2000 (4) TMI 155 - AT - Income Tax

Summary

Issues:
1. Competence of AO to initiate proceedings under section 147 of the IT Act.
2. Taxability of capital gains arising from the sale of land.
3. Application of the amendment to section 2(47) of the IT Act.

Competence of AO to initiate proceedings under section 147:
The appeal by the Revenue was rejected against the CIT(A)'s order, where the CIT(A) canceled the assessment despite the original assessment being completed under section 143(1)(a) and not section 143(3). The CIT(A) held that all relevant facts were disclosed during the original assessment, making the AO incompetent to change the opinion for initiating proceedings under section 147. The CIT(A) emphasized that the reassessment was a mere change of opinion on the same set of facts, rendering the assessment order illegal. The Revenue challenged the CIT(A)'s decision, arguing that the original assessment was completed under section 143(1)(a) and not section 143(3).

Taxability of capital gains arising from the sale of land:
The case involved the sale of agricultural land by the assessee to a society, where the AO issued a notice under section 148 for reassessment. The CIT(A) observed that the capital gains arising from the sale should be charged for the assessment year 1988-89 due to the insertion of sub-clause (v) to clause 47 of section 2. The Revenue contended that all transactions occurred before the introduction of the amendment and, therefore, should be subject to capital gains for the relevant assessment year. However, the authorized representative argued that the transaction did not fit the definition of transfer as existed at the time, and since the possession of the land was given before the amendment came into effect, no capital gains should be taxed for the year under appeal.

Application of the amendment to section 2(47) of the IT Act:
The ITAT Jaipur, after considering the facts and decisions from previous cases, concluded that since the possession of the land was given in a prior assessment year, no capital gain arose in the year under consideration. The ITAT referred to a previous case to support its decision, emphasizing that the amendment to section 2(47) was not retrospective and would only be effective for transactions occurring after its introduction on April 1, 1988. Therefore, the ITAT declined to interfere in the CIT(A)'s order, dismissing the appeal filed by the Revenue.