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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
PER G.MANJUNATHA, AM: This appeal filed by the Revenue is directed against the
order passed by the learned Commissioner of Income Tax
(Appeals)-7, Chennai, dated 28.06.2018 and pertains to
assessment year 2013-14.
We find that appeal filed by Revenue is barred by
limitation of one day for which necessary petition along with
affidavit for condonation of delay explaining reasons for the
delay has been filed. The learned DR submitted that relevant
records were not readily available, thus, the Revenue could
2 ITA No. 2623/Chny/2018
not file appeal within the time allowed under the Act, hence
prayed that delay may be condoned.
Having heard both sides and considered the petition filed
by the Revenue for condonation of delay, we are of the
considered view that reasons given by Revenue for not filing
the appeal within the time allowed under the Act comes under
reasonable cause as provided under the Act for condonation
of delay and hence, delay in filing of above appeal is
condoned and appeal filed by the Revenue is admitted for
adjudication.
The Revenue has raised following grounds of appeal:-
“ 1.1 The Order of the learned Commissioner of Income Tax (Appeals) is contrary to theLaw and facts of the case.
1.2 Though the tax effect is less than the monetary limit fixed by the CBDT’s CircularNo.3 of 2018 the issue was raised by RAP and accepted by the Department. Hence ,tax effect is not applicable in this case as per Para 10 of the above circular.
2.1 The CIT(A) erred in holding that re-opening u/s.147 is bad in law both technical and legal grounds on the basis of information already available on record.
2.2 The CIT(A) omitted to consider the decision of Hon’ble Supreme Court in the case of ALA Firm vs CIT [1991] 189 )TR 285 (SC) which is in favour of the department to consider the re-opening u/s.147 as valid.
3 ITA No. 2623/Chny/2018
3.1 The CIT(A) erred in deleting the disallowance made u/s.54F by holding that until the cost of residential property was exhausted by the amount of capital gains claimed to be have been invested, exemption u/s.54F could not be denied.
3.2 The CIT(A) omitted to consider the fact that the assessee failed to furnish the details I evidence in support of his claim at the time of re-assessment proceedings or even in the appellate proceedings to consider the claim made u/s.54F of the Act.
4.1 The CIT(A) erred in deleting the addition made of Rs.1,05,861/- being 8% of gross receipts by way of hire charges by holding that the assessee was not liable to file an audit report u/s.44AB of the Act.
4.2 The CIT(A) omitted to consider the fact that the assessee failed to furnish the details / evidence in support of his claim at the time of re-assessment proceedings or even in the appellate proceedings to substantiate his claim.”
Brief facts of the case are that the assessee is engaged in
the business of trading in gold and diamonds and also in the
business of hire purchase, filed his return of income for
assessment year 2013-14 on 26.07.2013 admitting total
income of Rs.8,24,810/-. The case has been subsequently
reopened u/s.147 of the Income Tax Act, 1961, on the ground
that income chargeable to tax had been escaped assessment
on account of wrong claim of deduction u/s.54F of the Income
Tax Act, 1961. The assessment has been completed u/s.143(3)
r.w.s 147 of the Act, on 19.07.2017 and determined total
4 ITA No. 2623/Chny/2018
income at Rs.11,94,300/- by making additions towards
disallowance of deduction claimed u/s.54F of the Income Tax
Act, 1961, at Rs.2,63,628/- on the ground that the assessee
has claimed deduction for very same house property in the
immediately preceding financial year. The Assessing Officer
had also made additions towards estimation of 8% profit on
hire charges received by the assessee of Rs.13,23,264/- and
made addition of Rs.1,05,861/-. The relevant findings of the
Assessing Officer are as under:-
“2. On going through the records it was found that the assessee has claimed deductions u/s.54F for an amount of Rs. 2,63,628/- for the A.Y. 2013-14 against a property at Royapettah, Chennai, for which the assessee has already claimed deductions u/s. 54F for the AX. 2012-2013. Which implies that the assessee has claimed the deduction u/s. 54F for both the assessment years against same property which is not allowable under the provision of Income Tax act, 1961. In view of the above, the sum of Rs. 2,63,628/- has escaped assessment under the head “Long term capital gains” and hence needs to be added.
Further, the assessee is in receipt of hire charges from M/s. Raaj Finance and as per P & L account furnished, the assessee has incurred a loss of Rs. 85,853/- but has not filed any audit report u/s. 44AB. In the absence of such audit report , the assessee ought to have estimated his income © 8% on his receipts of hire charges of Rs. 13,23,264/-. Therefore, the net
5 ITA No. 2623/Chny/2018
profit of Rs. 1,05,861/- being 8% of gross receipts, is omitted to be offered resulting in escapement of income under the head business income for the above assessment year and needs to be added. The assessment is finalized as follows:
Being aggrieved by the assessment order, the assessee
preferred an appeal before learned CIT(A). Before the learned
CIT(A), the assessee challenged reopening of assessment on
multiple grounds including on change of opinion. The
assessee has also challenged addition made towards
disallowance of exemption claimed u/s.54F of the Act, on the
ground that there is no bar under the Act to claim exemption in
two assessment years as long as conditions prescribed for
claiming such exemption are satisfied. The assessee had also
challenged estimation of 8% profit on gross receipts on the
ground that the Assessing Officer has wrongly presumed that
6 ITA No. 2623/Chny/2018
the assessee has declared net loss from business, whereas
fact remains that the assessee has offered profit of
Rs.9,20,603/-.
