2012 (12) TMI 699 - AT - Income Tax

Reopening of assessment - Eligibility of deduction u/s 54/54F - Held that - On examination of the agreement dated 14.4.2002 and also the affirmation letter dated 21.4.2004 it appears that the AO has arrived at the belief that the capital gains would be assessable in the assessment years 2003-04 to 2005-06. These discussions would show that the AO had enough reasons to draw a belief of escapement of income in these three years. As stated earlier it cannot be said that the AO had reached firm conclusion on the issue of year of assessment of the capital gains at the time of issuing notice u/s 148 hence dismissal of grounds raised with regard to the validity of the notice issued u/s 148 for the year under consideration. Validity of assessment of capital gains - Selection of year of assessment - Held that - On a careful reading of the agreement dated 14.4.2002 entered between the assessee and the builder it is noticed that the said agreement is a development agreement under which the builder has agreed for the development of the schedule property into multi storied residential building by name Nikunjam Apartments - the builder shall commence construction within 30 days from the date of entering the schedule property for the purpose of construction (clause 6.1). Further it is the responsibility of the builder to obtain necessary approvals. It is also mentioned in clause 2 of the agreement that the assessee has executed a registered general power of attorney in favour of the builder on the very same date i.e. on 14.4.2002 - CIT(A) was right in law in confirming the action of the assessing officer in assessing the capital gain in the assessment year 2003-04 since the development agreement was entered into on 14.4.2002. As assessee already declared capital gains in the assessment years 2005-06 and 2006-07 and hence the sale consideration declared in those years are required to be excluded in the assessment year 2003-04 - the right course for the assessee would be to approach the tax authorities for exclusion of the income which was wrongly offered by him in the subsequent assessment years Deduction u/s 54/54F - Held that - The assessee is urging this plea for the first time set aside this matter to the file of the AO with the direction to examine the claim of the assessee - appeal of the assessee as partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act for reassessment.
2. Validity of assessment of capital gain in the year under consideration.
3. Eligibility of deduction under Section 54/54F of the Income Tax Act.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148 of the Act for Reassessment:
The assessee contended that the Assessing Officer (AO) issued notices under Section 148 simultaneously for assessment years 2003-04, 2004-05, and 2005-06 based on identical reasons. The AO had reason to believe that there was an escapement of income due to an agreement dated 14.04.2002 between the assessee and M/s Nikunjam Constructions P Ltd. The AO's belief was based on the fact that the possession of the land was handed over on 21.04.2004, which could affect the assessment years 2003-04 to 2005-06. The Tribunal concluded that it is not necessary for the AO to reach a definitive conclusion at the time of issuing the notice under Section 148, as long as there are reasons to believe there is an escapement of income. Consequently, the Tribunal dismissed the grounds raised by the assessee regarding the validity of the notice issued under Section 148 for the year under consideration.

2. Validity of Assessment of Capital Gain in the Year Under Consideration:
The assessee argued that the capital gain should be assessed in the assessment year 2005-06, as the possession of the property was handed over on 21.04.2004. The Tribunal examined the agreement dated 14.04.2002 and the affirmation letter dated 21.04.2004, concluding that the substance of the transaction indicated that the physical possession of the land was handed over to the builder after the agreement date. The Tribunal referred to the case of Chaturbhuj Dwarkadas Kapadia v. CIT, which established that the date of the contract is relevant for determining the year of chargeability under Section 2(47)(v) of the Act. The Tribunal also noted that the development agreement was not registered, but this did not affect the applicability of Section 2(47)(v) since it refers to the "nature of transaction" rather than requiring full compliance with Section 53A of the Transfer of Property Act. Therefore, the Tribunal upheld the assessment of capital gain in the assessment year 2003-04.

3. Eligibility of Deduction Under Section 54/54F of the Act:
The assessee claimed that the AO failed to provide deductions under Section 54/54F while computing the capital gains. This plea was raised for the first time before the Tribunal. In the interest of natural justice, the Tribunal remanded the matter to the AO to examine the claim in accordance with the law and after providing the assessee an opportunity to be heard.

Conclusion:
The Tribunal upheld the validity of the notice issued under Section 148 and the assessment of capital gain in the assessment year 2003-04. The Tribunal also directed the AO to examine the assessee's claim for deductions under Section 54/54F. The appeal was treated as partly allowed for statistical purposes.