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Zakaria Industrial Prmises Co Operative Society Ltd Versus Income Tax Officer -20 (3) (4) , Mumbai

2016 (1) TMI 71 - ITAT MUMBAI

Reopening of assessment - addition of capital gain - Held that:- Return of income was duly processed and accepted u/s 143(1). Later on, ITO, E 20(3)(4) Mumbai issued a letter dated 03.07.2008 requiring the assessee to furnish certain information which included details of transaction of sale and purchase made by the society in respect of immovable property. In reply, the assessee had submitted the entire details vide letter dated 18th July,2008 and 4th August, 2008 giving the entire details of pe .....

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years and bank statement. Again in response to said summon, the assessee submitted all the requisite details.

Now, after all these exercise of seeking information which was already there on record and without there being any tangent material coming on record, the assessee’s case was sought to be reopened on the ground that assessee has received ₹ 1 crore during the relevant financial year from sale of FSI and the entire amount claimed as deduction cannot be allowed. There is no .....

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o further action has been taken, then, without there being any contrary or adverse material on record, reopening u/s 147 can be made without any tangent material indicating escapement of income. There cannot be “reason to believe” on the same set of facts and record, which has been subjected to examination by different Departmental authorities. - Decided in favour of assessee - ITA No. : 6254/Mum/2013 - Dated:- 15-10-2015 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL .....

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of the I.T. Act, 1961. 2. On facts, in circumstances of the case and in law the learned CIT-A erred in confirming addition by AO of ₹ 97,72,252/- to the total income as long term capital gain . 2. Brief facts qua the validity of reopening u/s 147 as challenged by the assessee vide ground no. 1 are that the assessee is a co-operative industrial society. It has filed its return of income for the assessment year 2007-08, u/s 139(1) on 15.11.2007 declaring Nil income. The said return of incom .....

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assessee vide letter dated 03.07.2008, wherein the AO specifically asked for details of transaction of sale and purchases of immovable property for the last five years with the copy of agreement. In response, the assessee furnished all the requisite information vide letter dated 15th July, 2008 and 4th August, 2008. This transaction of sale of FSI was also enquired upon and details were furnished by the assessee. After such exchange of letters, queries and replies, no action was taken against a .....

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atements. Further vide letter dated 14.09.2010, the assessee again furnished the requisite details as required by the Department. After such an exchange of letters, no adverse inference was drawn or any action was taken. Thereafter, on 28.03.2011, the assessee s case was reopened by issuance of notice u/s 148 on the following reasons recorded , which was supplied to the assessee on 14.10.2010 :- The reasons recorded for selection of your case are furnished here under: The assessee is a co-operat .....

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ct, 1961. (Sd/-) x x x Income-tax Officer - 20(3)(4) Mumbai 3. During the course of the assessment proceedings, the assessee raised its objections and justified the claim of deduction of long-term-capital-gain on the ground that, there was divergent of income by overriding title. The relevant submission of the assessee reads as under :- The structure of the building of the society needed urgent repairs. Society had no funds to carry out major structural repairs. Hence, society sought permission .....

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videncing this condition already placed on record. Hence, the society had no option to use the amount received on sale of land/FSI at its discretion. In view of foregoing, the amount received on sale of land/FSI got diverted by overriding title and was not liable to be included in computation of total income . Besides this, the assessee has also challenged the validity of reopening u/s 148 on the ground that, already enquiries were conducted by the Department and no adverse view was taken. Thus, .....

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d reason to believe that income chargeable to tax has escaped the assessment. In his order, Ld. CIT(A) discussed the entire law on change of opinion validity of reopening after referring to the various decisions and decided the issue against the assessee. 5. Before us, the Ld. Counsel submitted that once the assessee has given detailed note in the return of income for claiming of exemption of long-term-capital-gain and later on it has been enquired by the Department also twice, then on the same .....

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was no application of mind during assessment. Thus, the case has rightly been reopened on the reasons recorded by the AO. 7. We have heard the rival contentions and also perused the relevant material on record. The assessee which is a co-operative industrial society has shown sale consideration from sale of FSI of ₹ 1 crore and after deducting the cost of acquisition at ₹ 1,76,081/-, treated the entire long-term-capital-gain of ₹ 98,23,919/- as exempt. In the computation of inc .....

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ocities to raised funds for carrying out these major repairs by sale of part of land/FSI. The Dy. Registrar Cooperative Societies granted permission to sale portion of land subject to the condition that funds raised from sale of land have to be utilized only for the purpose of carrying out major structural repairs.: The Society had no option to use the said amount at its discretion. Hence the amount received on sale of land got diverted by overriding title and consequently not included in above .....

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me Diverted by overriding title. b) CIT v/s Shri Chhatrapati Sahakari Sahhar Kerhhenn Ltd (2000) 245 ITR 498 (Bom) Deduction made by Co-operative Sugar Mill from price payable by it to cane growers for collecting funds for development of local area and towards various relief funds pursuant to instruction of the Government did not constitute trading receipts as there was diversion of income by overriding title . Such a return of income was duly processed and accepted u/s 143(1). Later on, ITO, E .....

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e the fund for specific purpose . After having received this information, the assessee s case was not selected for scrutiny and time limit for issuance of notice u/s 143(2) had expired on 30.09.2008. Again a summon was issued by the Investigation on 27.01.2010, mainly requiring the assessee to furnish copy of income-tax return furnished for the last five years and bank statement. Again in response to said summon, the assessee submitted all the requisite details. 8. Now, after all these exercise .....

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or is incorrect and therefore, income chargeable to tax has escaped assessment. Here it is not a question of purely change of opinion , on the ground that earlier assessment was completed u/s 143(3) albeit the issue is, when the assessee has made full disclosure in the return of income which has been enquired upon by the Department twice and no further action has been taken, then, without there being any contrary or adverse material on record, reopening u/s 147 can be made without any tangent ma .....

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there is none. 9. Coming to argument of the Ld. DR that in this case no scrutiny assessment was made u/s 143(3) but return of income was processed u/s 143(1) and therefore, neither there is change of opinion nor there is any such presumption that there is application of mind on the material on record. The Statute has given sufficient power to the Assessing Officer for reopening the assessment either in the cases where return of income has been accepted u/s 143(1) or has been subjected to scrutin .....

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