2008 (2) TMI 650 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued under section 148 of the Income-tax Act, 1961.
2. Taxability of the amount deposited in the Capital Gain account under section 54(2) of the Act.
3. Levy of interest under sections 234B and 234C of the Act.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 148 of the Income-tax Act, 1961:
The assessee contested the jurisdiction of the Assessing Officer (AO) in issuing the notice under section 148, arguing that the conditions precedent for a valid exercise of jurisdiction were not met and that the AO acted on a mere change of opinion. The AO had noted five points for scrutiny, including the market value of the flat and whether the profit on sale could be considered long-term capital gain. The Tribunal examined these points and found that the AO had prima facie reasons to believe that income had escaped assessment, supported by adverse material. The Tribunal held that the reopening was valid, as it was within four years from the end of the relevant assessment year, and there was no need to show failure on the part of the assessee to disclose all material facts. The Tribunal dismissed the assessee's grounds, citing judicial pronouncements that supported the AO's actions.

2. Taxability of the amount deposited in the Capital Gain account under section 54(2) of the Act:
The assessee argued that the amount deposited in the Capital Gain account should not be taxable in the assessment year 1998-99, as the AO had not granted approval for closing the account. The Tribunal referred to the proviso to section 54(2), which states that if the deposited amount is not utilized within three years, it shall be charged as income of the previous year in which the three-year period expires. The Tribunal concluded that the unutilized amount was taxable in the assessment year 1998-99, irrespective of whether it was withdrawn by the assessee or not, and regardless of the AO's inaction. The Tribunal rejected the assessee's ground on this issue.

3. Levy of interest under sections 234B and 234C of the Act:
The assessee contended that interest under sections 234B and 234C should not be levied, as the AO's failure to allow the closure of the Capital Gain account prevented the payment of advance tax. The Tribunal noted that the levy of interest under these sections is mandatory and compensatory in nature. The Tribunal held that there is no provision to waive interest due to the AO's inaction and that the assessee would receive interest for the delayed period of withdrawal. The Tribunal upheld the CIT(A)'s decision and dismissed the assessee's grounds on this issue.

Conclusion:
Both appeals by the assessee were dismissed. The Tribunal upheld the validity of the notice under section 148, confirmed the taxability of the unutilized amount in the Capital Gain account, and ruled that interest under sections 234B and 234C was mandatory and not subject to waiver due to the AO's inaction.