ITAT Quashes Reassessment Beyond Four Years; Deletes Rs 14.03 Crore Sub-Contract Expense Disallowance 

The Income Tax Appellate Tribunal (ITAT), Mumbai, quashed the reassessment, as the notice was issued beyond the four-year limit. The Tribunal deleted the disallowance of Rs 14.03 crore towards alleged bogus subcontract expenses.

The assessee company, Hindustan Construction Company Limited, engaged in the business of civil construction and undertakes government projects, had filed its return declaring losses under normal provisions and under Section 115JB. The assessee’s return was selected for scrutiny, and an order under section 143(1) was passed on 19.05.2016.

The assessee’s case was reopened under section 148 of the Income Tax Act based on the information received from the investigation wing, which alleged the assessee had taken accommodation entries from M/s Kumar Enterprises. Accordingly, the AO issued a notice dated 30.03.2019 under section 148. However, the said notice for reopening the assessment was beyond four years from the end of the relevant assessment year. The AO in the reassessment order made an addition of Rs 14,03,68,378 towards the sub-contracting expenses to M/s. Kumar Enterprises. This decision was upheld by the CIT(A).

The assessee approached the ITAT, arguing that the reassessment was invalid for being beyond the four-year limit. The assessee company argued that the case was reopened just because of the change of opinion without any fresh tangible material. The assessee also submitted that it had fully disclosed all the facts related to the assessment.

The Tribunal noted that the AO had reopened the assessment based on the subcontractor’s Form 26AS Statement and assessment records, both of which were already available to the AO during the regular assessment u/s.143(3) ITR. Further, it noted that the assessee had fully disclosed all the facts related to the transactions with the subcontractor by filing a copy of the annual Report and the audited profit and loss account, Balance sheet and the ITR and these submissions were also acknowledged by the AO.

Further, it observed that no fresh or tangible material surfaced after completion of the regular assessment and the reassessment was initiated after the expiry of four years. It ruled that reopening just because of a change of opinion is bad under the law. Based on these facts, the Tribunal quashed the relevant reassessment order.