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TMI Blog2025 (4) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... Act for Assessment Year (AY) 2008-09 and offered to capital gains claiming relief in terms of Section 54F of the Act. The return was processed under Section 143(1) of the Act on 25.03.2010 and was not taken up for scrutiny thereafter. 3. The Department initiated proceedings for re-assessment on 10.08.2011 by issue of notice under Section 148 of the Act. After due enquiry, an order of re-assessment had been passed on 30.05.2012 under Section 143(3) read with Section 147 of the Act accepting the computation for the purposes of capital gains. 4. The assessee had claimed relief under Section 54F of the Act by investing a sum of Rs.47,44,95,882/- in residential property and the balance of Rs.55,82,82,845/- in long term capital gains scheme. The order of re-assessment examines the claim and accepts the return of income as filed. 5. While so, a notice was issued under Section 263 by the Commissioner of Income Tax (CIT) on 22.08.2012. The Commissioner re-visits yet again the claim under Section 54F and, being of the view that the order of re-assessment dated 30.05.2012 contained an error which was prejudicial to the interests of the revenue, put forth a proposal that the claim of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes a distinction between the provisions of Section 54F and Section 54 of the Act, noticing that the phrase 'lands appurtenant thereto' contained in Section 54 are absent in Section 54F. According to him, this distinction is conscious and relevant, and can only mean that the emphasis is on the residential house in the property rather than on the land. 12. He concludes that since the land area in the property in respect of which the deduction was claimed was substantial when compared with the dimensions of the house, the claim of deduction was vitiated on this account. The claim thus came to be disallowed and a consequent demand raised vide order of assessment dated 31.03.2016. 13. As against the rejection of the claim, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) (in short 'CIT(A)'), who, by order dated 05.01.2018 dismissed the same upholding the order of assessment. A further appeal was filed before the Tribunal that has come to be allowed on 16.10.2018, accepting the ground that assumption of jurisdiction by the Assessing Officer u/s 153A was erroneous. 14. The Tribunal notes that as the assessee had already suffered proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case before us. 16. We have heard Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant and Mr.SrinathSridevan, learned Senior Counsel appearing for Mr.K.S.Elangovan, learned counsel on record for the respondent. 17. The substantial questions of law admitted for resolution are as follows: "i. Whether the Appellate Tribunal is correct in law in holding that issues taken up in proceedings under Section 263 of the Income Tax Act cannot be reassessed in the proceedings under Section 153A of the Act, when the Commissioner of Income Tax had dropped the proceedings under Section 263 and the issue of deduction under Section 54F was never adjudicated in the revision proceedings ? ii. Whether the Tribunal was legally correct in placing reliance upon Circular No.7 of 2003 dated 05.9.2003 to hold that the proceedings under Section 263 shall not abate consequent to search action, when the words employed in Section 153A, in the matter of assessment/reassessment proceedings, which include revision/ rectification proceedings indicate otherwise? iii. Whether the Appellate Tribunal was legally justified in ignoring the decision of the Hon'ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived a notice under Section 148 dated 10.08.2011. The order of re-assessment dated 30.05.2012 reveals the reason for re-opening of the assessment was the claim under Section 54F. 20. A return was filed by the assessee in pursuance of notice under Section 148 and the claim of exemption was also looked into in detail. The assessing authority accepts the return of income filed and the deduction claimed, and the relevant portion of the order of re-assessment reads as follows: 4. The main issue involved in the above claim of the assessee is that the assessee has bought 43.56 acres of the land at Mahabalipuram for Rs.47,44,95,882/- and constructed a house in some part of land and claimed exemption u/s 54F of the IT Act. On examining the huge area of the land for exemption, the AR of the assessee has asked to explain why the exemption should not be restricted to the construction area instead of the whole land. The AR of the assessee has replied that "in the provisions of the Incomes tax Act there is no restriction to the word 'Land appurtenant to and forming part of House' and accordingly the assessee has rightly claimed the whole area of land along with house u/s 54F of the IT Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the assessee has got any objections against invoking the provisions of sec. 263 of the Act and for withdrawing the claim of deductions u/s 54-F and u/s 48(i), the assessee may represent either in person or through an authorized representative or through written submissions.The case is posted for hearing on 13-09-2012 at 11 A.M. at Room No.601, VI Floor, Aayakar Bhavan, New Block, No. 121, N.H.Road, Nungambakkam, Chennai 600 034. In case of failure to avail the opportunity of hearing, it will be presumed that the assessee has no objections to the proposed revision of assessment u/s 263 by the undersigned and accordingly, an order u/s 263 will be passed ex parte on the basis of the material available on record.' 