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Facts
The assessee, Hindustan Construction Company Limited, filed its return of income for Assessment Year 2012-13. The case was reopened under Section 147 of the Income Tax Act, 1961, after a delay of four years, based on information that the assessee had made payments for alleged accommodation entries to M/s. Kumar Enterprises. The Assessing Officer made an addition of Rs. 14,03,68,378/- on account of sub-contracting expenses.
Held
The Tribunal held that the reopening of the assessment was based on a change of opinion, as the material relied upon by the Assessing Officer (Form 26AS and assessment records of preceding years) was available during the original assessment proceedings. The Tribunal further found that the assessee had provided sufficient documentary evidence, including work orders, invoices, and bank payment documents, to substantiate the genuineness of the sub-contracting expenses incurred with M/s. Kumar Enterprises. Therefore, the disallowance made by the Assessing Officer was deleted.
Key Issues
Whether the reassessment proceedings initiated beyond the period of four years were valid, and whether the sub-contract expenses claimed by the assessee were genuine.
Sections Cited
143(3), 147, 148, 115JB, 144C(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 944/MUM/2025 Assessment Year: 2012-13 Hindustan Construction Dy Commissioner of Income Tax Company Limited Circle 14(1)(1), Hincon House LBS Marg, Mumbai Vs. Vikhroli (W), Mumbai - 400083 (PAN: AAACH0968B) (Appellant) (Respondent)
Present for: Assessee : Shri Jitendra Trivedi, CA Revenue : Shri Himanshu Joshi, Sr. DR Date of Hearing : 31.10.2025 Date of Pronouncement : 20.01.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal is filed by the assessee against the order of ld. Addl/JCIT(A)-7, Kolkata, vide order No. ITBA/APL/S/250/2024- 25/1071375594(1), dated 19.12.2024, passed against the assessment order by Deputy Commissioner of Income-tax, Circle – 14(2)(1), Mumbai, u/s. 143(3) r.w.s 147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 25.12.2019 for Assessment Year 2012- 13.
2 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13
Grounds taken by assessee are reproduced as under: “1. On the facts & circumstance of the case and in the law, the Learned CIT(A) erred in upholding the legality of the order passed by the learned Assessing Officer u/s 143 r/ws 147 rejecting the contentions of the Appellant that the said order was ab initio bad in law and without jurisdiction and hence merits being quashed. The order u/s 143(3) r/w s 147 be accordingly quashed and the order of the learned CIT(A) on this point be reversed. 2. On the facts & circumstance of the case and in the law, the learned CIT(A) erred in confirming disallowance of sub-contract expenses amounting to Rs.14,03,68,378/-rejecting the contentions of the Appellant and the evidence adduced by the Appellant in this regard. Without prejudice to Ground No, 1 above, the addition of Rs. 14,03,68,378 made by the learned Assessing Officer be directed to be deleted.”
Brief facts of the case are that assessee is a public listed company engaged in the business of civil construction and undertakes infrastructure development projects involving construction of roads, bridges, dams, tunnels, underground structures, break water constructions, power projects, chimneys, etc. Majority of its clients are Central/State Governments, defence, public sector undertakings/companies. Assessee filed its return of income on 31.10.2012, reporting a total loss of Rs.538,04,01,916/- under normal provisions of the Act and a book loss of Rs.318,82,05,729/- u/s. 115JB of the Act. Assessee’s case was selected for scrutiny and an order u/s.143(3) r.w.s. 144C(3) of the Act, was passed on 19.05.2016 assessing the loss at Rs. 521,01,27,248/- under the normal provisions of the Act and book loss of Rs. 309,42,17,849/- u/s. 115JB of the Act. Subsequently, based on the information received from investigation wing of Mumbai department, DGIT (Inv), Mumbai and the ACIT, Circle 50(1), New Delhi, regarding the alleged accommodation entries taken by the assessee from a Delhi based entity M/s Kumar Enterprises (Proprietor Arvind Kumar Goel), the case of the assessee was re-opened by issuing a notice dated 30.03.2019 u/s. 148 of the Act, by the office
3 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 of the DCIT, Circle 14(2)(1), Mumbai. The notice was issued beyond the limit of four years to reopen the case from the end of the assessment year. The impugned reassessment order was passed making addition of Rs. 14,03,68,378/- on account of sub-contracting expenses to M/s. Kumar Enterprises. It is pertinent to note that in the reasons recorded for reopening the amount mentioned was Rs.12,86,49,756/- whereas addition has been made for Rs 14,03,68,378/-. Ld. CIT(A)-7, Kolkata, has, vide order dated 19.12.2024, confirmed both actions of ld. Assessing Officer i.e., (i) the reopening proceedings, and (ii) the addition of sub-contracting expenses Rs. 14,03,68.378/-.
