2015 (10) TMI 62 - AT - Income Tax

Revision u/s 263 - AO failed to examine and consider the quantum of agricultural income and pension income earned by assessee - CIT(A) revising the assessment completed u/s 143(3) read with section 147 - Held that - As it is clear that assessee himself has admitted that he has earned income from agriculture as well as pension. However, neither in the course of assessment proceeding or while completing the assessment AO has paid any attention to nondisclosure of income from agriculture and pension. He simply completed the assessment by only bringing to tax accrued interest on bank deposit thereby completely overlooking the issue of pension earned and agricultural income. This reveals not only non-application of mind on the part of AO, but, also total lack of enquiry. The contention of the learned AR that when assessee is declaring nil income there is no necessity to show agricultural income is devoid of merit. It may be true that when the Assessee earned income only from agriculture it may not be taxable. However, in the present case, AO has determined taxable income at ₹ 19,94,589. Therefore, if there is any agricultural income, the same is required to be considered for rate purpose. AO having failed to examine and consider the quantum of agricultural income earned by assessee, assessment order is certainly erroneous and prejudicial to the interests of revenue. Further, as can be seen from the reply dated 04/08/10, assessee himself admitted of having earned pension income. That being so, how and under what circumstances, assessee filed his return of income showing nil income and the AO also overlooked to consider pension income is not understood. Therefore, failure on the part of AO to examine the issue relating to earning of agricultural income and pension income has rendered the assessment order erroneous and prejudicial to the interests of revenue. In these circumstances, CIT, in our view, was justified in setting aside the assessment order by exercising his revisional powers u/s 263 of the Act. - Decided against assessee.

Summary

Issues involved:
1. Revision of assessment orders u/s 263 of the Income Tax Act for the AY 2003-04.
2. Consideration of agricultural income and pension income in the assessment.

Issue 1 - Revision of assessment orders u/s 263:
The appeals were against orders of CIT(Central), Hyderabad revising assessments completed u/s 143(3) read with section 147 of the Act for the AY 2003-04. The CIT found the original assessment orders erroneous and prejudicial to the interest of revenue due to the failure to consider agricultural and pension income. The CIT set aside the assessment orders directing the quantification and taxation of agricultural and pension income. The CIT's decision was based on the AO's failure to consider these incomes, leading to an incomplete assessment. The AR argued against the revision, stating that the AO had verified the information and the assessment order was not erroneous. However, the DR supported the revision, emphasizing the importance of considering all income sources for a comprehensive assessment. The ITAT upheld the CIT's decision, stressing the necessity of examining all income sources and providing the assessee with an opportunity to establish their claims during reassessment.

Issue 2 - Consideration of agricultural income and pension income:
The assessee did not voluntarily file a return of income but did so after a notice was issued u/s 148, declaring 'NIL' income. However, the assessee disclosed pension income from CSIR and ownership of 10 acres of agricultural land during the assessment proceedings. The AO failed to consider these sources of income and only taxed accrued interest on bank deposits. The ITAT found the AO's oversight regarding agricultural and pension income as a lack of application of mind and non-enquiry, rendering the assessment erroneous and prejudicial to revenue interests. The ITAT highlighted the importance of considering all income sources for tax computation purposes, even if the assessee declared 'NIL' income. The ITAT supported the CIT's decision to set aside the assessment orders and directed the AO to reconsider agricultural and pension income independently and impartially during reassessment. The ITAT dismissed the appeals, upholding the CIT's orders based on the necessity of a thorough assessment considering all income sources.

In conclusion, the ITAT upheld the CIT's revision of assessment orders u/s 263 for the AY 2003-04 due to the failure to consider agricultural and pension income, emphasizing the importance of a comprehensive assessment to determine accurate tax liabilities.