V.Palaniappan, CHENNAI V. Addl. CIT, Salem

ITA 1798/CHNY/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4302 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 30-09-2013
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Capital asset; Gift; Cost of acquisition; Tangible material; Difference of opinion; Capital receipt; Reason to believe; Change of opinion
• Section: 143(3); 2(14); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1798/MDS./2013 / ASSESSMENT YEAR :2004-05 SHRI V.PALANIAPPAN , ANBAGAM, 79,NEW FAIRLANDS, SALEM 636 106. VS. THE ACIT, RANGE-I,SALEM. [PAN AGDPP 9502 B ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE /RESPONDENT BY : MR.SHIVA SRINIVAS, JCIT DR / DATE OF HEARING : 01 - 03 - 2017 / DATE OF PRONOUNCEMENT : 29 - 05 - 2017 , / O R D E R PER BENCH THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM DATED 29.07.2013 PERTAINING TO ASSESSMENT YEAR 2004-05. ITA NO.1798/ 13 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS), SALEM DATED 29.07.2013 IN L.T.A.NO.188/10-11 FOR THE ABOVE MENT IONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE ASSESS MENT OF COMPENSATION RECEIVED ON THE CANCELLATION OF THE CONTRACT(S) UND ER SCRUTINY AS REVENUE RECEIPT IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ASSESSMENT OF COMPENSATION RECEIVED AGGREGATING TO `88,06,960/- A S REVENUE RECEIPT WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SU STAINABLE IN LAW. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT COMP ENSATION RECEIVED WAS NOT FOR THE REASON OF LOSS OF REVENUE AND OUGHT TO HAVE APPRECIATED THAT THE SALE AGREEMENT DATED 31.10.2000 SHOULD BE THE FOUND ATION FOR UNDERSTANDING THE CIRCUMSTANCES RELATING TO THE REC EIPT OF COMPENSATION ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE RECEIPT OF COMPENSATION ON THE FACTS OF THE CASE SHOULD BE CONSTRUED AS CAPITA L RECEIPT AND OUGHT TO HAVE APPRECIATED THAT ISOLATING THE CANCELLATION AG REEMENT DATED 15.03.2004 READ WITH THE AGREEMENT DATED 24.03.2003 ENTERED IN TO WITH M/S MANTRI DEVELOPERS P LTD WITH THE AGREEMENT DATED 31.10.200 0 READ WITH REVISED AGREEMENT DATED 09.01.2003 FOR SALE OF PROPERTY TO M/S ABHISHEK DEVELOPERS WAS ERRONEOUS AND INVALID. 6. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARAS 8.2, 9.4 & 9.5 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE COMPENSATION ON THE FACTS OF THE CASE WAS LINKED TO A CAPITAL ASSET AS DEFINE D IN SECTION 2(14) OF THE ACT AND HENCE OUGHT TO HAVE APPRECIATED THAT THE MA CHINERY PROVISIONS IN SECTION 48 OF THE ACT FOR COMPUTING CAPITAL GAINS F OR TAXATION WOULD FALL TO THE GROUND IN VIEW OF THE COST OF ACQUISITION BEING AT `NII. 8. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARA 9.7 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PR OPER REASONS AND JUSTIFICATION. 9. