Case Law Details
P. Divagar Vs ITO (ITAT Chennai)
n the present case, the only issue for consideration is whether the reopening of assessment under section 147 of the Act is valid or not. For the sake of convenience, the reasons recorded and communicated to the assessee are reproduced as under:
“The assessee filed his return of income for the A.Y.2011-12 on 25.03.2013 admitting total income of Rs.2,17,740/- under the head salary and under the head capital gain admitted NIL income claiming exemption u/s 54 of Rs.12,39,280/-. During the Year under consideration the assessee has sold a property along with his brother and his share of consideration was Rs.39,05,530/-. Enquiries revealed that assessee has purchased a plot in his wife name. Hence exemption u/s 54 as claimed by the assessee is not allowable as plot has been purchased instead of residential house and that too in the name of his wife.
From the above issues, I have reason to believe that income has escaped assessment for the assessment year 2011-12; by virtue of section 147 of the I T Act.”
From the above, it is very clear that the Assessing Officer has not alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts to complete the assessment. That apart, we find that there is no failure on the part of the assessee in respect of disclosure of all relevant materials required for assessment fully and truly. Therefore, in our opinion, the reopening of assessment under section 147 of the Act is invalid and the same is quashed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Puducherry, dated 20.08.2019 relevant to the assessment year 2011-12. The assessee has raised the following grounds:
“1. The order of the Commissioner of Income-tax(Appeals) dismissing the appeal on the issue of jurisdiction and on the merits is contrary to law, erroneous and unsustainable on the facts of the case.
2. The CIT(A) erred in confirming the reopening by issue of notice u/s.148 and the completion of assessment u/s.147 of the Act.
3. The CIT(A) failed to appreciate that there was an apparent lack of jurisdiction to reopen the assessment in as much as the original assessment was completed u/s.147 r.w.s.143(3) on 15.12.14 and there was no failure on the port of assessee to furnish any material and hence the reopening was bad in law.
4. The CIT(A) further failed to appreciate that the reopening of assessment beyond the 4-year statutory time limit is impermissible as per the Proviso to sec.147, more so, in the absence of failure to disclose any material facts by the assessee and therefore reopening is invalid in law .
5. The CIT(A) ought to have token due cognizance of a catena decisions of the apex court, High Courts and Appellate Tribunals holding that Proviso to sec.147 applies in such situations and thus cancelled the reopening of assessment as not accordance with law.
6. The CIT(A) erred in confirming the denial of exemption under sec.S4F of the Act.
7. The CIT(A) failed to appreciate that the assessee was statutorily entitled to exemption u/s.54F, as the reinvestment in a residential house was made by July 2011 after having sold the property in August 2010 and thus allowed the same.
8. The CIT(A) further failed to appreciate that the assessee had invested more than the sale consideration within the statutory period of three years from date of sale and hence allowed the claim u/s.54F regardless of the date of completion of construction.
9. The CIT(A) ought to have also seen that the reinvestment of sale consideration made in residential property in the name of assessee’s wife was valid and thus the assessee was fully justified in the claim for exemption.
10. The CIT(A), in any event, ought to have considered the contentions of the assessee in the proper perspective one held that the notice u/s.148 and assessment were bad in law and also allowed the exemption under sec.54F of the Act.”
2. Facts are, in brief, that this is second round of litigation before the Tribunal. In the first round of litigation, the Single Member Bench of ITAT has quashed the order of assessment passed under section 143(3) r.w.s. 147 of the Act on the ground that when there is time limit to issue notice under section 143(2) of the Income Tax Act, 1961 [“Act” in short] and the Assessing Officer has to complete the assessment under section 143(3) of the Act, the Assessing Officer is precluded from issue of notice under section 148 of the Act. However, in terms of provisions of section 149(1)(b) r.w.s. 151(1) of the Act, the Assessing Officer has again reopened the assessment by issuing notice under section 148 of the Act dated 31.03.2018. In response to the notice, the assessee filed his return of income on 09.10.2018 and also asked reasons for reopening of assessment. After considering the objections of the assessee and following other procedure, the Assessing Officer has completed the assessment order under section 143(3) r.w.s. 147 of the Act dated 21.12.2018.
3. The assessee has challenged the reopening of assessment before the ld. CIT(A) and the ld. CIT(A) confirmed the order of the Assessing Officer.
4. On being aggrieved, the assessee is in appeal before the Tribunal. Before under section, the ld. counsel for the assessee has submitted that issuing notice under section 148 of the Act dated 31.03.2018 for reopening of assessment is beyond four years and nowhere, the Assessing Officer has recorded that there is a failure on the part of the assessee to disclose all relevant materials to complete the assessment. Thus, the ld. counsel prayed for quashing the time barred assessment order under section 143(3) r.w.s. 147 of the Act.
5. On the other hand, the ld. Departmental Representative strongly supported the order passed by the Assessing Officer and confirmed by the ld. CIT(A).
6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the present case, the only issue for consideration is whether the reopening of assessment under section 147 of the Act is valid or not. For the sake of convenience, the reasons recorded and communicated to the assessee are reproduced as under:
“The assessee filed his return of income for the A.Y.2011-12 on 25.03.2013 admitting total income of Rs.2,17,740/- under the head salary and under the head capital gain admitted NIL income claiming exemption u/s 54 of Rs.12,39,280/-. During the Year under consideration the assessee has sold a property along with his brother and his share of consideration was Rs.39,05,530/-. Enquiries revealed that assessee has purchased a plot in his wife name. Hence exemption u/s 54 as claimed by the assessee is not allowable as plot has been purchased instead of residential house and that too in the name of his wife.
From the above issues, I have reason to believe that income has escaped assessment for the assessment year 2011-12; by virtue of section 147 of the I T Act.”
From the above, it is very clear that the Assessing Officer has not alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts to complete the assessment. That apart, we find that there is no failure on the part of the assessee in respect of disclosure of all relevant materials required for assessment fully and truly. Therefore, in our opinion, the reopening of assessment under section 147 of the Act is invalid and the same is quashed.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced on 22nd March, 2022 at Chennai.
