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2015 (4) TMI 465 - ITAT BANGALOREReopening of assessment - validity of initiation of proceedings u/s. 147 - AO has come to the conclusion that by virtue of JDA dated 5.2.2005, there was a transfer of the capital asset giving rise to capital gains u/s. 45(2) - Held that:- t. As we have already seen the Assessee held the Whitefield property as investment and converted the same as stock-in-trade of business. This fact has also been recorded by the AO in the order of assessment passed u/s.143(3) of the Act. Sec.45(2) of the Act provides that the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him. The taxable event for application of Sec.45(2) is conversion of capital asset into stock-in-trade of business. The point of time at which tax is levied is the year in which the stock-intrade is sold. When the original assessment was completed u/s.143(3) of the Act, the AO did not think it fit to invoke provisions of Sec.45(2) of the Act either because he overlooked the applicability of those provisions or because he thought that the point of time at which tax is to be levied u/s.45(2) of the Act, viz., sale of the stock-in-trade had not occurred during the previous year. AO has relied on two important factors viz., (i) assessee has executed POA in favour of developer and the fact that assessee received refundable and nonrefundable deposits under the JDA, and (ii) the fact that several courts have held that capital gains is liable to tax on account of JDA entered into by the land owners with the builder on handing over of the possession of the property for joint development. In coming to the aforesaid conclusion, the AO has placed reliance on the decision of the Hon’ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia v. CIT, (2003 (2) TMI 62 - BOMBAY High Court) which was much before when the AO concluded the original assessment proceedings u/s. 143(3) of the Act on 31.12.2007. The other decision referred to by the AO in the reasons recorded is CIT v. T.K. Dayalu [2012 (6) TMI 405 - Karnataka High Court]. This decision was rendered on 20.6.2011, after the conclusion of the original assessment proceedings. The decision rendered subsequent to the original assessment proceedings will not mean that assessee did not fully and truly disclose material facts. If reassessment proceedings are initiated on the basis of a subsequent judicial decision, then that would also be a case of change of opinion, as was held by the Hon’ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT,(2004 (5) TMI 54 - BOMBAY High Court) on which reliance was placed by ld. counsel for the assessee. In the present case, the facts on record and reasons recorded clearly show that all facts were available before the AO when he completed the original assessment proceedings u/s. 143(3) of the Act. There is no tangible material which has come to the possession of the AO justifying initiation of reassessment proceedings. On the facts and circumstances of the present case, we are of the view that initiation of reassessment proceedings has been merely on the basis of change of opinion and in view of the law laid down by the Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) initiation of reassessment proceedings has to be held as not proper.We are, therefore, of the view that in the given facts and circumstances of the case, initiation of reassessment proceedings u/s 147 of the Act is held to be illegal and consequently, order passed u/s. 147 of the Act is cancelled on this ground. - Decided in favour of assessee.
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