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TMI Blog2022 (12) TMI 1286X X X X Extracts X X X X X X X X Extracts X X X X ..... s engaged in business of construction and engineering. 3.2) For the Assessment Year 2011-2012, the petitioner submitted e-return of income declaring total income of Rs.2,61,86,720/-. 3.3) The petitioner received a notice under section 142(1) of the Act dated 3.12.2012 calling for certain details which included details of scrutiny assessments of last three years and whether the petitioner is in appeal against the same and whether appeal has been decided and its status of demand. 3.4) The petitioner received another notice under section 143(2) of the Act dated 27.12.2012 seeking further details. 3.5) The petitioner submitted its reply dated 9.01.2013 and submitted copy of company's audit report and tax audit report as well as copies of previous three years' assessment orders and also clarified that the petitioner had preferred appeal against the order for Assessment Year 2009-2010 before the CIT(Appeals) which was pending. 3.6) The respondent thereafter issued notice under section 142(1) of the Act dated 28.06.2013 wherein once again the petitioner was required to submit assessment orders for Assessment Years 2008-2009, 2009-2010 and 2010-2011, if they were selected for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Desai Rs.5,82,500 Rs.5,82,500, Harshal K. Patel HUF: Rs.5,82,500, Ratnakala H Patel: 5,82,500, Mahesh Desai: Rs,98,000 & Moti Hira Land Developers Pvt. Ltd.:2,98,230) towards guarantee commission. Out of this payment, Rs.23,30,000 paid to first four entities were related persons as reported in annexure-2 of 3 CD report. The assessee company has deducted 10% TDS on this commission. The total guarantee commission is paid @2% of turnover amongst the entire guarantors in equal amount. 2.1. As per memorandum of understanding signed between assessee company and Moti Hira land Developers Pvt. Ltd. It was noticed that the memorandum was signed undated and without signature of any witness. The stamp of Rs. 100 embossed on the agreement born the date of 16.04.2010 indicating that it was executed on or after that date. Further, no agreement is on record in respect of guarantee commission payment made to other entities. The details of properties which were offered by these entities and proof that it were subsequently mortgaged with bank for loan taken by the assessee company is not on record. It is also noticed from the details of secured loan from banks and institution furnished by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd have escaped assessment. 4. In respect of income reconciliation as per 26AS and books of account revealed that the assessee had shown work contract income of Rs.33,54,39,765 and income declared in IT survey of Rs.2,33,00,000 totalling to Rs.35,87,39,765 as income from works contract. The assessee had made disclosure of Rs.2,33,00,000 during the survey dated 06.01.2011 on account of work-in-progress and inadequate explanation of expenditure. It is noticed from income reconciliation as per 26AS that the assessee has total construction income from P.C. Snehal Construction Pvt. Ltd., of Rs.35,28,19,625 during A.Y.2011-12. Against this, assessee has shown only Rs.33,54,39,765 as contract income. Therefore the difference of Rs. 1,73,79,860 (35,28,19,625 33,54,39,765) has escaped assessment. 3. In view of the above, income to the tune of Rs.2,09,86,944/-( 27,26,230 5,13,366 + 3,67,488+1,73,79,860) has escaped assessment within the meaning of section 147 of I.T. Act, 1961. Therefore, I have reason to believe that income has escaped assessment for A.Y. 2011-12 to the tune of Rs.2,09,86,944/- and accordingly assessment is required to be reopened w/s. 147 of the I.T. Act, 1961," 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,26,230/- to six entities, the petitioner had in the course of assessment proceedings in its replies dated 5.11.2012, 5.03.2014 and 19.02.2014 produced the details of secured loans taken from banks and institutions, details of Guarantee Commission and also the individual details about the name of person, amount of guarantee commission and nature of payment along with copy of Agreement of Guarantee Commission expenses. It was submitted that the Assessing Officer after being satisfied with such details and after application of mind passed the assessment order under section 143(3) of the Act without making any addition towards Guarantee Commission expenses. It was submitted that the Assessing Officer has not unearthed any fresh tangible material on record to prove that the assessee company has failed to disclose truly and fully material facts necessary for assessment. 4.5) With regard to payment of excess interest over 12% of Rs. 5,13,366/-, it was submitted that the Commissioner of Appeals- XI, Ahmedabad in case of the assessee company for the previous Assessment years 2009-2010 and 2010-2011 has allowed the contention of the assessee and passed the order deleting the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.8) Learned advocate Mr. Shah submitted that reopening is based on audit objections and therefore, also the notice of re- assessment of a previously scrutinized assessment beyond a period of four years is bad in law and therefore, the impugned notice and consequential orders may be quashed and set aside. 4.9) In support of his contention that reopening of an already completed scrutiny assessment beyond a period of four years cannot be undertaken, reliance was placed on the following decisions of this Court: 1) In case of Kalpataru Sthapatya (P) Ltd. v. Income tax Officer, Ward 1(3) reported in (20130 29 taxmann.com 218 Gujarat. 2) In case of Dhruv Dipakbhai Panchal v. Income Tax Officer Ward 5(2)(2) reported in (2018) 93 taxmann.com 206 (Gujarat). 4.10) It was submitted that there is nothing stated in the reasons recorded or from the material on record which suggest that the assessee failed to disclose truly and fully all material facts. Therefore, now to propose reassessment on the very same issues would amount to proposing reassessment on a mere change of opinion which is not permissible in law as has been laid down by the Apex Court in case of CIT v. Kelvinator of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot produce any agreement with these entities/individual to justify payment of guarantee commission. It was submitted that the agreements on the basis of which such guarantee commission was paid was essential and material fact for the Assessing Officer to arrive at a conclusion as to whether such commission paid was for business purposes or not. It was submitted that the deduction of TDS in itself does not lead to conclusion that such payment was for business purpose. Therefore, there is a failure on the part of the petitioner to truly and fully disclose all material facts necessary for assessment. 5.4) Relying upon the Explanation 1 to Section 147 of the Act, it was submitted that the said explanation clearly states that production of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure. It was submitted that the contention of the petitioner that the Assessing Officer could have asked for further details during the course of original scrutiny proceedings stands negated in view of Explanation 1 to Section 147 which does not exonerate the assessee from disclosin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the copy of Agreement of Guarantee Commission executed with said entities. The assessee had filed replies for claim of Guarantee Commission expenses during the assessment proceedings and the Assessing Officer passed the assessment order without making any addition under the head Guarantee Commission expenses. Therefore, there was no failure on part of the assessee to make full and true disclosure of material facts necessary for assessment. 8.Insofar as payment of excess interest over 12% to the tune of Rs.5,13,366/- is concerned, the petitioner had submitted audited balance sheet with its reply showing bifurcation of interest expenses during the course of assessment proceedings. The Assessing Officer after being satisfied with such documents made no addition on account of reason of higher rate of interest expense. 9.Insofar as disallowance under section 14A of the Act to the tune of Rs. 3,67,488/- is concerned, the petitioner had during the course of assessment proceedings through its reply produced list of investments yielding tax free income as well as details regarding investment in mutual fund which is taken as tax free income under section 14A along with details of investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to reopen the assessment for the Assessment Year 2011- 2012, more particularly, when the issue raised in the reopening assessment is already considered during the original assessment proceedings. The Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. reported in (2010) 320 ITR 561(SC) as under: "2. A short question which arises for determination in this batch of civil appeals is, whether the concept of "change of opinion" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987? xxxx 6. ............prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st ..... 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