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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN & SHRI JASON P BOAZ
Briefly stated, the facts of the case are as under:
3.1 The assessee, an individual in business as a contractor, filed his return for Assessment Year 2014-15 on 31.03.2015 declaring total income of Rs.30,61,280/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) and the case was subsequently taken up for scrutiny for this Assessment Year. The assessment was concluded under section 143(3) of the Act vide order dated 27.12.2016 wherein the assessee’s income was determined at
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Rs.81,29,280/-. This was in view of the Assessing Officer (AO) making an addition of Rs.50,68,00/- on re-computation on long term capital gains (LTCG) on sale of property by invoking of the provisions of section 50C of the Act and thereby raising demand of Rs.15,52,840/-.
2.2 Aggrieved by the order of assessment dated 27.12.2016 for Assessment Year 2014-15, the assessee preferred an appeal before the CIT(A)-3, Bangalore, who dismissed the assessee’s ex-parte; on the basis of material on record; without hearing the assessee in the matter.
3.1 The assessee, being aggrieved by the ex-parte order of the IT(A)-3, Bangalore, dated 30.01.2019 for Assessment Year 2014-15, has filed this appeal before the Tribunal wherein he has raised the following grounds:-
The order of the Assessing Officer as well as the Commissioner of Income Tax (Appeals) is against the fact and circumstances of the case and against equity and justice. 2. On the fact and circumstances of the case, the Assessing Officer erred in passing the order u/s 143(3) of the Income Tax Act, 1961 hurriedly which is one month earlier to the last date of the passing the order without waiting for the valuation report from the DVO and adopting the stamp duty valuation as the sale consideration received by the Appellant on the sale of the property. 3. On the fact and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in dismissing the appeal on the ground that the valuation of the property referred to the DVO by the Assessing Officer on his own initiation and not at the request of the Appellant. Hence, the Assessing Officer is right in passing the order without waiting for the DVO report. Such action of the Commissioner of Income Tax (Appeals) is against the principal of administration of law. 4. For these and other reasons which may be adduced at the time of the hearing, the Appellant prays before this Honourable Bench to set aside the order of the Assessing Officer for making fresh assessment after providing due opportunity to the Appellant and also considering the valuation report of the DVO.
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The appellant craves leaves, to add, to alter, to amend and to delete any other grounds at the time of hearing.
3.2 In support of these grounds (supra), the learned AR of the assessee contends that all the facts relevant to the issues of LTCG on sale of property agitated both before the CIT(A) and before us is evident from a perusal of the “statement of facts” filed before the CIT(A), which he selectively and erroneously quoted while dismissing the assessee’s appeal ex-parte. In sum and substance, it is contended by the learned AR that since in view of the assessee’s oral objection to the adoption of stamp duty valuation under section 50C of the Act for computation of LTCG on sale of property, the AO, after having made the reference to he Departmental Valuation Cell under section 50C(2) of the Act for valuation of the said property vide letter No.ACIT C03(2)(1)/16-17/105 dated 13.12.2016, ought to have waited for the DVO’s Report; but did not do so. It is submitted that the AO proceeded to conclude the order of assessment hurriedly, two weeks later, on 27.12.2016; without waiting for the DVO’s report in the matter which is in violation of the provisions of section 50C(2) of the Act. It is prayed that in these circumstances, as narrated above, the erroneous orders of the CIT(A) and AO which are unsustainable both on facts and in law be set aside and the matter be restored to the file of the AO for denovo examination and computation of the LTCG in accordance with law after taking into account the DVO’s report in the matter. In support of assessee’s contentions, reliance was placed on the decision of the Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT (2015) 372 ITR 83 (Cal).
3.3 Per contra, the learned DR for Revenue supported the orders of the authorities below.
3.4.1 We have considered the rival submissions; perused the orders of the authorities below and the material on record. From an appraisal of the records
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before us, it is seen that the assessee sold a property at Site No.11/15-490 vide Khata No.504 situated at Jattipalya Village, Kengeri Hobli, Bangalore South Taluk vide sale deed dated 26.06.2013 for sale consideration of Rs.80 lakhs and computed LTCG thereon at Rs.2,94,164/-. In the course of assessment proceedings, the AO noticed that stamp duty was paid by the purchaser as per stamp authorities’ valuation of the property at Rs.1,30,68,000/-; while the assessee had only offered Rs.80 lakhs as sale consideration in the sale agreement. The AO states that in view of the above, the provisions of section 50C of the Act were invoked taking Rs.1,30,68,000/- as the sale consideration and the LTCG was re-computed at Rs.50,68,000/-.
