IT: Where original assessment order bore signature of Assessing Officer, absence of signature in copy of assessment order would not vitiate assessment
IT: Where there was contradiction between both assessee and revenue with regard to nature of land, issue whether land was agriculture land or not to be remanded back for re-consideration
IT: Failure to take steps under section 143(3) will not render Assessing Officer powerless to initiate reassessment proceedings even when an intimation under section 143(1) had been issued
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[2013] 37 taxmann.com 243 (Cochin - Trib.)
IN THE ITAT COCHIN BENCH
Dr. Mampilly Antony
v.
Deputy Director of Income-tax (International Taxation)*
N.R.S. GANESAN, JUDICIAL MEMBER
AND B.R. BASKARAN, ACCOUNTANT MEMBER
AND B.R. BASKARAN, ACCOUNTANT MEMBER
IT APPEAL NO. 250 (COCH.) OF 2012
[ASSESSMENT YEAR 2007-08]
[ASSESSMENT YEAR 2007-08]
APRIL 12, 2013
I. Section 143, read with section 156, of the Income-tax Act, 1961 - Assessment - General [Signature of Assessing Officer] - Assessment year 2007-08 - Whether where Assessing Officer had duly signed original assessment order and notice of demand served upon assessee also bore signature of Assessing Officer, absence of signature in copy of assessment order would not vitiate assessment - Held, yes [Para 14] [In favour of revenue]
II. Section 2(14) of the Income-tax Act, 1961 - Capital gains [Agricultural land] - Assessment year 2007-08 - Whether use of land by seller is required to be considered in order to determine character of land and nature of use of land by buyer may not be relevant - Held, yes - Assessing Officer rejected claim of assessee that land sold by him was an agricultural land - While holding so, Assessing Officer relied upon report of Inspector that such land appeared in land records as residential land and that such land was transferred for non-agricultural purpose and no agricultural operations were carried out for last more three decades - Assessee however produced certificates given by Agriculture Officer and Village Officer to prove that he carried on agricultural operations in these lands - Whether since there was apparent contradiction between revenue and assessee with regard to nature of land and Assessing Officer did not consider evidence produced by assessee, issue was to be restored to file of Assessing Officer to decide same afresh - Held, yes [Paras 19 to 24] [Matter remanded]
III. Section 147, read with section 143 of the Income-tax Act, 1961 - Income escaping assessment - General [Section 143(3) v. Section 147] - Assessment year 2007-08 - Whether failure to take steps under section 143(3) will not render Assessing Officer powerless to initiate reassessment proceedings even when an intimation under section 143(1) had been issued - Held, yes [Para 15] [In favour of revenue]
CASE REVIEW-I
Kalyankumar Ray v. CIT [1991] 191 ITR 634 (SC) and Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal.) (para 14) followed.
CASE REVIEW-III
Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 15) followed.
CASES REFERRED TO
Vijay Corporation v. ITO [2012] 50 SOT 33 (URO)/18 taxmann.com 88 (Mum.) (para 5), Smt. Kilasho Devi Burman v. CIT [1996] 219 ITR 214/85 Taxman 346 (SC) (para 5), Kalyankumar Ray v. CIT [1991] 191 ITR 634 (SC) (para 5), Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal.) (para 10) and Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC) (para 15).
C.B.M. Warrier for the Appellant. Smt. S. Vijayaprabha and M. Anil Kumar for the Respondent.
ORDER
B. R. Baskaran, Accountant Member - The assessee has filed this appeal challenging the order dated 9th August, 2012 passed by the learned Commissioner of Income-tax (Appeals)-III, Kochi and it relates to the assessment year 2007-08.
