9911796707
TMI Blog2024 (6) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the company. The reasons make it apparent that whatever information was subsequently considered at the time of recording of reasons for reopening was, in fact, part of the assessment record on the basis of which assessment was completed on 17.10.2012 u/s 143(3) of the Act. As observed earlier, at the time of recording of the reasons, there is specific reference to a notice dated 30.05.2011 by which the assessee was said to have been given a final opportunity to produce books of account and copy of bank statement in compliance of which Shri Suraj Garg, CA and assessee filed bank statements and copy of the last audited balance sheet. Thus, it is established that at the time of recording of the reasons there was no fresh information with the AO. It appears that only because there was a new AO the case was reopened. As a matter of fact, the assessment u/s 143(3) of the Act and the survey was done by the same AO who was Joint Commissioner of Income-tax, Range-1, Bathinda who had concluded the assessment on 17.10.2012. The subsequent notice u/s 148 of the Act dated 11.08.2014 is issued by the Asstt. Commissioner of Income-tax, Circle-1, Bathinda while taking cognizance of onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enquires referred in re-opening reasons were collected before the original assessment u/s 143(3) - CIT(A) has merely gone on the question: if there was prima facie some material for reopening and not sufficiency or correctness of the material , relying on the judgement of Raymond s Woolen Mills [ 1997 (12) TMI 12 - SUPREME COURT] where there was allegation of suppression of material facts by the assessee during initial assessment, which is not the case here at all. Every aspect was enquired in initial assessment and there was no further information to show that was accepted out of enquiry in initial assessment was erroneous on facts or law, requiring re-assessment. Mere change of head of income from business to income from other source of the receipt from SNSPL, the Ld. AO has found it case of escapement. However, we are of considered view that it cannot at all result into belief of escapement of income or assessment without establishing and quantifying the escapement of tax in reasons itself. In the case of assessee both business receipts and income from other sources are liable to the same rate of 30% tax, and the Assessing Officer, in the reasons, has not specified that any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted in the case of M/s Shiv Naresh Sports Private Limited (henceforth SNSPL ) on 28.10.2010 and M/s SNSPL was searched in connection with the Commonwealth Games Scam of 2010 with allegations of blatant irregularities and fleecing and siphoning of public money by obtaining unrealistically high- value bogus contracts through underhand means. As Per the CIT(A) order, post the survey, the appellant's case was reopened by issuance of notice under section148 of the Act and assessment was reframed, assessing the taxable income at Rs. 7,62,98,570/-, raising a tax demand of Rs. 2,79,95,470/-. 2.2 In appeal before the ld.CIT(A), the question of re-opening and valid exercise of jurisdiction u/s 147/148 of the Act was decided against the assessee with the following observations:- 2. Even if it is assumed that the appellant had discharged its onus of disclosing all the primary facts in its return of income which was concluded as true and correct by the Assessing Officer at the time of the original assessment, yet the assessing authority would not be rendered powerless to reopen the assessment within a period of four years from the end of the relevant assessment year, if his reason to belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Shiv Naresh Sports Private Limited (SNSPL) amounting to Rs. 3.46 crores at for the stadiums in New Delhi namely Jawahar Lai Nehru Stadium, Tyagraj Stadium, Chhatarsal Stadium and Commonwealth Games Village. The company was simultaneously executing another work contract in New Delhi for M/s Delhi Metro Rail Corporation (DMRC) of approximately Rs. 20 crores. The said work contract being larger in size and duration as compared to the work contract from SNSPL, all the material, labour and other services and components used were kept centralised at the site of DMRC. As and when any material or labour or any other equipment/machinery et cetera was required for execution of work contract of SNSPL, the same was provided and mobilised from the company's site at DMRC. Therefore all the books of accounts, vouchers, muster rolls et cetera were maintained centralised at the company's site at DMRC. We are therefore producing all the books