Ita/307/2009 Of The Commissioner Of Income Tax v. Shri I.basheer

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.P.RAY WEDNESDAY, THE 24TH NOVEMBER 2010 / 3RD AGRAHAYANA 1932 ITA.No. 307 of 2009() --------------------- ITA.300COCH'/2002 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: ------------------------- SRI.I.BASHEER, PUTHIYADATH HOUSE, MUTTOM, ALUVA.(*) DIED ADDL. RESPONDENTS: 2.P.K.BEEFATHU, W/O.DECEASED,PUTHIYEDATH HOUSE,PUTHIYEDATH HOUSE, THAIKKATTUKARA P.O., ALUVA-683 106. 3.P.B.ASHRAF, S/O.DECEASED,.DO..DO..DO..DO. 4.P.B.SHERIFF, S/O.DECEASED,.DO..DO..DO..DO. 5.SHAKEELA NASAR, D/O.DECEASED,.DO..DO..DO..DO.6.P.B.ARAF, S/O.DECEASED,.DO..DO..DO..DO. 7.P.B.MANAF, S/O.DECEASED,.DO..DO..DO..DO. (ADDL. RESPONDENTS 2 TO 7 ARE IMPLEADED AS PER ORDER DT.5.7.2010 IN I.A. NO.1641/2010.) ADV. SRI.P.BALAKRISHNAN (E) FOR R1TO6 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24/11/2010, THE COURT ON 24/11/2010 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &BHABANI PRASAD RAY, JJ. .................................................................... I.T. Appeal No.307 of 2009 ....................................................................Dated this the 24th day of November, 2010. JUDGMENT Ramachandran Nair, J. Appeal is filed by the Revenue challenging the order of theTribunal allowing the appeal filed by late assessee who is nowrepresented by son and legal heir. We have heard Senior counselappearing for the Revenue and Adv. Sri.P.Balakrishnan appearing forthe respondent-assessee. 2. The first question raised is with regard to the validity ofassessment completed under Section 147, which though confirmed by the C.I.T.(Appeals) in first appeal was reversed by the Tribunal for thereason that assessee had disclosed the material facts pertaining to theassessment in the original return. According to the Tribunal, based onthe materials available in the original return filed, the department couldnot have reopened the assessment completed under Section 143(3) of the Income Tax Act in proceedings later initiated by issuing noticeunder Section 148. The facts leading to the controversy are the ITA No.307/09 following. 3. The assessee's 4.75 acres of land with residential building inAluva West Village was acquired in land acquisition proceedings forthe purpose of widening the National Highway. Even though theaward was passed only on 5.5.1993 that is, in the previous year relevantfor the assessment year 1994-95, the Government had taken overpossession of the land in exercise of powers under Section 17(1) of theLand Acquisition Act on 26.3.1992 and the said possession isreportedly taken by the Government with the consent of the assessee.The assessee was also paid advance compensation amount ofRs.8,83,900/- on 30.3.1992 that is, before the end of the previous yearrelevant for the assessment year 1992-93. Even though the assesseehad put a note in the return filed for the year 1992-93 stating that theassessee had received the amount as advance compensation and part ofit was deposited in the Bank, assessee contended that the capital gainarising is not assessable for the assessment year 1992-93. In theassessment completed under Section 143(3), the Assessing Officeroriginally did not consider assessment on capital gains. However, the ITA No.307/09 ITA No.307/09 Assessing Officer later issued notice under Section 148 and proceededto assess the compensation received in land acquisition proceedings,for the assessment year 1992-93. When the assessee filed appealbefore the C.I.T.(Appeals) challenging the validity of the assessmentcompleted under Section 147, the C.I.T.(Appeals) took into account theadvance possession taken by the Government and advancecompensation paid to the assessee in the previous year and, therefore,upheld the validity of assessment. In second appeal filed by theassessee, the Tribunal, however, held that compensation itself wasfixed finally vide order dated 5.5.1993 and so much so, the capital gainarising on acquisition of land is not assessable for the assessment year1992-93. The Tribunal also cancelled Section 147 assessment for thereason that assessee had furnished particulars in the original returnitself. 4. After hearing both sides, we are unable to sustain the order ofthe Tribunal vacating the reassessment under Section 147 because inthis case the transfer had taken place by way of acquisition of the landby the Government by taking over advance possession in exercise of ITA No.307/09 powers under Section 17(1) on 26.3.1992. In fact, 80% of thecompensation which is Rs.8,83,900/- was also received by the assesseeon 30.3.1992. So much so, transfer had taken place in the previousyear and the balance rights of the assessee is only to get compensationbased on adjudication and later enhancement, if the assessee hascontest in the matter. In fact, assessee himself was of the view that thecapital gain is assessable for the year 1992-93 and that is the reasonwhy assessee purchased another land for the purpose of claimingbenefit under Section 54 in the accounting year itself. The nextquestion to be considered is whether reopening of assessment ispossible because assessee in the original return made mention about theland acquisition proceedings whereunder he had received advancecompensation. However, what is clear is that besides reporting receiptof advance compensation, the assessee had not intimated thedepartment that possession was also taken over by the Government inexercise of powers under Section 17(1) of the Land Acquisition Act.In any case after the amendment to Section 147 in 1989 with effectfrom 1.4.1989, an assessment could be reopened for making income ITA No.307/09 escaping assessment within four years from the end of the relevantassessment year, even if assessee has disclosed fully and truly allmaterial facts necessary for assessment. In this case admittedly theassessment is reopened within four years from the end of theassessment year and so much so, assessment is not barred by limitationunder Section 147. Further, the disclosure made by the assessee in thereturn does not contain the most crucial aspect i.e. taking overpossession of the land by the Government in the previous year itselfunder the emergency clause contained in the Land Acquisition Actwhich answers the description of "transfer" as defined under the Act.So much so, we uphold the validity of assessment completed underSection 147. The order of the Tribunal will, therefore, stand reversed. 5. The assessee's counsel brought to our notice that the Tribunalhas not considered assessee's claim for exemption under Section 54(1)of the Act wherein the assessee claimed that the compensation receivedis reinvested in land and building. Counsel for the assessee brought toour notice also the finding of the Assessing Officer wherein he hasdenied benefit of exemption merely because property tax for the ITA No.307/09 ITA No.307/09 building constructed was paid only on 18.9.1997. The AssessingOfficer assumed that the construction of the building would not havebeen completed before 1.4.1997 because of the delayed payment ofproperty tax. There is no presumption that property tax paid to theGrama Panchayath is always immediately on completion ofconstruction of the building only. There may be delay in payment oftax to Panchayat. Further, in this case the assessee had invested inland and construction appears to have been in progress. Thecompletion of construction necessarily need not coincide with paymentof property tax to the Grama Panchayat. If assessee is able to produceevidence about completion of construction within the time providedunder Section 54(1), then assesee is entitled to exemption. TheTribunal does not appear to have considered the contentions raised bythe assessee on these grounds. We, therefore, feel the matter requiresreconsideration by the Tribunal. Accordingly we set aside the order ofthe Tribunal on this issue and remand the matter to the Tribunal toconsider assessee's eligibility for exemption under Section 54(1) for theinvestment made for purchase of land and construction of building. ITA No.307/09 The appeal will stand restored to the Tribunal on this issue for the Tribunal to issue notice and to decide the matter afresh. Appeal isallowed in part as above. C.N.RAMACHANDRAN NAIRJudge pms BHABANI PRASAD RAYJudge