ITO Ward 1, Kanchipuram V. Rajkumar, CHENNAI

ITA 2623/CHNY/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9520 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 10-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.BABASUBRAMANIAN
• Keywords: Business income; Audit objection; Tax effect; Tangible material; Difference of opinion; Assessment record; Change of opinion; Capital Gains
• Section: 54F

Judgement Text

आयकर अपील य अ धकरण, ‘बी’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘B’ BENCH, CHENNAI ी वी. द ु गा राव, या यक सद य एवं ी जी. मंज ु नाथ, लेखा सद य के सम% BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I . T. A. No. 2 6 2 3/ Chn y/ 2 0 1 8 ( नधा रणवष / A s s e ss m en t Yea r : 2 01 3 - 14) Income Tax Officer, Ward-1 Kanchipuram. V s Mr. Rajkumar, 17, High Road, Thirumazhisai Chennai-602 107. P AN: A E HP R 1 5 1 3 A (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/ Appellant by : Mr. G.Johnson, Addl.CIT यथ क ओरसे/Respondent by : Mr. K.Babasubramanian, Advocate स ु नवाईक तार ख/D a t e o f h e a r i n g : 10.01.2022 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 31.01.2022 आदेश / O R D E R PER G.MANJUNATHA, AM: This appeal filed by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-7, Chennai, dated 28.06.2018 and pertains to assessment year 2013-14. 2. We find that appeal filed by Revenue is barred by limitation of one day for which necessary petition along with affidavit for condonation of delay explaining reasons for the delay has been filed. The learned DR submitted that relevant records were not readily available, thus, the Revenue could 2 ITA No. 2623/Chny/2018 not file appeal within the time allowed under the Act, hence prayed that delay may be condoned. 3. Having heard both sides and considered the petition filed by the Revenue for condonation of delay, we are of the considered view that reasons given by Revenue for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of above appeal is condoned and appeal filed by the Revenue is admitted for adjudication. 4. The Revenue has raised following grounds of appeal:- “ 1.1 The Order of the learned Commissioner of Income Tax (Appeals) is contrary to theLaw and facts of the case. 1.2 Though the tax effect is less than the monetary limit fixed by the CBDT’s CircularNo.3 of 2018 the issue was raised by RAP and accepted by the Department. Hence ,tax effect is not applicable in this case as per Para 10 of the above circular. 2.1 The CIT(A) erred in holding that re-opening u/s.147 is bad in law both technical and legal grounds on the basis of information already available on record. 2.2 The CIT(A) omitted to consider the decision of Hon’ble Supreme Court in the case of ALA Firm vs CIT [1991] 189 )TR 285 (SC) which is in favour of the department to consider the re-opening u/s.147 as valid. 3 ITA No. 2623/Chny/2018 3.1 The CIT(A) erred in deleting the disallowance made u/s.54F by holding that until the cost of residential property was exhausted by the amount of capital gains claimed to be have been invested, exemption u/s.54F could not be denied. 3.2 The CIT(A) omitted to consider the fact that the assessee failed to furnish the details I evidence in support of his claim at the time of re-assessment proceedings or even in the appellate proceedings to consider the claim made u/s.54F of the Act. 4.1 The CIT(A) erred in deleting the addition made of Rs.1,05,861/- being 8% of gross receipts by way of hire charges by holding that the assessee was not liable to file an audit report u/s.44AB of the Act. 4.2 The CIT(A) omitted to consider the fact that the assessee failed to furnish the details / evidence in support of his claim at the time of re-assessment proceedings or even in the appellate proceedings to substantiate his claim.” 5. Brief facts of the case are that the assessee is engaged in the business of trading in gold and diamonds and also in the business of hire purchase, filed his return of income for assessment year 2013-14 on 26.07.2013 admitting total income of Rs.8,24,810/-. The case has been subsequently reopened u/s.147 of the Income Tax Act, 1961, on the ground that income chargeable to tax had been escaped assessment on account of wrong claim of deduction u/s.54F of the Income Tax Act, 1961. The assessment has been completed u/s.143(3) r.w.s 147 of the Act, on 19.07.2017 and determined total 4 ITA No. 2623/Chny/2018 income at Rs.11,94,300/- by making additions towards disallowance of deduction claimed u/s.54F of the Income Tax Act, 1961, at Rs.2,63,628/- on the ground that the assessee has claimed deduction for very same house property in the immediately preceding financial year. The Assessing Officer had also made additions towards estimation of 8% profit on hire charges received by the assessee of Rs.13,23,264/- and made addition of Rs.1,05,861/-. The relevant findings of the Assessing Officer are as under:- “ 2. On going through the records it was found that the assessee has claimed deductions u/s.54F for an amount of Rs. 2,63,628/- for the A.Y. 2013-14 against a property at Royapettah, Chennai, for which the assessee has already claimed deductions u/s. 54F for the AX. 2012-2013. Which implies that the assessee has claimed the deduction u/s. 54F for both the assessment years against same property which is not allowable under the provision of Income Tax act, 1961. In view of the above, the sum of Rs. 2,63,628/- has escaped assessment under the head “Long term capital gains” and hence needs to be added. 