The facts of the case are as follows:
- The assessee is an individual and an NRI.
- During the assessment year 2013-14, the assessee sold an immovable property at Maxworth Nagar, Sunnambu Kolathur, Madipakkam for a sum of Rs. 85,00,000/-.
- The property consisted of land valued at Rs. 62,00,000/- and a building valued at Rs. 23,00,000/-.
- The NRI computed capital gains and claimed exemption under section 54 of the Income Tax Act on long-term capital gains.
- The assessment was initially completed under section 143(3) of the Act and the return of income was accepted.
- Subsequently, the Assessing Officer (AO) noticed from the TNREGINET website that the guideline value for the property sold by the NRI as on 01.04.2012 was Rs. 4,000/- per sq.ft.
- The AO determined that the value for the extent of the site sold should be Rs. 1,14,20,000/- (including building value) based on the guideline value, but the NRI admitted a lesser value in the return of income to the extent of Rs. 29,20,000/-.
- As a result, the AO issued a notice under section 148 of the Act and reopened the assessment.
- The AO passed a draft assessment order adding additional income on account of capital gains under section 50C of the Act to the extent of Rs. 29.20 lakhs.
- The NRI raised objections before the Dispute Resolution Panel (DRP), but the DRP upheld the action of the AO in reopening the assessment.
- The NRI then appealed to the Income Tax Appellate Tribunal.
- The Tribunal quashed the notice issued under section 148 of the Act, as the escaped income was less than Rs. 50 lakhs and fell within the scope of the CBDT’s instruction clarifying the judgment of the Supreme Court in the case of Union of India vs. Ashish Agarwal.
- The Tribunal allowed the NRI’s appeal.
DRP Rejection
The Dispute Resolution Panel (DRP) upheld the action of the Assessing Officer (AO) in reopening the assessment under section 147 of the Income Tax Act. The DRP approved the draft assessment order of the AO, which added additional income on account of capital gains under section 50C of the Act to the extent of Rs. 29.20 lakhs. The DRP rejected the objection raised by the NRI regarding the issuance of the notice under section 148 of the Act, stating that the notice was issued within the stipulated time limits as laid down in section 149(1)(b) of the Act. The DRP considered and perused the submissions of the NRI and concluded that there was no infirmity in the action of the AO.
ITAT allowed the Appeal
The final result of the appeal is that the Income Tax Appellate Tribunal allowed the appeal filed by the NRI.
The Tribunal quashed the notice issued under section 148 of the Income Tax Act, as it was found that the escaped income was less than Rs. 50 lakhs. The Tribunal relied on the clarification issued by the Central Board of Direct Taxes (CBDT) regarding the implementation of the judgment of the Supreme Court in the case of Union of India vs. Ashish Agarwal. The CBDT clarified that notices cannot be issued for assessment years 2013-14 to 2015-16 if the income escaping assessment in those years amounts to or is likely to amount to less than fifty lakh rupees.
Based on this clarification and the fact that the escaped income in the present case was Rs. 29,20,000/-, the Tribunal held that the notice issued under section 148 of the Act was without jurisdiction. Therefore, the Tribunal quashed the reassessment and the notice.
As a result, the appeal filed by the NRI was allowed by the Tribunal.
Shri Kalyanasundaram Bharath Hari vs The Income Tax Officer, International Taxation Ward 1(1), Chennai
