2013 (6) TMI 548 - AT - Income Tax

Undisclosed bank accounts - survey u/s.133A - statement of brother of the assessee recorded on oath since the assessee was not available - revised return filled by assessee whether non-est? - Held that - The assessee in the instant case has filed his return of income on 16-08-2010 declaring total income of Rs.2,77,35,954/- & AO in the instant case has issued notice u/s.142(1) to the assessee on 03-03-2010. As per the provisions of section 139(5) if an assessee, who has filed a return in response to notice u/s.142(1), discovers any omission or any wrong statement therein he may furnish a revised return at any time before the expiry of 1 year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier. However as find CIT(A) has not considered the provisions of section 139(5) while holding the revised return filed by the assessee as non-est. Even AO is also silent on this issue, therefore, the revised return filed by the assessee is not non-est and the AO should have considered the revised return filed by the assessee before completing the assessment - thus restore the issue to the file of the AO with a direction to consider the revised return and complete the assessment in accordance with law after giving due opportunity of being heard to the assessee - appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the revised return filed by the assessee.
2. Classification of income from the sale of land as business income or capital gains.
3. Adequacy of the opportunity provided to the assessee to explain expenses.
4. Admissibility of certain expenses and claims.
5. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the Revised Return Filed by the Assessee:
The assessee filed a return on 16-08-2010 in response to a notice u/s.142(1) of the Income Tax Act. The CIT(A) held that the revised return filed on 17-03-2011 was non-est because the original return was not filed within the due date specified u/s. 139(1). However, the tribunal noted that as per section 139(5), an assessee who has filed a return in response to notice u/s.142(1) can file a revised return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The tribunal found that the CIT(A) did not consider this provision and directed the Assessing Officer to consider the revised return and complete the assessment in accordance with the law.

2. Classification of Income from the Sale of Land:
The Assessing Officer classified the income from the sale of land as business income, considering it an adventure in the nature of trade, based on the assessee's systematic transactions and development activities. The CIT(A) upheld this view, noting that the land was not transferred in the name of the assessee, who acted as a power of attorney holder, and that the land was developed and sold for profit. The tribunal did not adjudicate this issue, as it restored the matter to the Assessing Officer for reconsideration.

3. Adequacy of Opportunity Provided to the Assessee to Explain Expenses:
The assessee claimed that sufficient opportunity was not provided to explain the expenses. The tribunal directed the Assessing Officer to give one more opportunity to the assessee to substantiate the various expenses claimed in the Income and Expenditure account with evidence.

4. Admissibility of Certain Expenses and Claims:
The CIT(A) upheld the Assessing Officer's decision to allow only verifiable expenses and disallow the balance due to a lack of supporting details. The tribunal directed the Assessing Officer to reconsider the expenses claimed by the assessee in light of the revised return and additional evidence to be provided by the assessee.

5. Compliance with Principles of Natural Justice:
The assessee argued that the Assessing Officer violated the principles of natural justice by not providing a reasonable opportunity to explain the expenses. The CIT(A) found that sufficient opportunities were provided during the assessment and appellate proceedings. The tribunal directed the Assessing Officer to ensure that due opportunity is given to the assessee during the reassessment process.

Conclusion:
The tribunal restored the matter to the Assessing Officer, directing him to consider the revised return filed by the assessee, provide an opportunity to substantiate the expenses claimed, and complete the assessment in accordance with the law. The appeal was allowed for statistical purposes.