DR.VEENA GIRIYAPUR,BANGALORE vs. INCOME TAX OFFICER, BANGALORE

This appeal by the assessee is directed against the order dated: 31.08.2016 of CIT(A) for the assessment year 2006-07. The assessee has raised the following grounds.

The assessee is an individual and did not file any return of income for the year under consideration and claimed that no taxable income exceeding the maximum limit prescribed under Income Tax Act. The AO issued a notice u/s. 148 on 27.03.2013. Since there was no response from the assessee to the notice issued by the AO, the AO has completed the assessment u/s. 144 r.w.s. 147. The AO has assessed the capital gain to tax in respect of the property developed under Joint Development Argument (JDA). The assessee challenged the action of the AO before the CIT(A) and raised various grounds regarding the taxability of capital gain in the year under consideration and further the actual area received by the assessee in the project as well as the rate adopted by the AO for computing the capital gain. The CIT(A) issued a remand order directing the AO to submit a remand report. After considering the remand report the CIT(A) confirmed the action of the AO in assessing the capital gain.

Before the Tribunal, the ld. AR of the assessee has submitted that the AO has computed the capital gain by taking the area received by the Page 5 of 8 assessee of 2,221.66 sq.ft. instead of 1,785 sq.ft. of flat no. FF010 and further the flat no. TF005 which were actually sold. He has further submitted that the flat bearing no. TF005 was owned by the assessee along with Smt. Pushpalatha Rudramuni and Shri Satish Baleekai. Therefore, the assessee’s share in this flat was 1/3rd of total area of 1,310 sq.ft. which comes to 436.66 sq.ft. The ld. AR of the assessee has further submitted that the AO has applied the rate at Rs. 900/- per sq.ft. without taking into account the Fair Market Value (FMV) as on the rate of JDA. Further, the ld. AR has contented that the AO did not supply the reasons recorded for issuing notice u/s. 148 and only during the remand proceedings the reasons were supplied to the assessee. Though the assessee raised the issue and objections against validity of notice issued u/s. 148, the CIT(A) has not adjudicated that issue. Thus, the ld. AR has contented that the matter may be remanded to the record of the AO for deciding the objections against the notice issued u/s. 148 as well as considering the other aspect of applying the correct rate of price for computation of capital gain as well as the area received by the assessee.

On the other hand, the ld. DR has submitted that it is not mandatory for AO to supply suomoto the reasons recorded for reopening of the assessment to the assessee. It is for the assessee to request for the Page 6 of 8 reasons if the assessee chooses to file objection thereto. He has relied upon the decision of the Delhi High Court in the case of Safetag International India (P.) Ltd (332 ITR 622). On merits the ld. DR has submitted that when the authorities below have examined this issue and assessee was given opportunity in the remand proceedings then no grievance is left regarding non providing opportunity to assessee.

Having considered the rival submissions and relevant material on record, it is noted that the assessment was framed u/s. 144 r.w.s. 147 as the assessee did not appear in the assessment proceedings. Thus, it is clear that there was no occasion during the assessment proceedings for making request for supply of reasons recorded by the AO. Before the CIT(A) the assessee has requested for the reasons recorded for reopening of the assessment which were supplied to the assessee during the remand proceedings. It is manifest from the objections raised by the assessee before the CIT(A) that the assessee raised the objections against the reasons recorded for reopening of the assessment and validity of section 148 of the Act. However, there is no finding on this issue by the CIT(A). Thus, in view of the decision of the Hon’ble Supreme Court in case of G.K.N Driveshafts (Inida) Ltd. Vs ITO (259 ITR 19) as well as decision of Hon’ble Bombay High Court in case of CIT Vs Videsh Page 7 of 8 Sanchar Nigam Ltd (340 ITR 66) objections of the assessee against the notice u/s. 148 are required to be decided by the AO or by the CIT(A) as case may be. In this case since none of the authorities below have dealt with this issue, therefore in the facts and circumstances of the case and in the interest of justice, the matter is remanded to the record of the AO for deciding the objections of the assessee against the notice u/s. 148 and further the other objections of the assessee regarding the rate applied by the AO as well as the area considered by the AO to be considered while adjudicating the matter afresh.

In the result, the appeal of the assessee is allowed for statistical purposes.