2015 (3) TMI 56 - AT - Income Tax

Reopening of assessment - Computation of capital gains - information from Sub-Registrar's Office would show that the value of land as on 14.1981 is ₹ 2.46 per sq. yard instead of ₹ 8 per sq. yard taken by the assessee - Held that - As at the time of assessment all the details have been furnished and the Assessing Officer after taking into account all the details arrived at the capital gains. Further, the computation of capital gain was subject matter of appeal before the CIT(A). The CIT(A) has passed the order and the Department has accepted the same. The original assessment was made accepting the value of land as on 1.4.1981 at ₹ 8 per sq. yard whereas the AO held that another SRO has given the value as on 1.4.1981 at ₹ 2.48 per sq. yard. However, the computation of capital gain on the sale of land had reached finality with the order of the CIT(A) dated 9.2.2008. The assessment order insofar as computation of capital gains is concerned has merged with the order of the CIT(A). Therefore, the Assessing Officer has exceeded his jurisdiction in reopening the issue which has merged with the order of the CIT(A). Thus re-assessment order dated 7.12.2009 reopened for re-working the capital gains is without jurisdiction and requires to be set aside. Once the basis for reopening does not survive other additions made in the assessment order also cannot survive. - Decided in favour of assessee.

Summary

Issues:
1. Capital gain computation and relief granted by CIT(A)
2. Treatment of advance received for sale of site
3. Reopening of assessment u/s 147

Capital gain computation and relief granted by CIT(A):
The appeal by the Revenue and the Cross Objection by the assessee were directed against the CIT(A)'s order for assessment year 2004-05. The Revenue appealed against the quantum relief granted by CIT(A) on the capital gain from the sale of land, where the AO re-assessed the cost of acquisition at a lower value than originally allowed. Additionally, an amount received as advance for the sale of the site was treated as cash credit. The assessee contested the reopening of assessment u/s 147. The CIT(A) allowed the assessee's contentions, stating that the AO's adoption of a lower cost of indexation was not approved.

Treatment of advance received for sale of site:
The CIT(A) examined the advance of Rs. 3 lakhs received from four persons for the sale of the site and noted that the sales took place in the subsequent year. As the advances were converted into sales, they could not be treated as sale consideration, leading to the deletion of this addition.

Reopening of assessment u/s 147:
The AO proposed to reopen the assessment based on the market value of the land as on 1.4.1981, which differed from the value considered in the original assessment. The assessee contended that all materials were before the AO during the original assessment, rendering the reopening without jurisdiction. The Tribunal held that the re-assessment order exceeded jurisdiction as the computation of capital gains had reached finality with the CIT(A)'s order. The reassessment was deemed without jurisdiction and set aside, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's Cross Objection.

This judgment highlights the importance of adhering to proper assessment procedures, considering all relevant factors in capital gain computation, and the significance of jurisdiction in reopening assessments.