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| The Tax Publishers2020 TaxPub(DT) 2511 (Bom-HC) : (2020) 315 CTR 0473 : (2020) 272 TAXMAN 0359 INCOME TAX ACT, 1961
Section 147 Section 45
Where AO initiated reassessment proceedings on allegation capital gains were chargeable to tax when land was transferred and not when individual flats were sold, allegation of AO was invalid because flat purchasers, by purchasing the flats, certainly acquired a right or interest in the proportionate share of the land but its realization was deferred till formation of the co-operative society by owners of the flats and eventual transfer of the entire property to the co-operative society. Thus, reason rendered could not have led to formation of any belief that income had escaped assessment and notices issued under section 148 could not be sustained.
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Reassessment - Validity - AO issued notice for reopening of assessment on allegation that gain will arise when land was transferred and not when flats were sold by assessee-builder -
Assessee-firm was carrying out business of builders and developers. It purchased property consisting seven structures and two garages. It thereafter converted portion of property into stock-in-trade. It thereafter commenced construction of a multi-storied structure. Assessee contended that liability to tax under section 45(2) would arise as and when flats were sold. AO issued notice for reopening of assessment on allegation that gain will arise when land was transferred. Held: According to AO, assessee erred in offering to tax 'capital gains' in year when individual flats were sold whereas such 'capital gains' could be assessed to tax only when land was trasferred to co-operative society formed by flat purchasers. If assessee had offered to tax as 'capital gains' in the assessment years under consideration which should have been offered to tax in the subsequent years, it was beyond comprehension as to how a belief can be formed that income chargeable to tax for the assessment year under consideration had escaped assessment. Flat purchasers, by purchasing the flats, certainly acquired a right or interest in the proportionate share of the land but its realisation was deferred till formation of the co-operative society by the owners of the flats and eventual transfer of the entire property to the co-operative society. Thus, capital gains are chargeable to tax when individual flats are sold and not when the land is transferred to the co-operative society formed by the flat purchasers. Thus, reason rendered could not have led to formation of any belief that income had escaped assessment and notices issued under section 148 could not be sustained.
REFERRED : Sunil Siddharthbhai and Kartikeya V. Sarabhai v. CIT (1985) 156 ITR 509 (SC) : 1985 TaxPub(DT) 1358 (SC), ITO & Ors. v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) : 1976 TaxPub(DT) 742 (SC), Addanki Narayanappa & Anr. v. Bhaskara Krishtappa & Ors. AIR 1966 SC 1300, Chainrup Sampatram v. CIT (1953) 24 ITR 481 (SC) : 1953 TaxPub(DT) 120 (SC), Prashant S. Joshi v. ITO (2010) 324 ITR 154 (Bom-HC) : 2010 TaxPub(DT) 1561 (Bom-HC), CIT v. Miss Piroja C. Patel (2000) 242 ITR 582 (Bom) : 2000 TaxPub(DT) 540 (Bom-HC) and Addl. CIT v. Mohanbhai Pamabhai (1987) 165 ITR 166 (SC) : 1987 TaxPub(DT) 1259 (SC).
FAVOUR : In assessee's favour.
A.Y. : 1992-93
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