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Facts
The assessee sold an inherited immovable property and declared Long Term Capital Gains (LTCG). The Assessing Officer (AO), after referring the matter to the District Valuation Officer (DVO) under Section 142A of the Act for determining the cost of acquisition, made a substantial addition to the LTCG.
Held
The Tribunal held that the reference to the DVO under Section 142A was not appropriate for determining capital gains and that the assessment order was barred by limitation. The Tribunal quashed the assessment order, following a precedent from the ITAT Ahmedabad Bench.
Key Issues
Whether the reference made to the Valuation Officer under Section 142A for determining capital gains was valid and whether the assessment order was passed within the period of limitation prescribed under Section 153(1) of the Act.
Sections Cited
142A, 143(2), 143(3), 153(1), 144B, 48, 69, 69A, 69B
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
O R D E R
Per Rajesh Kumar, AM:
This is an appeal filed by the assesseeagainst the order passed by the ld. National Faceless Appeal Centre (NFAC), Delhi, dated 15.07.2025for the assessment year2022-2023.
At the time of hearing, the assessee raised additional ground which is extracted below: "2A. That on the facts and circumstances of the case, the order of assessment passed on 02/07/2024 is barred by limitation as being one passed beyond the period of limitation contemplated u/s.153(1) of the Act. 5A. The impugned addition made to the computation of Long Term Capital Gain and total income based on the report of the DVO based on a reference made u/s.142A of the Act, is unsustainable because, power to make a reference u/s.142A of the Act envisages estimation of the value of any investment referred to in Section 69, 69A or 69B of the Act, as its object. As a corollary, the alleged overvaluation, in the value of investment could not be verified under the ambit of Section 142A of the Act where the subject matter of examination under section 69, 69A or 69B of the Act is understatement in value of investments acquired during the year. Notably, the AO herein seeks to impugn the overvaluation (in contrast to undervaluation) in the cost of property acquired. Such act of challenging alleged overvaluation is apparently outside the confines of Section 69, 69A or 69B of the Act. Thus, the reference under section 142A of the Act could not have been made for finding out the extent of alleged overstatement in the value of investment. The reference under section 142A of the Act to the DVO requires to be quashed on this ground alone. Therefore the impugned addition made on the basis of report of DVO is also liable to be deleted.
After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional ground of appeal
challenging the jurisdiction of the AO to make addition. In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts are required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The case of the assessee is squarely coverd by the decisions of the Apex court in the case of i) Jute Corporation of India Ltd. Vs CIT in 187 ITR 688 , ii) National Thermal Power Co. Ltd v. CIT [1998] 229 ITR 383 and also by the decision of Hon’ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. [2017] 396 ITR 677 (Cal). Therefore we are inclined to admit the same for adjudication.
4. The issue raised in Ground No.1 is against the statutory notice issued for scrutiny as well as the order passed by the AO is without jurisdiction and, hence, the entire assessment is liable to be quashed.
5. Facts in brief are that the assessee is an individual and has filed the return of income for the AY2022-23on 07.09.2022declaring a total income The assessee has reported substantial amount under the head 'Improvement Cost' under Schedule CG of ITR. Here, the genuineness of such claim may be verified. In order to verify the genuineness of such claim, notices u/s 143(2) & 142(1) of the Act were issued.
6. In this case, statutory notices in response to which the assessee has furnished his reply. On perusal of the details furnished, the AO noticed that the assessee had sold an inherited immovable property (Land) to Shri Vijay Chopra & Smt. Rajni Chopra for Rs.4,50,00,000/- on 09.03.2022. The assessee had absolute ownership of 33.33% in that property. The assessee had shown cost of acquisition as on 01.04.2001 as Rs.1,39,70,697/- through the Registered Valuer and worked out Long Term Capital Gains (LTCG) at Rs.7,12,887/-. During the course of assessment proceedings, the assessee furnished copy of Sale Deed, Copy of Valuation Report, working of Capital Gain, etc. In order to determine the accurate cost of acquisition as on 01.04.2001, the AO referred this matter to District Valuation Officer u/s 142A of the IT Act. The DVO determined the cost of acquisition as Rs.20,86,000/- as per guidelines for valuation of immovable property for 2009. The report of the DVO was forwarded to the assessee and reply was called for. After considering the replies of the assessee, the AO determined LTCG at Rs.3,83,87,780/- as against the LTCG declared by the assessee of Rs.7,12,887/-. Accordingly, the difference of Rs.3,76,74,893/- was brought to tax by the AO as under-reported income.
7. Before the ld.CIT(A), the assessee raised the grounds on merit as well as legal ground challenging the validity of the notice issued u/s 143(2) of the Act issued by the AO on the ground that the nature of scrutiny (limited or complete) was not specified as required by CBDT Instruction No. 225/157/2017 dated 23.06.2017. However, the ld.CIT(A) confirmed the addition made by the AO and also rejected the legal ground raised by the assessee holding that the CBDT instructions are administrative in nature and do not override the statutory validity of notices issued under the Act. The notice dated 01.06.2023, though not explicitly stating "limited" or "complete" scrutiny, does not vitiate the assessment proceedings unless prejudice is demonstrated. The AO had jurisdiction and the notice was issued within prescribed time. Further the ld. CIT(A) observed that this ground was not raised before the AO and has no bearing on the merits of the assessment. In view of the same, the additional ground is dismissed. Thus, the ld.CIT(A) held that the assessment framed by the Assessing Officer under section 143(3) r.w.s. 144B is valid both on jurisdictional and substantive grounds. The addition of Rs. 3,76,74,893/- under LTCG is sustained.
