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TMI Blog2019 (7) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes the entire record of subsequent and preceding years. Since the issue of refundable security deposit was examined in assessment year 2012-13 and the opinion so formed will be equally relevant for assessment year 2009-10 to 2011-12 as well and as such the reassessment proceedings based on a different view adopted in assessment year 2013-14, in our opinion, would be based on change of opinion and reappraisal of facts already on record. Therefore, we agree with the contention of the ld. counsel for the assessee that the reassessment proceedings so initiated are void on the ground that the reasons are not based on any tangible material for recording of such reasons. The various decisions relied on by the ld. DR are distinguishable and not applicable to the facts of the present case. In view of the above discussion, we hold that the reassessment proceedings initiated by the Assessing Officer are not in accordance with the law. - Decided in favour of assessee. - ITA Nos.403, 404 & 405/Del/2019 - - - Dated:- 28-6-2019 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri R.S. Singhvi, CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of assessment. It was submitted that the interest free security deposits were duly recorded in the books of account and the same information was available at the time of processing of return u/s 143(1). Relying on various decisions, it was argued that the case cannot be reopened. Vide order sheet entry dated 16.12.2016, the Assessing Officer intimated the assessee that since the objections were not filed till 22.11.2016 it would not be possible to dispose them off separately since objections have been filed at the fag end of the time barring month. However, the Assessing Officer disposed off the objections after recording reasons in para 3.2 of the assessment order and rejected such objections. 4. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain as to why the amount of ₹ 7,00,64,800/- received during the year by the assessee on account of non-refundable interest free security deposits should not be added to the income declared by the assessee company for the impugned assessment year. The assessee filed the copy of financial statement for financial year 2008-09, copy of operation and maintenance agreement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company is a party, in which it is specifically mentioned that the security deposits will be non-refundable and M/s Silverline Holding Pvt. Ltd., after collecting the same will transfer to the assessee. Accordingly, M/s Silver Line Holding Pvt. Ltd. receives the security deposits from customer without passing through its account, transfers the same to the assessee and the assessee booked this amount as interest free security deposit under schedule of the balance sheet. The assessee company did not produce any document which shows/proves that this security deposit is shown as advance or receivable at the assets side or shown as liability towards customers in the balance sheet of M/s Silver Line Holding Pvt. Ltd. Hence, the contention of the assessee that this amount has been received from M/s Silver Line Holding Pvt. Ltd. as refundable liability is not supported. However, as per tri-party agreement among M/s Silver Line Holding Pvt. Ltd., customers and the assessee, the security deposits are non refundable. Actually this is a valid document which executes at the time of receiving the security deposits and the contract which the assessee has mentioned to be entered between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it from time to time in order to provide the proper maintenance facilities. Similarly, in the event of any future extraordinary capital cost towards maintenance, not presently envisaged the Company or SGDP or its nominees or the Maintenance Agency shall call upon the buyer and the Buyer shall make a prorate contribution with the other Buyers for meeting such capital costs. In case of necessity the buyers would also be required to recoup/increase the Security Deposit as and when found necessary. ii. On perusal of the above mentioned terms and conditions, it is established that the recipient of the non-refundable security deposit is the assessee and this will be taxable in the hand of the assessee only. Further, M/s Silver Line Holding Pvt. Ltd. is acted as conduit between the buyer of Villas and the assessee for collecting non-refundable security deposits and making payment to the assessee only. However, the assessee vide submission dated 23.12.2016 tried to shift the same on M/s Silver Line Holding Pvt. Ltd. which is not acceptable as per terms of Buyer Agreement. iii. Once it is decided that the security deposit is the nonrefundable and taxable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39,00,000/- Total 82,85,200 7,83,50,000 10,54,53,085 12,05,00,000 12,53,50,000 12,92,50,000 During the course of assessment proceedings for assessment year 2013- 14, the AO examined the issue of non refundable security deposits and held that the same is chargeable to tax as income of the appellant. Since the return of income for the year under consideration was processed only u/s 143(1), on the basis of findings recorded in assessment year 2013-14, the AO initiated proceedings u/s 148 after recording detailed reasons as reproduced in para 2 of the assessment year. The copy of reasons was provided to the assessee on 17.11.2016 with clear cut direction that in case, no objection was filed by 22.11.2016, it would be understood that the appellant had no objection to the reopening of the assessment proceedings. Undisputedly, the objections were not filed by the specified date. However, only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lverline Holding Pvt. Ltd. Relying on the decision of the Mumbai Bench of the Tribunal in the case of Aakash Lavlesh Leisure Pvt. Ltd. (2017) 78 taxmann.com 338 (Mum) , the ld.CIT(A) held that the non-refundable security deposits received by the assessee have nexus with the O M services provided to the clients and, hence, the same are liable to be taxed as revenue receipts. He accordingly upheld the addition on merit also. 8. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- l (i) That on facts and circumstances of the case, the CIT(A) is not justified in confirming reassessment u/s. 148 without appreciating that the original assessment was completed u/s 143(3) and there being no case of any omission or failure on the part of the assessee in disclosing relevant information for the purpose of completion of assessment, the reassessment is not in conformity with proviso to sec. 147 and accordingly same is illegal and without jurisdiction. (ii) That in any case, reassessment is merely on the basis of change of opinion and in the absence of any fresh tangible mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on change of opinion and are wholly without jurisdiction. Referring to the copy of reasons recorded u/s 147 of the Act, a copy of which is placed at pages 2 to 18 of the paper book, he submitted that a perusal of the reasons shows that the reassessment proceedings have been initiated solely on the basis of opinion formed in assessment year 2013-14 which is inconsistent with the view taken in assessment year 2012-13. Referring to the copy of the order passed u/s 143(3) for assessment year 2012-13, copy of which is placed at pages 96 and 97 of the paper book, he submitted that no such addition has been made by the Assessing Officer on account of such non-refundable security deposit. He submitted that the factual position to this effect has been accepted by the Assessing Officer in the reasons itself wherein it is clearly mentioned that this very issue has been examined in assessment year 2012-13 and detailed note was sought from the assessee. The ld. counsel for the assessee drew the attention of Bench to para 5(c) at pages 14 15 of the assessment order which reads as under:- c. the contention of the assessee that my predecessor during the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm record includes the entire record of subsequent and preceding years which is available before the Assessing Officer as held by the Hon'ble Supreme Court in the case of Mahendra Mills Ltd. vs. AAC (1975) 99 ITR 135 (SC) . He submitted that in the present case, the issue of refundable security deposit was examined in A.Y. 2012-13 and the opinion so formed will be equally relevant for A.Y. 2009-10 to A.Y. 2011-12 as well and as such the reassessment proceedings based on different view adopted in A.Y. 2013-14 would be based on change of opinion and reappraisal of facts already on record and as such the impugned reassessment proceedings are vitiated on two counts i.e., (a) Reasons are based on change of opinion; and (b) reasons are not based on tangible material. So far as various decisions relied on by the Assessing Officer and CIT(A) are concerned, he submitted that they are distinguishable and not applicable to the facts of the present case. 12.1 So far as the merit of the case is concerned, the ld counsel for the assessee submitted that M/s Silverline Holding Pvt. Ltd. is the owner of villas and golf course and the same were sold to the prospective buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company cease to have running and maintenance right or becomes non-functional, the security deposit being liability is to be refunded to M/s Silverline Holding Pvt. Ltd. 12.2 So far as the decision in the case of Aakash Lavlesh Leisure Pvt. Ltd . (supra) relied on by the CIT(A) is concerned, he submitted that the said decision, in fact, supports the case of the assessee and reliance on the same by the CIT(A) is misplaced. He submitted that in that case, the refundable security deposit was accepted by the Assessing Officer as non-taxable receipt and the dispute before the ITAT was only with regard to non-refundable deposit. However, in the present case, the security deposit received by the assessee is shown as liability and is fully refundable to M/s Silverline Holding Pvt. Ltd., and, therefore, the decision of the Mumbai bench of the Tribunal relied on by the CIT(A) is, in fact, in support of the assessee. So far as the observation of the Assessing Officer that M/s Silverline Holding Pvt. Ltd., has not recorded these entries in the balance sheet is concerned, he submitted that the Assessing Officer and the CIT(A) has not properly considered the facts of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidity of reassessment proceedings as well as the addition on merit. So far as the reopening of the case is concerned, the ld. DR submitted that the original assessment was completed u/s 143(1) for assessment years 2009-10 and 2010-11 and under section 143(3) for assessment year 2011-12. Referring to various decisions, he submitted that the reassessment proceedings initiated by the Assessing Officer and upheld by the CIT(A) are fully justified:- 14. Referring to the decision in CIT Vs Rajesh Jhaveri Stock Brokers (P.) Ltd, 291 ITR 500 (SC) , he submitted that the Hon'ble Supreme Court in the said decision has held that so long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings, even when intimation under section 143(1) has been issued. 15. Referring to the decision in the case Yuvraj v. Union of India, 315 ITR 84 he submitted that the Hon ble Supreme Court in the said decision has held that points not decided while passing asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns, raises more questions than satisfying the queries already raised. 15.6 Referring to the decision in the case of Aravaliinfrapower Ltd, Vs DCIT [2017] 77 taxmann.com 322 (Delhi) he submitted that in the said decision the Hon ble Delhi High Court held that where assessee-company furnished only cheque numbers, but failed to provide bank details of share applicants and it was found that share applicants had meager income while investing huge sum of ₹ 8 crores, reopening notice was justified. 