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ASSESSMENT OF CAPITAL GAIN/REVENUE RECEIPT IN THE PREVIOUS YEAR RELATING TO THE ASSESSMENT YEAR UNDER CONSIDERATION WAS INCORRECT AND WENT WRONG IN RECORDING THE FINDINGS ITA NO.1798/ 13 :- 3 -: IN THIS REGARD IN PARA 10.2 OF THE IMPUGNED ORDER W ITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 10. THE CIT (APPEALS) ERRED IN CONFIRMING THE VALID ITY OF THE REASSESSMENT WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION AND OUGHT TO HAVE APPRECIATED THAT THERE WERE NO FRESH MATERIALS WARR ANTING THE ASSESSMENT U/S 147 READ WITH 143(3) OF THE ACT. 11. THE CIT (APPEALS) WENT WRONG IN RECORDING THE F INDINGS IN THIS REGARD IN PARA 9.10 OF THE IMPUGNED ORDER WITHOUT ASSIGNING P ROPER REASONS AND JUSTIFICATION. 3. THE FACT OF THE ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, PROPRIETOR OF M/S VAP TEXTILES AND FOR THE ABOVE AS SESSMENT YEAR THE RETURN OF INCOME WAS FILED ON 24.12.2004 SHOWING A TOTAL I NCOME OF ` 25,33,530/-. THE SAID RETURN OF INCOME WAS INITIALLY ACCEPTED U/ S 143(3) OF THE ACT ON 27.12.2006 BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, CHENNAI. THE ASSESSMENT WAS REOPENED BY ISSUING A NOTICE U/ S 148 OF THE ACT DATED 19.6.2009 AND IN RESPONSE TO THE REOPENING NOTICE, THE APPELLANT FILED HIS RETURN OF INCOME ON 20.7.2009. THE RE-ASSESSMENT WA S ULTIMATELY COMPLETED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE -I, SALEM ON 28.12.2010 AT A TAXABLE INCOME OF ` 1,13,79,494/-. WHILE COMPLETING THE SAID ASSESSMENT THE ASSESSING OFFICER BROUGHT TO TA X ` 88,06,960/- IN THE COMPUTATION OF TAXABLE TOTAL INCOME BEING THE ADDIT IONAL COMPENSATION RECEIVED. 3.1 A SALE AGREEMENT DATED 30.10.2000 WAS ENTERED BETWEEN SHRI P.L.ANNAMALAI, SHRI P.L.VIVEKANANDAN AND SHRI AMPA PALANIAPPAN AND M/S ABISHEK DEVELOPERS, A PARTNERSHIP FIRM FROM BANGALO RE FOR THE SALE OF PROPERTY SITUATED AT BANGALORE FOR THE AGREED CONSI DERATION OF ` 15 CRORES TO ITA NO.1798/ 13 :- 4 -: BE PAID AS PER THEIR SHARE. A SUPPLEMENTARY AGREEME NT DATED 9.1.2003 WAS ENTERED INTO BETWEEN THE PARTIES TO INCORPORATE THE GIFTING OF THE SHARE OF SHRI P.L.ANNAMALAI IN FAVOUR OF SHRI S.PALANIAPPAN AND SHRI S.MANICKAVASAGAM AND FURTHER THE GIFTING THE SHARE OF SHRI P.L.VIVEKANANDAN IN FAVOUR SHRI V.PALANIAPPAN, THE APPELLANT HEREIN. THE AGREED CONSIDERATION AS PER THE SAID SUPPLEMENT AGR EEMENT WAS INCREASED TO ` 17.50 CRORES AND THE SAID SUPPLEMENTARY AGREEMENT P ROVIDED FOR A CONTRA PURCHASE OF A PROPERTY WORTH ` 2.5 CRORES CONSISTING OF THE BUILT-UP AREA AT CHAMBERS@MANTRI BELONGING TO M/S MANTRI DEV ELOPERS P LTD., SISTER CONCERN OF M/S ABISHEK DEVELOPERS, BANGALORE. IN TH IS REGARD, A SEPARATE AGREEMENT DATED 24.3.2003 WAS ALSO ENTERED INTO BET WEEN THE APPELLANT AND M/S MANTRI DEVELOPERS P LTD. SUBSEQUENTLY, WHI LE ADDITIONAL COMPENSATION AGREEMENT DATED 15.4.2004, THE PURCHAS E