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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A (SMC
Before: SMT. P. MADHAVI DEVI
For Revenue : Shri K.A. Sai Prasad For Assessee : Shri Subramanyam T. Date of Hearing : 29-10-2020 Date of Pronouncement : 03-11-2020 O R D E R
This is Assessee’s appeal for the AY 2008-09 against the order of the Commissioner of Income Tax (Appeals) - 1, Guntur, dated 22/06/2018.
Brief facts of the case are that the assessee, an individual, is engaged in the business of real estate. He filed his return of income for the relevant AY 2008-09 on 05/12/2008 admitting income of Rs. 1,35,940/- and Rs. 20,000/- from agriculture. Thereafter, the assessee filed revised return on 01/03/2010 showing income of Rs. 9,35,940/- from business activity and Rs.
:- 2 -: Gonugunta Venkateswarlu, Kandukur.
20,000/- from agriculture. The return was taken up for scrutiny and the assessment was completed u/s 143(3) of the IT Act on 06/12/2010. Thereafter, the AO was of the opinion that the income of the assessee has escaped assessment and, therefore, he issued a notice u/s 148 on 26/11/2012 and during the reassessment proceedings u/s 143(3) r.w.s. 147 of the Act, the AO had disallowed a sum of Rs. 8,21,960/- u/s 40A(3) of the Act.
Aggrieved, the assessee preferred an appeal before the CIT(A) both against 147 proceedings as well as the addition made u/s 40A(3) of the Act.
The CIT(A), however, confirmed the assessment order and, therefore, the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The learned Commissioner of Income Tax (Appeals) failed to properly appreciate the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in rejecting the appellant's ground regarding initiating of proceedings u/s 147.
3. The learned Commissioner of Income Tax (Appeals), in the facts and circumstances of the case, is not justified in rejecting the appellant's ground against the application of provisions of section 40A(3).
4. The appellant reserves his right to add, amend, delete or substitute any ground or grounds during the course of hearing.”
:- 3 -: Gonugunta Venkateswarlu, Kandukur.
As far as Ground No. 2 against 147 proceedings is concerned, the ld. counsel for the assessee submitted that though the assessment has been reopened u/s 147 by issuing a notice u/s 148 within a period of 4 years from the end of relevant AY, the AO did not have any fresh tangible material, which has come to his notice after completion of assessment proceedings, to initiate proceedings u/s 147 of the Act. In support of his contention that the AO has not found any fresh material for coming to the conclusion that the income has escaped assessment and that in such circumstances, assessment cannot be reopened, he placed reliance on the following decisions: 1. Pr. CIT Vs. Smt. Santosh Jain, 296 ITR 324 (P&H). 2 Pr. CIT Vs. Jadau Jewellers and Manufacturers (P) Ltd., 409 ITR 85 (Raj.) 3. CIT Vs. Banwari Lal Bashidhar, 229 ITR 229 (All.) 6. The ld. DR, on the other hand, submitted that the AO during the assessment proceedings u/s 143(3) of the Act, accepted the returned income of the assessee, and it was only subsequently that the incumbent AO, on verification of the cash book filed by the assessee, found that the assessee has made cash payments and therefore disallowance u/s 40A(3) ought to have been made. Therefore, according to him, the AO had tangible material to come to the conclusion that there was escapement of income of the assessee. He, therefore, prayed for confirmation of the assessment order.
:- 4 -: Gonugunta Venkateswarlu, Kandukur.
Having gone through the material on record and having considered the rival contentions, I find that the AO completed the assessment u/s 143(3) of the Act after considering the assessee’s submissions and cash book and thereafter, estimated the income. Therefore, the AO has considered the cash book before estimating the income and it is also evident that the subsequent incumbent AO did not have any fresh tangible material to come to the conclusion that there was escapement of income in the case of assessee. He has verified the very same assessment records to form an opinion that there was escapement of income. In such circumstances, the decisions cited by the assessee are clearly applicable and respectfully following the same, I hold that the reassessment order passed u/s 147 of the Act is not sustainable and, therefore, the same is hereby quashed. Since the reassessment proceedings have been set aside, consequential addition made by the AO need not be adjudicated at this stage as it will only result in academic exercise.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 3rd November, 2020.