2017 (1) TMI 120 - HC - Income Tax

Reopening of assessment - amount already been included within the fold of assessment by way of an appropriate order under sec 154 - Held that - Taking action for rectification of an assessment order under section 154 would not debar the department from taking separate steps for reassessment under Section 147 of the Act. We thus do not find reason to interfere with the order of the first appellate authority as the ld. CIT(A) has rightly upheld the action of the AO in computing the income of ₹ 5,53,520/- in the reassessment. - Decided in favour of revenue Grant of exemption u/s 54(1)/(2) denied - Held that - Requirement under 54E are to be complied with strictly and for failure to make compliance, the benefit cannot be granted to the assessee. In our view, both CIT(A) & Tribunal has not committed any error merely because separate account is opened. The capital account is required under the statute to be opened within six weeks. Therefore, the issue is also required to be answered in favour of the department against the assessee. Penalty u/s 271C (1)(c) - Held that - In view of the bonafide mistake by the assessee, we are of the opinion that the provisions under 271C will not be attracted therefore, issue no. 3 is required to be answered in favour of the assessee. It is only that the assessee could not follow the procedure exactly. In that view of the matter, basic requirement of 271C (1)(c) of the Act are absent and hence, levy of penalty is unjustified.

Summary

Issues:
1. Validity of initiation of proceedings under sections 147/148 of the Income Tax Act, 1961
2. Eligibility for exemption under sections 54(1)/(2) of the Income Tax Act, 1961
3. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961
4. Validity of framing two separate assessments under sections 154 and 147 for the same income

Analysis:

Issue 1:
The appellant challenged the initiation of proceedings under sections 147/148 of the Income Tax Act, 1961, arguing that the income in question had already been included in the assessment under section 154. The Tribunal upheld the initiation, stating that rectification under section 154 does not prevent separate reassessment under section 147. The High Court agreed with the Tribunal's view, ruling in favor of the department.

Issue 2:
Regarding the eligibility for exemption under sections 54(1)/(2) of the Income Tax Act, 1961, the appellant claimed compliance by depositing the amount in a bank account for the acquisition/construction of a new residential house. However, the authorities rejected the claim, emphasizing strict compliance with the statute's requirements. The High Court concurred with the authorities, holding that the separate account opened by the assessee did not fulfill the statutory mandate within the specified time frame, ruling in favor of the department.

Issue 3:
The question of imposing a penalty under section 271(1)(c) of the Income Tax Act, 1961 arose due to a reference to a wrong provision by the assessee. The High Court, considering the assessee's bona fide mistake, concluded that the penalty provision was not applicable in this case. The court ruled in favor of the assessee, highlighting the absence of the basic requirements for penalty imposition.

Issue 4:
The validity of framing two separate assessments under sections 154 and 147 for the same income was raised. Given the decisions on issues 1 and 2, the High Court ruled in favor of the department, stating that the assessment under section 147, being subsequent, would prevail over the one under section 154. Consequently, the court decided in favor of the department against the assessee on this issue.

In conclusion, the High Court disposed of the appeal, upholding the department's position on issues 1, 2, and 4, while ruling in favor of the assessee on issue 3 regarding the penalty imposition.