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Facts
The assessee sold a property for Rs. 7,00,000, while the circle rate was Rs. 44,00,000. The AO reopened the assessment under Section 147 and issued a notice under Section 148. Despite no compliance, further notices were issued, and the assessee's representative attended, providing the sale deed. The AO referred the matter to the Valuation Officer, who could not provide a report. The AO then adopted the circle rate for capital gains computation.
Held
The Tribunal found contradictions in the Assessing Officer's order regarding the acceptance of the assessee's declared value and the subsequent computation of capital gains based on stamp valuation. The Tribunal also noted it was unclear why the fair market value was referred to the DVO. Consequently, the Tribunal set aside the impugned order and restored the assessment for denovo assessment.
Key Issues
Whether the addition made by the AO under Section 50C based on circle rate was justified without a proper valuation report, and whether the assessment proceedings were valid given the notice issued under Section 143(2) on the same day as the return filing.
Sections Cited
147, 148, 142(1), 50C, 143(2), 48
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI NIKHIL CHOUDHARY
PER KUL BHARAT, VICE PRESIDENT.:
By way of this appeal, the assessee has challenged the order of the Learned Commissioner of Income-tax (Appeals), dated 17.07.2014, pertaining to the assessment year 2009-10. The assessee has raised the following grounds of appeal: -
1. That the Learned Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs.19,65,685/- under the head Long Term Capital Gains by applying provisions of section 50C of the Income Tax Act, 1961, with total disregard to the facts & circumstances of the case.
2. That the Learned Assessing Officer has erred in assumption of jurisdiction to initiate re-assessment proceedings u/s 148 of the Income Tax Act, 1961, in the case of the assessee.
3. The assessee reserves its right to add, amend, alter or delete any grounds of appeal at the time of hearing.”
1. Because, on the facts and in the circumstances of the case, the impugned orders of assessment as also of the Commissioner of Income Tax (Appeals) are patiently illegal and bad in law since notice u/s 143(2) has been issued on the very same day, assessee filed his return of income. The Hon'ble Court has held that issuance of notice u/s 143(2), on the same day of filing return signifies that notice u/s 143(2) was issued without any application of mind and without examining the return of income and such notice is illegal and non-est in law. The entire proceedings are therefore liable to be set aside and quashed as it is a case synonymous to an assessment without the issuance of jurisdiction notice u/s 143(2).
Heard, the Ld. Representatives of the parties on the additional ground. This ground is on the point of law i.e on the validity of the assessment order in the absence of valid notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”, for short). The ground being legal is admitted herein and shall be disposed of along with other grounds of appeal for the sake of convenience.
The facts giving rise to the present appeal are that the assessment was re-opened u/s 147 of the Act on the basis that the assessee had sold property for a sale consideration of Rs.7,00,000/-. However, the value of the property as per circle rate was Rs.44,00,000/-. The Assessing Officer issued a notice to the assessee u/s 148 of the Act. In response to the statutory notice u/s 148 of the Act, there was no compliance by the assessee. Thereafter, notices u/s 142(1) of the Act was issued to the assessee. In response thereto, Shri Navneet Gaur, Advocate attended the assessment proceedings on behalf of the assessee and filed copy of sale deed. The AO has recorded that the issue qua valuation of properly was referred to the Assistant Valuation Officer for valuing the market value as per Section 50C of the Page 3 of 9 Act. However, the Valuation Officer expressed his inability vide letter dated 28.12.2011 to assess value on account of the assessee’s failure to provide the relevant information. Thus, the AO adopted the value as per circle rate and made the impugned addition, by computing capital gain of Rs.19,65,330/- at the hand of the assessee being owner of half share into the property. Aggrieved by this, the assessee preferred an appeal before the Ld. CIT(A) who sustained the finding of the assessing authority. Now, the assessee is in appeal before this Tribunal.
The assessee has taken multiple grounds against the impugned addition. It is submitted on behalf of the assessee that the assessing authority without giving adequate opportunity to the assessee regarding furnishing valuation report/evidence qua the correct market value proceeded to make the impugned addition. It is further submitted by the Ld. AR that without obtaining correct market value from DVO, the AO could not have assessed the value of property by his own. Hence, he prayed that the impugned addition may be deleted.
On the other hand, the Ld. Departmental Representative (“DR”) opposed the submissions and contended that it was due to negligence of the assessee and he strongly supported the orders of the authorities below. He drew our attention towards finding of assessing authority, to buttress the contention that the AO was justified in adopting the value of property on the basis of circle rate.