3.4.2 In the ‘statement of facts’ filed by the assessee, in its appeal before the CIT(A) and which the CIT(A) purportedly utilized to dispose of the assessee’s appeal ex-parte for non-prosecution, the assessee has submitted as under:-
“Since the market value mentioned in the sale deed was not the actual consideration, the appellant objected to the adoption of market value for capital gains purposes during the scrutiny proceedings before the Assessing Officer, and insisted upon not taking the deemed sale consideration as per Section 50C. By virtue of the power vested in him under section .1.42A of the Income tax Act, the Assessing Officer referred the matter to the Departmental Valuation Cell vide his letter • No. ACIT C- 3(2)(1)/16-17/105 dated: 13.12.2016. Pursuant to such a reference, the Valuation Officer vide his letter No. VO (B)/CG/680/2016-17/346 dated: 16.12.2016 called for various particulars for the purpose of making the valuation. He had fixed the date as 2.1.2017 as the date for compliance. Numbers of details were called for. The appellant was in the process of gathering particulars for compliance. However, to his utter shock and surprise, he received the order of assessment itself dated: 27,12.2016, much before the date fixed by the Valuation Officer. The reason for completion of assessment in such haste is not discernible from the assessment order. According to Explanation 1 to Section 153, in computing the period of
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limitation, 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 shall be excluded. According to sub-section (6) of section 142A, the Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be of Section 142A, to the Assessing Officer and the assessee, within a period of six months from the end of the month in Which a reference is made under sub-section (1) of section 142A. The Valuation Officer having got a letter 13.12.2016 from the Assessing Officer had time up to 30.6.2017 to send the report. The period of six months odd taken by the Valuation Officer could have been excluded for the purpose of completion of assessment. The Assessing Officer, on the contrary, rushed through the assessment on 27.12.2016 without waiting for the valuation report itself. He has fixed the value of the property at Rs. 1,30,68,000/- for the purpose of computation of capital gains. After deducting the cost of acquisition etc., he has arrived at a difference of Rs. 50,68,000/-and added the same to the. income returned. The order of assessment is bad in law, in as much as, the Assessing Officer has not adopted the value as per Valuation Officer, after having made a reference to him. The appellant did not have fair opportunity to furnish the particulars to the Valuation Officer, study his proposal and obtain a final Valuation Report. The order of the Assessing Officer is, therefore, opposed to principles of natural justice.
3.4.3 In the impugned order the CIT(A) has dismissed the assessee’s appeal holding as under at para 4.7 of the impugned order:-
“4.7 The claim of the appellant during appellate proceedings (as in the statement afflicts) that he had made a request to the AO to refer the matter to Valuation Officer is without any basis as neither any such documents have been produced by the appellant during appellate proceedings nor there are any such documents on the assessment
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records which support the claim of the appellant. el The order sheet notings available on the assessment records also do not show that any such claim was ever made by the appellant before the AO. So the contention of the appellant that the AO should have waited for the valuation report is without any merit. In the case of Amhattur Clothing Company Limited vs ACIT, 2010 326 IT1? 245 (Madras), the High Court held that the AO is bound to follow the mandate of law and if the assessee has not availed the opportunity as provided under Section 50C of the Act, there was no option available with the AO. Considering above the grounds of appeal 5 to 7 of the appellant are dismissed.”
3.4.4 We are inclined to accept that there appears to be merit in the averments of the learned AR that; it is because the assessee had orally objected to the AO’s proposal to invoke the provisions of section 50C of the Act; to substitute the sale consideration of Rs. 80 lakhs mentioned in the sale deed with the value as per stamp valuation authorities of Rs.1,30,68,000/- for computing the LTCG on sale of the aforesaid property; that the AO referred the matter to the DVO for valuation of the property vide letter dated 13.02.2016. Nowhere in the relevant provisions of the Act has it been laid down that the assessee has to put forth a request in writing to the AO for making a reference to the DVO. In our view, the AO, after having made the reference to the DVO; ostensibly on the assessee’s objections to the AO’s proposal invoking the provisions of section 50C of the Act; the AO ought to have completed the assessment in accordance with the valuation report rendered by the DVO.
