MOHAMMED KHALID MASUD,KOLKATA vs. ACIT, CIR-33, KOLKATA. , KOLKATA

The appeal is time barred by 389 days. A separate application for condonation of delay has been filed, which is further supported by an affidavit of the petitioner namely Mohammed Khalid Masud. Considering the submissions made in the affidavit, the delay in filing the appeal is hereby condoned.

The assessee in this appeal is aggrieved by the action of the CIT(A) in confirming the addition made by the Assessing Officer of Rs.17,82,513/- invoking the provisions of section 50C of the Act.

The Assessing Officer during the assessment proceedings noted that the assessee in his return of income, for the purpose of computation of capital gains, has shown consideration received on the sale of property at Rs.45,00,000/- while as per the stamp duty authority, the circle rate of property was at Rs.62,82,513/-. On being asked to explain in this respect, the assessee requested the Assessing Officer that the value adopted by the stamp duty authority was higher than the fair value of the property as on the date of transfer and that the matter may be referred to the Departmental Valuation Officer. However, the Assessing Officer rejected the aforesaid contention of the assessee and made the impugned addition.

Being aggrieved by the above order of the Assessing Officer, the assessee preferred appeal before the CIT(A). The assessee again before the ld. CIT(A) requested that the market/fair value of the property was less than the value adopted by stamp duty authority and that the matter may be referred to the Departmental Valuation Officer as per the provisions of section 50C of the Act. However, the ld. CIT(A) also rejected the aforesaid plea of the assessee and confirmed the addition so made by the Assessing Officer.

Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us. The ld. AR has duly demonstrated from the assessment order as well as from the appellate order of the CIT(A) that the assessee right from the very beginning claimed that the fair market value of the property was less than the stamp duty value adopted by the stamp duty authority/collector rate and that the matter may be referred to Departmental Valuation Officer to ascertain the correct and fair value of the property at the time of transaction. However, the said contention of the assessee has been rejected by both the lower Assessment Year: 2017-18 Mohammed Khalid Masud authorities without assigning any reason. Both the lower authorities, therefore, have failed to act according to the statutory provisions of section 50C(2) of the Act and summarily rejected the plea of the assessee to get fair value of the property from the Departmental Valuation Officer without assigning any reason. The addition made by the Assessing Officer under the circumstances is not sustainable in the eyes of law. The issue is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Hari Om Garg v. ITO in order dated 31.05.2019, wherein, the Coordinate Bench of the Tribunal while referring to the various decisions of the Hon’ble High Court including that of the Jurisdictional Calcutta High Court in the case of “Sunil Kumar Agarwal Vs. CIT” reported in 372 ITR 83, has held that the additions made by the Assessing Officer under such facts and circumstances are not sustainable and the same are liable to be set aside. The relevant part of the order of the Co-ordinate Bench of the Tribunal (supra) is reproduced as under:

“8. In the present case, neither, the AO nor the ld. CIT(A) has made any efforts to crystalize the actual value of investment by the assessee in the purchase of the property by way of bringing material documentary evidence on record to establish the unexplained investment in the property by the assessee. Merely, rejection of the reply of assessee without giving valid reasons cannot justify the action of the subordinate authorities.

The Sub-section (2) clearly mandates that where the assessee claims that the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer, the AO would refer the valuation of such property to the Valuation Officer. Hon'ble Calcutta High Court, in the case of "Sunil Kumar Agarwal Vs. CIT" reported in 372 ITR 83 has clearly held that the AO, discharging quasi-judicial function, has the bounden duty to act fairly and to follow the course provided by law, which in that case, was the reference to the valuation officer. In the present case, in view of the assessee's specific dispute and claim before the AO that stamp valuation Assessment Year: 2017-18 Mohammed Khalid Masud of the property sold was not its "fair market value", it was the bounden duty of the AO to have made reference to the Valuation Officer which, for the reasons not borne on records, was not made.

