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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.1.3.2016 of Commissioner of Income Tax (Appeals) for the Assessment Year 2006-07.
2. The assessee has raised the following grounds :
“1. The Assessing Officer has served the notice under Section 148 in the Assessment Year 2014-15 which is beyond the time prescribed.
The Assessing Officer contemplates accrual of capital gains the very moment the JDA is signed which is ridiculous.
The JDA is for construction of residential flats only. Hence we are entitled for exemption under Section 54(F).
4. Further, grounds of appeal will be furnished at the time of hearing.”
3. Ground No.1 is regarding validity of reopening of the assessment under Section 148 of the Income Tax Act, 1961 (in short 'the Act') .
The learned Authorised Representative of the assessee has submitted that the assessment was reopened by the Assessing Officer vide the notice issued under Section 148 dt.27.1.2013 which is beyond four years from the end of the assessment year under consideration. Thus the learned Authorised Representative has submitted that when there is no failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment then reopening based on the report of the Investigation Wing that the capital gains arising at the time of Joint Development Agreement (JDA) has escaped assessment is not valid. He had submitted that the Assessing Officer has reopened the assessment on the ground that capital gains arising on the date of execution of JDA whereas the assessee has offered capital gains arising
Assessment Year 2013-14. The learned Authorised Representative has further contended that there is no escapement of income assessable to tax as the capital gains in question has been offered by the assessee in the subsequent year and prior to the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. T.K. Dayalu 202 Taxman 531. The assessee had no reason to believe that the capital gains are chargeable at the time of execution of JDA. Thus the learned Authorised Representative has submitted that the reopening in this case is bad in law and consequently reassessment is liable to be quashed.
On the other hand, the learned Departmental Representative has submitted that there is no assessment under Section 143(3) of the Act therefore the case does not fall under the ambit of proviso to section 147 even if the notice issued under Section 148 is beyond four years form the end of the assessment year. He has relied upon the orders of the authorities below.
Having considered the rival submissions as well as relevant material on record, it is noted that the return filed by the assessee for the assessment year under consideration was accepted by the Assessing Officer under Section 143(1) of the Act. Subsequently, the Assessing Officer has proposed to reopen the assessment on the ground as recorded in the assessment order as under :
“ Investigation Wing, Bangalore forwarded information that the above assessee had executed a Joint Development Agreement with a builder/developer Shri K. Gopal Raju under which land bearing Sy.No.16, 17, 18, 19 situated at Sarakki Kere Village, Uttra Halli Hobli, Bangalore South Taluk measuring 6000 sq. ft. owned by him had been allowed to be developed into residential apartments by the builder. This agreement was registered as document 2448/05-06 dt.8.2.2006 in the office of the Sub-Registrar Ke3ngeri, Bangalore. As per the terms of this agreement, in consideration of the assessee agreeing to transfer undivided share of 66% in the above said land, the builder agreed to construct and deliver 34% of super built up area in the form of apartments along with similar % of car parking and other benefits in the constructed area. Since this transaction which is in the nature of transfer of land, capital gains accrued in the hands of the assessee in F Y 2005-06 relevant to A.Y. 2006-07. On verification of assessment records, it was found that the assessee did not declare any capital gains to tax. Therefore, the assessment was reopened by issue of notice under Section 148 on 27.3.2013 after recording the reasons and obtaining necessary approvals from the competent authority.”
Thus it is apparent form the record that the reopening is based on the judgment of Hon'ble jurisdictional High Court as well as on the report of the Investigation Wing regarding the assessee executed a JDA with a builder. Prior to the judgment of Hon'ble jurisdictional High Court in the case of T.K. Dayalu (supra), the issue of capital gains arising on the date of JDA was a debatable
Tribunal in favour of the assessee holding that no capital gains arises on the date of JDA. Therefore the assessee was having a bona fide belief of not reporting in capital gains arising from the JDA in the return of income. Even the Assessing Officer was also under the belief that the capital gains would arise only when the assessee sells the developed property under JDA. It transpires that the CIT (Appeals) has not given any finding on this issue of validity of reopening and dismissed this ground of assessee's appeal in para 6.1 as under :
“6.1 During the hearing of the instant appeal the provisions of income tax act particularly the section 149(1)(b) and Explanation 2 of Section 147 was discussed in detail and the authorized representative, during the hearing was satisfied that the reopening of the case under Section 147 of IT Act is maintainable. Accordingly, the grounds of appeal of the appellant on this issue is dismissed.”
Instead of deciding the issue raised by the assessee, the CIT (Appeals) has chosen to dismiss on the ground that the A.R. of the assessee was satisfies on the reopening of the assessment is maintainable. When the assessee has raised a specific ground and it has not been withdrawn or it has been specifically not press the ground then the ground raised by the assessee ought to have been decided on merits instead of adopting a shortcut method of dismissal. Accordingly, in the facts and circumstances of the case, the issue of validity of reopening is set aside to the record of the CIT (Appeals) for adjudication by a speaking order. The issue on merits is left open.
In the result, the appeal is allowed for statistical purpose.
Order pronounced in the open court on 31st day of Aug., 2016.