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TMI Blog2015 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... ews the decision. Re-assessment powers cannot be exercised to merely review the earlier assessment on the special ground that something was omitted from consideration or particular conclusion was imprecisely or wrongly arrived at. Formation of such belief by the Assessing Officer has to satisfy the requisite parameters which are conditions precedent for examine of provision under Section 147. The necessary conditions being satisfied. From the reasons recorded themselves, therefore, it was seen that the Assessing Officer proceeded to exercise the powers since he wanted to verify certain aspects the assessment already complete, Thus Assessing Officer has clearly exceeded his jurisdiction under Section 147 of the Act in issuing the impugned notice. - Decided in favour of assessee. - SCA No. 17885 of 2011 - - - Dated:- 9-8-2012 - VIJAY MANOHAR SAHAI AND N. V. ANJARIA JJ. RK Patel, Advocate for the Petitioner Paurami B Sheth, Advocate for the Respondent ORDER N. V. ANJARIA, J. 1. The challenge in the present petition under Article 226 is directed against notice dated 30.12.2010 of the respondent No.1-Income Tax Officer issued under Section 148 of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per his order dated 05.12.2011, rejecting the same. 4. Learned advocate for the petitioner submitted with reference to the reasons recorded by the Assessing Officer for assessment that respondent No.1 while issuing the impugned notice under Section 148 of the Act, acted on a wrong premise inasmuch as it was mentioned in the reasons that the assessee's return of income for the Assessment Year in question showed that the Net Profit was ₹ 02,43,21,076/-, which was not the correct figure and the Net Profit for the relevant Assessment Year ₹ 03,61,74,866/-. Therefore, it was submitted that re-opining was upon a misconception of facts. It was submitted that the Assessing Officer acted on the ground that deduction under Section 80 IA(4) was wrongly granted and that he wanted to verify the factum of ownership. Learned advocate further submitted that the deduction under the said provision was considered and the assessment order was passed. The same was passed after scrutiny assessment, thus the Assessing Officer closely verified the material before him. 4.1 Learned advocate submitted that the necessary details were disclosed in the Audit Report and after considering al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the re-opening was within four years and therefore, once it was discovered from the relevant material that there was an escapement of income, the action of re-opening could not be faulted. 5. At this stage, in order to properly appreciate the controversy and the contentions canvassed by the respective parties, it is useful to look into the reasons recorded by the Assessing Officer whereon he has sought to re- open the assessment. The Assessing Officer's reasons for re-opening, as reproduced, are as under: Name of Assessee Agrawal J.V. Near Lions Hall, Deesa Status A.O.P. PAN AAAAA 5696 F Assessment Year 2007-08 07.04.2010 The assessee is an A.O.P has filed its return of income on 26.10.2007 declaring total income of Rs. NIL. As per profit and loss the assessee, It had declared the net profit of ₹ 2,43,21,076/- and the same has been allocated amongst the members of the J.V.(Joint Venture). The assessee engaged in Road Construction work and it had executed the work contract of the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deduction. During the assessment proceedings it is remained to be Verified the expenses incurred by the A.O.P. which are liable for the TDS and disallowances u/s.40A(ia) for violation of provision of Chapter XVII of the Act. Looking to the above circumstances, the order passed u/s.143(3) dated 13.4.2009, is prejudicial to the interest of revenue. Therefore I have reason to believe the income chargeable to tax have been escaped assessment for A.Y.2007-08 within the meaning of section 147 of the I.T.Act. I.T.O. 5.1 The powers to reopen the assessment are derived by virtue of Section 147 of the Act, which reads as under: Section 147 ' Income escaping assessment If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the relevant assessment period, the first part of Section 147 would apply. The essential conditions are firstly that the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment. Secondly, the fact that the income chargeable to tax escaped assessment has come to his notice subsequently. The third requirement could be, of course, that there is an escapement of income. The first Proviso deals with the cases wherein the assessment is sought to be re-opened after expiry of five years, in which cases further fetters are provided. However, as noted above, the Proviso part does not apply, since the impugned notice is within four years. It is well settled principle that exercise of reopening powers has to be on the basis of some tangible material becoming available with the Assessing Officer. There has to be a rational connection and a line link between the material discovered and the formation of belief by the Assessing Officer. 6. Considering in the context of the facts of the present case, the petitioner-assessee was engaged in the civil construction business which was in the nature of construction of infrastructure facilities. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork. The assesse is doing a business with construction of two companies with a separate agreements in the form of Joint Venture with the separate determined the share of profit in both the venture. Both the companies engaged in the business of civil contracts, i.e. in work of construction of roads, bridges, canals etc. During the year the assessee was engaged in the business activity of construction of infrastructure for Swaroopganj-Pindware of NH-14 in the state of Rajasthan and Vadodara ' Padra ' Jambusar Road, from the National Highway Authority of India, New Delhi and National Highway Circle, Vadodara respectively. The work was allotted by the Government authorityes. The contention of the assessee is that all the construction work of the road and other facilities were infrastructure project and the assessee developed the same and therefore the assessee has claimed the deduction u/s.80IA(4) of the Income tax Act in respect of profit earned from the execution/development of civil work. The assessee has claimed the deduction in the preceding year on the same contact work. After discussion with the representative of the assessee, and replying on the decision of the juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exercise of powers under Section 147, as is reiterated and emphasized in the celebrated decision in Commissioner of Income Tax Vs Kelvinator of India [(2010) 320 ITR 561 (SC)], which held as under: The concept of change of opinion on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. 7.1 In Gujarat Narmada Velly Fertilizers Vs CAT [310 ITR 120], it was observed that on a plain reading of Section 147 of the Act it becomes apparent that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, it means that one reviews the decision. Re-assessment powers cannot be exercised to merely review the earlier assessment on the special ground that something was omitted from consideration or particular conclusion was imprecisely or wrongly arrived at. Formation of such belief by the Assessing Officer has to satisfy the requisite parameters which are conditions precedent for examine of provision under Section 147. The necessary conditions being satisfied. From the reasons recorded themselves, therefore, it was seen that the Assessing Officer proceeded to exercise the powers since he wanted to verify certain aspects the assessment already completed. 8. It may be noted that in the subsequent Assessment Year 2008-09, similar claim was made by the assessee in its return of income. The Commissioner (Appeals) allowed the deduction for the same projects under Section 80 IA(4) as per order dated 13.10.2011, which is on record of the petition. In the subsequent Financial Year 2009-10 the petitioner-assessee did not claim the deduction in view of amendment in Section 80 IA in the Finance Act, 2009. It is, however, stated in the Memorandum of Petition that the virus of amending Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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