Page 4 of 9 7. We have heard the rival submissions and perused the material available on record. First, we shall deal with the legal ground which is raised in the form of additional ground and against legality of assessment framed without giving notice u/s 143(2) of the Act. However, looking to the facts of the case, this ground of the assessee is not sustainable and the decision relied by the assessee are clearly distinguishable on facts of the case. Moreover, it is transpired from the records that a notice u/s 148 of the Act dated 15.10.2010 calling upon the assessee to file his return of income was issued. A notice u/s 143(2) of the Act dated 29.12.2011 along with additional ground is placed on record by the assessee. The notice is purported to have been issued calling upon the assessee to attend the assessment proceedings. It is interesting to note that the said notice dated 29.12.2011 referred to the Income Tax Return filed on 29.12.2011. Ld. Counsel for the assessee strongly urged that the assessment order passed in pursuance of such notice deserves to be quashed. As it is clear case of non application of mind by the assessing authority. Ld. Counsel has relied upon the judgment of the Hon'ble Delhi High Court rendered in the case of Director of Income Tax v/s Society for Worldwide Interbank in of 2010. The facts in the present case are clearly distinguishable. Hence, the judgment of the Hon'ble Delhi High Court in our considered view does not help the assessee. Another aspect which is noted here that undisputedly the assessee has filed acknowledgment of ITR which is placed on record is dated 29.12.2011. We failed to understand as what were the circumstances that made the assessee to file the said return at the fag end of the assessment Page 5 of 9 proceedings. As the noted by the assessing authority that the assessment was likely to be barred by time on 31.12.2011. However, the assessment order is completely silent about the return filed on 29.12.2011 and notice issued u/s 143(2) of the Act on the same date. The supervisory authority of the Assessing Officer would take note of this fact and take remedial steps in accordance with law. The additional ground as taken by the assessee lacks merits. The assessee grossly failed to explain as to why ITR was not filed in response to notice dated 05.10.2010 issued u/s 148 of the Act. The inaction by the assessee, cannot be allowed to be for his advantage. The additional ground is hereby dismissed.
Now coming to the other grounds raised by the assessee in respect of the computation of the capital gain by applying provision of Section 50C of the Act. The contention of the Ld. Counsel for the assessee as recorded elsewhere in this order is that the Ld. CIT(A) as well as the assessing authority grossly failed to obtain valuation report from the DVO as contemplated u/s 50C of the Act. This contention of the assessee is strongly opposed by the Ld. DR, by drawing our attention to the finding of the Assessing Officer that the Assistant Valuation Officer expressed his inability to furnish the valuation report vide letter dated 28.12.2011 in the absence of relevant information. Admittedly, the assessing authority has noted that the assessment was getting barred by time. He, therefore, passed the impugned assessment order and made the addition under challenge. It is also interesting to note that the Assessing Officer Page 6 of 9 in the assessment order itself states that the value declared by the assessee is accepted. For the sake of clarity, the relevant finding of the assessing authority is reproduced as under: - “During this period the assessee has also filed return showing income of Rs.1,41,125/-. Notice u/s 143(2) I.T. Act, 1961 was issued Shri Y.K. Singh (Brother of the assessee) attended and filed copy of purchase deed and sale deed. Assessee has shown improvement value of Rs.1,66,400/-. Looking to the circumstances of the case the value shown by the assessee is being accepted.”
However, the Ld. CIT(A) without verifying the correct value proceeded to sustain the finding of AO. The relevant finding of the Ld. CIT(A) is reproduced as under: - “Decision and reasons therefore, I have carefully considered the written submissions of the AR for the appellant. The provisions of section 50C are as under: Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer: 75a[Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.] (2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.—For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.—For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. It is noticed that the AO has taken the sale consideration value on the basis of value adopted or assessed or assessable by the “stamp valuation authority” for the purpose of payment of stamp duty in respect of transfer: Once the value assessed by the stamp valuation authority is available, the AO cannot refer the valuation to Valuation Officer. In view of availability of valuation assessable by the Stamp Valuation Authority and adoption of such rates for land on this basis by the AO, the AO can’t refer the same for valuation to Valuation Officer. In this back ground of the facts and circumstances, I find no case to disturb the working of LTG by the AO. As such the grounds of appeal
raised by the appellant fails.”
10. Looking to the facts of the present case, we are unable to sustain the finding of the Ld. CIT(A). The finding of the Assessing Page 8 of 9 Officer has contradiction in the assessment order. It is not clear as to why the assessing authority having accepted the value shown by the assessee proceeded to compute capital gain as per the stamp valuation value. Moreover, it is not clear as to why the issue of fair market value was referred to the DVO by the AO. It is therefore, presumed that the assessee had objected for adopting the value as per circle rate. As per provisions of section 50C(3) of the Act, the value assessed by the DVO was required to be adopted by AO. We, therefore, hereby set aside the impugned order of the Ld. CIT(A) and restore the assessment to the file of the assessing authority for making denovo assessment. It is needless to say that the Assessing Officer would give adequate opportunity of being heard to the assessee. The AO would be at liberty to call for a valuation report from the DVO. All the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 30/04/2025.