ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), HYDERABAD vs. ABIR INFRASTRUCTURE PRIVATE LIMITED, HYDERABAD

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘B', HYDERABAD BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No. 2068/H/2018 Assessment Year: 2010-11 Asst. Commissioner of Vs. Abir Infrastructure Pvt. Income-tax, Ltd., Hyderabad. Central Circle – 1(3), Hyderabad. PAN – AAFC3608N (Appellant) (Respondent)

Revenue by: Shri M. Dayasagar Assessee by: Shri H. Srinivasulu Date of hearing: 27/05/2021 Date of pronouncement: 11/06/2021 O R D E R PER L.P. SAHU, AM: This appeal of the Revenue for AY 2010-11 is directed against the CIT(A) - 11, Hyderabad’s order, dated 24/07/2018 involving proceedings u/s 143(3) rws 147 of the Income Tax Act, 1961 ; in short “the Act”.

2 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. completed on 20.03.2013 assessing the total income at Rs. 88,07,94,590/- . The case was reopened to verify sub-contractor expenditure of Rs. 95,49,67,088/-. Accordingly, notice u/s 148 was issued to the assessee on 23/03/2017 which was duly served on the assessee, against which, assessee company filed its return of income on 11/04/2017 by admitting an income of Rs. 88,07,94,590/-.

2.1 The AO made the addition of Rs. 95,49,67,088/- towards payments made to the sub-contractors on the ground that the assessee could not produce any information nor could produce any sub-contractor.

"2. Objections to reopening: Upon receipt of the reasons which were nothing but the reproduction of the information received from the Investigation Wing, the appellant objected to reopening of the completed assessment on various legal grounds. On facts also the appellant made elaborate submissions along with documentary evidences in its possession that the subcontractors were genuine and completed the work. The salient points contained in the objections which were submitted and reiterated

3 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. from time to time in various submissions and by way of oral submissions are given below for kind consideration of CIT(A). • That the satisfaction recorded is nothing but a reproduction of information received from DDlT. • No independent enquiry was caused before invoking the provisions of section 147 by the AO himself that the income has escaped assessment. It was contended that the satisfaction is bereft of independent application of mind which is sine qua non for reopening an assessment. • That assessment year squarely falls within firrst Proviso to Section 147. This section stipulates that when an assessment year falls beyond four assessment years from the end of the relevant assessment year for which the assessment was completed under section 143(3)/147, the Assessing officer should bring out clearly in the satisfaction note that the escapement of income was due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. • It was brought to the notice of AD that essential aspect of the stipulation of the proviso is that the satisfaction note should clearly bring out the omission or failure on the part of the assessee. The same having not been brought out in the satisfaction note, there is no satisfaction in the eye of law to sustain reopening. • It was specifically brought to the notice of the AO that at the time of reopening on 27/03/2017 the case records were not available with the AD to come to a finding that there was a failure on the part of the assessee to disclosure material particulars at the time of completion of the original assessment. The case records at the relevant point of time were with the Assessing officer of Delhi. It was

4 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. vehemently contended that the AD could not have come to a conclusion that there is escapement of income when he did not possess the case records with him at the relevant point of time. This is a fact which remained uncontroverted till end of passing the assessment order. There is no mention about this vital fact in the assessment order as to how the requisite satisfaction was reached in the absence of case records. 3. Assessment order: In salient aspects of the assessment order are as follows: (f) The AO did not dispose of the objections raised by the appellant before completion of assessment and completed the assessment and an order U;s. 143(3) r.w.s. 147 was passed by making an addition of Rs.95,49,67,088/- relating to payments made to alleged subcontractors and raising a demand of Rs. 62,81,25,782/-. (if) AO despite repeated requests did not make available the reopening records maintained at Hyderabad at the time of reopening the assessment for inspection (Boards Instruction 17 (XL) - 36 dated 28-06-1965, copy of the approval in the prescribed pro-forma submitted to Pr. CIT and provide a copy of the order sheet for reopening despite the decision of the Hon'ble Supreme Court in the case of Suraj Mall Mohta and Company Vs A V Viswanath Sastri 26 ITR 1, Delhi High Court in the case of SASH Infrastructure Ltd Vs CIT 398 ITR 198 and Orissa High Court in the case of Shankarlal Khaitan Vs ACIT WP(C) 4816 of 2017 as AO was very well conscious of his own act of omission and commission that no reopening is possible without perusing the facts in case records, particularly in a case falling under First Proviso to section 147. (iii) Even AO did not address to the basic issues which were agitated in various submissions filed by appellant while passing the assessment order. There

