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2020 (7) TMI 194 - AT - Income TaxValidity of reopening of assessment u/s 147 - jurisdiction of the AO the ITO Ward 2(2) - notice in the name of wrong person - non approval of the prescribed authority - Notice issued after four years - disallowance of construction cost of building and disallowing the benefit u/s 54 - HELD THAT - AO in spite of having information in his possession, he has merely gone by the information received from DIT (I CI) and shows non-application of mind on his part and failure on his part to carry out preliminary enquiry on receipt of such information and thus, the reasons so recorded and the very basis, that the assessee has not filed the return of income and therefore, the income on sale of property has escaped assessment, is vitiated in the instant case. On perusal of the original return filed by the assessee, we find that in the said return, he had computed and disclosed income under the head long term capital gains showing full value of consideration and after claiming deduction for cost of acquisition and improvement, has computed long term capital gains and has claimed exemption of equivalent amount on account of fresh investment. The said disclosure matches with the transactions and the full value of consideration (including the impugned transaction which is subject matter of 148 notice) which has been finally brought to tax by the Assessing officer and thus, shows that the impugned transaction which is subject matter of 148 notice was duly reflected and offered to tax in the original return so filed by the assessee and therefore, on this count as well, there is no escapement of income in respect of impugned transaction. Therefore, in our considered view, such action on the part of the Assessing Officer for assumption of jurisdiction U/s 147 cannot be accepted and the notice under section 148 is thus set-aside. Issuing of notice u/s 148 in the wrong name - We agree with the contention of the ld DR that it was only a typographical error in first name of the assessee though other particulars such as assessee s surname, name of his father and address were correct and which has been corrected during the course of proceedings wherein the assessee has participated and thereafter, the reassessment order has been issued in correct name of the assessee. Therefore, on this account, the notice issued u/s 148 cannot be held as invalid in the eyes of law. Notice issued after four years - As noted that the notice u/s 148 was issued on 27.03.2015 after period of four years from the end of the relevant assessment year 2008-09 and such notice has admittedly been issued after seeking approval from Add.CIT, Range 2 Jaipur which is not in conformity with the provisions of section 151(1) wherein such notice issued after period of four years from the end of the relevant assessment year can be issued after seeking approval from concerned PCCIT/CCIT/PCIT/CIT and on this count as well, where the notice is issued without approval of the prescribed authority, the same is vitiated and cannot be sustained in the eyes of law. Notice issued under section 148 is vitiated on accounts of reasons stated supra and is hereby set-aside for want of valid jurisdiction and requisite approval. The ground of appeal is thus decided in favour of the assessee and against the Revenue. Disallowance of construction cost of building and disallowing the benefit u/s 54 - There is nothing on record in terms of buyers confirmation/affidavit or photographs of the property at the time of sale which can corroborate that what has been purchased/sold is not just a plot of land but a plot of land along with constructed house thereon which could then have been verified by the Assessing officer. - Since we have already quashed the notice u/s 148, no useful purpose would be served in setting aside the matter to the AO to allow the deduction under section 54F as the consequent proceedings stand quashed. The ground is disposed off accordingly.
Issues Involved:
1. Assumption of jurisdiction under Section 147 of the Income Tax Act, 1961. 2. Consideration of sale as land only, disallowance of construction cost, and denial of benefit under Section 54 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Assumption of Jurisdiction under Section 147 of the Income Tax Act, 1961: - Grounds of Appeal: The assessee challenged the jurisdiction assumed by the Assessing Officer (AO) under Section 147, arguing that the notice under Section 148 was issued based on incorrect facts and without proper jurisdiction. - Assessee's Arguments: The assessee contended that the AO's statement that no return of income was filed was factually incorrect, as the return had been filed and the capital gains were declared. The AO did not conduct independent inquiries and acted on borrowed satisfaction from the DIT (I&CI). The notice was issued in the wrong name, which was later corrected, but the initial error rendered the notice invalid. The jurisdiction over the case should have been with ITO, Ward 6(4), Jaipur, not ITO, Ward 2(2). - Revenue's Arguments: The Revenue argued that the assessee had ample opportunity to challenge the jurisdiction during the assessment proceedings and failed to do so. The AO had credible information from DIT (I&CI) and formed a belief of escapement of income. The typographical error in the name was rectified, and the notice was valid. - Tribunal's Findings: The Tribunal noted that the assessee had filed the return of income and declared the capital gains. The AO failed to verify this information and proceeded based on incorrect facts, showing non-application of mind. The notice under Section 148 was set aside due to the factual inaccuracies and lack of proper jurisdiction. The Tribunal also noted that the approval for issuing the notice was not obtained from the prescribed authority, further invalidating the notice. 2. Consideration of Sale as Land Only, Disallowance of Construction Cost, and Denial of Benefit under Section 54: - Grounds of Appeal: The assessee argued that the AO erred in considering the sale as land only and disallowing the construction cost and benefit under Section 54. - Assessee's Arguments: The assessee provided evidence such as an affidavit from a tenant, a certificate from Jaipur Vidyut Vitran Nigam Ltd, electricity bills, and water bills to prove that a constructed house was sold along with the land. - Revenue's Arguments: The Revenue contended that the sale deeds did not mention any constructed house, only the plot of land. The electricity and water bills could not substitute for construction bills, and no rental income was disclosed by the assessee. - Tribunal's Findings: The Tribunal agreed with the AO's findings that the sale deeds mentioned only the plot of land, not a constructed house. The evidence provided by the assessee (tenant's affidavit, electricity and water bills) was insufficient to prove the existence of a constructed house at the time of sale. The claim for construction cost and deduction under Section 54 was rightly rejected. However, the Tribunal noted that the AO should have considered the deduction under Section 54F for the fresh investment made by the assessee. Conclusion: The Tribunal allowed the appeal of the assessee by setting aside the notice issued under Section 148 due to lack of proper jurisdiction and factual inaccuracies. The Tribunal upheld the AO's decision to disallow the construction cost and benefit under Section 54 but noted that the AO should have considered the deduction under Section 54F. The appeal was allowed in light of these directions.
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