2023 (6) TMI 274 - AT - Income Tax

Validity of reopening of assessment - taxability of the receipts from the transfer of the development rights - validity of second assessment order - HELD THAT - The assessee in its appeal against the first assessment order passed u/s 147 r.w.s. 143(3) had challenged the taxability of the receipts from the transfer of the development rights before the learned CIT(A). Assessee also challenged the reference to DVO to determine the actual sale consideration of properties. Therefore, the second assessment order passed under section 147 r.w.s. 143(3) is clearly in contravention of the provisions of the aforesaid proviso to section 147 since it reassesses the income which was the subject matter of the appeal before CIT(A). We find that the Hon ble jurisdictional High Court in ICICI Bank Ltd 2011 (11) TMI 304 - BOMBAY HIGH COURT held that the power to re-open an assessment cannot be exercised to re-open issues that formed the subject matter of an appeal to Commissioner (Appeals). Therefore, we affirm the conclusion reached in the impugned order that the second assessment order dated 31/08/2017, passed under section 147 read with section 143(3) of the Act is null and void ab-initio being contrary to provisions of the Act. As the second assessment order is quashed for this short reason, we see no need to deal with other issues raised by the Revenue in the present appeal.

Summary

Issues involved:
The judgment involves issues related to the assessment order passed under section 147 read with section 143(3) of the Income Tax Act, 1951 for the assessment year 2009-10. The key issues include the treatment of the transfer of developmental rights under sections 28 and 50C of the Act, consideration of the transfer of development right to the Joint Venture (JV) as a business transaction, and the validity of the assessment order passed by the Assessing Officer (AO).

Issue I: Treatment of Transfer under Sections 28 and 50C
The Revenue challenged the order of the Commissioner of Income Tax (Appeals) (CIT(A)) regarding the treatment of the transfer of developmental rights. The Revenue contended that the addition made by the AO was under section 28, while the CIT(A) held it was under section 50C. The Tribunal found that the AO had passed two assessment orders based on the same reassessment notice, and the income of the assessee was not based on the valuation report of the Departmental Valuation Officer (DVO) as required by section 142A(7) of the Act. The Tribunal concluded that the second assessment order was null and void as it did not comply with the provisions of the Act.

Issue II: Transfer of Development Rights to JV
The CIT(A) erred in not considering the transfer of development rights to the JV as a business transaction, despite the assessee's submission that it was in the business of development rights. The Tribunal noted that the second assessment order reassessed the income that was already a subject matter of appeal before the CIT(A), contravening the provisions of the Act. Citing a ruling by the jurisdictional High Court, the Tribunal held that the power to re-open an assessment cannot be used to re-open issues subject to appeal. Consequently, the Tribunal declared the second assessment order as null and void ab-initio.

Issue III: Validity of Assessment Order
The Tribunal found that the AO passing multiple assessment orders on the same reassessment notice without awaiting the DVO report was incorrect. The second assessment order was deemed null and void for reassessing income already under appeal before the CIT(A). The Tribunal upheld the CIT(A)'s decision that the second assessment order was contrary to the provisions of the Act. As a result, the appeal by the Revenue was dismissed, and the second assessment order was quashed.

This judgment highlights the importance of following procedural requirements and legal provisions in conducting assessments under the Income Tax Act to ensure fairness and compliance with the law.