8. Now, the assessee is in further appeal before the Tribunal against the order of the ld. CIT(A).
9. Ld. AR before us submitted that the assessment framed by the AO is hopelessly barred by limitation in terms of Section 153(1) of the Act. The ld.AR while taking us to the said Section submitted that Section 153 of the Act provides that no order of assessment shall be made under Section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable. Then the ld. AR referred to the 4th proviso to section 153 of the Act which provides that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2022, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted. In terms of 4th proviso to Section 153(1) of the Act, the limitation period for passing the order of assessment would be 31.03.2024 i.e. 12 months from the end of the relevant A.Y.2022-2023. Ld.AR thereafter referred to clause (v) to Explanation 1 to Section 153 of the Act which provides that the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer. Ld. AR submitted that but for the extension of period of limitation under clause (v) to Explanation-1, the order of assessment dated 02.07.2024 is barred by limitation. The NFAC cannot take the benefit of the extended period under clause (v) to Explanation-1 to Section 153 of the Act because when a reference u/s.142A of the Act is made for determination of FMV of immovable property then the extended time limit laid down in clause (v) in Explanation-1 to Section 153 of the Act cannot be taken by the NFAC as laid down by the Ahmedabad Bench of the Tribunal in the case of Smt.
Rashidaben Taher Morawala Badri Mohalla, passed in 1353/Ahd/2019, dated 19.10.2022, wherein in similar circumstances it was held that assessment so made was barred by imitation. Ld. AR drew our attention to the relevant observation of the Tribunal which reads as under :- "The assessee sold immovable property on 23.01.2015 in the form of office premises bearing No. 3,4,5,6,7,13 & 14, in building wing "CBI" at Wonder City situated at Katran village, Taluka-Haveli, Pune-District and also adjacent Terrance portion fora consideration of Rs. 1,50,00,000/-. On 09/11/2017, the A.O. referred the transaction to the Valuation Officer, Solapur u/s. 142A to ascertain the property value as on the date of sale. The stamp value of the property as on the date of sale was Rs. 2,21,40,900/-. The Valuation Officer submitted his report on14/08/2018 valued the Fair Market Value of the property at Rs. 1,80,39,000/-. Heard rival parties and perused the materials available on record including the Paper Book and Case Laws cited by the assessee counsel. Section 142A of the 1.T. Act titled as 'Estimate by Valuation Officer in certain cases'. This section prescribes that for the purpose for making an assessment, where an estimate of the value of any investment referred to in sections 69, 69A, 69B are required to be made, the A.O. may require the Valuation Officer to make an estimate of such value and report the same to A.O. Thus the scope of section 142A is limited in its span only to determine the value of investment in respect of certain assets, such as, bullion, jewellery, valuable articles etc. In this section as well there is no power vested with A.O. to seek the help of Valuation Officer in respect of determination of capital gain prescribed undersection 48 of the Act. 6.4. Reading of the above provisions makes it very clear that the Assessing Officer is necessarily to pass the assessment order within the time limit as prescribed under section 153(1) of the Act which is in this case namely 31.12.2017. However the Assessing Officer has wrongly referred the valuation of the immovable property under section 142A of the Act which is not provided under the provisions of the Income Tax Act. However after receipt of the Valuation Report from the DVO, the A.O. passed the assessment order on 28.09.2008 which is clearly barred by limitation which is not sustainable in law. Therefore, the assessment order is hereby invalid in law. Thus the ground no. 1 raised by the assessee is hereby allowed."
Ld. AR submitted that the above decision will squarely apply to the facts of the present case. In this case, admittedly the reference was made by the NFAC u/s.142A of the Act and not u/s.55A of the Act. The AO therefore cannot avail the benefit of time as per Clause (v) of Expin.-1 to Sec. 153 of the Act. Hence, the AO ought to have passed the order of assessment within 12 months from the end of AY 2022-23, i.e., on or before 31/03/2024. The Assessment order was passed on 02/07/2024 and hence it is barred by time. It is clear that the NFAC has presumed that because of a reference u/s.142A of the Act, it could benefit of extended time from the date of making reference to the DVO u/s.142A and till such time such report is received. Therefore, the ld. AR prayed that the Assessment order may be annulled as one passed beyond the period of limitation as laid down in Sec. 153(1) of the Act.
On the other hand, ld.Sr.DR vehemently supported the orders of the authorities below and submitted that the order is not barred by limitation. It was also submitted that the AO had exercised his jurisdiction rightly and the notice was issued within prescribed time. The assessee has also not raised this ground was not raised before the AO and has no bearing on the merits of the assessment. In view of the same, the orders passed by both the authorities below deserve to be upheld.
After hearing the rival contentions of the parties and perusing the material available on record, we find that in terms of 4th proviso to Section 153(1) of the Act, the order was to be passed on or before 31.03.2024 i.e. twelve months from the end of the relevant assessment i.e. AY.2022-23. For the extension of period of limitation under clause (v) to Explanation-1, the order of assessment dated 02.07.2024 is barred by limitation. The