The learned CIT(A), after considering relevant facts and
has also by relied upon certain judicial precedents, including
decision of the Hon'ble Supreme Court in the case of CIT Vs.
Kelvinator of India Ltd. 320 ITR 561, quashed reassessment
order passed by the Assessing Officer on the ground that the
Assessing Officer has reopened the assessment on ‘change of
opinion’ without there being any fresh tangible material which is
evident from fact that the assessee had already submitted
relevant details with regard to exemption claimed u/s.54F of the
Income Tax Act, 1961. The learned CIT(A) also deleted
additions made towards disallowance of exemption claimed
u/s.54F of the Act, at Rs.2,63,628/- by following decision of the
ITAT., Mumbai in the case of Ajit Patnagar Vs. ITO (2006) 9
SOT 685 (Mum) by holding that there is no bar under the Act, to
claim exemption u/s.54F in two assessment years on single
property as long as conditions prescribed for claiming
exemption are satisfied. The learned CIT(A) had also deleted
7 ITA No. 2623/Chny/2018
additions made towards 8% of profit estimation on hire charges
at Rs.1,05,861/- by holding that as per details filed by the
assessee, gross receipts from business is lesser than
prescribed limit of turnover for conducting tax audit u/s.44AB of
the Income Tax Act, 1961, and further, the assessee has also
declared net profit of Rs.9,20,603/-, which is more than 8% of
profit estimated by the Assessing Officer and thus, there is no
reason to make further addition on estimation basis @ 8%
profit on gross receipts. Aggrieved by the learned CIT(A) order,
the revenue is in appeal before us.
The learned DR submitted that the learned CIT(A) has
erred in holding that reopening of assessment u/s.147 of the
Act is bad in law, without appreciating fact that deduction
claimed u/s.54F of the Act, for exemption in subsequent year
is a basis for reopening of assessment. Further, said
information was not readily available when original assessment
was completed u/s.143(3) of the Act. The learned DR further
referring to provisions of section 54F of the Act, submitted that
the assessee has claimed exemption u/s.54F in two financial
years. However, facts with regard to commencement of
8 ITA No. 2623/Chny/2018
construction or completion of construction of property was not
forthcoming from the assessment order or from order of the
learned CIT(A) and thus, for verification of facts, the issue may
be remitted back to the file of the Assessing Officer. As regards
estimation of profit at 8% on gross receipts on hire purchase
business, the learned CIT(A) erred in not considering fact that
the assessee has failed to furnish details/evidences in support
of his claim at the time of reassessment proceedings.
Therefore, the Assessing Officer left with no option, has
estimated profit on the basis of gross receipts. However, the
learned CIT(A) has deleted additions without assigning proper
reasons.
The learned A.R for the assessee, on the other hand,
strongly supporting order of the learned CIT(A) submitted that
except revenue audit objection, there was no fresh tangible
material in possession of the Assessing Officer to form basis
for escapement of income and thus, the learned CIT(A) has
very clearly held that reopening of assessment u/s.147 of the
Act is mere change of opinion, which is not permissible under
law. As regards additions made towards exemption u/s.54F of
9 ITA No. 2623/Chny/2018
the Act, it is well settled principles of law that there is no bar
under the Act to claim exemption u/s.54F of the Act in two
assessment years, when two instances of capital gain was
there and further, property in question was satisfied conditions
prescribed u/s.54F of the Act. Similarly, the Assessing Officer
has apprised wrong facts to come to the conclusion that the
assessee has declared loss from business, whereas fact
remains that the assessee has declared profits from business
which is more than profit estimated by the Assessing Officer
and thus, the learned CIT(A) has rightly deleted additions made
towards estimation of profit and hence, order of the learned
CIT(A) should be upheld.
We have heard both the parties, perused material
available on record and gone through orders of the authorities
below. On the issue of reopening of assessment, the learned
CIT(A) by following various decisions, including decision of the
Hon'ble Supreme Court in the case of CIT Vs.Kelvinator of
India Ltd (supra) has observed as under:-
“As regards the issue of change of opinion regarding the claim of sec. 54F and the issue of hire charges received by Bajaj Finance, I have perused the assessment records and found that
10 ITA No. 2623/Chny/2018
this particular issue has been raised on the basis of Audit (RAP) querry/objections. Now an argument can be taken that the case was selected for scrutiny under CASS on the issue of ‘Large income of unsecured loans and that the A.O was restricted in his scope of enquiry and therefore gives AO the justification to re-visit the issues raised. However, CBDT vide its instructions No20/2015 [F.No. 225/269/2015- ITA-Il] dated 29.12.2015 has laid down the scope of scrutiny in cases selected through computer Aided scrutiny selection (CASS). This instruction is applicable to cases selected through CASS-2014 and the scope scrutiny is limited to the specific issue pertaining to AIR/CIB/26 As data. Wide scrutiny in these cases could only be conducted as per guidelines stated instruction No 7/2014.