AGREEMENT DATED 24.3.2003 WAS CANCELLED AND A COMPENSATION OF ` 2,79,32,000I- WAS DETERMINED AS PAYABLE BY M/S MANTRI DEVELOPERS P LT D. THE TABULATION IS GIVEN IN PAGE 4 OF THE RE-ASSESSMENT/IMPUGNED ORDER DATED 28.12.2010 GIVING THE VARIOUS FACTUAL DETAILS WITH REFERENCE T O THE SAID COMPENSATION AGREEMENT. FURTHER, THE ADDITIONAL COMMISSIONER OF INCOME TAX HAD OBSERVED THAT THOUGH THE CHEQUES HAVE BEEN POST-DAT ED I.E., 14-5-2004, THE DATE OF AGREEMENT FOR ADDITIONAL COMPENSATION BEING 15-3-2004 AND THE ASSESSEE RECEIVED ENTIRE CONSIDERATION ON THE DATE OF AGREEMENT ITSELF, WHICH INCLUDED REFUND OF ADVANCE PAID BY THE PURCHASERS T O THE TUNE OF ` 2,45,68,000/-, THE TRANSACTION APPEARS TO HAVE BEEN CLOSED ON 15-3-2004 ITSELF. ITA NO.1798/ 13 :- 5 -: 3.2 THEREFORE, THE ADDITIONAL COMMISSIONER OF INCO ME TAX CAME TO A CONCLUSION THAT THE ASSESSEE FAILED TO REFLECT THE COMPENSATION RECEIVED VIDE AGREEMENT DATED 15.3.2004 TO THE EXTENT OF ` 88,06,9601- AND FURTHER CONCLUDED THAT RENTAL INCOME RECEIVED TO THE TUNE O F ` 39,000/- WAS ALSO NOT DISCLOSED BY THE ASSESSEE AS PER THE LEDGER EXTRAC T OBTAINED FROM M/S MANTRI DEVELOPERS P LTD. IN RESPONSE TO THE SAID OB SERVATION, THE ASSESSEE FILED A DETAILED LETTER DATED 6.7.2009 AND WHEREIN IT WAS HIGHLIGHTED THAT THE ORIGINAL ASSESSMENT WAS FRAMED ON ALL FACETS OF THE ORIGINAL RETURN OF INCOME. FURTHER IT WAS STATED THAT THE RECEIPT OF COMPENSAT ION WAS TO BE CONSTRUED AS A CAPITAL RECEIPT AND AT THE SAME BREADTH, THE A SSESSMENT OF CAPITAL GAINS ON TRANSFER OF A CAPITAL ASSET WAS RULED OUT IN THE ABSENCE OF THE ESSENTIAL INGREDIENT TO TERM THE SAID TRANSACTION AS TRANSFER . FURTHER, THE APPELLANT ELABORATED HIS REASONINGS IN CANVASSING A PROPOSITI ON OF NON-TAXABILITY OF COMPENSATION AS REVENUE RECEIPT. REJECTING THE CONT ENTIONS IN PARA 8 OF THE RE-ASSESSMENT ORDER DATED 28.12.2010, THE ADDITIONA L CIT WHILE REFERRING TO CERTAIN DECISIONS HAD HELD THAT CAPITAL ASSET AS DE FINED IN SECTION 2(14) OF THE ACT WAS TRANSFERRED WITHIN THE SCOPE OF SECTIO N 2(47) , OF THE ACT. THE ADDITIONAL CIT IN THE PROCESS HAD CONCLUDED THAT TH ERE WAS NO COST OF ACQUISITION AND COST OF IMPROVEMENT INVOLVED FOR AD MISSIBILITY. AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A ). 4. ON APPEAL, THE LD.CIT(A) CONFIRMED THE REOPENI NG OF ASSESSMENT AND ALSO REGARDING THE TAXABILITY OF THE IMPUGNED R ECEIPT AS A REVENUE RECEIPT. LD.CIT(A) OBSERVED THAT THE COMPENSATION R ECEIVED BY THE ASSESSEE ITA NO.1798/ 13 :- 6 -: FOR THE LOSS OF REVENUE AND IT WAS FORTIFIED ONLY W HEN DEVELOPERS FAILED TO PERFORM ITS OBLIGATIONS AND THAT WAS HAPPENED ONLY ON 15.04.2003 AND IT IS TO BE TAXED IN THE ASSESSMENT YEAR 2004-05 AND NOT IN THE ASSESSMENT YEAR 2003-04, THOUGH THE PURCHASE AGREEMENT WAS DRAWN UP ON 24.03.2003. ACCORDINGLY, LD.CIT(A) DECIDED THE ISSUE AGAINST TH E ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. REGARDING REOPENING OF ASSESSMENT , THE LD.A.R SUBMITTED THAT THERE WAS NO FRESH MATERIAL FOR THE PRUPOSE OF REOPENING OF ASSESSMENT AND THE AO ON THE SAME MATERIAL WHICH WAS ALREADY ON RECOR D UNDUE BASIS REOPENING THE ASSESSMENT. ACCORDING TO HIM, THE ASS ESSMENT WAS REOPENED AFTER THE FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. THE LD.A.R SUBMITTED THAT REOPENING OF ASSESSMENT IS B AD IN LAW. HE RELIED ON THE FOLLOWING DECISIONS. 1. GKN DRIVESHAFTS (INDIA) LTD. VS. ITO IN [2003] 259 ITR 19 (SC ) 2. CIT VS. SAURASHTRA CEMENT LTD., IN [2010] 325 ITR 422 (SC) 3. CIT VS. SOUTH INDIA FLOUR MILLS PRIVATE LTD. IN [1970] 75 ITR 147 (MAD) 6. ON THE OTHER HAND, LD.D.R SUBMITTED THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FURNISH ALL MATERIALS FULLY AND TRU LY REQUIRED FOR THE PURPOSE OF ASSESSMENT. HE STATED THAT THE REOPENING IS VAL ID AS THERE IS AN ESCAPEMENT OF INCOME IN THE ASSESSMENT YEAR UNDER C ONSIDERATION. ITA NO.1798/ 13 :- 7 -: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF LD.A.R IS THAT IN THIS CASE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. THE ASSESSEE HAS FURNISHED ALL DETAILS TO THE AO AT THE TIME OF FILING OF RETURN OF INCOME AND ACCORDING TO THE A.R, THERE WA S NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIA L FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT. HE SUBMITTED THAT T HE REOPENING VIDE NOTICE U/S.148 OF THE ACT DATED 19.06.2009, IT IS ONLY A CHANGE OF OPINION. HE SUBMITTED THAT THE AO GOING THROUGH THE SAME DOCUMENTS, WHICH WERE ALREADY ON RECORD, WANTE D TO RE- OPEN THE ASSESSMENT, WHICH IS NOTHING BUT REVIEW OF THE EARLIER OPINION, WHICH IS NOT POSSIBLE U/S.147 OF THE ACT. IN THIS CASE, THE ASSESSMENT WAS REOPENED AFTER RECORDING THE REASONS THAT THERE WAS AN ESCAPEMENT OF INCOME WITH REFERENCE TO COMPE NSATION RECEIVED ON CANCELLATION OF PURCHASE/SALE EQUIPME NT AT ` 88,06,959.60 AND RENTAL INCOME OF ` 39,000/- 7.1 ADMITTEDLY IN THIS CASE, THERE WAS ORIGINAL ASSESSMENT U/S.143(3) OF THE ACT VIDE ORDER DATED 27.12.2006. IT IS A SETTLED LAW THAT ON THE BASIS OF MATERIAL, PRIMA FACIE, AVAILABLE BEFORE THE ASSESSING OFFICER, OPINED THAT INCOME ITA NO.1798/ 13 :- 8 -: CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT CAN BE FOR MED. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOU LD MEAN CAUSE OR JUSTIFICATION. IN CASE THE ASSESSING OFFICER HAS A CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAS ES CAPED ASSESSMENT, ACTION U/S 148 CAN BE TAKEN. BUT OBVIOU SLY, THERE SHOULD BE RELEVANT MATERIAL ON WHICH A REASONABLE M AN COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THIS MATERI AL(S) WOULD CONCLUSIVELY PROVE THE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT PARTICULAR STAGE. SO WHAT IS REQUIRED IS TH E SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER