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TMI Blog2017 (6) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... t was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) failed to appreciate that compensation received was not for the reason of loss of revenue and ought to have appreciated that the sale agreement dated 31.10.2000 should be the foundation for understanding the circumstances relating to the receipt of compensation on the facts and in the circumstances of the case. 5. The CIT (Appeals) failed to appreciate that the receipt of compensation on the facts of the case should be construed as capital receipt and ought to have appreciated that isolating the cancellation agreement dated 15.03.2004 read with the agreement dated 24.03.2003 entered into with M/s Mantri Developers P Ltd with the agreement dated 31.10.2000 read with revised agreement dated 09.01.2003 for sale of property to M/s Abhishek Developers was erroneous and invalid. 6. The CIT (Appeals) went wrong in recording the findings in this regard in paras 8.2, 9.4 & 9.5 of the impugned order without assigning proper reasons and justification. 7. The CIT (Appeals) failed to appreciate that the compensation on the facts of the case was linked to a capital asset as defined in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the parties to incorporate the gifting of the share of Shri P.L.Annamalai in favour of Shri S.Palaniappan and Shri S.Manickavasagam and further the gifting the share of Shri P.L.Vivekanandan in favour Shri V.Palaniappan, the Appellant herein. The agreed consideration as per the said supplement agreement was increased to Rs. 17.50 Crores and the said supplementary agreement provided for a contra purchase of a property worth Rs. 2.5 Crores consisting of the built-up area at Chambers@mantri belonging to M/s Mantri Developers P Ltd., sister concern of M/s Abishek Developers, Bangalore. In this regard, a separate agreement dated 24.3.2003 was also entered into between the Appellant and M/s Mantri Developers P Ltd. Subsequently, while additional compensation agreement dated 15.4.2004, the purchase agreement dated 24.3.2003 was cancelled and a compensation of Rs. 2,79,32,000I- was determined as payable by M/s Mantri Developers P Ltd. The tabulation is given in page 4 of the re-assessment/impugned order dated 28.12.2010 giving the various factual details with reference to the said compensation agreement. Further, the Additional Commissioner of Income Tax had observed that though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against this, the assessee is in appeal before us. 5. Regarding reopening of assessment , the ld.A.R submitted that there was no fresh material for the prupose of reopening of assessment and the AO on the same material which was already on record undue basis reopening the assessment. According to him, the assessment was reopened after the four years from the end of the relevant assessment year. The ld.A.R submitted that reopening of assessment is bad in law. He relied on the following decisions. 1. Gkn Driveshafts (India) Ltd. Vs. ITO in [2003] 259 ITR 19 (SC) 2. Cit Vs. Saurashtra Cement Ltd., in [2010] 325 ITR 422 (SC) 3. CIT Vs. South India Flour Mills Private Ltd. in [1970] 75 ITR 147 (Mad) 6. On the other hand, ld.D.R submitted there was a failure on the part of the assessee to furnish all materials fully and truly required for the purpose of assessment. He stated that the reopening is valid as there is an escapement of income in the assessment year under consideration. 7. We have heard both the parties and perused 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this plea of the ld.AR is not tenable in the eyes of law. It is true that u/s 147, the Assessing Officer can either assess or re-assess but for taking action there under, he has to record reasons that income chargeable to tax has escaped assessment . It is also mandated by section 148(2) to record reasons in writing. The reassessment proceedings u/s 147 are further subject to sections 148,149,150,151,152 and 153. But in the present case, we are required to decide the limited issue regarding the validity of proceedings undertaken after four years of the assessment year in question. The Assessing Officer is required to see if the conditions laid in Explanation 2(c) are satisfied because in this case no assessment was completed u/s 143(3) of the Act. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made the subjective of excess relief under this Act; or (iv)excessive loss or depreciation allowance or any other allowance under 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso''. It is possible that with due diligence of the Assessing Officer would have ascertained this fact at the time of assessment, if any also, but in view of the explanation (1) it does not mean that there was no default on the part of the assessee. Hence, reopening u/s.147 is held to be valid. The assessee has tried to take shelter under the exception provided in that section. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment and there is no assessment u/s.143(3) of the Act, this proviso will not come to its rescue. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. 8. Regarding merit, it was submitted by ld.A.R that a sale agreement of 30.10.2000 between assessee 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The appellant pleaded that the cost of acquisition should be reworked on the facts and circumstances of the case. 8.2 It was submitted by the ld.A.R that the compensation given for sterilization of a source of income is a capital receipt. The appellant cites the decision of the Hon'ble Apex Court in P.H. Divecha vs Commissioner of Income Tax(1963) 48 ITR 222(SC). The ld.A.R relied on the order of Tribunal in the case of Shri K. Subramanian in ITA No.1652/Mds/2012 wherein held that what has been received by the assessee in the form of compensation is for the loss of earnings only. Therefore, it was held that the compensation received by the assessee is revenue receipt exigible to tax and not a capital receipt. 8.3 The ld.A.R contended that the origin of the transaction was by another separate purchase agreement which was entered dated 24.03.2003, based on which additional compensation agreement dated 15.03.2004, was entered. The ld.A.R stated that the origin of these transactions, dates 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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