2012 (4) TMI 417 - AT - Income Tax

Deduction u/s 54 and 54-F - Reopening - assessment u/s 147 - held that - the reopening was definitely valid since the No Objection Certificate from Appropriate Authority issued on 21.02.2000 was never brought to the notice of Assessing Officer by the assessee during the course of original assessment proceedings. Regarding eligibility of exemption u/s 54 and 54F - held that - The original agreement of sale of the Chennai property was made on 28-6-1996. Based on that agreement, NOC from the Appropriate Authority was obtained on 8-10-1996. Thereafter a supplementary agreement was executed on 6-2-1998 in order to accommodate the actual extent of the landed property arrived at on re-measurement. When the sequences of events are considered in a wholesome manner, it is evident that the possession of the property was handed over to the buyers and the consideration was paid by the buyers on 28-11-1999 itself. This giving away of the possession of the properties to the buyers against receipt of the consideration of the transaction, has satisfied the requirements of transfer within the meaning of section 2(47) of the Income-tax Act, 1961 and within the meaning of section 53A of the Transfer of Property Act. It is to be seen that the NOC issued on 21-2-2000 relates back to 8-10-1996 and as such reinforces the fact of transfer of the property on 28-11-1999, when the possession was handed over to the buyers. In these circumstances, as far as this case is concerned, therefore, there is complete compatibility between the application of section 2(47) of the Income-tax Act, 1961 with section 53A of the Transfer of Property Act and Chapter XX-C of the Income-tax Act, 1961. Investment made by the assessee on 9.12.1998 in the residential property was well within the time period mentioned for availing deduction under Section 54 / 54F of the Act. - Decided in favor of assessee.

Issues Involved:
1. Validity of the reopening of the assessment.
2. Eligibility for deduction under Sections 54 and 54F of the Income Tax Act.
3. Determination of the date of transfer of property.
4. Compliance with Chapter XXC of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment:
The Department contended that the reopening of the assessment was valid as the No Objection Certificate (NOC) from the Appropriate Authority was obtained only on 21.02.2000, which was not disclosed during the original assessment. The assessee argued that all material facts were fully and truly disclosed during the original assessment, and no new material had come into the possession of the Assessing Officer to justify the reopening. The Tribunal found that the reopening was valid since the NOC was a crucial document that was not brought to the notice of the Assessing Officer during the original assessment.

2. Eligibility for Deduction under Sections 54 and 54F:
The core issue was whether the assessee was eligible for deductions under Sections 54 and 54F, given the timing of the investment in the new property. The assessee claimed that the transfer of the old property occurred on 28.11.1999 when possession was handed over, thus making the investment in the new property within the eligible period. The Assessing Officer, however, argued that the transfer could only be recognized after the NOC was issued on 21.02.2000, making the investment in the new property outside the eligible period.

3. Determination of the Date of Transfer of Property:
The Tribunal had to determine whether the transfer of the property took place on 28.11.1999, as claimed by the assessee, or on 21.02.2000, as argued by the Department. The Tribunal noted that the possession of the property was handed over to the buyers on 28.11.1999, and the consideration was received, fulfilling the conditions of "transfer" under Section 2(47)(v) of the Income Tax Act and Section 53A of the Transfer of Property Act. Therefore, the Tribunal concluded that the transfer took place on 28.11.1999.

4. Compliance with Chapter XXC of the Income Tax Act:
The Department argued that any transfer of property without obtaining the NOC from the Appropriate Authority would be void under Chapter XXC, thus invalidating the transfer date claimed by the assessee. The Tribunal, however, held that the NOC issued on 21.02.2000 related back to the original agreement and the first NOC issued on 08.10.1996. Therefore, the Tribunal found that the requirements of Chapter XXC were met and did not invalidate the transfer date of 28.11.1999.

Conclusion:
The Tribunal allowed the appeal of the Revenue on the issue of reopening, holding it to be valid. However, on the merits of the case, the Tribunal concluded that the transfer of property took place on 28.11.1999, making the assessee eligible for deductions under Sections 54 and 54F. The Tribunal's decision reconciled the provisions of Section 2(47)(v) of the Income Tax Act with the requirements of Chapter XXC, ensuring that the NOC issued on 21.02.2000 did not invalidate the earlier transfer date. The final judgment restored the order of the Assessing Officer on the reopening issue but upheld the CIT(A)'s decision on the merits, granting the deductions to the assessee.

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