IN THE ITAT MUMBAI BENCH ‘D’
Dadanbai B. Bachani v. ITO
IT Appeal Nos. 2759 & 2760 (Mum.) of 2011
[Assessment Year 1996-97]
MAY 11, 2012
ORDER
Amit Shukla, Judicial Member – ITA No.2759/Mum/2011(A.Y. 1996-1997) : This appeal has been filed against the order dated 25-2-2011, passed by the CIT(A)-30, Mumbai for the quantum of assessment determined under Section 143(3), r.w.s. 147 r.w.s. 254 for the assessment year 1996-1997 on the following grounds :-
“1. The learned CIT(A) erred in law and in facts in upholding the order passed by the Assessing Officer u/s.143(3) r.w.s. 147 r.w.s.254 of the Income Tax Act, 1961, which is illegal and bad in law.
2. The learned CIT(A) erred in law and in facts in upholding the order of the Assessing Officer passed in violation of the principles of natural justice.
3. The learned CIT(A) erred in law and in facts in upholding the validity of the reasons for reopening of the assessment recorded by the Assessing Officer.
4. The learned CIT(A) erred in law and in facts in confirming the order of the Assessing Officer in bringing to tax a sum of Rs. 1,87,02,463/- as long-term capital gains in respect of sale of 1/3rd share of the appellant in ‘Bachani Niwas’ as against Nil declared.
5. The learned CIT(A) erred in law and in facts in sustaining the order of the Assessing Officer denying deduction of the following amounts while computing capital gains in respect of sale of 1/3rd share of the appellant in ‘Bachani Niwas’ ignoring the provisions of S.54 of the Act :
(i) Rs. 85,00,000/- paid to Shri Brijlal Bachani;
(ii) Rs. 85,00,000/- paid to Shri Ramchand Bachani;
(iii) Rs. 24,00,000/- paid to M/s Haq Constitution; and
(iv) Rs. 1,00,00/- being construction cost.
6. The learned CIT(A) has erred in law and in facts in upholding the order of the Assessing Officer charging the interest u/s 234 A and 234 B of the Income Tax Act.”
2. At the time of hearing both the parties addressed the preliminary issue first as has been raised in ground Nos.1 to 3, relating to the validity of re-opening under Sections 147 and 148. The factual matrix for adjudication of validity of proceedings under Section 148 are that the assessee, who is an individual, has filed original return on 27-7-1997 for the assessment year 1996-1997, declaring ‘Nil‘ income. The said return of income was duly processed and accepted under Section 143(1). Thereafter the assessee’s case was reopened by issuance of notice under Section 148, dated 10-2-2000 which was served on 14-2-2000. In response to the said notice, it seems that the assessee not filed her return of income. However, the copy of “reasons recorded” were also not supplied or made available to the assessee. Without these legal formalities by both the parties, the assessment was completed vide order dated 28-3-2001 and income was determined under the head ‘long-term capital gain’ at Rs. 1,87,02,460/-, after disallowing the claim of deduction under Section 54. Aggrieved by the said order, the assessee preferred an appeal before the CIT(A), who vide order dated 8-4-2002 dismissed the appeal of the assessee. The assessee against this order preferred a second appeal before the ITAT, contending that “reasons recorded” for re-opening the assessment has not been provided at any stage. The ITAT vide order dated 26-12-2005 passed in in ITA No. 3392/M/2002, restored the matter back to the Assessing Officer with the direction to provide “reasons recorded” for re-opening of the case and to give adequate opportunity of hearing to the assessee and decide the issue afresh not only the validity of the re-opening under Section 147, but also on merits.
3. In the second round of proceedings, the Assessing Officer did not comply with the directions of the ITAT. He neither supplied copy of “reasons recorded” nor adjudicated the validity of the proceedings u/s. 148 and instead, completed the assessment on the same figure vide order dated 8-12-2006, captioned as “143 (3) r.w.s. 147 r.w.s. 254” of the Income Tax Act. The assessee aggrieved by this second order, filed an appeal before the CIT(A), who vide order dated 21-1-2008 also dismissed the appeal of the assessee without verifying the fact that copy of “reasons recorded” have not been made available to the assessee as per directions of the ITAT, nor he himself called upon for such records from the Assessing Officer to verify the “reasons recorded” and adjudicate the objections for validity of Sections 147 & 148. For the second time aggrieved by the order of the CIT(A), the assessee carried the matter before the ITAT. This time the ITAT restored the matter to the file of the CIT(A) with the specific directions :-
“We, therefore, set aside the order of Ld. CIT(A) and restore the matter back to his file in terms of the direction of ITAT order dated 26.12.2005. The CIT(A) is directed to provide the reasons for reopening the assessment to the assessee and decide the issue afresh after giving opportunity to the assessee.”
4. In pursuance of the categorical direction of the ITAT , the CIT(A), required the Assessing Officer to provide the “reasons” for re-opening the assessment u/s.147, vide letter dated 10-11-2010. The Assessing Officer in compliance thereof submitted the “reasons recorded” for re-opening the assessment vide letter dated 13-12-2010 through the Addl. CIT Range 19(1), Mumbai. The entire content of the letter dated 13-12-2010 is reproduced hereunder as it has a vital bearing on the issue which needs to be decided by us :-
Office of the Income-tax Officer-19(1)3,
R.No.314, 3rd Floor, Piramal Chambers, Lalbaug, Mumbai-12, Tel No.24130874 Extn.2314
No.ITO-19(1)(3)/Appeal/2010-2011
Dated:13.12.2010
To,
The Commissioner of Income-tax(A)-30,
Mumbai
[Through Addl. CIT., Rg.19(1)]
Sir,
SUB: Appellate proceedings in the case of Smt. Dadanbai B Bachani-A.Y.1996-1997-Reg.
REF: No.CIT(A)-30/Misc./2010-11 dated 10.11.2010
Kindly refer to the above.
On verification of the case record, the reasons recorded for re-opening the assessment is as under :-
“On going through the computation of income filed along with the return of income, it is seen that the assessee has received an amount of Rs. 2,12,51,667/-(1/3rd share on sale price of Bachani Niwas at Khar (w) which includes Rs. 3,85,000/- received from Kishin B. for FSI). Against this figure, the assessee has claimed deduction for a total sum of Rs. 2,20,49,204/-, the details of which are as under :-
