2017 (2) TMI 38 - AT - Income Tax

Reopening of assessment - addition being profit on sale of flats - Held that - No addition was made by AO in respect of income from Colaba flat which was the basis of formation of belief that income had escaped assessment as per the reasons recorded for reopening the assessment. In view of the decision of Jet Airways (2010 (4) TMI 431 - HIGH COURT OF BOMBAY ) which was followed by the CIT(A), we do not find any infirmity in his order for quashing the reopening and deleting the addition made on account of income in respect of Radhakrishna Niwas, in so far as CIT(A) has clearly mentioned in his order that AO is free to issue fresh notice u/s. 148 if satisfied about any escaped income from Radhakrishna Niwas subject to applicable provisions of IT. Act, 1961. - Decided in favour of assessee

Summary

Issues:
1. Addition of profit on sale of flats
2. Validity of reopening assessment

Issue 1: Addition of profit on sale of flats
The Revenue filed an appeal against the CIT(A)'s order for the assessment year 2005-2006, challenging the deletion of the addition of ?1,07,69,930 as profit on the sale of flats. The Revenue contended that the CIT(A) wrongly quashed the reopening. The assessee, a non-filer, had purchased immovable property based on information from AIR transactions. The AO observed that the assessee had sold multiple flats and car parkings, considering her as a "Builder & Developer," and assessed the income at ?1,07,69,927. The CIT(A) held that since no additions were made in respect of income from the Colaba flat, the basis for reopening, the additions made on other issues were not sustainable. The CIT(A) quashed the reopening, allowing the appeal, and directed the AO to initiate fresh proceedings if necessary.

Issue 2: Validity of reopening assessment
The CIT(A) quashed the reopening after citing the decision of the jurisdictional High Court in a similar case. The CIT(A) noted that the AO had not addressed the objections raised by the appellant during reassessment proceedings and failed to issue a fresh notice under section 148. The CIT(A) emphasized that the AO should have followed the High Court's decision and quashed the additions made. The Revenue appealed this decision. The ITAT upheld the CIT(A)'s order, stating that no additions were made in respect of the Colaba flat, the basis for reopening. The ITAT found no infirmity in the CIT(A)'s decision to quash the reopening and delete the addition made on account of income from another property. The ITAT dismissed the Revenue's appeal, allowing the AO to issue a fresh notice if satisfied about any escaped income.

In conclusion, the ITAT upheld the CIT(A)'s decision to quash the reopening of the assessment and delete the addition made on account of income from properties other than the Colaba flat. The ITAT dismissed the Revenue's appeal, allowing the AO to take further action if necessary based on applicable provisions of the IT Act, 1961.