INCOME TAX ACT, 1961

Section 147, Proviso

Reassessment - Beyond four years - Failure to disclose fully and truly all material facts -

Assessee has sold 4.45 acres of agricultural land at Thaiyur Village under various survey numbers and made short-term capital gains which was claimed as an exempt income on the grounds that capital gain arising on sale of a agricultural land was exempt from income-tax. AO on verification observed that land under Survey No. 1248 & 1249 was classified as 'Residential Area Clause-1' and hence the said land was capital asset wherein short-term capital gains arising from sale of said land is chargeable to tax in respect of Survey Nos. 1248 & 1249. Accordingly, AO reopened assessment after expiry of four years from the end of relevant assessment year. Assessee took plea of proviso to section 147 and argued that there was no failure to disclose fully and truly all material facts.Held: Assessee had made disclosure in the return of income filed with Revenue that assessee had earned Rs. 7000 from agricultural operations carried on this land measuring 4.45 acres, but what transpired from enquiry made by AO from Tahsildar was that land was not used for agricultural activities during 2003-2007, except for survey number 1395/3B. Even assessee contended that assessee grew some water melon and pumpkin on this land but no evidence was placed on record. Even on being required by AO, the assessee did not co-operate with AO and did not file details as to agricultural activities carried on by the assessee on the said land. The assessee has sold land within a short span of time and made huge short-term capital gains of Rs. 9 crores. Also, initial assessment was framed under section 143(3) but AO accepted exemption of Rs. 9 crores claimed by assessee by way of short-term capital gains on sale of land without making any enquiries which the AO ought to have made. It was also pointed out by revenue audit team that survey numbers 1248 and 1249 were classified as Residential Area-Class-1' which triggered reopening of the concluded assessment by AO by invoking provisions of section 147. Accordingly, reopening beyond four years was justified in view of assessee's failure to disclsoe fully and truly all material facts.

Supported by:Chemmancherry Estates v. ITO TCA Nos. 545 & 546 of 2009 : 2019 TaxPub(DT) 5894 (Mad-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2008-09

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