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Facts
The assessee, a partnership firm dealing in agri-products, filed a return of NIL income for AY 2013-14. The original assessment u/s 143(3) was completed with additions on Long Term Capital Gain and other sources. The case was later reopened u/s 147 based on a discrepancy in the stamp value of land sold versus the sale consideration and alleged suppression of capital gain.
Held
The Tribunal held that the reopening of the assessment u/s 147 was vitiated as it was based on audit objections and not on any material or information outside the assessment record, nor was there any failure on the part of the assessee to disclose material facts. The assumption of jurisdiction was therefore deemed bad in law.
Key Issues
Whether the reopening of assessment u/s 147 was justified without any new material or information, and whether the assumption of jurisdiction was vitiated. Whether Section 50C of the Act was correctly applied in computing capital gains.
Sections Cited
147, 143(3), 144B, 50C, 148, 48, 50C(1), 50C(2), 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: G : NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
This appeal is preferred by the assessee against the order dated 12.02.2024 of the Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No.NFAC/2012-13/10123773 arising out of the appeal before it against the order dated 27.03.2022 passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Ward-2(2)(1), Ghaziabad (hereinafter referred to as the Ld. AO).
Heard and perused the records. The assessee is a partnership firm and is dealing in cultivation and trading of agri-products. The assessee filed its return of income electronically for A.Y. 2013-14 on 28.09.2013 declaring income of Rs. NIL. The case was selected for scrutiny through CASS and the assessment was completed u/s 143(3) on 29.12.2015 at total assessed income of Rs.5,04,900/- by making addition of Rs.4,01,338/- under head Long Term Capital Gain and Rs.1.03,562/- under other sources respectively.
The claim of capital gain was allowed as under: Sale price of land: Rs. 40000000/- Less: Indexed cost of purchase Rs. 16177171/- Less: Indexed cost of improvement Rs. 24724279/- (Improvement expenses disallowed Rs. 1701685/-) Expenses on Transfer Rs. 399999/- Net Capital Gain Rs. 401338/-
3. The case of assesse was reopened u/s. 147 of Act in order to verify the fact that the perusal of sale deed showed that the stamp value of land was Rs. 8,81,68,000/-. Ld. AO took note of the provision of Section 50C of the Act and observed that since the land sold was not the stock in trade of the assessee, as it had claimed the benefit of indexation on land sold, the computation of capital should have been made considering the provision of section 50C of the Income Tax Act which was not done in this case. Further the ld. AO observed that the authenticity of the assessee's claim of expenses on improvement are not fully verified as purchases were made in cash from unregistered dealers. The omission resulted in short computation of capital gain of Rs.4,81,68,000/- Accordingly, notice u/s. 148 of the Act dated 25.03.2021 was issued and response filed by the assessee as reproduced by AO is reproduced below;
“1. The land (sold Property) was gone under compulsory Provisions of Section 50C of the Act as state Government initiated acquisition proceedings on 16.10.2004 under section 4/17 of land acquisition Act 1894 vide extraordinary gazette No 2679/9-A-3-2004-90. All the khasra Number which were sold were incorporated in this said Notification (copy enclosed) 2. Section 6/17 of land acquisition Act 1894 was issued on 28.11.2005 vide extraordinary gazette No 4727/8-3-2005-90 (copy enclosed)
Compensation was declared through adjudication order by Collector (L.A.) on 21.04.2012 via section 11 of land acquisition Act at Rs.1000/- Per Sq Meter and 6 % of land area as Plot, (copy of order enclosed) 4. Even though for stamp Purpose the market value of land was declared Rs.13200/- per sq Meter the land is under compulsory acquisition, the actual value of land as on date is 1000/- M2 as declared by state Government. 5. After all this even assessee has sold land on 15.03.2012 at Rs 4.00 Crore approx. Rs 6000/- per sq Meter Although later on Assessee was not able to Received his total sales value from purchaser without intervention of court as Post dated cheque issued were bounced. As purchaser Sh Bhagwat Singh & Likhi Ram were very disappointed when they came to know that Compensation was declared just Rs 1000/- per sq mt and they purchased land at Rs 6000/- per sq mt. 6. Keep in view of above mentioned facts that as the land is under compulsory acquisition and value declared by State Government was too low. Respectfully acquisition and value adopted for the purpose of stamp 3
