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TMI Blog2021 (5) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, thereof in case of M/s. NCCPL (supra) already stands decided against the Revenue and in favour of the tax payer. We therefore are of the opinion that there is nothing left in the instant second round for to delve deeper on the impugned issue(s). The purpose of reopening mechanism was only to assess the assessee qua these receipts followed by the alleged bogus invoices wherein the learned coordinate bench had made it clear in the former round itself that neither of them could be taken as assessee's income. We thus hold that merely because the Assessing Officer has added these receipts as income from other sources or the CIT(A) as business income (supra), does not make any difference at all. This is more particularly for the reason that the assessee had already succeeded qua assessment of the very sum as income in the first round as set aside in Section 254 proceedings. There is hardly any dispute that the Assessing Officer had invoked his section 148/147 jurisdiction for the reason that the survey exercise dt. 20.7.2007 had witnessed the impugned receipt in assessee's credit side without carrying out any development works since involving as bogus invoices only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of ₹ 6,48,27,000. For A.Y. 2008-09 it filed return of income on 30.09.2008 (wrongly stated as 30.08.2010 in the order of Ld. CIT(A)), acknowledged by I.T. department on 07.10.2009 as per page 36 of the paper book, declaring total income of ₹ 1,33,68,000. There were survey operations under section 133A in assessee's business premises on 20.07.2011. During the course of survey, it was found that assessee has no bills or vouchers for the expenditure claimed in the returns of income. Similarly, from the bank statement found during the survey and also obtained post survey, it was found that assessee had received huge amounts from M/s. Global City Projects P. Ltd., now known as New Global City Projects P. Ltd. (NCCPL). Enquiries were made from the said company and a statement of the Director Mr. Prasad V. Potluri was recorded. Consequent to the above findings, A.O. has issued notice under section 148 by initiating proceedings under section 147 and served notices on 20.09.2011. In response, assessee filed letters on 15.11.2011 requesting to treat the returns filed originally as returns filed in response to the notice issued under section 148. The reasons for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice u/s. 148, the assessment records were called for and perused. A perusal of the assessment records shows that thought the appellant sought and was provided the reasons recorded for issue of notice u/s. 148, it did not object to the issue of the notice. In the absence of any objection from the appellant, there was obviously no occasion for the Assessing Officer to pass any order, speaking or otherwise, dealing with the objections. 7.8 The appellant has also submitted that the Assessing Officer had failed to comply with the provisions of sec. 151. Sec. 151(1) applies to a situation where the original assessment had been made u/s. 143(3) or u/s. 147. In the appellant's case, the returns had merely been processed u/s. 143(1) before issue of notice u/s. 148 resulting in the present proceedings. Sec. 151(1) is, therefore, not relevant to the facts in the appellant's case. 7.9. Sec. 151(2) applies in a situation where the notice u/s. 148 is issued more than 4 years from the end of the relevant assessment year. In the appellant's case, the notices for both the years were issued well before this period of 4 years. Sec. 151(2) is, therefore, not relevant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year had indisputably ended on 31.3.2010 for AY 2007-08 and on 31.3.2011 for AY 2008-09 and therefore, the benefit of sec. 139(5) was no longer available to it on 12.03.2013 for either of the two years. 9.11. Even if it were to be presumed that the return filed in response to notice u/s. 148 was equivalent to one filed u/s. 139, such a return would be subject to all the conditions laid down u/s. 139(5). The benefit of sec. 139(5) is available only to a return filed u/s. 39(1) and not to a belated return u/s. 139(4). The appellant did not file the return in response to the notice u/s. 148 within the time of 30 days allowed to it and the belated letter filed by it, deeming the original return filed as one filed u/s. 148, would at best qualify the appellant to the benefits of sec. 139(4), not of sec. 139(5). 9.12. It is, therefore, held that the revised returns filed on 12.03.2013 for the two years were not valid returns and the Assessing Officer was justified in ignoring them for the purpose of making the assessment. 6. Assessee further contended that it has filed revised audit report and accordingly, the incomes as declared in the revised audit report sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reference to merits of the addition made by A.O. it was submitted that assessee did enter into agreement with M/s. New Cyberabad City Projects P. Ltd., for the purpose of development of project and funds have come and gone and it was the intention of assessee to enter into real estate transactions. But since there were disputes regarding project and the area, nothing has materialized and so assessee has revised the accounts and there were no incomes. It was the submission that revised income should be considered in re-assessment proceedings. 