GONUGUNTA VENKATESWARLU,KANDUKUR vs. INCOME TAX OFFICER, WARD-2, ONGOLE

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.

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.

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.

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.