1985 (9) TMI 107 - AT - Income Tax

Issues Involved:
1. Taxability of capital gains from the acquisition of a property.
2. Validity of notice issued under section 148 of the Income-tax Act.
3. Partial partition claim under section 171 of the Income-tax Act.
4. Jurisdiction of the ITO to initiate reassessment under section 147(a) of the Income-tax Act.
5. Service of notice in accordance with section 283(1) of the Income-tax Act.

Detailed Analysis:

1. Taxability of Capital Gains from the Acquisition of a Property:
The primary issue in the appeal was the taxability of capital gains arising from the acquisition of a property situated at 22, Hardinge Avenue, New Delhi. The property was acquired by the Delhi Administration under the Land Acquisition Act, 1894, for establishing a women's polytechnic. The Land Acquisition Collector gave his award on 26-10-1966, and the possession of the property was formally transferred on 20-12-1963. The ITO initially assessed the capital gains for the assessment year 1967-68 but later revised it to 1964-65, based on the date of possession transfer. The Tribunal upheld the ITO's revised assessment year as 1964-65, based on the date of possession transfer.

2. Validity of Notice Issued under Section 148 of the Income-tax Act:
The ITO issued a notice under section 148 on 20-8-1976, which was served on Shri B.D. Agrawal. The Commissioner (Appeals) found that the notice was not validly served in accordance with section 283(1), which requires notices to be served on all adults who were members of the family immediately before the partition. The Tribunal upheld this finding, stating that the issuance of a valid notice and its valid service are prerequisites for the ITO to assume jurisdiction under section 147(a). The notice was addressed to an HUF that had ceased to exist in 1973, making it invalid.

3. Partial Partition Claim under Section 171 of the Income-tax Act:
The assessee claimed that a partial partition had taken place in the family on 8-12-1962, making the property a joint property of various family members. However, this claim was made for the first time on 12-2-1980. The Commissioner (Appeals) and the Tribunal rejected this claim, citing the Supreme Court decision in Kalloomal Tapeswari Prasad (HUF) v. CIT, which necessitates an order under section 171 even for partial partitions.

4. Jurisdiction of the ITO to Initiate Reassessment under Section 147(a) of the Income-tax Act:
The assessee contended that there was no omission or failure on its part to disclose material facts necessary for the assessment year 1964-65, and thus, the ITO lacked jurisdiction to initiate reassessment under section 147(a). The Commissioner (Appeals) and the Tribunal found that the ITO did not have the necessary information about the formal transfer of the property until the Additional District Judge's order on 18-3-1975. Therefore, the ITO's belief that only occupation, not ownership, had been transferred was justified.

5. Service of Notice in Accordance with Section 283(1) of the Income-tax Act:
The Commissioner (Appeals) held that the service of notice on Shri B.D. Agrawal was not in accordance with section 283(1), which requires notices to be served on all adults who were members of the family immediately before the partition. The Tribunal agreed, stating that the non-service of notice on all adult members could not be condoned under section 292B, as it was not merely a procedural irregularity but a jurisdictional requirement.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s decision to cancel the reassessment made by the ITO on 24-7-1981, due to the invalid issuance and service of the notice under section 148. The appeal by the department was dismissed, and the cross-objections by the assessee were treated as infructuous and rejected.

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