of accounts, expenditure vouchers, muster rolls et cetera pertaining to the New Delhi branch for the year under consideration. As cited above our company has maintained all the records of the work executed for SNSPL in New Delhi branch from where co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for in the single set of books and an averment was made that perhaps the AO failed to appreciate the concept of recording accounts of projects in a single set of books. It was further contended that in the assessment of SNSPL framed under section 153A/143(3) for the same assessment year, the payment made to the appellant was neither doubted nor adversely commented upon and the GP rate disclosed was accepted as such in the post-search assessment. The past assessment history of the appellant company was also canvassed to show that the books of accounts were regularly accepted and never before a NP rate of 10% or any other odd flat rate had been applied. Failure of the AO to cite any comparative instance for adopting the NP rate of 10% was emphasised to suggest the unreasonableness of such assessment. It was pleaded that the succeeding officer s different view than taken by the predecessor AO on the same materials amounted to nothing, but change of opinion in the reassessment proceedings under section 147 of the Act and a plethora of judicial precedents were cited to the effect that such change of opinion is not permissible as per the provisions of the act. 8. The aforesaid submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant before the AO. At the risk of reiteration, it is stated here that the appellant despite innumerable opportunities failed to discharge its onus. Since the assessment of income is a civil proceedings, rules of probability of circumstances apply. It is probable in the circumstances that the appellant garnered the impugned receipt of money to window-dress its gross turnover, increment or maximisation of which entitles the appellant or puts him in a sound position to bid for bigger contracts of MES or DMRC. Such gratuitous receipts are generally masqueraded as contractual receipts against which bogus and dubious expenses are debited to square off the taxable income component of such receipts. However, this has been stated only to answer and address the refrain of the appellant as to why SNSPL would make a huge gratuitous payment if no work was to be executed. 9. In view of what has been stated above, it is held that the AO's action in treating the purported contractual receipt from SNSPL as income from other sources is fully justified, requiring no interference. All the grounds of appeal pertaining to this impugned issue is treated as dismissed. 10. Now the question of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. He was given to understand that the books contained debit of expenses with respect to that portion of the contractual receipt in the gross turnover, which actually was not a business turnover. In such a scenario, the AO was well within his rights to treat the books as incorrect and even incomplete, which he did and rejected the book results. Once the books were rejected, the AO had to estimate the profits. He could not have been bound by the consistent GP rate shown by the appellant as in the present circumstances, the situation was entirely different in as much as non-contractual receipts of significantly higher amount was masqueraded as contract receipts. In his assessment, NP rate of 10% was a reasonable estimate after allowing the credit of claim of depreciation. Even if he had adopted a GP rate of 8% as stipulated in the presumptive provisions of the statute (section 44AD), taking in its fold as deemed allowed any deduction allowable under the provisions of section 30 to 38, the assessment of taxable business income would have been in the same vicinity or even marginally higher. It is therefore held that the AO's act in adopting the net profit rate of 10% was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdiction u/s 147 by way of issuance of notice u/s 148 dated 11/08/2014 by Assistant Commissioner of Income Tax, Circle I, Bathinda, who was neither the Assessing Officer of the assessee nor had made the original assessment order u/s 143(3) dated 17/10/2012 for the impugned assessment year, is illegal and, therefore, the resultant reassessment order dated 08/01/2015 deserves to be quashed. 5. Without prejudice to the above, the notice u/s 143(2) dated 12/08/2014 served by the Assessing Officer upon the Authorized Representative of the assessee on the same date on which the Authorized Representative submitted the return in response to the notice u/s 148 dated 11/08/2014, obviously without examination of return and application of mind, is illegal and void-ab-initio and, therefore, the resultant reassessment order dated 08/01/2015 deserves to be quashed. 