15.7 Referring to the decision in the case of Raymond Woollen Mills Ltd. v. ITO And Others, 236 ITR 34 , he submitted that in the said decision the Hon ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 15.8 Referring to the decision in the case of R.K. Malhotra ITO vs. KasturbhaiLalbhai (1977) 109 ITR 537 (SC) , he submitted that in the said decision the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 17. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in the business of operation and maintenance of golf course owned by M/s Silverline Holding Pvt. Ltd. It filed its return of income on 23.11.2009 declaring loss of ₹ 62,12,919/-. We find the Assessing Officer, on the basis of the assessment order for assessment year 2013-14, wherein the refundable security deposit received from M/s Silverline Holding Pvt. Ltd. was considered as taxable income in the hands of the assessee, reopened the assessment by issue of notice u/s 148 of the IT Act. Rejecting the various arguments advanced by the assessee, the Assessing Officer made addition of ₹ 7,00,64,800/- on account of such security deposit received by the assessee during the year under consideration on the ground that such security deposit received by M/s Silverline H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere initiated on the basis of the findings in assessment year 2013-14. 19. We find the reasons recorded for reopening of the assessment for the impugned assessment year is based on the findings of the assessment order for assessment year 2013-14 whereas the same issue was decided and accepted in assessment year 2012-13. Thus, we find merit in the submission of the ld. counsel for the assessee that the reassessment proceedings are based on change of opinion and re-appraisal of facts already on record and are not based on any tangible material and, therefore, such reassessment proceedings are vitiated. We find the Hon'ble Bombay High Court in the case of NYK Line (India) Ltd. (supra) has held that where the assessee has disclosed all material facts relating to container detention charges at the time of making assessment, mere fact that Assessing Officer had come to a different conclusion in respect of said income in subsequent assessment year would not justify reopening of assessment. It has been held in the said decision that an order of assessment which has been passed for a subsequent assessment year may not be the foundation to reopen an assessment for an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reassessment proceedings only: so long as the ingredients of Section 147 are fulfilled and with reference to Section 143(1) vis-a-vis Section 147, the only ingredient is that there should be reason to believe that income chargeable to tax has escaped assessment and it does not matter that there has been no failure or omission on the part of the assessee to disclose full and true particulars at the time of the original assessment. There is nothing in the language of Section 147 to unshackle the Assessing Officer from the need to show reason to believe . The fact that the intimation issued under Section 143(1) cannot be equated to an assessment , a position which has been elaborated by the Supreme Court in the judgment cited above, cannot in our opinion lead to the conclusion that the requirements of Section 147 can be dispensed with when the finality of an intimation under Section 143(1) is sought to be disturbed. 16. The Court in CIT v. Orient Craft Ltd. (supra) examined the meaning given of the words reasons to believe ‟ , quoted from the decision of the Supreme Court in CIT v. Kelvinator India Ltd. and held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orient Craft Ltd. (supra) further comprehensively rejected the argument of the Revenue, which it seeks to urge in the present case as well, that an 'intimation' under Section 143 (1) cannot be equated to an assessment. The Court held: The argument of the revenue that an intimation cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also appear to be self-defeating, because if an intimation is not an assessment then it can never be subjected to Section 147 proceedings, for, that section covers only an assessment and we wonder if the revenue would be prepared to concede that position. It is nobody ‟ s case that an intimation cannot be subjected to Section 147 proceedings; all that is contended by the assessee, and quite rightly, is that if the revenue wants to invoke Section 147 it should play by the rules of that section and cannot bog down. In other words, the expression reason to believe cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made under Section 143(3) and another applicable where an intimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and when in such cases reopening is valid or invalid on the ground of change of opinion? (iii) Whether the bar or prohibition under the principle change of opinion will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects? (iv) Whether and in what circumstances Section 114 (e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion? 21. Therefore, the central issue examined in the decision of the Full Bench in Usha International Ltd. was as to what constituted a change of opinion ‟ . The Court, therefore, does not consider the decision in Orient Craft Ltd. as being contrary to the decision in Usha International Ltd. In other words, there is no occasion for the Court to refer to a larger bench the question of the correctness of the decision in Orient Craft Ltd. which decision squarely applies to the facts of the present case. 22. For all of the aforementioned reasons, the Court holds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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