DHANUSHKODI HARIDEERTHAM,PUDUKOTTAI vs. ITO, INTL TAXNL WARD 2(1), CHENNAI

The ld. AR Shri N.V. Krishnan, Advocate drew our attention to ground No. 6 and argued that the impugned assessment is not maintainable for non-mentioning of DIN as mandated by CBDT Circular No. 19 of 2019. Further, he referred to page 36 of paper book and argued that the notice under section 142(1) of the Act issued by the Assessing Officer contains no DIN and the assessment made thereon is illegal and bad in law.

The ld. DR Shri R. Clement Ramesh Kumar, CIT referred to page 35 of the paper book and argued vehemently that DIN is very much issued for the notice under section 142(1) of the Act. After considering the submissions of the ld. AR and the ld. DR and on perusal of page 35 & 36 of the paper book, we note that DIN is mentioned in the notice under section 142(1) of the Act and it is clear from page 35 of the paper book. Therefore, ground No. 6 raised by the assessee is dismissed.

Ground No. 1 raised by the assessee is general in nature and requires no adjudication.

Ground No. 2 raised by the assessee, it was submitted that there is no relevancy and requested to dismiss the same as not pressed.

Ground No. 3 to 8 raised by the assessee in challenging the action of the Assessing Officer in initiating reassessment proceedings in the facts and circumstances of the case.

Brief facts relating to the case are that the assessee is a non- resident, engaged in the business of running manpower agency. The assessee filed the return of income admitting total income of ₹.2,30,000/- and the Assessing Officer accepted the same by completing the scrutiny assessment under section 143(3) of the Act vide order dated 28.07.2016. As the matter stood thus, the Revenue audit party raised objection regarding incorrect classification and computation of capital gain, in pursuance of the same, notice under section 148 of the Act was issued on 19.04.2021. The assessee filed the return of income for AY 2014-15 on 13.10.2021. Since, the said case was reopened during the period beginning on 01.04.2021 and ending with 30.06.2021, within the time extended by the taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and various notifications issued there under, in accordance with the Board’s instruction No. 01/2022 dated 11.05.2022 on the implementation of the judgement of the Hon’ble Supreme Court dated 04.05.2022 [2022 SCC Online SC 543 (Union of India v. Ashish Agarwal)], the assessee was provided with the information and material relied upon for issuance of extended reassessment notice with a request to furnish a reply on or before 15.06.2022 as to why a notice under section 148 of the Act should not be issued on the basis of information available on record. After considering the submission of the assessee, the case was reopened by issuing notice under section 148 of the Act dated 28.07.2022 after passing an order under clause (d) of section 148A of the Act dated 28.07.2022.

The ld. AR Shri N.V. Krishnan, Advocate agitated the reopening of assessment under section 147 of the Act and submits that the notice issued under section 148 of the Act dated 31.07.2022 is barred by limitation under section 149 of the Act. He further submits that the decision of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal (supra) has no application to the facts of the assessee’s case. He argued that initiating reassessment proceedings, without fulfilling the precondition of possessing the information contemplated in Explanation 1 to section 148 of the Act as well as under section 149(1)(b) of the Act, is bad in law and prayed to quash the reassessment proceedings.

The ld. DR Shri R. Clement Ramesh Kumar, CIT submits that as per post amendment to section 147 to 151 of the Income Tax Act by Finance Act, 2021, the Assessing Officer issued notice under section 148 of the Act dated 19.04.2021 proposing for reopening assessment and required the assessee to file the return for AY 2014-15. The ld. DR drew our attention to pages 27 to 35 of the paper book and submits that as per amended provisions of section 148A(b) of the Act and in consequence to the decision of the Hon’ble Supreme Court (supra), the Assessing Officer, vide his letter dated 01.06.2022, provided information and material relied upon for issuance of extended reassessment notice under section 148 of the Act dated 19.04.2021 for AY 2014-15 requiring the assessee to furnish reply and after considering the reply of the assessee, passed order under clause (d) of section 148A of the Act dated 28.07.2022 and also issued intimation letter as well as notice under section 148 of the Act dated 28.07.2022. The ld. DR vehemently argued that by following due procedure as per amended provisions and as per directions contained in the decision of the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal (supra), the Assessing Officer validly initiated the reassessment proceedings and completed the assessment under section 147 r.w.s. 144C(13) of the Act dated 22.12.2023 by passing draft assessment order under section 144C(1) of the Act dated 26.03.2023 and pleaded to confirm the reassessment order passed by the Assessing Officer.

Heard both the parties and perused the material available on record. We note that in order to bring to tax the income chargeable to tax has escaped assessment within the meaning of section 147 of the Act; the Legislature amended the provisions of section 147 to 151 of the Act by Finance Act, 2021. As per clause (b) to sub-section (1) of section 149 of the Act, the time limit for issuing notice under section 148 of the Act is three years, but not more than ten years. We find that as per page 11 of the paper book, the Assessing Officer issued notice under section 148 of the Act dated 19.04.2021, whereas, on or after 01.04.2021, the Assessing Officer was required to issue notice under section 148A of the Act. We note that the reassessment notice issued on or after 01.04.2021 under unamended section 148 of the Act, the Hon’ble Supreme Court in the case of Union of India v. Ashish Agarwal (supra) held that the such notice should not be set aside, rather deemed to have been issued under substituted section 148A of the Act. Thus, the prayer of the assessee that the notice issued under section 148 of the Act is barred by limitation under section 149 of the Act stands ruled out.

Upon perusal of the letter dated 01.06.2022 issued by the Assessing Officer and thereupon reply of the assessee, order passed under clause (d) of section 148A of the Act and notice dated 28.07.2022, we find that the Assessing Officer has legally initiated the reassessment proceedings as per amended provisions of section 147 of the Act and completed the assessment under section 147 r.w.s. 144C(13) of the Act and the same stands confirmed. Thus, Grounds No. 3 to 8 raised by the assessee are dismissed.

