Case Law Details
Valmik Thapar Vs ACIT (ITAT Delhi)
Conclusion: While recording of the reasons to reopen an assessment, AO was required to form only prima Facie opinions about escapement of income as he was not making an assessment but taking a first baby step for making the assessment by forming a reasonable belief that whether the claim of assessee should be tested in reassessment proceedings or not. Thus, there was no infirmity in the action of AO that reasoned escapement of income by claiming deduction of Rs. 1 crore u/s 54EC.
Held: During reassessment proceedings, assessee submitted that he entered into a collaboration agreement with the receipt of part consideration from the builder and handing over the property for redevelopment to him. The builder was to develop the property at her own cost and also paid assessee a sum of Rs 12.5 crores in consideration of which assessee was to transfer/sale the agreed half portion of the newly constructed property to her nominees along with the proportionate undivided and earmarked portion entitled to the land underneath the develop property. Assessee also stated that the capital gain had arisen in assessment year 2008 – 09 for reason explained, thus the capital gain tax was not chargeable in assessment year 2008 – 09. The reason being that that according to the provisions of Section 45 (2) in accordance to which the capital gain from conversion of a capital asset to stock in trade arose in the year of conversion and capital gain tax became payable in the year in which the converted assets was transferred/sold. Assessee further explained several clauses of the collaboration agreement. Assessee also dealt with the provisions of Section 53A of The Transfer of Property Act 1882 and submitted that collaboration agreement executed on 29th of April 2006 for construction of built-up space was not a document of part performance in accordance with provisions of Section 53A. Assessee further submitted that though capital gain accrued in assessment year 2008 – 09, would be chargeable only in the year when the actual sale deed is executed i.e. assessment year 2010 – 11. Assessee submitted a revised computation of total income for assessment year 2010 – 11 , whereby the indexed cost for assessment year 2008 – 09 had been adopted and the loss under Business head was claimed for set off against the recomputed capital gains. AO considered the explanation of the assessee after considering the revised computation of total income submitted before him, holding that assessee had reduced the taxable long-term capital gain to ₹ 6,095,701/– whereas in the original computation assessee himself had disclosed the amount of capital gain of ₹ 25,036,358. He rejected the contention of the assessee that assessee had actually converted the investment into stock in trade for the reason that this fact should have been disclosed by the assessee in the return filed for assessment year 2007 – 08, and also the long-term capital gain arising on this conversion should have been shown in the return filed u/s 139 (1). He further stated that in the revised computation submitted by assessee there were other issue of indexed cost of acquisition as well as the claim of deduction u/s 54 and Section 54EC. AO further stated that assessee himself was not sure in which year he would like to offer the taxability of the capital gain arising on the sale of the above property. However as assessee had stated revised computation , for taxability of the above sum for assessment year 2007 – 08, he initiated the proceedings u/s 147 for assessment year 2007 – 08 on protective basis considering that the transaction had arisen in financial year 2006 – 07 as the year in which the capital gain had actually resulted. It was held that when AO had recorded his reason to believe that assessee had claimed excess deduction of ₹ 50 lakhs on 1 March 2012, naturally, there were no decisions available of High Court which provided that assessee could claim deduction of sum deposited in excess of ₹ 50 lakhs u/s 54EC. At the time of recording of the reasons, to reopen an assessment, AO was required to form only prima Facie opinions about escapement of income. It was required to be understood that he was not making an assessment but taking a first baby step for making the assessment by forming a reasonable belief that whether the claim of assessee should be tested in reassessment proceedings or not. There was no infirmity in the action of AO that reasoned escapement of income by claiming deduction of Rs. 1 crore u/s 54EC.
FULL TEXT OF THE ORDER OF ITAT DELHI
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