Sec 147, AO has no power to review; he has the power to re-assess: ITAT

The assessee is an individual and filed his return of income for the assessment year under consideration, declaring total income at Rs. 7,33,530. In the assessment order, the assessing officer noted that contract receipts as per form 26AS were indicated to be Rs. 2,23,50,249 whereas the audited books of account indicated total contract receipts of Rs. 1,59,26,417 only. The total receipts of the assessee were worked out by the assessing officer at Rs.3,08,25,664 in the final order.

Appeal before CIT(A): Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has computed the estimated addition based on a gross profit ratio 12.89% and sustained the additions.

Appeal before ITAT: Aggrieved by the addition sustained by ld CIT(A), the assessee is in further appeal before the tribunal.

The tribunal held that the department must act judiciously and not arbitrarily while making estimated addition and local knowledge and repute, besides the previous returns an assessment of the assessee concerned, and all other matters must be taken into account for fair and proper estimation. The tribunal held that the estimation made by AO. Thus, based on the past three years’ average net profit, the addition, on turnover ought to have been made by the assessing officer at the rate of 4.79%. As the assessee has declared net profit on turnover at Rs. 7,86,505, therefore, the assessing officer was directed to make additions of Rs.7,54,778 (Rs.15,41,283- Rs. 7,86,505) and the appeal was partly allowed.

The tribunal noted that the AO had made the addition of Rs. 2,00,000 in respect of 12 parties from whom the assessee borrowed a small amount for business purposes. AO failed to bring any evidence on record to show that said amount borrowed from friends and relatives was bogus and for non-business purposes. Hence, based on this factual position the addition of Rs. 2,00,000 was deleted by the tribunal.

With regards to Revenue`s main grievance that ld. CIT(A) has erred in quashing the reopening of the assessment initiated u/s 149 the tribunal held that no new tangible material was found to reopen the assessment. The tribunal relied on the decision of the Hon’ble Supreme court in the case of Kelvinator India Ltd., and held that the reopening is not sustainable. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion.

Thus, it was held that the re-assessment u/s 144 r.w.s. 147 was rightly quashed by the ld CIT(A). The Tribunal declined to interfere with the order of Id. CIT(A) in deleting the above additions. The order was upheld and the grounds of appeal of the Revenue were dismissed.