2023 (6) TMI 118 - AT - Income Tax

Reopening of assessment u/s 147 - assessee did not file his return of income - undisclosed capital gain - On the basis of the information available in AIR that the assessee along with 17 other co-owners has sold immovable property and since the assessee has not filed any return of income therefore no income under the head capital gains has been offered for taxation - HELD THAT - If there is reasonable information on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment then proceedings u/s 147 can be validly initiated - sufficiency or correctness of the material is not a thing to be considered at the stage of recording reasons. Therefore we find no infirmity in the initiation of proceedings u/s 147 in the facts of the present case. Accordingly grounds raised in assessee s appeal are dismissed. Year in which the transfer of immovable property has taken place - In the present case it has not been disputed that the assessee has transferred the development rights in the plot of land to the builder/developer. possession of the land was also handed over to the builder/developer alongwith the development rights. Therefore even though the Agreement for Sale was executed on 30/03/2010 the property was already transferred on 18/01/2008 at the time of execution of the Development Agreement and thus for all intent and purpose the land was transferred in the assessment year 2008-09. We are of the considered view that the aforesaid land was transferred by the assessee along with the other 17 co-owners to the builder/developer in the previous year relevant to the assessment year 2008-09 and therefore capital gains if any thereon cannot be taxed in the year under consideration. As a result ground no.3 raised in assessee s appeal is allowed.

Issues Involved:
1. Validity of notice under section 148.
2. Alleged escapement of income.
3. Assessment year for capital gains on the transfer of land.
4. Justification of the assessment order due to non-filing of return.
5. Proper appreciation of facts by CIT(A).

Summary:

1. Validity of Notice under Section 148:
The assessee contended that the learned CIT(A) did not address the challenge to the validity of the notice issued under section 148. The Tribunal upheld the initiation of proceedings under section 147, referencing the Supreme Court's observation in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd., which stated that if there is reasonable information that income has escaped assessment, the AO can validly initiate proceedings. The Tribunal found no infirmity in the initiation of proceedings under section 147.

2. Alleged Escapement of Income:
The AO observed that the assessee, along with 17 co-owners, sold immovable property but did not offer the profit for tax. The AO treated Rs. 5,11,93,000 as the full value of the consideration received and made an addition of Rs. 28,44,056 as income under the head "capital gains." The Tribunal found that the AO had cause or justification to believe that income had escaped assessment, thus dismissing the assessee's grounds on this issue.

3. Assessment Year for Capital Gains on Transfer of Land:
The main issue was determining the year in which the transfer of immovable property took place. The assessee argued that the transfer occurred in the assessment year 2008-09 when the Development Agreement was executed and possession was handed over. The Tribunal referred to the Supreme Court's decision in Sanjeev Lal v/s CIT, which considered the date of the agreement to sell as the date of transfer. The Tribunal concluded that the transfer took place in the assessment year 2008-09, not 2010-11, thereby allowing the assessee's ground on this issue.

4. Justification of the Assessment Order due to Non-Filing of Return:
The learned CIT(A) justified the assessment order on the basis that the assessee did not file a return for the assessment year 2008-09. The Tribunal, however, found that the transfer of the property occurred in the assessment year 2008-09, thus the capital gains could not be taxed in the year under consideration (2010-11).

5. Proper Appreciation of Facts by CIT(A):
The assessee claimed that the learned CIT(A) did not properly appreciate the facts of the case. The Tribunal's findings on the primary issues rendered separate adjudication on this ground unnecessary.

Conclusion:
The Tribunal partly allowed the appeal, concluding that the capital gains from the transfer of land should be assessed in the assessment year 2008-09, not 2010-11. The issues raised by the assessee were addressed, with the Tribunal finding merit in the argument regarding the correct assessment year for capital gains.

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