2020 (5) TMI 525 - AT - Income Tax

Reopening of assessment u/s 147 - income on account of capital gain arising from transfer of the immovable properties has escaped assessment - deduction u/s 54F claimed - HELD THAT - AO issued notice u/s 133(6) to the assessee for ascertaining the facts about the taxability of capital gain. In reply, the assessee has claimed that he has filed the return of income and shown this transaction but claimed deduction u/s 54F as well as Indexed Cost. The reply of the assessee is very brief and not with the details of the deduction u/s 54F. Further the assessee has not furnished any evidence during the said enquiry conducted by the AO prior to recording the reasons. Therefore, the assessee, despite the enquiry conducted by the AO, has not disclosed the facts regarding the investment made by him for purchase or construction of the new residential house. This fact indicates that the assessee has made this claim without any supporting evidence and even during reassessment proceedings the assessee could not produce the documentary evidence to the satisfaction of the AO and the claim of the assessee u/s 54F of the Act was rejected. Once the AO has brought on record the facts and reasons to form the belief that income is assessable to tax on account of capital gain then the quantum of the income finally computed is not a material aspect at the stage of initiation of proceedings u/s 147/148 of the Act. Therefore, the objection raised by the assessee regarding the correct amount of capital gain as recorded in the reasons cannot be a ground for quashing the proceedings u/s 147/148 of the Act when the AO has shown the relevance between the reasons recorded and the formation of belief on the subject matter and the source of income which has escaped assessment. Therefore, the decisions relied by the ld.AR of the assessee are not applicable in the facts of the present case. When the reasons are itself self-explanatory and speaking the link between the material and the formation of belief then the approving authority i.e. Pr. CIT is not required further to supplement the reasons to believe as recorded by the AO. Hence, in view of the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A). - Decided against assessee. Disallowance of deduction u/s 54F - property which was claimed to be reconstructed/ renovated was not owned by the assessee - HELD THAT - additional evidences which were sought to be filed by the ld.AR of the assessee, there is nothing to show that the assessee has invested the money in the construction of the house. Further, when the assessee has no right in the house then even if it is financed by the assessee the ownership of the property would not change. Accordingly, the additional evidences produced by the are not going to support the claim but only support the claim of ownership of the father of the assessee. The affidavit which has been sought to be filed by the assessee, could have been filed before the lower authorities. After a gap of about 12 years, the affidavit filed by the assessee cannot be accepted, being after though and self serving. Hence, in view of the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A). Thus Ground of the assessee is dismissed.

Summary

Issues Involved:

1. Validity of initiation of proceedings under Sections 147/148 of the Income Tax Act.
2. Disallowance of deduction under Section 54F of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Initiation of Proceedings under Sections 147/148 of the Income Tax Act:

The assessee challenged the validity of the initiation of proceedings under Sections 147/148 of the Income Tax Act, claiming that the Assessing Officer (AO) lacked jurisdiction and did not have reasons to believe that income had escaped assessment. The AO received information about the transfer of immovable properties by the assessee and issued a notice under Section 133(6) to gather information. Subsequently, the AO issued a notice under Section 148 after recording reasons that income on account of capital gain had escaped assessment. The assessee argued that the AO did not consider the facts disclosed in the return of income and that the approval by the Principal Commissioner of Income Tax (Pr. CIT) was mechanical.

The Tribunal held that the AO had a prima facie reason to believe that income had escaped assessment based on the information received and the lack of evidence provided by the assessee for claiming deduction under Section 54F. The Tribunal noted that the reasons recorded by the AO were based on credible material and had a live link with the belief that income had escaped assessment. The Tribunal found no merit in the assessee's objections and upheld the reopening of the assessment, dismissing Grounds No. 1 and 2.

2. Disallowance of Deduction under Section 54F of the Income Tax Act:

The assessee claimed a deduction under Section 54F for the investment in the construction of a residential house. The AO denied the deduction on the grounds that the property was not owned by the assessee and the receipts produced were held to be bogus. The assessee argued that the property was a Hindu Undivided Family (HUF) property and that the investment in the construction should be eligible for deduction.

The Tribunal found that the residential house was owned by the assessee's father through a Will, and not by the assessee. The Tribunal noted that the assessee failed to provide documentary evidence to prove that the investment in the construction was made by him. The Tribunal upheld the AO's decision to reject the claim of deduction under Section 54F, as the assessee could not establish the investment in the construction of the house. The Tribunal also dismissed the additional evidence submitted by the assessee as it did not support the claim of investment.

Conclusion:

The Tribunal dismissed the appeal of the assessee, upholding the validity of the initiation of proceedings under Sections 147/148 and the disallowance of deduction under Section 54F. The Tribunal emphasized the importance of credible material and documentary evidence in supporting claims of deduction and the formation of belief for reopening assessments.