JEEVANLAL RIKHABCHAND JAIN,MUMBAI vs. ASST CIT RG 14(3), MUMBAI

This appeal by the assessee is directed against the order of the CIT(Appeals)-25, Mumbai dated 12/12/2013 for assessment year 2006- 07.

2.1 The assessee, in business as manufacturer and trader in cloth, filed his return of income for assessment year 2006-07 on 31/10/2006 declaring income of Rs.10,29,070/-. The case was taken up for scrutiny and the assessment was completed u/s. 143(3) of the Income Tax Act, 1961 ( in short ‘the Act’), wherein the income of the assessee was determined at Rs.36,60,120/- vide order dated 18/12/2008 after allowing the assessee exemption u/s. 54 of the Act to the extent of Rs.71 lakhs as against Rs.95 lakhs claimed. No appeal was filed by the assessee against the aforesaid order of assessment for assessment year 2006-07.

2.2 The assessment for assessment year 2006-07 was subsequently reopened by the Assessing Officer by initiating proceedings u/s. 147 of the Act on the issue of grant of exemption of capital gain u/s. 54 of the Act on the sale of property. Notice u/s. 148 of the Act was issued to the assessee on 30/9/2009. This assessment was completed u/s. 143(3) r.w.s. 147 of the Act vide order dated 22/12/2010 by withdrawing the exemption earlier granted under section 54 of the Act and thereby determining the assessee’s total income at Rs.1,08,60,120/-. On appeal by the assessee, the Ld. CIT(A) vide order dated 28/7/2011 allowed the assessee exemption under section 54 of the Act to the extent of Rs.71 lakhs as was allowed in the original order assessment for assessment year 2006-07.

2.3 It is mentioned that while giving effect to the aforesaid order of the CIT(A), new facts emerged from the details on record and consequently, a show cause notice was issued to the assessee (as reproduced at para-5 of the order of assessment for assessment year 2006-07 passed under section 143(3) r.w.s. 147 of the Act vide order dated 31/01/2013) as to why proceedings under section 147 of the Act be not initiated in the case for assessment year 2006-07. The assessee filed its objections thereto vide letters dated 4/10/2011 and 7/10/2011, which were rejected by the Assessing Officer. In response to notice u/s. 148 dated 9/3/2012, the assessee filed a return of income on 10/04/2012 declaring total income of Rs.10,29,070/-, after claiming exemption of Rs.95,00,000/- u/s.54 of the Act. The assessment was completed u/s. 143(3) r.w.s. 147 of the Act vide order dated 31/1/2013, wherein the income of the assessee was determined at Rs.1,08,60,120/- in view of the Assessing Officer disallowing the assessee’s claim for exemption of Rs.95,00,000/- u/s. 54 of the Act.

2.4 Aggrieved by the order of assessment for assessment year 2006- 07 dated 31/1/2013 for assessment year 2006-07, the assessee preferred an appeal before the CIT(Appeals)-25, Mumbai raising various grounds of the validity of assumption of jurisdiction u/s. 147, the validity of the assessment order, etc., and on merits of the claim of exemption u/s. 54 of the Act. The Ld. CIT(A) disposed of the appeal vide the impugned order dated 12/12/2013 partly allowing the assessee’s appeal for statistical purposes.

“On the facts and in the circumstances of the case and in law the learned Commissioner of Income tax Appeals)-25; 1. erred in confirming the action of the Assessing Officer for initiating proceedings under s. 147 of the Act which are illegal, bad in law and void ab initio; 1.1. erred in not appreciating that no income chargeable to tax has escape assessment; 1.2 erred in confirming that the appellant has not disclosed fully and truly all material facts necessary for assessment.

1.3 ought to have appreciated that the reopening is on account of change of opinion; 2. Without prejudice to above Erred in confirming the action of learned A.O in not allowing deduction under section54; 2.1 ought to have appreciated that the appellant has not violated the provisions of sub-section 54 of the Income Tax Act, 1961; 2.2 ought to have appreciated that appellant was prevented by sufficient cause for not depositing the amount in capital gain account scheme. 3. without prejudice to above Failed to appreciated that sec.54 of the Act is a beneficial provision and should be constructed liberablly.

The appellant craves leave to add, alter, amend, modify or delete any of the above ground or grounds of appeal.” 4.1.1 In the grounds raised at S.No.1 to 1.3, the assessee contends that the action of the Assessing Officer in initiating proceedings u/s. 147 of the Act and issue of notice under section 148 of the Act are illegal, bad in law and void-ab-initio as there was no income of the assessee chargeable to tax that had escaped assessment. It is contended that the assessee had disclosed fully and truly all material facts necessary for the assessment and the initiation of the assessment proceedings on the same set of facts amounted only to a change in opinion by the Assessing Officer .

4.1.2 In support of the aforesaid contentions of the assessee that the order of assessments dated 31/1/2013 for the assessment year 2006-07 is bad in law, the Ld. AR submitted that the re-assessment proceedings initiated under section 147 of the Act and pursuant to the issue of notice under section 148 of the Act were carried out in violation of the procedure laid down by law and judicial precedents on the