2024 (3) TMI 35 - AT - Income Tax

Validity of proceedings initiated u/s 147 - tangible material for reason to believe that income has escaped assessment - primary reason to believe escapement of income is alleged non filing of return for AY 2010-11 by the assessee - HELD THAT - As the purported reasons to believe are based on the allegation that the assessee did not file her return of income, whereas, as a matter of fact the return of income was filed by the assessee. Evidence of filing e-return by the assessee on 29.10.2010 for AY 2010-11 and processing thereof on 21.02.2011 under section 143(1) of the Act appears at page 1 and 1A of the Paper Book. In proforma for obtaining approval of Ld. PCIT against column 8(a) also the information given by the Ld. AO is in negative to the question whether any voluntary return had already been filed . It is, therefore, obvious that the primary reason to believe escapement of income is alleged non filing of return for AY 2010-11 by the assessee which is contrary to the facts on record. The factum of non-consideration of ITR filed by the assessee on the part of the Ld. AO has been accepted by the Ld. CIT(A). Co-ordinate Bench of Delhi Tribunal 2019 (11) TMI 1002 - ITAT DELHI relied upon the decision Braham Prakash Lakra 2019 (11) TMI 1002 - ITAT DELHI AND Indo Arab Air Services 2015 (10) TMI 2383 - DELHI HIGH COURT wherein the Hon ble Court observed that while law does not require AO to form definite opinion by conducting any detailed investigation regarding escapement of income from assessment, it certainly did require to form prima facie opinion based on tangible material which provide nexus or link to having reason to believe that income escaped assessment. Following the decisions (supra) and applying their ratio to the facts of the assessee s case we sustain CO No. 2 of the assessee which is sufficient to hold that the notice u/s 148 issued to the assessee is bad in law and deserves to be quashed. Taxability of enhanced compensation u/s 45(5) - year of assessment - HELD THAT - CIT(A) was perfectly justified in deleting the impugned addition. CIT(A) recorded the finding that as per the given facts the enhanced compensation by way of the 550 sq. Meter plot was received on 12.06.2007 which implies AY 2008-09 and not AY 2010-11. Thus, the capital gain to be taxed under section 45(5)(b) of the Act should have been brought to tax in AY 2008-09 as per law and also as held by the Hon ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT This finding of the Ld. CIT(A) is fully in consonance with the principle of law laid down by the Hon ble Supreme Court in the decision (supra) Thus no material with the Ld. AO on the basis of which it could be established that enhanced compensation was received during the FY 2009- 10 relevant to AY 2010-11 under consideration. Decided in favour of assessee.

Summary

Issues Involved:

1. Deletion of addition of enhanced compensation under section 45(5)(b) of the Income Tax Act, 1961.
2. Initiation of proceedings under section 147 of the Income Tax Act, 1961.
3. Jurisdictional challenge regarding notice under section 148 and assessment by a different authority.
4. Timeliness and maintainability of the Revenue's appeal.

Summary:

1. Deletion of Addition of Enhanced Compensation:

The Revenue contested the deletion of Rs. 3,21,75,000/- by the CIT(A), arguing that the amount was taxable under section 45(5)(b) of the Income Tax Act, 1961. The CIT(A) observed that the land allotted by the Delhi Development Authority (DDA) was in the nature of enhanced compensation. The assessee sold the plot for Rs. 6,43,50,000/- (50% share being Rs. 3,21,75,000/-) and the AO treated this amount as capital gains under section 45(5)(b). However, the CIT(A) found that the enhanced compensation should have been taxed in AY 2008-09, not AY 2010-11, in line with the Supreme Court's decision in CIT vs. Ghanshyam (HUF). The Tribunal upheld the CIT(A)'s decision, rejecting the Revenue's original ground and dismissing the appeal on merits.

2. Initiation of Proceedings under Section 147:

The assessee challenged the initiation of proceedings under section 147, arguing that the return was filed and processed under section 143(1), and there was no tangible material for the AO's 'reason to believe' that income had escaped assessment. The CIT(A) dismissed this ground, stating that the AO had received information from the Investigation Wing and made independent inquiries. However, the Tribunal noted that the AO's primary reason for reopening was the alleged non-filing of the return, which was factually incorrect. Citing the Gujarat High Court's decision in Sunrise Education Trust, the Tribunal quashed the notice under section 148, deeming it bad in law.

3. Jurisdictional Challenge:

The assessee argued that the notice under section 148 was issued by one AO, but the assessment was completed by another without proper transfer of jurisdiction. Given the quashing of the notice under section 148, the Tribunal did not adjudicate this issue.

4. Timeliness and Maintainability of Revenue's Appeal:

The assessee contended that the Revenue's appeal was filed 17 days late. The Tribunal condoned the delay, considering the reasons provided by the Revenue.

Conclusion:

The Tribunal dismissed the Revenue's appeal on merits and partly allowed the assessee's cross-objection, quashing the notice under section 148 and the consequent assessment order. The appeal of the Revenue was deemed infructuous due to the quashing of the notice. The order was pronounced in the open court on 28th February, 2024.