ASHUTOSH AGARWAL,GHAZIABAD vs. ITO, WARD- 1(1), GHAZIABAD

With this appeal, the assessee has challenged the correctness of the order of the Commissioner of Income Tax [Appeals] – Ghaziabad dated 31.08.2017 pertaining to assessment year 2012-13.

The grievance of the assessee reads as under:

Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the Assessing Officer came to know that the assessee has sold property on 24.02.2012 for Rs. 11 lakhs, which has been assessed at Rs. 19.74 lakhs by the said authorities for stamp duty purposes.

Vide query letter dated 14.10.2014, the assessee was required to explain as to why provisions of section 50C of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'] should not be applied and why market value of Rs. 19.74 lakhs should not be taken as full value of consideration. In its reply, the assessee stated in most of the cases, commercial properties value adopted by stamp valuation authorities is generally much higher price than the fair market price. It was explained that the stamp duty value has been taken on the basis of fair rental value in the locality and not on the basis of stamp value applicable for commercial land and building. The assessee asked the Assessing Officer to refer the matter to the Department Valuation Officer [DVO] as per the provisions of section 50C of the Act. The Assessing Officer declined the request of the assessee and completed assessment by taking stamp duty value at Rs. 19.74 lakhs as full value of sale consideration and computed capital gains tax liability accordingly.

The assessee carried the matter before the CIT(A) but without any success.

Before us, the ld. AR vehemently stated that by not following the procedure laid down in section, the Assessing Officer has grossly erred and hence the assessment order deserves to be annulled. In support, the ld. AR strongly relied on the decision of the coordinate bench in the case of M/s Aditya Narain Verma in ITA No. 4166/DEL/2013. The ld. AR further relied on the decision of the Hon'ble Allahabad High Court in the case of Dr Shashi Kant Garg Vs. CIT reported in 285 ITR 158. It is the say of the counsel that such procedural lapses cannot be cured by giving second innings to the department and the only way is to annul the assessment.

Per contra, the ld. DR strongly supported the findings of the Assessing Officer. It is the say of the ld. DR that if the Assessing Officer has not referred the matter to the DVO, he may be directed to do so.

I have given thoughtful consideration to the orders of the authorities below. I have also considered carefully the judicial decisions relied upon by the ld. AR. It is true that during the course of scrutiny assessment proceedings itself the assessee requested the Assessing Officer to refer the matter of valuation to the DVO. It is equally true that the Assessing Officer declined the request. The undisputed fact is that the Assessing Officer computed the capital gains tax liability by adopting the assessed value as full value of consideration which is in line with the provisions of section 50C of the Act. No doubt, the provision also provides for reference to the DVO if the assessee asks so. In my considered opinion, by not referring the matter to the DVO on the request of the assessee, the Assessing Officer may have erred. But such error cannot be so fatal so as to make the assessment annulled. In my considered view, such errors can be cured by setting aside the matter with a direction to refer the issue of valuation to the DVO and then decide the issue afresh.

I find that the counsel has heavily relied upon the decision of the coordinate bench in the case of Aditya Narain [supra]. I find that the reason for challenging the assessed value by the stamp duty authority was that the land was subject to following distressing circumstances:

I further find that in that case, the assessee has seriously disputed the value adopted for the purpose of stamp valuation which does not at all reflect the fair market value of the impugned land in view of several distressing circumstances mentioned hereinabove. In spite of the glaring circumstances, the Assessing Officer did not consider it fit to refer the matter to the DVO and, therefore, assessment was annulled.

The facts of the case are clearly distinguishable, in as much as, in the case in hand, no disturbing circumstances have been brought on record not is the case of the assessee that the impugned sale was distressed sale. Therefore, assessment cannot be annulled merely because the Assessing Officer did not refer the matter to the DVO, which defect can be easily cured by setting aside the issue to the file of the Assessing Officer.

Similarly, the judgment of the Hon'ble High Court of Allahabad in the case of Shashi Kant Garg [supra] is on a different context for which the Hon'ble High Court held that when the provisions of the Act require any authority to exercise power or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. In my considered view, this judgment of the Hon'ble High Court of Allahabad was totally on a different context and not related to the facts of the case in hand.

The ld. AR has emphatically stated that no second innings should be given to the Assessing Officer which in my considered opinion is not correct on the facts of the case in hand. By setting aside the issues to the file of the Assessing Officer with a direction to refer the matter to the DVO does not amount to giving second innings to the Assessing Officer as valuation by the DVO would be binding on the Assessing Officer.

Considering the facts of the case in totality, I deem it fit to restore the matter to the file of the Assessing Officer. The Assessing Officer is directed to refer the issue relating to valuation to the DVO and decide the issue afresh after giving a reasonable and fair opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee in is allowed for statistical purposes.