Sanjit Jitendranath Biswas Vs ITO (ITAT Surat)
Conclusion: AO had no power to review; he had the power to re-assess. Reassessment was not justified in case there was no “tangible material” found to come to the conclusion that there was escapement of income from assessment.
Held: AO had reopened the assessment of assessee. Assessee contended that the reopening of assessment was arbitrary and based on mere change of opinion as the issues of reopening were duly covered in the original assessment order u/s 143(3). From the original assessment order u/s 143(3), it was cleared that receipts of Rs.64,23,832/- and Rs.84,75,415/- were duly considered while calculating total turnover and estimating profit @ 8% for addition of suppressed income. Assessment was reopened on the basis of the same receipts of Rs.64,23,832/- and Rs.84,75,415/- which were taken in the total turnover in original scrutiny assessment and reopening of assessment again on the basis of same issues amounted to change of opinion not permissible under the provisions of Act. It was held that AO had no power to review; he had the power to re-assess. But re-assessment had to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” was removed, as contended on behalf of the Department, then, 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 AO. Hence, after 1.4.1989, AO had power to re-open, provided there was “tangible material” to come to the conclusion that there was escapement of income from assessment. Therefore, the re-assessment u/s 144 r.w.s. 147 was rightly quashed by the ld CIT(A).
FULL TEXT OF THE ORDER OF ITAT SURAT
Captioned cross appeals filed by the Assessee and Revenue pertaining to Assessment Year (AY) 2011-12, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals), Valsad [in short “the ld. CIT(A)”] dated 28.02.2020, which in turn arises out of an assessment order passed by the Assessing Officer u/s.143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”], dated 24.06.2014.
2. Since the issue involved in these cross appeals are common and identical therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
3. Now, we shall take assessee’s appeal in ITA No.136/SRT/2020 for AY.2011-12, wherein the grounds of appeal raised by the assessee are as follows:
“1. Ld. CIT(A), Valsad has erred in law and on facts to take G.P. of Rs.12.89 percent on contract receipts of Rs.64,23,832/- and thereby directed to take income @ Rs.8,28,032/- as against A.O’s addition of Rs.16,79,548 being 8% N.P. on turnover of Rs.3,08,25,664/-.
2. CIT(A), Valsad has erred in law and on facts to direct the assessing officer to take income @ Rs.2,35,501/- on peak basis with respect to cash deposits in SBI account by withdrawing cash from 2 bank accounts i.e. ICICI Bank and Axis Bank ignoring the fact that bank account with SBI is specifically opened for transfer of payment to the workers and thereby it is a business bank account. CIT(A), ought to have even telescopic adjustment of peak credits against his G.P/N.P addition. Alternatively, no peak to be added as there is substantial cash withdrawal from 2 bank accounts.
3. CIT(A), Valsad has erred in law and on facts to upheld A.O’s addition u/s 68 of the Act for Rs.2,00,000/- in respect of 12 parties ignoring the fact that small borrowings are from friends and family member ought to be accepted.”
4. Now, we shall take ground Nos.1 and 2 raised by the assessee. The issue involved in ground Nos. 1 and 2 raised by the assessee is that assessing officer made addition of receipts of Rs.64,23,832/- pertaining to contract receipts not shown in the total turnover and cash deposits of Rs.84,75,415/- into SBI Bank account and the total contract receipts shown by the assessee at Rs.1,59,26,417/-making the total contract receipts at Rs.3,08,25,664/-( Rs.64,23,832 + Rs.84,75,415 + Rs.1,59,26,417) and estimation of profit @8% i.e. Rs.24,66,053/- ( 8% of Rs.3,08,25,664) so as to make net addition of suppressed profit of Rs.16,79,548/-(Rs.24,66,053- Rs.7,86,505 profit already declared by the assessee).
5. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is an individual and filed his return of income for the assessment year under consideration on 29.09.2011, declaring total income at Rs.7,33,530/-. Later on, the assessee`s case was selected for scrutiny under CASS and accordingly a notice under section 143(2) dated 03.08.2012, was issued and served on the assessee. In the assessment order, the assessing officer noted that contract receipts as per form 26AS was indicated to be Rs.2,23,50,249/- whereas the audited books of account indicated total contract receipts of Rs.1,59,26,417/- only.
Thus, prima facie, it was observed by the assessing officer that there was suppression of contract receipt to the tune of Rs.64,23,832/-. It was also noted by the assessing officer that assessee had deposited cash of Rs.92,20,415/- in the saving bank account held with SBI Pardi Branch. It response to query by the assessing officer during assessment proceedings, the assessee had stated that he cash deposited cash of Rs.92,20,415/- in the saving bank account held with SBI Pardi Branch. In response to query by the assessing officer during assessment proceedings, the assessee had stated that cash deposits were from contract receipts and transfer from one bank to another bank. This contention was not accepted by the assessing officer on the ground that the SBI bank account was nowhere reflected in the print- out of cash book filed by the assessee. The assessing officer also noted that the assessee has shown in the cash books, cash receipts from the parties for whom job work was carried out. However, these parties did not confirm about any payment of cash to the assessee. The instances noted by the assessing officer from the cash book was Rs.1,40,000/- on 16.04.2010 from Shri D.R. Patel and Rs.1,80,000/- on 22.04.2010 noted in the cash book but these parties denied any cash payment to the assessee. Similarly, cash payment in the name of M/s. S.A. Builders amounting to Rs.1,50,000/- was reflected in the cash payment made to the assessee. Based on these findings, the assessing officer concluded that the assessee’s claim of cash deposit in the SBI account out of other bank withdrawal and contract receipts were not acceptable and therefore assessing officer rejected the same. The assessing officer also observed that transaction in the SBI bank statement indicated withdrawals by ATM mostly at Jalpaiguri. The assessing officer also noted that cheque was issued to Shankar Biswas and Naushad from these accounts. All these facts led the assessing officer to conclude that the deposits in the SBI account was unaccounted contract receipts of the assessee. Thus, the receipts of Rs.64,23,832/-and Rs.84,75,415/- were added to the total contract receipts shown in the return of income at Rs.1,59,26,417/-. On the adjusted total contract receipts of Rs.3,08,25,664/- (Rs.15,92,6417 + Rs.64,23,832 + Rs.3,08,25,664), the profit @8% i.e. Rs.24,66,053/- was calculated and after reducing the profits shown at Rs.7,86,505/- in the return of income by assessee, the net addition of Rs.16,79,548/- was made by assessing officer, by considering all the above facts and taking a lenient view. The total receipts of the assessee was worked out by assessing officer at Rs.3,08,25,664/- as under:
