TMI Blog2019 (8) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... terial coming into the possession of AO after expiry of period of limitation for framing assessment order u/s. 143(3) based on which, he came to the conclusion that there has been escapement of income chargeable to tax. The department has also not been able to show before the Tribunal the reasons recorded to justify the validity of initiation of reassessment proceedings u/s. 147. In these circumstances, drawing an adverse inference, we hold that initiation of reassessment proceedings u/s. 147 were not valid. Deduction u/s 54B - As far as merits of the addition is concerned, it is seen that the assessee has invested a sum of ₹ 4.68 crores by paying advance for purchase of agricultural lands. It is not disputed that had the sale been completed pursuant to those agreements, the assessee would be entitled to benefits of deduction u/s. 54B. It is also not disputed that due to pending litigation, the sale could not be completed between these parties. However, in respect of agreement between assessee and Narayanappa Others., the litigation has ended and assessee had got title of property on 03.07.2019, copy of the sale deed was filed before us. We are of the view that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes (hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- ( i ) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil ; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the date of transfer of capital asset which gives rise to capital gain, then the amount not so utilised shall be charged u/s. 45 as income of the previous year in which period of two years from the date of transfer of the original asset expires. In that case the capital gain will not be taxed in the year of transfer but will be taxed in the previous year within which it had to be utilized and if not so utilized it will be charged to capital tax in that year in which the period for utilization of the capital gain expires. This is how the deduction u/s.54B of the Act came up for consideration in AY 2010-11 even though the transfer of the capital asset which gave raise to capital gain was in AY 2008-09. 6. The assessee contemplated buying of another agricultural land and claimed exemption from tax of capital gain u/s. 54B of the Act. As far as AY 2010-11 is concerned, the assessee had filed return of income on 20.05.2011. As to whether, there was any intimation u/s. 143(1) or 143(3) order is not clear from the order of assessment passed u/s. 143(3) r.w.s. 147 of the Act. However, the assessment order mentions the fact that assessment was being reopened by issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements of section 54B of the Act, capital gain had to be utilised in purchase of another agricultural land and the fact that assessee had paid the entire sum of ₹ 4,68,00,000 out of the capital gain within the period contemplated u/s. 54B of the Act was not disputed. The fact that registration and other formalities could not be completed owing to circumstances beyond the control of assessee cannot be the basis on which deduction u/s. 54B of the Act can be denied to the assessee. The assessee in this regard had placed reliance on the decision of the Hon ble High Court of Karnataka in the case of CIT v. Sambandam Udaykumar in ITA No.175 of 2012, judgment dated 15.02.2012 wherein the Hon ble High Court took the view in the context of provisions of section 54F of the Act which requires construction of a residential house for claiming exemption. The Court found that capital gain had been invested for construction, but the construction of house was not complete. The Court took the view that requirements of section 54F of the Act were completed by the assessee inasmuch as within the period required by provisions of section 54F of the Act, capital gain was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was brought to tax by the AO. 11. Before the CIT(Appeals), the assessee challenged the initiation of reassessment proceedings on the ground that reasons recorded was not provided to the assessee and that there was no belief regarding escapement of income chargeable to tax. This ground was rejected by the CIT(Appeals) by observing that from the records it is seen that assessee was provided with reasons recorded by the AO and assessee s representative filed objections before the AO. The CIT(Appeals) accordingly rejected the claim of assessee. 12. With regard to deduction u/s. 54B of the Act, the CIT(Appeals) held that thought the amount of capital gain was invested in purchase of agricultural land, the assessee failed to get valid title in his name within the stipulated period and therefore assessee was not entitled to deduction u/s. 54B of the Act. The assessee had, before the CIT(Appeals), relied on the decision of the Hon ble Delhi High Court in the case of CIT v. Kuldeep Singh [2014] 49 taxmann.com 167 (Delhi) wherein the Hon ble Court took the view that if the assessee enters into an agreement with the builder within the prescribed period c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections of Tribunal. 17. When the appeal was finally heard on 27.3.2019, even on this date, the department could not produce the relevant records. The assessee had pleaded for copy of reasons recorded under the RTI Act, 2005 and in response to the said application, the AO has given a copy of the assessment order to the assessee, but has informed the assessee that assessment records for AY 2010-11 was not readily traceable and reasons recorded would be furnished as soon as records are available. Even in the proceedings before the Tribunal, the department has informed that appeals may be decided on merits, rather than on validity of initiation of proceedings u/s. 147 of the Act. 18. We are of the view that initiation of reassessment proceedings have not been established to have been in accordance with the requirements of section 147 of the Act. There is no material brought to our notice that reasons were recorded before issue of notice u/s.148 of the Act which is a sine quo non for valid initiation of reassessment proceedings u/s.147 of the Act. Apart from the above, there appears to be no tangible material coming into the possession of AO after ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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