2017 (5) TMI 166 - AT - Income Tax

Validity of reassessment proceedings - the claim of the assessee U/s 54F was in respect of long term capital gain arising on the sale of plot, has been disallowed - claim of AO is that AO came to know that the assessee was having two residential properties - The ld AR of the assessee has categorically stated that the assessee is not having any residential property at Bayana. The figure mentioned in the balance sheet was a mistake of the accountant - Held that - It is noticed that the balance sheet submitted for the year ending of 31/3/2008 relevant to assessment year 2008-09 has shown house property - However, the balance sheet filed for preceding year i.e. 31/3/2007 relevant to assessment year 2007-08, the assessee has shown two house properties one located at Bayana and another at Jaipur - Assessing Officer was justified in reopening the assessment proceedings I find it appropriate to restore the issue back to the file of the Assessing Officer. The Assessing Officer shall investigate with regard to the claim of the assessee that he is not having any property at Bayana and after ascertaining the correct fact, the Assessing Officer shall decide the issue accordingly in accordance with law - appeal allowed by way of remand.

Summary

Issues:
1. Validity of reassessment proceedings and eligibility for exemption u/s 54F of the IT Act.
2. Under-declaration of rental income and disallowance of claimed deductions.

Issue 1: Validity of reassessment proceedings and eligibility for exemption u/s 54F of the IT Act:
The appeal challenged the reassessment proceedings and the denial of exemption u/s 54F of the IT Act. The Assessing Officer reopened the case based on discrepancies in the balance sheet showing ownership of multiple properties. The appellant argued that the reopening was unjustified, citing lack of new material. The ITAT upheld the reopening, noting the balance sheet discrepancies between the relevant years. The ITAT ruled that the reopening was not due to a change of opinion, supporting the Assessing Officer's decision.

Issue 2: Under-declaration of rental income and disallowance of claimed deductions:
The appellant contested the addition of ?15,420 for under-declaration of rental income. The CIT(A) confirmed the addition, finding the appellant failed to justify the variance in declared income. The ITAT upheld the CIT(A)'s decision, stating that the rental income should be assessed based on actual receipts. The claim of service tax liability as a deduction was rejected, as service tax does not impact rental income. The ITAT dismissed the appellant's claim, affirming the addition of ?15,420.

In conclusion, the ITAT partially allowed the appellant's appeal for statistical purposes only, directing further investigation into the property ownership claim. The judgment addressed the validity of reassessment proceedings and the under-declaration of rental income, providing detailed analysis and legal reasoning for each issue raised in the appeal.