2. The grounds urged by the assessee give rise to the following issues :
| "(a) | Whether the assessment under consideration is valid, since the copy of the assessment order issued to the assessee was not signed by the Assessing Officer. | |
| (b) | Whether the reopening of the assessment under section 147 is valid in law, since no original assessment order was passed on the original return of income filed by the assessee and further there was no escapement of income. | |
| (c) | Whether the learned Commissioner of Income-tax (Appeals) was justified in holding that the property sold by the assessee is not agricultural land. | |
| (d) | Whether the learned Commissioner of Income-tax (Appeals) was justified in disallowing the cost of improvement claimed on the property sold amounting to Rs. 3,51,448." |
3. The facts relating to the case are stated in brief. The assessee is a non-resident and is a practising ophthalmologist. He filed his return of income for the year under consideration on March 31, 2008 admitting the taxable income of Rs. 7,44,950. In the statement accompanying the return of income, the assessee declared long-term capital gain of Rs. 15,25,378 on sale of a residential property and claimed the same as exempt under section 54 of the Act, as he had invested a sum of Rs. 42,09,750 on purchase of another residential property. The assessee further declared short-term capital gain of Rs. 24,16,120 on sale of an agricultural land and claimed the same to be exempt. Subsequently, the Assessing Officer reopened the assessment by issuing notice under section 148 of the Act. The Assessing Officer held that the assessee is not eligible for exemption under section 54(1) of the Act in respect of the long-term capital gain. The Assessing Officer also held that the short-term capital gain earned on sale of land is also not exempt, since the assessee did not carry out any agricultural operation in the said land. While computing the total income, the Assessing Officer did not consider the claim of improvements made in the lands sold. The assessee challenged the assessment order before the learned Commissioner of Income-tax (Appeals), but could not succeed. Hence the assessee has filed this appeal before us.
4. It is pertinent to note that the assessee did not urge before us the issue relating to the rejection of exemption under section 54 of the Act and hence the said issue has attained finality by the order passed by the learned Commissioner of Income-tax (Appeals).
5. Besides the issues urged on merits, the assessee has also urged two legal grounds before us. Hence, we prefer to adjudicate the legal grounds initially. The first legal ground urged by the assessee is that the copy of the assessment order served upon him was not signed by the Assessing Officer and hence, the entire assessment has to be treated as invalid. In this regard, learned counsel for the assessee placed reliance on the following case law :
| (a) | Vijay Corporation v. ITO [2012] 50 SOT 33 (URO)/18 taxmann.com 88 (Mum.). | |
| (b) | Smt. Kilasho Devi Burman v. CIT [1996] 219 ITR 214/85 Taxman 346 (SC). | |
| (c) | Kalyankumar Ray v. CIT [1991] 191 ITR 634 (SC). |
6. In this regard, the assessee has also filed an additional ground wherein it is contended that the assessment is barred by limitation since no valid assessment order is served on the assessee before the expiry of the limitation period.
7. The learned Departmental representative, however, submitted that the notice of demand issued to the assessee under section 156 of the Act was duly signed by the Assessing Officer and the copy of the assessment order issued to the assessee was inadvertently omitted to be signed. The learned Departmental representative further submitted that the original assessment order available in the assessment record was duly signed by the Assessing Officer. The learned Departmental representative further submitted that the assessee is served with only a copy of the assessment order and hence absence of signature in that copy shall not invalidate the assessment order.
8. Since the learned Departmental representative submitted that the original assessment order was signed by the Assessing Officer, the learned Departmental representative was directed to produce the assessment record before the Bench. Learned counsel for the assessee was allowed an opportunity to inspect the assessment record. On examination of the assessment record, we notice that the original assessment order was found signed by the Assessing Officer. Learned counsel for the assessee also confirmed the fact of availability of the signature of the Assessing Officer on the original assessment order. Thus, it transpires that the Assessing Officer has inadvertently failed to sign the copy of the assessment order, which was served upon the assessee.
9. Now the question that arises for our consideration is whether the non-signing of the copy of the assessment order would invalidate the original assessment order, when the original order was duly signed. The learned authorised representative has placed strong reliance on the case law cited above to contend that the absence of signature in the copy of the assessment order would also invalidate the assessment. We have carefully gone through the case law relied upon by the learned authorised representative. In the case of Vijay Corporation (supra), the Mumbai Bench of the Tribunal decided the issue by following the decision of hon'ble Supreme Court in the case of Smt. Kilasho Devi Burman (supra). However, in the case before the Mumbai bench of the Tribunal, the finding given by the Tribunal was that the Assessing Officer did not dispute the fact that the order of assessment was not signed, meaning thereby even the original assessment order was not signed by the concerned Assessing Officer. In the case of Smt. Kilasho Devi Burman (supra), the hon'ble Supreme Court has observed as under at page 220 :
"The High Court did not give due importance to the fact that upon the record produced by the Revenue before the Tribunal there was no signed assessment order nor a signed assessment form."