3.1. To deal with jurisdictional issue contested by the assessee vide ground No.1, challenging the reopening proceedings invoked by section 147 and passing of the reassessment order thereafter, it is important to take note of the reasons to believe recorded by the ld. Assessing Officer before issuing notice u/s.143. We specifically take note of para – 2 and 4 of the reasons to believe so recorded, placed in the paper book from page 60 to 63. The Paras- 2,3 and 4 are reproduced for ready reference:
“2. Brief details of information collected / received by the AQ: In this case, information was received from DGIT (Inv.), Mumbai and Circle -50(1), New Delhi. It was informed by the ACIT, Circle -50(1), New Delhi that Shri Arvind Kumar Goel (PAN-ADWPG2980N) has been providing accommodation entries of bogus expenses to the companies whose contractual receipts appear in 26AS statement of Shri Arvind Kumar Goel. Data of 26AS statement of Shri Arvind Kumar Goel was also provided for F.Y. 2011-12 along with the information received. 3. Analysis of information collected/received: It is seen from the 26AS details of Shri Arvind Kumar Goel (proprietor of M/s Kumar Enterprises) that total payments amounting to Rs. 12,86,49,756/- have been made by the assessee Hindustan Construction Co. Ltd. to Shri Arvind Kumar Goel (Proprietor of Kumar Enterprises) during FY 2011-12, pertaining to AY 2012-13. 4. Enquiries made by the AO as sequel to information collected/ received:
4 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 On perusal of the assessment records for the assessee, it is seen that similar issuewas involved in the case of the assessee for A.Ys. 2010-11 and 2011- 12also. After examination, it has been established in the assessment orders passed under section 143(3) r.w.s. 147 for AYs 2010-11 and 2011-12 that the transactions entered into by the assessee with the aforesaid concern named M/s Kumar Enterprises (Prop Arvind Kumar Goel) are non-genuine accommodation entries of bogus sub-contract expenses. Additions were made on this account in these AYs in the hands of M/s Hindustan Construction Co. Ltd. after thorough enquiries after providing sufficient opportunities to the assessee. Thus, the transactions with M/s Kumar Enterprises have been established to be bogus and are to be disallowed in the present AY also.”
3.2. From the perusal of the above, it is noted that ld. Assessing Officer has referred to Form 26AS statement of the sub contractor, Shri Arvind Kumar Goel which formed the basis for information leading the invocation of reopening proceedings. It is pertinent to note in this respect that Form 26AS statement was available at the time of filing of return itself u/s. 139. Ld. Assessing Officer has analysed the information contained in this 26AS statement to record the reason to believe that payments amounting to Rs.12,86,49,756/- made to Shri Arvind Kumar Goel by the assessee though the addition have been made at Rs.14,03,68,378/-.
3.3. Further, from para-4, it is observed that Assessing Officer had perused the assessment records of the preceding Assessment Years namely, 2010-11 and 2011-12 from where he had taken note of similar disallowances made in those years when the assessment orders were passed u/s.143(3) r.w.s. 147 holding similar payments as non-genuine accommodation entries towards bogus sub-contract expenses. Even these assessment records for the preceding two assessment years were available at the time of completion of original assessment u/s. 143(3) in the case of assessee.
3.4. Further, in para-8 of the reasons to believe recorded by the ld. Assessing Officer, he has dealt with the aspect of Explanation-1 to
5 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 section 147, so as to record that assessee has not fully and truly disclosed the facts relating to transactions with Shri Arvind Kumar Goel, proprietor of M/s. Kumar Enterprises. In this paragraph, ld. Assessing Officer acknowledges that assessee had filed a copy of Annual Report and audited profit and loss account as well as balance sheet along with return of income wherein various information/material were disclosed. He also notes in this paragraph that the issue under consideration for the purpose of reopening was not examined by the ld. Assessing Officer during the course of regular assessment u/s.143(3).
3.5. Thus, the summary of reasons to believe recorded by ld. Assessing Officer can be noted as under: “a) That shri Arvind Kumar Goel (Proprietor of M/s. Kumar Enterprises) provides accommodation entries of bogus expenses to the companies whose contractual receipts appear in 26AS statement of shri Arvind Kumar Goel. b) That during FY 2011-12, total payments amounting to Rs. 12,86,49,756/- have been made by appellant to Shri Arvind Kumar Goel. c) That the assessment records of the appellant shows similar issues involved for AYs. 2010-11 and 2011-12 also. And after examination, such transactions are found to be non-genuine accommodation entries of bogus sub-contract expenses and accordingly additions were made in the assessment orders passed u/s. 143(3) r.w.s. 147 in both years. d) Thus, the transactions with M/s Kumar Enterprises have been established to be bogus and are to be disallowed in the present assessment year also.”
