2012 (12) TMI 699 - AT - Income Tax

Tribunal upholds notice validity & capital gains assessment, directs further review of deductions claim under Sections 54/54F.

G. Sreenivasan Versus Deputy Commissioner of Income-tax, Central Circle

G. Sreenivasan Versus Deputy Commissioner of Income-tax, Central Circle - [2013] 140 ITD 235 Issues Involved:1. Validity of notice issued under Section 148 of the Income Tax Act for reassessment.2. Validity of assessment of capital gain in the year under consideration.3. Eligibility of deduction under Section 54/54F of the Income Tax Act.Detailed Analysis:1. Validity of Notice Issued Under Section 148 of the Act for Reassessment:The assessee contended that the Assessing Officer (AO) issued notices under Section 148 simultaneously for assessment years 2003-04, 2004-05, and 2005-06 based on identical reasons. The AO had reason to believe that there was an escapement of income due to an agreement dated 14.04.2002 between the assessee and M/s Nikunjam Constructions P Ltd. The AO's belief was based on the fact that the possession of the land was handed over on 21.04.2004, which could affect the assessment years 2003-04 to 2005-06. The Tribunal concluded that it is not necessary for the AO to reach a definitive conclusion at the time of issuing the notice under Section 148, as long as there are reasons to believe there is an escapement of income. Consequently, the Tribunal dismissed the grounds raised by the assessee regarding the validity of the notice issued under Section 148 for the year under consideration.2. Validity of Assessment of Capital Gain in the Year Under Consideration:The assessee argued that the capital gain should be assessed in the assessment year 2005-06, as the possession of the property was handed over on 21.04.2004. The Tribunal examined the agreement dated 14.04.2002 and the affirmation letter dated 21.04.2004, concluding that the substance of the transaction indicated that the physical possession of the land was handed over to the builder after the agreement date. The Tribunal referred to the case of Chaturbhuj Dwarkadas Kapadia v. CIT, which established that the date of the contract is relevant for determining the year of chargeability under Section 2(47)(v) of the Act. The Tribunal also noted that the development agreement was not registered, but this did not affect the applicability of Section 2(47)(v) since it refers to the 'nature of transaction' rather than requiring full compliance with Section 53A of the Transfer of Property Act. Therefore, the Tribunal upheld the assessment of capital gain in the assessment year 2003-04.3. Eligibility of Deduction Under Section 54/54F of the Act:The assessee claimed that the AO failed to provide deductions under Section 54/54F while computing the capital gains. This plea was raised for the first time before the Tribunal. In the interest of natural justice, the Tribunal remanded the matter to the AO to examine the claim in accordance with the law and after providing the assessee an opportunity to be heard.Conclusion:The Tribunal upheld the validity of the notice issued under Section 148 and the assessment of capital gain in the assessment year 2003-04. The Tribunal also directed the AO to examine the assessee's claim for deductions under Section 54/54F. The appeal was treated as partly allowed for statistical purposes.