BASED ON OBJE CTIVE MATERIAL EVIDENCE. THE REASON WAS RECORDED AS DISCUSSED ABOV E. THE ARGUMENT OF THE LD.AR IS THAT WHERE THERE WAS NO FRESH TANGIBLE MATERIAL TO REOPEN THE ASSESSMENT U/S 147, NO ACTION COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR, INTER ALIA. 7.2 AS SEEN FROM THE ASSESSMENT ORDER, IT GIVES A CLEAR PICTURE THAT THE ASSESSING OFFICER HAS GOT MATERIAL EVIDENCE TO FORM HIS OPINION FOR TAKING RECOURSE TO SECTION 147 R.W.S 148 OF THE ACT. THERE CANNOT BE TWO OPINIONS. AT THE POINT OF TIME WHEN ITA NO.1798/ 13 :- 9 -: THE REASONS ARE RECORDED, FORMING OPINION OF ESCAP EMENT OF INCOME IS ONLY RELEVANT. HENCE, THIS PLEA OF THE L D.AR IS NOT TENABLE IN THE EYES OF LAW. IT IS TRUE THAT U/S 147 , THE ASSESSING OFFICER CAN EITHER ASSESS OR RE-ASSESS BUT FOR TAKI NG ACTION THERE UNDER, HE HAS TO RECORD REASONS THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT . IT IS ALSO MANDATED BY SEC TION 148(2) TO RECORD REASONS IN WRITING. THE REASSESSMENT PROC EEDINGS U/S 147 ARE FURTHER SUBJECT TO SECTIONS 148,149,150,151 ,152 AND 153. BUT IN THE PRESENT CASE, WE ARE REQUIRED TO DECIDE THE LIMITED ISSUE REGARDING THE VALIDITY OF PROCEEDINGS UNDERTA KEN AFTER FOUR YEARS OF THE ASSESSMENT YEAR IN QUESTION. THE ASSE SSING OFFICER IS REQUIRED TO SEE IF THE CONDITIONS LAID IN EXPLAN ATION 2(C) ARE SATISFIED BECAUSE IN THIS CASE NO ASSESSMENT WAS CO MPLETED U/S 143(3) OF THE ACT. IN CASE, (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESS ED AT TOO LOW RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJEC TIVE OF EXCESS RELIEF UNDER THIS ACT; OR (IV)EXCESSIVE LOSS OR DEP RECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED, THEN THE ASSESSING OFFICER WOULD HAVE VAL ID COGNIZANCE U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY SPEAK FOR THE UNDER ASSES SMENT OF TAX HENCE, THE CONDITIONS LAID ABOVE STAND FULFILLED IN SO FAR AS RE- ITA NO.1798/ 13 :- 10 - : ASSESSMENT PROCEEDINGS ARE CONCERNED. IN SO FAR AS THE REASONS RECORDED, EXTRACTED IN THE EARLIER PORTION OF THIS ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THIS FACT CONFERS JU RISDICTION ON HIM TO REOPEN THE ASSESSMENT. THE POWER TO RE-ASSES S POST 1ST APRIL, 1989 ARE MUCH WIDER THAN THESE USED TO BE BE FORE. BUT STILL THE SCHEMATIC INTERPRETATION OF THE WORDS REASON T O BELIEVE FAILING WHICH SECTION 147 WOULD GIVE ARBITRARILY PO WERS TO THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE B ASIS OF MERE CHANGE OF OPINION, WHICH CANNOT BE, PER SE A REASO N TO REOPEN THE CASE. THE ACT HAS NOT GIVEN POWER TO THE ASSESS ING OFFICER TO REVIEW BUT HAS ONLY GIVEN POWER TO RE-ASSESS. THERE IS A CONCEPTUAL DIFFERENCE BETWEEN THE TWO ASPECTS AS TH E ASSESSING OFFICER HAS NO POWER AT ALL TO REVIEW THE ASSESSMEN T. THE REASSESSMENT, AS STATED ABOVE, HAS TO BE BASED ON F ULFILLMENT OF CERTAIN