TaxTMI 
TaxTMI 
2020 (10) TMI 35
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.... got 60% of the constructed property viz., 9 flats amounting to 17442 sq.ft., each flat measuring 2010 sq.ft. inclusive of proportionate share in common area and the sale of such flats was effected by Assessee in the month of March 2003, wherein two flats were transferred in favour of the company's Director viz., Mrs.Nirmala Ravindran and the other flats were sold to other persons in the relevant financial years 2003-04 and relevant for AY 2003-04 and AY 2004-05. 4. Since apparently no taxable event for imposing capital gains tax under the head 'Capital Gains' arose in the month of December 2000, when Joint Development Agreement was executed, the question of taxability on the 'Capital Gains' arose in the AY 2003-04 and AY 2004-05, when sale of flats took place. 5. Against the order of the learned Commissioner of Income Tax (Appeals), upholding the imposition of capital gains tax, the matter was taken up by the Assessee before the learned Income Tax Appellate Tribunal for these two Assessment Years, viz., AY 2003-04 and AY 2004-05, which came to be disposed of by the "D" Bench of the learned Income Tax Appellate Tribunal on 31 May 2010. It appears that befo....
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....ng the guideline value and fixing the fair market value as on 1.4.1981 based on guideline value at Rs. 25 per sq ft. He has also disallowed the business expenditure claimed by the assessee during the year with the observation that no business was carried on by the assessee during the relevant year. Thus, two issues were raised before the Id. CIT(A) - (1) challenged the computation of capital gains; (Not the levy of Capital Gains Tax itself) and (i) Disallowance of business expenditure. The Id. CIT(A) has directed to adopt a value of Rs. 143/- per sq ft as on 1.4.1981 as against Rs. 217.80 adopted by the assessee and Rs. 25/- per sq ft adopted by the Assessing Officer. The Id. CIT(A) has also disallowed the claim of business loss by not accepting that there was a temporary lull in the business of the assessee and now the assessee has filed appeal by taking the following grounds in Assessment Year 2003-04. "1. The order of the Id. CIT(A) is contrary to law facts and circumstances of the case and opposed to princess of legitimate expectation. 2. Capital Gains: (a) The Id. CIT(A) fundamentally failed to appreciate that no capital gains is taxable in the year ....
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....by the ld.AR to demonstrate that no such capital gains actually accrued to the assessee during the year. Reliance was placed on various decisions including that of Chennai Bench and the Hon'ble Madras High Court wherein it has been held that at the time of delivery of possession to the vendor and having received full consideration as per the terms of the agreement transfer was complete on delivery of possession and capital gains arose in that relevant year. We have gone through the decision of Hon'ble Madras High Court in the case of D Kasturi vs CIT, 251 ITR 532, and other decisions whose ratio are on the line and the copies of the orders/judgments are annexed in the assessee's paper book. Having established the fact that transfer of the asset has already taken place in the year 2000, capital gains cannot be taxed in Assessment Year 2003-04 and 2004-05. (sic ! Tribunal wholly missed the point here that the Capital Gains Tax Liability on transfer/sale of flats was being considered by Tribunal and not transfer of land under J.D.Agreement). Therefore, we have to allow Ground No.2 first part and thereafter the adoption of fair market value as on 1.4.1981 ....
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....Judicial Member. While Vice President (Mr.D.Manmohan) and Judicial Member (Mr.N.R.S.Ganesan) held the reassessment for AY 2001-02 to be time barred, the Accountant Member (Mr.Chandra Poojari) held it to be within limitation. 10. We find from these orders that even in the questions referred to the learned Third Member, the two members (Mr.N.R.S.Ganesan, Judicial Member and Mr.Chandra Poojari, Accountant Member), differed and framed different questions. 11. The questions as referred by them and as noted by the Third Member, the Vice President (Sri.D.Manmohan), are quoted below for ready reference :- "On account of difference of opinion between the learned Accountant Member and the learned Judicial Member, the matter was referred to the Hon'ble President for nominating a Third Member under section 255(4) of the Income Tax Act, 1961, to resolve the points of difference. It may be noted that even while framing the points of difference, there was a difference of opinion. According to the learned Judicial Member, (Sri. N.R.S.Ganesan) the following questions need to be resolved: (1) 1n the facts and circumstances of the case, in the absence of any speci....
