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2020 (11) TMI 211 - AT - Income TaxReopening of assessment u/s 147 - Disallowance of claim u/s. 54EC - HELD THAT - The admitted fact is that the assessee has declared long term capital gains and claimed deduction u/s. 54EC of the Act in AY 2009-10. The AO, in the reasons for reopening, has taken the view that the capital gains is assessable in AY 2008-09. Hence, the correct course of action as per the reasons for reopening was that the AO should have assessed long term capital gains in AY 2008-09. AO has not assessed the capital gains in assessment year 2008-09. Instead, he has disallowed claim of deduction made u/s. 54EC in assessment year 2008-09, while the assessee has actually claimed the said deduction in AY 2009-10. Hence the question of disallowing claim made u/s. 54EC of the Act shall arise only in assessment year 2009-10 and not in AY 2008-09. Since the assessee has not claimed any deduction u/s. 54EC of the Act in AY 2008-09, the question of making any disallowance of the said claim does not arise in AY 2008-09. Hence the AO was not justified in making disallowance of any amount, which was not claimed at all in AY 2008-09. CIT(A) was not justified in confirming the said disallowance. Direct the AO to delete the disallowance - Decided in favour of assessee.
Issues Involved:
Validity of reopening of assessment and disallowance of claim made u/s. 54EC of the Act. Analysis: Validity of Reopening of Assessment: The appeals were filed against the orders passed by Ld CIT(A)-7, Bengaluru for the assessment year 2008-09. The assessees contested the validity of the reopening of assessment. The AO reopened the assessment by issuing notice u/s. 148 of the Act, expressing the view that the capital gain is assessable in AY 2008-09. However, the AO did not assess long term capital gains in the reopened assessment, but added amounts in the hands of the assessees by disallowing the claim made u/s. 54EC of the Act. The Ld CIT(A) confirmed the AO's order. The assessees argued that they did not claim any deduction u/s. 54EC of the Act in AY 2008-09, making the reopening itself bad in law. The Tribunal observed that the AO should have assessed long term capital gains in AY 2008-09 as per the reasons for reopening, but he did not. As the assessees did not claim the deduction in AY 2008-09, the disallowance should not have been made for that year. The Tribunal held that the disallowance was not justified and directed the AO to delete the disallowance amounts. Disallowance of Claim u/s. 54EC of the Act: The assessees declared long term capital gains in AY 2009-10 and claimed deduction u/s. 54EC of the Act for investments made in bonds. The AO disallowed the claim in AY 2008-09, stating that the transfer of shares was deemed to have taken place in September 2007, and the investments were made beyond the stipulated period of six months. The assessees argued that they made the investments in bonds after the actual transfer of shares in April 2008. The Tribunal found that the disallowance of the claim u/s. 54EC of the Act in AY 2008-09 was unjustified since the assessees did not claim any deduction for that year. The Tribunal set aside the Ld CIT(A)'s order confirming the disallowance and directed the AO to delete the disallowance amounts. In conclusion, the Tribunal allowed the appeals of the assessees, dismissed the stay applications, and directed the AO to delete the disallowance amounts made in the hands of the assessees for AY 2008-09.
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