By TIOL News Service

AHEMDABAD, FEB 23, 2018: THE ISSUE IS - Whether when AO has accepted the returned income barring minor adjustment of claim of expenditure, he is not permitted to re-examine the entire issue once again, looking at materials on record from a different angle. YES IS THE VERDICT.

Facts of the case:

The Assessee is an individual and is engaged as a professional architect. For the A.Y 2010-11, the return filed by Assessee was accepted u/s 143(1). However, the assessee was later on subjected to survey, consequent to which the AO issued notice u/s 148 to reopen the assessment for A.Y 2010-11. In response to the same, the assessee filed his return declaring total income of Rs. 48.85 lakhs. In the meanwhile, a survey was conducted in the business premises of assessee, wherein certain loose papers were found indicating unaccounted professional income to the tune of Rs.5,96,914/. The AO thereupon passed an order of assessment u/s 143(3) r/w/s 147 after making disallowance of Rs.1.79 lakhs of the assessee's claim of expenditure of 30% of the receipts.

High Court held that,

++ it is seen that the gist of the reasons elaborately recorded by the AO is that according to him, there is material on record to suggest that the figures mentioned in the personal diary maintained by the assessee represented the cash transactions reduced by one zero. In other words, reference to the outstanding payment of Rs.4,10,000/- in the diary was made by noting a figure of Rs.41,000/-. This picture, the AO desired to project against the assessee's unaccounted receipt of Rs.5,96,914/- made in the diary. It is seen that during the survey operations, the assessee was confronted with such entry in the diary and he admitted that the said figure of Rs.5,96,914/- represented his unaccounted cash and professional receipts, which he had not offered to tax. While therefore filing a return in response to the notice u/s 148, the assessee included such income in the declared income. The AO accepted such return and, as noted earlier, barring minor adjustment of claim of expenditure, confirmed the assessee's declaration of income. To reopen such assessment, the impugned notice came to be issued which clearly is beyond the period of four years from the end of relevant assessment year. The reasons proceed concededly only on the material available on record. Such relevant material included the notings in the assessee's diary which recorded a figure of Rs.5,96,914/- as outstanding fees to be collected and other entries referring to certain outstanding payments;

++ it is seen that the AO now contends that insofar as other entries are concerned, there is material to believe that the figures in the diary were recorded after dropping one zero. The AO therefore now contends that even the said figures of Rs.5,96,914/- should be considered as the assessee's undisclosed income by adding one zero. However, this court is not called upon to decide the validity of AO's contention. The fact remains that whatever legal conclusions on the basis of the factual analysis the AO desirous to arrive at, is based on the material already on record all throughout during previously reopened assessment proceedings. In absence of any new information or material which do not form part of the original assessment proceedings, it would not be open for the AO to frame fresh assessment, that too, in a case where the notice of reopening has been issued beyond a period of four years. Even otherwise, permitting the AO to reexamine the entire issue once again, looking at materials on record from a different angle would destroy the very concept of finality of an assessment order which can be permitted only on legally recognized grounds.

(See 2018-TIOL-333-HC-AHM-IT)