Income Tax Appellate Tribunal - Delhi
Menka Radhu, New Delhi vs Assessee on 1 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 1905/Del/2014
A.Y. : 2005-06
SMT. MENKA RADHU, ITO, WARD 15(1),
D-828, NEW FRIENDS COLONY, Vs. NEW DELHI
NEW DELHI - 110 025
(PAN: AAHPR4503N)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. SANKALPA SHARMA, ADV.
Department by : Sh. P. DAM KANUNJNA, SR.
DR
Date of Hearing : 22-06-2016
Date of Order : 01-07-2016
ORDER
PER H.S. SIDHU, JM
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 ITA No. 1905/Del/2014 A.Y. 2005-06 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. 2 ITA No. 1905/Del/2014
A.Y. 2005-06 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 3 ITA No. 1905/Del/2014 A.Y. 2005-06 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 4 ITA No. 1905/Del/2014 A.Y. 2005-06 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 5 ITA No. 1905/Del/2014 A.Y. 2005-06 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 6 ITA No. 1905/Del/2014 A.Y. 2005-06 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 7 ITA No. 1905/Del/2014 A.Y. 2005-06 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 8 ITA No. 1905/Del/2014 A.Y. 2005-06 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 9 ITA No. 1905/Del/2014 A.Y. 2005-06 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.
Sd/-
(I P MADAN) Income Tax Officer, Ward 15(1), New Delhi "
10 ITA No. 1905/Del/2014
A.Y. 2005-06 7.1 After going through all the records available with us, we find that in this case the reassessment seeks to review the original assessment without any fresh or tangible material and was actuated by Change of opinion in the original assessment. We note that the AO in the reasons recorded has referred to the record which were already available at the time of original assessment. No fresh or tangible material came into the hands of the AO when reasons were recorded. In the circumstances, the reopening was sought to be made only to review the original assessment which was actuated by Change of opinion by the AO, which is clearly impermissible 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). The Hon'ble Apex Court in the aforesaid case has analysed in detail the provisions of section 147 of the IT Act and held as under:-
"After the Amending Act, 1989, Section 147 reads as under:
"Income escaping assessment - 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course 11 ITA No. 1905/Del/2014 A.Y. 2005-06 of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
4. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re- assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-
12 ITA No. 1905/Del/2014A.Y. 2005-06 opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in- built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows:
"7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147. -A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the 13 ITA No. 1905/Del/2014 A.Y. 2005-06 past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same."
5. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs."
7.2 In view of the aforesaid facts and circumstances, as explained above and respectfully follow the law as laid down by the Hon'ble Supreme Court of India in the case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), as aforesaid, we are of the view that both the authorities below have gone wrong in deciding the reopening as valid. Therefore, we quash the orders of the authorities below on this legal issue and decide the same in favor of the assessee.
8. Since we have already quashed the reassessment proceedings as aforesaid, raised in the Assessee's Appeal, in our considered opinion, there is no need to adjudicate the issues on merits.
14 ITA No. 1905/Del/2014A.Y. 2005-06
9. In the result, the Appeal filed by the Assessee stand allowed.
Order pronounced in the Open Court on 01/07/2016.
Sd/- Sd/-
[PRASHANT MAHARISHI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 01/07/2016
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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