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TMI Blog2015 (10) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng disclosure about fudging of accounts of the company and fraud committed, AO reopened assessment u/s 147 of the Act by issuing a notice dated 24/03/10 u/s 148 to assessee as he happens to be a family member and close relative of Shri B. Ramalinga Raju. In response to the notice issued u/s 148, assessee filed his return of income declaring NIL income. AO looking at the complexity of the accounts opined that assessee s case required audit u/s 142(2A) of the Act. Though assessee objected for such special audit but assessee s case was referred for special audit and the special audit report was also obtained. Ultimately, AO completed the assessment vide order dated 04/08/2011 passed u/s 143(3) read with section 147 of the Act determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by assessee. The findings of the learned CIT are extracted hereunder for convenience. 3. I have gone through the submission of the assessee. The AO while completing the assessment u/s 143(3) r.w.s. 147 had made additions of ₹ 19,94,589/- towards interest accrued on fixed deposits in various banks as against income returned NIL filed by assessee. For the computation of tax purpose the AO ought to have quantified the agricultural income from agricultural lands of 10 acres. Further the AO should have ascertained and brought to tax the pension income. But the AO failed to do so and hence the order passed u/s 143(3) r.w.s. 147 was certainly erroneous and prejudicial to the interest of revenue. 4. Under the circumstances stated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned assessment order has been challenged by way of an appeal before the CIT(A) It was submitted, assessee has challenged the validity of the reopening of assessment in the appeal filed. In case, the CIT(A) declares initiation of proceeding u/s 147 to be invalid, the very basis on which the proceeding has been initiated u/s 263 will not survive. In this context, learned AR submitted that reopening of assessment made for the earlier years on similar grounds has already been quashed by the first appellate authority. It was submitted, in the aforesaid circumstances, exercise of revisionary power u/s 263 s not correct. 4. Learned DR, on the other hand, submitted that on the basis of various irregularities, AO recommended for special au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31/03/2003 Ans: Having 10 acres of agricultural lands 5. Capital account for the financial year 2002-03 Ans: Having 10 acres of agricultural lands 6. Cash flow statement for the Financial Year 2002-03 Ans: Pension/Agricultural income 11. Have you derived any exempted income during the year such as agricultural income, dividend income etc., details with proof. Ans: Pension/Agricultural income 12. Personal drawings total family expenditure for the year in consideration. Ans: Personal expenditure meets out of pension/agricultural income. From the aforesaid reply of assessee, it is clear that assessee himself has admitted that he has earned income from agriculture as well as pension. However, neither in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudicial 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. Mere pending of appeal before the first appellate authority would not debar or restrict the CIT from exercising powers u/s 263 of the Act. In the aforesaid circumstances, we are of the view that the order passed by the CIT deserves to be upheld. However, we make it clear that AO while redoing the assessment shall examine the issue of agricultural income and pension independently and with an unbiased mind. AO should afford adequate opportunity to assessee to establish his claim and only after considering the submissions of assessee and examining the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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