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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI P.K. BANSAL & SHRI PAWAN SINGH
This appeal has been filed by the Revenue against the order of CIT(A), Mumbai dated 15.4.2013. The Revenue even though has taken as many as 10 grounds of appeal, but they involve only two issues.
2. Ground nos. 1 to 6 are raised against the decision of CIT(A) holding the initiation of proceedings u/s 147 of the Income Tax Act, 1961 (in short ‘the Act’) to be invalid on the basis of change of opinion at the time of issuance of notice u/s 148 of the Act.
3. The brief facts of the case are that the assessee filed return of income on 26.12.2006 at an income of Rs.59,04,374/-. Assessment was completed u/s 143(3) of the Act at Rs.2,32,96,991/-. Subsequently, the order was rectified and appeal effect to CIT(A) order was given, which resulted in total income at Rs.75,30,187/-. The Assessing Officer initiated the proceedings u/s 147 of the Act by issuing notice dated 26.5.2010 u/s 148 of the Act by recording the reasons as under :-
“Perusal of the record reveal that assessee has sold 'dry agricultural land' during the year under review for Rs.60,00,000/-. He has claimed capital gains exemption to the tune of Rs.56,00,000/-. The relevant paragraph (no.8) in the assessment order u/s.143(3) dated 31-12- 2008 with regard to the treatment of the above transaction is reproduced:
“In the Long Term Capital Gains (Property) working the assessee has shown Long Term Capital Gain of Rs 56,53,547/- from this amount the assessee has reduced a sum of Rs.56,00,000/- shown as investment in Vijaya Bank Capital Gain Schedule. During the course of assessment proceedings, the assessee was asked to show cause under which section the assessee has claimed exemption and have invested in the capital gain bonds. The assessee has not filed any details/written submission nor explained any thing relating to the query raised. In the absence of the justification of the assessee and there being no provision under which the assessee has claimed exemption of Rs. 56,00,000/-, the same cannot be allowed to the assessee. Therefore, an amount of Rs. 56,00,000/- is treated as long term capital gains and taxed accordingly.”
Subsequently, a rectification order u/s.154 of the I.T.Act, 1961 has been passed on 06-03-2009 giving a relief on the addition elaborate in the aforementioned paragraph. The relevant portion of the said rectification order is reproduced below for ready reference.
"The assessee admitted that due to oversight the specific section of deduction was not mentioned. However, from the records it is found that the necessary documents were filed with the return of income claiming deduction of capital gains. Thus, the mistake apparent from records is hereby rectified by allowing deduction u/s.54 of the Act.”
Perusal of the documents on record, reveal the following discrepancies: a. A reading of the sale agreement of the capital asset, reveal that the property which has been sold on 25-01-2006 is 'dry agricultural land' and not residential premises. Therefore, this capital gains transaction does not qualify for relief u/s.54 of I.T.Act, 1961, since the said section is applicable in case of transfer of residential premises. Prima-facie, therefore it is apparent that the relief given u/s.54 to the tune of Rs.56,00,000/- is questionable and incorrect. b. The assessee has substantiated his claim of exemption u/s.54 by attaching a Xerox copy of saving bank account pass book. The said Xerox copy of the pass book shows two entries. i. By SB 18610 Rs.45,00,000/- ii. Cash Rs.11,00,000/-
The Xerox copy pertains to saving bank account in Vijaya Bank, Worli Branch. Prima facie this is no evidence/proof good and authentic enough to substantiate and allow a claim u/s.54 of the I.T. Act, 1961. Hence, it is apparent that the relief granted u/s.54 with a remark 'the mistake was apparent from record' is incorrect. c. It is seen that the above credits in the savings bank account of the assessee on 31-10-2006 to the tune of Rs.45,00,000/- (by cheque) and Rs. 11,00,000/- (by cash) is prima-facie not from known sources. This aspect is prima-facie evidenced by the fact that the sale proceeds of the property to the tune of Rs.60,00,000/- has been deposited in Citibank account of the assessee on the date of sale (copy of Citibank summary on record). The said summary also reveals that there have been no transfers to Vijay Bank during the year under review. d. From the details at (c) above, it is apparent that the source of Rs.56,00,000/- deposited in Vijay Bank Savings account has also remained to have been examined/investigated during the assessment proceedings. Subject to further verification therefore, this could be prima-facie treated as unexplained credits u/s.68 of the I.T. Act, 1961.
Close examination and perusal of the copy of bank summaries reveal that assessee has received the following amounts:
(i) Rs.48,50,000/- deposited in Standard Chartered Bank account No.241-1-021238-2 of the assessee claimed to have been received from Industrial tubes.
(ii) Rs.25,00,000/- deposited in Vijaya Bank account No.18160 of the assessee claimed to have been received from Industrial Tubes. Assessee is required to provide the proof.
Regarding the capital account of the assessee on record reveal that the assessee has introduced additional capital to the tune of Rs.40,75,000/- during the year under review. Perusal of the submissions, prima-facie reveal that the source of capital introduction needs to be verified.”