Hon'ble Allahabad High Court in the case of CIT Vs Chandra Narain Chaudhary in ITAT No.287/2011 vide Judgment dated 29.08.2013 in a case, though having different facts where assessee therein had filed more than one valuation Report , in the context of section 50C of the Act, held that "whenever objection is taken or claim is made before AO, that the value adopted or assessed or assessable by the Stamp Valuation Authority under sub-section (1) of Section 50-C exceeds the fair market value of the property on the date of transfer, the AO has to apply his mind on the validity of the objection of the assessee. He may either accept the valuation of the property on the basis of the report of the approved valuer filed by the assessee, or invite objection from the department and refer the question of valuation of the capital asset to DVO in accordance with Section 55-A of the Act. In all these events, the AO has to record valid reasons, which are justifiable in law. He is not required to adopt an evasive approach of applying deeming provision without deciding the objection or to refer the matter to the DVO under Section 55-A of the Act as a matter of course, without considering the report of approved valuer submitted by the assessee. The Hon'ble High Court further held that Section 50-C of the Act is a rule of evidence in assessing the valuation of property for calculating the capital gain. The deeming provision under Section 50 C (1) of the Act is rebuttable. It is well known that an immovable property may have various attributes, charges, encumbrances, limitations and conditions. The Stamp Valuation Authority does not take into consideration the attributes of the property for determining the fair market value in the condition the property is a offered for sale and is purchased. He is required to value the property in accordance with the circle rates fixed by the Collector. The object of the valuation by the Stamp Valuation Authority is to secure revenue on such sale and not to determine the true, correct and fair market value on which it may be purchased by a willing purchaser subject to and taking into consideration its situation, condition and other attributes such as it occupation by tenant, any charge or legal encumbrances.

Hon'ble Jurisdictional High Court of Allahabad in the case of Dr. Shahsi Kant Garg V. CIT 285 ITR 0158 has also observed "that if under the provisions of the Act an authority is required to exercise power or 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 the present case, as discussed above the AO not only passed a cryptic order without disputing any of the grounds of dispute raised by the assessee but also failed to follow the procedure prescribed in law i.e. making of a reference to the DVO as mandated by section 50C (2) of the Act. Therefore, the addition made by the AO cannot be approved.

Now, having held that since the AO failed to follow the procedure prescribed under the law and for this reason the addition cannot be held legally valid, the next question arises for consideration is whether the case be set aside to the AO for following the said procedure and then pass fresh order. 14. In this respect we state that though the powers of the Tribunal are wide enough but they should not be used to allow the department to make up its shortcomings, doing so would defeat the purpose of justice and fair play. Objection that the assessee did not request for making reference to the valuation cell, suffice would be to observe that assessee has no obligation to instruct the AO to follow the law. 15. Deciding similar issue, ITAT, Hyderabad in the case of ACIT V. Lalitha Karan, order dated 04/01/2017 (copy placed in assessee's compilation on Pgs. 7 - 15) has observed in para 7.1 - "when deeming provision was to be invoked, the same has to be construed strictly and it has to be taken to its logical conclusion i.e. upon not following the proper procedure prescribed therein, particularly, in the backdrop of the fact that the assessee has prima-facia shown that it was a tenanted property and, therefore, subject to certain encumbrances and also the fact the in the absence of obtaining a DVO's report, asssessee cannot be put to the trouble of facing a virtual trial even after five years of appearing before AO/DVO at this stage to prove the sale price declared by her is reasonable." 16. In the case of ACIT Vs Anima Investment Ltd [ 73 ITD 0125] Third Member, ITAT, Delhi observed in para 13 of the order as under - "The powers of the Tribunal in the matter of setting aside an assessment are large and wide, but these cannot be exercised to allow the AO an opportunity to patch up the weak part of his case and to fill up the omission. In my opinion, a party guilty of remissness and gross negligence is not entitled to indulgence being shown. In this context, I would like to make a reference to a decision of the Chennai Bench of the Tribunal in the case of Tatia Skyline & Health Farms Ltd. vs. Asstt. CIT (2000) 66 TTJ (Chennai) 203 : (1999) 70 ITD 387 (Chennai). In this decision, on Assessment Year: 2017-18 Mohammed Khalid Masud the assessee's request that the case be sent back to the AO for another round of enquiry and fresh assessment in accordance with law. the Bench, rejecting the assessee's request has held that the remand order should be made in very rare and exceptional case, for example, if at original stage, patently grave error was committed by the original authority or that the order was made in haste owning to the limitation or that the first appellate authority had violated the rules of natural justice. Nothing like this has happened on the present case. The Bench has further observed that the Courts have also cautioned the Appellate Authorities by holding that remand should be made only in those cases where the original authorities have not passed orders in accordance with law but in no case, remand should be made only in those cases where the original authorities have not passed orders in accordance with law but in no case, remand should be made to enable an assessee to fill in the blanks or lacuna in the case which remains present. What applies to the assessee, would equally apply to the AO. Likewise, in the case of Smt. NeenaSyal vs. Asstt. CIT (1999) 70 ITD 62 (Chd.), the Chandigarh Bench of the Tribunal has observed that it is not the function of the Tribunal to allow further opportunity to the AO to cover up legal lapses made by him, by restoring the matter back to his file. Therefore, remand/setting aside order could not be made in this case to enable the AO to make up his earlier deficient work by initiating assessment proceedings for the third time after a lapse of considerable time."

