TMI Blog2017 (6) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... he land sold as per the earlier sale agreements is entirely different from the land on which the appellant is acquiring the property. In view of the above it is very clear that the compensation received by the appellant is purely for non fulfillment of contractual obligations with regard to purchase of built up area in “Mantri Chambers” and in no way linked to the sale of the land at “Begur Hobli” in Bangalore South Taluk as per sale agreement dated 30.10.2000 and supplementary agreement dated 9.1.2003. The assessing officer in his well reasoned order has correctly treated the receipts as revenue receipt and has in no way treated the same as income on account of capital gains. Therefore, the appellants’ claims with regard to cost of acquisition or the extinguishment of rights are not accepted. The compensation was received by the appellant, for loss of revenue. Further, compensation has been awarded only by way of agreement dated 15/3/2004. The mere provision of a compensation agreement dated 24.3.2003, does not presuppose the default by the developer receipt of compensation on that count. The claim of compensation fructifies only when Developer failed is his obligations and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the facts of the case was linked to a capital asset as defined in section 2(14) of the Act and hence ought to have appreciated that the machinery provisions in section 48 of the Act for computing capital gains for taxation would fall to the ground in view of the cost of acquisition being at Rs. NiI. 8. The CIT (Appeals) went wrong in recording the findings in this regard in para 9.7 of the impugned order without assigning proper reasons and justification. 9. The CIT (Appeals) failed to appreciate that the assessment of capital gain/revenue receipt in the previous year relating to the Assessment Year under consideration was incorrect and went wrong in recording the findings in this regard in para 10.2 of the impugned order without assigning proper reasons and justification. 10. The CIT (Appeals) erred in confirming the validity of the reassessment without assigning proper reasons and justification and ought to have appreciated that there were no fresh materials warranting the assessment u/s 147 read with 143(3) of the Act. 11. The CIT (Appeals) went wrong in recording the findings in this regard in para 9.10 of the impugned order without assigning prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to the said compensation agreement. Further, the Additional Commissioner of Income Tax had observed that though the cheques have been post-dated i.e., 14-5-2004, the date of agreement for additional compensation being 15-3-2004 and the assessee received entire consideration on the date of agreement itself, which included refund of advance paid by the purchasers to the tune of ₹ 2,45,68,000/-, the transaction appears to have been closed on 15-3-2004 itself. 3.2 Therefore, the Additional Commissioner of Income Tax came to a conclusion that the assessee failed to reflect the compensation received vide agreement dated 15.3.2004 to the extent of ₹ 88,06,9601- and further concluded that rental income received to the tune of ₹ 39,000/- was also not disclosed by the assessee as per the ledger extract obtained from M/s Mantri Developers P Ltd. In response to the said observation, the assessee filed a detailed letter dated 6.7.2009 and wherein it was highlighted that the original assessment was framed on all facets of the original return of income. Further it was stated that the receipt of compensation was to be construed as a capital receipt and at the same breadth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material on record. The main contention of ld.A.R is that in this case the original assessment was completed u/s.143(3) of the Act. The assessee has furnished all details to the AO at the time of filing of return of income and according to the A.R, there was no failure on the part of the assessee to disclose all material facts necessary for the purpose of assessment. He submitted that the reopening vide notice u/s.148 of the Act dated 19.06.2009, it is only a change of opinion. He submitted that the AO going through the same documents, which were already on record, wanted to reopen the assessment, which is nothing but review of the earlier opinion, which is not possible u/s.147 of the Act. In this case, the assessment was reopened after recording the reasons that there was an escapement of income with reference to compensation received on cancellation of purchase/sale equipment at ₹ 88,06,959.60 and rental income of ₹ 39,000/- 7.1 Admittedly in this case, there was original assessment u/s.143(3) of the Act vide order dated 27.12.2006. It is a settled law that on the basis of material, prima facie, available before the Assessing Officer, opined that income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act has been computed, then the Assessing Officer would have valid cognizance u/s 147 of the Act. The reasons recorded by the Assessing Officer clearly speak for the under assessment of tax hence, the conditions laid above stand fulfilled in so far as re- assessment proceedings are concerned. In so far as the reasons recorded, extracted in the earlier portion of this order, we are satisfied that the Assessing Officer has reason to believe that income has escaped assessment. This fact confers jurisdiction on him to reopen the assessment. The power to re-assess post 1st April, 1989 are much wider than these used to be before. But still the schematic interpretation of the words reason to believe failing which section 147 would give arbitrarily powers to the Assessing Officer to reopen the assessment on the basis of mere change of opinion, which cannot be, per se a reason to reopen the case. The Act has not given power to the Assessing Officer to review but has only given power to re-assess. There is a conceptual difference between the two aspects as the Assessing Officer has no power at all to review the assessment. The reassessment, as stated above, has to be based on fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee family and M/s.Abhishek Developers, was entered into. A supplementary Agreement of 09.01.2003, provided for an enhanced consideration and also for a contra purchase of a property developed by its sister concern. A separate agreement of 24.3.2003 also provided for purchase and also for identifying a tenant on par with market rate. By virtue of a Compensation Agreement of 15.03.2004. The ld.A.R submitted that : The assessee received the compensation not out of transfer of a Capital Asset but upon the termination of agreement for non fulfillment of certain clauses agreed. The assessee was only an one-time investor and not a real estate dealer, holding any asset as stock in trade so as to be brought within the meaning as a dealer and treating the compensation as a Business Income . It is submitted that, where the compensation is given for sterilization of a source of income, such compensation is a capital receipt, as has been held by Hon ble Supreme Court in P.H. Divecha vs Commissioner of Income Tax(1963) 48 ITR 222(SC) and several other High Court divisions following the same. By virtue of the clauses in the Compensation Agreement of 15.03.2004, which provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to IT Asst. Year 2003-2004 in view of the purchase agreement drawn up dated 24.03.2003 and further Long Term Capital Gains on sale property was duly admitted by the appellant in 2003-2004 Asst. Year. 9. We have heard both the parties and perused the material on record. A perusal of the entire gamut of this agreements show that the compensation is not to be linked to the sale agreements. The agreement dated 24.3.2003 for acquisition of the said portion of 14,014 sq. ft in Mantri Chambers, which also has a clause to find a TENANT at market price, is a separate agreement and in no way related to the sale agreements. This in effect means that the compensation is on account of loss of revenue by way of rental income, which is in any case of revenue income. The compensation is only to compensate the loss of rental income, which would have arisen to the appellant had the agreement dated 24.3.2003 been honoured by the developer. A perusal of the purchase and compensation agreements shows that the land sold as per the earlier sale agreements is entirely different from the land on which the appellant is acquiring the property. In view of the above it is very clear that the compens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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