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2015 (7) TMI 161 - ITAT CHENNAI

2015 (7) TMI 161 - ITAT CHENNAI - TMI - Validity of reopening of assessment - The assessee filed the return of income and the same was processed under Section 143(1) of the Act - Held that:- While processing the return under Section 143(1) of the Act, AO is empowered to correct arithmetic error in the return or adjustment of an incorrect claim which is apparent on the information given in the return. The Assessing Officer is not expected to decide in respect of the issue which requires a discuss .....

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Parliament with effect from 1.4.1989. Since the Assessing Officer cannot make any adjustment with regard to an issue which is debatable in nature, this Tribunal is of the considered opinion that the Assessing Officer cannot express any opinion in a proceeding under Section 143(1) of the Act. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment by issuing a notice under Section 148 of the Act. - Decided against assessee.

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Apex Court in Chennai Properties & Investments Ltd. (2015 (5) TMI 46 - SUPREME COURT). - Decided in favour of assessee for statistical purposes. - ITA No.2145/Mds/2011 - Dated:- 26-6-2015 - Shri N.R.S. Ganesan and Shri A. Mohan Alankamony, JJ. For the Petitioner : Shri T. Vasudevan, Advocate For the Respondent : Shri N. Madhavan, JCIT ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-XII, Chennai, date .....

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ng notice under Section 148 of the Act on 30.03.2007. According to the Ld. counsel, the Assessing Officer reopened the assessment due to change of opinion. The Ld.counsel placed his reliance on the judgment of the Delhi High Court in CIT v. Orient Craft Ltd. (2013) 354 ITR 536. According to the Ld. counsel, the assessee is a partnership firm dealing in real estate business. The assessee is managing properties apart from buying and selling of lands and leasing/letting out of properties. The asses .....

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5) TMI 46, the Ld.counsel submitted that the object of the assessee-company before the Apex Court is to acquire properties in the city of Madras and let out those properties. The assessee received rental income therefrom and showed as business income in the return filed. The Assessing Officer, however, treated the same as income from house properties. The Commissioner allowed the claim of the assessee holding it as its business income. However, Tribunal declined to interfere with the order of th .....

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ness or exploitation of his property as owner. A commercial asset is only an asset used in a business and nothing else. The Apex Court further found that the rental income received by the assessee has to be assessed as income from business. Therefore, according to the Ld. counsel, even on merit, the assessee has a case. On a query from the Bench - what is the business of the assessee, whether the property was let out in the course of its business or it was let out as an owner? The Ld.counsel sub .....

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ing to the Ld. D.R., the Assessing Officer has rightly reopened the assessment. 4. Referring to the merit of the appeal, the Ld. D.R. submitted that the assessee let out the property as an owner. It is not a business of the assessee to let out the properties. Therefore, according to the Ld. D.R., the judgment of Apex Court would not be applicable to the facts of the case. 5. We have considered the rival submissions on either side and perused the relevant material on record. The first issue arise .....

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t of Delhi High Court in the case of CIT v. Orient Craft Ltd. (2013) 354 ITR 536. The Delhi High Court, by placing reliance on the judgment of the Apex Court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561, found that the Assessing Officer cannot change his opinion. The Delhi High Court further found that the satisfaction of the Assessing Officer with regard to escapement of income amounts to change of opinion even though the return was scrutinized under Section 143(1) of the Act. We have .....

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in the return ; (b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a) ; (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebat .....

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o the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him : Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made. Explanation - For the purposes of this sub-section,- (a) 'an incorrect claim apparent from any information in the return' shall mean a claim, on the basis of an entry, .....

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timation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a). While processing the return under Section 143(1) of the Act, the Assessing Officer is empowered to correct arithmetic error in the return or adjustment of an incorrect claim which is apparent on the information given in the return. The Assessing Officer is not expected to decide in respect of the issue which requires a discussion and examination. .....

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ect from 1.4.1989. Since the Assessing Officer cannot make any adjustment with regard to an issue which is debatable in nature, this Tribunal is of the considered opinion that the Assessing Officer cannot express any opinion in a proceeding under Section 143(1) of the Act. Therefore, the judgment of the Apex Court in Kelvinator of India Ltd. (supra) and the judgment of the Delhi High Court in Orient Kraft Ltd. (supra) are not applicable to the facts of the case. In fact, the Apex Court in ACIT v .....

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taken away. Between the period from April 1, 1989, and March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement .....

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d. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The ver .....

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. 2) Act of 1991 an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between June 1, 1994 and May 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that the expressions "intimation" and "assessment order" have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is u .....

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(1)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the Departmental work to scrutinize each and every return and to concentrate on selective s .....

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t is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them ? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissib .....

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