5 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. is nothing in the assessment order as to how there was a failure on the part of the appellant to disclose material particulars when the assessment was taken for scrutiny for the precise reason to verify the genuineness of expenses which included subcontractors expenses. (iv) Side tracking all the crucial issues which go to the root of the matter of reopening, A 0 completed the assessment raising high pitched demand. (v) On the legal issues AO relied on some decisions of the Apex Court which are distinguishable. In some cases the ratio supported the case of the appellant. (vi) On merits of the case AO did not make adequate enquiry except relying on the report of the DDIT (Inv). AO treated the payments to various subcontractors as bogus mainly for the reason that they are not traceable. (Vii) The alternative plea of the appellant (Without prejudice to the basic legal objections) to adopt a percentage of the profit on the payment to subcontractors as decided by the jurisdictional ITAT simply ignored without distinguishing the same. Despite the fact that the appellant made elaborate submission that as a lower forum, he is bound by the decision of the ITA T as per decisions of Apex Court and other High Court was not addressed to in the assessment order. (Viii) In an the assessment order was non-speaking, did not address various vital issues raised by the appellant. The basic requirement of a scrutiny order is lacking.

6 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. by the AO u/s 147/148 of the Act, by observing as under:

“8. I have considered the assessment order, material placed before me, the written submissions of the assessee, factual report of the Assessing Officer, rebuttal of the assessee on the factual report of Assessing Officer and the case laws relied upon by the appellant and the AO. The ground nos. 2 to 5 and 8 are against the validity of the re-opening the assessment u/s.147 of the I.T. Act, 1961. The basic contention of the assessee is that the AO has not recorded satisfaction as to failure on part of the assessee as required under first proviso to sec.147 as the case was already scrutinized and order u/s.143(3) was passed. Secondly, the AO could not have recorded the proper satisfaction as to failure on part of the assessee as required under the proviso in the absence of the assessment record with him which could enable him to come to the conclusion that there is failure on part of the assessee in the escapement of income chargeable to tax wherein assessment u/s.143(3) was already completed. Thirdly the case was taken up for scrutiny to examine the very same issue and the assessee has filed all the details called for, the basis of re-opening amounts to 'change of opinion', which is not allowed as per various judicial pronouncements on the issue. The assessee also raised the contention that the AO did not mention the reasons recorded on body of the notice issued u/s.148, which makes the proceedings void. The assessee also raised the contention that the AO did not apply his own mind to come to the conclusion that income has escaped assessment rather he based his satisfaction solely on information received from Investigation wing. Each of the above issues raised are discussed below:

7 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 8.1 In this case, the assessment year involved is 2010-11. The return of income originally was filed on 01.10.2010 and the assessment u/s.143(3) of the I.T. Act was completed on 20.03.2013. The notice u/s.148 is issued on 23.03.2017. It means it is a case where the scrutiny assessment was completed which is sought to be reopened after four years from the end of the assessment year. The provisions applicable to the present case are as under: “147. If the (Assessing) officer ( has reason to believe) that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned(hereinafter in this section and in sections 148 to 153 referred to as the relevant assessmen t year): Provided that where an assessment under sub- section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section(l) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his asssessment for that assessment year;"

8 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 8.1.1 As the scrutiny assessment was completed in the case and sought to be reopened after four years, the first proviso is clearly applicable. The scope and function of proviso as held by the Hon'ble Supreme Court in the case of CIT"Vs Indo Mercantile Bank Ltd (1959) 36 ITR, is as under: “ •••••• The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. It is a fundamental rule of construction that the proviso must be considered with relation to the principal matter to which it stands as a proviso. Therefore it is to be construed harmoniously with the main enactment. (Per Des, CJ) in Abdul Jaber Butt Vs State of Jammu and Kashmir (1957) SCR 51, 59 Bhagwati, J., in Ram Narain Sons Ltd Vs Asst. Commissioner of Sales Tax(1955) 2 SCR 483, said: It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. Lord Macmillan in Madras and Southern Maharatta Railway Co. Vs Bezwada Municipality (1944) LR 71 lA, 113, 122 laid down the sphere of a proviso as follows: The proper function of a proviso is to except and deal with a case which would otherwise