3. Further, the assessee is in receipt of hire charges from M/s. Raaj Finance and as per P & L account furnished, the assessee has incurred a loss of Rs. 85,853/- but has not filed any audit report u/s. 44AB. In the absence of such audit report , the assessee ought to have estimated his income © 8% on his receipts of hire charges of Rs. 13,23,264/-. Therefore, the net 5 ITA No. 2623/Chny/2018 profit of Rs. 1,05,861/- being 8% of gross receipts, is omitted to be offered resulting in escapement of income under the head business income for the above assessment year and needs to be added. The assessment is finalized as follows: 6. Being aggrieved by the assessment order, the assessee preferred an appeal before learned CIT(A). Before the learned CIT(A), the assessee challenged reopening of assessment on multiple grounds including on change of opinion. The assessee has also challenged addition made towards disallowance of exemption claimed u/s.54F of the Act, on the ground that there is no bar under the Act to claim exemption in two assessment years as long as conditions prescribed for claiming such exemption are satisfied. The assessee had also challenged estimation of 8% profit on gross receipts on the ground that the Assessing Officer has wrongly presumed that 6 ITA No. 2623/Chny/2018 the assessee has declared net loss from business, whereas fact remains that the assessee has offered profit of Rs.9,20,603/-. 7. The learned CIT(A), after considering relevant facts and has also by relied upon certain judicial precedents, including decision of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. 320 ITR 561, quashed reassessment order passed by the Assessing Officer on the ground that the Assessing Officer has reopened the assessment on ‘change of opinion’ without there being any fresh tangible material which is evident from fact that the assessee had already submitted relevant details with regard to exemption claimed u/s.54F of the Income Tax Act, 1961. The learned CIT(A) also deleted additions made towards disallowance of exemption claimed u/s.54F of the Act, at Rs.2,63,628/- by following decision of the ITAT., Mumbai in the case of Ajit Patnagar Vs. ITO (2006) 9 SOT 685 (Mum) by holding that there is no bar under the Act, to claim exemption u/s.54F in two assessment years on single property as long as conditions prescribed for claiming exemption are satisfied. The learned CIT(A) had also deleted 7 ITA No. 2623/Chny/2018 additions made towards 8% of profit estimation on hire charges at Rs.1,05,861/- by holding that as per details filed by the assessee, gross receipts from business is lesser than prescribed limit of turnover for conducting tax audit u/s.44AB of the Income Tax Act, 1961, and further, the assessee has also declared net profit of Rs.9,20,603/-, which is more than 8% of profit estimated by the Assessing Officer and thus, there is no reason to make further addition on estimation basis @ 8% profit on gross receipts. Aggrieved by the learned CIT(A) order, the revenue is in appeal before us. 8. The learned DR submitted that the learned CIT(A) has erred in holding that reopening of assessment u/s.147 of the Act is bad in law, without appreciating fact that deduction claimed u/s.54F of the Act, for exemption in subsequent year is a basis for reopening of assessment. Further, said information was not readily available when original assessment was completed u/s.143(3) of the Act. The learned DR further referring to provisions of section 54F of the Act, submitted that the assessee has claimed exemption u/s.54F in two financial years. However, facts with regard to commencement of 8 ITA No. 2623/Chny/2018 construction or completion of construction of property was not forthcoming from the assessment order or from order of the learned CIT(A) and thus, for verification of facts, the issue may be remitted back to the file of the Assessing Officer. As regards estimation of profit at 8% on gross receipts on hire purchase business, the learned CIT(A) erred in not considering fact that the assessee has failed to furnish details/evidences in support of his claim at the time of reassessment proceedings. Therefore, the Assessing Officer left with no option, has estimated profit on the basis of gross receipts. However, the learned CIT(A) has deleted additions without assigning proper reasons. 9. The learned A.R for the assessee, on the other hand, strongly supporting order of the learned CIT(A) submitted that except revenue audit objection, there was no fresh tangible material in possession of the Assessing Officer to form basis for escapement of income and thus, the learned CIT(A) has very clearly held that reopening of assessment u/s.147 of the Act is mere change of opinion, which is not permissible under law. As regards additions made towards exemption u/s.54F of 9 ITA No. 2623/Chny/2018 the Act, it is well settled principles of law that there is no bar under the Act to claim exemption u/s.54F of the Act in two assessment years, when two instances of capital gain was there and further, property in question was satisfied conditions prescribed u/s.54F of the Act. Similarly, the Assessing Officer has apprised wrong facts to come to the conclusion that the assessee has declared loss from business, whereas fact remains that the assessee has declared profits from business which is more than profit estimated by the Assessing Officer and thus, the learned CIT(A) has rightly deleted additions made towards estimation of profit and hence, order of the learned CIT(A) should be upheld. 