The assessment year in the present case is A.Y 2013. Therefore the A.O was not fettered by any Board instruction restricting the scope of his enquiry. The AO had full scope to examine all issues arising in assessment proceedings.
Going by facts narrated above, I would have to hold that re-opening on the basis of information already available on record is bad in law.”
From the above, what is clear is that the Assessing
Officer has formed reasonable belief of escapement of income
on the basis of revenue audit party objection without there
being any fresh tangible material to suggest escapement of
income within the meaning of section 147 of the Act. Further,
the learned CIT(A) has recorded categorical finding that
11 ITA No. 2623/Chny/2018
reopening of assessment was on the basis of ‘change of
opinion’, which is evident from fact that except audit objection,
no other evidence is in possession of the Assessing Officer
which suggests escapement of income. The audit party has
pointed out certain objections on the basis of materials already
placed before the Assessing Officer at the time of original
assessment u/s.143(3) of the Act. Therefore, it is very clear
that the Assessing Officer has formed reasonable belief of
escapement of income on the basis of very same materials,
which was part of original assessment proceedings and thus,
we are of the considered view that the learned CIT(A) is right in
holding that reopening of assessment u/s.147 of the Act is on
mere change of opinion. The facts remain unchanged. The
revenue fails to bring on record any further evidence to counter
finding of facts recorded by the learned CIT(A). Hence, we are
inclined to uphold findings of the learned CIT(A) and reject
ground taken by the revenue challenging reopening of
assessment u/s.147 of the Act.
As regards, deletion of disallowance u/s.54F of the
Income Tax Act, 1961, the facts borne out from records clearly
12 ITA No. 2623/Chny/2018
indicate that the assessee has claimed exemption u/s.54F of
the Act, for purchase of residential flat in two assessment years
on one house property. However, source of income for
purchasing house property is two different transactions of
capital gain derived from sale of assets. It is well settled
principles of law that when conditions prescribed u/s.54F of the
Act are satisfied, then there is no bar under the Act, to claim
exemption in two different assessment years, if source for
making investments for purchase of residential property is from
different assets. In this case, the assessee has claimed
exemption for first year from sale of jewellery, whereas for
second year the assessee as sold once again jewellery and
reinvested consideration for construction of house property.
Therefore, we are of the considered view that as long as there
is different source of income in two assessment years for
investment in purchase of one residential property, then the
assessee can claim exemption u/s.54F of the Act, if other
conditions prescribed thereunder are satisfied. In this case,
there is no observation from the Assessing Officer with regard
to satisfaction of conditions prescribed for claiming exemption
u/s.54F of the Act. Therefore, we are of the considered view
13 ITA No. 2623/Chny/2018
that there is no error in the reasons given by the learned
CIT(A) to delete additions made by the Assessing Officer
towards disallowance of exemption claimed u/s.54F of the Act.
Hence, we are inclined to uphold findings of the learned CIT(A)
and reject ground taken by the revenue.
As regards estimation of profit from hire purchase
business, it was finding of the learned CIT(A) that total turnover
from business of the assessee for impugned assessment year
does not exceed turnover prescribed for getting his accounts
audited u/s.44AB of the Income Tax Act, 1961. The learned
CIT(A) further observed that the assessee has offered net
profit of Rs.9,20,603/- from business, which is more than
amount of profit estimated by the Assessing Officer @ 8% on
gross receipts of hire purchase business. Therefore, he opined
that the Assessing Officer has erred in estimating 8% profit on
hire charges and made addition of Rs.1,05,861/-. The facts
remain unchanged. The revenue fails to bring on record any
further evidences to counter finding of facts recorded by the
learned CIT(A). Hence, we are inclined to uphold findings of the
learned CIT(A) and reject ground taken by the revenue.
14 ITA No. 2623/Chny/2018
In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 31st January, 2022 Sd/- Sd/- (वी. दुगा� राव) (जी. मंजुनाथ) (V.Durga Rao) (G.Manjunatha) #या�यक सद&य /Judicial Member लेखा सद&य / Accountant Member
चे#नई/Chennai, )दनांक/Dated 31st January, 2022. DS आदेश क� ��त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु.त (अपील)/CIT(A) 4. आयकर आयु.त/CIT 5. ,वभागीय ��त�न2ध/DR 6. गाड� फाईल/GF.