Admittedly, it is a fact on record that regular assessment was undertaken u/s. 143(3) for which the order was passed on 19.06.2016. In the course of this regular assessment proceedings, assessee had furnished the details called for, by the ld. Assessing Officer vide submission dated 27.08.2017 placed in the paper book at page – 157- 158. Assessee had furnished its audited financial statements along with Annual Report, which even the ld. Assessing Officer has acknowledged in the reasons to believe recorded by him, which was available in the course of regular assessment proceedings. In the statement of Profit and
6 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 Loss account, under the head “Expenses”, construction expenses are reported with note no.26. Further, in Note no.26 relating to “construction expenses”, at item no.(b) sub-contract, transportation, hire expenses are further bifurcated with a sub note no.26.1 whereby it is stated that this item of sub-contract, transportation, hire, etc. includes insurance, rates and taxes, lease rent. Also in this note on construction expenses, further bifurcations are given relating to material consumed, power and fuel, repairs to machinery, other repairs, rent and water charges.
4.1. On the strength of this factual position, assessee is contending that there is no failure on the part of the assessee to truly and fully disclose material facts relating to assessment as required under proviso to section 147 as case of the assessee falls within this requirement. According to the assessee, it is a case of change of opinion with no new fresh tangible material brought on record for invoking reopening proceedings which is admittedly beyond period of four years from the end of the year under consideration. In the reasons to believe recorded by the ld. Assessing Officer, the basis is analysis of Form 26AS as well as assessment records of the preceding two assessment years, namely 2010-11 and 2011-12 which were always available with the ld. Assessing Officer at the time of making regular assessment u/s.143(3). Assessee has strongly placed reliance on the decision of Hon'ble Supreme Court in the case of Commissioner of Income-Tax, Delhi vs. Kelvinator of India Limited. [2010] 320 ITR 561 (SC). Reliance is also placed on decision of Coordinate Bench of ITAT, Mumbai in the case of Shaf Broadcast Pvt. Ltd. vs. ACIT in ITA No.1819/Mum/2012, dated 17.04.2013 wherein it is held that initiation of reassessment proceedings by ld. Assessing Officer is not valid as the ld. Assessing Officer failed to establish that assessee did not disclose fully and truly all material facts
7 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 at the time of making the original assessment, as charge of escapement of income from assessment is based only on the statement of Mukesh Choksi which is a general statement and no reference of any transaction with assessee is mentioned therein nor any material has been brought on record in the assessment order which came into the notice of the Department.
We have perused the material on record and gone through the submission made before us. We have also considered the judicial precedents relied upon and the view taken by the authorities below. It is undisputed that regular assessment was completed u/s.143(3) and reopening has been invoked after expiry of four years from the year under consideration. Thus, proviso to section 147 is applicable in the present case. From the reasons to believe recorded by the ld. Assessing Officer, it is explicitly discernible that the basis of reopening is the entry in Form 26AS relating to payments made by Shri Arvind Kumar Goel (proprietor of M/s. Kumar Enterprises) reflected therein. Also, reference is made to assessment records for the preceding two Assessment Years in assessee’s own case. There is no other reference to any material which forms the basis for the ld. Assessing Officer to arrive at a reason to believe which is a new, fresh tangible material surfacing out after the completion of regular assessment leading to formation of such a belief. What has been referred by the ld. Assessing Officer in the reasons to believe recorded by him was always available with him at the time of completion of regular assessment u/s.143(3). Also, adequate disclosures have been made by the assessee in its audited financial statements, more particularly relating to sub-contract expenses forming part of note-26 to the audited financial statements.