9 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. fall within the general language of the main enactment, and its effect is confined to that case. Where as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms. The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section, it has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that it is necessary effect. ( Vide also Corporation of City of Toronto Vs Attorney General for Canada (1946) AC 32, 37. 8.1.2 In Ali M. K Vs State of Kerala (2003) AlR SC 4006/11 SCC 632, SC made similar observations: " 10. The normal function of a proviso is to exempt something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins Vs Treasurer of Survey (1880) 5 QBD 170: 42 LT 128 (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory Vs. Subhash Chandra Yograj Sinha AIR 1961 SC 1596 and Calcutta Tramways Co. Ltd Vs. Corporation of Calcutta AIR 1965 SC 1728), when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case

10 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule .... " 8.1.3 Viewed in this light, the proviso to sec.147 of the said act, carves out an exception from the main provisions of sec. 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of sec. 147 of the said act would not be material. Once the exception carved out by proviso came into play, the case would fall outside tile ambit of sec.14 7. Examining the proviso (set out above), we find that no action can be taken under section. 147 after the expiry of four years from the end of the releveni assessment year if the following conditions are satisfied: a. an assessment under sub-sec. (3) of sec. 143 or this section has been made for the relevant assessment year, and b. Unless any income chargeable to tax has escaped assessment for such assessement year by reason of the failure on the part of the assessee. i) to make a return under sec.1390r in response to a notice issued under sub-section (1) of sec. 142 or sec. 148 ; or ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly

11 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. satisfied in as much as the original assessment was completed under sec.l43(3) of the said act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under sec.139 or in response to a notice issued under sub-section (1) of sec.l42 or sec.l48. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under sec.l47 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts. 8.1.4 In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to re-open assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to sec. 147. If this condition is not satisfied, the bar would operate and no action under sec.147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not

12 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. 8.1.5 In the case of WeI Intertrade P Ltd, Hon'ble Delhi High Court agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the AO under sec.147 beyond the four year period would be wholly without jurisdiction. 8.1.6 The above issue was also discussed in the case of CIT Vs Samcor Glass Ltd in ITA NO.768/2015,dt.12.10.2015, wherein it was held as under: “5. Apart from the fact that the impugned order of the ITAT suffers from no legal infirmity, the court is of the view that on the face of it, the reasons for reopening of the assessment in both the cases did not satisfy the basic requirement of the law, in at least in two aspects. One was that the reopening was of assessment beyond four years after the A.Y. for which the original assessment was framed and yet the reasons for reopening did not categorically state that there was a failure by the assessee to disclose any material particulars on the basis of which there were reasons to believe that the income has escaped assessment. This court has recently, in a decision dt.22nd September, 2015 in ITA No.356 of 2013 (CIT Vs Multiplex Trading and Industrial Co. Ltd) clearly stated in cases where reopening of assessment is beyond four years from the end of the relevant assessment

13 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. year the condition that there has been a failure on the part of the assessee to truly and fully disclose all material facts must be concluded with certain level of certainty.” 8.1.7 The legal position emanating from discussion above is that the AO has to conclude that there is failure on part of the assessee to disclose fully and truly all the material relevant for the computation of income. The same has to be specifically recorded. It is found that in the present case no such recording has been done by the AO. In view of the above it is held that the proceedings have not been validly initiated. 8.2 The second aspect raised by the assessee is regarding the absence of assessment records with the AO at the relevant point of time which will enable him to record the failure of the assessee to disclose fully and correctly required by the proviso. It is clear from the factual report submitted by the AO that at the time of recording reasons for reopening on 23.03.2017, the AO did not have the assessment records and the records pertaining to the earlier scrutiny done by the AO at New Delhi to come to the conclusion there was a failure on the part of the assessee. As the AO did not have the assessment record with him at the time of recording reasons it cannot be said that he was in a position to conclude with any level of certainty that income has escaped assessment on account of failure of the assessee to disclose fully and truly the material relevant for the determination of total income. In view of the above also, it is held that proceedings are not validly initiated. 8.3 The third issue raised by the assessee is reasons recorded are on account change of opinion as contended by the assessee as the assessee's return was scrutinized for the purpose of examining the sub contractor expenditure earlier. In this regard it