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....esent case, as the above orders are delivered on different context? 12. On account of such difference in the referred questions themselves, the learned Third Member reframed the following two fresh questions only after hearing the learned counsel for both the parties, for the same. 1. Whether the notice issued under Section 148 r.w.s.150(1) of the Act dated 10.06.2011 for the Assessment Year 2001-02 is based on any finding or direction issued by the ITAT In I T. A. Nos. 327 & 328/Mds/20I0? (decided on 31.05.2010) 2. In the event of holding that there is a finding or direction, whether the notice issued u/s 148 of the Act dated 10.6.2011 is barred by limitation or not? 13. The Third Member, however, agreed with the Judicial Member and held that the reassessment for AY 2001-02 to bring to tax the Capital Gains was barred by limitation. 14. Para 17 of the order passed by the Third Member (Vice President Shri D.Manmohan) is quoted below for ready reference :- 17. I have carefully considered the rival submissions and perused the record. As could be noticed from the observations made by the Tribunal, while disposing of the appeals for Assessment Years 2003-04 a....
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....ecided by the learned Tribunal holding that no capital gain tax was leviable in these years became final with the withdrawal of the appeals by the Revenue in High Court under Section 260A, which were dismissed as withdrawn vide order dated 28.01.2016 passed by this Court before the filing of the present appeal, TC.A.No.788 of 2016 for AY 2001-02, which was filed on 26.08.2016. However, those orders of Tribunal could not be said to have merged with the order of High Court dated 28.01.2016, permitting such withdrawal of appeal as per CBDT Circular and leaving the questions open for consideration. 18. The present appeal was thereafter filed before this Court on 26 August 2016, for AY 2001-02, raising the following substantial questions of law, for our consideration. 1. Whether the notice issued u/s 148 r.w.s. 150(1) the Act dated 10.6.2011 for the assessment year 2001-02 is based on any finding or direction issued by the Income Tax Appellate Tribunal in ITA Nos.327 & 328/Mds/2010? 2. Whether on the facts and circumstances the case the Tribunal was right and justified in holding that the notice u/s 148 was barred by limitation without noting that the time limit was....
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....tax imposition under the head 'Capital Gain' despite its own admission of such Capital Gains Tax Liability, in the return of income filed for AY 2003-04 and 2004-05. He submitted that by a change of stand before the learned Income Tax Appellate Tribunal in the appeals for AY 2003-04 and AY 2004-05, which was decided on 31 May 2010, though this issue raised was only of Fair Market Value and not of the Capital Gains Tax Liability itself, the Assessee got the relief on a wholly wrong premise before the learned Tribunal who held that no capital gain tax liability was attracted in AY 2003-04 and AY 2004-05, whereas the sale of flats had taken place only in March 2003 and thereafter, while on the other hand, for AY 2001-02, by raising the ground of limitation for invoking the reassessment proceedings, to bring to tax the said transactions in that year also, the Assessee succeeded before the learned Tribunal and despite the difference of opinion in the Members of Tribunal and therefore, the Revenue is constrained to argue the present appeal for AY 2001-02 on merits and submit before the Court that the Assessee, by this devious method can go Scot free or tax free on the taxable eve....