Subsequently, after the service of notice u/s 143(2) dated 19.8.2010 the assessee vide his letter dated 22.11.2010 stated that the original return may be treated as filed in response to the notice u/s 148 of the Act. Subsequently, assessment has been completed by making disallowance of exemption claimed u/s 54 amounting to Rs.56,00,000/- as well as adding unexplained cash credit u/s 68 amounting to Rs.11,00,000/- and assessment has been completed at Rs.1,42,30,190/-. Assessee went in appeal before CIT(A). CIT(A) took the view that since the assessment has been reopened only on account of change of opinion, therefore, the proceedings initiated u/s 147 of the Act is invalid and in consequence, he annulled the assessment order passed u/s 147 r.w.s. 143(3) of the Act.
We heard the rival submissions and carefully considered the same alongwith the order of tax authorities below. We noted that in this case the proceedings had been initiated u/s 147 of the Act by recording the reasons as has been reproduced in the preceding paragraphs. The reasons state that assessee has shown Long Term Capital Gains at Rs.56,53,547/- and claimed exemption of Rs.56,00,000/- u/s 54 of the Act in respect of investment in Vijaya Bank Capital Gain Schedule. The Assessing Officer denied the exemption of Rs.56,00,000/-, therefore, assessee moved an application before the Assessing Officer u/s 154 of the Act, which was decided by the Assessing Officer vide his order dated 6.3.2009 allowing relief to the assessee. The Assessing Officer passed an elaborate order. While granting deduction u/s 54 of the Act, it was noted by the Assessing Officer as well as by the CIT(A), before whom copy of Sale Deed was filed alongwith other documents, that the property sold mentioned as “dry agricultural land” was originally allotted jointly to three persons on 23.4.1966. Subsequently, one of these persons filed an application for conversion of property for non-agricultural purposes and the competent authority, i.e. the Dy. Commissioner (Revenue), Bangalore accorded the required sanction on 10.4.1989. Thereafter, in 1994 (14.11.1994) the said property described as one square house of ACC sheet roofing was purchased by the assessee. Thus, the property was a residential house property and the assessee had claimed deduction u/s 54 of the Act, which was granted by the Assessing Officer while passing order u/s 154 of the Act. The investment of Rs.56,00,000/- had been made on 31.10.2006 by depositing amount of Rs.45,00,000/- by transfer of said amount from assessee’s Savings Bank account no. 18610 and Rs.11,00,000/- in cash. Thus, the assessee complied with the conditions as stipulated u/s 54 of the Act for allowing deduction to the assessee by way of passing the order u/s 154 of the Act which clearly proves that the Assessing Officer had applied his mind while passing the order u/s 154 of the Act. We do agree with the CIT(A) that once the Assessing Officer has applied his mind and allowed the claim of assessee u/s 154 of the Act by passing an order, it is a case where the reasons to believe cannot be regarded to be bona fide in view of the decision of the Hon'ble Supreme Court in the case of Kelvinator (India) Ltd., 320 ITR 561 (SC) which is binding on us. In the said case, it was held that Sec. 147 does not empower the Assessing Officer to reopen the assessment under the garb of ‘reasons to believe’ to review his own decision, which was a possible view taken after considering the material already on record. In that case, the Assessing Officer had examined the claim of bad and doubtful debts originally. However, the assessment was reopened on the ground that assessee has not debited any amount on account of write off of debts in the Profit & Loss Account and also for computing book profit u/s 115JB of the Act. The assessee had not considered certain provisions. The Assessing Officer thus made addition in the assessment order accordingly. The Hon'ble Supreme Court held that reopening so far as allowability of claim of bad and doubtful debts are concerned was based on mere change of opinion because the said claim was already examined by the Assessing Officer during the assessment and same was found in order. In the instant case also, we noted that the claim of assessee was duly examined by Assessing Officer while passing order u/s 154 of the Act. It is not a case where Assessing Officer has not formed an opinion. Since the Assessing Officer had examined the claim of assessee and found that assessee is entitled to deduction u/s 54 of the Act, therefore, on the very same basis we are of the view that the Assessing Officer cannot reopen the assessment and action of reopening the assessment is invalid and void ab initio. Accordingly, respectfully following the decision in the case of Kelvinator (India) Ltd. (supra), we confirm the order of CIT(A) annulling the assessment. Thus, ground nos. 1 to 6 stand dismissed.
Ground nos. 7 to 9 is against the finding of CIT(A) allowing deduction u/s 54 of the Act without bringing on record any evidence that it was a sale of residential house.
We heard the rival submissions and carefully considered the same. We noted that the CIT(A) has given a detailed finding on the basis of the history given in the copy of Sale Deed. According to the said history, assessee has sold a residential house and claimed exemption in respect of Capital Gains arising from the sale of the residential house. The said sale proceed was invested by the assessee in the Capital Gains scheme. No contrary evidence or material was placed before us, which may compel us to take a different view. In view of the above fact, we do not find any illegality or infirmity in the order of CIT(A). We accordingly confirm order of CIT(A) on this ground.
In the result, appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 23rd December, 2016.