6. Without prejudice to the above, the rejection of accounts by invoking section 145(3) of the Act and estimation of profit @ 10% of turnover subject to deduction of depreciation allowance are illegal and unjustified and, therefore, the addition of Rs. 5,52,73,760 deserves to be deleted. 7. Without prejudice to the above, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption of jurisdiction u/s 147 of the Act and framing of assessment u/s 143(3)/148 of the Act. The remaining grounds no. 6-9 relates to the challenge to the rejection of accounts and addition made in the assessment order u/s 143(3)/148 of the Act. 5.1 As to challenge to the assumption of jurisdiction u/s 147 and framing of assessment u/s 143(3)/148 of the Act, it was submitted, in regard to Ground No. 2, that the only basis of the Reason dated 11/08/2014 is stale information and change of opinion. Referring to the Reason dated 11/08/2014 (Pg. No. 918- 921 of Paper Book) it was submitted that same does not refer to any tangible material. The only reference made in the Reason is Survey conducted upon the Assessee on 27/05/2011 in order to enquire into civil contract for preparation of sub base for laying Synthetic Athletic track for four stadiums at Delhi for Rs. 3.92 crore awarded by one M/s Shiv Naresh Sports Pvt. Ltd. (in Short SNSPL ) and executed by Assessee, while the initial assessment of the Assessee by way of Scrutiny Assessment Order U/s 143(3) dated 17/10/2012 (Pg. No. 912-914 of Paper Book) was made by the same income-tax authority Mr. S.K. Gupta who carried out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal assessment order dated 17/10/2012, the Joint Commissioner of Income Tax, Range-I, Bathinda noted that the case was received by him on transfer from the then AO. He submitted that the notices under section 142(1) of the Act dated 09/04/2012 and 18/09/2012 (Pg. No. 134- 136 of Paper Book), calling for information and explanation from the assessee for the impugned assessment year, were issued by the Joint Commissioner of Income Tax, Range- I, Bathinda. Eventually, the Joint Commissioner of Income Tax, Range-I, Bathinda made the original assessment order dated 17/10/2012. Ld. AR contended that in the absence of any order under section 127 of the Act of the transfer of the assessee s case after 17/10/2012, it necessarily implies that the Joint Commissioner of Income Tax, Range-I, Bathinda was the AO of the assessee since the year 2012 for the simple reason that the assessee never received any notice or order under section 127 of the Act for transfer of its case from the Joint Commissioner of Income Tax, Range-I, Bathinda to any other income-tax authority. He thus contended that re-opening of case of the assessee through issuance of the notice under section 148 dated 11/08/2014 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors or debtors against cheques issued or received to such creditors or debtors, including but not limited to SNSPL, was found from any of the premises of the assessee surveyed by the revenue. It is not the case of the AO that any creditor or debtor denied its transactions with the assessee. 7.2 Secondly, in assessment order of SNSPL for the impugned AY 2010- 11 (Pg. No. 1144- 1148 of Paper Book), the AO of SNSPL has not taken adverse inference with regard to allowance of expense of Rs. 3.46 crores to SNSPL. If no objection is raised while allowing expense of such sub-contract expense of Rs. 3.46 crore to SNSPL, raising doubt on the nature of receipt as contract revenue in the hands of assessee is unfair. 7.3 With regard to non-appearance of Sh. Shiv Prakash Singh, director of SNSPL, without issuance of any summons by AO to him, no adverse inference can be drawn against the assessee. Even otherwise, failure of assessee to produce any party cannot be a valid ground for rejection of accounts u/s 145(3) as held in CIT v. Jas Jack Elegance Exports 324 ITR 95 (Del). 