2014 (6) TMI 568 - AT - Income Tax

Validity of reassessment u/s 147/148 of the Act Failure to issue notice u/s 143(2)(ii) within period of limitation - Held that - The assessee had filed the return for AY 1998-99 in December, 1998, for AY 1999-2000 in March, 2000 and for AY 2001-02 in January, 2001 as it has already been decided in the earlier assessment year, the agricultural income shown by the assessee has been accepted by the Revenue in some years in 143(1) and in some years in 143(3) - the income disclosed by the assessee is Rs.2,50,000/- in AY 1998-99, Rs.3,00,000/- in AY 1999-2000 and Rs.4,50,000/- in AY 2000- 01 - the income disclosed is higher than the income accepted in the preceding two years - if the AO had any doubt about the correctness of the agricultural income disclosed and he wanted to verify the same, he ought to have issued notice u/s 143(2)(ii) within the time limit permissible under the proviso to above sub-section - Having failed to issue the notice u/s 143(2)(ii) with the period of limitation, Section 148 cannot be invoked to get the extended time limit for verification of the correctness of the income returned thus, the issue of notice u/s 148 was not valid Decided in favour of Assessee. Estimation of the agricultural income Held that - The assessee has not maintained any regular books of account with regard to agricultural income - after several years, the AO was not justified in estimating the agricultural at Rs.1,00,000/- in AY 2001-02 and Rs.59,553/- in AY 2003-04. - the assessee has enclosed the copy of the letter written by the assessee to Tehsildar for issuing certificate of agricultural income - it would meet the ends of justice if the agricultural income of the assessee is estimated at Rs.3,50,000/- in both the years Decided partly in favour of Assessee.

Summary

Issues:
- Validity of reassessment made by the AO under section 147/148
- Estimation of agricultural income by the Assessing Officer
- Grounds challenging the addition made in the reassessment order

Analysis:

Issue 1: Validity of reassessment under section 147/148
The appeal was against the order of the CIT(A) for the assessment years 1998-99 to 2000-01. The main contention was the validity of the reassessment made by the AO under section 147/148. The reasons recorded for reopening the assessment were related to the agricultural income disclosed by the assessee. The AO issued a notice under section 148 much after the period of limitation for issuing a notice under section 143(2). The Tribunal found that the AO used section 148 to verify the correctness of the income returned, which should have been done under section 143(2)(ii) within the time limit provided. As the notice under section 148 was not valid due to exceeding the time limit, the Tribunal quashed the reassessment order, restoring the original assessment order.

Issue 2: Estimation of agricultural income
In the appeals for the assessment years 2001-02 and 2003-04, the only ground raised was the estimation of agricultural income by the Assessing Officer at a lower figure than disclosed by the assessee. The Tribunal noted that the assessee had not maintained regular books of account for agricultural income and had offered it on an estimated basis, which had been accepted in preceding and subsequent years. The AO's estimation of agricultural income at a significantly lower amount in these years was deemed unjustified. The Tribunal considered the evidence provided, including a certificate from the Tehsildar certifying the higher agricultural income, and decided to estimate the income at a higher figure, resulting in adjustments to the additions made by the AO.

Issue 3: Grounds challenging the addition in reassessment
The assessee had raised various grounds challenging the additions made in the reassessment order, but since the Tribunal had already quashed the reassessment, these grounds were deemed moot and not required for adjudication.

In conclusion, the Tribunal allowed the appeals for the assessment years 1998-99 to 2000-01 and partly allowed the appeals for the assessment years 2001-02 and 2003-04 based on the above analysis and considerations.