14 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. is seen that the case was selected for scrutiny after obtaining approval of CCIT, Delhi with the following note of AO/ Addl. CIT: "Nature of business: Infrastructure/Power Projects: In the case of the assessee, loans of Rs.56 Cr(approx) from entities other than banks and sum of Rs.371 Cr as loans and advances are reflected in the balance sheet, the source, utilization and veracity of the same needs to be verified. Further, in the P&L ale, a sum of Rs.557 Cr has been debited. The allowability of this expenditure needs to be verified. Further, assessee has earned exempted income and disallowance u/s.14A needs to be checked. Donation of more than 501acs has been debited in the P&L account which is not an allowable expenditure and needs to be disallowed. In view of the above, necessary approval for selecting the return for scrutiny may be given. b) Notes above may kindly be perused. A major point that merits investigations is that is a sum of Rs.55.7Cr debited to the P&L account, there are no details regarding the nature of the expenses so incurred. In view of the reasons recorded above, necessary approval may kindly be accorded by the 1d. CCIT in terms of guidelines for selection of cases for scrutiny during 2011- 12." .. - After that, the AO has completed the assessment u/s. 143(3) which shows that the assessee has complied with the notices issued and furnished details as required by the AO. Out of the expenditure the AO made some disallowance on account that the expenditure was not properly vouched. The above shows that the assessee has produced the details

15 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. during the assessment proceedings and were examined by the AG. However, certain facts regarding the sub contractors and the expenditure incurred meaning during the Search shows that a new material has come to the possession of the AO which warranted action uls.148. The action taken by the AO based on material unearthed/information obtained during the course of Search proceedings constitute fresh evidence based on which the AD has recorded the reasons. It cannot be said that the recording of reasons is on account of only change of opinion of contending by the assessee. The contentions of the assessee cannot be accepted that the assessments were reopened on account of change of opinion in the facts and circumstances of the case as brought out above. 8.4 In view of the above discussions, the ground nos.4&S raised by the assessee are allowed. Ground no.2,3 & 8 are rejected. Ground no. 1& 10are general in nature which do not require adjudication. The ground nos. 7&9 are not adjudicated as the proceedings are held to be not initiated validly. as contended in ground nos.4& 5. 8.5 The assessee During the assessment proceedings after getting the reasons recorded for reopening from the AO has objected to the reopening vide their letter dt.OS.06.2017 and requested that proceedings be dropped. The AO disposed off the objections vide letter dt. 11.l2.2017. Thereafter, the assessment u/s.153A r.w.s. 143(3) was completed on 29.12.2017. The issue as to whether the AO has complied with the law laid down by Hon'ble Supreme Court in the case of M/s. GKN Drive Shafts (India) Ltd 259 ITR 19 on account of the above is questionable but the same is not discussed/adjudicated as the assessee did not press the ground no.6 raised with reference to the above issue. The ground is dismissed.”

16 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 6. Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT by raising the following grounds of appeal: “1. The ld. CIT(A) erred in deciding the proceedings initiated ul s.148 of the Act, as invalid though there is a failure on the part of the assessee to disclose the facts fully and truly as required in first proviso of Section 147 of the Act. 2. The ld. CIT(A) erred in not appreciating the fact that the AO has recorded the reasons for reopening the assessment u/s.147 beyond 4 years as required under the provisions of the Act. 3. The ld. CIT (A) erred in deciding the proceedings initiated u/s .148 of the Act, as invalid on the ground that the case records pertaining to original assessment completed u/s. 143(3) were not available with the AO at the time of recording reasons, whereas the AO was in possession of such assessment details through online computer software maintained by the department. 4. The ld. CIT(A) erred in not appreciating the fact that the AO was in possession of information of the conclusive findings of the investigation wing about the bogus nature of the subcontract found during the course of search & seizure conducted u/s.132 of the Act, in the case of assessee, which led to reopening of the assessment. 5. The ld. CIT (A) erred in deleting the addition of Rs.95,49,67,088/- made on account of bogus sub- contract expenses which is the crucial information available to the AO and the same was mentioned in the reasons recorded before reopening the case u/s 147 of the Act. 6. The ld. CIT(A) erred in defending the assessee's illegal act of obtaining information from the

