2018 (12) TMI 1831 - AT - Income Tax

Reopening of assessment u/s 147 - change of opinion - sale of agricultural land - Claim of deduction u/s.54F denied - HELD THAT - A perusal of the letter of assessee addressed to AO explaining the sale of the property at Uthandi village in the course of original assessment proceedings, which culminated in the assessment order dated 21.01.2014 clearly show that the issue has been considered by AO in the course of original assessment proceedings. Re-opening of the same done by AO by issue of notice u/s.148 of the Act dated 27.11.2015 on the basis of the Gazettee Notification dated 09.11.2010, is nothing but a change of opinion. Gazettee Notification dated 09.11.2010 was very much available when the original assessment order was passed u/s.143(3) of the Act on 21.01.2014. Therefore, this is not new evidence, which has come to light. The benefit available to the Department under Explanation -2 to Section 147 of the Act also would not help to the Department in so far as the claim of agricultural land is not falling under any exemptions provided in the said Explanations. Assessment order in the case of assessee s wife Smt Seema Shroff and the coowner passed u/s.143(3) of the Act on 14.03.2014 accepting the claim on sale of agricultural land remains undisturbed. This being so, clearly the reopening being on change of opinion, the same is unsustainable and consequently quashed. Deduction u/s.54F - What has been sold by assessee is only agricultural land in so far as the sale deed was executed on 18.01.2011 whereas the said Uthandi village has come within the Corporation limit by virtue of the Government Order No.97 dated 19.07.2011 as has already been held by the Co-ordinate Bench of the Tribunal in the case Shri N. K. V. Krishna referred to supra. In respect of an alternate claim of assessee that the assessee has also alternatively eligible of deduction u/s.54F. Admittedly, the certificate issued by Executive Engineer, Greater Chennai Corporation clearly shows that the location of the building is in primary residential zone as per CMDA land use map and the building plan has been sanctioned for residential purpose only. Obviously, the Executive Engineer, Zonal Office, Greater Chennai Corporation is a competent person to decide on the location map in respect of the building as also the plan approval and the Executive Engineer having given a finding and being the competent authority, obviously assessee would be entitled to claim of deduction u/s.54F, though the same is liable to be restricted to the residential portion only. - Decided in favour of assessee.

Summary

Issues involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Levy of capital gains tax on the sale of agricultural land.
3. Disallowance of deduction under section 54F of the Income Tax Act.

Reopening of assessment under section 147:
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2011-12. The assessee contended that the re-opening of the assessment by the Assessing Officer was wrong, illegal, and opposed to law. The grounds raised included the lack of additional tangible material to show that income had escaped assessment and the assertion that the assessments cannot be re-opened merely based on a change of opinion. The Assessee provided evidence that the property sold was classified as agricultural land and located outside municipal limits. The Tribunal noted that the re-opening of the assessment based on a Gazette Notification was a change of opinion and quashed the re-opening, emphasizing that the property was indeed agricultural land and the original assessment had accepted this fact.

Levy of capital gains tax on the sale of agricultural land:
The dispute revolved around the levy of capital gains tax on the sale of land at Uthandi village, classified as agricultural land by the Revenue Department. The Assessee argued that the property was agricultural land, supported by the purchase deeds and the fact that the property was sold as agricultural land. The Tribunal considered the Gazette Notification and a previous Tribunal decision, which confirmed that the village came within the Corporation limits after the sale. The Tribunal upheld the Assessee's claim that the property was agricultural land and not subject to capital gains tax, ultimately allowing the appeal.

Disallowance of deduction under section 54F:
The Assessee also contested the disallowance of the deduction under section 54F of the Income Tax Act. The Assessee had invested the sale proceeds in constructing a residential property, supported by documents showing the property's residential nature. Despite the contention that a portion of the property was used for commercial purposes, the Tribunal held that the Assessee was entitled to the deduction under section 54F for the residential portion of the property. The Tribunal allowed the appeal, emphasizing that the property's residential use qualified for the deduction under section 54F.

In conclusion, the Appellate Tribunal ITAT Chennai ruled in favor of the Assessee, quashing the re-opening of the assessment under section 147, confirming that the property sold was agricultural land not subject to capital gains tax, and allowing the deduction under section 54F for the residential portion of the property.