PRE-CONDITIONS BUT THE CONCEPT CHANGE OF O PINION HAS TO BE TAKEN INTO CONSIDERATION OTHERWISE IT MAY GIVE U NBRIDLED POWER TO AN ASSESSING OFFICER TO REOPEN ANY AND EVERY ASS ESSMENT ORDER WHICH WOULD SIMPLY AMOUNT TO A REVIEW. THE CONCEPT CHANGE OF OPINION IS AN IN-BUILT TEST TO CHECK THE ABUSE OF POWER BY THE ASSESSING OFFICER. SO, NOW ONLY WHEN THE ASSESSING OFFICER HAS A TANGIBLE MATERIAL TO BASE HIS CONCLUSION THAT THERE IS AN ITA NO.1798/ 13 :- 11 - : ESCAPEMENT OF INCOME FROM ASSESSMENT AND THE REASON S RECORDED HAVE A LINK WITH THE FORMATION OF HIS BELI EF, HE HAS THE POWER U/S 147 OF THE ACT. 7.3 IN THE PRESENT CASE, THE ASSESSEE HAS NOT SHO WN COMPENSATION RECEIVED AT ` 88,06,959.60 VIDE AGREEMENT DATED 15.03.2004 BY M/S.MANTRI DEVELOPERS P LTD. AS PER EXPLANATION 2 OF SECTION147, IT IS VERY CLEAR THAT DUE TO NON-DIS CLOSURE OF THIS BY THE ASSESSEE, THE INCOME CHARGEABLE TO TAX HAD ESCA PED ASSESSMENT. THE ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TO SHOW AS TO HOW THERE IS NO INCIDENCE OF TAX IN THIS ASSESSMENT YEAR. HE NCE, THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) AND THAT OF ASSESSING OFFICER IS FULLY COVERED BY THE PROVISIONS OF EXPL ANATION 1 TO SECTION 147 OF THE ACT IS NOT CORRECT. THE SAID PRO VISION READS AS UNDER: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUN TS BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COUL D WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. IT IS POSSIBLE THAT WITH DUE DILIGENCE OF THE ASSES SING OFFICER WOULD HAVE ASCERTAINED THIS FACT AT THE TIME OF ASS ESSMENT, IF ANY ITA NO.1798/ 13 :- 12 - : ALSO, BUT IN VIEW OF THE EXPLANATION (1) IT DOES NO T MEAN THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE. HENCE, REOPENING U/S.147 IS HELD TO BE VALID. THE ASSESSE E HAS TRIED TO TAKE SHELTER UNDER THE EXCEPTION PROVIDED IN THAT S ECTION. BUT AS STATED ABOVE, WHEN THE ASSESSEE HAS NOT DISCLOSED F ULLY AND TRULY THE FACTS NECESSARY FOR THE ASSESSMENT AND THERE IS NO ASSESSMENT U/S.143(3) OF THE ACT, THIS PROVISO WIL L NOT COME TO ITS RESCUE. CONSEQUENTLY, WE HOLD THAT THE ENTIRE R EASSESSMENT PROCEEDING IN THIS CASE IS VALID AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS UPHELD. 8. REGARDING MERIT, IT WAS SUBMITTED BY LD.A.R THAT A SALE AGREEMENT OF 30.10.2000 BETWEEN ASSESSEE FAMILY AND M/S.ABHISHEK DEVELOPERS, WAS ENTERED INTO. A SUPPLEMENTARY AGREE MENT OF 09.01.2003, PROVIDED FOR AN ENHANCED CONSIDERATION AND ALSO FOR A CONTRA PURCHASE OF A PROPERTY DEVELOPED BY ITS SIST ER CONCERN. A SEPARATE AGREEMENT OF 24.3.2003 ALSO PROVIDED FOR PURCHASE AND ALSO FOR IDENTIFYING A TENANT ON PAR WITH MARKET RATE. BY VI RTUE OF A COMPENSATION AGREEMENT OF 15.03.2004. THE LD.A.R SUBMITTED THAT : THE ASSESSEE RECEIVED THE COMPENSATION NOT OUT OF T RANSFER OF A CAPITAL ASSET BUT UPON THE TERMINATION OF AGREEMENT