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Before: Shri V. Durga Rao & Shri Manoj Kumar Aggarwal
आयकर अपीलीय अिधकरण, ‘बी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी वी. दुगा� राव, �ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� के सम� । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. No.124/Chny/2018 िनधा�रण वष�/Assessment Year: 2009-10 & C.O. No. 58/Chny/2018 [in I.T.A. No.124/Chny/2018] The Income Tax Officer, Vs. Shri Ramachandra Raman, Non Corporate Ward 15(3), 21B, Deccan Parvathy, 2nd Floor, Room No. 206, Wanaparthy Kannappa Nagar Extension, Block, 121, M.G. Road, Thiruvanmiyur, Chennai 41. Chennai – 600 034. [PAN: AEHPR6467D] (अपीलाथ� /Appellant) (��थ�/Respondent/Cross Objector) Department by : Shri Sajit Kumar, JCIT Assessee by : Shri T. Banusekar, C.A. सुनवाई की तारीख/ Date of hearing : 17.05.2022 घोषणा की तारीख /Date of Pronouncement : 08.06.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: The appeal filed by the Revenue and the Cross Objection filed by the assessee are directed against the order of the ld. Commissioner of Income Tax (Appeals) 15, Chennai, dated 28.09.2017 relevant to the assessment year 2009-10.
The Cross Objection filed by the assessee is in respect of reopening of assessment under section 147 of the Income Tax Act,
2 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 1961 [“Act” in short]. Since the reopening of assessment goes to the root of the matter, we shall first adjudicate the issue of reopening of assessment.
Facts, are in brief that the assessee filed his return of income for the assessment year 2009-10 on 29.09.2009 declaring total income of ₹.1,31,78,732/-. The return filed by the assessee was processed under section 143(1) of the Act and thereafter, the assessment was completed under section 143(3) of the Act dated 08.12.2011. In the original assessment order, the Assessing Officer has considered the claim of deduction under section 54EC and section 54F of the Act and the assessment was concluded. Thereafter, the Assessing Officer issued a notice under section 148 of the Act dated 30.03.2016 for reopening of assessment on the ground that the assessee is not entitled for deduction under section 54EC and section 54F of the Act, because, the entire consideration are of short term capital gains. The reasons for reopening of the assessment notified to the assessee vide letter dated 14.09.2016 are extracted as under: “The reasons for reopening of the assessment for AY 2009-10 is given as under: In the order U/s. 143(3) dated 8/12/2011 for the A.Y. 2009-10, the total LTCG computed was Rs.1,27,64,254/- (Rs.11956296 + 807958) and it was subject to special rate of taxation i.e. at the rate of 20% only. As per section
3 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 50, income received as a result of depreciable asset (intangible) shall be deemed to be Short Term Capital Gain irrespective of period of holding. Thus, full consideration of Rs.22323186/- is to be treated as Short Terms Capital Gain and to be taxed accordingly. The deduction u/s 54EC and 54F is not applicable in this case as it is not a Long Term Capital Gain. To bring the same to taxation the case is reopened. Since, the scrutiny assessment is getting time barred by 31.12.2016, you are required to furnish the relevant details on or before 22.09.2016 and the same day your case is posted for hearing at 11.30 am.” 4. The very same reopening of assessment has been challenged before the ld. CIT(A) by the assessee. The ld. CIT(A) confirmed the reopening of assessment under section 147 of the Act and dismissed the ground raised by the assessee. However, on merits, the ld. CIT(A) allowed the grounds.
The assessee preferred Cross Objection by objecting confirmation of reopening of assessment under section 147 of the Act, whereas, the Revenue preferred appeal against allowance of exemption under section 54EC and section 54F of the Act.