7.4 Thirdly, rejection of accounts is unjustified because AO has not disturbed credit side of profit loss account by poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er services and components used were centralised at the site of the DMRC. As and when any material or labour or any other equipment/machinery etc. was required for execution of works contract of SNSPL, the same was provided and mobilised from the company s site at DMRC. Therefore, all the books of accounts, vouchers, muster rolls, etc. were maintained centralised at the company s site at DMRC. The assessee produced all the books of accounts, expenditure vouchers, muster rolls, etc. pertaining to the Delhi branch for the year under consideration. All the expenses made for the works contract of SNSPL were duly vouched and kept in the said branch. The assessee thus submitted that it had maintained all the records of the work executed for SNSPL in New Delhi branch from where contract of DMRC was also being undertaken simultaneously. Copy of all documents submitted during the course of original assessment proceedings inasmuch as related to the assessee s transactions with SNSPL project and books of accounts of Delhi project is enclosed at Page No. 141-911 of Paper Book submitted on 24/03/2021. Order Sheet recording production of such books even during reassessment proceedings is enclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue in his order, meaning that he did not find any force in the AO s ground to confirm his order of rejection of accounts on this ground. Furthermore, this point had already been duly considered by the Assessing Officer while passing the initial assessment order u/s 143(3) dated 17/10/2012 (Pg. No. 912-914 of Paper Book) where the Assessing Officer assessed the assessee accepting its books of account after adding Rs. 3 lakh to the returned income on ad hoc basis without initiating any penalty proceedings, and explicitly did not reject the books while recording in categorical terms in the order that the vouchers for labour and wages expense of Rs. 7.07 crores were mostly self-made and did not contain their address. As regards non-availability of addresses of construction labour/workers in the muster roll maintained by assessee, assessee s explanation is as under: a) Due compliance with the provision in this regard has been made by maintaining muster rolls wherein fortnightly attendance is recorded and payment is made against thumb impression/signature of construction workers/labour. Labour laws provide for statutory format of muster rolls, requiring assessee to mention na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work out the value of the material, a deduction to the extent of 30% is allowed on account of labour component involved in execution of the contract. g) Assessee has been maintaining muster roll and other labour records in the same manner consistently in past and succeeding years, and revenue has never rejected assessee s accounts on this ground. Thus, principle of consistency is applicable. Copy of the Muster Rolls for AYs 2009-10 to 2011- 12 and Assessment Orders u/s 143(3) of the Act for AY 2009-10 is enclosed at Page No. 947-1062 of Paper Book submitted on 24/03/2021. h) In this regard, reliance is also placed upon the following judicial orders: ACIT v. Ashoka Builders - ITA NO. 375/MUM/2009; Brij Bhushan Lal Parduman Kumar v. Commissioner of Income-Tax, 115 ITR 524;and Yog Raj Soni V. ACIT (2007) 108 TTJ (Del) 912. 7.7 Sixthly, the erstwhile section 145, prior to its substitution by the Finance Act, 1995, permitted AO, by virtue of proviso to sub-section (1) of section 145, to reject accounts where it was not possible to deduce income there from properly. However, by virtue of substitution of section 145 by Finance Act, 1995 w.e.f. 01/04/1997, this power of AO has been dispens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rejecting accounts are just and proper. See, CIT v. Shiv Agrevo Ltd. 398 ITR 608 (Raj). 10. As to Ground No. 8 9 challenging the estimation of Net Profit @ 10% of turnover again the Ld. AR has filed a comprehensive submission to supplement to what he argued and we consider it advantageous to reproduce the same here in below to avoid anything being left out. 8.1 Firstly, the Estimation @ 10% of turnover subject to deduction of depreciation allowance is without giving any basis thereof in the form of past history of assessee or comparable industry trend. In the reassessment order, the Assessing Officer has not at all given any basis for the fixation of net profit @ 10% of the gross receipts. Upon rejection of accounts, estimation of income has to be based upon (i) past history of assessee, or (ii) industry or trade comparables citing the factors or points of similarity between instant assessee and the person whose GP/NP rate is being used as comparable, or (iii) assessment orders of assessee of past or succeeding years passed by and accepted by IT Department, or (iv) prevailing economic conditions vis-a- vis the assessee s business, or (v) rise in price index as notified by Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xports 324 ITR 95 (Del) CIT v. Inani Marbles P. Ltd., (2009) 316 ITR 125 (Raj) For detailed discussion on this argument, the Assessee places reliance upon Para No. 48 at Page No 92-93 of Paper Book submitted on 24/03/2021. 