Ground 9 raised by the assessee in challenging the action of the Assessing Officer in making addition of ₹.1,18,85,600/- under section 56(2)(vii) of the Act in the given facts and circumstances of the case.

A show cause notice was issued why the difference of ₹.1,18,85,600/- between guideline value as residential type-1 and market value for the property purchased as dry land should not be chargeable to tax. The assessee submitted his response, which is reflected at para 7 of the draft assessment order, whereas, the Assessing Officer held the same is not acceptable and proceeded to treat the same as income from other sources on account of the difference of value between the residential type-1 and dry land. The DRP upheld the view of the Income Tax Officer [International Taxation]. The Assessing Officer, in accordance with the direction of the DRP, passed final assessment order under section 147 r.w.s. 144C(13) of the Act. Aggrieved by the same, the assessee is in appeal before us.

The ld. AR Shri N.v. Krishnan, Advocate submits that the Assessing Officer grossly erred in abdicating his power in not considering the fundamental facts as per Explanation (f) of section 56(2)(vii) of the Act viz., stamp duty value means, the value adopted by the Registrar. He argued that the stamp duty value is to be accepted as value for the purpose of section 56(2)(vii) of the Act for determining the income under section 56(2) of the Act. He argued that the assessment made thereon is illegal and unsustainable in law. Further, he submits that the Assessing Officer failed to consider the question of adopting sq. ft. rate is not applicable for undeveloped barren land and the rate fixed by the Registrar is to be accepted. The ld. AR submits that the Assessing Officer erred and ignored the basic facts of stamp paper value adopted by the Registrar is the market value and the purchase document of the assessee is a conclusive evidence for the same. He submits that the Assessing Officer grossly erred in valuing the transaction and the DRP in confirming the proposed addition in the draft assessment order on account of difference between the market value of dry land and residential type-1 and prayed to allow ground No. 9 raised by the assessee.

The ld. DR Shri R. Clement Ramesh Kumar, CIT drew out attention to DRP order and submits that the panel, during the course of proceedings, directed the Assessing Officer to cause enquiry with the Sub-Registrar officer to determine the correct value as well as to obtain the details about the subjected land from concerned authorities. The Assessing Officer gathered the information by issuing notice under section 133(6) of the Act and drew our attention to para 2.3 of the DRP order. The ld. DR submits that the SRO, Joint 2, Chengalpattu stated that as per guideline value for Survey Nos. 132/7A, 132/7B are residential type 1 land and he determined at sq. ft. category. He submits that 1 sq. ft. is valued at ₹.600/- and the difference determined by the Assessing Officer is correct. Further, the Tahsildar, Chengalpattu Taluk also stated that the subjected land was vacant land and duly fenced with hollow bricks, surrounded by house site layouts. Further, the said land was not used as agricultural land. The ld. DR vehemently contended that since the subjected land is surrounded by residential layouts and the value is to be determined at sq. ft. category only and also argued that the report of the Tahsildar clearly shows that the subjected land is a non-agricultural land.

The ld. DR further submitted that the assessee by mentioning wrongly the nature of the property, paid less stamp duty and vehemently argued that the order of the Assessing Officer is correct in making the addition on account of difference between the value of agricultural land and residential type-1, prayed to dismiss ground No. 9 raised by the assessee.

Heard both the parties and perused the material available on record. The ld. AR filed copy of sale deed No. 12480/2013 dated 22.10.2013 with English translation. On perusal of the same, we note that the assessee purchased 1.4 acre of land in No. 51, Vallancheri Village for a consideration of ₹.2,50,00,000/-, which is evident from page 5 of the sale deed. The market value of the said property is shown as ₹.2,61,60,000/-, which is evident from para 13 of the sale deed. On plain reading of page 12 of the said sale deed, the nature of the land is declared as Punjai land i.e., agricultural land. Accordingly, the stamp duty and registration fee were determined based on the said declaration as agricultural land, but not as residential type-1 land. The assessee also paid stamp duty and registration fee as determined by the Sub-Registrar. The Sub-Registrar accepted stamp duty and registration fee as paid by the assessee and the said sale deed was registered. Therefore, it clearly establishes the view of the Assessing Officer in reopening assessment by impeding the market value of residential type-1 category is not justified and the said stamp duty and registration fee as paid by the assessee on value of the agricultural land is justified. Further, nothing was brought on record by the Assessing Officer that the assessee paid deficit stamp duty or registration fee and the sale deed was withheld by Sub-Registrar for the same, as there is no deficit stamp duty, in our opinion, reopening of assessment by the Assessing Officer basing on the report of the Tahsildar, is not justified to say that the assessee paid less stamp duty and registration fee. Consequently, the addition made by the Assessing Officer is not maintainable.

Further, with regard to the difference of ₹.11,60,000/- [₹.2,61,60,000 – 2,50,00,000] between sale consideration and market value, as discussed above, the fact remains admitted that the assessee paid stamp duty and registration fee basing on the value determined by the Sub-Registrar at ₹.2,61,60,000/-, but, however, the assessee paid sale consideration only at ₹.2,50,00,000/-. The ld. AR contents that the said difference is less than 5% in variation and thus, no addition is maintainable on such difference also. We note that it is an established principle if the variation between the market value and the sale consideration is less than 5%, no addition is maintainable. We find force in the argument of the ld. AR and addition made by the Assessing Officer is not justified. Thus, the order of the Assessing Officer passed under section 147 r.w.s. 144C(13) of the Act is not justified and accordingly set aside and allowed the ground raised by the assessee.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 26th February, 2025 at Chennai.