2012 (8) TMI 424 - AT - Income Tax

Reopening of assessment u/s 147 - capital gains had arisen because of a sale deed executed on 13.3.1994 belongs to the AY 19994-95 & not in AY 1997-98 - Held that - As no valid notice u/s 143(2) was issued within one year of filing of the return of income and AO without even dealing with the factual aspect of the plea has declined it by citing principle of estoppel the same is not sustainable because the plea challenging the validity of the assessment goes to the root of the case and if the assessment itself is held to be bad in the eyes of law nothing further survives - in favour of the Assessee

Issues:
Validity of notice under sec.143(2) of the I.T. Act.
Applicability of sec.69/69A/69B of the I.T. Act.
Assessment of undisclosed income under VDIS.
Calculation of capital gains for Assessment Year 1994-95.
Cross Objection challenging the validity of the assessment.

Validity of notice under sec.143(2) of the I.T. Act:
The case involved a dispute regarding the validity of the notice issued under sec.143(2) of the I.T. Act. The Assessing Officer contended that the Assessee waived the right to challenge the notice since it was not raised earlier. However, the Tribunal held that challenging the validity of the notice was crucial as it goes to the root of the case. Citing relevant case law, the Tribunal concluded that the assessment itself was flawed due to the absence of a valid notice, thus supporting the Assessee's position.

Applicability of sec.69/69A/69B of the I.T. Act:
The Assessing Officer applied sec.69/69A/69B of the I.T. Act to treat the undisclosed income declared under the Voluntary Disclosure Scheme as available income for the Assessment Year 1998-99. The Assessee argued against this application, emphasizing that the undisclosed income pertained to the Assessment Year 1994-95 and should not be considered for the subsequent year. The CIT(Appeals) supported the Assessee's stance, ruling that the capital gains from 1994-95 could not be included in the assessment for 1997-98, ultimately allowing the Assessee's appeal.

Assessment of undisclosed income under VDIS:
The Assessee disclosed income under the Voluntary Disclosure Scheme without paying tax, leading to a subsequent assessment by the Assessing Officer. The original assessment raised a demand, which was challenged by the Assessee through appeals. The Tribunal's decision to remand the matter back to the Assessing Officer allowed for a reevaluation of the case, leading to a detailed review of the capital gains and other relevant factors before reaching a final decision.

Calculation of capital gains for Assessment Year 1994-95:
During the reassessment proceedings, the Assessee presented a detailed calculation of capital gains for the Assessment Year 1994-95, including sale proceeds, indexed cost, compensation, and brokerage. The Assessee also raised objections regarding the validity of the assessment process and the timing of the capital gains realization, asserting that the amount in question belonged to the earlier assessment year and should not be attributed to the current one.

Cross Objection challenging the validity of the assessment:
The Assessee filed a Cross Objection challenging the validity of the assessment, specifically focusing on the notice issued under sec.143(2) of the I.T. Act. The Tribunal, after considering arguments from both sides and relevant case law, concluded that the absence of a valid notice rendered the assessment contrary to the provisions of the Act. Consequently, the Cross Objection was accepted, leading to the dismissal of the Revenue's appeal based on the assessment's flawed foundation.

This detailed analysis of the judgment highlights the key issues addressed by the Appellate Tribunal ITAT, CHENNAI, providing a comprehensive overview of the legal complexities and decisions made in the case.

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