2014 (4) TMI 742 - AT - Income Tax

Validity of re-opening of assessment u/s 148 of the Act - Consideration in part received for construction of additional built up area - Held that - The observation of the Tribunal for the purpose of deleting the addition in respect of the assessment year 2002-03 cannot be treated to be a finding for reopening the AY 2001-02 as the appeal for assessment year has not been before the Tribunal for adjudication - the observation of the Tribunal that the case of the assessee is to be brought to tax for assessment year 2000-01 and not assessment 2002-03 as done by the AO is incidental for holding the addition made in the year 2002-03 is not justifiable and the same cannot be the basis for having recourse to section 150 of the Act by holding it as finding or direction . The observation of the Tribunal does not require compliance by the authorities so far as the assessment year 2000-01 is concerned, taking recourse to section 150 of the Act by holding the same as finding of the Tribunal is not legally tenable Relying upon Rakesh N. Dutt Vs. ACIT 2007 (10) TMI 285 - BOMBAY HIGH COURT - once section 150 of the Act is not applicable to the case of the assessee, the reopening of the assessment beyond the period of six years from the end of the relevant assessment year would be time barred - thus, CIT(A) is not justified in confirming the validity of the notice issued u/s 148(1) the proceedings for re-opening of the assessment is set aside Decided in favour of Assessee.

Summary

Issues:
1. Validity of reopening of assessment u/s 148
2. Interpretation of the Tribunal's observation as a 'finding or direction' for reopening beyond six years
3. Adoption of value of flats for calculating capital gains
4. Levying of interest u/s 234A, 234B, and 234C

Issue 1: Validity of reopening of assessment u/s 148
The appeal challenged the Ld.CIT(A)'s decision confirming the reopening of assessment u/s 148. The Tribunal's order in a previous case for AY 2002-03 led to the AO issuing a notice u/s 148 for AY 2000-01. The assessee contended that the Tribunal's observation did not provide a finding or direction for reopening beyond six years. Citing legal precedents, the assessee argued against the validity of the notice, while the revenue relied on a different case law. The Tribunal analyzed the Tribunal's observation and relevant legal principles to determine if it constituted a 'finding or direction' for reopening under section 150(1) of the Act.

Issue 2: Interpretation of the Tribunal's observation
The Tribunal examined the legal position regarding 'finding or direction' under section 150(1) based on past judgments. It concluded that the Tribunal's observation in the AY 2002-03 case could not be considered a 'finding or direction' for reopening the AY 2000-01 assessment. The Tribunal emphasized that section 150(1) is applicable only when compliance with a higher authority's order is necessary, which was not the case here. Citing relevant case laws, the Tribunal held that the AO's reliance on the Tribunal's observation was not legally tenable, ultimately quashing the reopening proceedings and reassessment order.

Issue 3: Adoption of value of flats for calculating capital gains
The issue regarding the adoption of the value of flats based on the DVO's report for calculating capital gains was rendered unnecessary due to the quashing of the reopening of assessment. Therefore, the Tribunal did not adjudicate on this issue as it arose from the now-invalid reassessment order.

Issue 4: Levying of interest u/s 234A, 234B, and 234C
The Tribunal noted that the issue of levying interest under sections 234A, 234B, and 234C was consequential and did not require separate adjudication since the reassessment order had been quashed. Consequently, the Tribunal treated the appeal as allowed, and the order was pronounced accordingly on April 16, 2014.