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TMI Blog2019 (10) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court RAJESH JHAVERI STOCK BROKERS P. LIMITED [ 2007 (5) TMI 197 - SUPREME COURT] on the reopening of the assessment u/s 147 we uphold the order of the Ld. CIT(A) that the AO has reason to believe that the income had escaped assessment within the meaning of section 147. Interest income received from FDR s - Double addition being duly disclosed in the P L account and balance sheet in the return of income filed - We note that in the original assessment order the AO has applied net profit rate only on the contract receipts. AR has not brought on record any evidence to demonstrate either before the AO or the ld. CIT(A) or even in the appellate proceedings before us to show as to how the amount of interest income received from FDR s could be treated as part of assessee s business income or contract receipts when the net profit rate was applied by the AO on the contract receipts. Further the counsel has not established that whether there was a pre-condition to please the aforesaid the FDR s to procure business before applying for determination of contract tenders by the assessee. Assessee s claim to consider the interest on FDRs as part of his business income to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate order being unjust, illegal, and arbitrary; hence deserves to be amended. 2. Apropos Ground No. 1, the assessee has challenged validity of the re-opening of the assessment u/s 147 of Income Tax Act, on account of change of opinion. 3. The AO framed original assessment in the case of assessee u/s 143(3) by estimating profit rate after rejecting books of account. Subsequently the AO noticed that the assessee s interest income from FDRs to the extent of ₹ 47,34, has escaped assessment within the meaning of section 147 of the Act, (APB 52).Accordingly, the AO while taking due cognizance of fact that interest income from FDR of ₹ 47,34,000/- had escaped assessment, he recorded his satisfaction on the escapement of the assessee s income from other sources and reopened the assessee s case u/s 147 of the Act by way of issue of notice u/s 148 of the Act dated 13.10.2014 to the assessee in the reassessment proceedings, and the AO has accordingly made an addition of ₹ 47,34,000/- under the head income from other sources against interest income from FDRs and thus assessed the total income of the assessee of ₹ 3,37,86,820/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment earlier. Therefore, the assessee s contention that it was a change of opinion is misconceived and without any legal force. 4.4 As per the scheme of re-assessment provisions u/s 147 of the Act, the word reason in the phrase 'reason to believe' would mean cause or justification. If the assessing officer has a cause or justification to think or suppose that income had escaped assessment, the AO can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean that the AO should have finally ascertained the facts by legal evidence. It only means that the AO forms a belief from the examination he makes and information that he receives. If the AO discovers or finds or satisfies prima-facie himself/herself that the income has escaped assessment, it would amount to saying that AO has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision whether the income has escaped assessment or not. His formation of the belief is not a judicial decision, but an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. reported at 131 DTR 344, have also held so relying on the decision of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra). 6. Further the ld. CIT(A) after considering the facts of the case, written submissions filed by the ld. AR confirmed the addition made on account of income from other sources by observing vide para 5.2 of the impugned order: 5.2 I have considered the facts of the case, written submissions filed by the Ld.AR for the appellant and perused the order of the AO. The main contention of the Ld. AR on this issue is that the FDRs were purchased from the business funds of assessee for pledging the same with contract awarding departments for taking the contracts. However, the Ld.AR could not explain why the interest on FDRs has been shown by the assessee himself under the head other income in the P L Account. Also the Ld.AR could not furnished any evidence before the AO as well as in the appeal proceedings to show as to how the amounts held as FDRs could be treated as part of assessee s business income, when the net profit rate is attracted only on the contractual receipts. Besides, no details as to whether there was any preco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contention, perused the material on record and the case law relied upon on the issue of validity of reopening of assessment u/s 147.The AO has recorded reason to believe u/s 147 of the IT Act 1961 as follows (APB-52). In this case, the assessment was completed u/s 143(3) of the IT Act at total income of ₹ 2,90,52,820/- against the return income of ₹ 2,73,46,630/-. From the perusal of Balance sheet, Profit and loss account, assessment order and other documents placed on record, it is noticed that the Assessing Officer has rejected the books of accounts of the assessee u/s 145(3) of the Income Tax Act and assessed income of the assessee only on total contract receipt (on percentage basis) of work done by self and subcontract. Apart from contract receipt the assessee firm also has shown some other income in the audited Balance sheet which is as under: Interest on FDR s : ₹ 47,34,000/-. This amount of ₹ 47,34,000/- is himself mentioned in Profit and loss account \ (Schedule 12 of Balance sheet) by the assessee as Other Income . This amount is not included in the Contract receipt by the Assessing Officer and also no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following manner (refer para 4.1 of AO s order). 13. On perusal of the computation of original assessment order passed u/s 143(3) of the Act, as above, we find that there was no reference made regarding the other income earned by the assessee on account of interest on FDR s either in the notices issued by the AO or the compliance and written submission furnished by the assessee during the course of assessment proceedings. 14. In the case of A.L.A. Firm vs. Commissioner of Income Tax (supra). The Hon ble Apex Court held that: . The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) is excessive relief granted in assessment. In this context Explanation 2 to section 147 has to be referred to which exhaustively states certain cases where income chargeable to lax has escaped assessment under sub-clause (iii) of clause (c) of Explanation 2, if income has been made the subject of excessive relief under the Act, then the same is one of the circumstances of income escaping assessment. Therefore, if excessive deduction of interest is allowed under section 36(1)(iii), then certainly it is a case of income escaping squarely covered by Explanation 2 to section 147 of the Act. Even though counsel for the assessee submitted that when the claim was allowed in the original assessment any proposal for subsequent disallowance of relief granted originally in the assessment either fully or partially should be taken as on account of change of opinion, we are unable to accept the same because in the first place, the Assessing Officer has not discussed the matter in the regular assessment but allowed deduction in terms of the claim made in the returns. There is no embargo in section 147 against the Assessing Officer re-examining the assessment file and re-appreciating the evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stage. The decision relied by ld. AR which justifiable on the facts are not applicable to the facts and the case as being justifiable, further the AR has not brought on record in contrary judgments in rebuttal to the contentions of the department. We hold that there is no sufficient material to establish that there was change of opinion on the part of the AO while recording reasons to believe u/s 147 of the Act. 17. We find no merit and substance in the argument of the ld. Counsel, and in the absence of corroborative evidence to substantiate the contentions of the assessee on the change of opinion of the AO, the ld. Counsel, we approve the reason to believe that the income of ₹ 47,34,000/- escaped assessment in the meaning of section 147 of the Income Tax Act.In view of that the ld. CIT(A) was justified in confirming the reopening of the assessment. 18. Following the Hon ble Apex Court on the reopening of the assessment u/s 147 of the Act, we uphold the order of the Ld. CIT(A) that the AO has reason to believe that the income of ₹ 47,34,000/- had escaped assessment within the meaning of section 147 of the Income Tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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