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TMI Blog2019 (11) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... td. [ 2007 (5) TMI 197 - SUPREME COURT] observed that the intimation u/s 143(1) is not an assessment. Since the intimation u/s 143(1) is not an assessment within the meaning of statute, there is no question of treating the reassessment was based on change of opinion. Therefore, we hold that in the instant case having processed the returns u/s 143(1), there is no case for change of opinion and the AO has rightly reopened the assessment after being satisfied with the reason that the income chargeable to tax had escaped the assessment. AO ought to have resorted for action u/s 154 or 263 instead of reopening the assessment u/s 147 - It is for the AO to take appropriate remedial action and to bring the escaped income to assessment but not for the assessee to dictate the terms. In the instant case, the AO viewed that correct remedial action is reopening of assessment and rightly invoked jurisdiction u/s 147, hence we reject the argument of the Ld.AR. Accordingly, we uphold the order of the CIT(A) and dismiss the appeal of the assessee on this ground for the A.Y. 2011-12, 2012-13, 2014-15 and 2015-16. Reopening on audit objection - A.Y.2013-14 - HELD THAT:- Assessee could not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of running them on hire - HELD THAT:- In the instant case, the assessee failed to establish that the dominant purpose was to use the vehicles for running them on hire. The dominant purpose is to use the vehicles for its own business. The purpose of allowing deduction at higher rate of depreciation in vehicles running them on hire is that the vehicles are used extensively without taking much care and suffer heavy wear and tear. Whereas in the case of assessee s own business, the wear and tear is lesser than the vehicles used in running on hire. In the instant case, the assessee also failed to establish that the vehicles were used in the business of running them on hire. Following the decision of Hon ble Kerala High Court in the case of N.D.Joseph Vs.CIT [ 2010 (1) TMI 382 - KERALA HIGH COURT] and CIT Vs. Gupta Global Exim [ 2008 (5) TMI 7 - SUPREME COURT] we hold that the assessee is disentitled for higher rate of depreciation. - Decided against Assessee - I.T.A.No.321-325/Viz/2019 (Assessment Year : 2011-12 to 2015-16) - - - Dated:- 23-8-2019 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER Appellant by: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27,236 - 1,05,94,944 2012-13 74,18,560 9,85,056 1,45,569 55,551 - 85,54,320 2013-14 50,81,840 10,58,518 - 5,92,597 - 67,32,955 2014-15 23,95,240 4,22,564 5,18,342 39,388 82,397 34,58,551 2015-16 32,42,869 2,19,069 5,92,486 51,185 63,009 41,68,623 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 148 and dismissed the appeal of the assessee on this ground. 4. Against the order of the Ld.CIT(A), the assessee filed appeal before us. During the appeal hearing, the Ld.AR argued that issue of notice u/s 147 for reopening of assessment and consequent issue of notice u/s 148 is invalid and it was due to change of opinion, but not having reason to believe that income had escaped assessment. The Ld.AR further argued that if there is excess claim of depreciation, there are other remedial measures available in the Act, which the AO ought to have taken action u/s 154 or 263 instead of reopening the assessment. No fresh information was received by the AO and the assessment was reopened only on account of audit objections as per the information obtained from the AO under RTI Act, hence argued that invoking the jurisdiction u/s 147 is illegal and requested to set aside the orders of the Ld.CIT(A) and to quash the notice issued u/s 148 of the Act. 5. On the other hand, the Ld.DR supported the orders of the lower authorities. 6. We have heard both the parties and perused the material placed on record. In the instant case, all the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2013-14 7. In the instant case, the assessment was originally completed u/s 143(3). Later on, the AO found that the assessee had claimed the depreciation on earth moving machinery @30% against the actual rate of 15%. Therefore, the AO reopened the assessment u/s 147 and issued notice u/s 148 of the Act. On appeal before the first appellate authority, the Ld.CIT(A) upheld the validity of issue of notice u/s 148 placing reliance on various case laws. The Ld.CIT(A) has made elaborate discussion upholding the action of the AO. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT(A) from para No.7.2. to 7.2.10 which reads as under : 7.2.0 INITIATION OF PROCEEDINGS U/S 147 OF THE ACT : Ground No.1 2 1. The order passed by the learned Asst.Commissioner of Income Tax for the assessment year 2013-14 u/s 143(3) r.w.s. 147 is erroneous in law, contrary to the facts, probabilities of the case and against the principles of natural justice. 