FOR NON FULFILLMENT OF CERTAIN CLAUSES AGREED. ITA NO.1798/ 13 :- 13 - : THE ASSESSEE WAS ONLY AN ONE-TIME INVESTOR AND N OT A REAL ESTATE DEALER, HOLDING ANY ASSET AS STOCK IN TRADE SO AS TO BE B ROUGHT WITHIN THE MEANING AS A DEALER AND TREATING THE COMPENSATION AS A BUS INESS INCOME. IT IS SUBMITTED THAT, WHERE THE COMPENSATION IS G IVEN FOR STERILIZATION OF A SOURCE OF INCOME, SUCH COMPENSATION IS A CAPITAL RE CEIPT, AS HAS BEEN HELD BY HONBLE SUPREME COURT IN P.H. DIVECHA VS COMMISS IONER OF INCOME TAX(1963) 48 ITR 222(SC) AND SEVERAL OTHER HIGH COU RT DIVISIONS FOLLOWING THE SAME. BY VIRTUE OF THE CLAUSES IN THE COMPENSATION AGR EEMENT OF 15.03.2004, WHICH PROVIDED FOR TERMINATION OF EARLIER AGREEMENT ENTERED INTO. BY VIRTUE OF CANCELLATION OF THE AGREEMENT ENTERE D, IT HAD RESULTED, IN A SITUATION WHEREBY THE APPELLANT BEING PRECLUDED IN FUTURE IN EXPLOITING THE SAID SOURCE FOR INCOME GENERATIONS. IN ONE OF THE REFERRED CASES, AS QUOTED IN THE AS SESSMENT ORDER, COMMISSIONER OF INCOME TAX VS TATA SERVICES LTD (B ORN) 122, ITR 594 -, WHERE IT WAS DISCUSSED BY HONBLE GUJARATH HIGH CO URT IN AN ANOTHER CASE, IN PARA 37 OF THE SAID ORDER, WHERE IT COULD BE NOT ED THAT THE CONTRACT WAS KEPT ALIVE IN THAT CASE, WHICH CLEARLY DISTINGUISHE S APPELLANT CASE WHEREIN HERE, IN APPELLANTS CASE, WAS TERMINATION OF AGREE MENT. 8.1 FURTHER IT WAS SUBMITTED THAT THERE WAS NO TRANSFER OF ASSET. IT WAS ARGUED THAT THERE WAS NO TRANSFER OF CAPITAL ASSET AND THAT THE COST OF ACQUISITION WAS NIL. THE APPELLANT PLEADED THAT THE RECEIPT IS TO BE TREATED AS CAPITAL RECEIPT. IT WAS SUBMITTED THAT TRANSACTION OF THE SALE OF PROPERTY SHOULD HAVE BEEN CONSIDERED IN A GLOBAL VIEW ON A C OMBINED READING OF ALL THE AGREEMENTS AND NOT JUST THE CONSIDERATION OF AD DITIONAL COMPENSATION AGREEMENT. IT WAS FURTHER SUBMITTED THAT CAPITAL GAINS ARE NO T ATTRACTED AND ITA NO.1798/ 13 :- 14 - : THAT THE ADDITIONAL COMPENSATION IS TO BE TREATED A S CAPITAL RECEIPT. THE APPELLANT ALSO RELIES ON THE FACT THAT COST OF ACQU ISITION WAS NIL AND THIS ALSO FORTIFIES THE CASE FOR NON-TAXABILITY. THE APPELLAN T PLEADED THAT THE COST OF ACQUISITION SHOULD BE REWORKED ON THE FACTS AND CIR CUMSTANCES OF THE CASE. 8.2 IT WAS SUBMITTED BY THE LD.A.R THAT THE COM PENSATION GIVEN FOR STERILIZATION OF A SOURCE OF INCOME IS A CAPITAL RE CEIPT. THE APPELLANT CITES THE DECISION OF THE HONBLE APEX COURT IN P.H. DIVECHA VS COMMISSIONER OF INCOME TAX(1963) 48 ITR 222(SC). THE LD.A.R RELIED ON THE ORDER OF TRIBUNAL IN THE CASE OF SHRI K. SUBRAMANIAN IN ITA NO.1652/MDS/2012 WHEREIN HELD THAT WHAT HAS BEEN RECEIVED BY THE ASS ESSEE IN THE FORM OF COMPENSATION IS FOR THE LOSS OF EARNINGS ONLY. THER EFORE, IT WAS HELD THAT THE COMPENSATION RECEIVED BY THE ASSESSEE IS REVENUE RE CEIPT EXIGIBLE TO TAX AND NOT A CAPITAL RECEIPT. 