2017 (4) TMI 253 - AT - Income Tax

Validity of the assessment - notice issued under section 143(2) of the Act was beyond the prescribed period of limitation from the original return of income - Held that - The notice under section 143(2) of the Act has been issued on 01/08/2012 and duly served upon the assessee. As per the provisions of the Act, notice under section 143(2) was required to be served within a period of six months from the end of the financial year in which return is furnished. Thus, according to the provisions of section 143 , notice in the case of the assessee could have been served till 30/09/2012 . In the case of the assessee notice under section 143 (2) was issued on 01/08/2012 and was duly served upon the assessee. In view of these facts, the contention of the Ld. counsel that assessment was barred by limitation, is not acceptable due to the reason that the revised return of income was a valid return and notice under section 143 (2) of the Act was served upon the assessee within the limitation period available as per provisions of the Act. In our opinion merely mentioning by the Additional CIT in the direction issued under section 144A of the Act that the revised return cannot be accepted, cannot change otherwise validity of the assessment. - Decided against assessee Assessing of income from plying of trucks - amount as reported in the original return of income as against the income declared by the assessee in the revised return - interpretation of clause (ii) of the section 44AE(2) - Held that - The contention of the Revenue is not correct as during the relevant period, the assessee was having option of choosing a prescribed fixed sum towards profit from plying of goods carriages for declaration or higher amount declared in the return of income. The assessee has chosen the option of a prescribed fixed sum per month in the revised return of income, which has already been held by us as a valid return. The provision of assessing higher income out of two options has been made effective only from assessment year 2011-12 and not for the year under consideration. CIT-A is not justified in directing the AO to assess income from plying of goods carriages as was declared in the original return of income. Accordingly, we direct the Assessing Officer to compute profit from goods carriages at the rate of fixed sum prescribed for relevant period under clause (i) of section 44AE(2) of the Act. - Decided in favour of assessee

Issues Involved:
1. Validity of the revised return of income.
2. Issuance and timeliness of the notice under section 143(2).
3. Interpretation and application of section 44AE of the Income Tax Act.
4. Alleged errors in law and facts by the Commissioner of Income Tax (Appeals).
5. Alleged violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the Revised Return of Income:
The assessee filed an original return on 28/09/2010 declaring an income of ?44,90,180/-. Subsequently, a revised return was filed on 28/09/2011 declaring a reduced income of ?12,84,334/- under the presumptive taxation scheme of section 44AE. The Tribunal held that the revised return was filed within the permissible period under section 139(5) and was not defective under section 139(9). Therefore, the revised return was valid. The Tribunal cited the case of R. Kasi Visvanathan & Bros. Versus Assistant Commissioner of Income Tax to support this view, emphasizing that the revenue authorities should have followed the procedure under section 139(9) if they intended to reject the revised return.

2. Issuance and Timeliness of the Notice under Section 143(2):
The notice under section 143(2) was issued on 01/08/2012 and duly served upon the assessee. The Tribunal noted that the notice was served within the six-month period from the end of the financial year in which the revised return was filed, thus complying with the statutory requirement. Consequently, the Tribunal dismissed the contention that the assessment was barred by limitation.

3. Interpretation and Application of Section 44AE:
The dispute revolved around the interpretation of clause (ii) of section 44AE(2) during the relevant period. The assessee argued that they had the option to declare income based on a fixed sum per month per goods carriage, which was ?3,500 per month. The Tribunal agreed with the assessee, noting that the relevant period allowed the assessee to choose between a fixed sum or a higher amount declared in the return. The Tribunal highlighted that the provision requiring the declaration of the higher of the two amounts only came into effect from the assessment year 2011-12. Therefore, for the year under consideration, the assessee's choice to declare income based on the fixed sum was valid.

4. Alleged Errors in Law and Facts by the Commissioner of Income Tax (Appeals):
The Tribunal found that the CIT(A) erred in upholding the assessment based on the original return rather than the revised return. The CIT(A) had relied on the direction of the Additional CIT under section 144A, which stated that the revised return could not be accepted. However, the Tribunal clarified that this did not invalidate the revised return. The Tribunal directed the AO to compute the profit from goods carriages based on the fixed sum prescribed under section 44AE(2) for the relevant period.

5. Alleged Violation of Principles of Natural Justice:
The assessee claimed that the CIT(A) had not provided a fair opportunity to be heard. However, the Tribunal did not find substantial evidence to support this claim. The focus was more on the procedural and substantive compliance with the Income Tax Act rather than on procedural fairness.

Conclusion:
The Tribunal partly allowed the appeal, validating the revised return and directing the AO to compute the income based on the fixed sum per month per goods carriage as per section 44AE(2) for the relevant period. The Tribunal dismissed the ground related to the notice under section 143(2) being barred by limitation. The decision emphasized the correct interpretation of section 44AE and the procedural requirements for rejecting a revised return.

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