2016 (11) TMI 1649 - AT - Income Tax

Reopening of Tax Assessment u/s 147 Invalidated Due to AO's Incorrect Claim of Non-Filing of Return.

The ITAT Ahmedabad allowed the assessee's appeal, primarily invalidating the reopening of assessment under section 147 of the Income Tax Act, 1961, due to ... Reopening of assessment u/s 147 - assessee had not filed his return for the impugned assessment year - HELD THAT:- Order dated 09.02.2015 disposing of assessee’s objection to reopening reads that the said return had not been filed u/s.139(1) - CIT(A) on the other hand is of the view that the said return was not filed with the Assessing Officer issuing Section 148 notice. The fact however remains that the filing of assessee’s return in question is not otherwise in dispute. We put up a specific query to Ld. Departmental Representative to prove that assessee’s residential status or his ward is different in the above stated return or in Section 148 notice or in reassessment. He could not point out such difference. It has further come on record that assessee had also received acknowledgement of his return from department’s end forming part of the paper book. We quote hon’ble jurisdictional high court in Manish Kumar Pravinbhai Kiri vs. ACIT [2016 (1) TMI 787 - GUJARAT HIGH COURT] holding that the only reason of non filing of return forming basis of the impugned reopening in such circumstances stands belied. We thus accept assessee’s challenge to validity of the reopening and conclude that the Assessing Officer’s above stated reasoning goes contrary to the record. The same is accordingly quashed rendering assessee’s other ground on merits as infructuous. Issues involved:1. Validity of reopening of assessment under section 147 of the Income Tax Act, 1961.2. Disallowance of claim of exemption under section 54F of the Act.Analysis of the Judgment:Issue 1: Validity of Reopening of AssessmentThe appeal challenged the CIT(A)'s order dismissing the ground that the order passed under section 143(3) r.w.s. 147 of the Act was bad in law. The Assessing Officer's reason for reopening the assessment was based on the belief that the assessee had not filed the return of income for the relevant assessment year. However, it was established that the return was indeed filed by the assessee, contradicting the AO's claim. The CIT(A) overlooked the submissions made by the appellant regarding the filing of the return. The Tribunal, after perusing the case file, found that the AO's main ground for reopening, i.e., non-filing of the return, was incorrect. The Tribunal referred to a high court decision that stated the reason for non-filing of the return could not be the basis for reopening. Consequently, the Tribunal accepted the challenge to the validity of the reopening and quashed the same.Issue 2: Disallowance of Exemption under Section 54FThe second substantive ground of appeal involved the disallowance of the claim of exemption under section 54F of the Act. The appellant contended that the CIT(A) erred in disallowing the claim on the grounds that a residential house was not purchased within two years from the date of the transaction. The appellant argued that despite giving a significant portion of the development cost within the stipulated time, the completion of the residential flat was delayed due to unavoidable circumstances. The appellant cited various case laws to support the argument that exemption under section 54F cannot be denied even if all transactions are not fully complete as required by law. However, the Tribunal did not provide a detailed analysis or ruling on this issue in the judgment.In conclusion, the Tribunal allowed the assessee's appeal, primarily on the grounds of the invalidity of the reopening of assessment. The judgment did not delve deeply into the second issue regarding the disallowance of the exemption under section 54F. The decision was pronounced on November 30, 2016, by the Appellate Tribunal ITAT Ahmedabad.