CMD RATNAKAR DY. COMMISSIONER OF INCOME TAX CIRCLE-2(1), HYDERABAD vs. TIME PROJECTS PRIVATE LIMITED, HYDERABAD

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ITA 118/HYD/2021Status: DisposedITAT Hyderabad07 September 2021AY 2007-084 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was invalid as it was based on a mere change of opinion. The material relied upon by the AO was already available during the original assessment proceedings, and there was no new material to suggest that the assessee had failed to disclose fully and truly all material particulars.

What were the facts?

The Assessing Officer (AO) reopened the assessment for AY 2007-08 based on the company's debit of site development expenses and provisions for future expenses. The AO noted that income tax does not recognize provisional income or expenses and that the assessee's sales and work-in-progress figures did not support claiming provisional expenses.

What were the issues?

Whether the reopening of assessment under Section 147 was valid when it was based on a change of opinion by the Assessing Officer without any new material. Whether the Assessing Officer's reasons for reopening were sufficient and met the conditions stipulated in the proviso to Section 147.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3)

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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad

Before: Shri S.S. Godara & Shri Laxmi Prasad Sahu

Hearing: 25/08/2021Pronounced: 08/09/2021

This Revenue’s appeal for the A.Y 2007-08 against the order of the CIT (A)-11, Hyderabad in Appeal No.10312/2019-20, dated 01.10.2020 in proceedings u/s 143(3) rws 147 of the Income Tax Act, 1961 (in short the Act). Heard both the parties. Case file perused.

2.

Coming to the Revenue’s first and foremost substantive grievance that the CIT (A) erred in law and on facts in quashing the impugned reopening as an invalid one, we note that the Assessing Officer had recorded his reopening reasons dated 10.01.2013 as under: “To The Principle Officer, M/s. Time Projects Pvt. Ltd., Pothula Towers Annexe, 6-3-883/Fl, 2nd Floor, Somajiguda Cirle, Begumpet Road, Hyderabad-5000 16.

Sir/Madam, Sub: Reasons for the re-opening of assessment U/s.147 of I T. Act, 1961 in your case - Asst. Year 2007-08 - communicating - Reg. ***** The reasons for re-opening of assessment u/s.147 of the Income Tax Act, 1961, for the Asst. Year 2007-08. are furnished as under:-

It was noticed vide "Schedule 12 (Development Administrative and Selling Expenses]" forming pan of P&L account for the year ending 31.03.2007 that an amount of Rs.2,86,13,678/- was debited towards site development expenses. The ledger account of "Site Development account" for the period 01.04.2006 to 31.03.2007 shows an amount of Rs.2.24,21.116/- was accounted as provisions in respect of three projects namely (i) Golden Ridge [GR) Phase-I- Rs.1,08,75,811/- (ii) Golden Ridge [GR] Phase -II, Rs.l,10,95,305/- and (iii) Time City Phase-I, Rs.4,50,000/-. In order to substantiate its claim of this provisional site development expenditure of Rs.2,86,13,678/-, the assessee company in its letter dated 28.08.2009 stated that the provisions for expenses was created to spent once it had sufficient funds. It also stated the difference between sales and the total expenses already incurred and the “provisions for future expenses” was shown as income and paid necessary tax on the same.

Further, as seen from the accounts of the three projects, the assessee made sales as follows: Time city Phase-I Rs. 12,34,695 2 Golden Ridge Phase-I Rs.2,21,49,639 3 Golden Ridge Phase-Il Rs.3,86,53,822 TOTAL Rs.6,20,38,156 The same was accounted in the P&L account for the year ended 31.03.2007.

The closing WIP (Work in progress) of all the three projects as per respective accounts shows as follows: 1. Time City Phase – I Rs. 1,94,04,547 2. Golden Ridge Phase-I Rs. 82,72,285 3. Golden Ridge Phase II Rs. 39,48,585 TOTAL Rs. 3,16,25,417 The same was accounted vide Schedule-6 Work in Progress. Hence, from the working as provided by the assessee company, there was no account of any provisional income on the above three projects in order to claim any provisional expenses against it. Further, income tax does not recognize any provisional income or provisional expenses. Income and expenditure accrued and due are only to be accommodated in the books of account.

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