2021 (1) TMI 352 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - difference of opinion arose between Hon'ble Accountant Member and Hon'ble Judicial Member - matter referred to Hon'ble Third Member - Escapement of long-term capital gain s - Whether the order of assessment passed under section 147 on 28/12/2012 was without furnishing reasons recorded for initiating the proceedings under section 147 and therefore was void and of no effect? - Whether there was transferred took place during previous year relevant to assessment year 2006-07? - HELD THAT - Hon'ble Third Member concurred with the view taken by Hon'ble Judicial Member, who observed that, order dated 28/02/2014 passed by Ld. AO under section 143(3) read with 147 of the Act, without furnishing reasons recorded for initiating proceedings for reassessment under section 147 of the Act is void and of no effect. Whether transfer of property occurred u/s. 2(47)(v)? - JDA entered - Hon'ble Third Member concurred with the view taken by Hon'ble Judicial Member, who held that there was no transfer of property during the previous year relevant to assessment year 2006-07. Computation of capital gains being erroneous and excessive - The present proceedings pertains to asst. year 2006-07 and not for the asst. Year 2009-10. It is an admitted position in law that the tax is to be charged in the year it accrued. Therefore the finding of the lower authorities is devoid of merit. We hold that authorities below erred in computing capital gains in the hands of assessee during year under consideration. Interest under section 234 A, B, C - This ground to be consequential in nature.

Issues Involved:
1. Validity of assessment order without furnishing reasons for initiating proceedings under section 147.
2. Whether a transfer of property occurred during the previous year relevant to assessment year 2006-07.
3. Computation of capital gains.
4. Whether the transaction results in an Association of Persons (AOP).
5. Interest under section 234A, B, C.

Detailed Analysis:

1. Validity of Assessment Order Without Furnishing Reasons for Initiating Proceedings Under Section 147:
The appellant argued that the assessment order dated 28/12/2012 was void as the reasons for initiating proceedings under section 147 were not furnished. The Hon'ble Third Member agreed with the Judicial Member, stating that the ratio laid down by the Hon'ble Supreme Court entitles the assessee to a copy of the reasons recorded, provided the assessee has filed a return in response to the notice under section 148. The failure to furnish these reasons rendered the reassessment invalid. Consequently, Grounds 2, 3, 6, and 7 were allowed.

2. Whether a Transfer of Property Occurred During the Previous Year Relevant to Assessment Year 2006-07:
The issue of whether a transfer occurred under section 2(47)(v) was contentious. The Hon'ble Third Member concurred with the Judicial Member, who held that the Joint Development Agreement (JDA) dated 07/06/2005 was extinguished by subsequent agreements and was not registered. Therefore, there was no transfer of property during the relevant assessment year. Grounds 4, 5, 10, 10.1, 14, and 15 were allowed.

3. Computation of Capital Gains:
The appellant contested the computation of capital gains, arguing it was erroneous and excessive. The Judicial Member held that since no transfer occurred on 07/06/2005, there was no justification for computing capital gains for that date. The reliance on a letter dated 17/01/2013 to infer a different sale consideration was also misplaced. Consequently, Grounds 9, 9.1, and 13 were allowed.

4. Whether the Transaction Results in an Association of Persons (AOP):
The issue of whether the transaction resulted in an AOP was deemed academic by the Judicial Member and was not adjudicated upon. Thus, Ground 12 was not addressed.

5. Interest Under Section 234A, B, C:
The Judicial Member held that the grounds related to interest under section 234A, B, and C became academic due to the findings on other issues. Consequently, Grounds 16 and 16.1 were deemed consequential and not adjudicated upon.

Conclusion:
The appeals were decided in favor of the appellant on most grounds. The reassessment orders were found invalid due to the failure to furnish reasons for initiating proceedings, and it was held that no transfer of property occurred during the relevant assessment year. The computation of capital gains was deemed erroneous, and the issues regarding the formation of an AOP and interest under sections 234A, B, and C were not adjudicated upon due to their academic nature. The appeals were allowed or partly allowed based on these findings.

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