2. Initiation of reassessment proceedings is one to change of opinion and the same is against provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. 7.2.5. Further, in case, where the AO omitted to consider certain facts at the time of original assessment u/s. 143(3) of the Act, it cannot be considered as change of opinion, when the income which was chargeable to tax is actually taxed correctly in accordance with the provisions of law which was omitted to be considered due to mistake by the AO at the time of completion of the original assessment. Under the circumstances, when the issue itself was not at all considered at the time of original assessment u/s. 143 (3) of the Act, the question of attributing change of opinion while passing the reassessment order rectifying such mistake doesn't arise. 7.2.6. It is also important to note that the basic requirement to reopen the assessment u/s. 147 of the Act is that there should be reason to believe on the part of the AO that income has escaped assessment while passing the original assessment u/s. 143(3) of the Act. In this regard, it is trite law that the word 'reason' in the phrase 'reason to believe' would mean cause or justification. Accordingly, if the AO has a cause or justification to think that the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The following tests and principles would apply to determine the applicability of section 34(l)('b) to the following categories of cases: (1) where the information is as to the true and correct slate of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the ITO. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (3) where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. If these conditions are satisfied then the ITO would have comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment has been reopened were scrutinised by the AO during the original assessment proceedings u/s. 143(3) of the Act would not preclude the AO from reopening the assessment. The relevant portion of the decision is reproduced below for ready reference. 10. The contention that there was no failure on part of the assessee to disclose truly and fully facts cannot be accepted The Assessing Officer, as noted, received fresh material after the assessment was over, prima facie, suggesting that the assessee company had received bogus share application/premium money from number of shell companies. 11. Merely because the transactions in question were examined by the Assessing Officer during the original assessment would not make any difference. The scrutiny was on the basis of disclosures made and materials supplied by the assessee. Such malarial is found to be prima facie untrue and disclosures not truthful. Earlier scrutiny or examination on the basis of such disclosures or materials would not debar a fresh assessment. Each individual case of this nature is bound to have slight difference in facts. 7. Krishna Developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved by the above decision of the Hon ble Gujarat High Court, the assessee preferred Special Leave Petition (SLP) before the Hon'ble Supreme Court. However, after examining the issue, SLP filed by the assessee has been dismissed by the Hon 'ble Supreme court as reported in Krishna Developers and Company vs DCIT' [2018] 91 taxmann.com 306 (SC). 7.2.8 At this juncture, it is also important to note that at the time of initiation of proceedings u/s 147 of the Act i.e. while recording the reasons and issuance of notice u/s 148 of the Act, absolute certainty regarding the escapement of income from assessment is not necessary. However, reasons to believe recorded prior to issue of notice must not be based on mere suspicion, gossip or rumour. There should be live link between the information available with the AO and inference drawn that income has escaped assessment. 7.2.9 In the instant case, it is clearly established that the AO has fulfilled the crucial requirement of live link between the information available and inference drawn in as much as, prima facie, the assessee, who is engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sham transactions. That, on the basis of such materials on record that he formed a belief that the assessee had not made trite and full disclosures and the income chargeable to tax as, therefore, escaped assessment. [Para 6] The reasons thus recorded do not proceed only on the information supplied by the Investigating Wing. The Assessing Officer having applied his mind and processed such information, formed his belief that the income chargeable to tax has escaped assessment. Neither the application of mind, nor the formation of belief that income chargeable to tax has escaped assessment on the basis of information available at the disposal of Assessing Officer, have to be expressed in any rigid format in the reasons recorded. Hence, as these two essential requirements can be gathered from the reasons recorded, the notice for reopening cannot fail on such basis. [Para 7] The question of change of opinion and failure on the part of the assessee to disclose truly and fully all material facts, in the present case are closely connected. Undoubtedly, as noted earlier, the Assessing Officer during the original assessment had examined the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion. Therefore, there is no case for reopening the assessment u/s 147 of the Act. 9. Per contra, the Ld.DR relied on the orders of the lower authorities. 10. We have heard both the parties and perused the material placed on record. In the instant case, the assessment was originally completed u/s 143(3) by an order dated 29.10.2015. Notice u/s 148 was issued on 17.03.2017 within 4 years from the relevant assessment year. As per the provisions of the Act, for reopening the assessment within 4 years it is not necessary to have fresh information or the failure on the part of the assessee to disclose full information. During the appeal hearing, for a query from the Bench, the assessee could not furnish any information on submission of details with regard to claim of higher rate of depreciation with the relevant evidences before the AO. As per para 2 of the assessment order dated 29.10.2015 for the A.Y.2013-14, the AO called for the various details and the AR had produced the books of accounts, bills and vouchers for verification which was observed that the bills, vouchers and books of accounts were torn out and not in verifiable condition. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a larger Bench of this Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was valid in law. The judgment under appeal is set aside to this extent. 11.1. In the instant case there is no dispute that the Audit party has raised the objection with regard to the excess claim of depreciation and there is no evidence available on record to show that the assessee is using the vehicles for running them on hire. Therefore we, find no merit in the argument of the Ld.AR and reject the same. A.Y.2011-12 12. The next issue in Ground No.2 for the A.Y.2011-12 is with regard to the delay in remittances of EPF and ESI contributions of employees u/s 43B of the Act. This issue is involved for the A.Ys.2012-13, 2013-14, 2014-15 and 2015-16 also. From the assessment order, it is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for deduction on account of PF and ESI if the same is remitted before the due date of filing the return of income. Accordingly, we set aside the order of the CIT(A) and delete the addition made by the AO. The appeals of the assessee on this issue for the A.Y.2011- 12 to 2015-16 are allowed. 14. Ground No.3 is related to the disallowance of depreciation claimed by the assessee. The assessee is engaged in the business of civil contract and claimed the depreciation on the following items @30% instead of 15%. (i) Hitachi Excavator (v) Ace Hydra (ii) Dozer D80 (vi) Escort Hydra (iii) Tata Di 207 (vii) JCB Machine fixed (iv) Anw Tippers The AO disallowed the excess depreciation claimed by the assessee holding that the assessee is not in the business of running them on hire. From the service tax returns, the AO found that the assessee is providing the services of manpower recruitment, cargo handling services, erecting machinery and communication business services and construction services in respect,, of the commercial and industrial buildings and civil contractors. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee also relied on the decision of ITAT Rajkot in the case of ACIT, Gandhidham Circle, Gandhidham Kutch Vs. M/s Bhimji Velji Sorathia Construction in I.T.A. No.346/Rjt/2016 dated 28.02.2018. 16. On the other hand, the Ld.DR supported the orders of the Ld.CIT(A). 17. We have heard both the parties and perused the material placed on record. In the instant case, the assessee is engaged in the business of civil contracts, but not engaged in the business of running vehicles on hire. The AO has given a finding in the assessment order that as per the service tax returns, the assessee was providing services of manpower recruitment, cargo handling services, erecting, commissioning and installation, business auxiliary services, construction services in respect of the commercial or industrial buildings and civil structures. As per the assessment record, the assessee is engaged in the business of civil contract works. The AO further observed that the assessee is not in the business of hiring vehicles and the bills submitted by the assessee shows temporary arrangement for earning extra income and the assessee is occasionally using the vehicles for hire p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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