Assessing Officer has no Power to Review but has Power to Reassess: Madras High Court [Read Judgment]

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The Madras High Court, while dismissing the appeal filed by the revenue held that the Assessing Officer has no power to review and he has the power to reassess.

The assessee, K.R.Jayaram is an individual engaged in Real-Estate business, filed his return of income for the assessment year 2009-10, declaring the total income of Rs.1,31,99,850/-.

The Assessing Officer completed the assessment under Section 143(3) of the Act by making an addition of Rs.23,29,000/- being disallowance of improvement cost of land claimed by the assessee and the assessee had shown the sale of the land under the head of “short term capital gain”.

Subsequently, the assessment was reopened and the Assessing Officer proposed that the sale consideration for capital gains computation should have been worked out on the said amount of Rs.367.50 lakhs.

The Assessing Officer held that the assessee had filed the return, which was a revised return, that too, only after the notice under Section 148 was issued, the same cannot be accepted.

Further, the Assessing Officer held that in the original return, the assessee has shown the amount as “capital gains” and in the return filed in response to the Section 148 notice, the said income was shown by the assessee as “business income”, which is not acceptable.

The assessee preferred appeal before the CIT (A). The appeal was dismissed by order. Aggrieved by the same, the assessee preferred appeal to the Tribunal, which was allowed by order.

The Court complied with all the 3 inter-linked questions and answered the issue of whether the reopening by the AO was justified.

The division bench of Justice T.S. Sivagnanam and Justice V.BhavaniSubbaroyan in the light of the Supreme Court’s decision in the case of Calcutta Discount Co., Ltd., vs. ITO wherein it was held that the duty of the assessee is to make full and true disclosure of all primary facts and once it is done, it is for the Assessing Authority to decide what inference of fact or law could be drawn therefrom.

It was further reiterated that The law does not require the assessee to state the conclusion that could reasonably be drawn from the primary facts and if there were, in fact, some reasonable grounds for thinking that there had been any non-disclosure as regards any primary facts, which could have a material bearing on the question of “under assessment”, that would be sufficient to give jurisdiction to the ITO to issue notices under Section 34 (1922 Act) and whether these grounds are adequate or not for arriving at a conclusion that there was a non-disclosure of material facts could not be opened for the Court’s investigation.

Therefore, the court held that the Tribunal was right in allowing the assessee’s appeal.

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