2010 (8) TMI 1036 - AT - Income Tax

Summary

Issues Involved:
1. Legal validity of reopening of assessment u/s 147.
2. Assessment of income on account of gift of immovable property u/s 28(iv).

Summary:

1. Legal Validity of Reopening of Assessment u/s 147:
The first dispute concerns the legal validity of reopening the assessment. The assessee, a trade union leader, had disclosed business income as honorarium from Engineering Mazdoor Sabha and Mumbai Mazdoor Sabha. During the assessment for AY 2004-05, it was found that the assessee received a gift of immovable property on 26.4.2001, valued at Rs. 1,96,28,314/-. The AO reopened the assessment for AY 2002-03, issuing a notice u/s 148 on 6.11.2006, considering the gift as income u/s 28(iv). The assessee argued that the assessment for AY 2002-03, completed u/s 143(1) on 6.3.2003, could not be reopened u/s 147. The AO and CIT(A) disagreed, citing that intimation u/s 143(1) is not an assessment, as held by the Supreme Court in Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500). The tribunal upheld this view, stating that reopening in such cases is not based on a change of opinion, as the AO at the time of processing u/s 143(1) does not apply mind regarding the allowability of claims or assessability of receipts.

2. Assessment of Income on Account of Gift of Immovable Property u/s 28(iv):
The second dispute involves the assessment of income from the gift of immovable property received by the assessee from Engineering Mazdoor Sabha. The assessee received a flat valued at Rs. 1,96,28,314/- on 26.4.2001. The AO assessed this gift as income u/s 28(iv), arguing that it arose from the exercise of the profession, not from personal affection. The assessee contended that the gift was a token of love and affection for completing 25 years of service to the union and cited several judgments to support the claim. However, the AO and CIT(A) found these cases distinguishable, noting that the gift was connected to the professional services rendered by the assessee to the union. The tribunal upheld this view, stating that the gift had a direct nexus with the services rendered and was assessable as income u/s 28(iv). The tribunal also rejected the alternate plea to consider the stamp duty value of Rs. 1,00,28,000/-, affirming the value of Rs. 1,96,28,314/- as the cost of the property for tax purposes.

Conclusion:
The tribunal dismissed the appeal, upholding the reopening of assessment u/s 147 and the assessment of the gift as income u/s 28(iv) at Rs. 1,96,28,314/-. The order was pronounced in open court on 13.08.2010.