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2016 (5) TMI 408 - ITAT KOLKATA

2016 (5) TMI 408 - ITAT KOLKATA - TMI - Reopening of assessment - exemption u/s. 54F disallowed - Held that:- As from the provisions of section 54F(4) of the Act that in any case the claim of exemption u/s. 54F could not be disturbed in A.y 2005-06 even if the construction of residential house has not been completed by the assessee within 3 years from the date of transfer. Accordingly, the basic reason on an issue for which the assessment was re-opened fails. Hence, any addition made other than .....

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material with the ld.AO for initiation of re-assessment proceedings. We also find that in view of provisions of section 54F(4) r.w. proviso thereon, there is no scope for making any addition in A.y 2005-06. Hence, there could not be any reason to believe that income has escaped assessment for the A.y 2005-06. - Decided in favour of assessee - ITA No. 206/Kol/2013 - Dated:- 29-3-2016 - Shri M. Balaganesh, Accountant Member, and Shri S.S.Viswanethra Ravi, Judicial Member For The Appellant: Shri A .....

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initiated u/s. 147 of the Act. In this regard the assessee has raised the following grounds:- 1. That the learned Commissioner of Income Tax (Appeals) erred in dismissing the first ground of appeal before him relating to validity of the Assessment order passed by the Assessing officer under section 143(3) of the Income Tax Act, 1961 pursuant to the proceedings initiated under section 147/148 of the Act. 2. That the reassessment proceedings initiated under section 147/148 of the Act was without .....

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claimed exemption u/s. 54F on purchase of land. Since the exemption of ₹ 8,41,360/- u/s. 54F is granted for buying of house or construction of house, the case of assessee was reopened u/s. 147 on 17-9-2008. The reasons were recorded and statutory notice u/s. 148 dated 17-9- 2008 was issued and duly served upon the assessee on 3-10-2008. In response thereto the ld.AR of the assessee submitted a letter and requested to treat the original return as return filed in response to notice u/s. 148 .....

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o effort or investment in constructing the house is placed on the record. • Till 31/3/2009, the construction is not complete which means more than five years. 3.2. Therefore, the ld.AO was of the opinion that the assessee has not fulfilled the main condition of section 54F and if the argument of the assessee is believed that the investment in land itself is required for exemption u/s. 54F, there was no need for law makers to a put a condition of three years in section 54F. Obviously, what l .....

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. 4. On 1st appeal before the ld.CIT(A) the assessee submitted that the assessee is an individual. During the year the assessee had income from Salary, income from long term capital gain on shares and interest income. Prior to the assessment the Learned Income Tax Officer made detailed investigation and enquiries with regard to transactions in shares entered into by the assessee and required the assessee to submit. contract notes, D-mat Statements showing quantitative information of shares IN an .....

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cintilla Comm. through M/s Rajendra Prasad Shah and the Contract Note for the same was submitted at the time of hearing. c) That the net consideration of ₹ 8,81,520/- received on 14-06-2004 was fully invested in land (Rs.2,87,760/-) and to the Developer for construction of House (Rs.6,17,000/-) by 07- 06-2005 and that this was well within the time allowed by section 54F. d) That the assessee never claimed exemption u/s 54F on purchase of land as purported by the Learned Income Tax Officer. .....

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ment on the part of the assessee to construct a house on the purchased land is baseless and in contradiction to the records placed before him. The assessee had entered into an agreement with the Developer and made initial payment of ₹ 6,I7,000/-. Copy of agreement was enclosed as Annexure B and copy of cheques issued to Developer as Annexure 'C'. 5. After considering the above submissions of the assessee, the ld. CIT(A) has held as under:- (iii) It is not in dispute that the constr .....

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e competent court has passed restraint order directing the assessee to maintain status quo of the property. Similarly the factual position of other cases relied by the ld.AR differs from the case of the appellant. (v) It is an established principle of law that the burden to prove that the assessee is entitled to exemption is on assessee (CIT Vs. Ramakrishna Deo (1959) 35 ITR 312(SC). (vi) In the present case the appellant has failed to discharge his burden hence I am of the considered view that .....

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or advance. I have carefully considered the submission of the appellant and perused the facts of the case. Though the ld.AR has filed the letter of the appellant and the company before the AO in support of the above submission but has not produced any letter from Allahabad Bank who as per the ld.AR has at its own has transferred the aforementioned funds. Since the appellant has failed to produce any documentary evidence from Allahabad bank confirming the submission of the ld.A/R, hence this gro .....

