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2019 (4) TMI 418 - AT - Income TaxReopening of assessment - validity of reasons to believe - assessee showed license fee of unsold flats as Income from house property - HELD THAT - AO has failed to refer to any tangible material coming to his knowledge, which was relied upon for reopening the assessment, there is no merit in re-assessment proceedings initiated in the hands of assessee. It may also be pointed out that re-assessment proceedings were initiated on the ground that declaration of income from unsold flats by the assessee as Income from house property was not correct and the Assessing Officer was of the view that income should be assessed as Income from other sources . However, the jurisdictional High Court in CIT Vs. Sane & Doshi Enterprises (2015 (4) TMI 882 - BOMBAY HIGH COURT) have held the same to be assessable as Income from house property . Accordingly, we find no merit in the jurisdiction exercised by Assessing Officer. Since we are deciding the issue on preliminary issue itself and even where the issue is in favour of assessee on merits, the appeal filed by assessee is thus, allowed.
Issues Involved:
1. Reopening of assessment under section 147/148. 2. Classification of license fees as 'Income from House Property' vs. 'Income from Other Sources'. 3. Disallowance of exemption under section 54F. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 147/148: The primary issue raised was the validity of the reopening of assessment. The assessee argued that the reopening was based on no new tangible material and merely a change of opinion by the Assessing Officer (AO). The original assessment was completed under section 143(3), and the reopening notice under section 148 was issued within four years. The Tribunal emphasized that the AO must have "reason to believe" that income chargeable to tax had escaped assessment, which must be based on tangible material. The Tribunal relied on precedents such as the Hon’ble Bombay High Court in CIT Vs. Sane & Doshi Enterprises and the Pune Bench in DDIT Vs. Sandvik AB, which held that in the absence of new tangible material, reopening of assessment is not valid. Consequently, the Tribunal found no merit in the jurisdiction exercised by the AO to reopen the assessment, and thus, the reassessment proceedings were deemed invalid. 2. Classification of License Fees: The second issue involved the classification of license fees received by the assessee. The AO assessed the license fees of ?47,52,000 under 'Income from Other Sources' instead of 'Income from House Property', as declared by the assessee. The AO's rationale was that the property given on license was part of the stock-in-trade of the assessee's construction business. However, the Tribunal noted that the jurisdictional High Court in CIT Vs. Sane & Doshi Enterprises had held that income from unsold flats should be assessed as 'Income from House Property'. Thus, the Tribunal found that the AO's decision to reclassify the income was incorrect. 3. Disallowance of Exemption under Section 54F: The third issue was the disallowance of the assessee's claim for exemption under section 54F. The AO disallowed the exemption on the grounds that the investment in the Capital Gains Account Scheme was made beyond the due date of filing the return under section 139(1). The assessee argued that the investment was made within the extended due date under section 139(4). The Tribunal did not delve deeply into this issue as the appeal was allowed on the preliminary issue of invalid reopening. Conclusion: The Tribunal concluded that the reopening of assessment was invalid due to the absence of new tangible material. Consequently, the reassessment proceedings were annulled, and the appeal was allowed in favor of the assessee. The Tribunal also noted that the classification of license fees should be under 'Income from House Property' as per the jurisdictional High Court's ruling. Since the preliminary issue was decided in favor of the assessee, the Tribunal did not need to address the merits of the exemption claim under section 54F.
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