SMT. MENKA RADHU,NEW DELHI vs. ITO, NEW DELHI

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ITA 1905/DEL/2014Status: DisposedITAT Delhi01 July 2016AY 2005-0615 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were initiated without any fresh or tangible material and were actuated by a mere change of opinion by the Assessing Officer. Following the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., the Tribunal quashed the reassessment proceedings.

What were the facts?

The assessee filed a return of income, and the original assessment was completed. Later, reassessment proceedings were initiated under Section 147/148 of the Income Tax Act, 1961, based on the Assessing Officer's belief that income had escaped assessment. The assessee challenged the validity of these reassessment proceedings.

What were the issues?

Whether the reassessment proceedings were validly initiated based on a change of opinion without tangible material. The legality and jurisdiction of reopening the assessment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI

Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHISMT. MENKA RADHU,

Assessee has filed this Appeal against the Order dated 09.1.2014 passed by the Ld. Commissioner of Income Tax (Appeals)-XVIII, New Delhi pertaining to assessment years 2005-06 on the following grounds:-

“That the Ld C.I.T.(Appeals) has grossly erred both in law and on facts, in upholding the reassessment proceedings initiated by the Income Tax Officer, Ward 15(1), New

Delhi failing to appreciate that the notice issued u/s 148 of the Act was wholly illegal, without jurisdiction and had been issued without fulfilling the pre-requisite conditions laid down for assumption of valid jurisdiction. The order of the Id C.I.T.(Appeals) is vitiated being ab initio void as the same has been passed in disregard of the settled law that mere change of opinion is not permissible in law for assumption of a valid jurisdiction to reopen a case

1.1 That the Id C.I.T.(Appeals) has failed to appreciate that there was material on record to show that t ere had been any failure on the part of the assessee to disclose fully and truly all material facts relevant to the computation of income for the assessment year under consideration. The finding that that reopening done by the AO is in accordance with criteria laid down by Hon'ble

Supreme Court is devoid of any merit and is thus unsustainable.

1.2 That the Id C.I.T.(Appeals) has further failed to appreciate that the AO has not disposed off all the objections raised by the assessee to the initiation of reassessment proceedings and as such the assessment as framed was wholly illegal and without jurisdiction.

1.3 That the Id C.I.T.(Appeals) has grossly ignored the fact that in the original return of income, the assessee had declared long term capital gain on sale of property no. 0-828, 2nd Floor, New Friends Colony, New Delhi, deduction u/s 54EC and set off of brought forward losses against long term capital gains had been settled by the Id C.I.T.(Appeals), which order was also confirmed by the Hon'ble Income Fax Appellate Tribunal and as such the re-assessment as framed is only change of opinion.

2. That the Id C.I.T.(Appeals) has grossly erred both

in law and on facts in upholding the assessment framed determining the total income at Rs.30,39,020/- against the returned income of Rs.6,03,596/- inter alia arbitrarily upholding the computation of LTCG at Rs.24,35,427/- against NIL claimed by the assessee.

2.1 That the Id C.I.T.(Appeals) has grossly erred in law and on facts in upholding the allowance of deduction uls

54EC of the Act at Rs.40 Lakh against Rs.70 Lakh claimed by the assessee. The finding that the investment will take place as and when amount is debited in the bank account and not on the date of remittance of cheque for the purposes of investment is devoid of any merit as the same is contrary to the settled legal position. The Ld C.I.T.(Appeals) has arbitrarily disregarded the judicis: pronouncements relied upon by the assessee in this regard.

3. That the Ld. C.I.T.(Appeals) has erred in upholding

the levy of interest holding the same to be mechanical failing to appreciate that no such interest could be charged on the facts of the instant case.

It is, therefore, prayed that the orders of the authorities below be set aside and the reassessment proceedings as initiated be held as illegal, barred by limitation and without jurisdiction. In any case, the long term capital gains as declared by the assessee be accepted. The b/f losses as claimed be allowed. The interest as charged by cancelled.

2.

The brief facts of the case are that the assessee filed a return declaring income of Rs. 6,03,596/- on 24.6.2006. Original assessment in this case was completed on 17.9.2007 at an income of Rs. 17,88,230/- u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act). In pursuance of the CIT(A)’s order No. 68/07-08 dated 26.2.2008, the same was reduced to Rs. 6,03,596/- vide order u/s. 250/143 of the Act. AO has observed that the assessee had claimed deduction u/s. 54EC which was wrongly been allowed. Accordingly, the proceedings u/s. 147/148 of the Act were initiated by issue of notice dated 30.3.2012. In response thereof, the assessee vide letter dated 6.4.2012 that the return of income filed originally may be treated to have been filed in response to notice u/s. 148 of the Act. The reasons recorded were duly provided to the assessee alongwith the notice issued u/s. 148 of the Act. Thereafter the objections raised were also duly complied with vide AO’s letter dated 24.1.2013. In response to statutory notice, Ld. Authorised Representative of the Assessee filed letter dated 6.2.2013 in DAK and the same was perused by the AO. AO observed that during the year under consideration, the assessee sold property No. D-828, 2nd floor, New Friends Colony, New Delhi on 21.2.2005 for a consideration of Rs. 80 lacs. The assessee had claimed deduction u/s. 54EC in respect of investment made in specified bonds of NHB on 27.8.2005. AO observed that on plain reading of the section 54EC(1) it reveals that no deduction shall be allowed in respect of the investment made after a period of six months from the date of such transfer. In the instant case the date of such transfer is 21.2.2005. As per the certificate issued by National Housing Bank on 7.10.2005, the date of allotment is 27.8.2005, however it has been claimed by the assessee that the investment has been made vide cheque dated 18.8.2005. AO further observed that on perusal of the statement of the assessee reveals that the said cheque was debited from its account on 26.8.2005. Therefore, neither the payment has been made nor the allotment of bonds has been made within the stipulated period of six months and thus the amount of Rs. 30 lacs do not qualify for deduction u/s. 54EC of the Act. Hence, the claim of deduction was denied by the AO.