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formation that has been received by him subsequent to the date of intimation issued u/s. 143(1) of the Act dated 31-07-2006. The reasons recorded by the ld.AO are very categorical in the sense that on scrutiny of the assessment folder, however, it revealed that ………. . He placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Orient Craft Ltd reported in 29 Taxmann. Com 392(Del), which is directly applicable on the point. Without prejudice to t .....

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al. Hence, there cannot be any reason to believe on the part of the ld.AO that income of the A.y 2005-06 has escaped assessment.. In this regard, he also placed his reliance on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Kuldip Singh reported in (2014) 49 Taxmann.com 167(Del). He further argued that once the reason for which the assessment was reopened on a particular issue is found to be failed, then the entire re-assessment would automatically fail as it goes to the roo .....

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indicate on scrutiny of the assessment folder and not scrutiny of the return of the assessee. Hence, it goes to prove that some other material might have been there in the assessment folder, which triggered the reassessment proceedings. 7. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the reasons recorded by the ld.AO are as below:- Mahesh Pal Arora A.Y.2005-06 17-9-2008 The assessee filed return of income for the A.Y. 2005-06 on .....

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and. But exemption u/s. 54F is. available for construction of residential house only. Moreover, construction .of residential house is not permissible on a Sali land. So, the amount of ₹ 8,41.360/- has escaped .assessment within the meaning of section 147. Issue notice u/s. 148. Sd/- Chandan Datta Income-tax Officer Ward-7(1), Kolkata 7.1 From the reasons recorded by the ld.AO we find that the ld.AO merely reviewed the assessment folder and tried to arrive at different conclusion that incom .....

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believe' . The assessee's contention that even an assessment made under section 143(1) of the Act can be reopened under section 147 if the Assessing Officer has 'reason to believe' that income chargeable to tax has escaped assessment, is sound. It is true that no assessment order is passed when the return is merely processed under section 143(1) and an intimation to that effect is sent to the assessee. However, it has been recognized by the Supreme Court itself in Asstt. CIT v. .....

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imation under section 143(1) at his whims and caprice; he must have reason to believe within the meaning of the section. [Para 8] In absence of any tangible material, there will be a review in guise of reopening • In CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312 / 320 ITR 561 (SC), it was observed that after 1-4-1989 the Assessing Officer has power to reopen provided there is 'tangible material' to come to the conclusion that there is escapement of income. The judgment has l .....

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cause of the language employed in section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore, it is not permissible to adopt different standards while interpreting the words 'reason to believe' vis-a-vis section 143(1) and section 143(3). [Par 13] • An assessee in whose case the return was processed under section 143(1) cannot be placed in a more vulnerable position than an assessee in whose case there .....

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ces to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression 'reason to believe ' in cases where assessments were framed earlier under section 143(3) and cases where mere intimations were issued earlier under section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed. [Para 13] • The Supreme Court in Rajesh Jhav .....

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reason to believe that income chargeable to tax has escaped assessment. The expression reason to believe have two different standards or sets of meaning, one applicable where the assessment was earlier made under section 143(3) and another applicable where an intimation was earlier issued under section 143(1). It follows that it is open to the assessee to contend that notwithstanding that the argument of change of opinion is not available to him, it would still be open to him to contest the reo .....

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ef that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words reason to believe vis-à-vis an intimation issued .....

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e has not been completed by the assessee within 3 years from the date of transfer. For the sake of convenience, the provisions of section 54F(4) of the Act is reproduced herein below:- Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. ) 54F (1) *** *** *** *** *** *** (a) *** *** *** *** *** *** (b) *** *** *** *** *** *** (2) to (3) *** *** *** *** *** *** (4) The amount of the net consideration which is not appropriated by the asse .....

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section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost .....

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would not have been so charged had the amount actually utilized by the assessee for the purchase or construction of the new asset within the period specified in subsection (1) been the cost of the new asset, shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) The assessee shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid. 7.3 We also fin .....

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sub-section requires the assessee to deposit unspent amount not utilized by the assessee for purchase or construction of a new asset before the date of furnishing of return, in a specified account. It further states that the amount, if already utilized for purchase or construction of the new asset, the amount so deposited will be deemed to be cost of a new asset subject to the proviso. The word purchase is used in subsection (2) and indicates that the said word is not restricted or confined to r .....

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