SONIA GOEL,NEW DELHI vs. ITO, NEW DELHI

The return of income for A.Y. 2008-09 was filed on 19.03.2009. The case of the assessee was selected for scrutiny and vide assessment order dated 31.12.2010, the assessment was completed. In the assessment order, it was mentioned that the assessment was completed subject to the outcome of the valuation report of the Valuation Officer. Thereafter, the said report was received on 06.04.2011 by the AO in which the value of the property sold by the assessee in the year under consideration was determined at Rs. 3,66J7,300/- as against Rs. 77,50,000/- declared by the assessee. Pursuant thereto, a notice under section 148 of the Act was issued to the assessee on 09.04.2012.

3. During the course of reassessment proceedings, the assessee objected to value determined by the Valuation Officer. The AO dismissed those objections and made an addition of Rs. 48,21,216/- on account of understated capital gain in the hands of the assessee by order dated 10.03.2014.

The assessee is in appeal before us and has raised the following grounds of appeal: 2. 3. “1. That the assessment order as well as CIT Appellate order is against the law and facts of the case. -

Grounds No.1 to 4 pertain to the validity and the jurisdiction of the AO to have issued notice under section 148 of the Act. The Ld. AR submits that the sole reason for issuance of notice of reassessment was the valuation report and that is only an expert opinion. He relied upon the judgment passed by this Tribunal in the case of ACIT Vs. Sh. Saidan Kapoor, dated 13.01.2016. He further submits that all the required documents were submitted during the original proceedings and the material obtained subsequent to the assessment order cannot be used to reopen an assessment. The Ld. DR on the other hand relied upon the order passed by the AO and the CIT(A).

I have heard the rival submissions and perused the record and judgments. The notice under section 148 was issued to the assessee on 09~04.2012. The said notice was objected by the assessee vide letter dated 07.02.2014 stating as under:- “Subject: Challenging of issue of notice u/s.148 of Income Tax Act, 1961 for the Assessment Year 2008-09. That your predecessor referred that matter to district valuation officer for determination of market value of property i.e. bearing no. Plot No.3, Pocket 5 Block-E, Sector 7, rohini, Delhi of which Long Term Capital Gain was shown in return. Your predecessor was not received the valuation repot of DVO up to time of assessment. That my prime objection in respect of issue of notice u/s. 148 read with section 147 for reopening of assessment that, it is necessary action for the revenue of establish that the assesses has failed to disclosed a fact or material truly and correctly and the same had lead to escape assessment if material fact and contempaous records placed before the ITO at the time of original Assessment,

It can be seen from the objections raised by the assessee during the reassessment proceedings that there was no challenge to the validity of the notice with respect to the grounds raised in the present appeal i.e. (i) reopening on the basis of valuation report (ii) material obtained subsequent to assessment order for issuance of notice under section 148. There were no objections taken by the assessee in the reassessment proceedings on aforesaid grounds. It is settled law that if the assessee chooses not to challenge the notice issued under section 148 of the Act the same is to be treated as valid and final. The objections raised by the assessee pertain to the sufficiency of reasons for issuance of notice under section 148. The same cannot be gone into at the stage of reassessment. The judgment relied upon by the assessee is not applicable in the present case in view of the failure of the assessee to challenge the validity of the notice under section 148. In the case of N. Govindraju Vs. ITO, of 2013, the Hon'ble High Court of Kartanaka held as under:-

In the case of Raymond Woollen Mills Ltd. vs. ITO (1999) 236 ITR 34 (SC) where such notice had been challenged, the Supreme Court held that what is to be seen is “whether there was prima facie some material on the basis of which the Department can reopen the case. The sufficiency of correctness of the material is not to be considered at this stage”. Relying on this decision, the Apex Court, in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman, 316, while considering the issuance of notice under section 147 of the Acty prior to the amendment of 2009, has held that the final outcome of the proceedings is not relevant and at the initial stage, what is required is ‘reason-to believe but not established fact of escapement of income. It further held that “at the stage” of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief whether the material would conclusively prove the escapement is not the concern at this stage.

This would clearly mean that the issuance of notice is justifiable. If the assessee chooses not to challenge the notice or if it is challenged and found to be valid, then in either case, such notice is to be treated as valid and final. Since the validity of the notice issued under section 148(2) can be challenged or is subject to judicial scrutiny, in our view, the assessment or reasssessment of any other income in the case of a validly issued notice cannot be said to be a case of fishing and roving enquiry. The assessee has the opportunity to challenge the notice, and if it is held to be invalid for not giving adequate reasons for reopening the assessment, the entire reopening proceedings would lapse. In such a case there would be no question of assessment of either such income of the first part of section n147 or any other income of its second part. But if the notice is either not challenged or if challenged and found to be justified, it would be a case of reopening the assessment on the basis of a valid notice.”

The belief that the AO may form can be based on information obtained from the original assessment record. In the case of M/s U.S. Foods {P} Ltd. Vs. DClT, this tribunal held as under:- “7.4 It is well settled that at the time of issue of notice under section 148, it is only the relevancy of the reasons that can be looked into and not the sufficiency [S. Narayanappa v. CIT [1967] 63 ITR 219 (SC).”

In view thereof, the grounds raised by the assessee relating to the validity of notice under section 148 of the Act are dismissed. Grounds no. 1 to 4 are dismissed.

Grounds No.5, 6 and 7 relate to the correctness of the valuation report. The Ld. AR contends that the revenue was not justified to accept the value mentioned in the sale deeds relied upon by the Valuation Officer and rejecting the comparable cases given by the assessee.

I have heard the submissions and perused the valuation report. The objections raised by the assessee during the course of assessment are as under:- “That the valuation has taken the comparable case of property was located at Prashant Vihar, Outer Ring Road, New Delhi and my objection over this is as under: (i) That the property in question was located at Sector-7, Rohini which was lying about 2 K.M. from Outer Ring Road. Therefore, the comparison of property cannot be made on this basis. (ii) That property lying at outer Ring Road is to be used commercial due to location and property in question is purely residential and therefore, there is no comparison on this point. (iii) That as per valuation report, the learned valuer has admitted the instance property is located on the area near to Main Road and property in question is in the inert area of Rohini. Hence the rate reduced was very nominal when actually the difference is in multiple. (iv) That the shape of property in question was not rectangular in shape which is great disadvantage of property for resale and the Valuation Officer was reduced very nominal i.e. 30% when such type of property was used to sell at least 25% of market value. (v) That the plot area of property in question is three times bigger as compare to instance property. The bigger property always require more money and the number of purchases are always less and the property cannot be sold, the bigger property on the same rate of smaller plot. (vi) That the property in question was in co-ownership of six person and instance property was of DDA. When co-owners are more and it is difficult in co-operation and keep watch interest of every co-owner.”

In the valuation report the said objections raised by the assessee have been elaborately considered and required adjustments/deductions with respect to location, shape, size and co-ownership were given to determine the net rate per sq. meter. The Ld. AR has failed to point out any specific defect in the said report. The objections are neither substantiated nor supported by evidence. In view thereof, Grounds Nos. 5, 6 and 7 are dismissed.

In the result, the appeal of the assessee is dismissed.