ITAT grants Section 54EC exemption, allows appeals for disputed amount.

The ITAT allowed the assessee's appeals, granting exemption under Section 54EC for the disputed amount. Other issues were not adjudicated upon, as the exemption was granted. The decision applied to the co-owner's case as well, allowing exemption under Section 54EC for them too. Both appeals were allowed.

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Issues Involved:
1. Validity of reopening of assessment under Section 147.
2. Year of transfer of capital assets and taxability of capital gain in the assessment year 2003-2004.
3. Disallowance of deduction under Section 54EC.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147:
The assessee challenged the reopening of the assessment under Section 147, arguing that the reopening was based on a "change of opinion" since the Assessing Officer (AO) had already accepted the capital gain in the assessment year 2004-2005. The AO initiated the reopening based on the objections raised by the revenue audit team, which indicated that the capital gain should have been assessed in the assessment year 2003-2004, not 2004-2005. The AO disallowed the exemption under Section 54EC for an amount of Rs. 47,00,000/- invested beyond the specified period, leading to the reopening of the case. The CIT(A) upheld the reopening, rejecting the assessee's objections.

2. Year of Transfer of Capital Assets and Taxability of Capital Gain in the Assessment Year 2003-2004:
The assessee argued that the transfer of the property occurred in the assessment year 2004-2005, as the possession was given on 21-8-2003, and all conditions of the development agreement were fulfilled in that year. The AO, however, contended that the transfer occurred in the assessment year 2003-2004 based on the development agreement dated 21-9-2002, and all payments were received within the same period. The CIT(A) supported the AO's view, relying on the decision of the Hon'ble Jurisdictional High Court in the case of Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income-tax, which stated that the date of the development agreement is the date of transfer.

3. Disallowance of Deduction under Section 54EC:
The core issue was the disallowance of the deduction under Section 54EC for the amount of Rs. 47,08,000/- invested on 21.4.2003 and 26.4.2003, beyond six months from the date of the development agreement (21.9.2002). The assessee argued that the period of six months should be reckoned from the date of receiving the payment, not the date of the agreement. The ITAT accepted this argument, citing the CBDT Circular No.791, which clarifies that the period for making investments in specified assets should be taken from the date the sales consideration is realized. The ITAT held that the assessee's claim for exemption under Section 54EC for the amount of Rs. 47,08,000/- was valid, as the investment was made immediately after receiving the payment.

Conclusion:
The ITAT allowed the appeals of the assessee, granting the exemption under Section 54EC for the disputed amount. The other issues raised were rendered academic and were not adjudicated upon. The decision applied mutatis mutandis to the co-owner's case, allowing the exemption under Section 54EC for them as well. Both appeals were allowed.

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