23. The assessee filed a reply dated 13.09.2012 to notice under Section 263 dated 22.08.2012, which was pending consideration before the CIT. Inter alia, the assessee has pointed out specifically that there is no error in the order of re-assessment dated 30.05.2012. The re-assessment had been concluded after calling for several particulars in relation to the claim for capital gains exemption under Section 54F. 24. The specific issue that had been deliberated upon in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of re-assessment as well as of detailed examination in revision under Section 263, that had ultimately come to be dropped. We extract below the provisions of Section 153A and proviso thereunder to the extent to which they are relevant to this matter: Assessment in case of search or requisition. 153A.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making of requisition under Section 132A, as the case may be, shall abate. 32. There has been a schematic shift in the framing of assessments pre 01.06.2003 and post 01.06.2003. Prior to 01.06.2003, there were two assessments that could be made, one, a regular assessment and the other, an assessment that was based wholly and solely on incriminating materials found in the course of search. 33. Post 01.06.2003, the two assessments merge, in that, the requirement for two assessments, one regular and one for income found in the course of the search, stands obviated. Sections 153A and C provide for a single assessment that takes into account issues touching on search materials as well as other regular additions/disallowances. 34. The above procedure is enabled by the proviso which mandates that once a search has taken place, then, pending assessments/re-assessments for that year shall abate. This is to pave the way for a wholistic assessment, including income based on search material as well as regular (not based on incriminating search material) income. 35. The Supreme Court in the case of Principal Commissioner of Incometax, Central - 3 vs. Abhisar Buildwell (P) Ltd. (454 ITR 212 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 39. In the present case, the fact of the matter is that proceedings under Section 263 were pending as on the date of search. However, and as per the above Circular, nothing prevented the CIT to have concluded the revisionary proceedings as it is only the proceedings for assessment or re-assessment pending as on date of the search that would abate. The CIT has however not chosen to do so and has dropped the proceedings officially. With this, the curtains fall on the revisionary proceedings and the benefit available under the above Circular is no longer available to the Department. 40. We also do not find that the above Circular advances the case of the Department in the facts and circumstances of the present case. The Circular clarifies that proceedings for assessment or re-assessment pending as on date of the search shall abate. In the present case, the re-assessment initiated has culminated in an order dated 30.05.2012 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent raking up the same issue yet again in the absence of any incriminating material. Hence, and on a plain reading of the second proviso to Section 153A, the Department is estopped from framing a regular assessment in this case as the re-assessment stands concluded as on 30.05.2012. 47. Moreover, and on the question of assumption of jurisdiction u/s 153A, the search has admittedly not yielded any incriminating materials in regard to the claim under Section 54F of the Act. A perusal of assessment order dated 31.03.2016 does not indicate any incriminating material based on which the assessment has been made, save the Inspector's report dated 10.08.2011. That report is extracted in unnumbered paragraph in internal page 3 of order of assessment and reads as follows: The land purchased is agricultural dry land with standing Casuarina Trees and after purchasing the land from M/s.Pallava Resort Pvt. Ltd., constructed a boundary wall and started constructing the building in one corner of the land. One Inspector was deputed for a field enquiry during the reopened assessment proceedings. The inspector has reported on 10.08.2011. The following are the observations made in the ITI's repo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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