Income Tax Officer, Hyderabad V. Dr.G.Shailaja, Hyderabad

ITA 1362/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77894 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOLGY JOSE KOTTARAM
• Assessee Lawyers: A V RAGHURAM
• Keywords: Capital asset; Audit objection; Difference of opinion; Competent authority; Reason to believe; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1362/HYD/13 : ASSTT. YEAR 2006 - 07 INCOME TAX OFFICER, WARD 12(3), HYDERABAD V/S. DR. G.SHAILAJA, HYDERABAD ( PAN - ABGPG 6835 J ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SOLGY JOSE KOTTARAM DR ASSESSEE BY : SHRI A.V.RAGHURAM DATE OF HEARING 29.5.2014 DATE OF PRONOUNCEMENT 29.5.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) II, HYDERABAD DATED 10.07.2013 FOR THE ASSESSMENT YEAR 200 6 - 07. 2. EFFECTIVE GRIEVANCE OF THE REVENUE IN THIS APPEAL RELATES TO LEGALITY AND VALIDITY OF THE REOPENING O F TH E ASSESSMENT UNDER S.147 OF THE ACT. GROUNDS OF THE REVENUE ON THIS ASPECT READ AS FOLLOWS - 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT THERE WAS ANY ESCAPEMENT OF INCOME TO INITIATE PROCEEDINGS UNDER S.147 OF THE I.T. ACT 1961. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SUM OF RS.20 LAKHS RECEIVED ON EXTINGUISHMENT OF RIGHTS BE CHARGED AS LONG TERM CAPITAL GAINS AND IN ALLOWING DEDUCTION UNDER S.54EC. 4. .. I TA NO .1362 / HYD/2013 DR. G.SHAILAJA, HYDERABAD 2 4. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AV AILABLE ON RECORD. WE FIND THAT THE ASSESSMENT ORIGINALLY COMPLETED UNDER S.143(3 ) OF THE INCOME - TAX ACT, ON 18.12.2008, AFTER EXAMINING EXHAUSTIVELY ALL THE FACTS OF THE CASE BY THE ASSESSING OFFICER , WAS REOPENED, IN VIEW OF THE RECEIPT AUDIT OBJECTION S TATING THAT CERTAIN AMOUNT RECEIVED BY THE ASSESSEE BY WAY OF LONG TERM CAPITAL GAINS, WHICH WAS TREATED AS EXEMPT UNDER S.54EC OF THE ACT BY THE ASSESSING OFFICER IN THE ASSESSMENT, AS ASSESSABLE UNDER THE HEAD OTHER SOURCES . WE FURTHER FIND THAT T HE O NLY ISSUE WITH REFERENCE TO CORRECTNESS OF THE CLAIM OF EXEMPTION UNDER S.54EC OF THE INCOME - TAX ACT, IN RESPECT OF LONG TERM CAPITAL GAINS THAT AROSE ON ACCOUNT OF THE CANCELLATION AGREEMENT WAS DISCUSSED/EXAMINED IN DETAIL IN THE ORIGINAL ASSESSMENT. W E ALSO FIND THAT THE ASSESSEE HAS FURNISHED MATERIAL AGREEMENT TO SELL, CANCELLATION AGREEMENT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. VIDE ORIGINAL ASSESSMENT ORDER DATED 18.12.2008, INCOME RETURNED BY THE ASSESSEE HAS BETWEEN ACCEPTED. 5. ON 22 .1.2010, THE RECEIPT AUDIT OFFICER RAISED AN OBJECTION STATING THAT THE AMOUNT OF R S .20 LAKHS RECEIVED FROM M/S. BALAJI CON S TR U CTION COMP A NY SHOULD BE BROUGHT TO TAX UNDER THE HEAD INCOME F R OM OTHER SOU R CES FOR THE FOLLOWING REASON S - 1 . SUCH INCOME IS IN T HE NATURE OF WINDFALL GAIN FALLING UNDER THE HEAD INCOM E FROM OTHER SOU R CES. 2 . THIS AMOUNT IS RECEIVED IN BREACH OF CONTRACT; 3 . THERE IS NO TRANSFER OF ANY ASSET, HENCE THERE IS NO QUESTION OF CLAIMING EXEMPTION UNDER S.54EC. TO THE ABOVE OBJECTION, ON 2.2.2 010, THE ASSESSING OFFICER GAVE A VERY CATEGORICAL REPLY STATING THAT COMPENSATION WAS RECEIVED FOR RELINQUISHING THE RIGHT OF THE ASSESSEE, WHICH SHOULD BE TAXABLE AS CAPITAL GAINS. THE ASSESSING OFFICER DID NOT ACCEPT THE AUDIT OBJECTION