2.1 AO further noted that during the course of original assessment proceedings, the AO worked out income under the head long term capital gain at Rs. 11,84,633/-. The assessee preferred appeal before the Ld. CIT(A) who vide order dated 26.2.2008 disposed off the same. The issues disposed off inter alia included the manner of allowing claim of b/f losses of long term capital gains.

The Ld. CIT(A) had directed to allow B/F losses after computing income under the head Long Term Capital Gain and not against the capital gain earned on each property. Therefore, the AO completed the assessment at an income of Rs. 30,39,020/- u/s. 147/254/143(3) of the I.T. Act, 1961 on 22.2.2003.

3.

Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 09.1.2014 has dismissed the appeal of the assessee on the legal ground of reopening as well as on merits.

4.

Aggrieved with the order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.

5.

At the time of hearing, Ld. Counsel of the assessee has only argued on the legal issue i.e. about the validity of the reopening. In this connection, he stated that the Ld C.I.T.(Appeals) has grossly erred both in law and on facts, in upholding the reassessment proceedings initiated by the Income Tax Officer, Ward 15(1), New Delhi failing to appreciate that the notice issued u/s 148 of the Act was wholly illegal, without jurisdiction and had been issued without fulfilling the pre-requisite conditions laid down for assumption of valid jurisdiction. It was the further contention that the order of the Ld C.I.T.(Appeals) is vitiated being ab initio void as the same has been passed in disregard of the settled law that mere change of opinion is not permissible in law for assumption of a valid jurisdiction to reopen a case. He further stated that there was material on record to show that there had been any failure on the part of the assessee to disclose fully and truly all material facts relevant to the computation of income for the assessment year under consideration. It was further stated that the finding that reopening done by the AO is in accordance with criteria laid down by Hon'ble Supreme Court is devoid of any merit and is thus unsustainable. He further stated that the reasons recorded as referred to the record that were already available at the time of original assessment. Hence, no fresh or tangible material came into the hands of the AO when reasons were recorded and it is a case of change of opinion, which is not permissible, in view of the law settled by the Hon’ble Supreme Court of India in the case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), therefore, he requested that the orders of the authorities below be set aside and the reassessment proceedings as initiated be held as illegal and the same may be quashed.

6.

On the other hand, Ld. DR relied upon the order of the Ld. CIT(A) and stated that lower authorities have passed a well reasoned order on the basis of the documentary evidences filed by the assessee as well as prevailing law. He further stated that Notice u/s. 148 has been issued after adopting the prescribed procedure under the law and with tangible material. Therefore, he stated that the question of quashing the reassessment does not arise.

Accordingly, he requested that the Appeal filed by the Assessee may be dismissed.

7.

We have heard both the parties and perused the records especially the orders of the Revenue authorities alongwith the Paper Book filed by the assessee containing pages 1 to 48 having various documentary evidences including the copy of Notice u/s. 148 dated 30.3.2012 alongwith the reasons recorded dated 30.3.2012 at page no. 34 & 35. We have also perused the case law cited by the Ld. Counsel of the Assessee, as aforesaid. We have also perused the reasons recorded by the AO. For the sake of clarity, we are reproducing the reasons recorded by the AO as under:-

“OFFICE OF THE INCOME TAX OFFICER, WARD-15(I), ROOM NO. 213, C RBUILDING, NEW DELHI F.NO. ITO W-15(1)/2011-12/426 DATED 30.3.2012 To Smt. Menka Radhu D-828, New Friends Colony, New Oelhi-11 0029

REASON The case has been completed u/s 143(3) at a total income of Rs. 17,88,230/- as against the returned income of Rs. 6,03,596/-. It was observed that the date of sale of property no D-828, New friends colony 2nd Floor, was 21.02.2005 and the sale consideration is Rs, 80,00,000/-. Out of this the amount of Rs. 30,00,000/- were invested in specified bonds of NHB on 27.08.2005 i.e. beyond the period of six month from the date of transfer of long term capital assets. Thus the deduction allowed u/s 54EC for this amount is not allowable.

As per section 54EC of Income-tax Act, any long term gain, arising to any assessee, from the transfer of any capital asset shall be exempt to the extent such capital gain is invested within a period of six months after the date of such transfer in the long term specified assets, provided that such specified asset is not transferred or converted into money within a period of 03 years from the date of its acquisition.

In view of the above facts, I have reason to believe that the assessee has not disclosed its income fully and truly all material facts necessary for his assessment. I have also reasons to believe that the income of Rs.30,00,000/-(Capital gains) has escaped assessment in the case and the same is to be brought to tax under section 147/148 of the Income Tax Act.

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