17 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. Assessing Officer without officially seeking for it and concluding that it cannot be doubted. 7. The appellant craves leave to amend or alter any ground(s) or add a new ground which may be necessary.” 7. Before us, the ld. CIT-DR submitted that the ld. CIT (A) erred in deciding the proceedings initiated u/s 148/147 of the Act, as invalid on the ground that the case records pertaining to original assessment completed u/s. 143(3) were not available with the AO at the time of recording reasons, whereas the AO was in possession of such assessment details through online computer software maintained by the department. He further submitted that the ld. CIT(A) was wrong in not appreciating the fact that the AO was in possession of information of the conclusive findings of the investigation wing about the bogus nature of the sub- contract expenses found during the course of search & seizure conducted u/s.132 of the Act, in the case of assessee, which led to reopening of the assessment.

7.1 The ld. CIT-DR further submitted that the AO made enquiries with the alleged sub-contactors by issuing notice u/s 133(6) calling for details of their transaction with the assessee and some of the notices issued were returned unserved and all the complete details called for were not received from others. Therefore, the AO after conducting further enquiries went on to hold that

18 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. the transaction with sub-contractors were bogus and the expenditure to the extent of Rs. 95,49,67,088/- was disallowed. He, therefore, prayed that the order of the AO be restored.

19 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd.

It was seen during the search operations that M/s Abir had booked the subcontract expenses in the names of the following concerns for the following assessment years: Disallowances AY AY AY of expenses 2010-11 2011-12 2012-13 booked on the names of following concerns Metalpalm 27,85,29,440 5,39,49,560 Falcon Foundations 17,15,58,520 3,71,34,440 Avantika 8,15,35,400 28,22,51,050 Coastal Infra 18,65,77,018 48,48,81,603 Sri Pavitra Engineers Pvt.Ltd. 10,78,28,000 - Sri Venkateswara Constructions 2,60,23,315 69,49,315 GRS Engineers 2,66,40,400 1,72,17,140 42,93,706 Kanyaka paramesshwari Constructions 2,69,66,125 - Coastal constructions 2,55,45,995 Sri Satya Sai constructions 2,46,62,875 50,27,459 14,07,463 Total 95,49,67,088 88,74,10,567 57,01,169 The companies, M/s. Metalpalm Infra Projects Pvt. Ltd. and M/s. Falcon foundations were identified as bogus sub-contractors and the whereabouts of these concerns remain untraceable. Further, the re of the firms/companies mentioned above have not been filing returns and remain untraceable. Further, notices u/s 153A have already been issued for the AYs 2011-12 and 2012-13 as these years have been covered under the block period prior to the date of search.

20 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. In view of the aforesaid mentioned reasons I have reason to believe that an income of Rs. 95,49,67,088/ - has escaped assessment within the meaning of section 147 of the I.T. Act 1961.” 9.1 From the reasons recorded as above, it is clear that the Assessing Officer has reason to believe that there is an escapement of income, but, the case falls under first proviso of section 147 i.e. earlier the assessment was completed u/s 143(3) of the Act and now it was reopened beyond the four yeas from the Assessment Year. In such a case, we are unable to find in the reasons recorded that there is no allegation on the part of the assessee in disclosing fully and truly all the material facts for completion of assessment. It is well settled by a number of judgments of the Hon’ble Supreme Court that the twin conditions which are required to be fulfilled before an Assessing Officer can exercise his jurisdiction under clause (a) of section 147 of the Act are (a) that the Assessing Officer must have reason to believe that income, profits or gains chargeable to tax had either been underassessed or had escaped assessment and (b) that the Assessing Officer must have reason to believe that such escapement or underassessment was caused by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the impugned case, the Assessing Officer has not satisfied with the second limb of section 147. In support of our findings, we rely on the decision of the

