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TMI Blog2020 (5) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... nt sale of flats to prospective buyers took place in the financial years 2005-06 and 2006-07. During the assessment of the assessee for the AY 2007-08, the A.O. made an addition of Rs. 51,19,683/- as short term capital gain by considering Rs. 70 lakhs as sale consideration for sale of 5 flats. Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the order of the AO by accepting the sale consideration at Rs. 38,56,040/- as against Rs. 70 lakhs taken by the AO. For this purpose, the CIT(A) considered the SRO value as on the date of transfer. On further appeal to ITAT by both the parties, the Tribunal allowed the appeal in favour of the assessee. ITAT, in its order dated 04.04.2014 in ITA No.1356/H/2012 & 896/H/2013 and also vide order dated 16.7.2014 in MA No.89 & 90/H/2014 has allowed appeal in favour of assessee for the A.Y. 2004-05 (the year in which assessee entered into development agreement) and for AY 2007-08, the ITAT has directed that the sale consideration has to be arrived at considering the provisions of the Act as per section 50C of the Act and it was also held that the finally determined capital gains cannot exceed the capital gains originally ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same as second stage of capital gain and also the CIT(A)-3, Hyderabad, had directed to follow the case of Smt. Radhika and others. Therefore, to protect the interest of revenue, the deleted addition in AY 2004-05 by the CIT(A), was proportionately (basing on the flats sold) added back to the assessed income in AY 2007-08 and accordingly, assessment was completed on protective basis. The AO, accordingly, brought additional income of Rs. 8,63,463/- to tax. 3. Aggrieved, the assessee preferred an appeal before the CIT(A) challenging the validity of the re-assessment proceedings and also the addition made by the AO. The CIT(A), upheld the validity of re-assessment proceedings and confirmed the addition made by the AO, thus dismissing the assessee's appeal. 4. Thus, the assessee is in second appeal before the Tribunal by raising the following grounds of appeal. 1. The order of the CIT (A) is erroneous both on facts and in law. 2. The Ld. CIT (A) erred in dismissing the appeal. 3. The Ld. CIT (A) has erred in holding that the reopening of the assessment is in accordance with the provisions of the Act. 4. The Ld. CIT (A) ought to have appreciated that 'doctrine of merger& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by making an addition of Rs. 51,19,683/- as short term capital gain. He submitted that this assessment order was challenged before the CIT(A) u/s 250 of the Act and that the CIT(A) has granted partial relief to the assessee. Therefore, according to him, the assessment order dated 24/12/2009 has already merged with the order of the CIT(A) and, therefore, it cannot be reopened by the AO subsequently. 6. He further submitted that the ITAT, in its order dated 04.04.2014 in ITA no.1356/H/2012 & 896/H/2013 and also in its order dated 16.07.2014 in M.A.Nos. 89 & 90/H/2014 has allowed the appeal in favour of the assessee for the AY 2004-05 (i.e. the year in which assessee entered into development agreement) and for AY 2007-08, the Tribunal has ordered that the sale consideration has to be arrived at considering the provisions of sec.50C of the Act. He submitted that while the matter is pending before the ITAT the AO has initiated reassessment proceedings and passed order on 31.3.2014 i.e. just few days before the order passed by ITAT that too on protective basis. He submitted that for re-opening of an assessment completed u/s 143(3) of the Act, the AO has to record reasons for comin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain to tax in AY 2004-05 and the ITAT in AY 2004-05 has held that the capital gain has to be brought to tax in subsequent years. Therefore, he supported the action of AO in reopening of assessment in AY 2007-08, because the Tribunal has held that the capital gain on transfer of land is to be brought to tax in the AY 2007-08. Therefore, he prayed for dismissal of the appeal of the assessee. 7.1. Having regard to rival contentions and material placed on record, I find that the development agreement was entered into in F.Y. 2003-04 relevant to AY 2004-05 and the assessee had to offer the capital gain to tax on account of joint development agreement wherein assessee had transferred 50% of the land in favour of the developer. In FY 2006-07, assessee had sold flats received by him and during the relevant AY, i.e., 2007-08, the assessee is liable to capital gain tax on transfer of the flats. Therefore assessee was liable to pay capital gain tax on parting with 50% of the plot of land to the developer in AY 2004-05. However, the coordinate Bench of the Tribunal had considered the judicial precedent of a coordinate Bench at that point of time to hold that the capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08/2011. Further, the CIT (A) stated that the addition is to be considered for subsequent years following the Hon'ble ITAT's decision. In view of the Hon'ble CIT (A)-III, Hyderabad, this case is reopened after taking proper approval and notice U/ss. 148 was issued and subsequently the notice U/ss. 143(2) also issued." 7.2 Further, the AO in the last paragraph of his order has held as under:- "However, the assessee request is not accepted, because while computing the capital gain income in the order passed on 24/10/2010 for the AY 2007-08, the AO has adopted the cost of acquisition basing on the case of Dr. Maya Shenoy (23 DTR), Secunderabad case (treating the same ass second stage of capital gain). But the Hon'ble CIT (A)-III, Hyderabad order in ITA No. 0631/11-12, dated 29/06/2012 directed to follow the case of Smt. K. Radhika & others, therefore to protect the interest of Revenue the disallowed amount in the AY 2004-05 by the CIT (A) is proportionately (basing on the flats sale) added back to this Asst. Year and accordingly the assessment is completed on protective basis as under......" 8. Therefore, it is clear that the AO has made the protective assessment in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authorities" where the Petitioner has contended that the transactions amount to a revocable transfer and that the income which would arise should be taxed in the hands of the individual contributors. The reopening of an assessment under Section 148 on the basis of a submission which is raised before the appellate authority by the assessee is clearly impermissible because what Section 147 requires is a formation of a reason to believe by the Assessing Officer. In the present case, there is clearly a want of compliance with the jurisdictional condition. The Assessing Officer has not formed a reason to believe that income has escaped assessment since the reopening is based purely on a contingency that may arise upon a particular outcome before the appellate tribunal." 9. Thus, it can be seen that an assessment completed u/s. 143(3) of the Act, cannot be reopened on a presumption that it may escape assessment in future, if the revenue failed in its litigation before the Hon'ble High Court. Thus, I am satisfied that the reassessment proceedings initiated and completed on protective basis are null and void. The ground of appeal no.3 is allowed. Since the reassessment is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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