8.3 THE LD.A.R CONTENDED THAT THE ORIGIN OF THE TR ANSACTION WAS BY ANOTHER SEPARATE PURCHASE AGREEMENT WHICH WAS ENTERED DATED 24.03.2003, BASED ON WHICH ADDITIONAL COMPENSATION AGREEMENT DATED 15 .03.2004, WAS ENTERED. THE LD.A.R STATED THAT THE ORIGIN OF THES E TRANSACTIONS, DATES BACK TO IT ASST. YEAR 2003-2004 IN VIEW OF THE PURCHASE AGREEMENT DRAWN UP DATED 24.03.2003 AND FURTHER LONG TERM CAPITAL GAIN S ON SALE PROPERTY WAS DULY ADMITTED BY THE APPELLANT IN 2003-2004 ASST. Y EAR. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE ENTIRE GAMUT OF THIS AGREEMENTS SH OW THAT THE ITA NO.1798/ 13 :- 15 - : COMPENSATION IS NOT TO BE LINKED TO THE SALE AGREEM ENTS. THE AGREEMENT DATED 24.3.2003 FOR ACQUISITION OF THE SAID PORTION OF 14,014 SQ. FT IN MANTRI CHAMBERS, WHICH ALSO HAS A CLAUSE TO FIND A TENANT AT MARKET PRICE, IS A SEPARATE AGREEMENT AND IN NO WAY RELATED TO THE SAL E AGREEMENTS. THIS IN EFFECT MEANS THAT THE COMPENSATION IS ON ACCOUNT OF LOSS OF REVENUE BY WAY OF RENTAL INCOME, WHICH IS IN ANY CASE OF REVENUE I NCOME. THE COMPENSATION IS ONLY TO COMPENSATE THE LOSS OF RENTAL INCOME, WH ICH WOULD HAVE ARISEN TO THE APPELLANT HAD THE AGREEMENT DATED 24.3.2003 BEE N HONOURED BY THE DEVELOPER. A PERUSAL OF THE PURCHASE AND COMPENSATI ON AGREEMENTS SHOWS THAT THE LAND SOLD AS PER THE EARLIER SALE AGREEMEN TS IS ENTIRELY DIFFERENT FROM THE LAND ON WHICH THE APPELLANT IS ACQUIRING THE PR OPERTY. IN VIEW OF THE ABOVE IT IS VERY CLEAR THAT THE COMPENSATION RECEIV ED BY THE APPELLANT IS PURELY FOR NON FULFILLMENT OF CONTRACTUAL OBLIGATIO NS WITH REGARD TO PURCHASE OF BUILT UP AREA IN MANTRI CHAMBERS AND IN NO WAY LINKED TO THE SALE OF THE LAND AT BEGUR HOBLI IN BANGALORE SOUTH TALUK AS P ER SALE AGREEMENT DATED 30.10.2000 AND SUPPLEMENTARY AGREEMENT DATED 9.1.20 03. 9.1 THE ASSESSING OFFICER IN HIS WELL REASONED ORD ER HAS CORRECTLY TREATED THE RECEIPTS AS REVENUE RECEIPT AND HAS IN NO WAY TREAT ED THE SAME AS INCOME ON ACCOUNT OF CAPITAL GAINS. THEREFORE, THE APPELLA NTS CLAIMS WITH REGARD TO COST OF ACQUISITION OR THE EXTINGUISHMENT OF RIGHTS ARE NOT ACCEPTED. THE COMPENSATION WAS RECEIVED BY THE APPELLANT, FOR LOS S OF REVENUE. ITA NO.1798/ 13 :- 16 - : FURTHER, COMPENSATION HAS BEEN AWARDED ONLY BY WAY OF AGREEMENT DATED 15/3/2004. THE MERE PROVISION OF A COMPENSATION AGR EEMENT DATED 24.3.2003, DOES NOT PRESUPPOSE THE DEFAULT BY THE D EVELOPER RECEIPT OF COMPENSATION ON THAT COUNT. THE CLAIM OF COMPENSATI ON FRUCTIFIES ONLY WHEN DEVELOPER FAILED IS HIS OBLIGATIONS AND THAT HAPPEN ED ONLY ON 15/3/2004.THE COMPENSATION IS TO BE TAXED IN ASSESSMENT YEAR 2004 -2005 ONLY. IN VIEW OF THIS, WE DISMISS THE GROUND TAKEN BY THE ASSESSEE O N MERIT ALSO. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 29 TH MAY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 29 TH MAY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF