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2018 (1) TMI 10 - AT - Income TaxReopening of assessment - non disposing assessee s objections by a separate order before passing the assessment order - Held that - As per GKN Driveshafts (India) Ltd. vs. ITO (2002 (11) TMI 7 - SUPREME Court), where the assessee has filed objections before the AO to the reasons recorded for initiating proceedings to reopen the completed assessment, the AO is enjoined upon to decide the objections by a separate speaking order before passing the assessment order. This mandate of the law laid down by the Hon ble Supreme Court has clearly been flouted, as the AO has not disposed of the assessee s objections by a separate order before passing the assessment order. The ld. CIT(A) did not decide this issue, though the assessee had specifically raised it before the ld. CIT(A). Therefore, the impugned order is set aside and the matter is restored to the file of the AO to first decide the assessee s objections in accordance with law on affording adequate opportunity of hearing to the assessee and to only thereafter pass the assessment order. The assessee, no doubt, shall co-operate in the fresh proceedings before the AO. All pleas available under the law shall remain so available to the assessee.
Issues Involved:
1. Validity of reopening the case under Section 147 of the Income Tax Act. 2. Confirmation of addition on account of long-term capital gains. 3. Determination of the assessment year for the transfer of property. 4. Interpretation of Section 2(47) of the Income Tax Act regarding the transfer of property. 5. Taxability of the 'right to conveyance of immovable property' as a capital asset. Issue-wise Detailed Analysis: 1. Validity of Reopening the Case under Section 147: The assessee contended that the reopening of the case under Section 147 was invalid as the Assessing Officer (AO) did not dispose of the objections before passing the assessment order. The AO had reasons to believe that income chargeable to tax had escaped assessment based on the sale deed executed on 21.04.2006. The assessee filed objections on 17.12.2014, arguing that the notice under Section 148 was illegal and that the transaction fell in the year 2003-04. The AO completed the assessment without addressing these objections. The Tribunal found that the AO violated the mandate laid down in 'GKN Driveshafts (India) Ltd. vs. ITO', which requires the AO to decide objections by a separate speaking order before passing the assessment order. Consequently, the Tribunal set aside the impugned order and restored the matter to the AO for a fresh decision on the objections. 2. Confirmation of Addition on Account of Long-term Capital Gains: The assessee challenged the addition of ?4,91,126 on account of long-term capital gains, arguing that the capital asset (land) was transferred on 21.08.2003 through a registered agreement, falling within the meaning of Section 2(47)(v) of the Income Tax Act. The assessee also contended that the AO did not provide an opportunity to cross-examine the power of attorney holder and the purchaser of the land. The Tribunal did not explicitly address this issue due to the primary focus on the procedural lapse regarding the objections. 3. Determination of the Assessment Year for the Transfer of Property: The assessee argued that the property transfer should be considered in the assessment year 2004-05, not 2007-08, as the possession was allowed in part performance of the contract in 2003. The AO treated the transfer as occurring in 2007-08 based on the sale deed dated 21.04.2006. The Tribunal did not resolve this issue directly but indicated that the AO must reconsider it after addressing the objections. 4. Interpretation of Section 2(47) of the Income Tax Act: The assessee cited Section 2(47)(v) of the Income Tax Act, which includes any transaction involving the allowing of possession of immovable property in part performance of a contract as a transfer. The assessee claimed that the transaction fell within this definition as the possession was given in 2003. The Tribunal acknowledged this argument but emphasized the need for the AO to address the procedural lapse first. 5. Taxability of the 'Right to Conveyance of Immovable Property' as a Capital Asset: The assessee argued that the 'right to conveyance of immovable property' obtained by the power of attorney holder is a capital asset under Section 2(14) of the Income Tax Act, as held in 'CIT vs Tata Services Ltd'. The Tribunal did not delve into this argument due to the procedural focus but implied that the AO should consider all relevant pleas in the fresh proceedings. Conclusion: The Tribunal set aside the impugned order and restored the matter to the AO to first decide the assessee's objections in accordance with law, providing adequate opportunity for hearing. The appeal was treated as allowed for statistical purposes, with all legal pleas remaining available to the assessee.
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