21 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. coordinate bench of this Tribunal in the case of Union Bank of India in ITA Nos. 192 & 315/Hyd/2019, order dated 20/05/2021, wherein the coordinate bench has held as under:

“9. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. It is a settled position of law that the assessment can be reopened under section 147/148 on the basis of ‘reason to believe’ and not ‘reason to suspect’. Unless the reasons to believe about the escapement of income exist, no recourse can be taken to the provisions of section 147. An Assessing Officer ventures to initiate reassessment proceedings with an object of finding some material about the escapement of income, such reassessment cannot legally stand and the law does not permit the Assessing Officer to conduct inquiries after the initiation of reassessment proceedings, to find if there is an escapement of income. The scope of section 147 cannot encompass such an action under which certain examination is to be conducted for forming a reason to believe as to the escapement of income. It is well settled by a number of judgments of the Hon’ble Supreme Court that the twin conditions which are required to be fulfilled before an Assessing Officer can exercise his jurisdiction under clause (a) of section 147 of the Act are (a) that the Assessing Officer must have reason to believe that income, profits or gains chargeable to tax had either been underassessed or had escaped assessment and (b) that the Assessing Officer must have reason to believe that such escapement or underassessment was caused by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year.

22 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 9.1 In the case on hand, all the information relating to depreciation on investments were there before the AO at the stage of original assessment, as there was no failure on the part of the assessee to disclose fully and truly all material facts that are necessary for completion of the assessment and further we observe in the reasons recorded, there is no reason to believe, allegation on the assessee that the income of the assessee underassessed or had escaped assessment.

9.2 The contention of the assessee is that no new material has been found by the AO in the reassessment proceedings and therefore reopening of assessment is only due to change of opinion and that too beyond the time limit as prescribed in the proviso to section 147 of the Act which is bad in law.

9.3 In this connection, we refer to the following decisions: “(1) In Deputy Commissioner of Income Tax Vs. Manak Shoes Co. P. Limited, (2011) 11 ITR (Trib) 673 (Del), the Tribunal held that where regular assessment had been made under Section 143(3) allowing depreciation of factory building, plant and machinery, and reassessment proceedings were initiated on the ground that depreciation was not admissible since the assessee had no manufacturing activity during the year, the Tribunal found that the matter had been examined during the assessment stage and that there was no fresh information to justify a different inference and notice under Section 148. Though action was initiated within the four year time limit, it was found that it was based on mere change of opinion and reassessment proceedings was, therefore, not justified.

23 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. (2) In Consolidated and Fin vest Limited Vs. Asst. Commissioner of Income Tax, (2006) 281 ITR 394 (Delhi), the High Court held that the doctrine of change of opinion could not be a basis for reopening completed assessments and would be applicable only to situations where the Assessing Officer had applied his mind (in earlier assessment) and taken conscious decision on a particular matter in issue, and it would have no application, where the order of assessment did not address itself to the aspect which was the basis for re- opening of the assessment. The High Court further held that mere production of books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the material evidence does not necessarily amount to a disclosure within the meaning of the proviso to Section 147 of the Act. (3) In Jai Hotels Co. Limited Vs. Asst. DIT, (2009) 24 DTR 37 (Del), the Delhi High Court has held that there being no new material in the hands of the Revenue leading to view that there was reason to believe that income had escaped assessment, the case is a classic instance of a change of opinion. The High Court further observed that when copies of statement of income, trading account, profit and loss account, audit report etc., were appended to the return filed by the assessee, taking resort to Section 147/148 was unwarranted as it constituted a change of opinion, since the material acted upon had been made available along with return of income. (4) In Satnam Overseas vs. Addl. Commissioner of Income Tax, (2010) 329 ITR 237 (Delhi), the High Court held that the only reason which has been given seeking reopening of the assessment for the years

