2010 (5) TMI 705 - AT - Income Tax

Summary

Issues Involved:
1. Validity of initiation of reassessment proceedings u/s 148.
2. Classification of capital gains on sale of land as short-term or long-term.

Summary:

Issue 1: Validity of Initiation of Reassessment Proceedings u/s 148
The assessee challenged the reassessment proceedings initiated u/s 148, claiming it was a mere change of opinion. The initial return was processed u/s 143(1) and reassessment notice was issued within four years. The Tribunal referred to the apex court's decision in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561, which allows reopening if there is tangible material indicating income escapement. The Tribunal also cited Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500, stating that processing under section 143(1) does not constitute an assessment order, thus no change of opinion occurs. The Tribunal found the reason for reopening (incorrect classification of capital gains) to be tangible and justified, dismissing the assessee's ground on this issue.

Issue 2: Classification of Capital Gains on Sale of Land
The assessee claimed long-term capital gains on the sale of land, arguing the land was held since 1993-94 and exemption u/s 54EC was rightly claimed. The Assessing Officer observed that the asset sold was a depreciable asset (shed godown BMK premises) and should be classified as short-term capital gains u/s 50. The Commissioner of Income-tax (Appeals) upheld this, stating the asset was used as a business asset with depreciation claimed at 10 percent till the assessment year 2001-02. The Tribunal found that the assessee had claimed depreciation on the asset from 1993-94 to 2001-02, and thus, the sale value must be adjusted against the block of assets. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), confirming the classification as short-term capital gains and disallowing the exemption u/s 54EC.

Conclusion:
The appeal filed by the assessee was dismissed, upholding the reassessment proceedings u/s 148 and confirming the classification of capital gains as short-term. The order was pronounced in the open court on May 14, 2010.