3.4.5 The CIT(A)’s view is that since the assessee did not make a written request to the AO for reference for valuation of the said property and therefore has not availed the opportunity under section 50C of the Act, the AO had no option but to proceed to apply provision of section 50C of the Act and in this regard placed reliance on the decision of the Hon’ble Madras High Court in the case of Ambattur Clothing Co. Ltd., Vs. ACIT (2010) 326 ITR 245 (Madras). The CIT(A)’s attempt
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to buttress this claim was in his observation that the AO’s reference to the DVO was made suo-moto and invalid as the AO exceeded his jurisdiction.
3.4.6 Per contra, the learned AR has placed reliance on the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT reported in (2015) 372 ITR 83 (Cal). On a perusal thereof, we find that the Hon’ble Court; after detailed consideration of the provisions of section 50C of the Act; has held that the valuation by the DVO, contemplated under section 50C of the Act, is required to give fair treatment to the tax-payer and avoid the miscarriage of justice as the Legislature did not intend that the capital gains should be fixed merely on the basis of the valuation to be made by the District Sub-Registrar for the purpose of stamp duty. There is no reason why the machinery provided by Legislature should not be used and the benefit thereof refused, even in a case where no prayer has been made by the assessee, who may not have been properly instructed. Since the AO, discharging a quasi-judicial function, has the bounden duty to act fairly; he should in all fairness make a reference to the DVO to have the valuation of the said property contemplated under section 50C of the Act. In this regard, the Hon’ble Calcutta High Court finally at paras 9 to 11 thereof has held as under:-
………………….We are of the opinion that the valuation by the Departmental Valuation Officer, contemplated under section 50C is required to avoid miscarriage of justice. The Legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub- Registrar for the purpose of stamp duty. The Legislature has taken care to provide adequate machinery to give a fair treatment to the citizen / taxpayer. There is no reason why the machinery provided by the Legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the Assessing Officer, discharging a quasi-judicial function, has
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the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.
10 For the aforesaid reasons, the order under challenge is set aside.
The impugned order including orders passed by the Commissioner of Income-tax (Appeals) and the Assessing Officer are all set aside. The matter is remanded to the Assessing Officer. He shall refer the matter to the Departmental Valuation Officer in accordance with law. After such valuation is made, the assessment shall be made de novo in accordance with law.”
We must observe that in the case on hand, the circumstances are even more acute as the AO who had admittedly made a reference to the DVO vide letter No.ACIT C-3(2)(1)/16-17/105 dated 13.12.2016, strangely did not wait for the DVO’s valuation report and hurriedly proceeded to pass the impugned order of assessment on 27.12.2016; just 14 days later; when the DVO had already initiated valuation proceedings by calling for details to be filed by the assessee on 02.01.2017 and had time to submit his Valuation Report upto 30.06.2017.
3.4.7 We now have slightly contrasting judicial pronouncements on the issue before us; wherein Revenue has relied on the Hon’ble Madras High Court in the case of Ambattaur Clothing Co. Ltd., (2010) 326 ITR 235 (Mad) and the learned AR of the assessee has placed reliance on the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT (2015) 372 ITR 83 (Cal). In our view, in the circumstances that prevail on the issue before us, the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) has laid down the principle that the Rule of judicial precedence demands that if there are judgments in favour of the assessee and against the assessee, then the view favourable to the assessee should be adopted. Respectfully, following the ratio of
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the aforesaid decision of the Hon’ble Apex Court in Vegetable Products Ltd., (supra) and from we drew support, we hold that the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT (2015) 372 ITR 83 (Cal) is to be followed and applied and do so. In this view of the matter, the orders passed by the authorities below i.e., CIT(A) and AO are set aside and we restore the matter of computation of LTCG on sale of the said property by the assessee to the file of the AO. The AO shall obtain the DVO’s Valuation Report, as called for by him in his reference dated 13.12.2016 , and after such valuation is made by the DVO, the computation of LTCG shall be made on this issue, de novo in accordance with law and after affording the assessee adequate opportunity of being heard in the matter by both the DVO for valuation proceedings and the AO and to file details required which shall be duly considered by the DVO / AO before deciding the issue. We hold and direct accordingly. Consequently, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the assessee’s appeal for Assessment Year 2014-15 is allowed for statistical purposes.
Order pronounced in the open court on this 14th day of August, 2019.
Sd/- Sd/- Sd/- (N. V. VASUDEVAN) (JASON P BOAZ) Vice President Accountant Member Bangalore. Dated: 14th August, 2019. /NS/*
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Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.