The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that charging capital gains tax twice on the same land from the execution of the sale deed was impermissible, and consequently quashed the reassessment under Section 148 of the Income Tax Act, 1961.
The assessee, M/s Dabur India Limited, is engaged in the business of manufacturing and trading of herbal products of health, personal care, cosmetics and FMCG products etc. Return of income for assessment year 2011-12 was filed declaring income of Rs.253,24,04,903/-. Regular assessment was completed vide order dated 19.03.2015 passed under Section 143(3) of the Income Tax Act assessing total income at Rs.296,28,03,260/- after making certain disallowances/additions. This assessment was sought to be reopened by the AO vide issuance of notice under Section 148 of the Income Tax Act on 31.03.2018 for the AY 2011-12. The assessee vide letter dated 16.04.2018 and 10.07.2018 submitted that the original return filed by the assessee may be treated as a return filed in response to notice under Section 148 of the Income Tax Act.
The transaction of sale actually got concluded in AY 2007–08 itself and assessment under Section 143(3) of the Income Tax Act was also framed accepting the stand of the assessee. While this is so, for the very same property, how can there be capital gains in AY 2011- 12. Admittedly, there was no reopening made for AY 2007–08 or revision proceeding made under Section 263 of the Income Tax Act for AY 2007-08 disturbing the findings recorded by the AO with regard to capital gains in the scrutiny assessment proceedings for AY 2007–08 vide order dated 14.02.2011.
The bench considered the opinion that the mere execution of the sale deed dated 20.09.2010, which was effectively a registration deed due to certain objections raised by the local authorities, could not impose any capital gains tax liability on the assessee for AY 2011-12, given that the capital gains for the same property had already been declared by the assessee and assessed by the AO in scrutiny assessment proceedings in AY 2007-08.
The Gujarat High Court considered a similar issue in the case of PCIT vs. Dipak Govind Bhai Dalwadi. The bench found no error in the Tribunal’s findings because the issue related to the transfer of land to M/s. Aanya Developers in the Assessment Year 2009-10 had attained finality. No appeal was preferred by the assessee against the additions made.
Therefore, the Tribunal observed that the issue had been examined and taxed in A.Y. 2009-10 based on the Banakhat (agreement to sale) dated 24-7-2008. The department also treated it as a transfer in the Assessment Order for A.Y. 2009-10.
It was noted that, “Charging capital gains tax on the same land based on the final execution of the sale deed amounts to taxing the same transaction twice, which is not permissible.”
The two member bench of the tribunal comprising Amit Shukla ( Judicial member) and M. Balaganesh ( Accountant member) held that the assumption of the jurisdiction by the AO under Section 147 of the Income Tax Act was illegal and in any case, there cannot be any assessment of capital gains on merits and on law for AY 2011-12. Accordingly, the grounds raised by the assessee are allowed, the appeal of the assessee was allowed.
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