So far as Cross Objection filed by the assessee is concerned, besides challenging ld. CIT(A)’s confirmation of the reopening of assessment, by filing additional grounds of CO, the assessee has also contended that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for completing the
4 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 original assessment and without prejudice to the claim that the income is long term capital gain, exemption under sections 54EC and 54F of the Act can be allowed even if the gain is to be held as short term capital gain. By referring to the grounds raised in the cross objection, the ld. Counsel for the assessee has submitted that the Assessing Officer did not record any reason that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and relied on the judgements of Hon’ble Jurisdictional High Court in the case of CIT v. Schwing Stetter India P. Ltd. 378 ITR 380 (Mad) and in the case of CIT v. Arvind Remedies Ltd. 378 ITR 547 (Mad). It was further submission that having completed the original assessment under section 143(3) of the Act by allowing exemption under sections 54EC and 54F of the Act, the reopening of assessment to disallow exemptions under section 54EC & 54F of the Act tantamount to review of the original assessment order, which is mere change of opinion and not permissible in view of the Judgement of the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC), the Assessing Officer cannot reopen the assessment order passed under section 143(3) of the Act. Thus, the ld. Counsel for the assessee prayed for quashing the reassessment order.
5 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18
On the other hand, the ld. DR strongly supported the order passed by the ld. CIT(A) with regard to reopening of assessment under section 147 of the Act.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including case law relied upon by the assessee. In this case, the original assessment under section 143(3) of the Act was completed on 08.12.2011, wherein, the Assessing Officer has verified the claim of deduction under section 54EC and 54F of the Act at para 7 and 8 of the assessment and accepted the claim of deduction under section 54EC of the Act as well as restricted the claim of deduction under section 54F of the Act to the extent of ₹.45,58,932/-. The relevant
portion of the order is reproduced as under: “7) Verification of claim of deduction under section 54EC and 54F: On 20/09/2011 afternoon, the assessee also made other submissions vide letter dated 20/09/2011. The submissions were duly verified. a) Deduction under section 54C: During the hearing on 20/09/2011, the assessee was asked why the deduction under section 54EC should not be disallowed as the agreement date of sale of IPR was 16th October 2008 and the investment in RECL bonds was 30/04/2009 and thus the investment falls after 6 months from the sale of original asset. The assessee replied that although the agreement is dated 16th October 2008, the agreement clearly states that the closing date (date on which payment is made for sale of IPR) should be considered as the date of transfer. The explanation was acceptable. Thus, the date of transfer of the capital asset should be considered as the date on which
6 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 sale proceeds towards IPR sale was received by the assessee. As evident from the bank statement of Axis bank for the financial year 2008-09, 03/11/2008 is the closing date. Hence, 03/11/2008 is the date of transfer of the capital asset. The explanation was found to be satisfactory and thus the deduction claimed under section 54EC is accepted. 8) Deduction under section 54F: During the hearing on 20/09/2011, the assessee stated that the house property at Shanti Avenue did not belong to him. The assessee was asked to submit proof in support of his claim that the house property at Shanti Avenue did not belong to him. This was asked because there was reason, to suspect that the assessee was stating this only to retain his claim of the deduction under section 54F as the deduction is not allowable in case where the assessee has more than one house property. The assessee asked for time till 26/09/2011 to prove the same. The assessee appeared on 26/09/2011 and produced a copy of the property assessment of the house property at Shanti Avenue. It shows that the owner of the house property is Mr. N. Sivakumar. Thus, the assessee's claim that the house property is not his own property was partially proved, However, there was still suspicion whether the house property was under the assessee's possession during financial year 2008-09 and that he had subsequently sold it. Thus, the Inspector of Income Tax, attached to this office, Mr. Anuj Kumar was sent to enquire about the house properties stated in the return. The inspector submitted a report on 10/11/2011 in which he states that the house property at Shanti Avenue did not belong to the assessee and the house property at Shanti Avenue is the ancestral property of Mr. N. Sivakumar. The deduction claimed under section 54F was duly verified and checked whether all conditions as mentioned in the Act were complied with by the assessee. The claim of deduction under section S4F is restricted to Rs.45,58,932 because of the reason mentioned in Para 6 of this order. 8.1 However, in the reasons for reopening of the assessment notified vide letter dated 14.09.2016, the Assessing Officer has stated that the above deductions claimed under section 54EC and 54F of the Act are not applicable as it is not long term capital gain and to be treated as short term capital gain and to be taxed accordingly and thereby, the Assessing Officer reopened the assessment, which is mere change of