9. In reply, Ld. D.R. submitted that assessee has originally offered gross profit on contract receipts and offered income. A.O. found out in the survey proceedings that no expenditure as claimed in the P L Account, was incurred by assessee and accordingly, the receipts were brought to tax correctly. It was, however, for Assessee to substantiate the expenditure claimed. Considering the statement of Mr. Prasad V. Potluri it can be stated that assessee has entered into transactions and issued bogus expenditure bills. Therefore, the gross receipts are taxable as Assessee has shown amounts as revenue receipts in the P L account. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of Sun Engineering Works Ltd., 198 ITR 297 it was held that proceedings under section 147 are for the benefit of Revenue and not for the benefit of assessee. Since, assessee has offered incomes originally which were accepted, the proceedings being initiated are only to add some more to the originally admitted incomes. Therefore, on that context, the revised returns and revised audit reports cannot be considered. The Hon'ble Supreme Court Order in the above referred case has held as under : Held Under s. 147, the Assessing Officer has been vested with the power to assess or reassess the escaped income of an assessee. The use of the expression assess or reassess such income or recompute the loss or depreciation allowance in s. 147 after the conditions for reassessment are satisfied, is only relatable to the preceding expression in cls. (a) and (b), viz., escaped assessment . The term escaped assessment includes both non-assessment as well as underassessment . Income is said to have escaped assessment within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the rule is that construction should be preferred which makes the machinery workable. Since the proceedings under s. 147 are for the benefit of the Revenue and not an assessee and are aimed at garnering the 'escaped income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceedings at the instance of Assessee, thereby making the machinery unworkable. Thus in proceedings under s. 147 the ITO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under s. 148 and where reassessment is made under s. 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such income which has escaped tax or has been under assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting Assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the underassessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted as the proceedings are initiated for bringing to tax the escaped incomes. The contentions of assessee on that fails. 14. However, the action of the A.O. in taxing the entire receipts as income cannot be upheld. As far as the statement of Potluri V. Prasad is concerned, it was admitted that they have entered into an agreement for purchase of property through assessee company for acquiring land bank in Hyderabad and development of the same. For passing on amounts to assessee, assessee might have raised bogus bills but at present, the parties are in dispute. The said company New Cyberabad City Projects P. Ltd., admittedly treated the amount paid to assessee as advance and assessee even though treated the receipts as revenue receipts and offered incomes, subsequently with revising accounts treated them as a liability in the books of accounts. Be that as it may, there are enquires made by A.O. about the transactions and AO has the following findings. In view of the statement of Sri Prasad V. Potluri, Director of NCCPL that no development activities were carried on by the assessee company and the fact that no evidence in the form of bills/vouchers were found at the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, we also not in a position to give any finding that the audited accounts revised by assessee are to be accepted as such, in the absence of any justification of the same. Therefore, while disallowance of entire expenditure made by A.O. cannot be upheld as such, we set aside the assessment to the file of A.O. to make fresh enquiries and see the latest position and whether the amounts received and appropriated by assessee can be considered as incomes of assessee. A.O. is directed to enquire whether any proceedings are initiated under any other Act, like Money Laundering Act or whether there are any other violations committed in these transactions. Admittedly, there were bills were given for the so called work which was not done and as seen from the statement of Mr. Prasad V. Potluri, assessee also registered some properties in the name of the said company which are found to be not correct. Therefore, A.O. is directed to 15 ITA. No. 1173 1174/Hyd/2014 M/s. SPR Infrastructure (India) Ltd., Hyderabad. enquire about these aspects and arrive at the correct position of incomes as per law and facts of the case. However, in case, no escaped incomes are to be considered, A.O. is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions sufficiently proved that it had been merely created as a namesake for the purpose of obtaining funds from NCCPL in the guise of contract works; in turn directed to the sister concerns for buying properties and starting newspaper. The Assessing Officer therefore added the impugned sum(s) of ₹ 99.65 Crores and ₹ 47.15 Crores (supra) as income from other sources. 