CHAKKILAM SUDHAKAR, HYDERABAD,HYDERABAD vs. ITO, WARD-6(1), HYDERABAD, HYDERABAD

Brief facts of the case are that the assessee, an individual, filed his return of income for the AY.2008-09 on 31- 07-2008, admitting income from salary, consultancy business and income from house property at Rs.2,08,280/-. The said return was processed u/s.143(1) of the Income Tax Act [Act] on 23-06-2009 with NIL demand. Thereafter, the Assessing Officer (AO) received information that the assessee has sold a plot admeasuring 900 sq. yds., situated in Survey No.92, Devarakonda Nagar, Shaikpet Village for a consideration of Rs.98,00,000/-, but the same was not disclosed by the assessee in his return of income. Since the Long Term Capital Gain was not offered to tax by the assessee, the AO re-opened the assessment u/s.147 of the Act by issuance of notice u/s.148 of the Act. The AO obtained the copy of the sale deed from SRO, Banjara Hills, Hyderabad and observed that the property was purchased by the assessee on 05-06-2003 for a consideration of Rs.9 Lakhs. Accordingly, the indexed cost of acquisition was worked out to Rs.10,71,058/-. The AO invoked the provisions of Section 50C of the Income Tax Act and worked out the sale consideration at Rs.3,04,28,942/-. Thereafter, after considering the assessee’s submissions and on the request of assessee, the matter was referred to DVO, who valued the property at Rs.4,05,59,000/-. The AO observed that Section 50C(3) of the Act provides that where the Fair Market Value determined by the DVO is higher than the valuation or assessment of the property as per the Stamp Valuation Authority, the computation of capital gain is to be done with reference to the value whichever is lower. Accordingly, the AO adopted Rs.3,15,00,000/- as the value of the property for the purpose of computation of capital gain and brought the same to tax.

Aggrieved, the assessee filed an appeal before the CIT(A), who granted partial relief to the assessee by directing the AO to compute the Long Term Capital Gain by allowing the deduction for indexed cost of acquisition, since the AO had admitted the full value of the consideration as Long Term Capital Gain.

Against the said order of the CIT(A), the assessee is in appeal before us by raising the following Grounds:

The Ld.CIT(A) ought to have appreciated that the assessee derives income from consultancy business.

The Ld.CIT(A) ought to have annulled the assessment Proceedings on failure to issue notice U/s143(2) within the time limit prescribed under the Income Tax Act, 1961.

The Ld.CIT(A) erred in its order by not adhering to the provisions of Section 143(2) of the Income Tax Act,1961 wherein the law specifically provides that "No Notice shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished"

The Ld.CIT (A) ought to have appreciated that notice issued under section 148 was to be preceded by a sanction duly obtained from Chief Commissioner / Commissioner as per proviso to section 151 (1), whereas such sanction had been obtained only from Additional Commissioner is not as per law and failure of such compliance shall invalidate the issuance of Notice U/s148 and hence ultimately the Assessment Proceedings made U/s147 of the Act shall be liable to be annulled.

As per the ratio laid down by the Honourable Supreme Court of India in the case of National Thermal Power Co. Ltd v. CIT (1998) 229 ITR 383 (SC), the Hon'ble ITAT has jurisdiction to examine the question of law which has been taken before the ITAT for the first time though not taken before the first appellate authority.

The CIT(A) ought to have appreciated the settled position of law that Referring to DVO by an assessing authority without rejecting books of account is not permissible as held by the Hon'ble Supreme Court in the case of Sargam Cinema in 197 Taxman 203 (SC)

The Ld.CIT(A) has erred in confirming the addition without considering the fact that the reference to DVO is improper.

The Ld.CIT(A) ought to have considered that the appellate authority is not binded by the report obtained from DVO and should have independently considered the plea of appellant applying the principles of natural justice”.

The case was taken up for hearing on 13-10-2020 through video conferencing and both the parties were heard.

Since the additional ground of appeal No.11 is a legal ground on the jurisdictional issue, we deem it fit and proper to admit and adjudicate the same.

In reply, Ld.DR has filed a copy of the notice u/s.143(2) of the Act and also the order sheet entries from the assessment record.

After hearing both the parties and considering the material on record, we find from the order sheet entry dt.10-09-2014, that the assessee has filed a letter on 25-11- 2013, requesting that the return filed on 11-07-2008 vide acknowledgment No.1611004041 be treated as the return filed in response to the notice issued u/s.148 of the Act. He has further sought reasons for reopening of assessment u/s.147 of the Act. As the assessee has complied with the notice, by requesting the return filed earlier to be considered as filed in response to notice u/s.148A of the Act, the copy of the reasons recorded were communicated to the assessee on 10-09-2014. Thus, as seen from the copy of the notice u/s.143(2) of the Act, it was issued on 20-11-2014. It is therefore to be examined if it was issued within the prescribed time.

In the result, the appeal of assessee is treated as partly allowed.