CIT vs I. Basheer and Others

C.N. Ramachandran Nair, J.—Appeal is filed by the revenue challenging the order of the Tribunal allowing the appeal filed by late assessee who is now represented by son and legal heir. We have heard senior counsel appearing for the revenue and advocate Sri. P. Balakrishnan appearing for the respondent-assessee.

The first question raised is with regard to the validity of assessment completed u/s 147, which though confirmed by the CIT(A) in first appeal was reversed by the Tribunal for the reason that assessee had disclosed the material facts pertaining to the assessment in the original return. According to the Tribunal, based on the materials available in the original return filed, the Department could not have reopened the assessment completed u/s 143(3) of the IT Act in proceedings later initiated by issuing notice u/s 148. The facts leading to the controversy are the following.

The assessees 4.75 acres of land with residential building in Aluva West Village was acquired in land acquisition proceedings for the purpose of widening the National Highway. Even though the award was passed only on 5-5-1993 that is, in the previous year relevant for the assessment year 1994-95, the Government had taken over possession of the land in exercise of powers u/s 17(1) of the Land Acquisition Act on 26-3-1992 and the said possession is reportedly taken by the Government with the consent 6f the assessee. The assessee was also paid advance compensation amount of Rs. 8,83,900 on 30-3-1992 that is, before the end of the previous year relevant for the assessment year 1992-93. Even though the assessee had put a note in the return filed for the year 1992-93 stating that the assessee had received the amount as advance compensation and part of it was deposited in the bank, assessee contended that the capital gain arising is not assessable for the assessment year 1992-93. In the assessment completed u/s 143(3), the AO originally did not consider assessment on capital gains. However, the AO later issued notice u/s 148 and proceeded to assess the compensation received in land acquisition proceedings, for the assessment year 1992-93. When the assessee filed appeal before the CIT(A) challenging the validity of the assessment completed u/s 147, the CIT(A) took into account the advance possession taken by the Government and advance compensation paid to the assessee in the previous year and, therefore, upheld the validity of assessment. In second appeal filed by the assessee, the Tribunal, however, held that compensation itself was fixed finally vide Order dt. 5-5-1993 and so much so, the capital gain arising on acquisition of land is not assessable for the assessment year 1992-93. The Tribunal also cancelled section 147 assessment for the reason that assessee had furnished particulars in the original return itself.

After hearing both sides, we are unable to sustain the order of the Tribunal vacating the reassessment u/s 147 because in this case the transfer had taken place by way of acquisition of the land by the Government by taking over advance possession in exercise of powers u/s 17(1) on 26-3-1992. In fact, 80 per cent of the compensation which is Rs. 8,83,900 was also received by the assessee on 30-3- 1992. So much so, transfer had taken place in the previous year and the balance rights of the assessee is only to get compensation based on adjudication and later enhancement, if the assessee has contest in the matter. In fact, assessee himself was of the view that the capital gain is assessable for the year 1992-93 and that is the reason why assessee purchased another land for the purpose of claiming benefit u/s 54 in the accounting year itself. The next question to be considered is whether reopening of assessment is possible because assessee in the original return made mention about the land acquisition proceedings whereunder he had received advance compensation. However, what is clear is that besides reporting receipt of advance compensation, the assessee had not intimated the Department that possession was also taken over by the Government in exercise of powers u/s 17(1) of the Land Acquisition Act. In any case after the amendment to section 147 in 1989 we.f. 1-4-1989, an assessment could be reopened for making income escaping assessment within four years from the end of the relevant assessment year, even if assessee has disclosed fully and truly all material facts necessary for assessment. In this case admittedly the assessment is reopened within four years from the end of the assessment year and so much so, assessment is not barred by limitation u/s 147. Further, the disclosure made by the assessee in the return does not contain the most crucial aspect i.e., taking over possession of the land by the Government in the previous year itself under the emergency clause contained in the Land Acquisition Act which answers the description of "transfer" as defined under the Act. So much so, we uphold the validity of assessment completed u/s 147. The order of the Tribunal will, therefore, stand reversed.

The assessees counsel brought to our notice that the Tribunal has not considered assessees claim for exemption u/s 54(1) of the Act wherein the assessee claimed that the compensation received is reinvested in land and building. Counsel for the assessee brought to our notice also the finding of the AO wherein he has denied benefit of exemption merely because property tax for the building constructed was paid only on 18-9-1997. The AO assumed that the construction of the building would not have been completed before 1-4-1997 because of the delayed payment of property tax. There is no presumption that property tax paid to the Grama Panchayath is always immediately on completion of construction of the building only. There may be delay in payment of tax to Panchayath. Further, in this case the assessee had invested in land and construction appears to have been in progress. The completion of construction necessarily need not coincide with payment of property tax to the Grama Panchayath. If assessee is able to produce evidence about completion of construction within the time provided u/s 54(1), then assessee is entitled to exemption. The Tribunal does not appear to have considered the contentions raised by the assessee on these grounds. We, therefore, feel the matter requires reconsideration by the Tribunal. Accordingly, we set aside the order of the Tribunal on this issue and remand the matter to the Tribunal to consider assessees eligibility for exemption u/s 54(1) for the investment made for purchase of land and construction of building. The appeal will stand restored to the Tribunal on this issue for the Tribunal to issue notice and to decide the matter afresh. Appeal is allowed in part as above.