7 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 opinion, which is not permissible as per the law laid down by the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra), wherein, it was held that an assessment cannot be reopened on a mere change of opinion; reason to believe that the income chargeable to tax has escaped assessment is one of the conditions precedent for invoking the jurisdiction of the Assessing Officer to reopen the assessment under section 147 of the Act. The Hon’ble Supreme Court further observed that the Assessing Officer had power to re-assess but no power to review. If the concept of “change of opinion” is removed, review would take place in the garb of reopening of assessment. Applying the ratio of the above judgement of the Hon’ble Supreme Court to the instant case, since no new material was brought on record after completion of assessment under section 143(3) of the Act, the reopening of assessment was not on account of fresh material or change of law, the reopening of assessment is liable to be quashed.
8.2 So far as reopening of assessment under section 147 of the Act after four years is concerned, the reasons must record that there was a failure on the part of the assessee to disclose material facts or reasons must lead to clear and direct inference that there was a failure on the
8 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 part of the assessee to fully and truly disclose all material facts necessary for assessment. Further, reasons must indicate which material fact was not fully and truly disclosed.
8.3 On plain reading of the provisions of section 147 of the Act, the Assessing Officer can reopen the assessment after four years from the end of the relevant assessment year only when both the conditions provided in section 147 of the Act are satisfied. That is: 1. The Assessing Officer must have reason to believe that income or profits or gains chargeable to tax had escaped assessment and; 2. The Assessing Officer must have reason to believe that such escapement has occurred by reason of either omission or failure on part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year or failure on part of the assessee to make a return of income under section 139 or in response to notice issued under section 142(1) or 148. 8.4 In the instant case, notice under section 148 of the Act was issued on 30.03.2016 for the assessment year 2009-10. Since action under section 147 of the Act was initiated after four years from the end of the relevant assessment year 2009-10, which expired on 31.03.2014, both the conditions provided in section 147 of the Act should have been satisfied for the reopening proceedings to be valid. However, even assuming that the Assessing Officer had reason to
9 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 believe that income had escaped assessment, the second condition was not satisfied in the instant case as the assessee had disclosed fully and truly all necessary material facts in the course of original assessment proceedings and the Assessing Officer has identically verified the same in para 7 and 8 of the assessment order under section 143(3) of the Act dated 08.12.2011. Thus, the Assessing Officer has not established that the assessee has not made a full and true disclosure of all material facts. Since the reasons recorded in the present case did not meet the conditions stipulated under section 147 of the Act, the reassessment proceedings could not be sustained in view of the judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. Schwing Stetter India P. Ltd. (supra).
8.5 Under the above facts and circumstances and respectfully following the judgement of Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra) and the judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. Schwing Stetter India P. Ltd. (supra), we set aside the order of the ld. CIT(A) on this issue and quash the reassessment order passed under section 143(3) r.w.s. 147 of the Act. The ld. DR could not file any counter statement against the cross objection filed by the assessee.
10 I.T.A. No.124/Chny/18 & C.O. No.58/Chny/18 9. So far as appeal filed by the Revenue is concerned, since we have quashed the assessment order passed under section 143(3) r.w.s. 147 of the Act and decided the issue against the Revenue, going to merits is mere academic and no adjudication is required. Thus, the appeal filed by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed and the Cross Objection filed by the assessee is allowed.
Order pronounced on the 08th June, 2022 at Chennai.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 08.06.2022 Vm/- आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��यथ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.