24 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 1997-98 and 1998-99 is that suppression of sales has taken place on account of the fact that when average price of the closing stock is multiplied with the quantity of the sales in the year then the value of the sales would be at a higher figure, than declared by the assessee. Clearly, there is no new material which is alleged to have come to the notice of the Assessing Officer which has caused him to seek reopening of the assessment. Admittedly, the reasons given for seeking reopening of the assessment contains the expression ‘perusal of the case record reveals’ clearly showing that it is on the basis of the same assessment record as was filed by the assessee, during the relevant assessment years and also scrutinised by the Assessing Officer before passing the orders under Section 143(3). Further, the new logic, rationale and opinion which has been formed by the Assessing Officer for seeking reopening of the assessment is nothing but a change of opinion and a new approach to the existing facts and material which the Assessing Officer could well have done during the regular assessment proceedings of the relevant assessment years. (5) In Commissioner of Income Tax Vs. Eicher Limited, (2007) 294 ITR 310 (Del), the High Court has taken a view that since the facts and materials were before the Assessing Officer at the time of framing of the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounted to a change of opinion, which would not form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. The Honourable High Court further observed that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original

25 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income had escaped assessment and, therefore, the assessment needed to be reopened. The assessee had no control over the way an assessment order is drafted. (6) In Commissioner of Income Tax Vs. Kelvinator of India Limited, (2010) 320 ITR 561, the Supreme Court observed that post 01- 04- 1989, the power to reopen is much wider. However, one needs to give a schematic interpretation to the words ‘reason to believe’ failing which, Section 147 would give arbitrary powers to the Assessing Officer to reopen the assessments on the basis of ‘mere change of opinion’ which cannot be per se reason to reopen. The conceptual difference between the power to review and power to reassess is to be kept in mind. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on the fulfillment of certain pre conditions and if the concept of ‘change of opinion’ is removed, in the garb of re-opening the assessment, review would take place. One must treat the concept of ‘change of opinion’ as an in-built test to check abuse of power by the Assessing officer. Hence, after 01-08-1989, the Assessing Officer has power to reopen, provided there is ‘tangible material’ to come to the conclusion that there is escapement of income from assessment. Reasons must have a link with the formation of the belief If the facts of the present case including especially the reasons recorded b y the Assessing Officer for reopening the assessment are considered in the light of the decision of the Coordinate

26 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai –vs.- Societe International De Telecommunication (supra), I am of the view that the initiation of reassessment proceeding itself was bad in law and the assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance of such invalid initiation is liable to be cancelled. I order accordingly. 9.4 In view of the above discussion, the reopening of assessment can be quashed on two counts, i) no new material was brought on record by the AO in the reopening of assessment to establish that the income of the assessee has escaped assessment as the assessee has already disclosed all the information necessary for completion of original assessment and ii) the reopening of assessment made beyond four years from the AY under consideration. We are of the view that the AO reopened the assessment based on change of opinion, which is not acceptable as per the decisions quoted supra. Therefore, we quash the reopening of assessment made by the AO and the grounds raised by the assessee on this issue are allowed.” 9.2 In support of our decision. we are also relying on the following judgements: “1. Sound Casting(P) Ltd. v. Dy. CIT (2012) 250 CTR 119 (Bom.) 2.Tao Publishing (P) Ltd..v. Dy. CIT (2015) 370 ITR 135 (Bom.) 3.Tata Business Support Services Ltd. v. DCIT (2015) 121 DTR 222/ 232 Taxman 702 (Bom) 4. Micro Inks P. Ltd. v. ACIT (2017) 393 ITR 366/ 246 Taxman 143 (Guj.)(HC)

27 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd. 5. Navkar Share and Stock Brokers P. Ltd. v. ACIT (2017) 393 ITR 362 (Guj.)(HC).”

9.3. Respectfully following the aforesaid decisions, we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue on this issue.

Sd/- Sd/- (S.S. GODARA) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, dated 11th June 2021 kv 1 DCIT, Circle – 1(3), 7th Floor, Aayakar Bhavan, Hyderabad. 2 M/s Abir Infrastructure Pvt. Ltd., H.No. 8-2- 577/B, Plot No. 34, 4th Floor, Mass Heights, Road No. 8, Banjara Hills, Hyderabad - 33 3 CIT(A) - 11, Hyderabad. Pr. CIT (Central), Hyderabad. 4 ITAT, DR, Hyderabad. 5 6 Guard File.

28 I.T.A. No. 2068/Hyd/2018 Abir Infrastructure Pvt. Ltd., Hyd.

S.No. Details Date 1 Draft dictated on 2 Draft placed before author Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order