duty is not to be treated as sale price for calculation of capital Gain and also further request to please not invoke Section 50C of IT Act. ”
The AO was not satisfied and invoked section 50C of the Act and concluded as follows:
“9. In light of the above discussion and owing to no substantial explanation from the assesse with respect to the addition proposed, this office has no other option but to invoke the Provisions of Section 50C of the Act in the case of Sale of said Land/ immovable property of Stamp Value of Rs. 8,81,68,000/-. Hence, in the absence of any cogent response or documentary evidences from the assessee, it establishes that the assessee suppressed the capital gain by Rs. 4,81,68,000/- (the difference amount of Rs. 8,81,68,000/- and Rs. 4,00,00,000/-), while offering the same in its original ITR. Hence, the difference amount of Rs.4,81,68,000/- will be treated as Capital Gain earned by the assessee during the A.Y. and the same is to be brought to the tax, accordingly. Further, Penalty proceedings under section 271(1)(c) of the Act will be initiated separately for the inaccurate particulars of income submitted by the assessee. [Addition (Long Term Capital Gain): Rs.4,81,68,000/-]”
The ld. CIT(A) has sustained the addition for which assesse is in appeal and fundamental issue raised about the wrongful assumption of jurisdiction on basis of stale information. We find that the AO mentions in the assessment order that the assessee had questioned the assumption of jurisdiction u/s 147 of the Act and a similar ground was also raised before the ld.CIT(A) and the NFAC has dealt with the ground by following findings:-
“5.4 I have gone through the Assessment Order, the grounds of appeal raised and statement of facts as well as rival submissions/letters (reproduced supra). All the grounds of appeal relate to the two issues raised by the appellant, one regarding challenging the reopening u/s 147 of the Act and the other regarding adding the difference in value of land sold as per stamp valuation authority. Thus, for the sake of brevity, all the 4 grounds (which includes some general grounds not requiring specific adjudication) are taken up together, issue wise, for adjudication.
5.5 The appellant has challenged the reopening of the case u/s 147 of the Act. During appellate proceedings the appellant relied on certain case laws in its submission with regard to its contention that the reopening was based on a change of opinion by the AO since, the appellant’s case had already been scrutinized u/s 143(3) prior to the reopening. It claimed that valuation of land as per stamp duty authority u/s 50C of the Act could not be taken as a sufficient ground for reopening. I have considered the facts of the case and the rival submissions. The Hon’ble Supreme Court In the case of GKN Driveshafts (India) Ltd. v. ITO 125 Taxman 963 held that “when a notice under section 148 is issued, the proper course of action for the assessee is to file return and if he so desires, to seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.”
5.6 As seen from the Assessment Order, the appellant had filed objections to reopening during assessment proceedings which were disposed of by the AO vide Order dated 12.03.2022. Thus the guidelines laid down by the Hon’ble Court were followed by addressing the objections of the appellant vide a separate Order. The appellant has again raised the issue regarding objection to reopening at the appeal stage which was already addressed by the AO during the course of assessment proceedings.
5.7 The full bench of the Hon’ble Delhi High Court in the case of Usha International Ltd. [2012] 348 ITR 485 (Del.) had examined in detail as to what constitutes change of opinion. If a subject-matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and, therefore, it is a case of “change of opinion”. When at the first instance, in the original assessment proceedings, no opinion is formed, the principle of “change of opinion” cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject- matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. Whether or not the Assessing Officer had applied his mind and examined the subject-matter, claim, etc., depends upon factual matrix of each case.
5.8 Section 50C of the Act spells out very clearly the position of the statute with regard to valuation of capital asset in certain cases. The appellant’s case fell under this category and the onus lay on it to follow the law. This was not a matter of opinion but of statute that had to be followed. The appellant has brought no document/detail/evidence on record in support of its ground that the basis on which the reopening was done constituted a change of opinion in as much as the information was already in possession of the AO at the time of earlier scrutiny assessment.