5. The CIT(Appeals) has confirmed the Assessing Officer's action but treated the very sum as business income as follows : 4. In accordance with the directions of the Hon'ble ITAT, the Assessing Officer carried out further enquiries and made following observations in assessment order u/s. 143(3) r.w.s. 147 r.w.s. 254 263. (a) That the money received from M/s. NCCPL was diverted by the appellant company to group companies namely SPR Publications, Suryateja Industries, SPR Entertainments, SP Creations where the directors are Sri N. Surya Prakash Rao and Smt. N. Padmaja w/o Sri N. Surya Prakash Rao and Smt. N. Grishma D/o Sri N. Surya Prakash Rao. A group company namely SPR Publications Pvt. Ltd. in which the above named persons are directors started telugu newspaper under the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000. In his letter dated 'Nil' before Assessing Officer, Sri Kunireddi Srinivas stated that this amount was received for purchase of land in favour SPR Publications as per the directions of the management. A copy of sale deed in favour SPR Publications form part of the assessment order dated 29.2.2016. (e) The appellant company utilized these amounts for purchase of land in the name of Smt. N. Padmaja, one of the directors of the company. 5. The appellant made submissions incorporating the background of the case and also emphasised the directions given by the Hon'ble ITAT which were already mentioned in the preceding paras. 6.1 I have carefully considered the information on record. To summarise the facts, for A.Y. 2007-08, gross receipt of ₹ 99,65,65,250/- were shown as received from M/s. NCCPL against which expenses to the tune of ₹ 92,82,92,980/- were claimed. The income returned was ₹ 6,48,27,000/- For A.Y. 2008-09, the receipts from M/s. NCCPL were shown at ₹ 5,51,84,985/- There was interest income of ₹ 2,1071,154/- and there was unaccounted gross receipts which was not reflected in P L a/c of ₹ 47,15,18,833/-, Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad stated that The inventory of the company consists of land which was acquired during the previous year. The physical verification of the land was not carried out subsequent to its acquisition. Since no physical verification was earned out during the year, commenting on adequacy of physical verification procedures does not arise. 6.3 It is also relevant to mention here that the proceedings under Money Laundering Act has no bearing on Income Tax proceedings. The proceedings under Money Laundering Act are criminal, whereas proceeding under Income Tax are civil in nature. In case of money laundering, the source of money is always an act which is criminal in nature. For example Smuggling of goods and generating black money out of it Selling of drugs Selling of arms etc etc. The purpose of money laundering act is to prevent the crime and to confiscate properties earned out of such income,. Whereas in the case of income tax, the source of income, whether legal or illegal is irrelevant. Further it is not possible to initiate action under any act against all the defaulters. Similarly, action under Money Laundering Act, 2002 is not initiated against all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out whether any repayments were made by appellant or its sister concerns S.No Name of Company Making repayments to M/s NCCPPL Date/Amount Name of the Bank Remarks Enclose the bank account Highlighting the entries The appellant was also asked to submit the reasons as to why such amounts cannot be treated as income u/s. 41 of IT Act, 1961 as he has not discharged repayment of trading liability within reasonable time. In reply submitted by the appellant dated 30.9.201(sic), the appellant stated that the amount is still outstanding. It is further to be mentioned that in the books of accounts of M/s. NCCPL, as per the remarks of the auditors, the amount was given for the purpose of land development. In the original return the appellant also shown the receipts as contract receipts, neither the work was done nor the amounts were paid back. Therefore the liability is certainly a trading liability. M/s. NCCPL had not taken any steps for recovery and had clearly stated before the assessing officer that it would adopt reconciliatory process and do not resort to filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (sic) upon the nature of the receipt and the true scope and effect of the relevant taxing provision. The receipt may be an income for the purpose of taxation though it may not amount to profit. What the word income denotes has to be determined in the context of the said section itself. Lachit Films vs. CIT (1992) 195 ITR 402 Considering the use of the word include in section 2(24), the word income shall be construed as comprehending not only those which section 2 (24) declares that they shall include but also such things as it signifies according to its natural import. This leaves the assessee aggrieved. 