10. Thus, in the said case also, the assessment record did not contain signed assessment order. In the case of Kalyankumar Ray (supra), the question that arose before the hon'ble apex court was whether the assessment order itself should contain the calculations of tax, interest, etc., or not. In the case ofKalyankumar Ray (supra), the hon'ble Supreme Court referred to the decision rendered by the hon'ble Calcutta High Court in the case of Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 and the relevant observations of the hon'ble apex court are extracted below (page 639 of 191 ITR) :
"In Sushil Chandra Ghose v. ITO [1959] 35 ITR 379 (Cal), the assessee was served apart from the assessment order, with a copy of the form known as I.T.N.S. 150 which was not signed by the Income-tax Officer but the court upheld the assessment because the original thereof had been duly signed."
11. The hon'ble Supreme Court also considered the significance of form I.T.N.S. 150 ("Income-tax computation Form" or form for "Assessment of tax/refund") and observed as under (page 639) :
"We are unable to see why this document, which is also in writing and which has received the imprimatur of the Income-tax Officer, should not be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of section 143(3)."
12. A combined reading of both observations would show that Form I.T.N.S. 150 was considered by the hon'ble Supreme Court as part of the assessment order and if the original of the same was signed by the Assessing Officer, then the absence of signature in the copy of the order, which was served upon the assessee, would not invalidate the assessment.
13. At this stage, we may gainfully refer to the observations made by the hon'ble Supreme Court in the case of Kalyankumar Ray (supra), referred supra at page 638 :
"It will be appreciated that once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the Income-tax Officer first draws up an order assessing the total income and indicating the adjustments to be made, directs the office to compute the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete".
14. In the instant case, the learned authorised representative, after examination of the assessment record, has confirmed that the Assessing Officer has duly signed the original assessment order. Accordingly, in view of the decision of the hon'ble Supreme Court in the case of Kalyankumar Ray (supra) and the decision of the hon'ble Calcutta High Court in the case of Sushil Chandra Ghose (supra), we may safely conclude that the statutory requirement has been duly complied with by the Assessing Officer. Further, it is pertinent to note that the "notice of demand" served upon the assessee bore the signature of the Assessing Officer. Hence, the absence of signature in the copy of the assessment order would not vitiate the assessment. Accordingly, we find no merit in the contentions raised by the assessee on this issue and accordingly, reject the same. Consequently, the additional ground raised by the assessee on expiry of limitation period also fails.
15. The next issue urged by the assessee is about validity of reopening of the instant assessment under section 147 of the Act. According to the assessee, the reopening is bad since the Assessing Officer has failed to pass the assessment order on the original return of income filed by the assessee. We find that this contention of the assessee is not in accordance with the decision rendered by the hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 wherein the hon'ble Supreme Court has held that the Assessing Officer is free to initiate proceedings under section 147 so long as the ingredients of section 147 are fulfilled and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when an intimation under section 143(1) had been issued.
16. The assessee also contends that there is no escapement of income and hence the reassessment notice is bad in law. However, on a perusal of the assessment order, we notice that the Assessing Officer has pointed out that (a) the assessee has claimed indexation benefit while in computing the short-term capital gain, (b) the exemption claimed by the assessee under section 54 of the Act is not in order and (c) the land on which short-term capital gain was claimed was only a vacant land and not an agricultural land. All these reasons cited by the Assessing Officer cumulatively show that the Assessing Officer had reason to believe that there was escapement of income. Hence, in our view, the Assessing Officer was justified in initiating reassessment proceedings and accordingly, we reject the grounds raised by the assessee in this regard.
17. The next issue is whether the land sold by the assessee is agricultural land or not. The last issue relating to the disallowance of claim of cost of improvement is also connected to the abovesaid issue. The assessee claimed that the land sold by him is an agricultural land. However, the said contention was rejected by both the tax authorities. The Assessing Officer has summarised the basis of his finding as under in paragraph 7 of the assessment order.
