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2024 (10) TMI 28 - AT - Income TaxValidity of reopening of assessment - notice beyond four years from the end of the relevant assessment year - denial of deduction u/s 54F - Addition on the ground that assessee was owning more than one residential house on the date of transfer of shares of FIITJEE Ltd (i.e. the original asset) - HELD THAT - There cannot be any failure at all on the part of the assessee to furnish the requisite details. Accordingly, the proviso to section 147 of the Act is not satisfied at all in the facts and circumstances of the instant case. Hence, AO could not have validly assumed jurisdiction u/s 147 of the Act in the facts and circumstances of the instant case. The only information in any case that is available or which is being relied upon by the AO for reopening the assessment is the information available on SDMC website. First of all, any information provided in any website cannot be construed as a relevant material for drawing adverse inference against the assessee. Further, the information available in the Government website about any person or any person s possession could have to be construed as an information available in public domain and cannot be construed as a fresh tangible material that had come into the possession of the ld AO warranting reopening of assessment. Hence, the reopening of assessment fails on this count. This tribunal in 2021 (1) TMI 973 - ITAT DELHI for AY 2013-14 dismissed the plea of the revenue and held that different floors of a property cannot be construed as a independent residential unit and instead had to be construed only as a single residential unit and accordingly deleted the action of the ld. CWT(A) levying wealth tax on the same. Hence, the issue has already been decided on merits i.e. basement and second floor owned by the assessee cannot be construed as two separate residential properties as already been decided by the Tribunal in assessee s own case in Wealth Tax proceedings stated supra. Hence it could be safely concluded that on the date of transfer of original asset, the assessee was having only one residential house property. The law is very well settled that merely because a residential home consisting of several independent residential units, it will not have an impact on claim of deduction u/s 54F of the Act. No hesitation to quash the reassessment proceedings on the ground that the assumption of jurisdiction u/s 147 of the Act is not sustainable in the eyes of law by the ld AO in the facts and circumstances of the instant case. Further, even on merits, the assessee would be entitled for deduction u/s 54F of the Act of ₹90 crores. Grounds raised by the assessee are allowed. Denial of deduction u/s 54F is only for the reason that the assessee had not utilized the sale proceeds of shares of FIITJEE Ltd in its entirety for making re-investment in residential property - AO had concluded that the transaction between FIITJEE and Alert Buildtech is not genuine and that were also made the basis for denial of deduction u/s 54F of the Act. In this regard, it was specifically clarified before the ld AO that the assessee had not even made any claim of deduction u/s 80G of the Act in respect of donation paid to trust in the computation of income or during the course of assessment proceedings. In the instant case, there has been an actual deposit of money on 28.04.2011 in capital gains account scheme and ₹60 crores on 29.07.2011. Both the deposits are within the prescribed time limit as per statute. It is a fact that assessee had received loan of ₹60 crores from Alert Buildtech and utilized the same for making investment in capital gain account scheme - AO had accepted the said loan to be genuine and had not resorted to make any addition u/s 68 of the Act in respect of the said loan. Hence, the entire allegations of the revenue are absolutely without any basis. In view of the aforesaid observations, the grounds raised by the revenue are dismissed.
Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961. 2. Validity of assumption of jurisdiction under Section 147 of the Income Tax Act, 1961. 3. Disallowance of deduction under Section 54F of the Income Tax Act, 1961. 4. Treatment of basement property as a separate residential house. 5. Deduction for expenses incurred on "transfer". 6. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 7. Deletion of addition of Rs. 60 Crores made by AO on account of claim of deduction under Section 54F. 8. Use of sale proceeds for making donations and investments in FDRs. 9. Compliance with principles of natural justice. Detailed Analysis: 1. Validity of notice under Section 148 of the Income Tax Act, 1961: The assessee challenged the notice issued under Section 148 dated 30th March 2017, arguing it was bad in law and void ab initio. The Tribunal found that the notice was issued beyond four years from the end of the relevant assessment year. The law requires that the Assessing Officer (AO) must demonstrate a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal concluded that all materials were indeed furnished by the assessee in the original search assessment proceedings, and there was no failure on the part of the assessee to provide requisite details. Thus, the notice under Section 148 was deemed invalid. 2. Validity of assumption of jurisdiction under Section 147 of the Income Tax Act, 1961: The Tribunal held that the AO could not have validly assumed jurisdiction under Section 147 of the Act. The only information relied upon by the AO for reopening the assessment was available on the South Delhi Municipal Corporation (SDMC) website. The Tribunal ruled that any information provided on a website cannot be construed as relevant material for drawing adverse inferences against the assessee. Consequently, the reopening of assessment failed on this count as well. 3. Disallowance of deduction under Section 54F of the Income Tax Act, 1961: The Tribunal addressed the issue of the disallowance of deduction under Section 54F, which was initially restricted by the AO to Rs. 30 crores, with the remaining Rs. 60 crores added back. The Tribunal found that the entire residential property, including the basement, ground floor, first floor, and second floor, should be construed as a single residential property with co-ownership. The basement, in particular, could not be considered an independent residential property, as per the DDA building bye-laws, which prohibit its use for residential purposes. Thus, the assessee was entitled to a full deduction under Section 54F. 4. Treatment of basement property as a separate residential house: The Tribunal found that the basement of the property could not be treated as a separate residential house. The DDA building bye-laws specifically prohibit the use of basements for residential purposes. The Tribunal concluded that the basement was not used for residential purposes and should not be considered a separate property. 5. Deduction for expenses incurred on "transfer": The assessee's claim for deduction of expenses incurred on the transfer amounting to Rs. 99,27,000/- was not explicitly addressed in the Tribunal's detailed analysis, indicating that it may not have been a primary focus of contention. 6. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961: The Tribunal did not provide a detailed discussion on the initiation of penalty proceedings under Section 271(1)(c), suggesting that this issue may not have been central to the Tribunal's decision. 7. Deletion of addition of Rs. 60 Crores made by AO on account of claim of deduction under Section 54F: The Tribunal upheld the deletion of the addition of Rs. 60 crores by the CIT(A), agreeing that the assessee was entitled to the deduction under Section 54F. The Tribunal found no basis for the AO's disallowance and concluded that the assessee had complied with the necessary conditions for the deduction. 8. Use of sale proceeds for making donations and investments in FDRs: The Tribunal addressed the AO's contention that the assessee used part of the sale proceeds for donations and investments in Fixed Deposit Receipts (FDRs). The Tribunal clarified that there is no requirement in law that the same sale proceeds must be used for reinvestment in a new residential property. The Tribunal dismissed the revenue's objections, stating that money has no color, and the assessee could use other funds or loans for the reinvestment. 9. Compliance with principles of natural justice: The Tribunal found that the orders passed by the AO and CIT(A) did not violate the principles of natural justice. The Tribunal's decision to quash the reassessment proceedings and allow the assessee's appeal indicates that the procedural and substantive rights of the assessee were upheld. Conclusion: The Tribunal allowed the assessee's appeal, quashed the reassessment proceedings, and upheld the entitlement to the deduction under Section 54F of Rs. 90 crores. The revenue's appeal was dismissed, and the stay application of the assessee was deemed infructuous. The Tribunal's decision emphasized the importance of adhering to statutory requirements and the proper interpretation of relevant provisions.
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