2013 (7) TMI 1046 - AT - Income Tax

Summary

Issues Involved:
1. Re-opening of the assessment (Ground No.1 and 2)
2. Year of taxability (Ground No.3 and 4)
3. Share of income (Ground No.5) and initiation of penalty proceedings (Ground No.6)

Summary:

Re-opening of the assessment (Ground No.1 and 2):
The assessee contested the re-opening of the assessment for AY 2007-08, arguing that the capital gains had already been disclosed and assessed in AY 2006-07. The CIT(A) upheld the re-opening based on information from the ADIT and the fact that the assessment for AY 2007-08 was accepted u/s 143(1). However, the Tribunal found that the AO had no proper reasons to believe that income had escaped assessment since the capital gains were already offered and assessed in AY 2006-07. The Tribunal concluded that the re-opening of the assessment was not justified.

Year of taxability (Ground No.3 and 4):
The primary issue was whether the capital gains should be taxed in AY 2006-07 or AY 2007-08. The assessee argued that the transfer of property was completed in FY 2005-06 (AY 2006-07) based on an agreement to sell and the receipt of consideration. The AO contended that the transfer occurred only after the registration of the sale deed on 23/08/2006. The Tribunal, referencing the principles established in Chatrabhuj Dwarkadas Kapadia vs. CIT, held that the transfer was complete when the agreement to sell was signed, and possession was handed over in part performance u/s 53A of the Transfer of Property Act. Thus, the capital gains were correctly offered in AY 2006-07.

Share of income (Ground No.5):
The AO had disputed the assessee's share of the property and added part of the amount received by the assessee's father. The Tribunal found that the transaction was concluded in October 2005 when the assessee and his family members entered into an agreement to sell their undivided share in the property. The subsequent death of the assessee's father and the recitals in the sale deed did not affect the conclusion that the transfer occurred in FY 2005-06.

Initiation of penalty proceedings (Ground No.6):
The Tribunal considered the ground regarding the initiation of penalty proceedings as premature since it was only the initiation and not the conclusion of the proceedings. This ground was rejected.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the capital gains were correctly offered in AY 2006-07, and the re-opening of the assessment for AY 2007-08 was not justified. The initiation of penalty proceedings was deemed premature.