8.4 Principle of Consistency - Fourthly, Assessee has been consistently maintaining same set of books of accounts in the same form and manner, particularly Muster Roll, consistently accepted by the revenue in past and succeeding years. Therefore, different view cannot be formed by AO in the impugned assessment year. See, CIT v. Navbharat Export 378 ITR 89 (Del) CIT v. Kohinoor Foods Ltd. 373 ITR 682 (Del) CIT v. S.R. Fragnances Ltd. 270 ITR 560 (Del) For detailed discussion on this argument, the Assessee places reliance upon Para No. 51-51.2 at Page No 95-96 of Paper Book submitted on 24/03/2021. 8.5 Fifthly, the assessee submitted complete details called for and audited books of accounts including cash book, bank book, journal book, general ledgers, debtor ledger, creditor ledger, and stock register along with vouchers and bills in soft as well as hard copy, which was acknowledged by the Assessing Officer in order sheet noting dated 05/01/2015. Copy of order she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company had not done the work under the sub-contract. The reasons as stood recorded show that the ld. AO had considered the statement of Shri Amarjit Mehta, one of the Directors of the assessee company and found that the purchases made by the assessee company from certain name suppliers were not of good quality. 10.1 The reasons mentions that when asked to produce the bills, copy of ledger accounts and proof of receipt of material at the stadium sites of the suppliers in their books, Shri Amarjit Mehta was not able to give satisfactory replies. He was asked to clarify why the details were not available with the Delhi office. Again, there was unsatisfactory reply. The AO narrates that when he was asked to produce the day book, the same were not produced. The AO specifically observes that he was unable to identify the expenses in respect of SNSPL out of day book extracted from the computer. Further, when asked why they have not pursued their pending bill of Rs. 2.45 crores as on 31.03.2010 out of which Rs. 94.68 lakhs only were paid by M/s SNSPL in the month of February, 2011. Shri Inderjit Mehta had stated that they pursued the payments on telephone only and no written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to reproduce the same below:- .During the course of assessment proceedings, it was noticed that the assessee has debited an amount of Rs. 70713250/- under the head labour and wages for which the vouchers are mostly self made. The addresses of the persons to whom the payments were made are also not available in record. Only names and thumb impressions/signatures of the persons stated to have received these payments have been mentioned on the vouchers but no address or detail are available. As such the verification of claim of the assessee for expenditure made is not possible under such circumstances. When this defect in the books of account was brought to the notice of the counsel of the assessee, the counsel of the assessee has contended that vouchers have been maintained as per trade practice. However, an addition of Rs. 3 lacs is being made by way of disallowance out of labour and wages expenses, in order to cover to any leakage of revenue... 10.5 Thus, what crystallises is that at the time of passing assessment order u/s 143(3) of the Act on 17.10.2012, the then AO had before him all the relevant material to examine revenue from the work done by the assessee concerning C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Delhi High Court judgement in CIT V/s Kelvinator of India Ltd. (supra) wherein the Hon ble Supreme Court judgement in the case of Indian and Eastern Newspaper Society vs. CIT (1979) 119 ITR 996 (SC) was relied for making observations that the AO must first have information in his possession and then in consequence of such information he must have reasons to believe that income has escaped assessment. The information to be relied, to our mind, should be one which was not in the knowledge of the Assessing Officer, for the reasons it was not patent or left latent. In the case in hand, the Assessing Officer has merely relied on the survey and post survey/search inquiries made by the then AO , himself. The aforesaid discussion establishes that there were extensive inquiries post survey with regard to the sub-contract work and its accounting in the books of the assessee in the course of regular assessment and merely by using the same the reasons to believe were recorded. 10.8 The ld. DR has although defended the reasons for reopening relying on the prima facie belief test that at the stage of reopening only a prima facie belief is to be formed and mere possibility is sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X
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