8 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 5.1. Ld. Assessing Officer has referred to explanation-1 to section 147 which reads as under “Explanation-1 – production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessary amount to disclosure within the meaning of the foregoing provisions”. On this aspect of the case, Hon'ble High Court of Gujarat in the case of Gujarat Ginning and Manufacturing Co. vs. CIT(A) 108 ITR 674 found that profit and loss account was there before the Assessing Officer during the original proceedings disclosing the amounts of municipal taxes recovered from the tenants of the assessee company which the Assessing Officer believed had escaped assessment. Question before the Hon'ble Court was whether in such case it would be held that primary facts necessary for ascertaining the income had been disclosed to the Assessing Officer and the disclosure so made in the profit and loss account was sufficient in the eyes of law. Hon'ble Court held that disclosure in the profit and loss account was sufficient and since it was submitted along with the return of income disclosing aforesaid recovery, it could not be brought within the purview of “production” of books of accounts or other evidences before the ld. Assessing Officer. Thus, Hon'ble Court observed that “produce” would not include balance sheet and profit and loss account which the assessee is obliged to file along with return and therefore, this explanation cannot be invoked where the Assessing Officer fails to notice an entry or statement in the balance sheet or profit and loss account. Relevant findings of the Hon'ble Court in this regard are reproduced below: "We are unable to accept Mr. Kaji's contention that this case of the Supreme Court and the observations of the Bombay High Court apply to the present case. In the instant case the assessee has not suppressed material facts as was the case in Jai Hind Printing Press's case (supra). He has not failed to disclose in the documents submitted to the ITO the amounts of the recoveries of municipal taxes from the tenants. Actually, in the profit and loss account one finds that in each of those two assessment years, the total amount of rates and taxes were first shown and the recoveries were shown as deductions from those amounts of rates and
9 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 taxes. Therefore, to any person reading the profit and loss account it would be obvious that these recoveries, namely, Rs. 27,098 in one case and Rs. 26,477 in the other case, were recoveries of taxes for which the assessee-company before us was not claiming any deductions. Thus, the primary fact that these recoveries were made was before the ITO at the time of the original assessment proceedings. As the Supreme Court has pointed out in CIT vs. Burlop Dealers Ltd. (supra), it was for the ITO to raise the possible inferences. The assessee-company was under no obligation to inform the ITO about the possible inferences which could be raised against him. If the ITO did not raise the appropriate inference on the primary facts disclosed before him the income which has escaped assessment cannot be brought to tax under s. 147(a) of the Act of 1961. The duty which has been cast upon the assessee is to disclose all the primary facts necessary to enable the ITO to arrive at the proper figure of the total income and to assess the tax accordingly. Beyond disclosure of the primary facts, no other duty is cast on the assessee. Here is not a case of books of account or other evidence produced by the assessee at the time of the original assessment proceedings. The profit and loss account of the assessee-company was submitted and it did disclose the recoveries in each of these two year. In the reassessment proceedings it has been pointed out that at the time of the original assessment proceedings those profit and loss accounts of the two years were before the ITO and those profit and loss accounts did mention these two amounts of Rs. 27,098 and Rs. 26,477 as recoveries of municipal taxes. If the ITO did not draw the necessary inferences from these primary facts, the assessee cannot be blamed and it cannot be said that the tax had escaped assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The material facts which were the primary facts were disclosed and the assessee was not bound to point to the possible inferences which should be raised from these primary facts. Because of the failure on the part of the ITO to raise the necessary inferences at the time of the original assessment proceedings, the assessee cannot be blamed nor can the case be brought under s. 147(a) of the IT Act, 1961, because of such failure of the ITO at the time of the original assessment proceedings."
5.2. This issue has been dealt by the Coordinate Bench of ITAT, Chandigarh in the case of Greater Mohali Area Development Authority vs. DCIT in ITA No.410/CHD/2013, dated 28.12.2017 wherein in para- 19, Coordinate Bench did not find any merit in the contentions of ld. DR that mere production of account books and balance sheet and profit and loss account will not tantamount to disclosure. It, thus held that reliance placed by ld. DR on Explanation-1 to section 147 is not applicable in such a case.
Considering the factual position as discussed and the judicial precedents relied upon, more particularly the judicial precedents by the
10 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 Hon'ble High Court of Gujarat (supra) fortified by the decision of Hon'ble Apex Court in the case of Kelvinator of India Ltd. (supra), we find that reopening initiated by the ld. Assessing Officer based on the reasons to believe recorded by him tantamount to change of opinion on the material which always was available at the time of regular assessment, there being nothing which has been brought on record as to fresh tangible material to charge the assessee for escapement of income. Accordingly, the reopening so initiated and reassessment order passed thereafter is bad in law, liable to be quashed. Accordingly, ground No.1 raised by the assessee is allowed.
Further, on the merits of the case contested vide ground No.2, assessee has submitted in detail, all the relevant documentary evidences and explanations, substantiating the claim in respect of sub- contract expenses incurred by it. Assessee made submissions vide letter dated 06.11.2019 and vide letter dated 12.12.2019 which are extracted below:
11 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13
12 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13
13 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13
14 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13
7.1. From the perusal of the findings in para 5.3, the basis adopted by the ld. CIT(A) for dismissing the ground raised by the assessee and sustaining the addition is that assessee failed to produce evidence of expenses incurred by it. However, from the above extraction of the submissions made by the assessee vide two letters, adequate details
15 ITA No. 944/MUM/2025 Hindustan Construction Co. Ltd. AY 2012-13 along with corroborative documentary evidences were placed on record, which have not been considered in proper perspective. Assessee has provided copies of work orders, invoices and bank payment documents substantiating the sub-contracting expenses and the work undertaken for the transaction entered into with M/s. Kumar Enterprises (Proprietor Arvind Kumar Goel) to establish genuineness of the same. Considering the over factual matrix and the submissions so made, we delete the disallowance made by ld. Assessing Officer. Accordingly, ground No.2 raised by the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 20 January, 2026
Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member
Dated: 20 January, 2026 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,
(Dy./Asstt.Registrar) ITAT, Mumbai