2018 (4) TMI 1529 - AT - Income Tax

Reopening of assessment - LTCG addition - whether the transfer is completed - Held that - the assessee s have never objected to the reopening of the assessment either before the AO or before the CIT (A). The assessee s have also not raised any grounds of appeal in writing much less the additional grounds of appeal against the reopening of the assessment. Rule 27 of the ITAT Rules, only permits the respondents to support the orders appealed against any of the decision against him and Rule 29 also provides that the parties to the appeal shall not entitled to file additional evidence either oral or documents before the Tribunal unless it is required by the Tribunal or if the Income Tax authorities have decided the case, without giving sufficient opportunity to the assessee, to adduce evidence either on points specified by them or not specified by them Tribunal may allow such documents to be produced or witnesses to be examined or affidavit to be filed. The assessee s are the petitioners/appellants before us and not the respondents. Further, they cannot raise a ground orally at the time of final hearing, as it would be against the principles of natural justice as the Revenue would not be in a position to defend itself again without proper records. In view of the same, we are not inclined to accept the argument of the assessee against the reopening of the assessment u/s 148 of the Act. As regards the LTCG being brought to tax by the AO, we find that the vendee himself has given a declaration, by a registered deed, that the sale deeds have been executed only in order to enable him to safeguard the properties and to settle all the legal disputes and that they shall be cancelled thereafter. In fact the assessee s have also filed the suits for cancellation of the sale deed which are pending before the Hon ble Civil Courts. The transfer is not complete and the capital gain therein will not arise. However, the outcome of the civil suits will determine the question of transfer and if the Civil Courts hold the transfer to be final, then in that year, the assessee s will be liable to pay the tax on the capital gain. In view of the same, we are inclined to allow the assessee s appeals with the above observations.

Summary

Issues:
Appeal against delay in filing, condonation of delay, validity of reassessment proceedings, LTCG computation, reopening of assessment.

Delay in Filing and Condonation:
Both assessee's filed appeals against CIT (A) orders with a delay of 194 and 202 days respectively. They cited various reasons including lack of awareness, personal losses, and legal disputes for the delay. The Tribunal, after considering the reasons, condoned the delay in filing the appeals by both assessee's.

LTCG Computation and Reopening of Assessment:
The case involved joint owners selling property below market value, leading to Long Term Capital Gains (LTCG) computation. The AO reopened the case under section 147 due to non-submission of returns. The assessee's claimed no transfer occurred as the sale deed was for legal disputes settlement and property was not actually transferred. The Tribunal found the transfer incomplete as per declarations and pending civil suits, thus no LTCG arose.

Validity of Reassessment Proceedings:
The assessee challenged the validity of reassessment proceedings under section 148, arguing lack of nexus with income escapement. They also raised concerns about the satisfaction requirement under section 149(1)(b) and cited legal precedents. However, the Tribunal noted that objections were not raised earlier, and additional grounds were not submitted, leading to rejection of the argument against reopening of assessment.

Conclusion:
The Tribunal allowed the appeals, emphasizing that the transfer was not complete based on declarations and pending civil suits. The outcome of civil suits would determine tax liability on capital gains. The Tribunal also dismissed the argument against reassessment proceedings due to lack of prior objections and additional grounds submission. The judgment was pronounced on 27th April 2018.