be satisfied. The argument of the learned Departmental Representative that since in the present case only an intimation under section 143(1) was issued by the Assessing Officer, the Assessing Officer could resort to the provisions of section 148 of the Act on conditions which are less onerous compared to re-opening of an assessment completed under section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment year 1999-2000. As rightly contended by the learned counsel for the assessee, firstly the Assessing Officer will not have jurisdiction to make any such observations. Secondly, in the assessment order for assessment year 1998-99 the Assessing Officer has not made any such observations. We have already extracted the relevant portion of the Assessing Officer's order for the assessment year 1998-99. The Assessing Officer has only observed that the contract of construction of Delhi-Noida flyover began only in the next financial year. This observation by no stretch of imagination can be said to be a suggestion that the receipts from the contract will be taxable in assessment year 1999-2000. This is the only reason recorded by the Assessing Officer for coming to the conclusion that income chargeable to tax has escaped assessment. In the circumstances, it cannot be said that the belief entertained by the Assessing Officer was bona fide. In fact the belief entertained by the Assessing Officer was on vague, irrelevant and non-specific information. The decisions relied upon by the learned counsel for the assessee in this regard are squarely applicable to the facts of this c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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