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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S.S. VISWANETHRA RAVI, JM &DR. A.L.SAINI, AM
O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Revenue, pertaining to Assessment Year 2009-10,isdirected against the order passed by the ld Commissioner of Income Tax (Appeals)-9,Kolkata, in Appeal No.48/CIT(A)-9/Cir-33/2014- 15/Kol dated 23.04.2015,which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3)/147of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 27.01.2014.
The grounds of appeal raised by the Revenue reads as follows: “On the facts and in the circumstances of the case and in law, the ld. CIT(A)-9, Kolkata has erred in deciding the reopening u/s. 147 of the Income-tax Act, 1961 is not valid.” 3.The brief facts qua the issue are that the assessee A.O.P. filed its Return of Income on 24-03-2010 declaring total income of Rs.4,92,59,104/-.It was noted from the perusal of Income-tax Return that the assessee had shown Long Term Capital Gain of Rs.4,92,59,104/- on sale of Land & Building. The sale consideration was shown at Rs.15,06,00,000/- and cost of acquisition was taken at Rs.10,13,40,896/- resulting into Long Term Capital Gain of M/s Estate of Late Lai Yun Hsian Liu, AOP Assessment Year: 2009-10 Rs.4,92,59,704/-.Facts of the case are that Mrs. Lai Yun Hsiang Liu, owner of the properties admeasuring an area of 4 Bighas 1 Cottah 11 Chittacks comprised in C.S.Plot No-355 and 3 Bighas 1 Cottah 11 Chittacks comprised in C.S Plot No.331 and 332 purchased on 08.03.1959 and 16.06.1959 respectively, and she died on 17.01.1998. The said property was executed by a will whereby Mr. Peter Liu was made the sole executor and gave bequeather and devised all her properties including the said property in favour of her children in the manner provided in thesaid will.After the death of Mrs. LAI YUN HSIANG LIU, an application of probate was filed before the Calcutta High Court in respect of the said will. Accordingly, theHon’ble Calcutta High Court granted the probate in the P.L.A. No. 51 of 2001 on 26.06.2001 in which Mr. Tung King Liu residing at 47, South Tangra Road, Kolkata- 700 046 was duly appointed as the constituted attorney of Mr. Peter Liu in India asMr. Peter Liu of 2566 Innis Fill Road, Missianga, Ontario, L5 MRJI, Canadatemporarily residing at 47 South Tangra Road, Kolkata-700046 was residing beyondthe jurisdiction of this Court, the executor and trustee in the said will. On going through the assessment records, it was found by the AO that the cost of acquisition on the date of sale i.e. on 23.07.2008 was mentioned at Rs.10,13,40,896/- but nowhere the value of the property at the time of acquisition was mentioned. Thus, it appeared that the assessee had deliberately avoided furnishing valuation as on 01.04.1981, which is a general prerequisite for calculation of Long Term Capital Gain (LTCG). It was noticed from the relevant assessment record for A.Y. 2009-10 of Tung King Liu that four of the seven members of the assessee AOP partners of M/s. A. Kong Tannery and owned land and building as fixed assets with a factory shed thereof measuring about 14.5 Cottahs, an adjacent property which was sold on the same date i.e. 23.07.2008 and to the same purchaser. During the assessment of Mr. Tung King Liu, the then D.C.I.T., Circle-33, Kolkata had referred the matter for valuation to the Valuation Cell, which resulted in reduction in valuation as on 01.04.1981.On identical principles, the cost of acquisition of the land(approximately 142 Cottahs) sold by the Page | 2 M/s Estate of Late Lai Yun Hsian Liu, AOP Assessment Year: 2009-10 assessee AOP would be drastically reduced and thus the calculation of the LTCG of the assessee AOP would be substantially increased. Therefore, a reference was made to the District Valuation Officer, Valuation Cell by the ITO, Ward-33(4), Kolkata vide letter No. ITO/Wd-33(4)/AAAAE2967P/2012- 13/100 dated 24.07.2012 u/s.55A of the Income-tax Act, 1961 ascertaining the fair market value of the said property.Hence, it was logical to conclude in respect of this property also, being appurtenant thereto the property of Tung King Liu and having been sold on the same date and to the same buyer, would have the same overvaluation as on 01.04.1981 as pointed out by the DVO in the case of Tung King Liu.Accordingly, in view of the above observations, Long Term Capital Gain, short, shown by the assessee on the sale of its property was estimated at Rs.2,83,11,540/-. After recording reasons, notice u/s 148 of the Income Tax, 1961 was issued to the assessee on 14.01.2013. In the reassessment proceedings the value determined by the D.V.O was taken at Rs.97,34,281/- then after the amount of long term capital gain on the sale of property works out Rs.9,39,46,450/- against which the assessee has declared long term capital gain at Rs.4,92,59,104/-. Therefore, the difference in long term capital gain amounting to Rs.4,46,87,346/- [Rs.9,39,46,450 – Rs.4,92,59,104] was added to the total income of the assessee.
4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld. CIT(A) who has deleted the addition made by AO.Theld CIT(A) noted that there was no income tax proceedings pending on the date of reference made to the DVO. The assessment was reopened on the basis of DVO’s report in the case of Mr. Tung Kind Liu and not in the case of the assessee. Therefore, ld CIT(A), following the judgment of Hon’ble Gujarat High Court, in the case of CIT vs. Umiya Co-op. Housing Society Ltd. Reported in 314 ITR 272 (Guj), wherein it was held that: “When the notice under section 148 has been issued and addition has been made by adopting the value estimated by the Valuation Officer and when we found that the Assessing Officer is not empowered to refer any property for valuation in a case where no assessment proceedings or reassessment proceedings of the assessee is pending before him, we see no justification to make any addition in such cases”, Page | 3 M/s Estate of Late Lai Yun Hsian Liu, AOP Assessment Year: 2009-10 Following the above decision, the ld CIT(A) held that reference made to DVO by the Assessing Officer was beyond his jurisdiction and reopening the case on the basis of DVO`s report in another case was also not valid. Therefore, ld. CIT(A) allowed the assessee’s appeal on the said technical ground and held the reopening U/s 147/148, was not valid.
5. Not being satisfied with the order of ld.CIT(A), the Revenue is in appeal before us. The ld DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
6. On the other hand, the ld. Counsel for the assessee has submitted before us that there was no income tax proceedings pending on the date of reference made to the DVO. The assessment was reopened on the basis of DVO’s report in the case of Mr. Tung Kind Liu and not in the case of the assessee. There was no reasons recorded in assessee`s own case U/s 147/148, therefore, the reopening itself is bad in law and hence addition made by AO should be deleted.
7. Having heard the rival submissions and perused the materials available on record, we notice that in this case, there was no income tax proceedings pending on the date of reference made to the DVO. The assessment was reopened on the basis of DVO’s report in the case of Mr. Tung Kind Liu and not in the case of the assessee. We note that reopening the assessment U/s 147/148 of the Act on the basis of DVO`s report in another case was not valid. In assessee`s case under consideration, we are of the view that no valid reasons were recorded by the Assessing Officer. If the AO failed to record the valid reasons then reassessment would be bad in law. We are of the view that when the notice under section 148 has been issued and addition has been made by adopting the value estimated by the Valuation Officer and when we found that the AO is not empowered to refer any property for valuation in a case where no assessment proceedings or reassessment proceedings of the assessee is pending before him, there is no justification to make any addition in such cases. Page | 4