2021 (9) TMI 1343 - AT - Income Tax

Reopening of assessment u/s 147 - Mandation of recording objections - main contention of the AR is that the AO has to dispose of the objections raised by the assessee for reopening the assessment by a separate speaking order and thereafter he has to frame the assessment order - HELD THAT - In the present case, AO issued notice u/s. 148 dated 29.3.2016 served on the assessee on 30.3.2016. There was change in the incumbent of office of AO and the proceedings continued vide letter dated 26.7.2016 and by one more letter dated 3.8.2016. Assessee sought reasons for reopening of assessment on 3.10.2016 which was furnished to the assessee on 24.10.2016. AO dealt with the objections raised by the assessee in his assessment order itself, though not by a separate order and completed the assessment on 30.12.2016. Now the grievance of the assessee is that the objections of the assessee was not disposed by the AO by a separate order. AO duly considered the objections and disposed the same by discussing it in his assessment order itself. In our opinion, he should have disposed it by a separate speaking order, however, it would not lead to nullity of the order. The case laws relied on by the ld. DR on this point are applicable to the facts of the present case. Accordingly, in the interest of justice, we vacate the orders of the lower authorities and remit this legal issue back to the file of the Assessing Officer for deciding the objections of assessee for reopening the assessment by a separate and speaking order, and in case the objections of the assessee is rejected, then the AO is required to pass a fresh assessment order, after adequate opportunity of being heard to the assessee. Appeal by the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Reopening of assessment.
2. Asset classification as agricultural land vs. capital asset.
3. Computation of capital gains.
4. Taxation status (individual vs. HUF).
5. Deduction under section 54B.
6. Assessment year applicability.
7. Interest under sections 234A & 234B.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The appellant contended that the reopening of the assessment was invalid due to non-compliance with mandatory conditions under section 148, lack of proper sanction under section 151, and failure to dispose of objections by a speaking order. The Tribunal noted that the notice under section 148 was issued and served, and objections were raised by the appellant. However, the Assessing Officer (AO) did not dispose of these objections by a separate speaking order, which is a procedural requirement as per the Supreme Court's decision in GKN Driveshafts (India) Ltd. The Tribunal concluded that the AO should have disposed of the objections by a separate order, but this procedural lapse does not nullify the assessment order. The matter was remitted back to the AO to decide the objections by a separate speaking order and, if necessary, pass a fresh assessment order.

2. Asset Classification as Agricultural Land vs. Capital Asset:
The appellant argued that the property sold was agricultural land and not a capital asset, thus not liable for capital gains tax. The authorities below treated the property as a capital asset based on its location within 8 kilometers of BBMP limits. The Tribunal observed that the sale agreement was executed before the notification of BBMP, and the property was situated in a Panchayat area with a population of less than 10,000. The Tribunal directed the AO to re-examine the classification of the property considering the evidence regarding its distance and location and the relevant notifications and circulars.

3. Computation of Capital Gains:
The appellant challenged the computation of capital gains, arguing that the guideline value on the date of registration should not be considered as the full value of consideration, and section 50C should not apply as the land was agricultural. The Tribunal noted that the authorities below failed to refer the matter to the valuation officer as per section 50C. The Tribunal directed the AO to refer the valuation to the valuation officer and re-compute the capital gains accordingly.

4. Taxation Status (Individual vs. HUF):
The appellant contended that the property was ancestral and should be taxed in the status of Hindu Undivided Family (HUF) rather than an individual. The Tribunal did not specifically address this issue in the judgment, as the primary focus was on procedural lapses and the classification of the asset.

5. Deduction under Section 54B:
The appellant argued that the AO erred in not granting deduction under section 54B. The Tribunal did not delve into this issue in detail, given the remand on other grounds.

6. Assessment Year Applicability:
The appellant contended that the capital gains should not be assessed for the assessment year 2009-10. The Tribunal did not specifically address this issue, focusing instead on the procedural aspects and asset classification.

7. Interest under Sections 234A & 234B:
The appellant challenged the levy of interest under sections 234A and 234B, arguing that there was no liability to additional tax. The Tribunal did not provide a detailed analysis of this issue, given the remand on other grounds.

Conclusion:
The Tribunal remitted the case back to the AO to dispose of the objections by a separate speaking order and, if necessary, pass a fresh assessment order. The AO was directed to re-examine the classification of the property and refer the valuation to the valuation officer for accurate computation of capital gains. Other issues raised by the appellant were not addressed in detail, given the remand on procedural grounds.