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Facts
The assessee, engaged in civil construction, filed a revised income. The initial assessment was completed under Section 143(3) r.w.s. 144. Subsequently, the AO initiated reassessment proceedings under Section 147, alleging escapement of income due to unverified expenses and improper application of Section 44AD.
Held
The Tribunal held that the Assessing Officer cannot reopen an assessment based on the same material and without fresh tangible evidence. The reassessment proceedings initiated on the same grounds as the original assessment were deemed invalid.
Key Issues
Whether reopening of assessment under Section 147 is valid when no new material is brought on record and the issue was already examined and concluded in the original assessment.
Sections Cited
147, 148, 143(3), 144, 250, 144B, 44AD, 143(2), 142(1), 271(1)(c), 68, 69
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the assesse filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter called ‘Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2013-14, date of order 03/03/2025. The impugned order emanated from the order of the National Faceless Assessment Centre, Delhi (for brevity, ‘Ld.AO’) passed u/s 147 r.w.s. 144B of the Act, date of order 30/03/2022.
Khajamohiaddin Ghousemohiaddin Syed 2. The brief facts of the case is that the assessee is engaged in the business of civil construction and declared its revised income for the impugned assessment year amount to Rs. 40,01,190/- filed on dated 25/02/2014. The income was assessed at Rs.2,74,23,670/- u/s 143(3) r.w.s. 144 of the Act on 28/03/2016 wherein the Ld.AO making disallowance of expenses applied section 44AD and arrived at a deemed net profit amount to Rs.1,33,63,668/- which is @8% of the gross receipts amount to Rs.16,70,45,850/-. The aggrieved assessee filed an appeal before the Ld. CIT(A) which is pending before the 1st appellate authority. Further, the Ld.AO initiated reopening proceedings u/s 147 of the Act and issued notice u/s 148 of the Act on dated 31/03/2021. In response to the notice, the assessee filed the return on dated 29/04/2021 declaring the total income at Rs.40,01,190/-. The notices u/s 143(2) and 142(1) of the Act were issued and finally the addition was made by the Ld.AO of Rs. 4,17,61,462 after deducting expenses of Rs.12,52,84,388/- being 75% of the expenses incurred by the assessee, from the gross receipts of Rs.16,70,45,850/-. The assessee challenged the order before the Ld.CIT(A) but the Ld.CIT(A) dismissed the appeal of the assessee. Being aggrieved, the assessee filed an appeal before us.
The Ld.AR argued and filed the paper book, containing pages 1 to 59 which is placed on the record. The Ld.AR invited our attention on the original assessment order passed u/s 143(3) r.w.s. 144 of the Act, date of order 28/03/2016. The relevant part of the assessment order is extracted below:- “It may be noted that at the sub clause (ii) of clause (a) ofthe explanation to the provision of section 444D of the LT. Act the section is available to the assessee having turnover not exceeding of 1 crore. Hence, it may be noted that the scheme of presumptive income has been Khajamohiaddin Ghousemohiaddin Syed enacted by the legislature with a view to facilitate the small businessmen from maintaining the records and evidences. However, while providing such facility the element of the profit should reasonably earnedis fixed @8% of the turnover, carried outby an assessee. Keeping in view of the above provisions and the fact in the instant case the assessee has not furnished any supporting evidence in support of the expenditure, claimed in the P&L account. Therefore, in such a situation it is fit case to invoke the provision of section 44AD of the I.T. Act to determine the income of the assessee. In view of the shove facts and the details available on record, it stashed that assessee fails to represent himself as well as furnish details called for till the date. Accordingly, book results of the assessee is rejected and the net profit of the assessee is calculated 8% of the total receipts from the operation i.e. of Rs.16,70,45,850/-. Hence, the profit of the assessee is determined at Rs. 1.33,63,668/ ( 8% 0f Rs. 16,70,45,850/-). As the assessee has furnished inaccurate particulars of Income, hence proceeding u/s 271(1) (c) of the IT Act is also initiated.”
The Ld.AR further invited our attention on the reasons recorded by the Ld.AO, annexed in APB page-38 and the relevant part of the recorded reasons is extracted below:- “2 On perusal of record, it was observed that in the assessment order dated 28.03.2016, the assessing officer applied section 44AD and accordingly arrived at deemed net profit of Rs. 133.63,668 (8% of total receipts) was not in order firstly on the basis that the assessee, having gross receipts of more than rupees one crore, is not entitled for section 44AD nor it has asked for the same. Secondly even after giving repeated opportunities to furnish the details regarding expenses in Profit an and loss accounts, investments, cash deposits etc., the assessee did not appear or furnish any information and accordingly the Assessing Officer made disallowances under section 68 /69 of the Act on these aspects except for expenses in Profit and loss accounts Khajamohiaddin Ghousemohiaddin Syed 3. In this respect, although it stated that the expenditure remained unverified and warned the assessee that if he did not explain in the last given opportunity, the expenditure will be treated as unproved and disallowance will be made accordingly. However despite the fact that the assessee did not appear despite receipt of notice and the AO had made full disallowance in respect of other aspects, full disallowance of expenditure in Pål was not made and section 44AD was wrongly applied. The Pid. expenses being Rs,14,46,17,516 (Direct expenses) and Rs.1,97,23,865 (Indirect expenses) the total disallowance should have been sum of the two Le. Rs. 16,43,41,381 instead of just Rs.1,33,63,668. One more remarkable fact is worth mentioning here that in the details of expenses, the assessee showed material expense for the year at Rs.54,22,540 whereas the labour and wages expenses was shown at Rs. 12,35,51,003 which did not appear to be believable as in a construction business with such a low value of material, it was not possible to incur such high expenditure on wages.”
The Ld.AR argued that the Ld.AO can not review his own order and addition was made on the issue on which addition was already made in the original assessment made u/s 143(3) r.w.s. 144 of the Act. So the entire addition is bad in law.
The Ld.DR argued and relied on the order of the revenue authorities.
We have heard the rival submissions and perused the material available on record. We find that the very same expenses were examined by the Ld. AO in the original assessment proceedings, and after applying the provisions of section 44AD of the Act, the profit was estimated at 8% of the gross receipts, amounting to Rs.1,33,63,668/-, which was added to the total income of the assessee. The notice under section 148 was issued on the basis of recorded reasons wherein the Ld. AO merely reiterated the same ground relating to the estimation of profit. In the reassessment proceedings, the Ld. AO again held that the Khajamohiaddin Ghousemohiaddin Syed expenses were improper and proceeded to make a disallowance @ 25% of the expenses. It is a well-settled legal position that an Assessing Officer cannot review or revisit his own earlier view in the absence of fresh tangible material. Respectfully following the judgment of the Hon’ble Bombay High Court in Kalpataru Land Pvt. Ltd. v. ACIT reported in [2022] 136 taxmann.com 434 (Bom.), the Special Leave Petition against which was dismissed by the Hon’ble Supreme Court reported in [2022] 145 taxmann.com 77 (SC), we reproduce the relevant observation of the Hon’ble High Court: “6. Therefore, it is not permissible for an Assessing Officer to reopen the assessment based on the very same material with a view to take another view without consideration of material on record once one view is conclusively taken by the Assessing Officer. It is also not permissible to reopen purely on change of opinion. A general statement that the escapement of income is by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him.” In light of the binding decision of the jurisdictional High Court, the reopening of the assessment on an issue already examined and concluded in the original assessment is unsustainable in law. Accordingly, we hold that the reassessment proceedings initiated on the same ground are invalid. Therefore, the reassessment order passed under section 147 read with section 144B dated 30/03/2022 is hereby quashed.