2014 (6) TMI 73 - AT - Income Tax

Validity of reopening of assessment u/s 144/147 - ROI had not been regularly verified and it was only processed u/s 143(1) capital gain not disclosed by the assessee in his ROI - nvestment was also not disclosed - Held that - The contention of assessee cannot be accepted because u/s 147 the AO can assess or reassess income - When the ROI had not been regularly verified and it was only processed u/s 143(1) of the Act, the AO can assess income after the Return of Income is processed u/s 143(3) of the Act - The AO has enough evidence of escapement of income thus, the action taken u/s 147 r.w.s.148 and section 144 is a valid action - The AO can very well assess as well as reassess the ROI if it is so done Decided against Assessee. Addition of unexplained capital expenses Expenses incurred in on erection and installation of plant and machinery Held that - The genesis of the addition is the Inspector s report - the report was never confronted to the assessee - The assessee has argued that no such capital expenditure was incurred during the year - Entire working and finding of the CIT(A) again is found to be based on Inspector s report - Untested statement of the Inspector given in his report cannot be made a basis of any addition unless it is confronted with the assessee and moreover, certain other corroborative evidence is found thus, this baseless addition is set aside Decided in favour of Assessee.

Issues Involved:
1. Assessment year 2007-08 - undisclosed capital gain and unreported construction expenses.
2. Validity of reassessment proceedings under sections 147 and 148 of the Income-tax Act, 1961.
3. Addition of alleged unexplained capital expenses.
4. Charging of interest under sections 234A and 234B.

Analysis:

1. Undisclosed Capital Gain and Unreported Construction Expenses:
The appellant filed the Return of Income for A.Y. 2007-08 but failed to disclose a short-term capital gain arising from the sale of land and unreported construction expenses incurred during the year. The Assessing Officer (A.O.) initiated reassessment proceedings under section 147 r.w.s. 148 of the Income-tax Act due to the non-disclosure. The A.O. made various additions, including a trading addition, resulting in the computation of the total income at Rs. 30,55,770/-. The appellant challenged these additions before the CIT(A) and further in the appeal.

2. Validity of Reassessment Proceedings:
The appellant contested the initiation of proceedings under sections 147 and 148, arguing that it was unjustified. However, the Tribunal held that the A.O. had sufficient evidence of income escapement, justifying the reassessment. The Tribunal dismissed the appellant's contentions regarding the validity of the reassessment proceedings, emphasizing the A.O.'s authority to reassess income under the Act.

3. Addition of Alleged Unexplained Capital Expenses:
The A.O. estimated the expenditure on erection and installation of plant and machinery based on an Inspector's report, leading to an addition of Rs. 8,47,939/-. The appellant disputed this addition, claiming no such capital expenditure was incurred during the year. The Tribunal observed that the Inspector's report was never confronted to the appellant, and the addition lacked substantial evidence. Consequently, the Tribunal ordered the deletion of this addition, finding it baseless and not adequately substantiated.

4. Charging of Interest under Sections 234A and 234B:
The appellant raised objections to the interest charged under sections 234A and 234B. The Tribunal clarified that the charging of interest under these sections is mandatory, and no relief could be granted in this regard.

Conclusion:
The Tribunal partially allowed the appellant's appeal, deleting the baseless addition of alleged unexplained capital expenses while upholding the charging of interest under sections 234A and 234B. The other formal grounds raised by the appellant were not considered for adjudication.

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