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....ee Company and not on the transfer of land for Joint Development in December 2000. 25. We are rather pained by the manner in which the learned Tribunal dismissed even the Miscellaneous Petition also filed by the Revenue, despite bringing the said mistake to the notice of the learned Tribunal, about the said illegal and mischievous change of stand by the Assessee that sale of flats did not attract 'Capital Gains Tax Liability' for AY 2003-04 or AY 2004-05 but for AY 2001-02 only. Having not raised this issue before the learned CIT (Appeals) who passed the order dated 22.07.2008, for AY 2003-04 and AY 2004-05, the Assessee could not have taken this stand before the Tribunal and the learned Tribunal instead of remitting the matter back to learned CIT (Appeals), chose to grant the complete relief to the Assessee on this ground alone, and even dismissed the Miscellaneous Petition Nos.173 and 174/Mds/2010 filed by the Revenue on 27.10.2010 in a quick response, on 18.02.2011. The said order dated 18.02.2011 rejecting the Miscellaneous Petition filed by Revenue is quoted below :- PER HARI OM MARATHA, JUDICIAL MEMBER: These miscellaneous petitions have been file....
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....se in rectification of mistake by Tribunal absolutely permissible under Section 254(2) of the Act. Section 254(1) and (2) of the Act is quoted below for ready reference :- Orders of Appellate Tribunal. 254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (1A) ... (2) The Appellate Tribunal may, at any time within [six months from the end of the month in which the order was passed], with a view to rectifying any mistake apparent from the record, amend any order passed by it under subsection( 1), and shall make such amendment, if the mistake is brought to its notice by the Assessee or the (Assessing Officer) : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard: [Provided further that any application filed by the Assessee in this sub-s....
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....001-02 was time barred. 29. We may observe here that the limitation for taking particular action for assessment/reassessment in law is prescribed even in the Taxation Laws to ensure timely action on the part of the Assessing Authorities, so that beyond a reasonable period, the Revenue Authorities do not rake up the dead issues or old issues and cause any prejudice to the Assessee. But there is a saving provision in the limitation provisions prescribed in the Act as well, when such reassessment are undertaken by the Authorities concerned under the directions of superior Tribunals or Court. The Assessing Authority, naturally gets a fresh limitation and in compliance with the direction of the higher Tribunal or Court, it is always open to the Assessing Authority to pass fresh assessment / re-assessment orders. Section 150(1) of the Act is that provision under the Income Tax Act, 1961. 30. Section 147 of the Act is the enabling provision for reassessment, which provides for reassessment where the income escapes assessment and Section 148 prescribes for a Notice to be issued to the Assessee for such reassessment. Section 149 of the Act provides for time limit for giving such notic....
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.... the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, [* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :] [Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said subsection by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or re....
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....consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 32. The scheme of Act about reassessment, coupled with the provisions of limitation is thus clear. It is not intended to defeat the taxability but it is intended to provide a safeguard to the Assessee so that beyond the prescribed period of limitation, action of reassessment on the part of the Assessing Authority is not permitted unless the conditions for initiating such action beyond the prescribed limitations are ....
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.... of stand by Assessee, to allow the Revenue to have its say on facts in that regard; or (iii) to direct the Assessing Authority to, specifically pass reassessment order for AY 2001-02 in pursuance of its own directions as it held that transfer of Asset had taken place in December 2000, so that the Assessing Authority could have invoked section 150(1) of the Act and pass fresh reassessment orders in pursuance of such order of Tribunal and question of limitation could not have arisen. 35. The reassessment for AY 2001-02 had once been made on 30.03.2000 and again on 25.03.2013 in pursuance of Tribunal order dated 31.05.2010, whereas reassessment for AY 2003-04 and 2004-05 had been initially made on 30.03.2006 and 28.12.2006 respectively, which was very much within limitation prescribed under Section 149 of the Act. The order of Commissioner of Income Tax (Appeals) for these three years was passed on 22.07.2008, which was 'subject matter' of appeal before Income Tax Appellate Authority which held reassessment to be time barred by an obvious misreading of Section 150(2) of the Act. 36. By deciding the question of limitation of AY 2000-01 against Revenue, and by holding tha....