HITESH JITENDRA PARIKH,MUMBAI vs. INCOME TAX OFFICER-5(1)(1), MUMBAI

Briefly stated facts necessary for adjudication of the issues at hand are: during the year under consideration i.e. A.Y. 2010-11 Assessing Officer (AO) noticed from the record that the assessee has wrongly shown Long Term Capital Loss (LTCL) of Rs.3,16,705/- on the sale of flat in “Patel Heights” purchased from M/s. Trishul Corporation for Rs.25,01,000/- vide agreement dated 29.10.2009 and sold to Shri Prakash Dhokane for sale consideration of Rs.29,30,175/- on 30.10.2009. Consequently, the AO reopened assessment by initiating the provisions contained under section 147/148 of the Income Tax Act,1961 (for short ‘the Act’) after recording the reasons. After deciding the objections raised by the assessee to the reopening the AO proceeded with the reassessment proceedings. 3. After declining the contentions raised by the assessee the AO treated the capital gain on transfer of flat by the assessee in “Patel Heights” as short term capital gain as under:

Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the addition by dismissing the appeal. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeal.

I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.

At the very outset the Ld. A.R. for the assessee contended that since the very initiation of reassessment proceedings under section 147/148 of the Act is beyond the period of four years without there being any tangible material and without there being any conclusion that there is an escapement of income from assessment reopening is bad in law, he would prefer to argue on the legal issue of reopening of the assessment first.

Undisputedly, return of income for the year under consideration was initially filed on 31.07.2010 which was processed under section 143(1) of the Act on 17.04.2011. It is also not in dispute that the assessee filed revised return of income on 09.02.2012, which was again processed under section 143(1) vide

In the backdrop of the aforesaid undisputed facts the Ld. A.R. for the assessee contended that there is no failure on the part of the assessee to disclose fully and truly all material facts and as such notice for reopening of assessment issued beyond a period of four years is bad in law.

I have perused the computation of taxable income filed by the assessee along with returns of income wherein he has duly declared long term capital loss of Rs.3,16,705/-. The Ld. A.R. for the assessee also brought on record the fact that the present issue as to the claim of Long Term Capital Gain (LTCG) was subject matter of A.Y. 2009-10 and brought on record copy of assessment order dated 26.12.2011 decided under section 143(3) of the Act and drew our attention towards para 6.2 which is available on record. In the assessment order for A.Y. 2009-10 the AO duly called the computation of income filed by the assessee for A.Y. 2010-11. Relevant para is as under: “6.2. The assessee has submitted that the agreement for the purchase of the property, Trishul Corporation is entered into on 29 October, 2009 between the builder and the assessee and registered on the same date for a total consideration of Rs.25,01,000/-. Subsequently, it is also seen that the flat, Trishul Corporation(Ghansoli flat ), is sold by the assessee to Dr.Praksh D.Dhokane for a lumpsum price of Rs.29,30,175/- vide agreement dated 30.10.2009 and registered on 3/11/2009. The assessee

When we examine para 6.2 of the assessment order passed in case of assessee for A.Y. 2009-10 it is a fact on record that the issue in controversy as to LTCG qua the property in question was there before the AO in A.Y. 2009-10 who has accepted the contention of the assessee.

It is also undisputed fact on record that as per order dated 18.06.2014 passed in ITA No.7218/M/2012 for A.Y. 2009-10, in assessee’s own case appeal of the assessee qua the issue in question was partly allowed which shows that the same issue was there before the AO, the Ld. CIT(A) and then before the Tribunal (copy of order is available from page 49 to 52 of the paper book).

In the backdrop of the aforesaid facts when we examine the impugned assessment order qua the year under consideration it is categorically recorded in para 1 that originally return filed by the assessee for the year under consideration declaring Rs.Nil income after claiming deduction under chapater VIA at Rs.91,833/- which was processed under section 143(1) of the Act and thereafter revised return of income was filed on 09.02.2012 declaring total income at Rs.4,42,780/- which was also processed under section 143(1) of the Act on 28.03.2012 after accepting the revised return.

The Ld. A.R. for the assessee contended that in the computation of taxable income filed along with both the returns the assessee has declared inter-alia LTCL of Rs.3,16,705/- on transfer of his right to a flat viz. flat No.A-901 “Patel Heights” situated at Ghansoli, Navi Mumbai which was being constructed by M/s. Trishul Corporation who has issued allotment letter dated 18.05.2006. Thereafter vide agreement dated 30.10.2009 the assessee had transferred this right to the said flat to one Dr. Praksh D. Dhokane and Smt. Jyothi Praksh D. Dhokane. It is also contended that the right to purchase property in accordance with section 2(29)(A) of the Act is Long Term Capital Assets and therefore the profit or loss arising on transfer thereof is assessable as LTCG/LTCL as the right was held for a period exceeding three years.

During the assessment year under consideration all these facts were duly explained to the Ld. CIT(A) who has declined to accept the contention of the assessee that “when the AO had full knowledge about the issue in controversy on 26.12.2011 when he has passed assessment order for AY. 2009-10 and all facts were before him and now after a period of four years the AO was not empowered to reopen the case as per proviso 1 to section 147 as all the material facts were brought on record by the assessee and were well within the knowledge of AO. Even by filing original return by the assessee on 31.07.2010, processed under section 143(1) on 17.04.2011 and then filing revised return of income on 09.02.2012 again processed under section 143(1) of the Act on 28.03.2012 the assessee has filed computation of income duly bringing on record facts as to the Long Term/Short Term Capital Gain qua the property

Hon’ble Bombay High Court in case of ICICI Bank Ltd. vs. K.J. Rao, Dy. CIT (268 ITR 128) (Bom) held that “notice for reopening of the assessment cannot be issued after a period of 4 years unless the escapement of income is on account of failure on the part of the assessee to disclose fully and truly all material facts. It has been further held that the Explanation to section 147 of the IT Act has to be r/w section 147 of the IT Act in its entirety. In the light of the aforesaid decisions, in the present case, there being no failure on the part of the assessee to disclose fully and truly all material facts, the impugned notices issued beyond the period of four years from the end of the relevant assessment years, are liable to be held to have been issued in contravention of the provision of the IT Act.”

Hon’ble Supreme Court in case of CIT vs. Kelvinator of India (320 ITR 261) held that when all the material facts have been brought on record by the assessee the AO is deemed to have

Hon’ble Bombay High Court in case of Idea Cellular (301 ITR 407) held that “once all the material were before the AO and he chooses not to deal with the several contentions raised by the Petitioner in his final assessment order, it cannot be said that he had not applied his mind to the material placed before him."

In view of what has been discussed above and decisions rendered by Hon’ble Bombay High Court discussed in the preceding paras, I am of the considered view that when the assessee has brought on record all the material facts fully and truly necessary for assessment qua the issue in controversy and there is no failure on his part and moreover in the earlier assessment year this issue was also there before the same AO, the impugned initiation of proceedings under section 147/148 of the Act is not sustainable in the eyes of law, so very initiation of reopening and subsequent assessment is bad in law, hence ordered to be quashed without going into the merits of the case as issue on merits has become academic.

Resultantly, the appeal filed by the assessee is allowed.