"7. In the light of the above discussion, I hold that the land was not an agricultural land and hence, cannot be excluded from the expression 'capital asset' as provided under sub-clause (iii) of clause (14) of section 2 of the Income-tax Act. For such a finding, the following points have been cumulatively considered.
| (a) | The land in question is located to highly developed area where the I. T. Park, luxury housing projects and industries of nationally reputed buildings well-laid roads are located ; | |
| (b) | the land was transferred for non-agricultural purpose ; | |
| (c) | no agricultural operations were carried out for the last more than three decades ; | |
| (d) | the intention of the assessee in acquiring the land cannot be said to be for genuine agricultural purposes; the assessee is not an agriculturist ; | |
| (e) | the motive for purchasing the land was only to earn gains on fetching higher value ; | |
| (f) | there is no evidence to prove that any agricultural activities on a regular and organised way were carried out ; | |
| (g) | physical characteristics, surrounding situation and use of lands in the adjoining do not indicate that the land was agricultural ; | |
| (h) | the amount of consideration for which the land was sold clearly indicates that no agriculturist could afford such price as the property could not yield agricultural produce of such value." |
18. Further the Assessing Officer has stated in the remand report that an Inspector of income-tax examined the land records on June 13, 2012 and he has given a report that the impugned land was shown as "purayidom", which means "residential purpose land" in Malayalam language. During the course of hearing, the learned authorised representative, however, disputed the said interpretation and submitted that the coconut grove is called "thengin purayidom" in Malayalam language and hence the word "purayidom" cannot be construed as "residential purpose land" as interpreted by the Assessing Officer.
19. The pertinent point to be noted here is that the sale of impugned land has taken place in July, 2006 and the Inspector of Income-tax has verified the land records in June, 2012, i.e., after a gap of six years. Further the copies of said land records were not produced before us and it is also not clear whether the assessee was given an opportunity to examine the same. On the contrary, the assessee has furnished copies of "basic tax register" pertaining to the impugned lands, wherein they have been described as "dry land". Thus, there is apparent contradiction between both the parties with regard to the nature of land.
20. We notice that the Assessing Officer has given more importance to the fact that the purchaser of land has used it for constructing villas, i.e., non-agricultural purposes. In our view, the user of land by the seller is required to be considered in order to determine the character of the land and the nature of use of the land by the buyer may not be relevant.
21. We notice from the paper book filed by the assessee that he has furnished the following documents also in support of his claim that he carried on agricultural operations in these lands :—
| "(a) | Copy of certificate from the Agricultural Officer dated October 14, 2004. | |
| (b) | Copy of certificate from the Assistant Engineer, Electrical section | |
| (c) | Copies of electricity bills. | |
| (d) | The Village Officer certificate regarding ownership | |
| (e) | The income and expenditure account and the balance-sheet for agricultural activities for the year ending March 31, 2004, March 31, 2005, March 31, 2006 and for the period ending on July 26, 2006. | |
| (f) | Consent letter dated July 3, 2006 of Shri Balakrishnan. | |
| (g) | Resignation letter dated January 10, 2008 from Sabu. | |
| (h) | Affidavits from Shri P. V. Sabu, Shri P. K. Mohammed and Shri P. E. Mohammed." |
22. In the remand report, the Assessing Officer has commented that the certificates given by the Agricultural Officer and the Village Officer do not show that the assessee was carrying on agricultural activities. However, we notice that the Assessing Officer did not make any comment on the income and expenditure account and other certificates obtained by the assessee from various related persons.
23. Before us, the learned authorised representative submitted that if the sale of agricultural land is considered as not exempt, then the assessee should be given deduction under section 54B of the Act in respect of the rubber estate purchased by him. We notice that there was no occasion for the Assessing Officer to examine this claim as he had held that the impugned land was not an agricultural land.
24. All these discussions show that the issues relating to the nature of land and the claim of exemption under section 54B, if any, have not been properly examined by the tax authorities. As stated earlier, the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) has placed more reliance on the report of the Inspector of Income-tax and the development work carried out by the purchaser of land. Accordingly, in view of the lacunae pointed out above, in our view, all these issues require fresh examination at the end of the Assessing Officer. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the same to the file of the Assessing Officer with the direction to examine the issues afresh and take appropriate decision in accordance with law, after affording necessary opportunity of being heard to the assessee.
25. In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes.
USPRegards
Prarthana Jalan
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