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Income Tax Appellate Tribunal, AHMEDABAD BENCH “D” , AHMEDABAD
Per Pramod Kumar VP:
By way of this appeal, the assessee appellant has challenged correctness of the order dated 24th December 2014 passed by the learned CIT(A) in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2008-09.
Grievances raised by the appellant are as follows:
In law and in facts and circumstances of the appellant's case, the Learned CIT(A) has erred in upholding the validity of reassessment notice as well as reassessment order when such notice itself is bad in law and deserves to be quashed. 1.1 In law and in facts and circumstances of the appellant's case, the Learned CIT(A) has erred in upholding the validity of reassessment notice as well as reassessment order when Ld. AO has no jurisdiction over appellant in view of transfer of records to ITO, Ward 5(2), Chandigarh from AY 2009-10. 1.2 In law and in facts and circumstances of the appellant's case, the Learned CIT(A) ought to have appreciated the records of Department obtained from incometaxfiling.gov.in on perusal of which it is clearly seen that the jurisdiction of the appellant lies with ITO, Ward 5(2), Chandigarh;
ITA No. 311/Ahd/2015 Channansingh S Gill Vs. ITO Assessment year: 2008-09 Page 2 of 4 2.1 In law and in facts and circumstances of the appellant's case, the Ld. A.O. has erred in holding that appellant cannot challenge his jurisdiction as he had not objected it within 30 days of issuance of notice u/s 143(2) of the Act as stated in section 124(3)(a) of the Act.
2.2 In law and in facts and circumstances of the appellant's case, the Ld. A.O. has entirely misplaced the reliance on provisions of section 124(3)(a) of the Act as the same is not applicable to the present case as same is reopened by issuance of notice u/s 148 of the Act.
2.3 In law and in facts and circumstances of the appellant's case, the Ld. A.O. has entirely misplaced the reliance on provisions of section 124(3)(b) of the Act as said clause is applicable only if return u/s 139 of the relevant Assessment year is not filed and thereafter notice u/s 148 of the Act is issued. The Learned Assessing Officer ought to have appreciated that appellant has filed the return u/s 139(1) for the year under consideration hence he has the right to challenge the jurisdiction of notice issued u/s 148 of the Act irrespective of the date on which return has been filed in response to notice u/s 148 of the Act.
3.1 In law and on facts and circumstances of the appellant's case, the Ld. CIT(A) has failed to appreciate the fact that reassessment proceedings initiated by Ld. A.O. in the present case is merely on change of opinion as there is no new cogent material available on record which would otherwise suggest that income chargeable to tax has escaped assessment.
3.2 In law and in facts and circumstances of the appellant's case, the Ld. A.O. has verified the claim of deduction u/s 54F of the Act during the course of original assessment proceedings and has also made part disallowance for the same hence re-assessment notice issued in the present case is mere change of opinion on part of subsequent Assessing Officer and requires to be quashed.
4(a) In law and on the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has grossly erred by sustaining the addition made by learned Assessing Officer u/s 54F(2) of the Act for Rs.44,49,206 when no such addition is called for. It may be deleted.
4(b) without prejudice to above, the said long term capital gain is not chargeable to tax during the year under consideration.”
To adjudicate on this appeal, only a few material facts need to be taken note of. It is a case of reopened assessment. On 14th February, 2013, the Assessing Officer recorded the following reasons recorded for reopening the assessment:
“The assessee had filed its return of income declaring income at Rs.11,22,980/- on 18.07.2008
ITA No. 311/Ahd/2015 Channansingh S Gill Vs. ITO Assessment year: 2008-09 Page 3 of 4 2. The assessee had purchased a new residential house (at sector 70) on 04.06.2008 on which exemption U/s 54F was claimed and thereafter, he further purchased a new residential house an 09.06.2008 at Mohali (construction on Plot No. 3656, Sector-69, SAS Nagar) within a period of one year. As the assessee had purchased a new residential house ( i.e. in sector 69) within a year i.e. from 04.07.2008 to 03.07.2008, the assessee was not eligible for exemption U/s 54F to the tune of Rs.44,49,206/- and the same is required to be withdrawn. Therefore, I have reason to believe that the income of the assessee hiss escaped assessment.”
Yet, when the Assessing Officer actually dealt with the issue he agreed that the income in question, due to disallowance under section 54F, should be brought to tax in the assessment year 2009-10, even though he proceed to bring the said income to tax in the present assessment year on protective basis as well. While doing so, the Assessing Officer observed as follows:
“5.3. However, as per section 54F(2) of the I.T. Act, the deduction claimed u/s.54F should be taxed in the year in which second house, other than the new asset, is purchased. The section 54F(2) is reproduced as under:
"(2) Where the assessee purchases, within the period of [two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head "Income from house property", other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head "Capital gains" relating to long- term capital assets of the previous year in which such residential house is purchased or constructed."
In this case, the assessee has purchased the second house on 09/06/2008, Therefore, this transaction has been made in the F.Y. 2008-09 relevant to the A.Y. 2009-10. Hence, as per section 54F(2), the deduction from capital gain u/s.54F amounting to Rs.44,49,206/- should be taxed in the A.Y. 2009-10 as deemed income under the head "capital gain" for the A.Y. 2009-10.
5.4. Without prejudice to the above, in this case, the violation of section 54F(1) was made by the assessee before the filing of original return of income. The assessee has filed the original return on 18/07/2008 in this Ward and violation of section 54F was occurred on 09/06/2008 which is before date of the filing of original return of income. Therefore, in the interest of revenue, deduction claimed u/s.54F of Rs.44,49,206/- allowed in the assessment order u/s.143(3) dated 30/09/2010, is withdrawn and added to the total income of the assessee on "protective basis".
ITA No. 311/Ahd/2015 Channansingh S Gill Vs. ITO Assessment year: 2008-09 Page 4 of 4 5. The challenge to the reassessment proceedings was rejected by the CIT(A). The assessee, not satisfied inter alia with that decision, is in further appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
As evident from the observations made by the Assessing Officer in the impugned assessment order, which have been reproduced above, the Assessing Officer was of the view that the income which had escaped the assessment, as a result of disallowance under section 54F, was in fact in the assessment year 2009-10, and not in the assessment year 2008-09. The impugned addition was admittedly on protective basis. These findings of the Assessing Officer clearly indicate that the Assessing Officer was of the opinion that no income had escaped the assessment for the present assessment year. His action was purely on precautionary basis ex abundante cautela. The scheme of Section 147 does not permit reopening of assessment in such a situation to, as learned Assessing Officer puts it, protect the interests of the revenue. In any event, the addition on substantive basis has been made in the assessment year 2009-10 as well, and that matter is also separately in appeal as now. In the light of these discussions, as also bearing in mind entirety of case, we set aside the reassessment proceedings as unsustainable in law and on the facts of this case.
As the reassessment proceedings are set aside, all other issues raised in the appeal are rendered academic and infructuous. No adjudication is called for on these issues.
In the result, the appeal is allowed in the terms indicated above. Pronounced in the open court today on the 4th day of March, 2019.
Sd/- Sd/-
Justice P P Bhatt Pramod Kumar (President) (Vice President) Ahmedabad, dated 4th day of March, 2019
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File By order etc True Copy Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad