In CIT Vs Ramesh Shroff, the appeal was filed before the Madras High Court filed by the revenue under Section 260-A of the Income Tax Act, 1961 is directed against the order passed by the ITAT, 'A' Bench in I.T.A.No.2710/Chny/2017 dated 13.12.2018 for the assessment year 2011-2012.
The respondent / assessee, who is an individual has filed his return of income on 30.07.2011 admitting a total income of Rs.4,44,610/-. The case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 01.08.2012 accepting the return filed by the assessee. Thereafter, the assessee had sold properties at Uthandi by a registered sale deeds. The assessee contended that the properties, which were sold were agricultural lands and did not offer any capital gain on such transfer. This was a ground on which assessment was re-opened by stating that income chargeable to capital gain has escaped assessment. In the re-assessment proceedings, the assessee contended that lands were agricultural lands, however, the assessing officer did not accept the same and assessed the sale consideration under 'long term capital gains'. Further, the assessing officer observed that the property cannot be treated as a rural area property, as the property is situated within the limits of the Corporation of Chennai, for which purpose, the assessing officer referred to the Web-Site of the Registration Department, Government of Tamilnadu. Further, the Assessing officer held that no agricultural income was offered in the earlier return and assessee treated the land as non agricultural, which were later sold by the assessee during the reassessment proceedings and that the residential property which the assessee purchased with the proceeds were partly lent out for commercial purpose with a month. The Tribunal held in favour of the appeal hence the appeal
The High Court agreeing with the Tribunal found several points in favour of the assess :-
1) A crucial aspect was taken note of the Tribunal, i.e., in the case of assessee's spouse, who was also co-owner of the very same property, the property was treated as agricultural land and the assessment was completed under Section 143(3) of the Act and the said finding remain undisturbed. The above will clearly show that the re-opening of the assessment in the instant case was a clear case of 'change of opinion' and the Tribunal was justified in allowing the assessee's appeal.
2) There are several instances where residential properties are put to use for non-residential purposes and this cannot be a test to decide the nature of the property under the provisions of the Income Tax Act, especially, in assessee's case, where the letting out of the property for non-residential purpose was much after the purchase.
3) So far as the Wealth-Tax assessment is concerned, it may be true that in the assessment, the property is shown as commercial complex, as on the relevant date, 31.03.2011, the property was leased out for commercial purpose. Therefore, the Tribunal was right in holding that the assessee would be entitled to claim deduction under Section 54F of the Act and also rightly restricted to the residential portion only.
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