AND REQUESTED TH E AUDIT PARTY TO DROP THE OBJECTION. AS THE AUDIT OBJECTION WAS NOT DROPPED, PROCEEDINGS UNDER S.147 I TA NO .1362 / HYD/2013 DR. G.SHAILAJA, HYDERABAD 3 WERE INITIATED, AFTER OBTAINING APPROVAL FROM THE COMPETENT AUTHORITY. THEREAFTER, THE OR D ERS UNDER S.143(3) READ WITH S.147 DATED 31.10.2012 WERE PASSED, MAKING THE ADDITION OF RS.20 LAKHS UNDER THE HEAD INCOME FROM OTHER SOURCES, THEREBY DENYING THE ASSESSEE, THE BENEFIT UNDER S.54EC. 6. AS RIGHTLY HELD BY THE CIT(A), WITH RESPECT TO THE ISSUE OF VALIDITY OF THE PROCEEDINGS UNDER S.147, THE ASSESSING O FFICER HAS ACCEPTED THE INCOME RETURNED UNDER S.143(3) OF THE ACT, AFTER EXAMINATION OF ALL THE RELEVANT MATERIAL, SUCH AS AGREEMENT/CANCELLATION OF AGREEMENT. EVEN IN THE REPLY TO THE AUDIT OBJECTION, THE ASSESSING OFFICER HAD STATED THAT THE ASSESSEE HA S CORRECTLY OFFERED UNDER THE HEAD LONG TERM CAPITAL GAINS WITH REFERENCE TO CONSIDERATION OF RS.20 LAKHS, WHICH WAS RECEIVED FOR RELINQUISHMENT OF THE RIGHTS OF THE ASSESSEE IN THE PROPERTY. HENCE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAD NO R E ASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME TO INITIATE PROCEEDINGS UNDER S.147 OF THE ACT. AS HELD BY THE SUPREME COURT IN THE CASE OF CIT V/S. KELVINATOR INDIA LTD.(320 ITR 561) , MERE CHANGE OF OPINION CANNOT BE A REASON TO REOPEN THE ASSE SSMENT. FURTHER, THE HONBLE GUAJ A RAT H IGH COU R T IN THE CASE OF ADANI EXPORTS V/S. DCIT (240 ITR 224), HELD THAT ACTION UNDER S.147 MUST DEPEND DIRECTLY AND SOLELY ON THE FORMATION OF THE BELIEF BY THE ASSESSING OFFICER ON ITS OWN, (EVEN WHERE SUCH INFORMATION IS PASSED ON TO IT BY AUDIT). FURTH E R, IT IS EVIDENT THAT DR.SHAILAJA RECEIVED RS.20 LAKHS FOR RELINQUISHMENT OF A RIGHT IN THE PROPERTY. UNDER S.2(47) OF TH E AC T , TRANSFER IN RELATION TO CAPITAL ASSET INCLUDES (1) SALE, EXCHANGE, OR RE LINQUISHMENT OF THE ASSET, (2) THE EXTINGUISHMENT OF ANY RIGHT THEREIN. HENCE, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS RIGHTLY TAKEN THE CONSIDERATION OF RS.20 LAKHS RECEIVED BY THE ASSESSEE FROM M/S. BALAJI CONSTRUCTION COMPANY UNDER THE HEAD CAPI TAL GAIN, AND GAVE BENEFIT UNDER S.54EC IN THE ORIGINAL ASSESSMENT. SIMILARLY, THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN DCIT V/S. LEE PHARMA PVT. LTD., HYDERABAD (ITA NO.1236/HYD/2010 DATE 8.6.,2012), RELIED UPON BY THE LEARNED COUNSEL FO R THE ASSESSEE, DULY FURNISHING A COPY THEREOF BEFORE US, ALSO APPLIES TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER, THE CIT(A), IN I TA NO .1362 / HYD/2013 DR. G.SHAILAJA, HYDERABAD 4 OUR CONSIDERED OPINION, WAS JUSTIFIED IN HOLDING THAT THE REOPENING OF THE ASSESSMENT, BASED ON THE AUDIT OBJECTION, IS NEITHER LEGAL NOR VALID, AND CONSEQUENTLY, CANCELLING THE SAME. WE ACCORDINGLY UPHOLD HIS ORDER AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CONCLUSION OF HEARING ON 29.5.2014. SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 29 TH MAY, 2014 COPY FORWARDED TO: 1. DR. G.SHAILAJA , D.NO.B - 502 PASHA COURT, 6 - 3 - 678 SOMAJIGUDA, HYDERABAD 500 082 2 . INCOME TAX OFFICER WAD 12(2) HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) II , HYDERABAD 4. COMMISSIONER OF INCOME - TAX I HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, H YDERABAD. B.V.S