5.9 The only issue raised in the grounds of appeal on merit is the addition made in the Assessment Order on account of stamp duty valuation [u/s 50C of the Act] of land sold by the appellant during the year. The appellant contested the addition on the ground that the land sold was falling under compulsory acquisition as the state government had initiated acquisition proceedings on 16.10.2004 and the value of the land was declared at the rate of Rs.1,000/- per square meter whereas the stamp duty valuation of the property was at the rate of Rs.13,200/- per square meter. The appellant sold the land at the rate of Rs.6,000/- per square meter. As seen from record, the AO, in the absence of any supporting documents as to why provisions of Section 50C of the Act should not be invoked, found the arguments of the appellant to be untenable. During appellate proceedings also, the appellant has not produced any corroborative evidence for its stand. In its submission filed during appellate proceedings, the appellant merely stated that ‘Ld. Assessing Officer has erred in law as well as on the facts of the case by making the addition of Rs. 4,86,72,900/- without verifying the facts that land (sold property) had gone under compulsory acquisition by government as considered by Ld. Assessing Officer.’ It stands to logic that if the land was already compulsorily acquired, the ownership would have changed and how could the appellant then have sold it during the period under consideration? If it was a different patch of land under compulsory acquisition process that the appellant was using as a comparable yardstick then how were the provisions of Section 50C, wherein the valuing authority for stamp duty valuation purposes is the state government itself, not applicable on the transaction for the other land/asset in the appellant’s reckoning?
5.10 The appellant was given numerous opportunities during appellate proceedings to present its case with evidence but it chose to comply scantily and only at will.
5.11 In any case, the appellant has brought nothing on record to show why and how the provisions of Section 50C of the Act are not applicable in its case. As per Section 50C of the Act the value taken by the stamp duty valuation authority is the value to be adopted in case the sale value shown in the transaction is lower. Section 50C(1) of the Act is a deeming provision wherein the registration value fixed by the State Government under the Stamp Act is deemed to be full value of consideration. It reads as under:
“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.” 5.12 Section 50C(2) of the Act permits the assessee to contend before the AO that the registration value fixed by the stamp valuation authority under the Stamp Act is excessive and does not correspond with the fair market value of the property as on the date of transfer and that a reference be made for fresh valuation. In the instant case, no such recourse appears to have been taken by the appellant. 5.13 In view of the above factual matrix of the case, there is no reason to interfere with the findings of the AO in the assessment order and the grounds of appeal s raised by the appellant are dismissed.
6. In the result, the appeal is dismissed.”
The contention before us as raised by the ld. counsel was that once assessment u/s 143(3) of the Act was concluded, then, without any material or information from outside source, the invocation of section 147 of the Act is not justified. It was submitted that there was no failure on the part of the assessee to disclose or conceal any facts and the sale deed was also on record at the time of assessment.
6.1 The ld. DR, however, defended the findings of the CIT(A) submitting that the detailed reasoning have been given giving relevant case laws.
In this context we find that at page 5 of the paper book the assessee has provided a copy of notice u/s 148 of the Act dated 25.03.2021 and at page 14 the reasons to believe giving rise to this notice are provided and we find that the 7 reopening has in its background the audit objection and the AO observed that the case record was perused in the light of the audit objections and based on the record it was seen that since the land sold was not the stock in trade of the assessee as it had claimed the benefit of indexation on the land sold, the computation of capital gain should have been made considering the provisions of section 50C of the Act which was not done in this case. In the reasons the AO mentions that as per the first proviso to section 147, the assessee had failed to disclose truly and fully all material facts during the course of assessment proceedings. Hence, though four years have elapsed, necessary sanction to issue notice u/s 148 of the Act was sought for reopening.
Admittedly, during assessment proceedings, all relevant documents like purchase bill, sale bill, vouchers related to expenses on cost of improvement were filed to the satisfaction of the AO. The AO examined all the documents and examined the computation of capital gains and has passed the assessment order. It further comes up that the assessee had explained in the response to show cause notice issued u/s 148 of the Act that the property was sold on 15.03.2012 @ 6000 per sq. mtr, but, the property was already under compulsory acquisition by the government and as the compensation amount was just Rs.1000/- per sq. mtr, the purchasers did not honour the sale deed as the post dated cheques were dishonoured and the assessee had to approach the civil court.
Thus, we are of the considered view that in the given facts and circumstances the reopening suffers from the fact that no material or information outside the assessment record was taken into consideration and the AO merely giving effect to audit objections has reopened the assessment without pointing out as to what all facts the assessee had failed to disclose so as to enable the AO to exercise powers of reopening by recourse to first proviso to section 147 of the Act. Thus, assumption of jurisdiction is vitiated. The ground No.2 is sustained. The appeal is allowed. The impugned assessment order is quashed.
The appeal of the assessee is allowed.
Order pronounced in the open court on 26.11.2025.