10. We have heard both the parties, perused material available on record and gone through orders of the authorities below. On the issue of reopening of assessment, the learned CIT(A) by following various decisions, including decision of the Hon'ble Supreme Court in the case of CIT Vs.Kelvinator of India Ltd (supra) has observed as under:- “As regards the issue of change of opinion regarding the claim of sec. 54F and the issue of hire charges received by Bajaj Finance, I have perused the assessment records and found that 10 ITA No. 2623/Chny/2018 this particular issue has been raised on the basis of Audit (RAP) querry/objections. Now an argument can be taken that the case was selected for scrutiny under CASS on the issue of ‘Large income of unsecured loans and that the A.O was restricted in his scope of enquiry and therefore gives AO the justification to re-visit the issues raised. However, CBDT vide its instructions No20/2015 [F.No. 225/269/2015- ITA-Il] dated 29.12.2015 has laid down the scope of scrutiny in cases selected through computer Aided scrutiny selection (CASS). This instruction is applicable to cases selected through CASS-2014 and the scope scrutiny is limited to the specific issue pertaining to AIR/CIB/26 As data. Wide scrutiny in these cases could only be conducted as per guidelines stated instruction No 7/2014. The assessment year in the present case is A.Y 2013. Therefore the A.O was not fettered by any Board instruction restricting the scope of his enquiry. The AO had full scope to examine all issues arising in assessment proceedings. Going by facts narrated above, I would have to hold that re-opening on the basis of information already available on record is bad in law.” 11. From the above, what is clear is that the Assessing Officer has formed reasonable belief of escapement of income on the basis of revenue audit party objection without there being any fresh tangible material to suggest escapement of income within the meaning of section 147 of the Act. Further, the learned CIT(A) has recorded categorical finding that 11 ITA No. 2623/Chny/2018 reopening of assessment was on the basis of ‘change of opinion’, which is evident from fact that except audit objection, no other evidence is in possession of the Assessing Officer which suggests escapement of income. The audit party has pointed out certain objections on the basis of materials already placed before the Assessing Officer at the time of original assessment u/s.143(3) of the Act. Therefore, it is very clear that the Assessing Officer has formed reasonable belief of escapement of income on the basis of very same materials, which was part of original assessment proceedings and thus, we are of the considered view that the learned CIT(A) is right in holding that reopening of assessment u/s.147 of the Act is on mere change of opinion. The facts remain unchanged. The revenue fails to bring on record any further evidence to counter finding of facts recorded by the learned CIT(A). Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the revenue challenging reopening of assessment u/s.147 of the Act. 12. As regards, deletion of disallowance u/s.54F of the Income Tax Act, 1961, the facts borne out from records clearly 12 ITA No. 2623/Chny/2018 indicate that the assessee has claimed exemption u/s.54F of the Act, for purchase of residential flat in two assessment years on one house property. However, source of income for purchasing house property is two different transactions of capital gain derived from sale of assets. It is well settled principles of law that when conditions prescribed u/s.54F of the Act are satisfied, then there is no bar under the Act, to claim exemption in two different assessment years, if source for making investments for purchase of residential property is from different assets. In this case, the assessee has claimed exemption for first year from sale of jewellery, whereas for second year the assessee as sold once again jewellery and reinvested consideration for construction of house property. Therefore, we are of the considered view that as long as there is different source of income in two assessment years for investment in purchase of one residential property, then the assessee can claim exemption u/s.54F of the Act, if other conditions prescribed thereunder are satisfied. In this case, there is no observation from the Assessing Officer with regard to satisfaction of conditions prescribed for claiming exemption u/s.54F of the Act. Therefore, we are of the considered view 13 ITA No. 2623/Chny/2018 that there is no error in the reasons given by the learned CIT(A) to delete additions made by the Assessing Officer towards disallowance of exemption claimed u/s.54F of the Act. Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the revenue. 13. As regards estimation of profit from hire purchase business, it was finding of the learned CIT(A) that total turnover from business of the assessee for impugned assessment year does not exceed turnover prescribed for getting his accounts audited u/s.44AB of the Income Tax Act, 1961. The learned CIT(A) further observed that the assessee has offered net profit of Rs.9,20,603/- from business, which is more than amount of profit estimated by the Assessing Officer @ 8% on gross receipts of hire purchase business. Therefore, he opined that the Assessing Officer has erred in estimating 8% profit on hire charges and made addition of Rs.1,05,861/-. The facts remain unchanged. The revenue fails to bring on record any further evidences to counter finding of facts recorded by the learned CIT(A). Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the revenue. 14 ITA No. 2623/Chny/2018 14. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 31 st January, 2022 Sd/- Sd/- (वी. द ु गा राव) (जी. मंज ु नाथ) (V.Durga Rao) (G.Manjunatha) #या यक सद&य /Judicial Member लेखा सद&य / Accountant Member चे#नई/Chennai, )दनांक/Dated 31 st January, 2022. DS आदेश क त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु .त (अपील)/CIT(A) 4. आयकर आय ु .त/CIT 5. ,वभागीय त न2ध/DR 6. गाड फाईल/GF.