6. We have given our thoughtful consideration to the rival pleadings against and in support of the impugned/identical addition(s). A perusal of the Tribunal's order in first round remand directions makes us clear that the same have already sealed the ultimate outcome of the instant 'lis'. This is for the reason that learned co-ordinate bench had made it clear inter alia concluded that it could not uphold the treatment of the twin receipt amounts received by the assessee as its taxable income. More particularly in view of the fact that it had not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on merits, there is no reason left to support the impugned reopening since its very foundation itself has no legs to stand as per learned co- ordinate bench decision in Joginder Singh Vs. ITO in ITA No. 222/Ars/2014 Dt. 11.06.2015 taking note of Hon'ble apex court's landmark decision G K N Driveshafts India Ltd. Vs. ITO (2003) 259 ITR 101 (SC) held that - 7. The short question before us really is whether in such circumstances the CIT(A) ought also to have cancelled the reassessment proceedings as well and whether there is any contradiction in the action of the CIT(A) in upholding the reassessment proceedings and quashing the additions made on the basis of the reasons recorded for reopening the assessment. This question assumes significance in the light of the fact that while these additions stand deleted, some other additions, made during the course of reopened assessment, continue to survive. 8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We have noted that the assessment was reopened on the ground that the partnership firm Citi Plaza, in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. It is a well settled legal position, as held by Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332 (Bom)], that when it comes to examining the validity of reassessment proceedings, .... No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him . Hon'ble Bombay High Court, in the case of Prashant S. Joshi vs. ITO [(2010) 324 ITR 154 (Bom)] has observed : The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147 and that the reasons which are recorded by the AO are the only reasons which can be considered when formation of belief is impugned . In view of these discussions, and the correctness of the reasons recorded for reopening the assessment having been decided against this assessee, the CIT(A) ought also have held that the very reassessment proceedings are legally unsustainable on the facts of this case. There is an inherent contradiction in the approach of the CIT(A). 12. Learned Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons with regard to the enunciation of law by Their Lordships in Majinder Singh Kang's case (supra). However, we find that the reliance by the learned Departmental Representative on this decision, on the facts of this case, to be inapt. In Majinder Singh Kang's case, Their Lordships have nowhere held that the proposition of law laid down therein to be applicable even to the cases wherein even when reasons recorded for reopening the assessment are held to be incorrect, and thus unsustainable in law, the Assessing Officer can still go ahead and make additions in the reassessment proceedings in respect of reasons other than the reasons recorded for reopening the reassessment. Hon'ble High Court's judgment in the case of Majinder Singh Kang's case (supra) has not been shown to have altered, even sub silentio, the well settled legal position that the validity of reassessment proceedings is a sine qua non for any additions being made to the income of the assessee, during the course of the reassessment proceedings whether in respect of the reasons recorded for reopening the assessment or in respect of the reasons other than the reasons recorded for reopening the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no income has escaped assessment. The conclusions in these two sets of somewhat parallel exercises cannot, therefore, be ordinarily different. In other words, when the Assessing Officer is satisfied that no additions can be made on the basis of the reasons of reopening, as recorded by him, he has to drop the reassessment proceeding at this initial stage itself. When the examination of correctness of the reasons recorded come up for adjudication before the appellate authorities, the approach, therefore, cannot be any different either. 18. In the case before Hon'ble jurisdictional High Court, as evident from the extracts from the CIT(A)'s order reproduced therein, the reassessment was quashed on the ground that the Assessing Officer could not make additions in respect of the income which had not escaped assessment for which no notice had been given to the assessee under Section 148 read with Section 147 of the Act . Their Lordships appreciated that to that extent the legal proposition was incorrect in the light of insertion of Explanation 3 to Section 147, and the earlier judicial precedents, which were relied upon by the assessee, did not hold good law, as Their Lords ..... X X X X Extracts X X X X X X X X Extracts X X X X
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