2013 (1) TMI 365 - AT - Income Tax

Tribunal Upheld Re-assessment for LTCG under Income Tax Act |

The Tribunal upheld the validity of the re-assessment under section 147 of the Income Tax Act and the assessment of Rs. 2.87 crores as Long Term Capital ... Validity of re-assessment u/s 147 – Notice u/s 148 - Re-opening of assessment - AO have specific and credible information from his counter-part - AO had reason to believe that the consideration received by assessee from the transfer of her property was liable to be taxed – Under the head “long term capital gains” - Escaped assessment in lieu of non-disclosure of LTCG in her return of income – Held that:- There was no trace of any objection worth the name for the reasons recorded for reopening of the assessment. Following the decision in case of Rajesh Jhaveri Stock Brokers P. Limited (2007 (5) TMI 197 - SUPREME COURT) that to confer jurisdiction u/s 147(a), two conditions were required to be satisfied, firstly, the AO must have reason to believe that income profits or gain chargeable to income-tax have escaped assessment and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year Hence, decides in favour of revenue Capital Gain – Sale of Land – Bringing to tax by way of LTCG - Held that:- Following the decision on identical issue in case of the assessee’s husband Shri V. S. Balasubramanyam. The issue raised by the assessee is akin to the issue considered in the case of the assessee’s husband. Accordingly, this issue goes against the assessee. Issues Involved:1. Re-assessment validity under section 147 of the Income Tax Act.2. Assessment of capital gains in the hands of the assessee.Detailed Analysis of the Judgment:1. Re-assessment validity under section 147 of the Income Tax Act:The assessee contended that the re-assessment was invalid due to lack of jurisdiction and non-compliance with mandatory requirements under section 148. The original return was processed under section 143(1) without a detailed assessment under section 143(3). The Assessing Officer (AO) received information indicating that the assessee had received Rs. 2.9 crores as sale consideration for property, which was not disclosed in the original return. Based on this information, the AO issued a notice under section 148 to re-open the assessment.The CIT (A) upheld the AO's decision, referencing the Supreme Court case of ACIT v. Rajesh Jhavery Stock Brokers P. Ltd, which allows re-assessment if the AO has 'reason to believe' that income has escaped assessment. The AO communicated the reasons for re-opening to the assessee, who responded without raising objections. The Tribunal confirmed that the AO had valid reasons to believe that income had escaped assessment and followed due procedure, thus the re-assessment was valid.2. Assessment of capital gains in the hands of the assessee:The AO assessed Rs. 2.87 crores as Long Term Capital Gains (LTCG) in the hands of the assessee. The assessee argued that the amount received was a return of capital from a partnership firm, not taxable as capital gains. The CIT (A) found that the partnership was not genuine, citing several inconsistencies, such as the lack of an original partnership deed, no business activity, and the firm's registration coinciding with the property sale. The CIT (A) concluded that the partnership was a sham to avoid tax on capital gains.The Tribunal agreed with the CIT (A) that the partnership was not genuine and that the amount received was taxable as LTCG. The Tribunal noted that the assessee's arguments were similar to those in her husband's case, which had been decided against him. Therefore, the Tribunal upheld the CIT (A)'s decision to tax the amount as LTCG.Conclusion:The Tribunal dismissed the assessee's appeal, confirming the validity of the re-assessment under section 147 and the assessment of Rs. 2.87 crores as LTCG. The decision was pronounced in the open court on 21.09.2012.