SUDALAIMANI PALANIVELRAJAN,MANNARGUDI vs. DCIT CIRCLE-2, THANJAVUR

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ITA 482/CHNY/2020Status: DisposedITAT Chennai20 September 2022AY 2014-157 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's explanation regarding the property purchase was not satisfactory. The AO was justified in making an addition based on the difference between the consideration paid and the guideline value.

What were the facts?

The assessee declared total income and agricultural income for AY 2014-15. The assessment was reopened under Section 147 as income chargeable to tax had escaped assessment. During scrutiny, the AO noted a property purchase for Rs. 80,82,900, while the guideline value was lower.

What were the issues?

Whether the reopening of assessment under Section 147 was valid and whether the addition made by the AO on account of property purchase was justified.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGHAND SHRI G. MANJUNATHA

For Respondent: Mr. Chinthapalli Meher Chand, JCIT
Hearing: 20.09.2022Pronounced: 20.09.2022

आदेश /O R D E R आदेश आदेश आदेश

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

1.

This appeal filed by the Assessee is directed against order of the learned Commissioner of Income Tax (Appeals)-1, Trichy in appeal No.ITA No.76/2019- 20/CIT(A)-1, TRY; dated 20.01.2020. The assessment was framed by the Assistant Commissioner of Income Tax, Circle–I(I/C), Thanjavur for the Assessment Year 2014 –

:: 2 :: 2015, u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter “the Act”) vide order dated 25.06.2019.

2.

The brief facts of the case are that the Assessee/Appellant had filed his return of income for the Assessment Year 2014 – 2015 declaring a total income of Rs.21,72,210/- and agricultural income of Rs.2,74,250/- on 15.04.2015. The assessment has been subsequently reopened u/s.147 of the Act for the reasons recorded as per which the income chargeable to tax has escaped assessment. The case has been selected for scrutiny and during the course of the assessment proceedings, the Assessing Officer had noticed that the Assessee had purchased a property vide Document No.5883/2013; dated 11.10.2013 for a consideration of Rs.80,82,900/-, whereas the guideline value of the property fixed by the Sub- Registrars' Office [SRO] was at Rs.2,83,00,000/-.

Therefore, the Assessee was called upon to explain as to why the difference between the consideration paid and the guideline value of the property amounting to Rs.2,02,17,100/- has not been added u/s.50C of the Act.

3.

In response to the same, the Assessee had submitted that the matter may be referred to the Departmental Valuation Officer [DVO] for determining the correct market value of the property. The Assessing Officer referred the valuation of the property to the DVO.

However, since the valuation report was not forthcoming, even when the assessment proceedings was getting time barred, the Assessing Officer completed the assessment u/s.143(3) r.w.s.147 of the Act on 25.06.2019 and made an addition of Rs.2,02,17,100/- as per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961.

4.

Aggrieved, the Assessee carried the matter before the first Appellate Authority but could not succeed, as the learned Commissioner of Income Tax (Appeals) for the reasons stated in his order dated 20.01.2020 sustained the addition made by the Assessing Officer and dismissed the appeal filed by the Assessee.

5.

Aggrieved by the order of the learned Commissioner of Income Tax (Appeals), the Assessee is now before us.

:: 4 :: The learned Authorized Representative for the Assessee submitted that the learned Assessing Officer as well as the learned Commissioner of Income Tax (Appeals) had erred in sustaining the addition made towards the difference between the consideration paid for the purchase of the property and the guideline value fixed by the SRO u/s.56(2)(vii)(b) of the Income Tax Act, 1961, even though, the matter has been referred to the DVO for determining the correct value of the property. However, the DVO has not furnished the valuation report and the Assessing Officer had completed the assessment.

Therefore, the appeal is to be set aside and the matter be remitted back to the file of the Assessing Officer to redo the assessment after considering the valuation of the property determined by the DVO.

6.

The learned Departmental Representative, Shri.

Chinthapalli Meher Chand, JCIT supporting the order of the learned Commissioner of Income Tax (Appeals) submitted that, as per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961, the difference between the :: 5 :: SRO should be assessed as income of the Assessee and thus, there is no error for the reasons given by the Assessing Officer in making the addition and therefore the order should be upheld.

7.

We have heard both the parties, perused the materials available on record and had gone through the orders of authorities below. As per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961, if there is a difference between the consideration paid for purchase of a property and the guideline value fixed by the SRO, then the difference should be assessed as income of the Assessee.

8.

In this case, there is no dispute with regard to the fact that there is a difference in the consideration paid for purchase of a property and the guideline value fixed by the SRO. The Assessee claims to have paid a sum of Rs.80,82,900/- as consideration; whereas the SRO had fixed the guideline value of the property at :: 6 :: Rs.2,83,00,000/-. Thus, there is a difference of Rs.2,02,17,100/-. The contention of the Assessee was that the guideline value fixed by the SRO is not the fair market value of the property and thus, had requested the Assessing Officer to refer the valuation of the property to the DVO. The Assessing Officer as per the request of the Assessee referred the valuation of the property to the DVO.

However, the DVO had not submitted the report when the assessment was getting time barred and therefore, the Assessing Officer completed the assessment without waiting for the DVO’s report and had made the additions towards the differential amount as per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961.

We find that once the Assessing Officer has referred the valuation of the property to the DVO, then he ought to have waited for the DVO’s report to ascertain the fair market value of the property for the purchase as per the provisions of Section 56(2)(vii)(b) of the Income Tax Act, 1961. Since the Assessing Officer has made the additions without waiting for the DVO’s report, we are of the :: 7 :: considered view that the issue needs to be remitted back to the file of the Assessing Officer to reconsider the issue afresh after taking into account the report submitted by the DVO. Hence, we set aside the issue and remit back the matter back to the file of the Assessing Officer and direct the Assessing Officer to redo the assessment and consider the issue in accordance with law after taking into account the valuation report submitted by the DVO.

9.

In the result, the appeal of the Assessee in I.T.A.

No.482/Chny/2020 is treated as allowed for statistical purposes.

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