2015 (9) TMI 267 - AT - Income Tax

Tribunal upholds reassessment under section 147 despite notice issue. Capital gain to be taxed in correct year.

The Tribunal upheld the reassessment proceedings under section 147 and the validity of the assessment order despite the alleged non-issuance of notice ... Reopening of assessment - Held that:- In the present case, on the basis of the clause no. 2 of the Supplementary Agreement dated 29.04.2002, cogent material was available before the A.O. to form prima facie belief about escapement of income in the present year. It is not relevant that in spite of this material, it was held by Hon’ble Allahabad High Court in assessee’s own case for assessment year 2006-07 [2014 (12) TMI 686 - ALLAHABAD HIGH COURT ] on the basis of circumstantial evidence that possession was in fact handed over by the assessee in F.Y. 2001 – 02 relevant to A.Y. 2002 – 03. Be that as it may but in view of this cogent material available on record and also in view of this fact that even the judgment of Hon’ble High Court about handing over of the possession in F.Y. 2001 – 02 is on the basis of presumption after considering various circumstantial evidences, it cannot be said that there was no valid basis for reopening. In view of above discussion, we do not find any infirmity in the order of CIT (A) on this issue. Accordingly, these grounds of the assessee are rejected. Capital gain accrue or arise or not in the present AY or not - Transfer u/s 2(47) - Held that:- In the present case, the assessee has not offered the capital gain in any year i.e. A.Y. 2000 – 01 being the year of initial agreement or in A.Y. 2002 – 03 being the year in which possession was given as per the assessee and transfer has taken place as per the judgment of Hon’ble High Court [2014 (12) TMI 686 - ALLAHABAD HIGH COURT ] or in A.Y. 2003 – 04 i.e. the present year when supplementary agreement was executed or in A.Y. 2006 – 07 when completion agreement was executed. This is also very important that even as per the judgment of Hon’ble High Court, this does not come out that there is any clear cut evidence about handing over of possession in F.Y. 2001 – 02 relevant to A.Y. 2002 – 03 but the claim of the assessee was accepted by Hon’ble High Court on the basis of surrounding circumstances. In view of these facts, we feel it proper to give consequential direction to the A.O. to tax this capital Gain in A.Y. 2002 – 03 being the year in which the transfer has taken place as per the judgment of High Court. Accordingly Assessing Officer is directed to compute the capital gain in assessment year 2002-03 in accordance with law and tax the same. - Decided in favour of assessee. Issues Involved:1. Validity of reassessment proceedings under section 147.2. Validity of the assessment order due to the alleged non-issuance of notice under section 143(2).3. Determination of the year of transfer of the capital asset for capital gains tax purposes.Issue-Wise Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147:The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO) under section 147 of the Income Tax Act, 1961, arguing that the reassessment was based on a change of opinion and lacked valid grounds. The AO had previously assessed the capital gain for the assessment year 2006-07 but initiated protective reassessment for the year 2003-04 based on the supplementary agreement dated 29/04/2002, which indicated that possession of the land was handed over to the developer on 01/05/2002. The Tribunal held that the reopening was valid as it was based on cogent material (the supplementary agreement) and the AO had prima facie reasons to believe that income had escaped assessment. The Tribunal rejected the assessee's contention and upheld the reassessment proceedings.2. Validity of the Assessment Order Due to Alleged Non-Issuance of Notice under Section 143(2):The assessee argued that the assessment order was invalid as no notice under section 143(2) was issued concerning the return filed in compliance with the notice under section 148. The AO had issued a notice under section 143(2) dated 06/07/2009, referring to the return filed on 14/08/2003. The Tribunal accepted the Revenue's argument that the date mentioned in the notice was a typographical error and that the notice was valid under section 292B, which allows for curing such defects. Consequently, the Tribunal upheld the validity of the assessment order.3. Determination of the Year of Transfer of the Capital Asset for Capital Gains Tax Purposes:The core issue was the determination of the year in which the transfer of the capital asset occurred for capital gains tax purposes. The Tribunal referred to the judgment of the Hon'ble Allahabad High Court in the assessee's case for the assessment year 2006-07, which concluded that the possession of the land was handed over by 23/11/2001. The High Court held that the capital gain should be taxed in the year when possession was handed over, i.e., the assessment year 2002-03. The Tribunal, respecting the High Court's judgment, concluded that no capital gain tax was chargeable in the present year (2003-04) and directed the AO to tax the capital gain in the assessment year 2002-03.Conclusion:The Tribunal upheld the reassessment proceedings under section 147 and the validity of the assessment order despite the alleged non-issuance of notice under section 143(2). On the merits, the Tribunal, following the High Court's judgment, directed that the capital gain should be taxed in the assessment year 2002-03, not in the present year (2003-04). The appeal of the assessee was partly allowed with this direction.