In the case of Raj Kumar Jain, reported as 50 ITD 0001 (ITAT, Allahabad), Ch. G. Krishnamurthy, the then President of ITAT, as a Third Member also observed in para 5 as follows - "The Tribunal acting as an appellate authority has to see whether the assessment framed by the Assessing Officer and whether the appellate order appealed against was according to law and properly framed on facts and whether there was sufficient material to support it. When there is no material to support it and when as observed by the learned Accountant Member the additions made by the Assessing Officer could not be sustained, it is not for the Tribunal to start investigations suo-moto and supply the evidence for the Department. If the additions are not supported by evidence, the only course open to the Tribunal is to delete the additions pointing out how the additions made could not be sustained for want of adequate supporting material. It is for the Department to gather the material and make proper assessments and the Tribunal is not in that fashion an IT authority. Under the IT authorities stipulated under the IT Act, the Tribunal is not one of them. It is purely an appellate authority. Therefore, the object of the appeal before the Tribunal is whether the addition or disallowance Assessment Year: 2017-18 Mohammed Khalid Masud sustained was in accordance with law and supported by material. If there is no sufficient material, the addition must be deleted. The Tribunal cannot order further enquiry with a view to sustain the addition. This will amount to taking sides with the parties which is not the function of a judicial authority like the Tribunal."

The Hon'ble Supreme Court also in the case of 'Parusram Pottery Works Co. Ltd Vs. ITO', 106 ITR 0001 (SC)] observed as follows - It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well- versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (emphasis supplied) 19. The Coordinate Bench in the case of 'Dr. Sanjay Chobey (HUF) Vs ACIT', Circle - 2(3), Jhansi, (Order dated 02/07/2018), in almost similar facts allowed the assessee's appeal observing, vide para 14, as under - "The lower authorities passed the order in summery manner without going into the merits of the case and analyzing the legal issue involved, the applicability of Section 50C(2)(a) of the Act, in a particular. We further find that the AO has not found any adverse material evidence to indicate that the assessee has received any excess money over and above the sale consideration, in the return of income. In light of the peculiar facts of this case and in the absence of the DVO report, we are of the considered opinion that the assessee cannot put to travel up facing virtual trial to appear before the AO after three years to prove that the sale consideration declared by him was reasonable."

In the present case, it is noted that neither the Assessing Officer nor the Ld. CIT(A) appreciated the contentions raised by the assessee while adopting the the stamp duty value as fair market value of the property purchased nor referred the matter to the DVO as was required U/s 50C(2) of the Act. The AO has also not found or alleged with any corroborative material evidence that the assessee has paid any excess amount over the sale consideration mentioned in the sale deed.

In the above view, we set aside the impugned order passed by the Ld. CIT(A). As such, the grievance of the assessee is found legally justified and resultantly, the addition is deleted. Accordingly, appeal is allowed.”

Respectfully following the aforesaid decision of the Tribunal, it is held that the addition made by the lower authorities is not sustainable and the same is accordingly ordered to be deleted.

In the result, the appeal of the assessee stands allowed.