2017 (4) TMI 1149 - AT - Income Tax

Reopening of assessment - territorial jurisdiction of officers over the assessee - Held that - It is not clear from the records whether the Income Tax Officer was aware of the quantum of income returned by the assessee as the return of income was filed with the DCIT. The copy of the reasons recorded for reopening of the assessment is not filed before us and therefore, we are not able to come to any conclusion as to whether the AO has reopened the assessment on the basis of any information received by him or it is on the basis of the return of income filed by the assessee. If the return of income was not before the AO, it cannot be presumed that he was aware of the jurisdiction of the DCIT over the assessee and inspite of that have initiated proceedings u/s 148 of the Act. It is also not in dispute that as soon as the Income Tax Officer realized that he lacked pecuniary jurisdiction over the assessee, the case was immediately transferred to the file of the DCIT who again issued a notice u/s 143 (2) of the Act. Since one of the Officers who has concurrent jurisdiction over the assessee have issued notice u/s 148 of the Act, we are satisfied that the proceedings u/s 147 have been validly initiated. The assessee s additional ground of appeal is thus rejected. Disallowance of eviction charges in respect of three persons in computing the capital gains - Held that - The undisputed facts are that the assessee s husband along with his brothers has sold the land to M/s. Metro Cash & Carry India Pvt. Ltd, Bangalore and has gained LTCG therefrom. As regards the expenditure claimed by the assessee for getting the illegal occupants evicted from the land, the AO has accepted the payment to one of the occupants of the land, since he was produced before him. Therefore, it is clear that the land was not in peaceful possession of the assessee s husband and AO has accepted this fact. The assessee has claimed that she has claimed to have paid to 5 persons out of which, payment to one person has been allowed. The disallowance of payment to others is on the ground that the assessee has not been able to produce those parties for cross verification. No doubt, the onus is on the assessee to produce the parties. We find that the assessee has filed the affidavits of two persons but the AO has not accepted the same but also has not held that the payment is genuine. Therefore, to the extent of payment which is supported by affidavits, we direct the AO to allow the same. Similarly it is also not uncommon that village elders intervene and settle the land disputes to safeguard the law and order and protect the peaceful atmosphere of the village. The assessee has claimed to have paid for the village development. Therefore, we direct that 50% of the claim i.e. up to ₹ 1.50 lakhs be allowed. The assessee gets relief accordingly. Assessee s appeal is partly allowed.

Issues:
1. Disallowance of eviction charges in computing capital gains.
2. Disallowance of payment to village elders in computing capital gains.
3. Validity of assessment under section 147 of the Income Tax Act.

Analysis:

Issue 1: Disallowance of eviction charges in computing capital gains
The assessee contested the disallowance of eviction charges for three persons in calculating capital gains. The Counsel argued that the expenses were necessary to hand over peaceful possession of the property to the purchaser. The Tribunal found that while one payment was accepted by the Assessing Officer (AO), the disallowance for the others was due to the inability to produce those parties for verification. The Tribunal directed the AO to allow payments supported by affidavits. The decision was based on the principle that the onus is on the assessee to produce evidence, and where supported, the expenses should be allowed.

Issue 2: Disallowance of payment to village elders in computing capital gains
The assessee also contested the disallowance of a payment made to village elders, claiming it was a common practice for settling disputes and contributing to village development. The Tribunal acknowledged the role of village elders in maintaining law and order and accepted that such payments were for the transfer of property. Consequently, the Tribunal directed that 50% of the claimed amount, up to ?1.50 lakhs, be allowed as an expenditure related to the property transfer.

Issue 3: Validity of assessment under section 147 of the Income Tax Act
The additional ground of appeal challenged the validity of the assessment under section 147, arguing that the proceedings were void ab initio due to jurisdictional issues. The Counsel contended that the notice under section 148 was issued by an officer lacking jurisdiction over the assessee. However, the Tribunal noted that both officers involved had concurrent territorial jurisdiction over the assessee. It emphasized that the initiation of proceedings under section 147 was valid, as one of the officers with jurisdiction had issued the notice. The Tribunal rejected the additional ground of appeal, affirming the validity of the assessment.

In conclusion, the Tribunal partly allowed the assessee's appeal, directing the AO to allow eviction charges supported by affidavits and 50% of the payment to village elders. The decision highlighted the importance of producing evidence to support expenses and clarified the validity of assessment proceedings under section 147 based on territorial jurisdiction.

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